New Zealand Journal of Employment Relations (2007), 32(1)Earnings Heterogeneity and Job Matching – Evidence from
Linked Employer-Employee Data
DAVID C. MARÉ* and DEAN R. HYSLOP**
Abstract
This article uses data from Statistics New Zealand’s Linked Employer-Employee Data
(LEED) over the six year period April 1999-March 2005 in order to derive and analyseestimates of two-way worker and firm fixed effects components of job earnings rates.
The fixed effects estimates reflect the portable earnings premium that each worker
receives in whichever firm they work for, and the time-invariant premium that each firmpays to all the workers it employs. We focus on three issues. First, how much of thevariation in job earnings rates is attributable to observable worker demographic factors(age and gender), unobserved worker effects and unobserved firm effects? Second, howmuch compositional change occurred during this period of substantial employment
growth? Third, what is the aggregate pattern of sorting of workers and firms across jobs?

Introduction
Workers’ earnings rates may vary because of systematic differences across workers
and/or differences across the firms they work for. Disentangling the sources of variationin earnings is important for understanding in several areas, including earnings inequality,
productivity differences across firms, the impacts of alternative remuneration policies,
etc. In addition, if there are complementarities between workers and firms, then we would
expect high-earning workers to be concentrated in high-paying firms. Assessing therelative importance of alternative sources of variation in job earnings, as well as thestrength of the matching, requires the simultaneous estimation of unobserved worker andfirm effects from longitudinal job-level data that allow workers and firms to be linked(Abowd and Kramarz, 1999).
Using Statistics New Zealand’s Linked Employer-Employee Data (LEED) over theperiod 1999–2005, this article addresses these two sets of issues for the first time in New
Zealand. In particular, the primary objective of the article is to estimate the regressionadjusted joint (two-way) worker and firm fixed effects associated with the full-time
equivalent (FTE) annualised job earnings rate, controlling for worker observed (age andsex) demographic differences. We first document the cross-sectional variation in job-*

David C Maré is a Senior Fellow at Motu Economic and Public Policy Research, P.O. Box 24390
Wellington. Dave.Mare@motu.org.nz**
Dean R Hyslop is a Principle Analyst in Policy Support and Analysis Section at The Treasury, P.O. Box3724, Wellington . Dean.Hyslop@treasury.govt.nz

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New Zealand Journal of Employment Relations (2007), 32(1)earnings rates over the sample, and then consider various econometric identification andestimation issues associated with estimating the worker and firm effects of interest.
Our second objective is to describe and analyse the patterns of interaction between theseestimated components of the job earnings rate. In this analysis we focus on three broad
issues: the degree of worker and firm earnings heterogeneity, compositional changes overthe period, and the strength of assortative matching of workers and firms across jobs. In
doing so, we first document the degree to which earnings variability across jobs reflects
differences in workers’ observed demographics, versus unobserved systematic worker
effects, firm effects and/or idiosyncratic worker-firm job effects? Second, we describe theeffects of compositional change over a period of strong employment growth, by focusing
on changes in mean firm and person effects. Third, we document the degree of assortative
matching between workers and firms, both across the full population and within various
subgroups. Our main focus here is on the extent to which high-earning workers work forhigh-paying firms. A positive correlation between worker and firm effects can arise if
there are sufficient complementarities in production.1
The article is organised as follows. In the next section we provide a brief overview of the
LEED and a discussion of the derivation of the variables we use in the analysis. In thefollowing section, we outline the econometric framework adopted, and discuss various
identification and estimation issues encountered. We then discuss key results on thequestions of heterogeneity, matching, and compositional change, before concluding witha summary discussion and suggestions of future research directions.

Data
As stated earlier, the data used in this study was from Statistics New Zealand’s Linked
Employer-Employee Data (LEED), which uses information from tax and statisticalsources to construct a record of paid jobs. Since April 1999, all employers in New
Zealand are required to file a monthly record with Inland Revenue (IRD) called an
Employer Monthly Schedule (EMS), which lists all paid employees at that firm during
the month, the earnings they received and the amount of tax that was deducted at source.
Two types of recipients are covered by EMS: those who have Pay-As-You-Earn (PAYE)
tax deducted, who are employees; and those who pay withholding tax, who are a subsetof the self-employed. Because the selection and coverage of which self-employedworkers have tax withheld is unknown, we use only information on PAYE-deducted(employee) jobs.2 We use all the available data on PAYE employee jobs in New Zealandduring the six March-years from April 1999 to March 2005.
Firms (employers) and workers (employees) are identified by unique confidentialised
identifiers based on their respective IRD tax numbers. For workers, this represents asingle identifier over time, enabling workers to be tracked longitudinally and across thefirms that they work for. Employers are identified as the administrative unit to which the
EMS return relates, which may change for legal and/or other administrative reasons2New Zealand Journal of Employment Relations (2007), 32(1)without any change in the economic structure of the ‘firm’. We use a version of the
LEED that has allocated EMS returns to geographic units, identified by a unique
identifier (the Permanent Business Number, PBN) in Statistics New Zealand’sLongitudinal Business Frame (LBF) (Seyb, 2003), and adopt such geographic units as ourconcept of firms.
Conceptually, the LEED covers the universe of PAYE employment relationships andearnings in New Zealand over the period. In addition, there is limited information on thecharacteristics of workers and firms: age, sex, and location of workers; and industry andlocation of firms. Perhaps the main weakness of the LEED for the current analysis is that
the EMS returns report only monthly earnings for each employee and contains noinformation on hours worked. As a result, we cannot accurately distinguish hourly wages
versus hours worked variation on earnings – e.g. low monthly earnings may be due toeither a low hourly wage and/or low hours worked.
In order to provide a partial adjustment for the lack information regarding the number ofhours, we develop an algorithm to estimate each worker’s relative employment intensity.
This algorithm takes into account both the worker’s monthly LEED employment earnings
and any earnings-tested income they receive from other sources; the algorithm also
allocates their total employment across their (multiple) jobs. We first assume that eachworker can have up to one unit of employment intensity in any month, and theiremployment is zero in any month that they have no LEED earnings. We next scale downa worker’s monthly employment intensity if either their total monthly earnings are lessthan full-time minimum wage earnings, and/or they receive any earnings-tested LEED
‘non-work payments’ income. Specifically, we estimate individual-i’s employment
intensity in month-m

where earnim is i’s total LEED employment earnings in month-m, non-earnim is their total(earnings-tested) non-work income in month-m, and FT_mw_earnim is the full-timeminimum wage earnings level applicable to them in month-m. As hourly wages generally
exceed both minimum wages and non-work income rates, these adjustments likely
overstate the employment intensity of part-time workers and those receiving non-work
payments relative to full-time workers.3.
For workers with multiple jobs in a month, their total monthly employment intensity (or“effective employment”) is allocated across the jobs they held in that month in proportion
to the earnings from each job, to give their effective monthly employment in those jobs.
Job earnings and effective employment can be aggregated over a year, and we estimate
the full-time-equivalent (FTE) annual earnings rate as the relevant annual earnings
divided by estimated annual effective employment.

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New Zealand Journal of Employment Relations (2007), 32(1)TABLE 1: Sample Characteristics

Note: 2,776,361 workers, 322,713 firms and 9,729,904 jobs observed Years are April-March – e.g. 2000
refers to April 1999-March 2000. All income values are in December quarter 2005 $ values, adjusted using
the Consumers Price Index (CPI).

Table 1 provides a summary of the annual data: for all years pooled; the first year
(1999/2000); the last year (2004/05); and the percentage change between the first and lastyears. Over the six-year period, there are 18,676,300 distinct job-year observations and
8,018,300 FTE job-years associated with 9,729,900 jobs, worked by 2,776,400 workers(employees) in 322,700 firms (PBNs). On average over the six-year period, workers have
3.5 jobs (different firms), firms employ about 30 different workers, and there are 1.9
annual observations per job. In addition, there are 11,716,400 worker-year observations(on average 4.2 per worker) and 1,211,202 firm-year observations (3.8 per firm). The
sample period was one of strong employment growth. The number of annual job
observations, annual job FTE, number of workers and number of firms increased 14, 17,
16 and 10 percent, respectively, between the first and last years.
The focus of our analysis is on FTE-weighted statistics. The average job-year FTE
employment is 0.78, and 45 percent of job-year observations involve less than full-time
employment during the year. The employment weighted average age of workers was 38
years (and increased 1.4 years or 4 percent over the period), and 46 percent were female.
All earnings and incomes have been adjusted using the Consumers Price Index (CPI) and
expressed in constant (December quarter 2005) dollar values. Average annual FTE job
earnings are $44,077.

Statistical Model Specification and Estimation Issues
In this section we outline the statistical framework adopted to analyse the contributions to
the job-level earnings rate of a limited set of observable worker characteristics, and timeinvariant (unobservable) worker and firm effects. Letting i, j and t index workers, firms,
and time (year), and defining job-ij as the employment relationship between worker-i andfirm-j, the unit of observation for this analysis is a unique (ijt) job-year combination. We
estimate log-linear additive effects models of the following form:

4New Zealand Journal of Employment Relations (2007), 32(1)where yijt is the log(annual FTE earnings rate) of the job-ij in year-t, which is associatedwith worker-i (i = 1, … N) employed in firm-j (j = 1, … J); θi is the time-invariant effectassociated with worker-i, which represents their earnings premium across the firms theywork for; similarly, ψ j is the time-invariant effect associated with firm-j, which
represents the earnings premium it pays to all its workers; χijt is a vector of observable
worker and firm-level characteristics that affect earnings, and ß is the associatedparameter vector; τt are time effects; and εijt is a residual that captures idiosyncratic jobmatch effects, measurement errors, etc.
In the presence of worker fixed effects, time and age are perfectly collinear in a balanced
panel, so these effects are not identified in equation 2. Although we have an unbalanced
panel, and also measure age on an employment-weighted basis within each year, whichmeans age is not perfectly synchronised over time, we believe the resulting identification
associated with estimating equation 2 is tenuous at best. Maré and Hyslop’s (2006) paper
contains a discussion of preliminary results from estimating equation 2 and problems
associated with these.
Because of this identification problem, we adopt a two-step estimation procedure. In thefirst stage, we estimate unrestricted sex-age earnings profiles for each year by regressing
job FTE annual earnings rate on a full set of worker sex-age dummies, allowing thecoefficients to vary by year. Then, in the second stage, we use the first-stage residuals toestimate the (unobserved) worker and firm effects by projecting the residuals onto fullsets of worker, firm and time dummy variables. That is, the estimating equations are:where ßgAtvector ofisacoefficients on a full set of sex * age * year dummy variables, and εˆijt is the residualfrom the first-stage regression. This approach identifies the combined second stage
dependent variable (i.e. the combined worker, firm, and idiosyncratic job-year effects) as
orthogonal to the unrestricted sex-year age profiles estimated in the first-stage. The year
dummy variables in the second stage regression (τt) are included to control forcompositional changes over the period. We use information on all employment jobs
observed in the LEED, and weight each job-year observation in the estimation by its
estimated FTE employment.

5New Zealand Journal of Employment Relations (2007), 32(1)There are three main statistical challenges in estimating the relationships in equation 3.
First, not all worker and firm effects parameters can be identified. Abowd, Creecy andKramarz (2002) (ACK) consider the identification of worker and firm effects that arise
with the simultaneous estimation of worker and firm fixed effects models such as thatshown in the second line of equation 3. As with standard fixed effects models, restrictions
are required in order to identify the relevant effects of interest. The first step for
estimation and identification is to allocate job-year observations into distinct ‘connected’groups of firms and workers. A ‘connected’ group contains “all the workers who everworked for any of the firms in the group and all the firms at which any of the workers
were ever employed” (ACK, p. 3). Suppose there are G distinct non-overlapping groupsof connected workers and firms. Within a group g containing Ng persons and Jg firms, it
is possible to identify the group mean, Ng – 1 worker effects and Jg – 1 firm effects,
yielding Ng + Jg – 1 identified effects. Across all G groups, there are N + J – G estimableeffects.
Second, the estimates obtained are not unique, and an explicit identification proceduremust be imposed. The non-uniqueness of estimates arises because, within each group,
some arbitrary normalisation is required – e.g. omitting the group mean, one of theworker effects or one of the firm effects. Our identification strategy is to restrict theoverall mean firm effect to be zero, and the mean worker effect within each group to be
zero. Given these restrictions, we can identify the overall mean of the dependent variable,
and N + J – G – 1 worker and firm fixed effects.
Third, given the large number of person and firm fixed effects parameters in the model(more than 3 million), it is not feasible to use standard direct least squares estimation,
which requires inversion of a very large sparse covariate matrix. Instead, we use aweighted variant of the exact solution for estimation of this model, as described in ACK.
We adopt their approach of using a preconditioned conjugate-gradient algorithm
developed by Dongarra, Duff, Sorensen and Van der Vorst (1991), and implemented in
Fortran for this application by ACK. We apply the ACK grouping algorithm to data on all
job-years observed during the six years of our data.

Results
Aggregate Contributions to Earnings Variation Across Jobs

Based on the grouping and the two-stage estimation approach described above, Table 2
contains a summary of the main estimation results from FTE-weighted regressions of jobyear observations. The first row contains the main FTE-employment weighted estimation
results of job-year FTE earnings. The logarithm of the FTE annual job earnings rate has amean of 10.54 (geometric mean of $37,800 per year), with a standard deviation of 0.34.

6

New Zealand Journal of Employment Relations (2007), 32(1)By construction, the first stage residuals have zero mean. The earnings component
associated with the “first stage covariates” has a standard deviation of 0.17, while theworker and firm effects have standard deviations of 0.24 and 0.10, respectively. The
variability in each of these components reflects the degree of heterogeneity acrossworkers and firms, as measured across intensity-weighted job-years. These results
suggest there is greater systematic variability in job earnings within observable age-sex
worker demographic subgroups than there is across the groups – i.e. the standard
deviation of worker effects (0.24) exceeds the variability of earnings accounted for by the
sex-age profiles (0.17).
TABLE 2: Summary of Earnings Components

Note: Numbers in parentheses are standard deviations

Overall, the model accounts for 90.3 percent of the variation in FTE annual job earnings
rates. To gauge the importance of the various components to job earnings we measure
how much each contributes to the total variation in job earnings. For each component, wehave calculated both the “simple R2” from the regression of log (job earnings rate) onthat component and also the “marginal R2”, which is the increase in R-squared associatedwith adding that component to the model that already includes all other components. The
simple R2s associated with the observable variation across sex, age and/or years, worker
effects and firm effects, respectively, are 0.26, 0.49 and 0.25, while the marginal R2s ofeach of these is 0.24, 0.49 and 0.09. Based on these estimates, the worker effects makethe largest contribution, followed by the worker demographics. Given that we do not
observe education levels (and other common worker characteristics) in our data, theworker effect component absorbs the impact of human capital variation that is included
as part of observable interpersonal variation in some other studies. Also, the lower
contribution of the firm effects reflects, in part, the greater clustering of jobs across firms,
with an average of 58 job-year observations per firm, compared with only 7 job-year
observations per person. As we will see subsequently, the similarity of the simple andmarginal R2s for the worker effects and observable effects, and the substantial drop in
marginal versus simple R2 for the firm effects, is explained by the finding that these two
effects are negatively correlated, while each is positively correlated with the firm effects.

7New Zealand Journal of Employment Relations (2007), 32(1)Aggregate Correlations Across Earnings Components

In Table 3, we present the (FTE-weighted) estimated correlations between the various
components described in Table 2 across job-year observations. Perhaps the main result ofinterest in this panel is the correlation between the estimated worker and firm effects. The
correlation between the weighted estimates is 0.12. This correlation is greater than the
0.08 estimated by Abowd, Kramarz and Pérez-Duarte (2003) for seven US states, and-0.03 and -0.28 for Washington state and France, respectively, estimated by ACK,suggesting possibly greater positive assortative matching of workers and firms in New
Zealand.
TABLE 3: Correlation Between Earnings Components

In addition, the table shows that the worker effects are negatively correlated with theobserved sex-age profiles, suggesting that (lower earning) females and non-prime-aged
workers, on average, have positive effects, and males and prime-aged workers havenegative effects. Counterbalancing this effect, there is a positive correlation between firm
effects and worker demographics, which suggests that higher-paying firms predominantly
employ males and prime-aged workers.
Employment Composition Effects over the Period8New Zealand Journal of Employment Relations (2007), 32(1)Between 1999/2000 and 2004/05 there was strong growth in the number of workers andeffective annual employment over the sample period (16–17 percent), and in the numberof active firms (10 percent). Against this backdrop, we describe the compositionalchanges associated with the workforce and firms over the sample period, summarised inTable 4. The first row of Table 3 reports the means and variability of the components ofearnings variation for the full sample of job-years. The following rows describe theannual composition effects for each year over the period. Average FTE annual earnings
rate increased about 6 percent (0.06 log-points) over the period, and this increase isattributed to the sex-age profiles and aggregate time dummies in the first-stage regression(first-stage covariates).4.
The estimates of the second-stage components in the subsequent columns characterise thecomposition changes over the period, conditional on the observed year-specific sex-age
profiles. Although the first-stage regression ensures that the mean of the dependent
variable in the second stage (first-stage residual, εˆijt ) is zero for each year, thecomposition of workers and firms is changing, as reflected in their (average) estimatedeffects. Annual mean worker effects decline from 2 percent above the 6-year mean in thefirst year (1999/2000) to 3 percent below in the last year (2004/05). There is a smaller
decline in the average of firm effects by year from about 1 percent above average in
1999/2000 to marginally less than average in 2004/05. The second-stage estimated timeeffects act to balance out the impact of these declining average worker and firm effects
over the sample, and show an increase from -3 percent in 1999/2000 to 3 percent in
2004/05.5. In terms of possible compositional changes over the sample period, thecorrelation between worker and firm effects across jobs is roughly constant over theperiod, although falls somewhat over the final two years.
These results are consistent with a simple hypothesis that, during a business cycle
upswing, the composition of the workforce changes as it expands, and less productive
workers and firms are drawn into employment.6. However, it should be noted that ouranalysis is based on earnings and potentially confounds labour productivity with labour
supply effects.
Subgroup Analyses

Table 5 documents the variation in earnings rates, worker effects, firm effects, and thecorrelation between worker and firm effects across various worker and firm-level
dimensions,7.
We first describe the patterns across worker sex and age subgroups. The average job
earnings rate of males is about 30 percent (27 log-points) higher than for females.
Conditional on the respective estimated sex-age profiles, on average, males work in jobs
with 2 percent higher firm effects than average. As a consequence of this and of theidentification restrictions,8. females work in jobs with 2 percent lower firm effects, andthe average worker effects of males and females are -2 and +2 percent, respectively.

9New Zealand Journal of Employment Relations (2007), 32(1)The average job earnings rate across age groups describes a concave age earnings profile,with younger workers earning substantially less than, and older workers also earning lessthan, prime-aged workers. In addition, both young and old workers, on average, have jobs
with low firm effects (7 percent lower than average for those aged under 20 years, and 2
percent lower for those aged 60–69 years).
TABLE 5: Subgroup Variation in Earning Components and Matching

The estimated correlations for male and female workers are similar to the overallcorrelation. Over the age profile, the correlation is strong for prime-age workers (e.g. for
30–39 year olds, the correlation is 0.19), and weaker for young and old workers(correlations or 0.04 and 0.05 for workers aged under 20 years and 60–69 years,
respectively). For young workers, the low correlation between worker and firm effects
may be due to early labour market “job shopping”, which results in more “random”
matching between workers and firms, and also associated with relatively more higherability workers spending time in non-career jobs (e.g. students) than later in life. For
older workers, the lower correlation may be due to greater non-wage compensation
associated with older cohorts and/or reflect that the earnings rate is a less importantmeasure of the attractiveness of a job towards the later in the working life. Matching may

10New Zealand Journal of Employment Relations (2007), 32(1)thus contribute to the shape of the age-earnings profile, with peak earnings levels partly
reflecting better job matches.
The principal firm characteristic that we observe in the LEED is the industry the firm
operates in, and we describe the pattern of results across 1-digit industries. Figure 1
summarises the between-industry variation. In this figure, industries are ordered from left
to right by increasing average log (job earnings rates). Not surprisingly, there issubstantial cross-industry variation in job earnings rates. For example, the averageindustry-level log (FTE annual job-earnings rate) varies 0.78 across industries from a lowof 10.16 ($25,800) in the Accommodation, Cafes and Restaurants industry to a high of
10.94 ($56,400) in the Electricity, Gas and Water Supply industry.
Although there is quite great deal of variation, the raw industry earnings differentials
generally reflect all three of the demographic, worker and firm effects. That is, workers inindustries with high raw earnings also tend to have demographics associated with higher
than average earnings, although the cross-industry demographic relationship is weaker
than the raw earnings pattern. Furthermore, the average worker effects and average firm
effects tend to be higher in higher earning industries. For example, conditional on
observable worker demographics, the average worker effect varies from a low of about
13 percent below the overall average in Agriculture, Forestry and Fishing to a high of 14
percent above the average in Finance and Insurance, while the average firm effect ranges
from a low of 14 percent below the overall average in Accommodation, Cafes andRestaurants to a high of 19 percent above the average in Mining. There is also substantial
variation in the dispersion of firm effects within industries. The standard deviation offirm effects (not shown) ranges from a low of 0.05 in Accommodation, Cafes andRestaurants, in Government Administration and Defence, and in Education to a high of
0.15 in Mining.
There is substantial variation in the worker and firm effect correlations across industries.
The correlation is negative (about -0.05) in Agriculture, Forestry and Fishing, and inConstruction, and quite low in several other industries, while there is a strong correlation(0.29) in Communication Services, and also quite high correlation in some otherindustries.
The next subgroup dimension we consider in Table 5 is based on the geographic locationof the firms. Consistent with other research (e.g. Lewis and Stillman, 2005) this showsthat jobs located in Auckland and Wellington have 8–10 percent higher earnings rates
than the overall average. Our estimates attribute the differences almost entirely to(unobserved) worker and firm effects. In Auckland, both the average worker and theaverage firm effects are about 4 percent higher than their respective overall averages. In
Wellington, the average worker and firm effect differences are 6 percent and 3 percent,respectively. Across regions, the worker-firm effect correlation is higher in Auckland(0.13) and Wellington (0.20) and relatively low in Christchurch (0.05) and “Other” (0.04)
areas, providing some support for the hypothesis that labour market matching is more
efficient in dense urban areas.

11New Zealand Journal of Employment Relations (2007), 32(1)The final panel of Table 5 shows variation between groups defined by the stability of
employment of workers and firms. For this purpose, in each year, we stratify workers bywhether they worked full year and/or full-time in every month they worked; andsomewhat analogously, we stratify firms by whether the annual employment in a firm
consisted predominantly of full-time and/or full-year workers.9. For workers, the parttime characterisation appears to be the primary dimension along which job earnings rates
differ. Part-time workers earn on the order of 40 percent (strictly, 40 log-points) lower
job earnings than the overall worker average. The lower earnings are due to 9–12 percent
lower earnings associated with observable demographics, 18–19 percent lower worker
effects, and 5–6 percent lower firm effects. However, given that our measurement ofeffective employment is biased upwards (and FTE job earnings biased downwards) for
part-time workers, these results should be interpreted with some caution.
FIGURE 1: Between-Industry Variation in Earnings Components and Matching

A similar, though more muted, pattern applies to firms’ employment stability. For
example, the job earnings in firms with predominantly “part-time” employment are 4–10
percent lower than the overall average, which is due to 0–3 percent lower earnings
associated with worker demographics, 0–3 percent lower worker effects, and 4 percent
lower firm effects. The latter suggests that firms that use a relatively large fraction ofpart-time employment pay lower earnings rates than other firms (who employ the same
workers).

12

New Zealand Journal of Employment Relations (2007), 32(1)The correlation between worker and firm effects is negative for the subgroups of parttime workers (-0.01 and -0.04 for part-year and full-year subgroups, respectively). It isalso relatively low for the subgroups of full-time workers (0.04 and 0.02 for the part-year
and full-year subgroups). Thus, it appears, that much of the overall correlation between
worker and firm effects is associated with the full-time/part-time dimension of
employment stability, and that there’s little evidence of matching within these groups.
The correlation for the subgroups of “full-year” firms are also relatively low (0.05 for the“part-time” and 0.00 for the “full-time” firms).

