CHAPTER 1
Priorities for employment Labour market settings should be evidence-based and support the goal of improving productivity and overall wellbeing. Judged by their results, New Zealand’s labour market settings are performing well overall and do not require a radical overhaul. Evidence from both domestic and international research strongly suggests the incoming Government should: • not introduce the former Coalition Government’s proposals to introduce Fair Pay agreements (FPAs); • keep the current regulatory settings in relation to the popular contractor model used to govern workplace relations for many occupations, but enforce the existing regulatory settings more effectively; • modify the unjustified dismissal procedures of the Employment Relations Act 2000 (ERA) so they do not apply to highly paid employees (mirroring the approach taken in Australia); and • re-introduce lower youth minimum wage rates while rolling back recent minimum wage increases – or at least not further increase New Zealand’s already relatively high minimum wage rates. If the Government wishes to provide greater income support for families on low income, doing so through in-work transfers is more efficient.
New Zealand’s labour market settings are working well The 1991 labour market reforms dismantled the national awards system, under which most workers were represented through a system of collective bargaining. In its place,
10 ROADMAP FOR RECOVERY
the Employment Contracts Act 1991 (ECA) (the predecessor to the ERA) introduced individual employment contracts (now individual employment agreements) prevalent in workplaces today. Judged by its record since 1991, New Zealand’s labour market has performed well. • At 80.9% (pre-Covid-19), our labour market participation rate is among the highest in the world. Among developed countries, we sit behind only Sweden, Switzerland and Iceland. New Zealand’s position in the front ranks compares favourably with Australia (78.5%), the EU average (74.2%) and the OECD average (72.8%).3 Labour force participation matters. The link between work and wellbeing is incontrovertible. Joblessness harms not just material wellbeing but also mental and physical health. • Since 1991, the labour market has had the third highest rate of job creation in the OECD.4 While this ranking is no doubt influenced by high levels of immigration, the country’s employment growth record shows that labour market settings have enabled the economy to absorb high immigration flows. • Matching the high labour force participation and employment growth rates is a relatively low unemployment rate. At 4% for the last pre-Covid-19 quarter ended 31 December, 2019,5 the country’s unemployment rate was well below Australia’s (5.1%) and compared extremely favourably with the OECD average (5.2%) and the EU average (6.5%).6 New Zealand’s current employment rate