Concluding Discussion
In this article we have documented the joint estimation of worker and firm effects,
together with observable worker demographic effects, associated with the FTE annual
earnings rate of jobs in Statistics New Zealand’s LEED. The analysis of these factors has
focused on three broad themes. First, we examine how much of the variation in job
earnings rates is attributable to observable worker demographic factors (age and sex),
unobserved worker effects and unobserved firm effects, and document the degree ofheterogeneity in each factor across various dimensions. We find that the unobserved
worker fixed effects account for about one-half of the variance in job earnings, while
worker demographics account for one-quarter, and the firm fixed effects account for 10–
25 percent of the variance.
Second, we explore the compositional changes in workers and firms over the period.
Based on changes in the annual average of worker and firm effects over the period
associated with such compositional changes, we estimate that worker and firm effects
declined about 5 and 1 percent, respectively, over the period. The declining average
worker effect is consistent with the hypothesis that there are compositional changes in
employment and the labour force over the business cycle that lowers average worker
productivity during booms compared to recessions, and suggests there has been about a 1
percent annual decline over the sample period.
Third, we document patterns of sorting of workers and firms across jobs over the sample
period. The correlation between worker and firm effects is 0.12, which implies there is atendency for high-earning workers to work for high-paying firms, suggesting positive
complementarities between workers and firms. The 0.12 correlation between worker andfirm effects is relatively higher than international estimates. We found quite strong
between-group sorting along the full-time / part-time dimension of employment. Sorting
appears to be stronger in Auckland and Wellington than other regions. Perhaps
unsurprisingly, there is also substantial variation across industries. We find generally
positive associations between industries’ job earnings rates and each of the average
earnings based on worker demographics, average worker effects and average firm effects,
although there is also heterogeneity between different industries.

13

New Zealand Journal of Employment Relations (2007), 32(1)However, as this article is the first to estimate two-way worker and firm fixed effects
models for New Zealand, the scope for future research is broad and a discussion of theresearch possibilities opened up by the availability of linked employer employee data canbe found in Abowd and Kramarz (1999). Furthermore, there are two streams of potential
research emerging from the current study. The first is methodological, and includes
further analysis of the identification issues that led us to undertake two-stage estimation,
the impact of the strength of connectedness between firms and workers, and the stabilityof fixed effects estimates over time. The second stream entails further investigation ofsome of our key findings: analysis of the contribution of firm and worker entry and exit
to the reported composition changes over time, and analysis of the patterns of matching,which appear to be largely within rather than between full-time and part-time jobs.
The value of the LEED for further research would be enhanced by inclusion of additional
worker and firm covariates, and by some measure of hours. In the absence of suchinformation, the estimated fixed effects produced as part of the current project can serve
as proxies for unobserved productive worker and firm attributes in other research projects
examining outcomes for workers and firms.
It is worth noting that access to the LEED is restricted. Only researchers employed by
Statistics New Zealand are able to access the data, and then only on Statistics New
Zealand premises for approved projects. These restrictions reflect the sensitive nature of
the data, and give effect to the protections in the Statistics Act and the Income Tax
Administration Act.

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Zealand: How Does Auckland Compare?, New Zealand Treasury Working Paper, WP
05/08.
Maré. David C and Dean R Hyslop (2006). Worker-Firm Heterogeneity and Matching:
An analysis using worker and firm fixed effects estimated from LEED, Leed Research
Report, Statistics New Zealand; available at www.stats.govt.nz.
Seyb, Allyson (2003). The Longitudinal Business Frame. mimeo, Statistics New Zealand,available from www.stats.govt.nz.
Solon, Gary, Robert Barsky, and Jonathan A. Parker (1994). Measuring the Cyclicality ofReal Wages: How Important is Composition Bias?, Quarterly Journal of Economics, 109(1), pp. 1-25.
NOTES
1. The basic ideas are captured by Becker (1973), who highlights the central role ofcomplementarity in household production as a basis for positive assortative matching of marriage
partners.
2. In addition to regular firm-worker employment jobs being identified in the LEED, several otherrelationships involving PAYE tax deductions can also be identified by particular “employer”
identifiers. These are working-age social welfare taxable benefits; earnings-related accident
compensation payments from the Accident Compensation Corporation (ACC); Student
Allowance payments (SA); Paid Parental Leave (PPL) payments; and New ZealandSuperannuation (NZS) retirement pensions. In what follows, we make a distinction between
LEED earnings from employment-jobs and other LEED income from these other (nonemployment) sources.
3. We have compared the estimated average employment intensity and the fraction estimated to
be full-time with analogous estimates using Household Labour Force Survey (HLFS) data forworkers over the sample period (See Maré and Hyslop, 2006). The results confirm that, first, theLEED employment intensity construct has similar properties to analogous survey estimates and,second, in the absence of any direct hours measure, it provides a useful first-order adjustment for
estimating differing levels of employment intensity across workers.
4. Most of this change appears to be due to aggregate time effects. For example, allowing
unrestricted age earnings profiles by age and across males and females, but restricting these to beparallel in different years, we estimate the aggregate time effect to be 6 percent (0.06 log-points)
between the first and last years. Relaxing these specification to allow separate sex-year dummy

15New Zealand Journal of Employment Relations (2007), 32(1)variables, we estimate male aggregate (time) earnings growth of 4.4 percent, and female earnings
growth of 7.9 percent.
5. The pattern of changing time effects reflects the dynamics of worker and firm inflows andoutflows over the period. Maré and Hyslop (2006) contains a more detailed discussion, analysing
patterns separately for entering, exiting, and continuing firms and workers.
6. Solon, Barsky and Parker (1994) show that the usual macroeconomic finding of weakly
cyclical wages over the business cycle is substantially affected by composition bias: controllingfor compositional changes in employment over the business cycle, real wages are strongly
procyclical.
7. In considering the subgroup correlations it is important to realise that these are “within-group”
correlations (i.e. the correlations are calculated relative to the subgroup worker and firm effectmeans), and exclude any between-group correlation effect that is included in the overallcorrelation estimate.
8. Literally, the symmetry is exact if we have equally balanced male and female subsamples.
9. More specifically, we classify a firm’s employment in a year as “full-time” if the number ofobserved worker-months in LEED is at least 75 percent of the potential number of months given
the number of workers employed by the firm during the year, and we classify the firm as “fulltime” if the level of FTE employment in the firm is at least 95 percent of the number of workermonths. See Hyslop and Maré (2006) for a more detailed description and discussion of these
employment stability measures.

16New Zealand Journal of Employment Relations (2007), 32(1)Through the Outdoor: Drivers of Training Supported by New
Zealand Organisations
STEPHEN BLUMENFELD* and ASHISH MALIK**
Abstract
Factors affecting employer support for internal, external and industry training areassessed using data from the Business New Zealand Skills and Training Survey 2003.
Explanatory factors considered in this analysis are the size, location and age of theorganisation, the industry in which the organisation operates, the gender composition of
the organisation’s workforce, the extent of workforce casualisation, average employee
skill level and qualifications earned, and the concentration of those skills andqualification within the organisation. Measures of these factors are specified in logistic
regression models in which the likelihood the organisation invests in on-site (internal),
off-site (external) and/or industry training is included as the dependent variable. Resultsfrom this analysis suggest that the industry in which a firm operates and use of casual andpart-time staff are the most significant drivers of New Zealand employers’ willingness toinvest in on-sight and industry training. Geographic location manifests a positive
influence on firm investments in training provided off-site.

Introduction
Notwithstanding the focus over the past two decades on policy-level initiatives directed attraining as a means of enhancing firm competitiveness, leading experts in the field haveargued that global competitiveness can really only be achieved through initiatives
developed at the enterprise level (Cappelli, 1995; Porter et al., 2004). That is, for firms to
be competitive, they must demonstrate the flexibility to respond to frequent changes intheir external environment (Storey, 1995). Such flexibility is often achieved through skill
development and training. Yet, little is known about the factors that drive employer
investment in such initiatives.
This study makes use of data from the Business New Zealand Skills and Training Survey
2003, conducted as a part of a joint study by Business New Zealand and the Industry
Training Federation and supported by the New Zealand Department of Labour’s Futureof Work Contestable Fund. These data, which have been provided to the authors by
Business New Zealand, are used here to assess the impact of various organisational
characteristics and employee demographics on investments by New Zealand employers inboth internal and external training programmes. The former encompass the activities of
in-house training staff, training consultants and contractors, and modern apprenticeship*

Stephen Blumenfeld is a Senior Lecturer in the Management School at Victoria University of Wellington,
New Zealand**Ashish Malik is a Programme Leader in HR at The Open Polytechnic of New Zealand17

New Zealand Journal of Employment Relations (2007), 32(1)coordinators. External training includes training offered by polytechnics, universities, andprivate training establishments (PTEs).
This analysis further distinguishes between internal and external training, as identified
above, from industry training, which has elements of both internal and external training
and includes training provided by Industry Training Organisations (ITOs), governmentsupported training, conference attendance, supplier-provided training, and Modern
Apprenticeships. ITOs in New Zealand are similar to registered training organisations(RTOs) in Australia and offer nationally recognized training based on New Zealand’s
National Qualifications Framework (NQF). Moreover, since New Zealand’s Modern
Apprenticeships Programme is a work-based initiative coordinated at the industry level, it
has elements of both in-house or internal training and industry training. As such, forpurposes of this analysis, Modern Apprenticeships are encompassed in both the internal
and industry training categories.
The analysis presented herein focuses on the following explanatory factors: years ofoperation, enterprise size, industry sector, geographical location, casualisation of work,and the level and mix of qualifications and skills. Logistic regression is used to predict thelikelihood, or the odds given each of these explanatory factors, that an employer will
invest in each of the three types of training considered: internal, external and industrylevel training.

Key Drivers
Drivers of Employer-sponsored Training
Since mid 1980s, numerous attempts have been made to model the factors that drive
investment in training at an enterprise level. Studies from the UK suggest that a firm’s
investment in training is influenced by a complex interaction of certain driving (triggers)
and moderating (stabilizers) factors that are typical to an industry or an organisation(Sparrow & Pettigrew, 1985; Hendry & Pettigrew, 1989). In their study, Pettigrew andhis colleagues found that, while training is stabilized by a combination of factors insideand outside the firm, triggering factors are closely linked to the firm’s business strategy,
which may have a profound impact on its skill requirements and, in turn, its investment in
training.
More recently, studies in Australia have attempted to describe factors that influence thenature and extent of enterprise training (Hayton et al, 1996; Smith and Hayton, 1999;
Ridoutt et al, 2002; Smith et al, 2002). Expanding on the earlier work conducted in the
UK (Sparrow & Pettigrew, 1985; Hendry & Pettigrew, 1989), Hayton et al (1996) groupfactors influencing the nature (or various forms of training activities) and extent (orvolume) of training under three headings: training drivers, environmental factors andmediating factors. The latter two factors are, respectively, influences that are external andinternal to the firm.

18New Zealand Journal of Employment Relations (2007), 32(1)As noted by Ridoutt et al. (2002), since one set of factors is not universally applicable or
relevant to all industries, the Hayton et al model has the flexibility to accommodate
certain training drivers and environmental and mediating factors to allow for industryspecific or organisation-specific modeling. Similarly the outputs of this model proposed
by Hayton et al (1996), namely the nature and extent of training, can be modified to suit a
specific context in which training is provided.
Drivers of International, External and Industry Training
Internal training has been found in other studies to be less prevalent in small and medium
sized firms than it is in larger firms, which are more likely to have an integrated humanresource strategy, base work around a team approach, link training to business strategy.
Larger enterprises are also likely to have an established training infrastructure, such as a
training department, a training manager and workplace trainers. Such workplaces are
more likely to be unionised and be comprised of a more highly skilled workforce than aresmall- and medium-sized enterprises (SMEs). All of these attributes of larger
organisations have been shown to be positively correlated with the provision of training
by employers (Smith et al, 2002).
In addition to enterprise size, the extant literature points to a positive relationshipbetween industry sector and internal training provision (Hayton et al, 1996; Ridoutt et al,2002). No known studies, though, have considered the relationship between internal
training and the number of years the organisation has been in operation, its geographicallocation, its use of a casual workforce, the qualification levels achieved by its workers or
the concentration of skills and qualifications across its workforce.
One aspect of internal training that renders it difficult to distinguish from external
training is that an employer may hire an external training provider to provide formal,
structured training specifically to their employees. Unlike internal training, though, thenature of training provided through external training is not specific to that employer’s
needs but is, instead, more generally applicable across a broad range of employers. Also
unlike the case of internal training, the impact of establishment size on the likely
provision of external training is not clear (See, for instance, Hayton et al, 1996, andRidoutt et al, 2002).
New Zealand’s Industry Training Act 1992 defines industry training as industry-specificemployee learning or skills-upgrading that is supported by or on behalf of employers in
an industry or combination of industries. As noted by Smith and Hayton (1999) withregard to Australia, some industries have long traditions of training that have developed
over an extended period. In New Zealand, prior to 1992, employers and trade unions inmany sectors, such as shipping, building trades, manufacturing and charteredaccountancy, supported apprenticeship-based industry training. Subsequent to enactmentof the Industry Training Act 1992, Industry Training Organisations (ITOs) were
established in a range of sectors, however the need for and efficacy of that training likely
varies from one sector to another (ITF 2006).

19

New Zealand Journal of Employment Relations (2007), 32(1)In addition to Industry Training Organisations (ITOs) recognised by the Associate
Minister of Education (Tertiary Education) under the Industry Training Act 1992, there
are other forms of training in New Zealand. Within the business and finance sector, forinstance, some industry sub-sectors are served by ITOs with a well-established system of
qualifications. This is the case, in real estate, where a formal qualification is required
before one is permitted to work, and in call centres, were workers are typicallyencouraged to up-skill. In addition, chartered accountants are required to hold aqualification earned through what has been termed external training herein and approvedby the New Zealand Institute of Chartered Accountants (NZICA). One would expect,
nevertheless, that factors specific to the sector in which an organisation operates—be itcompetitive factors, changes in technology or merely the availability and accessibility ofsuch training—are the primary driver of that organisation’s support for industry training.

Data and Methods
This analysis makes use of data derived from the Business New Zealand Skills andTraining Survey 2003. The population covered in this survey is the 2003 membership ofBusiness New Zealand’s regional associations. As such, the sample is not necessarily
representative of all New Zealand employers. The survey sample was, nevertheless,stratified to ensure inclusion of a representative number of relatively small, medium andlarge size enterprises across all regions of the country. To this end, 15 percent of the
respondents to the survey employ 5 or fewer people, while 21 percent employ 100 or
more workers (Business NZ and ITF, 2003).
A demographic breakdown of the 467 establishments and the employees of thoseestablishments that are covered in this analysis is provided in Table 1. As can be seen
here, most of the organisations covered by this study are well established, having been in
operation for at least five years. Most are in the tertiary sector, which has been
subdivided, for purposes of this analysis into categories reflecting the wholesale andretail trade and accommodation, cafes and restaurants (“trade”); transport, storage andcommunication (“logistics”); finance and insurance; property and business services(business/finance”);
government
administration,
defenceandeducation(“government/education”);and health and community services; cultural, recreational,
personal and other services (“service”). These data also reveal that, while more than halfof the organisations in this study are located in Auckland or the Canterbury region, justover 10 percent operate on a national basis.

20

New Zealand Journal of Employment Relations (2007), 32(1)TABLE 1: Organisational Characteristics and Employee Demographics

Employees of the establishments encompassed in the study sample generally fall within
the known demographics of the country’s labour force. Forty-three percent of the workers
covered in this analysis are female, and 78.6 percent work full-time. These numbers
correspond with the 45.4 percent and 77.3 percent figures for the total working
population in New Zealand derived from Statistics New Zealand’s March 2003
Household Labour Force Survey (HLFS). In addition, the 18.2 percent share of those
employed by establishments in the sample with no school qualification is not
significantly different from the 18.7 percent figure for the New Zealand population as awhole reported by the New Zealand Department of Statistics for 2003 (Statistics New
Zealand, 2003).
Of particular concern with regard to the generalisability of the findings from this survey
as well as those from the present analysis, though, is the fact that 89 percent of the 479
New Zealand enterprises responding to the Business NZ survey indicated they support
training for at least some of their employees (Business NZ and ITF, 2003). Nearly 50,000
workers were employed by these respondents at the time of this survey. Having noted
this, however, while the Business New Zealand Skills and Training Survey 2003 likely
under-represents organisations in New Zealand that do not provide support for training,
the present analysis is concerned with factors that determine various types of training.
Hence, the fact that the Business New Zealand Survey may have over-sampledorganisations that support training does not necessarily bias results of this analysis.

21New Zealand Journal of Employment Relations (2007), 32(1)Logistic Regression Analysis
Logistic regression (logit) is used to estimate the likelihood, after controlling for theorganisational and employee factors described in Table 1, of an organisation supporting
either internal, external or industry training. The dependent variable in these models is
specific as the logarithm of the odds of that the specific type of training will be supportedby the organisation. The odds ratio for each independent variable represents the ceterisparibus factor change in the odds of observing the dependent variable. Because of the
difficulty inherent in interpreting logit coefficients, though, both the coefficient estimates
and the odds ratios are reported. Odds ratios greater than 1 indicate an increase in theodds of Y occurring and odds ratios less than 1 represent a decrease in the odds of Y
occurring.
In these regressions, average skill and average qualification are weighted measures of,respectively, skill levels and formal qualifications earned by employees of anorganisation. The share of the organisation’s employees with only a “simple” skill level isgiven a weight of 1; the shares of employees of the organisation with “moderate” and“complex/technical” skill level are provided a weight of 2 and 3, respectively; and theshare of employees with a “very high” skill level is weighted by a factor of 4. Similarly,
the share of the organisation’s employees with only a school qualification is given aweight of 1; the share of employees of the organisation with a trade qualification and thatwith a certificate or diploma are given a weight of 2 and 3, respectively; and, the share of
employees with a degree qualification is weighted by a factor of 4. The proportion of
employees with no school qualification is not included in the calculation of this measure.
The variables S-concentration and Q-concentration are each specified as a HerfindahlHirschman Index (HHI), which is most commonly used as a measure of product market
concentration. It is calculated, for purposes of this analysis, by squaring the share of eachorganisation’s employees in each skill or qualification category, and then summing thesquared values. The HHI can range from a minimum of 0.5 and 0.4, respectively, where
one quarter of the employees of an organisation fall into each of the four skill and one
fifth of the employees of an organisation fall into each of the five qualification categories,
to a maximum of 1.0, where all employees fall into a single skill or qualification
category. In this regard, then, higher values of S-concentration and Q-concentrationreflect greater skill or qualification concentration – i.e., less spread or variation in skill or
qualification levels – amongst the employees of the organisation. Alternatively, lower
HHI values are an indicator of greater diversity of skill levels and qualifications within
the organisation.

22

New Zealand Journal of Employment Relations (2007), 32(1)Empirical Results
Results of this analysis are presented in Table 2, however, one key finding from thisstudy is that, as an organisation matures, it becomes less reliant on industry training as ameans of developing its employees. This suggests that, over time, firms develop theirown internal training infrastructures, but do not rely on internal training to the extent towhich they previously relied on industry training. This later phenomenon might be
explained by the fact that, in most sectors, once employees have received formal training,
there is less of a need for further training. That is, concomitant with the maturation of anorganisation, a larger proportion of those employees who remain with the organisation
become sufficiently trained and, hence, a lesser share of those employees require training.
This same argument offers an explanation for our finding that the higher the average
qualification earned by employees of an organisation, the less likely is the organisation to
support both internal and industry training for its employees. That is, the saturation offormal qualifications may render it less likely that the organisation will support further
training, especially that which is undertaken in an effort to earn formal qualifications.
This, though, would seem to refute evidence from research conducted by OECD/CERI(1998), which found that skills and qualification possessed by current employees are
significant drivers of internal training supported by firms undergoing technologicalchange. One question which cannot be answered given the data employed in this analysis,
however, is whether technological change has any impact on investment in training.
Additionally, as one would expect, and confirming findings from Hayton et al (1996),
Ridoutt et al (2002) and Dawe (2003), results from our analysis point to the conclusionthat the industry sector in which an enterprise operates is an important and statisticallysignificant driver of industry training. However, the fact that employers in this sector
typically rely on either external or, more likely, industry training explains why businessand finance firms in New Zealand are not significantly more likely to provide internal
training than their counterparts in the IT sector, the referent industry category in thisanalysis.
With regard to regional differences, the fact that Auckland is the commercial businesshub for New Zealand and that the majority of external training providers are based in
Auckland explains why organisations located in Auckland are more apt that theircounterparts located elsewhere in New Zealand to support both external and industry
training. Similarly, Canterbury being served by two universities and a range ofpolytechnics and private training establishments (PTEs) is a likely reason why results ofthis analysis suggest that organisations in Canterbury are significantly more likely tosupport external training of their employees than organisations in other regions of thecountry, including Auckland, where industry training uptake is also relatively high. It isalso noteworthy that employer support for industry training is significantly greater inrural New Zealand, such as Bay of Plenty, Nelson and Marlborough, and South Otago,
where ITOs count a substantial, share of their student numbers than in most of the rest of
the country (ITF 2006).

23

New Zealand Journal of Employment Relations (2007), 32(1)TABLE 2: Logistic Regression Results
Dependent
Variable
Independent
Variable
Constant>5
Operation

Internal Trainingββ(std err)

e

-4.72
0.01
(5.27)
Yrs 0.09(1.06) 1.09

External Trainingββ(std err)e-8.7(3.88)

0.00**-0.26(0.78)

0.77

SectorPrimary4.95(2.04) 141.7**
2.31(2.15)
Secondary
3.81(1.56) 45.28**
0.29(1.93)
Trade
1.48(1.35) 4.38**
0.57(2.26)
Logistics
Predicts perfectly
1.51(2.87)
Business/Finance 3.23(2.10)
25.32
2.99(2.36)
Gov’t/Education 2.63(1.19)
13.87** -1.01(2.17)
Service3.01(1.75)
20.31
2.02(2.04)
Location
Auckland-0.79(2.08)
0.45
1.97(1010)
Canterbury-1.29(2.01)
0.28
2.38(1.09)
Wellington
2.14(3.07)
8.52
2.27(1.55)
Rural-5.01(2.63).01*
1.12(1.01)
EmployeesNo.
of 0.02(0.01)
1.02** 0.00(0.00)
Employees% Female0.42(1.59)
1.53-1.34(1.15)

Industry
Training
ββ(std err)

e0.00**
6.29(6.79)
0.37*
0.99(1.28)

10.07
1.33
1.76
4.55
19.97
0.36
7.57

3.48(3.24)
3.07(3.04)
3.75(3.30)
3.59(3.43)
4.24(3.09)
1.75(2.89)
3.22(3.11)

32.60**
21.44**
42.36**
36.13*
69.26**
5.74
25.02

7.20*
10.85*
9.68
3.06

2.59(1.37)
0.49(1.78)
1.48(2.94)
2.84(1.22)

13.35*
1.63
4.39
17.12**

1.00

0.00(0.00) 1.00

0.26

0.29(1.57)
0.90(2.02)
1.19(2.95)
1.32(0.74)
2.73(3.53)
1.20(0.54)
4.64(2.41)% Part-time

0.51(2.34)

1.67

2.37(1.34)

10.64*%Casual
Average Skill
S-Concentration
Avg
Qualification
Q-Concentration

2.22(1.47)
0.19(0.75)
1.82(3.68)-1.18(0.55)

9.18*
1.21
6.15
0.31**

2.01(0.91)-0.48(0.54)
2.41(2.37)
0.65(0.43)

7.49**
0.62
11.15
1.92

-0.03(3.39)

0.97

2.23(2.24)

9.27

0.75
0.41
3.28
3.75**
15.36
0.30**
0.01**

Other Training
Internal
External
Industry
Number of obs
Log Likelihood21.29(0.41)-5.21(1.52)-4.20(1.20)

d.f. = 21

LR Χ

2

3.7*
0.01***
0.01***
300-95.3986.36
d.f. = 22

Prob > Χ* Denotes significant at the 10% level.
** Denotes significant at the 5% level.
*** Denotes significant at the 1% level.

0.00-2.22(1.24)-1.80(1.12)
0.93(0.32) 2.5***306-141.67
87.41
d.f.=220.00

0.11***
0.17***
306
181.15
61.69
0.00

24

New Zealand Journal of Employment Relations (2007), 32(1)Finally, other research has found that part-time and casual employees are much less likely
than permanent employees to participate in internal training and are more likely toengage in external training and education (Campbell, 2001; VandenHeuvel and Wooden,
1999; Wooden and Hawke, 1998). Our analysis of the Business NZ Skills and Training
Survey data would seem to confirm this general finding with regard to external training.
However, our findings point to the conclusion that workforce casualisation is positively
associated with internal training. What we are not able to determine, though, is which
employees of the firm are provided this support. It may, therefore, be the case that, infirms where a relatively large share of the workforce is employed on a casual basis, theemployer is more willing to provide in-house training to their permanent staff but not tothe causal workers it employs.

Conclusion
To summarise the findings from this analysis, factors related to the industry in which afirm operates appear to be the most significant drivers of New Zealand employers’
willingness to invest in on-site and industry training. Somewhat unexpectedly, though,casualisation of work, including increased use of part-time employees, also appears tohave a positive effect on employer support for both of these categories of training. This
does not necessarily point to the conclusion that New Zealand employers who areadopting a core-peripheral strategy are targeting their peripheral workforces for training.
Rather, it may be the case that these organisations are investing more in training thanother New Zealand employers but supporting only their full-time permanent staff in thatendeavour. Finally, geographic region in which the organisation is located manifests a
positive influence on firm investments in training provided off-site, including that offeredat the industry-level and general training offered through polytechnics, universities, andprivate training establishments (PTEs).
Notwithstanding these results, it’s important to note that, due to the manner in which thesource of data employed in this analysis, the Business New Zealand Skills and Training
Survey, was designed, a number of key variables identified in the literature – for example,
adoption of new management practices like total quality management, the learningorganisation, team working, lean production, and business process restructuring, as well
as regulatory factors and alignment of business strategy to the organisation’s humanresource management strategy (Smith et al, 2002) – are not considered in our analysis.
An important consideration in this regard is that these omitted variables may bias
findings from this study. This, in turn, suggests directions for future research into factors
influencing enterprise training in New Zealand.

25

New Zealand Journal of Employment Relations (2007), 32(1)References
Campbell, I (2001). Casual employees and the training deficit: Exploring employer
calculations and choices. International Journal of Employment Studies, 9: 61-102.
Cappelli, P., (1995). Rethinking employment. British Journal Of Industrial Relations.
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Dawe, S. (2003). Determinants of successful training practices in large Australian firms.
NCVER, Adelaide.
Hayton, G., McIntyre, J., Smart, R., McDonald, R., Noble, C., Smith, A., & Roberts, P.
(1996). Final Report: Enterprise Training in Australia, Melbourne: Office of Training and
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Hendry, C., & Pettigrew, A. (1989, December). The factors that trigger training.
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Industry Training Federation (2006). Leading a skilled workforce: key statistics.
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Organisation for Economic Co-operation and Development/CERI. (1988). Human
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Porter, M.E., Schwab, K., Sala-I-Martin, X., & Lopez-Claros, A. (2004). The global
competitiveness report. Geneva, Switzerland: World Economic Forum.
Ridouttt, L., Dutneall, R., Hummel, K., & Smith, A. (2002). Factors influencing training
and learning in the workplace. Leabrook, SA: NCVER.
Statistics New Zealand. (2006). Labour market statistics. Wellington: Statistics New
ZealandSmith, A., Roberts, P., Noble, C., Hayton, G. & Thorne, E. (1995). Enterprise training:
The factors that affect demand. Melbourne (Vic): Australian National Training Authority
and the Office of Training and Further Education.
Smith, A., & Hayton, G. (1999). What drives enterprise training? evidence from
Australia. The International journal of Human Resource Management. 10(2): 251-72.
Smith, A., Oczkowksi, E., Noble, C. & Macklin, R. (2002). New management practices
and enterprise training. National Centre for Vocational Educational Research, Leabrook
SA: NCVER.

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New Zealand Journal of Employment Relations (2007), 32(1)Sparrow, J. & Pettigrew, A. (1985). Britain’s training problems: the search for a strategic
HRM approach. Human Resource Management. 26(1): 109-127.
Storey, J. (1995). ‘Human resource management: still marching on, or marching out’, in
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VandenHeuvel, A. & Wooden, M (1999). Casualisation and outsourcing: Trends andimplications for work-related training. NCVER, Leabrook, SA
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27

New Zealand Journal of Employment Relations (2007), 32(1)The Gap Between Immigration And Employment: A PolicyCapturing Analysis of Ethnicity-Driven Selection Biases
MARIE GEE WILSON* AND POLLY PARKER**
Abstract
Research over the past two decades has identified the impact of job irrelevant
variables on selection decisions. Many of these variables reflect stereotypes
associated with ethnicity, age or other factors. This study uses a short-listing
simulation with 183 New Zealand managers to assess the impact of ethnicity,
migration status on short-listing in a condition of labour scarcity. The policycapturing approach was complemented by in-depth interviews. The findings include
significant schema-driven, selection penalties for minority and migrant applicants thatare moderated by worker scarcity. This supports new models of social categorisationthat include employer motivation in selection decision-making. At a practical level, itsuggests that a ‘screen in’ approach to short-listing may reduce employment
discrimination.

Introduction
In recent years, New Zealand has witnessed an influx of immigration, broadening theethnic diversity of the population and the workforce. Demographic projections
indicate that an increasing number of ethnic minority groups will be strongly
represented in the New Zealand population and labour market (Statistics New
Zealand, 2006). However, despite current skill shortages (Department of Labour,2006), indications are that ethnic1 minorities remain a disadvantaged group in termsof employment outcomes (Ward and Masgoret, 2004; Wilson, Gahlout, Liu andMouly, 2005). Thus, the question is, “How and why migrants and members of ethnic
minority groups still face obstacles to full employment in New Zealand?”In assessing the suitability of applicants, the ‘reasonable’ employer attempts to findthe best fit between applicant skills and abilities and well-defined criteria for the job.
However, employment decisions are not always rational processes, and may
incorporate biases. Research over the last two decades has identified the impact ofmany job irrelevant variables on selection decisions: factors, such as age (Johnson and
Neumark, 1997), accent (Kalin and Rayko, 1978), gender (Heilman and Martell,
1986; McDonald and Hakel, 1985), physical attractiveness (Dipboye, Fromkin and
Wiback, 1975), disability and weight (Arvey and Faley, 1992), nationality (Hubbuck
and Carter, 1985) and sexual orientation (Reza, Marin and Wadsworth, 2002). Thesevariables have all been shown to result in stereotyping with negative consequences forselection. At the individual level, selection biases lower the probability of receiving a
job offer and reduce expected returns to job search (Carmichael and Woods, 2000). At
the organisational and societal level, these same biases distort labour markets andreduce the efficient and effective utilisation of talent (Watts and Trlin, 1999).

28

New Zealand Journal of Employment Relations (2007), 32(1)The purpose of this article, therefore, is to report on a study which investigated theeffects of ethnicity and recent migration to New Zealand on the perceived suitabilityof applicants for early career ‘professional’ positions. Using models of social
categorisation that include employer motivation in selection decision-making, thearticle presents findings from a structured survey questionnaire and interviews toassess hiring preferences of employers in the health sector. The article commenceswith a discussion of the process of discrimination and ethnicity and employment,
followed by a conceptualisation of selection bias. The methods used in the study arepresented, followed by the key findings of the study. The article concludes with a
discussion and a summary of how the findings can be applied both theoretically andpractically.

The Process of Discrimination
The term ‘discrimination’ is expressed negatively in the context of employment,
though the term is defined – without negative or positive connotations – as judgment
based on perception of differences. When these differences are salient and relevant to
the job, we would see this as best practice in employment. It is only whendiscrimination is premised on factors that are not relevant to the job that good
employment principles are violated. Kulik, Roberson and Perry (2007) havedeveloped a model for the incorporation of potentially biasing factors into selection
decisions, using a social categorisation approach, and incorporating elements of
employer motivation, salience of cues, and enhancement or repression of stereotypes
in employment decision-making.
The Kulik et al (2007) model builds on a stream of research that has emphasised therole of stereotypes in impression formation (Kulik, Roberson and Perry, 2007). This
perspective highlights categorisation as a key process in impression formation,
particularly in the context of employment (Brewer, 1988; Kulik, Roberson and Perry,2007). Once an applicant has been identified as a member of a particular social
category, stereotypes influence impressions formed by the potential employer, both
directly and indirectly (Bodenhausen and Macrae, 1998). The general categorisation
process has been supported in a large body of organisational research. Researchsuggests, for example, that organisational decision makers have stereotypes associatedwith applicants’ sex (Deaux, 1995; Eagly, Makhijani, and Klonsky, 1992), race andethnicity, (Chang and Kleiner, 2003; Wilson, Gahlout, Liu and Mouly, 2005), age(Finkelstein, Burke, and Raju, 1995; Wilson, Parker and Kan, 2007), and other social
categories. Activating these categories can influence a variety of organisational
judgments about an applicant, including the decision about whether to hire them.

Ethnicity and Employment
Studies conducted in U.S and U.K have illustrated that Asian and other ethnic
minority applicants remain disadvantaged when compared to non-minority “whites”
in terms of job opportunities. Evidence from some of the earliest UK based studies
conducted by Jowell and Prescott Clarke (1970), indicated that ethnicity of theapplicant influenced the selection outcome. This finding has been consistently
supported over the last three decades (Brown and Gay, 1985; Esmail and Everington,
29New Zealand Journal of Employment Relations (2007), 32(1)1993; 1997; Firth, 1981; Hubbuck and Carter, 1980). These studies strongly support
an “ethnic penalty” – based on stereotypes – that reduces search outcomes for job
applicants from ethnic minorities. This disadvantage manifests itself in terms ofhigher unemployment, under-representation in professions, and lower earnings.
Carmichael and Woods (2000) argued that the penalty is not uniform but varies
considerably among minority groups. Asian migrants to Anglo-Saxon countries
appear to face even larger employment hurdles than other groups (Blackaby, Leslie,
Murphy and Leary, 1999).
Research on employment outcomes of ethnic minority groups in New Zealand mirrors
the international pattern of reduced employment outcomes for migrants and membersof ethnic minorities (Massey et al, 2005). A study conducted by Spoonley (1978) in
New Zealand confirmed the existence of ethnic bias in selection of Pacific Islanders(comparing Pakeha, Maori and Niuean job applicants), and the prevalence ofstereotypes in the selection process. Singer and Eder (1989) investigated the effects of
ethnicity, accent and job status in the selection process in New Zealand and found that
Maori and Chinese applicants were less likely to be short-listed than Dutch applicants.
More recently, Wilson et al (2005) have demonstrated that ethnic penalties areassociated with both migration status and ethnicity, with Chinese and Indian migrants
experiencing significantly reduced opportunities for short-listing and access toemployment. Mace et al (2005) have also found decreased employment opportunities
for Asian migrants in New Zealand, with the development status of the host country
effectively discounting by proxy the perceived human capital of the applicant.

Contextualising Selection Bias
While much of the extant research on employment discrimination adopts a policycapturing approach, to profile the use and relative strength of decisional factors,
Kulik, Roberson and Perry (2007) suggest that a more contextualised approach isappropriate. There are many categories that are called into play when managers areshort-listing applicants – estimated or actual age, gender, inferred class distinctions,religious or other social categories, as well as ethnicity and migration status. The
employer may also be motivated differentially, for both social and self-esteem
reasons, as well as the practical aspects of filling an advertised vacancy in an
increasingly tight labour market. The following authors note that:“… the decision maker is not always a disinterested or passive …The decision
maker may operate as a “motivated tactician” who prefers certain decisionoutcomes over others (Fiske and Taylor, 1991) and who chooses amongalternative categories based on his or her goals, motives, and needs (Macrae
and Bodenhausen, 2001). The decision maker can suppress or inhibit one of
the activated categories and amplify the other … People often use categories
and their associated stereotypes to support desired impressions … andresearchers have noted the extensive capacity of social perceivers to use
categories and associated stereotypes to confirm preferred conclusions…
these motivations can be so powerful that perceivers will exert considerable
cognitive effort to activate categories (and their associated stereotypes) … if
the activated category can be used in the service of the perceiver’s personalgoals…” (Kulik, Roberson and Perry, 2007: 533)
30

New Zealand Journal of Employment Relations (2007), 32(1)The “motivated tactician” in Kulik et al’s social categorisation model is influenced
not only by stereotypes and their own beliefs and values; contextual factors may
motivate decision structures, as well. In particular, the salience of person-job or
person-organisation fit may increase in salience and decision impact when triggeredby either well-crafted selection requirements, or when the need to find suitable
candidates in a tight labour market is heightened. In New Zealand, policy analysts
have often assumed that an employer with a critical talent requirement will overcome
potential decision biases to hire skilled applicants who may not be similar (to thedecision-maker or job stereotypes). Anecdotal evidence does not support thisassumption, and there has been little empirical attention to the potential for “need tohire” to moderate biases in employment selection. This research sets out to test theinteraction of perceptual biases within the labour market context. We reiterate earlier
work on biases against ethnicity and migration status, both to establish a baseline formoderation and to continue to explore interaction effects. We have used ethnic
Chinese applicants as a salient group of both migrant and non-migrant ethnic
groupings.
Hypothesis 1. Ethnic Asian applicants of equal skill and ability will be less likely to
be short-listed for employment than European/Pakeha applicants.
Hypothesis 2. Migration status will decrease the likelihood of short-listing for
applicants who are recent migrants to New Zealand.
Hypothesis 3. The reduction in the likelihood of being short-listed for Asian and/or
migrant applicants will be moderated in labour markets where demand for skilledapplicants is high.

MethodThis study is part of a five year study of candidate and contextual factors that
influence the short-listing decision. In this part of the research programme, we focus
on the impact of perceived labour shortages on ethnic penalties. This research designused a simulation and survey structure to assess hiring preferences, complemented bystructured interviews. The simulation phase required respondents (all participants inexecutive education for healthcare management) to short-list candidates for two
positions – an early career HRM advisor (low to moderate demand condition) and an
early career nursing position (high demand condition). In both conditions, managers
were told that they were receiving a ‘long short-list’ from which they were selecting
candidates for interview.
Instrument. A standardised application form, modeled on that used by the district
health boards, was used to permit direct comparability among applicants, making iteasier for the respondent to evaluate and make selection decisions without
presentation biases and information dissimilarities.
The simulation included a three-page, job description and person specification foreach position, followed by 10 applications (8 active for the purposes of this research,with 2 ‘marginal’ cases), presented in alphabetical order. Each application included

31

New Zealand Journal of Employment Relations (2007), 32(1)the name and contact details of the applicant, details of a bachelor’s degree in humanresources (HR) or nursing, 16-19 months of relevant experience, a listing ofcompetencies (that met the person specification), and statements of fluency in English
and one other language. All of the active applications were independently judged to
be of equal quality by a panel of HR raters (for the HR applications) and by a charge
nurse panel (for the nursing applications). In each set of applications, two were oflower ‘marginal’ quality as judged by the expert panels. These were used to increase
the variance in the applicant pool and increase the realism of the simulation.
The applicants were either Anglo-Saxon (Pakeha) or Chinese applicants. Cues for
ethnicity included surname, country where the degree was gained (only the twohighest ranked Universities in each country were used); country where experience
was gained (with well-known international companies, such as Coca-Cola, Hilton
Hotels, and KPMG for HR, and national teaching hospitals for nursing), additional
languages spoken (Anglo-Saxon candidates spoke English and an additional European
language, Chinese candidates listed English and a specific regional dialect consistent
with their name). Names were deliberately gender-neutral (e.g. Robin, Terrie) toattempt to limit gender interaction effects, and first names of Chinese applicants wereanglicised to reduce additional assimilationist stereotyping noted in other New
Zealand research (Wilson et al, 2005).
The eight active applications included two each: Chinese migrant; Chinese nonmigrant; Anglo-Saxon migrant; Anglo-Saxon non-migrant. The final two “extra”
candidates were both non-migrants, that is, one Chinese and one Anglo-Saxon, eachwith lower level degrees or diplomas that barely met the expressed job requirements.
Decision Variables. Research participants were asked to evaluate each candidate on
suitability for the job (7 point Likert scale; 1= unsuitable for the job; 7= very suitable
for the job). Studies examining selection decisions have traditionally assessed theapplicants’ suitability for the position (e.g. Hakel, Ohnesorge and Dunnettee, 1970;
Landy and Bates, 1973; Dipboye, Fromkin and Wiback, 1975). The final measure wasa short-list, compiled by the participant, across all applicants. A demographic profileof the respondent (ethnicity, years of management experience – including prior shortlisting and hiring experience – and gender) was also gathered through self-reporting.
The design used in the study parallels real-world selection practices where employers
typically evaluate more than one candidate. Moreover, the design was analogous to ahiring situation where decision-makers often have limited information, typically in theform of a brief resume, in order to screen applicants (Bendick, Jackson and Reinoso,
1991; Stewart and Perlow, 2001). The respondents took on average 20 minutes tocomplete the short-listing of 10 applicants for a given position.
Manipulation checks. As a check on perception of social categories, 12 managers
were selected at random, and asked to dictate a summary of the characteristics of theapplicant pool for the “hiring manager” to use in combination with the short-list they
had generated. All 12 of the managers noted that there were Chinese applicants andmigrant applicants in the pool (most also made stereotypical assumptions about
gender, despite the lack of cues). As a manipulation check on the high and low
demand characteristics, all participants were asked to evaluate hiring difficulties for
10 positions in the district health boards using a 7 point Likert scale: 1= very easy to

32

New Zealand Journal of Employment Relations (2007), 32(1)hire for this type of position; 7= very difficult to hire for this type of position. The
positions evaluated included psychiatrist (uniform rating of 7); orderly (mean rating1.7); receptionist (mean rating of 2.1); ward nurse (mean rating of 6.7) and HR
advisor (mean rating of 3.2).
Qualitative Policy-Capture. While the majority of ‘policy-capturing’ research relies
on regression modeling of quantitative variables, this can reduce rather than increase
our understanding of contextuality. In this research, we complemented thequantitative policy-capture (through the simulations) with in depth-interviews of 12
randomly selected participants who, again working with a set of applications,discussed their rationales for judgment and selection decision-making. The interviews
were transcribed and returned to the interviewees for correction and clarification. We
then performed a configurational analysis, by looking for a cluster of rationales andstatements that were attached to each of the different types of applicants, and to theprocess overall.

Results
The survey was administered to 183 practicing managers enrolled in an executive
development programme in the management of healthcare organisations. The sample
demographics were heterogeneous in terms of ethnicity, gender, and managerial
experience, and statistically similar to the metropolitan population of working age.
The respondent managers had, on average, over ten years of supervisory experienceand had all been involved in short-listing and hiring decisions in the past.
A multivariate analysis was conducted to evaluate the hypotheses. Independent
variables were ethnicity of the applicant (Anglo-Saxon and Chinese); migration statusof the applicant (migrant or non-migrant); and perceived difficulty in hiring based ontalent shortages in the labour market (Low demand-HR, High demand-nursing). The
dependent variables included perceived suitability for the position. A multivariate
analysis of variance (MANOVA), with repeated measures, was performed to test the
hypotheses.
Effect of Ethnicity on Selection Outcomes
The MANOVA shows a significant effect for ethnicity of applicant by migration
status (Λ =. 946, η2 = .36, p<. 05). This supports hypotheses one and two. As
summarised in Table 1, the 2x2x2 ANOVA shows a significant main effect forethnicity on assessed suitability for the position (η2 = .48, p<. 01). The MANOVA
results demonstrate migration status modestly increases the impact of ethnicity on
evaluations of suitability, but that, consistent with recent research, this is a migration
effect that is moderated by ethnicity rather than directly interacting with it.
Specifically, Anglo-Saxon migrants are rated more highly and Chinese migrants lesshighly, than their local, non-migrant counterparts.

33

New Zealand Journal of Employment Relations (2007), 32(1)Table 1: MANOVA: Ethnicity, Migration and Demand on Suitability
Effects/ VariablesMultivariate F

Univariate F

9.177∗
2.879NS
6.384∗

10.015∗∗2.731NS
7.09∗

4.278∗∗

12.291∗∗

Within–Subject Factors
APPL ETHNICITYAPPL MIGRATIONAPPL ETHNICITY
x MIGRATION
DEMAND X APPL ETHNIC∗∗

p <. 01, ∗p<. 05; For multivariate statistics, df = (10,756).

In addition to suitability ratings, dependent variables in the simulation included thefinal short-listing decision. After rating all candidates, respondents were asked toconstruct an actual final short-list. We did not constrain the number who could beshort-listed, but most managers assumed that it would be a smaller subset of the ‘long
short-list’ with which they were provided. The applicant pool presented was evenly
divided among qualified candidates from each ethnic and migration group: AngloSaxon and Chinese; migrant and non-migrant. Given that all had equivalentexperience and qualifications, it is reasonable to expect that these types of candidates
would be equally represented in the final short-lists. However, the cumulative shortlists included far fewer ethnic candidates than would be expected based on the
representation in the applicant pool and the short-listing prevalence of non-Chinesecandidates (as shown in Table 2 and Figure 1).
Given that all had equivalent experience and qualifications, it is reasonable to expectthat each type of candidate would be equally represented in the final short-lists.
However, the cumulative short-lists included far fewer ethnic candidates than would
be expected based on the representation in the applicant pool, and Chinese migrants
appear far less frequently than Anglo-Saxon migrants (as shown in Table 2).

Table 2: Percentage of Times Short-Listed
AngloSaxon
Migrant
Across conditions- Low demand- High demand

98
96
100

AngloSaxon
Nonmigrant
86
72
100

ChineseNonmigrant

ChineseMigrant

71
54
88

44
13
75

34

New Zealand Journal of Employment Relations (2007), 32(1)Figure 1. Average rating of applicant suitability by social category with range
and quartiles (rating) and percentage short-listed.
7
98%

6
Rating

86%

5

71%
44%

4

Anglo
migrant

Anglo nonmigrant

Chinese nonmigrant

Chinesemigrant

Social category

Effect of Demand on Selection Outcomes
As noted in the MANOVA, the demand for certain types of workers impacts on theselection process as well. Perceived demand increases the perceived suitability of all
applicants, but has more pronounced impact in reducing the negative effects of
ethnicity and migration penalties for Chinese applicants. High demand conditions
significantly increased the likelihood of being short-listed for an interview for all
candidates, but again had particularly positive impacts on Chinese and Chinese
migrant applicants (see Figure 2).
The under-representation of ethnic applicants in the final short-list was highly
significant in the low demand condition (Pearson χ2 (3, N = 183) =334.6, p <. 001),
but not in the high demand condition. In the high demand conditions, participants
constructed longer short-lists (usually 6-8 candidates) which facilitated inclusion ofgreater numbers of Chinese and other candidates rated as ‘less suitable’, compared to
the low-demand conditions (2-4 candidates), (see Table 2).
To summarise, the findings point towards a significant impact of Chinese ethnicity inboth assessed suitability and probability of being short-listed for positions. This‘ethnic penalty’ is heightened for recent migrants. The penalty is, however,moderated, by high levels of demand for qualified applicants, which increases both
perceived suitability and likelihood of being short-listed. The latter is at least partiallythe result of larger, more inclusive short-lists which tend to include all, or almost all,candidates who meet job requirements.

35

New Zealand Journal of Employment Relations (2007), 32(1)Figure 2. Average Rating of Applicant Suitability by Social Category and
Demand Condition
7
6.5
6
5.5

High

5
Low

4.5
4
3.5
3
Anglo
Saxon
Migrant

Anglo
Saxon
NonMigrant

Chinese
NonMigrant

ChineseMigrant

Rater Rationales: Qualitative Policy Capturing
The selected participants began their interview on the short-listing process by talking
about the employment market; in particular how difficult it was to recruit good staff,
and how they struggled to compete in the health sector labour market against the
backdrop of demands for high quality outcomes and staff shortages. Theircharacterisation of the general labour market, however, was highly stereotypicalincluding references to ‘migrants who can’t speak English’, ‘Islanders who don’t want
to work hard’, ‘women who are too [expletive deleted] to work in teams’, and ‘Asians
who were only good with technology’. These characterisations reflect well-articulated
stereotypes, but in and of themselves, does not mean that decision-making is biased.
As the participants began to focus on the short-listing process and applications, theircomments became significantly less global, and more directed toward theorganisation, its culture and priorities. While their comments still retained
stereotypical aspects, and obvious social categories (women, “Asians”, “Kiwis”,“Brits”, etc, their comments were increasingly focused on the person-organisation fit
rather than global labour market characteristics or person-job fit. They spoke of
having a ‘United Nations of employees’ in their workplace, with ‘lots of workers fromoverseas’. Their conversations in this regard were about fitting the person into the‘public service’ culture of the organisation, and in particular the need for theprospective employee to ‘fit into the culture and systems of the health board’. In
looking over the applicant pool, the interviewees remarked on the ‘high’ proportion ofChinese applicants (but not the high proportion of migrants). Interviewees suggested
36New Zealand Journal of Employment Relations (2007), 32(1)that they would normally see a much more diverse applicant pool, with candidates
from the EU, the former Soviet republics, and Southeast Asia, as well as China. In
discussing migrants, or ‘overseas applicants’ as they were most often termed, theapplicants were characterised generally (and stereotypically) as “unaware of local
requirements”, and having difficulties ‘fitting in’ because of issues as simple as foodpreferences and hygiene, to ‘being part of the team’. Chinese were singled out as‘very different’, ‘shy’, ‘quiet’, ‘hierarchical’ and ‘not interested in fitting the New
Zealand culture’ With the exception of the last characteristic (not fitting in), Chinese
applicants were stereotyped whether they were born in New Zealand or were recent
migrants. Their discussions, rationales and actions were consistent with stereotype
activation and were used to reduce person-organisation fit, which in turn reduced thehiring probability. As the participants focused on the actual short-listing task, they
were much more attuned to person-job fit requirements, and made more extensive useof the selection criteria. However, this was significantly pronounced and frequent in
the high demand (nursing) situations, which is consistent with perceived demand, thusincreasing the “motivation to hire” and increasing vigilance for matches between
stereotype-driven candidate characterisations and position requirements.
In considering the applications for the HR (lower demand) position, participants
quickly moved to ‘screen out’ diverse candidates, stating the need for ‘New Zealandexperience’ (though this was not a stated job requirement) with a clear preference for
Anglo-Saxon candidates, both local and migrant (from Canada and the UK), eventhough the latter contravened their suggested “local experience” requirement, and theless preferred Chinese non-migrant applicants did not. The participants were generally
dismissive of the Chinese candidates for HR positions, particularly Chinese migrants,
expressing ‘common problems’ in the equivalence of qualifications, the standard ofEnglish spoken, knowledge of Treaty requirements (without any relevant evidencewith regard to these in the applications of any candidates). In these situations, there
were no contextual signals that would cause decision-makers to moderate their hiring
stance, or support negative stereotypes, despite clear job criteria. Decision-makers
who had “suitable”, that is, ethnically similar candidates at hand, created additionaljob requirements that contravened Chinese candidate stereotypes and discounted theirorganisational and job fit.
While similar issues arose occasionally in the context of the high demand (nursing)position, they appeared in a distinct minority of cases, and reflected more job relevant
concerns about ‘understanding common standards and protocols for medical
procedures’, and comparability of client and system knowledge. This suggests,
consistent with Kulik’s social categorisation model, that stereotypes were not broadly
invoked for person-organisation fit considerations in the high-demand condition, andwhere concerns were expressed, this was more consistent with pre-specified selection
requirements. Several participants noted that there were increased Chinese and other
Asian patients and this would make Chinese nurses more valuable. In addition, theparticipant’s statements about the short-listing process for nurses focused on ‘direneed’, and ‘chronic shortages’, which required ‘screening in’ candidates, consistent
with “motivated decision-making” as ‘even if they aren’t hired for this position, if
they are good we’ll place them anyway’.
Overall, the interviews reinforced the dominance of stereotyping and social categories
in the decision process. Consistent with the simulation results, however, ethnicity

37

New Zealand Journal of Employment Relations (2007), 32(1)driven employment disadvantage was moderated by perceived labour market scarcity
and thus, employer need. That is, the ‘motivated” decision-maker was more likely to“screen-in” minority candidates and to use job requirements to increase the “match”
with ethically diverse candidates. In low demand contexts, the converse occurred,decision-makers involved stereotypes to provide rationales for reduced personorganisation and person-job fit (even though the client demographic rationale, forexample, is equally applicable to both the HR and nursing positions).
The interviews were also interesting in their lack of internal logic; ‘kiwi experience’was preferred but so were UK migrants; migrants brought interesting experience andthe ability to connect with patients, but not if they were from China, despite Chinesepatients and job applicants outnumbering those from the UK in the healthcare system;and skills-based assessment only dominated when the situation was ‘dire’, but eventhen Chinese candidates – with equivalent objective skills (in qualifications,certifications and experience) – were less preferred.

Discussion
The purpose of this study was to investigate the effect of ethnicity and migration of
applicants on selection decisions, in a context of high and low labour market demand.
It is clear from the results that ethnicity of the applicants reduces preliminary
selection outcomes at the screening stage. The findings indicate that applicants with
Anglo-Saxon/European ethnicity have a higher perceived “fit” for the position, andorganisation, and a higher probability of being short-listed, based on social
categorisation, stereotyping, and resultant selection biases. On the other hand, Chinese
applicants, particularly new migrants, are impacted by selection bias throughstereotyping and social categorisation processes. These selection biases aremoderated, but not completely eliminated, by labour market demand. This latter
finding is one of the first demonstrations of the Kulik, Roberson and Perry (2007)
model regarding social categorisation process in employment discrimination. The
approach taken here is slightly different than Kulik et al.’s emphasis on internalsources of motivation for the decision-maker; in this research we have operationalised
motivation as the result of external pressures on the selection decision, throughperceived labour market shortages which result in ‘screening in’ of applicants rather
than screening out, a differentiated approach with significant impact on selection
outcomes.
Overall, these findings are consistent with the extant literature on influence of
ethnicity on selection decisions, and in differing levels of “ethnic penalty” (Mace etal, 2005; Carmichael and Wood, 2000, Wilson et al, 2005). In particular, this researchreinforces previous findings that Asian (particularly Chinese) applicants are penalisedin Anglo-Saxon/European work settings (Ward and Masgoret, 2004; Wilson et al2005) particularly when they are not engaged in ethnically-stereotypical jobs orindustries. The lower perceived suitability of ethnic applicants may be explained by
the concept of ethnic stereotyping which emphasises discriminatory or negative
biasing effects of ethnicity (Taylor, 1981). Given that all applicants in the poolactually possessed more than the stated qualifications and experience for the job,
average ratings for ethnic applicants that place them well below “suitable” (5-6 on the

38

New Zealand Journal of Employment Relations (2007), 32(1)7 point scale) suggests that the raters’ bias is driven by ethnic schema rather than byobjective differences in applicant or job characteristics.
More importantly, Kulik, Roberson and Perry’s model and this research, begin theprocess of contextualising the process and outcomes of selection bias. Context iscritical to understanding how stereotypes are both invoked and suppressed in
employment decisions. While Kulik et al. (2007) focus on micro-level motivators, e.g.
decision-maker attitudes, we have taken this to a higher level by looking at objective
causes of differential framing and motivational orientation. This higher level ofanalysis is also important as the linear, rational decision-maker in the social
categorisation model is focused primarily on engaging stereotypes in person-job fit,
while we have demonstrated that decision-makers may also call upon personorganisation fit to differentiate candidates who are objectively equivalent in their fit to
the job requirements.
We can also see partial multiplier effects in the interaction of migration and ethnicity.
As Kulik and other authors have noted, while ‘double jeopardy’ is intuitively
appealing, it is less commonly evidenced. Our findings give some insight into why
this may be the case. First, the impact of migration is paradoxical, enhancing thehuman capital of those from the developed world, and reducing that of migrants fromthe developing world. Secondly, while theories of social categorisation assume thateach category is considered consistently and independently, our research suggests thatsome categories are commingled, in particular with ethnicity and migration. For
example, our interviewees had somewhat pejorative single labels for migrants fromthe UK (‘poms’) and for New Zealand- born Chinese (‘bananas’). Where categories
are commingled, they may not be easily disaggregated and singularly invoked as thecategorisation model predicts. This is a gap in the model; while Kulik et al
specifically theorise the potential for sub-categories, meta-categories which cannot beeasily disaggregated are not incorporated in this theorising, but emerge anecdotallyfrom this research programme.
Finally, while most models focus primarily on attitudes and judgment, we haveextended this to areas of action, and demonstrated that external labour market
pressures may reduce active discrimination in employment access, even though
attitudinal barriers remain.

Conclusion
This study investigated the effects of ethnicity and recent migration to New Zealandon the perceived suitability of applicants for early career ‘professional’ positions in
New Zealand, a country that is becoming increasingly ethnically diverse. The major
finding is that the ethnicity of the applicant plays an important role in hiring
decisions, and that this decisional bias involves a social categorisation process ofstereotyping and stereotype-driven decision-making. Across ethnic groupings,
penalties appear to apply to immigrants, with non-Anglo-Saxon applicants being
penalised for recent migration, and Anglo-Saxon migrants being advantaged. The
findings show that ethnic minority applicants, particularly migrants, have reduced
access to the labour market and are less likely to advance to the next stage of theselection process. Consistent with policy statements, however, tight labour markets,
39New Zealand Journal of Employment Relations (2007), 32(1)characterised by widely acknowledged talent scarcity, do reduce barriers to
employment entry. This reinforces the importance of contextual factors, and employer“motivation” in selection bias, and supports the theoretical importance of social
categorisation models in understanding selection biases and stereotype drive
decisional biases.
This study, however, has several research limitations. As part of a larger, longitudinal
research programme, we have focused on a single aspect of the research – namely
ethnic penalty and perceived talent shortages. We are assessing only one non-majority
ethnicity, and Asian migrants, particularly those from China and Southeast Asia haveexperienced demonstrable labour market disadvantage in most OECD countries,
including New Zealand (Massey et al, 1998; Wilson et al 2005). This is a compromise
occasioned by limited access to relevant managers, and the need to constrain the
research parameters to ensure the ability to test the hypothesised relationships. We
have attempted to address the normal limitations of survey-based research, by using aquasi-experimental simulation approach, combined with an in-depth interview tobalance policy-capturing approaches. This is still dealing with only a limited numberof managers, albeit that these are representative decision-makers who are ‘gatekeepers’ in the larger national labour market. The research programme considers
many other moderating factors, including rater ethnicity, and organisational
demography, but these are not reported here.
Nonetheless, this study has implications for both managers and professional leaders inhealthcare. In particular, this research suggests that employment discrimination
persists, potentially overwhelming our ability to accurately perceive the talent andskills presented by diverse applicants. As the workforce becomes more ethnicallydiverse, issues of relative discrimination and opportunities for injustice persist andmay increase. Apart from increased awareness to combat stereotyping and focus
selection on clearly written skill-based criteria, the findings of this research suggestthat raising awareness of skill shortages and encouraging a ‘screen in’ rather than‘screen out’ orientation to short-listing may improve the diversity of the labour pool.
For job seekers, in many cases it is too late to switch careers to an area of skill
shortage (though this would be a potentially effective strategy), but in light of thefindings, reduction of ethnicity cues, and increased visibility and salience of job skills
that meet stated criteria may enhance employability.

40

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_____________________________________

1

Rather than skin colour or race, which are common categorizations in US and UK research, thisresearch focuses on ethnic groupings. While acknowledging that there are many Asian andCommonwealth ethnicities and identities, we have adopted the meta-terms, Anglo-Saxon and Chinese
to refer to large ethnic groupings. The term Anglo-Saxon is closely aligned with the ‘Pakeha’ label in
New Zealand to denote those of Anglo-Saxon heritage, primarily light-skinned, English speaking
peoples. Chinese is used as an encompassing terms for the multiple ethnicities in the PRC and related
economic zones, with a heritage that includes identification with the majority and minority ethnicities
and language groups of these regions

1

Rather than skin colour or race, which are common categorizations in US and UK research, thisresearch focuses on ethnic groupings. While acknowledging that there are many Asian andCommonwealth ethnicities and identities, we have adopted the meta-terms, Anglo-Saxon and Chinese
to refer to large ethnic groupings. The term Anglo-Saxon is closely aligned with the ‘Pakeha’ label in
New Zealand to denote those of Anglo-Saxon heritage, primarily light-skinned, English speaking
peoples. Chinese is used as an encompassing terms for the multiple ethnicities in the PRC and related
economic zones, with a heritage that includes identification with the majority and minority ethnicities
and language groups of these regions

44

New Zealand Journal of Employment Relations (2007), 32(1)Turnover and Retention in a Tight Labour Market:
Reflecting on New Zealand Research
VIVIENNE HUNT* and ERLING RASMUSSEN **Abstract
In recent years, New Zealand has experienced a dramatic drop in unemployment and theoverall unemployment rate is amongst the lowest in the OECD. The resultant tightlabour market has made skills shortages, staff turnover and retention the topic ofwidespread media reports. Staff turnover and retention has also become a key focus of
employers, managers and HRM specialists. This has prompted, as detailed in the article,
renewed research interest in staff turnover and retention in New Zealand. Key findingsof turnover and retention research are discussed and it is emphasised how age, income
levels and (industry and geographical) location are major explanatory factors. It appears
less clear how generational differences impact on job attitudes and behaviours. Using
case study evidence from New Zealand call centres, it is detailed how employers havereacted to a tighter labour market and a relative small pool of suitable labour. In contrast
to the prevailing picture of ‘sacrificial’ human resource management in international
research on call centres, our case study research shows a ‘mixed picture’. In some ofthe organisations researched, managers have experimented with various approaches,
including new human resource development strategies, in order to attract and retain
skilled and experienced staff.

Introduction
In the ‘War for Talent’ book (Michaels et al., 2001), it is suggested that in the current
service and knowledge society, the power has shifted from the organisation toemployees, who have a growing propensity to shift from job to job. In similar vein,
staff retention and turnover have become a major public policy and employer concern in
New Zealand in the last five years. This article explores why this is the case, what New
Zealand research has found about retention and turnover, and what the reactions of
employers have been. Overall, the article points out that the increased managerialinterest in employee concerns, employee-focused flexibility and improved pay andemployment conditions is in sharp contrast to previous management approaches.
To develop our understanding of staff retention and turnover in New Zealand, we draw
on publicly available literature and statistics and in particular, we apply insights
obtained through research projects on employment relations changes, adjustments toworkplace relationships and organisational performance, gender and call centre
employment, and two projects on retention and turnover. While the significant changes
to employment relations legislation in the post-1999 period have influenced employer*

Vivienne Hunt is a Contract Manager at Uniservices, University of Auckland, New ZealandErling Rasmussen is Professor of Work and Employment, Auckland University of Technology, New
Zealand.
**45

New Zealand Journal of Employment Relations (2007), 32(1)and employee approaches (see Haworth et al., 2006; Rasmussen, 2004; Waldegrave, etal., 2003), we have focused more on labour market trends and specific changes related
to retention and turnover in this article.
As we show, employees have started to vote with their feet and the higher level ofturnover is fuelled by both ‘push’ and ‘pull’ factors. The ‘push’ factors are related tothe search for more interesting work, more training and development, appreciative
managers and, sometimes, more money while skills shortages and a strong labourdemand provide many ‘pull’ factors. This retention and turnover scenario is illustrated
by our discussion of nursing in the health sector and, in particular, our analysis of
employment practices in call centres. The health sector has experienced growing skill
shortages since the mid 1990s and this has prompted more aggressive employee
reactions, a comprehensive change to bargaining arrangements, processes andoutcomes, and re-thinking of managerial strategies (Powell, 2005; North et al., 2005;
Rasmussen et al., 2005). In call centres, renowned for their high levels of turnover, weare focussing on emerging employment practices which try to attract and retain
experienced staff. As we suggest, New Zealand call centre experiences have always
been somewhat at odds with the prevailing image found in the international literature(Hunt, 2004a and 2004b) and this disparity has been further accentuated by the recent
tight labour market.

Changing Concerns: from high unemployment to skill shortages
In the early 1990s, after nearly a decade of neo-liberal public policy experiments, the
New Zealand government and the public were concerned about unemployment; thelevel of unemployment (peaking at 11.1% in 1992), its ethnic and geographicaldistribution and the persistence of long-term unemployment. It prompted theestablishment of a Prime Ministerial Task Force on Employment which concluded thatstrong economic growth was necessary to overcome ingrained long-term
unemployment. “The link between an improved economic environment and a skilled,
adaptable labour force was another point stressed by the Task Force.” (Deeks andRasmussen, 2004: 373).
Unemployment rate (%) in New Zealand, 1989-2004
11.0
10.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
20
04

20
03

20
02

20
01

20
00

19
99

19
98

19
97

19
96

19
95

19
94

19
93

19
92

19
91

19
90

0.0
19
89

%Unemployed

9.0

Source:Statistics NZ (2005) Labour Market Stats 2004 p. 18

46

New Zealand Journal of Employment Relations (2007), 32(1)Since 1993, New Zealand has experienced very strong growth in employment andlabour market participation and a remarkable fall in unemployment (see Figure 1
below). As can be seen from the unemployment graph, unemployment fell sharply inthe 1992-1996 period and then again in the post 1999 period.
In the late 1990s, when unemployment was hovering around 6%-7%, several
researchers began to express concerns that skill shortages would become a major
problem (Fallow, 1998; Rasmussen, et al. 1996). These predictions more than came true
as recorded by an overview of media reports:
Since the introduction of the Employment Relations Act, the media havefocused on two labour market themes: skill shortages and falling unemployment.
This followed the strong employment growth that occurred well before theintroduction of the Employment Relations Act. The reporting on skill shortages
initially focused on the health sector, where the media painted a gloomy picture:
overwork and poor pay were driving staff overseas to jobs with higher wages
and better conditions, and this created a vicious cycle of staff shortages whichplaced more stress on those staff left. /…./ A similar picture of critical staff
shortages was being painted for other essential public services such as police
and education during 2000-2001. Since then, reporting of shortages has
extended to just about every other industry sector, with many reports of regional
shortages. (Rasmussen and Ross, 2004: 32-33).
Why was New Zealand ‘suddenly’ faced with skill shortages? The short answer is that
this was a return to the normal state of affairs as New Zealand had experienced skills
shortages in most of the post 1945 period and importing skilled labour had become away of life. Additionally, skills shortages in other English-speaking countries made‘brain drain’ a common media theme from the late1990s onwards.
However, skills shortages were also associated with public policy and employer
approaches. The skill shortages can be linked to radical reforms in the public sector in
the 1980s – previously a major training ground – and a sharp decline in employer
investments in training and education during the high unemployment years. There wasan overall decline in apprenticeship numbers by over 50% in the March 1998 to June
1993 period (Statistics NZ, 1995: 109) and the new industry training system, introduced
in 1992, did not gather sufficient steam before 1998 (for an evaluation, see Deeks andRasmussen, 2004: 384-390). Finally, the exceptional high level of employment creation
was also part of the problem since it co-existed with relatively low productivity. This‘cheap labour’ growth model made it difficult to afford internationally competitive
wages. In fact, wages were so slow to react to a tighter labour market that one highprofile bank chief economist suggested in the media that the ‘market wasn’t functioning
properly’ (Rasmussen and Ross, 2004: 26-27).
In the last five years, the continuous strong economic growth, including considerable
infrastructure investments, has resulted in a very tight labour market. This has made theGovernment, employer organisations and unions focus on the availability of skilledemployees; skill shortages are now a major public policy issue. Just as importantly, it
has prompted a change in the approaches of individual employers, managers andemployees. It has certainly improved ‘market functioning’ – with some help from the47

New Zealand Journal of Employment Relations (2007), 32(1)unions – as average wages have outpaced inflation. In particular, it has made staff
retention and turnover a burning employment relations issue.

Findings From New Zealand Turnover Research
In this article, we will mainly draw on insights from three pieces of research: atelephone survey of employees, an analysis of employment and retention issues in thehealth sector and, in particular, case study research conducted in the call centre industry.
It is important to stress, however, that retention and turnover concerns cut right acrossthe New Zealand economy and there have been a variety of management approaches indealing with these concerns.
In late 2000, as retention and turnover started to appear as a major issue, a telephonesurvey of employees found that there were multi-dimensional reasons for people‘moving’ (see Boxall et al., 2003). This was the first major survey of staff turnover in
New Zealand for over 15 years and it established that turnover was rife amongst young
people and amongst low income employees. Staff turnover was often driven by thesearch for: interesting work, more training and development, and career opportunities.
These are not exactly startling findings and many employers appear to be aware of theseissues.
In particular, many employers appear to understand, at least in principle, that staff
turnover is costly and that lower turnover rates can improve productivity and service
quality. For example, the Department of Labour’s Productivity Task Force has touted
lower staff turnover as a major contributor to higher labour productivity. One of its
case studies stresses that “A Napier piemaker has reduced staff turnover from 180%(1998) to 14% (2003) through better work practices.” (Dept. of Labour, 2006: 1).
Likewise, Telecom has used low staff turnover as one of its arguments in its effort toencourage overseas companies to outsource their support services to New Zealand: “Ahighly educated, English-speaking workforce with low staff turnover (typically between
5% to 25%).” (Telecom NZ ,2006: 1). This is in line with well-established researchfindings. For example, a 2001 Otago University study, in which 400 firms weresurveyed and in-depth interviews of managers were conducted, found branding and staff
retention to be key competitive factors. In their retention approach, these firms “…
aimed to reduce staff turnover by promoting staff internally, providing career
opportunities and a career path and often mentoring junior staff. These firms also
encouraged staff to become multi-skilled; rather than just having professional skills, andrewarded them according to the competencies they had developed.” (University ofOtago, 2001: 1).
However, there is some disagreement in the research literature of how to tackle
retention issues. Currently, there is a great deal of focus on generational differences 1
and it is often suggested that different management approaches are necessary to limit
turnover levels. However, there are also analyses how challenge the idea of generational
differences and suggest that an adaptation of management practices would be a failure
1This was, for example, the major theme at the 2006 conference of the HR Institute of New Zealand (foran overview of different research findings, see HRINZ 2006. Human Resources, August/September2006).

48

New Zealand Journal of Employment Relations (2007), 32(1)(Bland, 2006a and 2006b; Hudson 2006). There is also the important question of how
much context determines the management retention approaches. This may explain thefindings of considerable variation in management practices: many New Zealandemployers appear to have decided just to contain the problem or they have made it partof their business model.
The latter approach is when the employing organisation has geared its HRM practices tohigh turnover levels. This approach is related to the famous ‘McJobs’ which are often
characterised by low pay, Taylorist work practices and limited career options. As
recently acknowledged by New Zealand Tourism Online: “Historically high staff
turnover or the difficulty attracting locals has been due to low remuneration rates,
season job prospects and possible the lack of a clear career path.” (NZ Tourism Online,
2004: 1). Thus, high staff turnover levels spill into recruitment difficulties as the
Hospitality Association (HANZ) reminded its members in November 2004: “Thehospitality sector is facing increasing difficulties in recruiting trained staff. This issignificantly exacerbated by the high level of staff turnover estimated at 30%, which
magnifies significantly the staff shortages.” (HANZ 2004: 1). While the 30% probably
is a gross under-estimation, there is no doubt that the hospitality industry, (together withretail, fast food and the call centre industries), has faced more staffing problems thanother industries.
As shown in the 2000 telephone survey mentioned above, important reasons for staying
are: staff relationships, interesting work, job security and relationship with supervisors(Boxall et al.; 2003: 206-7). In other words, important retention factors are the work
itself and the workplace culture. Additionally, commuting, work-life balance, andsatisfactory pay levels are other important factors. These results suggest that retention
can be improved if employers target the work environment and particular employment
conditions. As shown below, these suggestions have been headed to some degree by
employers in the health and call centre industries.
The health sector and in particular nursing have also faced major retention problems forsome time. This has prompted considerable re-adjustment in employment relations andemployment conditions. Fragmented bargaining arrangements have given way, after
fierce union pressure, to a national collective agreement and there have been significant
pay rises as well as increased targeting of work practices (for an overview, see
Rasmussen et al., 2005). As part of these adjustments, the Ministry of Health haspromoted the ‘magnet hospital’ idea and launched the Magnet Network to counterretention issues and thereby contain health spending:
Costs are reduced because of lower staff turnover and shorter length of stay.
Research has demonstrated a positive impact on organisational culture andincreased institution stability. In terms of nursing outcomes, magnet hospitals
have demonstrated enhanced recruitment and retention of highly qualified
nurses. /…./ Turnover of nurses in New Zealand is approximately 19 percent
across DHBs [District Health Boards] and 45 percent for new graduate nurses.
In 2002 a pilot study to establish the cost of nursing turnover found that
identifiable turnover costs were $50,000 over a six-month period for a surgicaland medical hospital units. Lower turnover results in substantial savings.
(Ministry of Health, 2004: 1).

49

New Zealand Journal of Employment Relations (2007), 32(1)The pilot study mentioned above is an in-depth study trying to estimate both the direct
and the indirect costs associated with turnover amongst hospital nurses (see North et al.,2005).2 By establishing the level, costs and consequences associated with nursing
turnover, the basis for developing considered staff policies is established. While it has
been found that turnover costs are very high – at least above $20,000 on average – andhave a major influence on patient care and staff morale, it was also found that someregional hospitals had limited or no turnover issues. This was especially so in soughtafter and rural areas (remember, that workplace culture, commuting and work-lifebalance were found to align with staff retention). Furthermore, considerable variation
between hospital units within the same hospital could also be detected. This suggeststhat the type of nursing work, the working environment and managerial approaches can
all have an impact on the level of turnover (again, this aligns with survey results).
Clearly, hospitals are trying to target work and employment conditions which may
reduce retention. The ‘threshold factor’ of pay has been targeted through significant
across-the-board pay rises and specific workplace payments, the magnet hospital idea
and considerable attention to management practices and the working environment.
Additionally, the limited retention issues in certain hospital units indicate that theemphasis on work-life balance and commuting could be increased. The well-establishedresearch findings of a high level of leaving intentions amongst nurses (Cobden-Grainge
and Walker, 2002, Gower and Finlayson, 2002) as well as an aging nursing workforce(currently, nearly half of all nurses are aged 45 years and over), indicate that it was hightime to react to retention and turnover issues.

Research on Employment Practices in New Zealand Call Centres
There has been much attention in academic research to call centres and the work carriedout in them. The majority of this research has been derogative about the labour processused to provide the personal customer interaction via the telephone, a customer service
operators represent the ‘voice’ of a ‘face-less’ organisation. Many researchers decry theconditions in which these operators have to respond to a stream of telephone calls,
answer customer queries, provide information or sell products (Hannif and Lamm,
2005; Holman, 2002; Holtgrewe and Kerst, 2002; Taylor and Bain, 1999; Taylor,
Hyman, Mulvey, and Bain, 2002a, 2002b; van der Broek, 2004; Wilk and Moynihan,2005). The labour process in call centres is facilitated by Integrated Communications
Technology (ICT) which provides a seamless operation so that each caller can be dealt
with quickly and efficiently. The technology allows too the continuous monitoring,recording of calls and provides statistical measurements to assess the performance ofeach operator. Average handling time (AHT), adherence to schedule, (ATS), wrap timeand call resolution are just some of the measures taken to determine how responsive andefficient the call centre operator has been.

2
The Cost of Nursing Turnover Study has been funded by the Ministry of Health and the Health ResearchCouncil. It is part of an international project to examine the cost of nurse turnover and the impact ofturnover on patient safety and nurse health and safety outcomes. Team members represent five countries
and co-principal investigators are Dr LindaO’Brian-Pallas (Toronto University, Canada) and Dr Judith
Shamian (Office of Nursing Policy, Health Canada). For further information, please contact A/Prof
Nicola North, University of Auckland (n.north@auckland.ac.nz ).

50

New Zealand Journal of Employment Relations (2007), 32(1)Overall, these features are criticised widely in the research for contributing to the stressassociated with call centre work. It is claimed that this stress leads to the high turnoveror ‘churn’ as commonly reported in the call centre industry sector with attrition rates of
50 to 100 per cent reported in the US (Srivastava and Theodore, 2006). Some callcentres have tolerated high turnover by adopting a sacrificial HR policy (van der Broek,
2004; Wallace, Eagleson, and Waldersee, 2000) and they simply replace their frontline
staff as they burn out. Such call centres have large recruitment drives and take in‘batches’ of call centre operators for mass induction and training which may only last
one day before the call centre representatives (CSRs) ‘go live’ on the telephones.
Although widely acknowledged that turnover is a problem in call centres, theinternational research on the retention of staff in the call centre environment has been
limited to studies focussed on why staff absences occur or how call centre work could
benefit from providing more flexible work practices (Deery, Iverson, and Walsh, 2002;
Knowles, O’Cathain, Morrell, Munro, and Nicholl, 2002; Pearson and Thewlis, 2002).
In New Zealand, annual benchmarking surveys of call centres indicate that the mean
turnover rates in call centres has ranged from 1999 to 2003 from 18 to 21% (see Figure2). These figures have to be read in conjunction with the knowledge that the literature
has found that turnover is typically under-reported by companies.
Figure 2: Mean Staff Turnover Rates in NZ Call Centres
Year

Mean Percentage FTAgent Turnover
1999
18%
2001
21%
2002
18%
2003
21%
Source: (ACA Research Pty Ltd., 2002, 2003)% of Call Centres with no Agent
Turnover, (n=161 call centres)
5%
2%
12%
15%

Another criticism of the international research on call centres is that they have limited
or non-existent career opportunities and a ‘glass ceiling’ is still evident despite women’snumerical dominance of the sector (Belt, 2002; Belt, Richardson, and Webster, 2000;
Belt, Richardson, and Webster, 2002; Belt, Richardson, Webster, Tijdens, andKlaveren, 2000; Deery and Kinnie, 2004; Durbin, 2006). Research in New Zealandsuggests, however, a contrasting situation with women developing distinctive career
paths and often managing the call centre operation even in traditionally male dominatedsectors such as banks (Hunt, 2004, 2004 (b)). The findings discussed below suggest thatdifferent HR practices are being used in the New Zealand call centres, to retain womencall centre workers, to encourage them to develop new skills and to accommodate theirdifferent labour market needs.
In order to determine whether women were developing career paths in their call centre
jobs, our research interviewed 32 women who had experienced some career
progression. Due to the widespread application of call centres across a diverse range ofindustries, case studies from six different sectors were chosen. The sample included
inbound and outbound call centres - an outsourcer, bank and food manufacturer;
inbound only call centres a government public service organisation and an exporter ofprimary produce, and an outbound-only call centre, a market research company. In
order to investigate Human Resource practices and to triangulate data, six managers
51

New Zealand Journal of Employment Relations (2007), 32(1)from each case study were also interviewed (bar one, these were all male). Data wasalso collected from a total of 40 Customer Service Representatives (CSR’s) via focus
groups, informal group interviews or via written surveys.
The case study research has found a number of positive findings. It is evident from theresearch that many of the interviewed women were passionate about their call centre
jobs and that they got a ‘buzz’ out of this particular kind of work. These women
provide a different perspective on call centre employment to that predominantly foundin the literature (Hunt and Rasmussen 2006; Hunt, Rasmussen and Lamm 2006). In thisarticle, we focus on changing management practices. These practices go beyond the
traditional token ‘fun days’ to relieve stress and boredom. Instead we found creative
recruitment practices, the use of pilot studies and trying out new ideas, climate surveys
to proactively develop a supportive culture, continuous management-staff discussion toempower staff and the encouragement of workforce diversity. Some of thesemanagement practices are illustrated below.
There’s an opportunity to be a little bit creative in the market as well – to source
the candidate we need. Our busy time is 9 to 2 so being able to recruit parttimers is one thing. We have to be able to respond to the changes in the market
very quickly and tailor our intakes with this. We don’t have a stable resourcebase by any means in our workforce. It goes like this (up and down) constantly(Female call centre manager, Case Study One 2004)
We have a group of CSR’s called our synergy group and they come up withideas themselves. For example we are going to introduce a Trolley run where weare going to have scones and jam and with the Olympics coming up we willencourage teams to pick a country. We have various theme days and havemonthly and quarterly awards – that’s recognizing your top performing staff
members, recognizing those who have made the most improvements andrewards for quality (Female HR Manager, case study one, 2004)
Recognition is really important and that’s one of things that came through veryclearly through the climate survey, and we do well at that certainly the messages
have been keep doing what you have been doing and doing more of it.
Particularly me, emails from me make a real difference …even if it’s just‘thanks for your help, I know it’s been a bit tough lately’ (Female Call Centre
Manager, Case Study one 2004)
We have two career paths, which starts to split of between those that areinterested in people, those that are interested in process (Female Call Centre HR
Manager Case Study one, 2004).
It’s a lot more than a job, I don’t even see it as a job, leaving it is never an
option that occurs to me, I am so passionate about it….The great part of ourbusiness is that we have those people who are really prepared to give everything
and equally no one has kept them down. No one has said you are only a 21 year
old, you don’t know anything, we just like them to get on with it and havestructures where they can do it. We encourage them to make the changes happen
so they start doing it… that’s pretty much the philosophy we have here (Female
Operations Manager, Case Study two 2005).
52

New Zealand Journal of Employment Relations (2007), 32(1)Some of the case studies demonstrate too that employers are providing family
friendly practices to keep their female staff. At one case study, this includes
switching rosters for mothers with students during the school holidays while
another actively targeted return-to-work mothers. Work life balance was a theme
that recurred across the case studies and staff at both entry level andmanagement felt they had a degree of flexibility in their call centre work. Someof this was around their ability to have control over the hours or days that they
worked.
We recruit specifically for return to work mothers…it might be somewhere at
the Crèches, where might put some advertising in to get people or have open
days to get them to come in and see what a call centre is all about (Call Centre
Manager, case study one)
Yes, they always very flexible when I started, I couldn’t start till 9.00 I would
drop my son off at 8.30 and I would walk out the door at 4.30. The manager
accepted that I was family focused and my main priority was my child(Female Call Centre Manager case study four 2005)
Women are developing roles as leaders in the call centre environment and many womenare learning the technical skills as well as getting opportunities to take part inmanagement training. Two of the women interviewed (from different case studies) had
been chosen to take part in University-level leadership development programmes.
Some of the women had experienced rapid career progress partly because of thematurity of the industry but overall there is clear evidence that the skills these womenbring to their call centre work are appreciated and in demand. Some call centre
managers reported having no problems with retaining staff, mainly because of the way
the call centre was run.
I have no issues with retaining staff and it is the same in Australia. I have used
TAFE for training and it’s neat as these people have chosen to study and you
know they have the commitment, and they’ve got passion. Sometimes they justneed a chance, they are the most loyal employees I’ve ever seen, and you know
wonderful people (Customer Service Manager, Case Study 4, 2004).
Some call centre managers are people managers, but are not so good atunderstanding the technology or the IT they are using. This is something I haveexcelled at.and now I am directly responsible for 9 call centres, and I have someas small as 6 – 90 to 95. There are three geographically diverse call centres(Female Call Centre Manager, Case Study 6, 2006).
A lot of managers generally believe their career is the responsibility of theiremployer I say to my leadership teams that their career is their career but we will
help them achieve their goals (Call Centre Manager, case study 6, 2006)
The Call centre was opened in October 2001 and I started in April in 2002 – itwas brand new, when I started the majority of the workers were females. There
was only 4 guys so it wasn’t hard for us to progress It was pretty easy, I was
promoted within six months (Female Project Manager Case study 5, 2006)
53

New Zealand Journal of Employment Relations (2007), 32(1)I don’t work for the money, I come to work because I am passionate about what
I do, because I can see me doing something good every day, I get results andthat’s a good thing, the money is great, it provides roof, shelter, food, shoes
and handbags (laughs) (Female Call Centre Manager, case study 1, 2003)
The overall picture is one of widespread change and experimentation. Individual
managers experiment with different management practices and they often listen andfollow suggestions from their staff. This is clearly a learning process where managers
and staff are trying to accommodate the needs of both the organisation and theindividual employee. As we have stressed previously (Hunt, 2004a and 2004b), context
is important as some types of call centres – for example, outbound market researchcompanies – and some types of call centre work – for example, low-skill, scripted
questions and answers – leave less scope for a stable and pleasant work environment. It
is also necessary to stress that the evidence of changing management practices are
mixed (Hunt, Rasmussen and Lamm 2006).

Conclusion
It is surprising that there was such a limited research interest in retention and turnover in
New Zealand in 1980s and 1990s. It indicates that there were other labour market
concerns and that the much talked about management saying that ‘employees are ourmost important asset’ was just that – talk! While there appears to be widespread
understanding, at least in principle, that turnover can be costly and can damage
production and service quality, research has shown that the gathering and the use ofretention and turnover information have been insufficient or, in many cases, nonexistent.
Still, the recent focus on retention and turnover has prompted more research and theseresearch projects have re-confirmed the importance of interesting work, career
opportunities and satisfactory employment conditions. This article has highlighted thatthe government, employers and employees have started to re-access their priorities. In
particular, our case study research in call centres have found interesting examples ofindividual managers experimenting with new management approaches and practices.
However, as we have emphasised elsewhere (Hunt and Rasmussen, 2006; Hunt,
Rasmussen and Lamm, 2006), context is important and the findings on management
practices are normally mixed. While individual managerial experiments have started tosurface in more generalised changes across occupations and industries there are still alarge number of jobs where interesting work, career opportunities and satisfactory
employment conditions are just not part of the deal.
Although this article has emphasised how current attempts to contain turnover look
spectacular when compared to the labour market of the ‘New Zealand experiment’ frommid 1980s to mid-1990s, this may be overstating the problem and focusing on thenegative. Current recent retention and turnover levels fall way short of the higher
turnover levels of the labour market in the 1960s (Dept of Labour, 1972). The 1960s
were seldom seen as ‘crisis years’ and a great deal of progress, that is, equality, reduced
working time, improved work environments, coincided with the tight labour market
conditions at that time. It is necessary to remember that, amongst economists, high54

New Zealand Journal of Employment Relations (2007), 32(1)labour mobility has commonly been seen as a positive indication that the ‘market’ isworking. The recent changes to public policies and management approaches havebenefited many New Zealand employees and these changes may also move theeconomy some way towards the elusive ‘knowledge economy’.

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58New Zealand Journal of Employment Relations (2007), 32(1)Exploring the Congruence between Job Perception and Job
Reality in the Cosmetic Sales Industry
BETH TOOTELL*, BARRY FOSTER** and KIMBERLY LETHWAITE***
Abstract
This research examines the relationship between job satisfaction, recruitment processes
and organisational culture in a work environment in the cosmetic retail industry which ischaracterized by a high rate of voluntary turnover among its employees. Elevenparticipants, who had previously worked or were currently working for a variety ofcosmetic firms in one particular organisational setting (a department store), were surveyedusing a qualitative method of questionnaire and, where appropriate, follow-up interviews toelicit their perceptions of what their cosmetic firms projected as an organisational image
and career prospects during the recruitment and induction process. Implications of thefindings to recruitment and induction processes, and employee job satisfaction andretention are suggested.

Introduction
Many organisations in the cosmetic sales industry experience the problem of high employee
turnover. Although high turnover rates may be attributable to a variety of factors, anecdotal
comments made to the researchers from those within the cosmetic retail industry (including
employees and supervisors) would suggest that the primary factor influencing voluntary
turnover is job satisfaction. Job satisfaction may influence turnover rate in all employment
settings, however, the issue seems to be pronounced in retail sales jobs. New employees,
even those with recent business degrees, appear to enter cosmetic sales jobs with highaspiration for career advancement, including management positions in the national or eveninternational arena. As an example, a sales position with an elite cosmetic company isenvisaged to be a possible career path to a prestigious management position in Auckland,
Wellington, or even Paris. Although this aspiration would appear to be unlikely at face value,experiences in the industry would suggest that this is how positions in cosmetic sales are
sometimes advertised and projected during the recruitment process.
The purpose of this research was to gather information from current and past employees in theretail cosmetic industry to see if there was an incongruence between the way theorganisational culture is perceived or advertised and the reality of the organisational culture
experienced when the employee has completed the induction phase of employment and is
working within the routines of the position. Further, the research examined this incongruence
to see how this impacted job satisfaction and motivation.
We begin with a review of the relevant literature, examining the role of employee fit, turnover
and the recruitment process with regards to employee satisfaction. From the literature review,* Beth Tootell is a Lecturer in HRM at Massey University, Palmerston North.
** Barry Foster is a Lecturer in Employment Relations at Massey University, Palmerston North.
*** Kimberly Lethwaite, Masters student, the Department of HRM at Massey University, Palmerston North

59

New Zealand Journal of Employment Relations (2007), 32(1)a number of hypotheses emerged, namely considering how individual employees
conceptualise their job trajectories, and how this in turn influences their job satisfaction andcareer decisions. Then the article reports on an empirical study of employee experiences. The
information was gathered using a qualitative methodology and the results suggest thatcosmetic industries should re-examine the role of career ‘promises’ in their recruitment
practices as it appears to have some impact on the (dis)satisfaction of employees, and,
therefore, the level of voluntary staff turnover.

Review of the Literature
There is a substantial amount of literature that examines the role of job satisfaction and work.
For the purposes of this article, we will draw only on themes and results which can cast lighton our examination of the relationship between job satisfaction, recruitment processes andorganizational culture.
The literature review finds that employee fit becomes a significant factor influencing an
employee’s level of satisfaction with a company and, consequently, an employee’s decision toremain with a company. In particular, two theoretical perspectives that have their origin insocial development theory are likely to assist in understanding the factors that influence job
satisfaction and employee retention.
Social Development Theory
The first theoretical framework that potentially helps to understand the interplay between
personal motivations and environmental factors and how they influence personal trajectories
is proposed by Rutter (1977, 1987). Rutter suggests that individuals have varying degrees ofresilience, a concept he defines as a capacity for successful adaptation in face of challenging
circumstances. A variety of personal attribute dispositions influence the varying degree ofresilience, including motivation, outlook and resolve. These attribute dispositions are also
influenced by a variety of personal factors such as an individual’s age, gender, self-esteem,
education and social status.
Rutter’s work has been applied to social settings such as the family, school and community
and the factors that contribute to or impede an individual’s success in areas such as staying at
school, not committing crime or refraining from taking drugs. However, it potentially can beapplied to the human resource management context. Within an organisation, an individual’s
motivation to leave a job may be heightened by their motivation and self-confidence to pursue
a more challenging job that provides more opportunities for professional advancement.
Ticehurst and Veal (2000) outline many of the personal attribute and environmental risk andprotective factors that are likely to contribute to employee turnover. They identify selfesteem, gender, age, housing tenure, education, social status, life satisfaction and marital
status as significant personal characteristics influencing employee turnover. They identify
salary, social interactions, organisational size, job uncertainty, type of industry, job level andinvolvement in decisions as significant work characteristics influencing employee turnover.
Labour Turnover60

New Zealand Journal of Employment Relations (2007), 32(1)The literature regarding job turnover is significant in both its scope and size. It is worth noting
for this research that it is a consistent finding that job dissatisfaction is an antecedent toforming the intention to quit (Harter, Schmidt and Hayes 2002). Incongruence between
perceived and actual job prospects in the cosmetic industry, it is hypothesized, may lead to job
dissatisfaction, and therefore increased turnover. A comprehensive study into labour turnoverin New Zealand (Boxall, Macky, and Rasmussen, 2003), suggested that while motivation of
job change was found to be multidimensional, the surveyed employees held strong
expectations regarding promotion, pay and job security that effected their retention decisions.
Organisational Culture
The social phenomenon of organisational culture is a complex one. Essentially, it refers to‘the way things are’ in an organisation (Dalin, 1993). It not only describes the organisation’s
physical environment, but also the psycho-social aspects of the environment (Fraser, 1994).
These dimensions are dynamically interrelated and largely are controlled or strongly
influenced by an organisation’s administration. In effect, the environment includes both
intangible and tangible aspects that silently and powerfully shape the experience andbehaviour of a people (Owens, 1995). According to Ivancevich, Olekahns, and Matteson(2000), organisational culture is what the employees perceive and how this perception createsa pattern of beliefs, values, and expectations. As suggested by Schein (1985), organisational
culture involves assumptions about what a company is like. This assumption is largely basedon the company’s brand image. Brand image is the company identity portrayed to the publicthrough marketing strategies (Schein, 1985). As an example, a cosmetic company may
market itself as a prestigious, luxury cosmetic brand. This is marketed through a variety ofstrategies including the clothing that their cosmetic retail staff are expected to wear.
In the context of this inquiry, organisational culture is important, as a new employee to thecosmetic sales industry is likely to hold a perception of what a company is like, but, in reality,
the organisational culture may differ markedly from that which is projected by the company
in the recruitment and selection process. A job advertisement and recruiting manager may
project an image of what the organisation’s beliefs, values and expectations may be but these
may be incongruent with the reality of the work setting. The socialisation process, as Schein(1985) suggests, is that time during the employment phase when an employee is introduced toand is adopting the culture of an organisation. This would likely be the time in which an
employer would become aware of this incongruence.
Job Satisfaction
Robbins, Millet, Cacioppe, and Waters-Marsh (1998) state that job satisfaction can be
identified as an individual’s general attitude towards their job. This definition is developedby Ivancevich, Olekalns, and Matteson (2000) who state that job satisfaction results from anindividual’s perception of their job and the degree to which there is a good fit between theindividual and the organisation. An employee’s assessment of how satisfied or dissatisfied
they are with their job is a complex summation of a number of discrete job elements. As
stressed by Firth, Mellor and Moore (2003) these elements may have both extrinsic andintrinsic sources. For example, these might include external attributes or aspects such as pay,promotion opportunities, and relationships with supervisors and co-workers. It also includes
further factors of the work environment such as the supervisor’s style; employment policies
and procedures; work group affiliation; working conditions; and fringe benefits. As well, an
individual’s sense of self-worth and ability to cope with change are often cited intrinsic or
61

New Zealand Journal of Employment Relations (2007), 32(1)personal factors which may influence job satisfaction (Firth, Mellor and Moore, 2003). In
this research inquiry, factors contributing to job satisfaction and dissatisfaction will beidentified. In settings where employees experience congruency between the reality of theorganisational culture and a positive employment aspiration, job satisfaction would be
expected to be quite high. A retail cosmetic employee who has started out as an ambitious,
happy motivated employee excited about their new job as a cosmetics counter manager, whois driven to succeed and do their best, comes to realise that there may be not the job prospects
or promising career path that they had hoped would come to fruition. This realization may
lead to the fact that they become disillusioned about their future with the company, or even let
down and bored by their position and they may soon feel that it is time to ‘move on’. As
Nicholson (2003, p. 26) notes, the effect of these ‘broken promises’ at work, is to transform aperson’s positive energy into negative.
The Recruitment Process
The third component relevant to this research inquiry is job recruitment. One of the aspects in
job recruitment most important to this inquiry is the consideration of how the organisation’s
image comes across in the job advertisement and the recruitment and selection process as thedegree of organisational fit has an important role in influencing job satisfaction. Since
recruitment programs are directed toward new employees, (i.e., those not now in theorganisation, it is desirable to give prospective employees information about not only the job
but also about those aspects of the organisation that affect the individual. As Ivancevich et al.
(2000) have stressed, the recruiter should, to the extent possible, convey factual information
about such matters as pay and promotion policies and practices, objective characteristics of
the work group the recruit is likely to join, and other relevant information about work policies
and practices.
Hypotheses
This study is focused on understanding the relationship between individual employees andtheir career trajectories and how the environment in which they work influences their job
satisfaction and career decisions. Further, it is suggested that job satisfaction may be
associated with the degree to which the image of the work setting, either as projected by
the employer or as idealised by the employee, corresponds to the reality of the setting
experienced as an employee (Harter, Schmidt, and Hayes 2002).

MethodThe paper uses data from a study that was conducted between May and July 2005 in a large
retail store where eight cosmetic companies currently have individual retail counters staffedby a company sales representative. The sales staff have been recruited by the cosmetic
company to serve the sales requirements of that company. In addition, the sales staff are
under the direct supervision of the retail store management. All departments within the retailstore, including the cosmetic sales staff, report to the store management on a day-to-day basis.
It is the store managers that monitor employee sales and performance. Although all cosmetics
are sold and allocated to the store from the cosmetic house head office (usually in Auckland),the profit from sales actually goes to the department store. Simply put, both the cosmetic sales
company and the retail store management want the sales staff to be successful in their sales
volume. It is also important to note that the sales consultants have minimal contact with their62

New Zealand Journal of Employment Relations (2007), 32(1)cosmetic company. They have infrequent contact with company representatives and haveopportunity for national professional development opportunities (single or multiple day
events) with other company sales representatives, on average, once every six months.
Participants
•
•
•
•
•
•
•

All of the eleven respondents were female.
They ranged in age from 21 to 51, with a median age of 26.
There was considerable variability in participant educational background, ranging from
School Certificate to Post-Graduate qualifications such as Marketing Diplomas andMasters Degrees.
The eleven respondents worked for a total of six cosmetic houses. The cosmetic houses
ranged considerably in image and customer clientele, two would be commonly perceived
as high-end, two medium-range and two lower-end cosmetic firms.
Five respondents were previous employees, and six were currently employed.
The past employees worked for a range of one to five years for their cosmetic house. The
median time was two years.
None of the current employees had worked longer than four years, with a median term of
employment of just over one year.

Each cosmetic company is unique in terms of how they advertise, recruit, select and train theirsales representatives. As well, each company has a particular brand image and their own
organisational culture. Despite these differences, each sales representative often operates inthe same physical work environment when, as in our research, several cosmetic companies
have sales counters within larger department stores. The sales consultants for these companies
have been recruited and trained by representatives from company head office which is usuallybased in Auckland. Employees both past and present were approached to participate in the
research inquiry.
The method used to collect the data was a combination of preparatory questionnaire followed
by a semi-structured interview. All contact with the sales staff were on a strictly confidential
manner. They were informed that their responses would not be released in any form tomanagement. Staff were surveyed through questionnaire, using a series of open and closedended questions, seeking biographical information and information pertaining to their jobs
and the three constructs in the inquiry, such as factors relating to job satisfaction andmotivation, and what information was given to them about their jobs in advertisements andinterview stages of recruitment. This information was then analysed to identify common
themes in order to help identify whether an incongruence existed between the perception andreality of the job. As well, the analysis focused on determining the influence of congruency on
job satisfaction and turnover. Follow-up interviews were also carried out to elucidate any
queries that emanated from the questionnaires. Furthermore, the researcher works in an
indirect role with the cosmetic sales participants and was able to make filed observations
pertaining to the context and focus of study.
The focus of this research inquiry was to identify whether individual employee personal
aspirations of their employment are congruent with organisational culture and the reality of
their job experience and by so doing determine whether the degree of congruency between
aspiration and culture influences job satisfaction. The focus of the inquiry is to uncover
meanings and understanding of the issues associated with social phenomena and, thus, theresearch is qualitative in nature (Ticehurst and Veal, 2000). Since the focus is on cultural
63

New Zealand Journal of Employment Relations (2007), 32(1)aspects of their personal experience, the specific qualitative interpretivist researchmethodology used in this research project was ethnography.
Eleven sales representatives participated in the study. The information from thequestionnaires was processed according to the suggestions made by Ticehurst and Veal
(2000). Emerging patterns, relationships and recurring themes were identified as theresearcher read and re-read the participant responses. These patterns and trends, once
identified, became tentative hypotheses that were then refuted or affirmed through the followup interviews. Seven of the eleven people that returned the questionnaires were interviewed.
Four participants were not available because of work, family and travel commitments forfollow-up interview during the time interviews were being conducted.

Results and Discussion
The Sample
Prior work experiences were quite variable. Younger employees typically had had retail sales
experience, but not necessarily in the cosmetic sales industry. As well, the younger employees(under 24) had just completed their tertiary qualification and this appointment was an entrylevel position in the cosmetic and beauty industry. More mature respondents (25 to 30), as
might be expected, had considerably more experience and education. Most of the respondents
had worked in the cosmetic, health and beauty industry, but in smaller companies. These
respondents had been in the company the longest, but still held no position of authority within
the organisation. There was consistency in the professional aspirations held by the
respondents. Five of the interviewees wanted to, in the future, be travelling area managers fortheir cosmetic companies; two wanted to be cosmetic training and development managers;
three ultimately wanted to manage or own their own cosmetic businesses; and one was
uncertain about the future career path. Thus, their appointment to this position was
accompanied by an aspiration to succeed within the industry.
The Recruitment Process
The majority of respondents found out about the cosmetic sales job through personal contacts.
Three reasons were identified for applying for the job.
1. Four identified it as a means of putting recent training to work.
2. Three suggested that the company was a good brand with good career opportunity.
3. Four suggested they were looking for a change from their previous position.
During the interview process, few could recall if there was any suggestion that there was a
possible career path with the cosmetic company. Two of the respondents, again working forthe more prestigious companies, were informed that supervisory and leadership opportunities
were available further on in their career with these cosmetic companies. In reference to theactual pharmacy as a work environment, based on the interviewers’ comments respondents
recall being under the impression that the work environment was competitive, but a fun place
to work. They were under the impression they would be highly rewarded for their efforts. In
general, the respondents stated that both the pharmacy and the cosmetic company projected abrand image that was very similar. As well, the advertised position and interview
corresponded to most of the respondents’ professional desires. As ‘Karen’ suggested:64

New Zealand Journal of Employment Relations (2007), 32(1)“I thought that the job as a cosmetic consultant tied in well with my recent educationand that I could utilise my education to move into a manager role in the company
within two years. I was told this by the current area manager.”
Furthermore Kate stated:“I really wanted to be a manager within a cosmetic company and really believed that
this was a good job to accept as it gave me this possibility. It was just what I wanted.”
Interestingly, two respondents clearly had an idealised perception of the position and what it
might offer as a career path. This perception was influenced largely by media imaging. For
example, Sylvia stated:“I was really excited about the prospects. For as long as I can remember I have wanted
to work for a prestigious company like this and travel. I know they have these counterseverywhere and I’d love to work for this company in Europe or something.”
In conclusion, anticipation of an exciting, challenging career path was a common perspective
presented or at least perceived to be presented to the respondents when they were going
through the recruitment process of their employment. As well, some respondents’ views werelargely constructed from their own perception of what the job would entail. As Eckman
suggested (1980) good recruitment processes should work towards establishing congruence
between perspective employee aspiration and what the organisation itself can offer. This
congruence or fit is imperative because prospective employees can see themselves fitting inwith the company objectives.
Actual Work Experiences and Perceptions
During the first month of employment, two common perceptions of the cosmetic house wereidentified by respondents.
1.
2.

Working relationships with colleagues
Competitive work and sales environment.

The first perception pertained to working relationships with colleagues. Most of the
respondents stated that the collegial relationships among the sales consultants were very
positive. The sales consultants commonly mentioned that their colleagues assisted them andhelped them understand some of the protocols, in particular performing the accounting andsales documentation and identifying the fairest bosses and who to watch out for. One
respondent (Sylvia) mentioned that although the collegial relationships were overall quite
positive, interpersonal relationships with colleagues could be strained:“Some of the people I work with have really bad mood swings which I find hard todeal with. I don’t like the way people talk about others behind their back. There canbe a lot of cattiness at our workplace and some people can back-stabquite a bit.”
Second, there was a very competitive, goal-oriented, high management expectation projectedby the direct work environment. This was accompanied by little support from the direct work
management. These experiences were shared especially by the younger employees on the lessprestigious counters. As an example, Stella said:

65

New Zealand Journal of Employment Relations (2007), 32(1)“I had a lot to learn and was not given much help or support. I knew I had lots oflearning to do and I was told that there was a company representative who would
support me – I was wrong. Instead, I was sent a photocopied booklet on the products I
was to sell, with a questionnaire at the end which I was to send back once I had sold acertain number of products and stuck the price stickers on and then they sent me acompany badge and that was it – I was in charge of the counter and expected toachieve ridiculous sales targets straight away.”
This comment was similar to that suggested by Kylie:“It was really obvious that this company was all about making money and they don’t
really look after their consultants…their targets are really high and I was given no
support.”Conversely, some employees had very positive induction processes. As an example, Kate
said:
“As soon as I was offered the job the company flew me to Auckland, put me up in a
flash hotel, and did a one-on-one intensive crash course in selling. Then when I had
my first day at work I was shown the ropes by a senior employee on a similar counterto mine and she was really supportive and helpful about everything from selling to
make up and using the computer to do paperwork. Then on the second week I was
there, the area manager came down and spent a day with me going over details, andthen after a few weeks, I was flown back to Auckland and put up in the flash hotel
again for a three-day basic training with all the other new consultants. I then camehome with hundreds of dollars worth of fine French perfume and cosmetics. It mademe feel really special and confident about my new job.”
Despite Kate’s positive experience with her cosmetic house, her experiences with the direct
managers in her work environment were negative. She stated:“I didn’t think that we would be monitored every day on how many customers weserved and how many items we sold per transaction, and being spoken to bymanagement sternly if it wasn’t high enough. I was under constant watch and pressure
which was horrible. The management was really horrible, not at all friendly.”
Despite the positive induction processes that most received from their cosmetic company, as
illustrated by Kate’s example, the actual in-house managers were seen to display little
personal concern for the new employees. In general, most respondents recognised that the inhouse business managers were not very personable or approachable; didn’t take an active
interest in the new employees; and only seemed to be interested in the sales figures that theygenerated each day. Stella mentioned that:“On my first or second day on the job, my direct manager told me that the store
manager/owner would look at the sales figures on the computer numerous times a day
to see how much everyone is selling, and if you are at the bottom he will come ask the
manager “what is wrong with her today, she hasn’t sold very much” that would makeme feel stink like I have let everyone down.”
In general, many of the respondents experienced a dichotomy of responses from management
as employees. On the one hand, the management of the cosmetic house that they worked for66

New Zealand Journal of Employment Relations (2007), 32(1)was very positive towards the employees. They wanted the employee to feel part of thefamily of both the international and organisational culture. Most employees were given theopportunity to attend prestigious overseas or national conferences in places like Singapore,Fiji, or Rotorua, but then others, normally those associated with less prestigious companies,
were not given these opportunities. As suggested by Ivancevich et al. (2000), the cosmeticorganisation’s primary activities during the first stage of socialisation are that recruitment,
selection and placement were effective, in allowing new employees to experience positive
feelings congruent with their aspirations. In contrast, the management of the direct work
environment was not seen by any respondents to be respectful of or value employees. They
felt that they were just shop workers that are only seen to be generators of income for thecompany directors. This dichotomy of response suggests that employees were experiencing
opposing organisational cultures. Even though during the recruitment process, they were seen
to be very similar. On one hand, the cosmetic house culture was congruent with their preemployment perceptions. In contrast, the culture of the pharmacy was incongruent with theirpre-employment perceptions. The direct work environment was being influenced negatively
by the direct management.
Job Satisfaction
Of the eleven respondents surveyed and interviewed, nine respondents were generally
satisfied with their job.
The most commonly cited aspects of the job that were enjoyed were:• the positive collegial relationships,• company rewards such as product allocation and travel
training/development workshops,• positive customer relations, and• the image of working for a prestigious place and company of work.

opportunities

toRespondents did not like:• the competitive environment of sales,• the ambivalence and rudeness of the owner/manager,• the rudeness of customers, and• the low pay.
Kate’s comments clearly capture the mixture of likes and dislikes about the job:
“I enjoy working with the other girls, but I don’t enjoy working in this business. Thereis so much pressure to sell-sell-sell, and the pay and benefits are shit. It was good for a
bit but now its so boring. I hate having to lay low when the boss is grumpy – I thinkthat’s pathetic. Rude customers just make it even worse.”
Half the respondents are no longer in the industry. Of those, two left because of negative,
unsupportive management, and two mentioned that they were seeking new opportunities
elsewhere. Five of the six remaining respondents currently working with the company were
not content to stay in their current position. Two found their work environment stressful, andthree were looking for jobs that better utilised their capabilities. These current employees
continued to display an aspiration to fulfil their career trajectories.
As Stella mentioned:
67

New Zealand Journal of Employment Relations (2007), 32(1)“It became a boring job because I had gone as far as I could. It was clear if I wasgoing to continue on I would have to leave. For the most part I enjoyed it here, but I
just needed a new environment where I could develop more.”
It was clear that self-determination and goal orientation were strong personal factors that
contributed to motivating individuals to either stay in a job or pursue new jobs. As stressedby Robbins et al. (1998), job satisfaction is an individual’s general attitude towards theirwork. As suggested by Firth, Mellor and Moore, (2003) a variety of extrinsic and intrinsic
sources contribute to job satisfaction. They suggest that satisfaction is primarily fostered by agood fit between an individual’s needs and what the organisation has to offer.
Company Culture
All respondents perceived that they ‘fitted’ with the culture of the cosmetic company. Asidefrom two of the younger respondents working for the less prestigious companies, they all feltthat they were made to feel welcome by the cosmetic companies during their induction phase.
As stated by Kate:“They are very encouraging and supportive and you are made to feel like you belong.
There is a strong emphasis on appearance – they want you to be classy and elegant,and you are made to feel that when you are recruited, you have those qualities and thepotential to fit the company image.”
Respondents also perceived that they fit the direct environment (the chemist shop) image, but
not necessarily the culture. As stated by Kate:“I thought this place had the image of being an efficient, supportive and highly
professional environment; at least that’s what I thought. But the culture is different
than that – it is really competitive and sales-driven.”
Most of the respondents suggested that the culture of the direct work environment was largely
incongruent with the actual culture advocated by the cosmetic sales company. The former
was seen as competitive, goal-oriented, influenced by the shop’s bosses’ personal moods that
tended to be very unsupportive and discouraging. The latter was the opposite. Employees
were made to feel a sense of belonging and contribution to team goals, respected, valued, andable to contribute ideas to the overall national strategies.
Sylvia’s comments captured this dichotomy:“The training is full-on, and there’s much info to absorb properly on the days that you
were away, but you feel really appreciated and acknowledged for your efforts. And
then I get back here and I work hard and don’t get a pat on the back at all, justnegative feedback.”
In summary, most respondents suggested that their fit with the cosmetic company contributed
to positive job satisfaction. However, although they perceived that they fit with the image,they did not feel that they fit in with the organisational culture.

False Expectations
68

New Zealand Journal of Employment Relations (2007), 32(1)The final section of the questionnaire and interviews gave the respondents an opportunity toagain identify the factors contributing to them either staying in their current position orleaving. As well, they were asked to clarify whether job satisfaction was influencing theirdecision. In many ways, this section of the questionnaire and interview served to confirm theaccuracy of the data collected in the previous data collection sections. Although the majorityof applicants displayed an adequate level of satisfaction with their employment, it was quite
apparent that various factors were contributing to their job dissatisfaction and this was
motivating or had motivated them to seek alternative employment.
As indicated in the previous sections of this report, two general themes were evident. First,
the direct work environment, especially the organisational culture being strongly dictated by
the management, was contributing to their negative job satisfaction. Factors such as the strongemphasis on sales; the unsupportive management, the moody boss, and repetitive andcompetitive nature of the work were commonly mentioned aspects. Second, respondents saw
little opportunity for advancement for career trajectory within this particular setting. Sylvia’scomment seemed to summarise this interplay:“It all boils down to working here. I thought it would be more than just standing here
looking pretty – I have had a good education and I want to put it to use, and here you
are not really encouraged to use your potential and there is really no opportunity to use
it either.”Conclusions
This study found that, in general, respondents anticipated an exciting, challenging career pathwith their cosmetic company. This common perception was presented or at least perceived to
be presented to the respondents when they were going through the recruitment process of theiremployment. Some respondents’ views were largely constructed from their own perception ofwhat the job would entail. In summary, most respondents had clear aspiration for successwithin the beauty and cosmetic industry, albeit potentially quite idealised. They also expectedthat the position being sought would provide the vehicle for achieving these goals.
Within the first month of their employment, the jobs the respondents secured seemed to becongruent with the professional goals of what they had in mind for their career paths. Thiswas particularly true for the more educated respondents that had recently completed theireducation and were looking quite specifically for a job that provided challenge andopportunity in pursuing a career trajectory. Thereafter, incongruence between expectation andreality became more evident. In general, most respondents suggested that their fit with thecosmetic company contributed to positive job satisfaction. Most respondents also perceived
that they fit with the organisational image (what the organisation was perceived to be) of thedirect work environment. In contrast, most respondents felt they did not fit with theorganisational culture (what the organisation was really like) experienced in their direct work
environment. This culture was strongly influenced by the direct work environment
management.
Interestingly, despite the dissatisfaction most of the employees experienced, employees
continued to have high resiliency in terms of career aspiration. For the most part, the retailcosmetic employees who started out as ambitious, happy, motivated employees excited about
their new job as a cosmetics counter manager and motivated to succeed and do their best,69

New Zealand Journal of Employment Relations (2007), 32(1)often came to realise that there may not be the job prospects or promising career path that they
had hoped would come to fruition. This contributed significantly to job dissatisfaction but did
not deter employees from considering other employment options.
Clearly, it is important that an employee experiences congruency between what is conveyed
about an organisation during recruitment and induction and what they experience in reality
during the socialisation process. As well, if the actual organisational culture is quite different
in a negative way from what was conveyed, job dissatisfaction is most likely, to occur. It is
likely that this dissatisfaction contributes to high employee turnover. In the context of thisstudy, employees that are working in environments that are congruent to and foster theirprofessional aspirations are likely to be experience more job satisfaction and are likely to staywithin their current work environment.

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Forest, NSW: Longman

71New Zealand Journal of Employment Relations (2007), 32(1)Is there a link between Workplace Health and Safety and Firm
Performance and Productivity?
FELICITY LAMM*, CLAIRE MASSEY** and MARTIN PERRY***

Abstract
Research on the connection between occupational health and safety (OHS) and increasing
employee productivity and performance has become topical as a result of increased
interest in ways to improve ‘performance’ in the workplace. Occupational health andsafety academics have also recognised the social benefits of introducing improved healthand safety standards. However, there is debate as to whether or not introducing
improvements can actually increase measurable economic benefits. While most of theresearch has been located overseas, there is, unfortunately, little empirical New Zealandbased research in this area. Recently efforts have been made by the New Zealand
Government and in particular the Department of Labour to remedy this situation and to
fund research that examines the possible links between OHS interventions and firm
performance and productivity as well as understand why firms implemented OHS
practices within the New Zealand context. As part of this research, a comprehensive
literature review on the topic was undertaken and it is this review that is the focus of thearticle.

Introduction
There is increasing and compelling overseas evidence that providing a healthy and safe
working environment has the potential to increase labour productivity and in turnincrease company profits. However, the New Zealand research on the links between OHS
interventions and firm performance and productivity (and the subsequent tangible gains)is still largely undeveloped. In an attempt to redress this situation, the Department ofLabour sponsored a study in which the aims were to: a) investigate the possible links
between OHS interventions and firm performance and productivity; and b) understandwhy firms implemented OHS practices within the New Zealand context. The starting
point for the project was a literature search to identify the most relevant material on thelinks between workplace health and safety and firm performance and productivity. It is
the highlights of this extensive literature review that will be the focus of the article.
The literature specific to the topic, however, is not easy to locate and is difficult to draw
upon. Instead, it is dispersed among multiple disciplines, such as ergonomics (e.g.
*Felicity Lamm is Associate of Professor of Employment Relations in the Business Faculty at AUT
University**
Claire Massey is Professor of Enterprise Development and Head of Department at Massey University.
She is also the Director of the NZ Centre for SME Research Centre..
***
Martin Perry is Senior Lecturer in the Department of Management and Enterprise Development, Massey
University (Wellington)

72

New Zealand Journal of Employment Relations (2007), 32(1)Oxenburgh, 1991; MacLeod, 1995), health economics (e.g. Grozdanovic, 2001; Lofland,Pizzi & Frick, 2004), environmental medicine (e.g. Burton, et al, 1999; Goetzel, et al,2001), sociology (e.g. Green, 1994; Hopkins, 1994) and law and economics (e.g.
Hawkins, 1989; Gunningham & Johnstone, 1999; Dorman; 2000; Viscusi, 2004). In
addition, the empirical research is often restricted by a predilection for a particulardiscipline. There is little interface between these disciplines, and differences also exist
between methods and endpoints of research that draws upon a singular (rather than amulti-disciplinary) approach. The more advanced literature, however, acknowledges not
only the complexities of trying to establish a connection between OHS and increasing
productivity and performance but also stresses the point that it is more useful to adopt a
multidisciplinary approach to the topic (e.g. Bohle & Quinlan, 2000; Shearn, 2003;De
Greef & Van den Broek, 2004; Frick, et al, 2000, 2004).
Investigating this area is also not a straightforward task as the relationship between
business performance and productivity and OHS interventions aimed at reducing illness
and injury is strongly contested. On one side, there is the view that good health and safety
practices are good for business and productivity, while on the other side, there is the viewthat OHS interventions are costly and interrupt the flow of work activity, and that
regulations impose a non-productive investment (Shearn, 2003; De Greef & Van den
Broek, 2004).
The central purpose of the literature review is to critique the extant overseas and New
Zealand research on the links between workplace health and safety and businessperformance and productivity. Key themes that underpin the literature review are:
1. What does the current literature say about the links between workplace health andsafety and company performance and productivity?
2. What are the key issues surrounding implementing OHS measures to increase
productivity? In particular, who benefits from increases in productivity; how toevaluate OHS measures and economic benefits; and increased productivity?

The Literature on Links between Workplace OHS and Company
Performance and Productivity
Attempts to link improved OHS practices and policies with improved firm productivity
and performance have been driven not only by state agencies,1 but also trade unions andthe more enlightened employers. Increasingly enlightened employers, together with tradeunions, are striving to provide safer and healthier workplaces which can translate into
increased productivity, more job satisfaction, and stronger bottom-line results (BrandtRauf, 2001; Occupational & Environmental Health Foundation (OEHF), 2004; Boles, etal., 2004; De Greef & Van den Broek, 20042).
Those concerned with workplace illness and injury are also endeavouring to quantify how
the overall health and safety of an employee affects their ability to work productively(Goetzel & Ozminkowski, 2000; Bunn, et. al. 2001; OEHF, 2004). More precisely, thedrive to link productivity with OHS outcomes is underpinned by four core reasons:73New Zealand Journal of Employment Relations (2007), 32(1)1. The need to find more innovative ways to reduce the high rates of workplace
injury and illness than has previously been the case.
2. The pressure to reduce the social and economic costs of injury and illness,particularly compensation costs.
3. The need to improve labour productivity which does not result in employees
working longer hours and taking on more work.
4. The need to provide good working conditions as a way of recruiting and retaining
skilled workers in a tight labour market.
This drive to link OHS and company productivity has in the past decade stimulated
academic research where rigorous, empirical evidence had previously been slow tomaterialise. The most sustained and notable examples in this area have taken place within
the discipline of ergonomics (e.g. Sanders & McCormick; 1987; Simpson, 1990;
Oxenburgh, 1991; MacLeod 1995; Frick, 1997; Shikdar & Sawaqed, 2003; Lahiri, et al2005). MacLeod (1995:19) provides some insight into the reasons why ergonomists havebeen more active in this area and why they have been more successful in engaging withthe business community over the links between OHS and productivity than professionals
in other fields of OHS:
‘Improving the fit between humans and tools inherently means a more effective
match. Good ergonomic improvements often result in better ways of performing atask. An ergonomically designed workplace (or product) is a more productive
workplace (or product). Not exceeding human capabilities does not mean
reducing output or doing less. On the contrary, good design permits more output
with less human effort.’
The other discipline that dominates the research on the links between OHS andworkplace productivity is occupational medicine/health promotion3. In particular, manyof the studies on OHS and productivity have been generated by the following
organisations within this discipline:•

The Occupational & Environmental Health Foundation (OEHF), which wasestablished in 2002 by members of the American College of Occupational andEnvironmental Medicine as an independent entity to promote and protect thehealth of workers through preventive services, clinical care, research andeducational programs (http://www.oehf.org).

•

The Institute for Health and Productivity Management, which is an Americanbased Institute created in 1997 with the sole purpose of investigating the link
between employee health and enhanced business performance(http://www.ihpm.org)•

Health Enhancement Research Organisation (HERO), which is a national,
research oriented, not-for-profit, coalition of organisations with common
interests in health promotion, disease management, and health-related
productivity research. Established in 1996, its primary concern is on

74

New Zealand Journal of Employment Relations (2007), 32(1)prevention and a more healthy and productive population (http://www.thehero.org).
•

Cochrane Collaboration4 is an international organisation of academics thatprovide current reviews on OHS research as well as fostering investigations
into prevention and intervention programmes that will enhance the well-beingof workers and assist employers to provide good working environments(Verbeek, Hale & Ker, 2006).

The central tenet that runs through almost all of the occupational medicine/healthpromotion literature is that:‘…human performance is higher when people are physically and emotionally able
to work and have a desire to work. Higher levels of human performance lead tohigher levels of productivity, which in turn can lead to higher profits.’(O’Donnell, 2000: 215)
Located within the occupational medicine/health promotion discipline, O’Donnell’s(2000) conceptual model of human performance exemplifies this belief in which heattempts to illustrate the linkages between health and safety, productivity and profits, as
outlined in Figure 1. Health and safety prevention and intervention programmes play a
critical role in his model as these types of programmes can improve the physical andpsychological well-being of the workforce which in turn reduces absenteeism andpresenteeism. He also argues that such programmes improve the organisational climate,which enhances employees’ desire to work and directly raises human performance. He
asserts that improved organisational climate, morale, and employment relationships aswell as higher profits have the potential to reduce the health and safety risks – in essence
it is a ‘catch-22’ situation. However, as laudable as O’Donnell’s (2000) sentiments are,others argue that the research on the relationship between safety climate andorganisational climate is still in its infancy and will require a thorough investigation of
the relationship between safety climate and safety culture (Guldenmund, 2000; Glendon& Stanton, 2000; Neal, et al, 2000; Smallman & John, 2001; Silva, 20045).
Taking O’Donnell’s (2000) premise one step further, Riedel et al (2001), argue that
reducing health and safety compensation costs has traditionally been the sole focus of
employers. Riedel et al (2001), however, note that employers are beginning to recognisethat employee wellbeing and corporate high performance ‘…emphatically go together’.
They continue:‘Greater gains may be experienced through the direct influence of positive worker
health on individual or group productivity, improved quality of goods andservices, greater creativity and innovation, enhanced resilience and increased
intelligent capacity.’ Riedel et al (2001:167)75

New Zealand Journal of Employment Relations (2007), 32(1)FIGURE 1: Linking Health, Productivity & Profit

Source: O’Donnell, (2000)

The model developed by Riedel et al (2001:168) outlined in Figure 2, illustrates how
improved worker health and safety has the potential to increased performance withresulting effects on short-term and long-term productivity for the company, although theyalso acknowledge that there is a need for more empirical evidence.

FIGURE 2: Pathways to productivity

Source: Riedel, et al. (2001)

76

New Zealand Journal of Employment Relations (2007), 32(1)Issues Surrounding Implementing OHS Measures to Increase
Productivity
As stated earlier, the topic on OHS relationship between business performance andproductivity and OHS interventions aimed at reducing illness and injury is strongly
contested. At the heart of this debate are three main issues, namely:
1. Who benefits from increases in productivity?
2. How to evaluate OHS measures and increased productivity?
3. How to evaluate the economic benefits?
Who benefits from productivity gains?
There is an inherent tension within this literature that cannot easily be resolved. Some
commentators argue that productivity gains are often at the expense of workers’ healthand safety. Businesses typically strive to become more productive whereby workers areoften driven to work longer, harder and more efficiently, and in some cases are required
to work in extremely hazardous conditions, (Mayhew & Quinlan, 1999; Dorman, 2000;
Quinlan, 2001). In many instances, OHS measures are implemented only to keepcompensation costs down. Working longer and harder has become a growing
phenomenon and over the past decade, New Zealanders are spending more time at workthan many other industrialised countries (Callister, 2005; Rasmussen and Burgess; Stock,2007). As a result, work-related stress and fatigue have become major issues. In short,
implementing measures, including OHS, to increase productivity may create the opposite
affect, as Goetzel, et al (2001:211) notes:‘Instead of feeling empowered, [workers] may feel … uncomfortable about their
new job demands…They may experience increased stress, more worry about their
job tenure, heightened feelings of detachment, and diminishing motivation to
perform at peak performance…Low morale and poor attitudes about work can
become contagious and infect fellow workers, further exacerbating individual
productivity and bring about increased turnover and general organisationalmalaise.’Based on his recent study James (2006) also observes that while exposure to hazards
associated with machinery and manual handling are being reduced, other risks associatedwith increases in labour productivity are on the rise. He continues:‘The fact that over half of these new cases of work-related ill-health stem from …
stress, depression and anxiety, and musculoskeletal disorders, also raises animportant issue of policy, particularly when account is taken of the further fact
that, against a background of increasing work intensity and declining worker
discretion, the prevalence rate for stress and related conditions has recently grown
substantially… It also further suggests, given the way in which these conditions
77

New Zealand Journal of Employment Relations (2007), 32(1)are intimately connected to workload levels and the nature of work tasks, that theachievement of reductions of this type will require employers to be placed undermuch greater pressure to design work tasks and establish workloads that are not
detrimental to worker health.’ (James, 2006:11)
Thus, it would appear that efforts to increase productivity through OHS can havecontradictory results.
How to evaluate OHS measures to increase productivity?
There is a plethora of OHS articles (both popular and scientific) spanning decades which
are almost entirely concerned with inventing and promulgating OHS prevention andintervention programmes, with little scrutiny of the efficacy of such programmes(Smallman and John, 2001). As Shannon, et al. (1999:161) rightly notes: ‘…many
interventions in occupational safety are implemented with the sincere hope that they will
work, but with a lack of solid evidence of their effectiveness [and] can sometimes makethe situation worse’. They argue that before we can properly assess the impact of healthand safety preventions/interventions on workplace productivity, it is necessary to firstjudge each prevention or intervention programme against a set of criteria (Shannon, et al.
1999: 163).
Further, as more attention is given to scrutinising the efficacy of health and safety
programmes, more substantial links are being made between the implementation of healthand safety programmes and their beneficial impact on a firm’s productivity. To date theresearch leans towards the acceptance that introducing health and safety measures will
have both direct (e.g. reduced insurance and workers’ compensation premiums) andindirect benefits (e.g., reduced staff turnover) including raising the level of productivity(Oxenburgh, 1991; Bottomley, 1994; Archer, 1994; Frick et al, 2000; Goetzel, 2001;
Shearn, 2003; De Greef & Van den Broek 2004).
However, it is important to understand the various means in which data can be collected –namely: self-reporting, archival sources, or mixed methods. Evans (2004) warns thatmeasuring increases in productivity is demanding and fraught with difficulties. In
particular, while self-reporting may be valuable when there is no other suitable source ofdata or when the data is too costly to obtain, it is nonetheless based on the subjective
reporting of the employer or employee. In terms of validity, archival data is the preferredsource, however, not all employers collect archival data and frequently the data is limited
to a sample (Evans, 2004).
There is also a need to clarify the various measurement tools available to assess theimpact of health and safety on productivity, including absenteeism, presenteeism, shortor long-term disability, as well as defining the increments and gains in health and safety
related productivity interventions (OEHF, 2004). As Goetzel, et al (2001:15) states:78New Zealand Journal of Employment Relations (2007), 32(1)‘A first step in establishing the link between health [and safety] and productivity
is determining which baseline measures are central, germane, and likely to bebroadly accepted by the employer community.’At the heart of this discourse is the identification of basic metrics that can be used asnational and international benchmarks for assessing health and safety related productivity(HSRP) and for the quantification of the fiscal impact of health and safety on the firms
bottom line (OEHF, 2004; Ozminkowski, et al, 2004; Lofland, et al, 2004). One of thebeneficial outcomes of this research is to provide senior managers with measurement
tools to better understand the full costs of illness and injury within their own firms and tobetter understand the value of health and safety prevention/intervention strategies.
In addition, each method of measurement has its strengths and its limitations and there
have been a number of useful critiques in this area undertaken by Riedel, et al. (2001);
Lofland, et al. (2004), Ozminkowski, et al. (2004) and Evans, (2004). The criteria usedby these authors to critique the various methods were: their reliability, validity,
productivity metrics, instrument scoring technique, suitability for direct translation into amonetary figure, number of items, modes of administration and the disease states inwhich it had been tested. Also Riedel, et al.’s (2001) study organised and synthesised theliterature on disease prevention and health promotion with reference to increasing
business productivity into three categories:•••

early detection of a condition;
behaviour change programmes to reduce the risk; andcare-seeking support to reduce the unnecessary use of care.

Although these attempts to scrutinize how best to evaluate OHS measures to increase
productivity are useful, this inquiry is still evolving and requires more attention.
How to evaluate the economic benefits?

One of the primary drivers for introducing OHS interventions is the resultant economic
benefits. More specifically, there is recognition that productivity drives economic growthand profits. Better management of worker health and safety and related productivity
outcomes may create a competitive business advantage (Sullivan 2004:S56). The
literature also suggests that managers are more likely to make a decision to implement
health and safety measures in order to increase productivity based on the knowledge that
there are economic benefits (Dorman, 2000; Grozdanović, 2001; Koningsveld, 2005).
However, Amador-Rodezno (2005) cautions, that it is not easy to convince employers of
the economic benefits of OHS as typically they will underestimate the cost of the OHS
problem while overestimating the costs associated with its remedy. Also establishing thecause-effect relation is not straightforward (William, et. al., 1997; Amador-Rodezno,2005). This difficulty is complicated by the fact that in many instances several initiatives
will be implemented at the same time (not only health and safety actions but also human79New Zealand Journal of Employment Relations (2007), 32(1)resource actions), which makes it difficult to link a specific initiative to a specificoutcome(s) (i.e. increased productivity = profits) (Bergström, 2005).
Nonetheless, there are a number of ways to estimate the cost of an OHS intervention6.
The two most prominent ones are: the insurance model and the cost benefit analysis
model.
The insurance model uses workers’ compensation insurance information to provide anestimate of the costs of OHS interventions. Although this approach has the advantage ofsimplicity in that it is reliant on only one source of information, it is also limited (Cutler& James, 1994). As Oxenburgh and Marlow (2005:210) note:‘It does not measure, for example, productivity losses and employee turnover andthus may seriously underestimate the total costs of injury absence. As it may
underestimate the total injury costs it will likewise underestimate the potential
savings from investment in avoidance of these costs…[It] will not provide an
incentive for small organisations with no history of injuries to implement
occupational health and safety improvements.’
The cost benefit analysis model requires more data than the insurance model in that it
measures all significant employment and production factors and therefore, it provides amore comprehensive picture. That is, it assesses the total costs of employment and thelosses due to workplace injury or illness (Oxenburgh & Marlow, 2005). Because it isspecific to the organisation, it is a better reflection of the actual economic benefits.
According to Lahiri, et. al. (2005: 242) there are four elements within the framework:
1. The cost of the equipment and labour of the intervention enters the cost equation
as a positive component;
2. The degree of effectiveness of the interventions essentially determines the valueof the avoidable costs of injuries and illnesses;
3. The increase in productivity results principally from the technological design ofthe equipment; and4. The displacement of workers that might result from an increase in productivity of
the intervention.
Lahiri, et al. (2005: 242) continue:‘While both the second and third component enter the accounting equation as
negative expressions and help to reduce the real cost of the intervention, the costof retraining for displaced workers enters the equation as a positive cost from thesocietal point of view’.
Oxenburgh & Marlow (2005:211)7 add that in order to determine whether or not there
have been economic benefits as a result of an OHS intervention, it is necessary to gather
data on the direct and indirect costs from a range of sources – namely:

80New Zealand Journal of Employment Relations (2007), 32(1)•Employee Data: this includes the number of employees, their working time andwages, overtime, training and production costs;•

Workplace Data: this includes supervisory costs, recruitment, insurance, and othergeneral overheads, maintenance, waste, and energy use; and•Intervention Data: this relates to the costs associated with the intervention, forexample, consultants’ fees, disruptions, errors, etc.

The data categories are intended to answer the question: ‘has optimal productivity beenachieved?’ If the answer is ‘no’, then the next questions are asked: ‘why’ and ‘what canbe done?’ Oxenburgh and Marlow (2005) suggest that there may be a number of reasonsfor a lower than optimum productivity, for example, an ill-conceived timeframe.
Oxenburgh & Marlow (2005:3) also argue that it is important to ensure that productivity
data is relevant to the OHS intervention and include both quantitative and qualitative
data. They warn, however, that ascertaining the economic and productivity gains as aresult of an OHS intervention can be difficult and necessitates resources being allocated.
For small businesses, in particular, undertaking this exercise could be problematic as
there may be a lack of resources and expertise as well as poor record keeping.

Conclusions
There is increasing and compelling evidence that providing a healthy and safe working
environment has the potential to increase labour productivity and in turn increasebusiness profits. There are, however, a number of issues that cannot be overlooked, forexample, what are the negative outcomes, how best to evaluate OHS measures in terms ofincreased productivity and are there economic benefits? It is also evident that there arecertain necessary ingredients required, such as a good level of cooperation between the
management and employees, to ensure the success of an OHS intervention and thesubsequent increases in productivity.
However, the review of the literature has revealed a number of key gaps:
1. First, while there are a growing number of studies indicating the benefits ofproviding a healthy and safe working environment, the evidence is still tenuousand difficult to quantify. In particular, it is not known if the benefits are shortterm or long-term. Also, while there is evidence that occupational injuries andillnesses impact on productivity losses, it is not clear whether or not reducing
injuries and illnesses will automatically influence productivity gains. Therefore,
as the literature suggests, getting employers, particularly those operating in thesmall business sector, to link health and safety measures with tangible increases in
productivity and profits could be difficult.
2. Second, the extant research is biased towards large organisations, frequently
situated in North America. This does not reflect the New Zealand businessdemographics (refer to Lamm & Walters, 2004). However, there is scant New
Zealand research on the topic to rectify this imbalance.

81New Zealand Journal of Employment Relations (2007), 32(1)3. Third, the literature on linking OHS with productivity is predominately
concentrated in two disciplines – namely ergonomics and occupational
medicine/health promotion. Indeed there is a danger that the topic will be entirely
captured by the health promoters with little or no acknowledgement of how safety
fits into the equation. Moreover, many of the OHS productivity methods andmeasurements are almost entirely health-based. Linking safety improvements(unless ergonomic) has been largely omitted from the discourse. Thus, given thecomplex nature of OHS and productivity, it is more useful to adopt a
multidisciplinary approach (refer to Bohle and Quinlan, 2001).
4. Finally, there are also few references that make the connection between OHS andthe sociology and organisation of work and productivity. It is imperative thatOHS policy and practice and productivity gains are placed within the context ofchanges in the business environment – the changes to the way we work, changes
to the legal framework, demographic changes; the impact of globalisation, etc.
That is, what is occurring in the business community is inextricably linked to
productivity and the status of occupational health and safety.

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85

New Zealand Journal of Employment Relations (2007), 32(1)

Notes
1

Recently the Department of Labour, for example, has been actively supporting collaborative research to
improving New Zealand’s productivity (www.dol.govt.nz).

2

As part of the European Agency for Safety and Health at Work, (2004) mandate, Marc De Greef and
Karla Van den Broek (2004) were engaged to undertake a comprehensive investigation into the link
between a good working environment and productivity across the European States. The aim of the study
was to gain a better understanding of positive effects of a good working environment that would support
the implementation of effective health and safety policy at company level.
3
The level of attention in this area by medicine/health promotion researchers can be seen in the January,
2001, 43(1) special issue of the Journal of Environmental Medicine.
4
The Cochrane Collaboration project also investigates the prevention and treatment of occupational
injuries (seewww.cochrane-injuries.Ishtm.ac.uk).
5
Refer to Silva, et al, (2004) for an extensive comparative discussion on the differences and similarities
between the concepts of organisational climate and safety climate.
6
For a comprehensive overview of six different tools to evaluate the economic benefits of OHS
interventions refer to Biddle, et. al. (2005) `Synthesis and Recommendations of the Economic Evaluationof OHS Interventions at the Company Level Conference’. Journal of Safety Research 36: 261-267.
7
Oxenburgh (1991) and Oxenburgh & Marlow (2005) elaborate further on assessing the productivity
increases as a result of OHS interventions in their software Increasing Productivity & Profit throughHealth & Safety (Product Ability, 2004).

86

New Zealand Journal of Employment Relations (2007), 32(1)Research Note: The Impact of Good Faith Principles on
Communication Issues in Collective Bargaining
PAM NUTALL*
Abstract
During the recent dispute between distribution workers and Progressive Enterprises Ltd(a subsidiary of Woolworths Australia Ltd), pay offers were communicated directly tolocked out employees, despite their union representation. These actions are reminiscentof issues litigated under the Employment Contracts Act 1991 in a line of “communication
cases” which developed the jurisprudence around the statutory requirement under thislegislation to “recognize the bargaining agent” [s12(2)]. Under the Employment
Relations Act 2000, general “good faith” principles and specific provisions relating tocommunication during collective bargaining provide the governing requirements for the
behaviour of the parties. This paper examines the extent of curial acknowledgement of
the radical shift in legislative policy underlying the Employment Relations Act 2000 in
its application of the statutory provisions to communication issues.

Introduction
Communication issues are integral to any consideration of collective bargaining
parameters. The nature and extent of employer communication with employees may
substantially affect negotiation outcomes – an essential element of Boulwarism”, after all,was the strategy of effectively merchandising the employer’s offer to employees (Gross,
Cullen & Hanslowe, 1968). Taken with other bargaining conduct, communication
behaviour may also provide an indicator of harsh and oppressive dealings andunconscionable behaviour (refer to Transportation Auckland Corporation Ltd v Marsh).
During the recent dispute between New Zealand distribution workers and Progressive
Enterprises Ltd (a subsidiary of Woolworths Australia Ltd), pay offers werecommunicated directly in order to locked out employees, despite their union
representation. The behaviour was reminiscent of situations litigated during the 1990s
under the Employment Contracts Act 1991 (ECA), but although the relevant unions
sought the intervention of the Employment Court, the settlement of the dispute precluded
any eventual judicial ruling on the conduct of the parties.
This paper considers the impact of the good faith requirements under the Employment
Relations Act 2000 (ERA) on the jurisprudence developed in the line of “communication
cases” and interpreting the statutory requirement under the ECA to “recognise the*

Pam Nuttall is a Senior Lecturer in the Faculty of Business at AUT University.

87New Zealand Journal of Employment Relations (2007), 32(1)bargaining agent”. It would appear that in this context, as with other examples thatgiving meaning to the provisions of the ERA, the Courts require specific legislative
wording to implement the radical policy intentions of the statutory objective to promote
good faith in the employment relationship by (inter alia) “acknowledging and addressing
the inherent inequality of power in employment relationships”.

Discussion
ERA Shift in Common Law Principles?
The New Zealand’s latest employment legislation has been described as “… radical andas effecting fundamental changes in labour law structures…The good faith obligation of
the ERA is intended to be a driver of a quite different pluralist approach to employment
relationships that contrasts with the market driven ECA. The broad formulation andscope of the statutory obligation…signal[s] a radical change of direction in labour law
philosophy”, (Anderson, 2006: p13.). However, the courts have appeared reluctant toacknowledge a major shift in legislative policy with its concomitant impact on theshaping of common law principle. Thus, from a range of leading cases since 2000, a
crucial question has emerged – namely: “To what extent has there been a shift or
departure from the ECA, in which the objectives and provisions of the ERA represent?”.
In the first case decided after the enactment of the ERA – Baguley v Coutts Cars – theFull Bench of the Employment Court stated that:“The Employment Contracts Act 1991 has been repealed. A markedly different
regime has been established in its place. It is therefore not satisfactory to makedecisions in reliance on cases decided while the Employment Contracts Act 1991
was in force unless they state principles of general application as opposed toprinciples peculiarly arising out of the Employment Contracts Act 1991” [2000] 2
ERNZ 409, 420
However, in overturning the Employment Court, the view of the majority in the Court ofAppeal was that:“It has long been the law that the special nature of the employment relationshipincorporates mutual obligations of trust and confidence…We do not see that the
new statutory obligation on employers and employees to deal with each other ingood faith introduces any significantly different obligation to that the Courts haveplaced upon parties to employment contracts over recent years”. [2001] 1 ERNZ
660, 672 per Richardson, P, Gault & Blanchard, JJ.
In concurring, Tipping, J also stated that “… the new Act simply ratifies and incorporates
much of what was regarded as implicit under the earlier regime”.

88New Zealand Journal of Employment Relations (2007), 32(1)The initial assessment of the Court of Appeal was that ideologically the legislative
principles underlying the ERA did not differ significantly from those of the ECA. A
specific legislative amendment was needed in order to clarify that the purpose of thestatute could only be achieved through recognising that “… employment relationships
must be built not only on the implied mutual obligations of trust and confidence, but also
on a legislative requirement for good faith behaviour …” and that the “… duty of goodfaith…is wider in scope than the implied mutual obligations of trust and confidence…”
s3(a)(i) & s4(1A) ERA.
A further Court of Appeal judgment, Three Foot Six Ltd v Bryson [2004] 2 ERNZ 526
rejected the submission of counsel for the appellant that the ERA definition of‘employee’ represented no change from the position under the ECA but described theeffect of the ERA as “… more in the nature of a nudge rather than radical change in thisarea of the law” (CA p544). A significant aspect of the reasoning supporting thisconclusion was an examination of the legislative history with close attention to therevision of wording at the Select Committee stage. The majority decision appeared
unable to accept the persistence of the original legislative intent in the face of amended
wording, preferring instead to read down the scope of the definition. This point remains
moot following the reversal of the Court of Appeal by the first employment law decisionin the new Supreme Court. While endorsing the interpretation of the statutory provisionin the Employment Court, (which reached a different outcome from the Court of Appeal)
the issue of legislative intention was not traversed by the superior court.
Also in the Gibbs case ([2005] 1 ERNZ 399), the Employment Court found itself unable
to read up the altered provisions which emerged from a Select Committee process inorder to achieve the outcomes that were clearly anticipated in the original explanatory
notes to the Bill when first introduced to Parliament. Although not assisted by thedrafting of the revised provisions, the decision again reflects what appears to be atendency to assume that the common law principles, shaped by the ECA, represent a
default position against which departures must be established by unambiguous, explicit,
statutory language. As mentioned, the enactment of further, very specific and detailed
legislative amendments was required to spell out the initial legislative intention, althoughthese amended provisions themselves have yet to be interpreted by the courts.
ERA and Communication Issues
In the first major ERA case to come before the courts on the issue of communications
during bargaining – Christchurch City Council v Southern Local Government Officers
Union Inc, [2005] 1 ERNZ 666 – the argument was again presented that the ERA did not
implement significant alterations to the position established under the ECA. Counsel forthe appellant submitted that relevant provisions of the ERA “… do not substantially alter
the law as it existed under the 1991 Act but incorporate s12 of that Act and subsequent
judicial interpretations of that section”. It was argued “… that the requirement in s
32(1)(d)(i) for the union and the employer to ‘recognise the role and authority’ of theother substantially reflects the wording of s12 of the 1991 Act”. Counsel also aruged that89

New Zealand Journal of Employment Relations (2007), 32(1)this wording in s32 was “… to reflect Parliament’s intention to retain the previous regime
by codifying the case law in relation to communications with employees as it was
decided under the 1991 Act”.
Although the Court rejected this position, it expressed its finding in terms of aparliamentary intention “… to extend the obligations of each party beyond that expressedin s12 of the 1991 Act”. The jurisprudence developed under the ECA around the extent
of communication between the bargaining parties permitted by judicial interpretation of s
12 again clearly provides a default reference point for the Court in giving meaning to the
ERA provisions. An examination of the development of principle in these“communication cases” provides an opportunity to assess the impact of the ERA’s goodfaith provisions and the extent to which the courts have recognised that these represent a
departure from the contractualist framework of the ECA legislation.
ECA “Communication Cases”
The initial ECA case, Adams v Alliance Textiles (NZ) Ltd, [1992]1 ERNZ 982, was heard
within a few days of the Act coming into force. The relevant statutory provision, s12(2),stipulated that:“Where any employee or employer has authorised a person, group or organisation
to represent the employee or employer in negotiations for an employment
contract, the employee or employer with whom the negotiations are being
undertaken shall...recognise the authority of that person, group or organisation torepresent the employee or employer in those negotiations.”
The complex facts also raised a range of other issues, including whether the employment
contract was procured by undue influence or by harsh and oppressive behaviour. In
effect, within the context of the new employment relations environment, the employer
sought to replace a union negotiated award with their own collective, standardized
contract. To procure this outcome the employer met with employees directly, exerted
strong pressure on individuals, and attempted to prevent union consultation with
employees. The judgment summarised the situation as including “… the control anddomination of the employer, the absence of independent advice, the deliberate exclusionof the union advisors, the pro-active aggressive marketing approach by…management to
the promotion of the contract, the strong personalities of the managers, the absence ofcompetent explanation of alternative rights or options available, [management’s]
knowledge of that void, and the nature of the transaction” [1992]1 ERNZ 982, 1033.
The Employment Court decision did not consider, however, that the s12 requirement torecognise the bargaining agent precluded the employer from direct communication with
employees about the bargaining or that it required a balanced or unbiased presentation.
“The Act is quite specific as to the conduct which is prohibited and the Court is
not justified in putting a gloss on the Act by importing a requirement nowhere

90New Zealand Journal of Employment Relations (2007), 32(1)expressed in it that the employer should remain neutral when its vital interests areaffected and maintain in that situation a “hands-off stance”…an employer may
adopt and impart to its employees a partisan stance”. [1992]1 ERNZ 982, 1023
Although insisting that the employer was required to negotiate with a properly instituted
bargaining agent, the Court countenanced both a direct approach by the employer torevoke a bargaining authorisation and employer persuasion to do so. (at 1024). The Chief
Judge’s refused to “… read into ...the Employment Contracts Act 1991 any implied ruleof neutrality or restricting communications to those said to be necessary for the efficient
operation of the employer’s business” (at 1026). He saw the New Zealand legislation, in
which the “…purpose is to abolish compulsory membership of unions and the monopoly
or statutory right which unions had in the past to negotiate collective employment
contracts on behalf of employees …” as “antithetical” to the Canadian good faithprovisions in a context where collective bargaining is “…the preferred option” (at 1025).
This decision provided no protection for employees from the undue pressure by
employers to revoke their option for union bargaining authorities during negotiations andto agree to the employer’s terms.
By the time Adams reached a full Court of Appeal, it had been re-titled Eketone v
Alliance Textiles (NZ) Ltd [1993] 2 ERNZ 783 and the issues were no longer considered
to be “live”. The following obiter dicta statements in the judgment of Cooke, P, which
was supported by three of the Court of Appeal bench, however, became widely accepted
as defining of the effect of s12(2).
“I am disposed to think that once a union has established its authority to represent
certain employees ...then the employer fails to recognise the authority of the union
if the employer attempts to negotiate directly with those employees. To go behindthe union’s back does not seem consistent with recognising its
authority…Certainly an employer is free not to negotiate with anyone; but if hewishes to negotiate I doubt whether he can bypass an authorised representative.”[1993] 2 ERNZ 783, 787
Following Eketone, the Employment Court’s interpretation of s12(2) focused
substantially more on employer communications with employees, rather than on attempts
to have the bargaining authority revoked and that the issue of “recognition” of thebargaining agent centred on whether the comments and actions of employers undermined
the authority of the agent to negotiate.
The applicants in NZ Medical Laboratory Workers Union v Capital Coast Health, [1994]
2 ERNZ 93, appeared to have negotiated a collective contract with the employer’s
predecessor, the Wellington Area Health Board. Discussions as to the details of the
document with Capital Coast Health, however, became progressively more acrimonious,to the point where Capital Coast began to communicate directly with employees rather
than the union, pressuring them to accept a consolidated enterprise contract, rather thanthe laboratory workers’ contract, which had been the subject of the earlier negotiations.
Information packs and copies of the contracts, together with letters containing

91New Zealand Journal of Employment Relations (2007), 32(1)disparaging comments about union officials, were circulated directly to employees.
Meetings were also held with employees in the absence of their bargaining agents,
promoting the employers’ consolidated, collective contract and seeking employees’
signatures.
A full bench of the Employment Court granted the injunction sought to prohibit further
breaches of s12(2), finding that the various actions and documents circulated undermined
the authority of the bargaining agent. The Court of Appeal upheld all but one of thesefindings but completely rejected the basis for the Employment Court’s conclusions that
there is an implied duty of mutual trust and confidence in all contracts of employment.
The Employment Court had accepted that “…this implied term will require an employer
and employee to negotiate in such a way that they do not contravene their mutual
obligations in the continuing employment relationship” [1994] 2 ERNZ 93 at 126. The
Court of Appeal found questions of motive and good faith to be inappropriate
considerations. Hardie Boys, J, in a passage quoted with approval in subsequent Court ofAppeal decisions, stated that:“The ECA must be seen as essentially practical legislation designed to deal witheveryday practical situations. It is not appropriate to subject it to esoteric analysis
or to draw fine distinctions in its application…I do not think that its meaning isgreatly assisted by devising tests, whether they be of motive, either dominant or
secondary, or of effect, either intended or incidental.
Section 12(2) is predicated on the basis that negotiations for an employment
contract are under way between the employer and the employees’ authorised
representative. Negotiations are as I have said a process of mutual discussion andbargaining, involving putting forward and debating proposal and counterproposal, persisting, conceding, persuading, threatening, all with the objective of
reaching what will probably be a compromise that the parties are able to accept
and live with. Once that process is under way with an authorised representative
participating, the process may not be conducted directly with any party so
represented. The provision of factual information does not impinge on thatprocess. But anything that is intended or is calculated to persuade or to threaten
the consequences of not yielding does. Whether any words or actions are of thatkind is a question of fact to be determined on an overall view of what was said ordone and the context in which it was said or done…But again the provision of
factual information, relevant to the matter in hand, cannot be interference. Andagain, the same kind of overall assessment must be made to determine on whichside of the line particular facts fall”. [1995] 2 ERNZ 7 at 320
The judgment also took a narrower view of what constituted “negotiation” for the
purposes of recognising a bargaining agent, regarding it as the bargaining process rather
than all communications on the subject of the negotiations.
Between the Employment Court and the Court of Appeal decisions in Capital Coast
Health, the Employment Court delivered its judgment in Ivamy & ors v New Zealand92

New Zealand Journal of Employment Relations (2007), 32(1)Fire Service Commission [1995] 1 ERNZ 724. The Commission was engaged in acontroversial restructuring of the New Zealand Fire Service and negotiating of acollective contract for firefighters. An existing undertaking by the Commission not tocommunicate directly with firefighters, rather than their union, had settled a previous
dispute arising from attempts to extract individual signatures to a collective contract
directly from the firefighters. The Commission arranged for individual information packs
containing contract proposals to be couriered to firefighters at a time when collective
negotiations were scheduled to resume with the union officials, (who would presumably
be out of reach of their members with their cell phones turned off). Unfortunately, theindividual information packs were couriered earlier in the day and the union received a
different set of information much later. The collective negotiations were abandoned.
The Court found that the information packs were an attempt to by-pass the union andnegotiate directly with the firefighter employees. In what became known as a “blanket
prohibition” Chief Judge Goddard stated that:“I would now hold that once negotiations for an employment contract have begun
and the employees’ representative has established its authority to represent therelevant employees, no further communication on the subject of the negotiations
should be addressed by the employer to those employees... Communications on
all other subjects may continue but if the employer has anything to say about thenegotiations, there is no reason why it should not say it to the employees’
authorised representative”. [1995] 1 ERNZ 724, 766.
A more restricted reading of s12(2), however, was provided by Judge Colgan in Coulingv Carter Holt Harvey. In discharging an interim injunction restraining communication toemployees, Judge Colgan did not consider the “blanket prohibition” of Ivamy
appropriate.
“I consider that it will be a matter of fact and degree in any particular case todetermine a number of questions including whether communications about thenegotiations amounted to an attempt to negotiate and whether on the facts of thecase they amount to a failure or refusal to recognise the authority of the appointed
bargaining agent...I do not agree that communications per se about thenegotiations necessarily amount to negotiating and thereby undermine therepresentatives’ authorities to represent employees” [1995] 2 ERNZ 137 at 153.
The Court of Appeal decisions in Ivamy [1996] 1 ERNZ 85 and in the Airways
Corporation case [1996] 1 ERNZ 126, were delivered on the same day, traversing similar
issues. In overturning the Employment Court ruling, the Court of Appeal found that
employer communications in these cases did not undermine the authority of thebargaining agent. The argument of the majority judgment reiterated the words of HardieBoys, J (above) and the principles set out in Capital Coast Health, and in this lightconsidered that “…the approach taken by the Chief Judge on the law was in certain
respects erroneous” [1996] 1 ERNZ 85,102 per Richardson P, Gault and Henry JJ. Thus,
Court of Appeal majority not only completely rejected the “blanket ban” approach, but

93New Zealand Journal of Employment Relations (2007), 32(1)also applied the law to the facts in both these cases in a manner that raised particularconcerns.
In his dissent in the Airways case, which he also incorporated by reference into his Ivamy
decision, Lord Cooke commented that:“The liberty recognised in Capital Coast Health to provide factual information
exists, but care is needed to avoid going further. In this case [Airways
Corporation] it might be hard to say with a straight face that the newsletters [fromthe employer to the employee pilots outlining the negotiations and seeking
responses on feedback forms] were intended to do no more than provide factual
information”. [1996] 1 ERNZ 126, 131 per Lord Cooke of Thorndon
The second dissent in Ivamy by Thomas, J was expressed more trenchantly.
“It may well be that no new principles of law are enunciated in the majority
judgment and that the principle that each case must turn on its particular
circumstances is reiterated. But it would be unrealistic to believe that a decision ofthis Court will not be closely scrutinised by industrial parties and their advisers todiscern what conduct and communications on the part of the employer is
acceptable under s 12(2)…”[This dissenting judgment then lists two full paragraphs of conduct which
Thomas, J clearly felt was not acceptable in recognising the authority of thebargaining agent but which he felt would now be considered legitimate in light ofthe majority decision.]“In these circumstances it is not to be unexpected that employers and employees
alike may conclude that collective bargaining in the form recognised in the
Employment Contracts Act is largely vitiated” [1996] 1 ERNZ 85,124 perThomas, J
Against this background, the Court of Appeal decision in Transportation Auckland
Corporation Ltd v Marsh [1997] 1 ERNZ 532 upheld the Employment Court [1996] 2
ERNZ 266 and appeared to be almost “against the run of play”.
Transportation Auckland Corporation Ltd, the defendant, was formed as a result of the
deregulation and privatisation of urban passenger services to operate Auckland’s Yellow
Bus service. In order to successful tender for the bus services against competition fromprivate bus companies, the Corporation was forced to significantly reduce its labourcosts. Following protracted negotiations with the relevant union, the company offered
incentive payments to those employees who signed a collective contract whichsignificantly reduced their working conditions. When this offer was almost unanimously
rejected, contracts were sent directly to individual employees offering incentive payments
for signatures and threatening partial lockout and loss of entitlement to the incentive
payment for those who did not sign within a specified time. Some individual employees

94

New Zealand Journal of Employment Relations (2007), 32(1)were also pressured by depot managers. Over a period of about three weeks of strikes,
picketing and disruption, the employees, who had not yet signed, ratified the contract at aunion meeting.
The Employment Court found that the Transportation Auckland Corporation Ltd’s
behaviour was harsh and oppressive and that there had been undue influence and duress
pursuant to s57 ECA and breaches of s12(2). While upholding the Employment Court
decision, the Court of Appeal judgment appeared to suggest that a major factor in thefinding of objectionable conduct under s57 was the illegal nature of the threat of partial
lockout. The breach of s12(2) was treated as an element of the harsh and oppressive
behaviour.
Under the ECA, then, although an employer might not directly attack the bargaining
authority of the employees’ agent, the provision of factual information about thebargaining, ostensibly without intention persuade or threaten, was permitted incircumstances which provided considerable employer latitude. Restriction on employer
communications applied only during “negotiations” of the actual bargaining process anddid not apply to communications before or after bargaining commenced.
The ERA Decision
In the Christchurch City Council case, the Employment Court reinstates the “blanket
prohibition” on communication “on the subject of the negotiation” which Goddard, CJ
had attempted to impose in Ivamy. While carefully preserving the right to communicate
on other matters, the decision is very clear that “…neither party may, without agreement
otherwise, correspond or communicate about the bargaining with persons for whom an
authorised representative is acting” [2005] 1 ERNZ 666, 686. The specific statutory
prohibition in s32(1)(d)(ii) on bargaining directly or indirectly with a represented person
is interpreted in light of the definition of bargaining in s5: “Communications andcorrespondence which precede and follow negotiations also include communications that
relate to the bargaining”. The Court indicates quite emphatically that:“Relating to the bargaining’ is a general term not to be read down. It [in thecontext of prohibiting communication] is not limited to communications that
persuade or undermine…The curial gloss placed on the expression ‘undermining
the authority of the bargaining agent’ under the 1991 Act has not been legislated
for in the 2000 Act”. [2005] 1 ERNZ 666, 686.

Conclusions
Evidence that there has been a marked shift in application from the ECA to the ERA andin particular, the impact of the good faith requirements under the ERA on“communication” between employers and employees during the negotiations has notalways been straightforward. Indeed, court decisions have frequently been contradictory.

95

New Zealand Journal of Employment Relations (2007), 32(1)Nonetheless, the Employment Court decision in the Christchurch City Council case does
recognise the clear shift in legislative policy between the ECA and the ERA. In its
judgment the Court comments that:“We note that the majority approach of the Court of Appeal in Ivamy was in stark
contrast to the strong dissenting judgment of Thomas J which foreshadowed theprovisions about bargaining conduct in the 2000 Act which was to follow 5 years
later” [2005] 1 ERNZ 666, 681.
However the decision is underpinned by clear and explicit statutory wording evolved
from the extensive litigation of the issue under the ECA. Whether it will survive thescrutiny of the Court of Appeal or be replicated in areas with less explicit legislative
direction still remains to be seen.

References
Statutes
Employment Contracts Act 1991
Employment Relations Act 2000
Cases
Adams v Alliance Textiles (NZ) Ltd, [1992]1 ERNZ 982
Airways Corporation of New Zealand v NZ Airline Pilots Association [1996] 1 ERNZ
126
Baguley v Coutts Cars [2000] 2 ERNZ 409
Bryson v Three Foot Six Ltd [2004] 2 ERNZ 526
Capital Coast Health v NZ Medical Laboratory Workers Union Inc [1995] 2 ERNZ 7
Christchurch City Council v Southern Local Government Officers Union Inc [2005] 1
ERNZ 666
Couling v Carter Holt Harvey [1995] 2 ERNZ 137
Coutts Cars v Baguley [2001] 1 ERNZ 660
Eketone v Alliance Textiles (NZ) Ltd [1993] 2 ERNZ 783
Gibbs v Crest Commercial Cleaning Ltd [2005] 1 ERNZ 399
Ivamy & ors v New Zealand Fire Service Commission [1995] 1 ERNZ 724
New Zealand Fire Service Commission v Ivamy [1996] 1 ERNZ 85

96

New Zealand Journal of Employment Relations (2007), 32(1)NZ Medical Laboratory Workers Union v Capital Coast Health, [1994] 2 ERNZ 93
Transportation Auckland Corporation Ltd v Marsh [1997] 1 ERNZ 532
Other references
Anderson, G. (2006). Transplanting and Growing Good Faith in New Zealand Labour
Law. Australian Journal of Labour Law. 19 (1), 1-29
Gross, J.,A, Cullen, D. E. & Hanslowe, K. L. (1968). Good Faith in Labor Negotiations:Tests and Remedies. Cornell Law Review. 53, 1009-1035

97

New Zealand Journal of Employment Relations (2007), 32(1)CHRONICLE
October 2006
Collective bargaining and industrial conflict in the health sector again dominated the
media reports of employment relations (see September Chronicle). Food and service
workers employed by New Zealand's 21 district health boards were campaigning for asingle national collective employment agreement covering the hospital boards andfour major contract companies. Actions included a nationwide series of rallies andprotests. For example, the Timaru Herald and the Southland Times reported that foodand service workers employed by local hospitals manned pickets outside theirworkplace. The workers alleged that the only time they received a pay rise was whenthe minimum wage was raised. The Timaru Herald cited the example of an employee
who had worked in the Timaru Hospital kitchen for 28 years and was still only
receiving the minimum wage of $10.25 per hour.
Meanwhile the Dominion Post reported that hospital radiographers were planningtheir fourth strike in less than a month after health board managers rejected a
mediated pay settlement (see September Chronicle). A planned five days strike in
November would be their longest strike to date.
However, the long running dispute involving junior doctors appeared closer to asolution (see August Chronicle). The Dominion Post reported that junior doctors
were poised to reach an agreement with District Health Boards and suggested thatmost of the key bargaining issues were resolved with only technical details still
outstanding. Both sides seemed willing to compromise on a process that would allow
them to trial new roster systems without having to go through a formal bargaining
process.
In an article voicing the frustration and concern of hospital administrators, the Press
presented the Canterbury District Health Board members’ view that doctors, nurses
and other hospital staff should be treated as essential workers and thus, having
restricted access to take strike action. The article suggested that the position wasprompted by a presentation to board members showing that although personnel costs
had increased by $20 million in the last three years, productivity had not kept pace.
According to the Press, plans by Air New Zealand to shed 1675 baggage and check-in
operators was part of a strategic decision to outsource the operation to a Spanish
company, Swissport International. Air New Zealand claimed that no decision had
been made but unions for the affected workers claimed that the cuts would irreparably
damage Air New Zealand’s goodwill and image and lead to security concerns. The
plan to contract out the services was estimated to save Air New Zealand $20m.
Meanwhile the Press also reported that another section of Air New Zealand’s
workforce was embroiled in an industrial dispute. About 270 workers at theChristchurch Engine Centre (a joint venture between Air NZ and US company Pratt &Whitney) refused to work overtime after a failure to reach settlement on working
conditions. The Union acting for the staff claimed that the key issue was theemployer’s attempt to cut an existing extra week holiday entitlement after six years

98New Zealand Journal of Employment Relations (2007), 32(1)service. Subsequently, the stakes were raised when the workers were told that theirjobs were at stake after Pratt and Whitney had decided it would not supply any more
jet engines to be serviced at the Christchurch Engine Centre.
The Press reported that Mount Cook Airline pilots ended their industrial action after
reaching an agreement with their employer over new working conditions (see August
Chronicle). The long-running dispute was settled after a negotiation processfacilitated by the Employment Relations Authority.
Television New Zealand staff walked off the job in what was described as the biggest
action of its type at the company for 30 years. Around 120 union members in
Auckland, Wellington and Christchurch picketed for an hour in support of their claim
for a 5 per cent pay rise and better annual leave entitlements. The workers claimed
they were frustrated at being offered a 2.25 per cent pay rise after seeing the salaries
of some high profile newsreaders.
A postie caught on camera taking a cell phone in a shop lost her job of 30 years when
the Employment Relations Authority rejected the employee’s claim that New Zealand
Post had unjustifiably dismissed her. The cell phone was taken from the counter of afast-food outlet, and staff contacted NZ Post after examining security camera footage.
The employee claimed that she did not notice she had the phone until she had returned
to her car and her advocate argued that the security camera footage was not enough toestablish the alleged serious misconduct. However, the Authority was satisfied fromthe security film footage that the employee had deliberately picked up the phone. The
Authority found that it was “tragic” that the employee had lost her job after 30 years
but a reasonable employer would have dismissed her in the circumstances.
A senior Victoria University academic, who clashed with his employer in a public email fracas and then received a written warning, was cleared of any wrongdoing by
the Employment Relations Authority. The warning stemmed from five e-mails
written by the academic criticising the university’s disciplinary process, which were
copied to 200 fellow academics. The Authority found that the university did notinvestigate the academic’s behaviour before deciding it was worthy of a disciplinary
offence. However, the academic was criticised by the Authority for antagonising
management with the tone of the e-mails and the Authority rejected his argument thatforwarding the copied e-mails to colleagues was an exercise of academic freedom.
The Dominion Post reported that a creative director at a top advertising agency wasawarded $130,000 after his manager sent a “premature and precipitous” e-mailannouncing his resignation. In early 2005, the employee became the company’s
creative director of brand and direct marketing earning a salary of $280,000. In April
2005, the employee was told that he ‘would be a casualty” of a decision to purchaseanother advertising agency. The employee was upset at the news, sought legal advice
and offered to resign in return for an exit package. When mediation failed to reach asolution, the manager sent an email to staff saying that he had received letter ofresignation. The Employment Relations Authority agreed that the employee had not
resigned and had offered to do so only if certain conditions were met. As well as fourmonths salary as compensation, the employee was awarded $15,000 as compensation
for distress and humiliation.

99

New Zealand Journal of Employment Relations (2007), 32(1)In a review of the work stoppages in the year to 30 June 2006, both the Independent
Financial Review and the NZ Herald reported that pay issues accounted for most of
the 59 work stoppages. This was the highest number of stoppages since 1997, which
had 69 work stoppages. President of the Council of Trade Unions (CTU) Ross
Wilson claimed that employers who were “unrealistic about the need for a decent
wage increase” would continue to see workers exercising their right to take industrial
action in support of a wage claim. He added that work stoppages “remain historicallylow” and “the vast majority” of employment agreements were settled without
industrial action. Figures from Statistics New Zealand supported these claims when it
was shown that work stoppages had shown a downward trend since a peak in the late1970s. From annual levels of more than 400 work stoppages in the late 1970s, thenumber of stoppages had reduced to less than 100 a year since 1990.
The Business NZ-KPMG survey of compliance costs showed that the compliance costburden on businesses continued to grow. The report estimated that firms with fewer
than 10 employees faced annual compliance costs averaging $3,000 per employee.
Companies with more than 50 employees had annual compliance costs of less than
$1,000 per employee. After tax, the next biggest concern amongst business was thecost of complying with the Employment Relations Act, Holidays Act and Health &Safety in Employment Act. In particular, respondents’ comments indicated they were
unhappy with the complicated work imposed by the Holidays Act and by theprovisions of the Employment Relations Act that allow for spurious grievance claims.
Responding to the report, CTU President Ross Wilson stated that the report was an“annual moan” from the business sector and that the World Bank had judged New
Zealand to be the second easiest place in the world to do business (and first in theworld for the two previous years) which put the constant complaints from business in
an international context. Wilson argued that the Employment Relations Act had
restored a commitment to international labour conventions, which guaranteed theright for workers to choose to join unions and bargain collectively, as well as
providing a framework of good faith within which to negotiate.
November 2006
The National Business Review reported that the Minister of Labour Ruth Dyson had
instructed the Department of Labour to investigate employment laws that ‘penalised’
employers for dismissing even their worst employees. In a letter to the Employers
and Manufacturers Association (Northern), Ms Dyson admitted her concern about
whether there was the right balance between “the substantive reason to dismiss andthe correct processes for an employer to follow”.
The Department of Labour released a discussion paper on flexible work. The paper
proposed that employees should have the ability to negotiate greater flexibility inwork hours and conditions with their employers. Meanwhile, a coalition of business,
union and women groups was launched in Parliament to support Green MP Sue
Kedgley’s Private Member’s Bill aimed at introducing legislation on flexible working
hours. Both the coalition and the discussion paper were the result of a period of
consultation, which the Transport and Industrial Relations Select Committee hadrequested after considering the Bill.

100

New Zealand Journal of Employment Relations (2007), 32(1)The National Business Review revealed that the Ministry of Health had lobbied thegovernment not to pass a law requiring employers of ‘vulnerable workers’ to open
their books to competitors (see March Chronicle). Documents obtained under the
Official Information Act showed that the Ministry of Health opposed the introductionof disclosure provisions in the Employment Relations Amendment Act, which wereadded to the Bill by a last minute supplementary order paper on the day it was passed
by Parliament. Crown health organisations are the largest employers of ‘vulnerable
workers’, such as cleaners, caterers and laundry staff. A cabinet paper said that the
Ministry of Health believed the existing provisions were sufficient to protect
vulnerable workers and the disclosure requirements would not add any further
protection to those employees.
It was reported that the Maori Party would vote to stop the Probationary Employment
Bill from progressing any further when the Bill returned to the House (see August
Chronicle). The Bill had passed its first reading with Maori Party support but with theproviso that it would not disadvantage Maori workers. The party had since comeunder pressure from unions and members to reject the Bill. National Party
Spokesperson Dr Wayne Mapp said he was disappointed that the Maori Party had
made up its mind before hearing all the submissions, and warned the party thatprobation periods and other industrial law reform would be a priority for National at
the 2008 election. After months of controversy the Bill was voted down in its second
reading.
Again, the Health sector again featured prominently in the media with strike action or
strike notices amongst senior doctors, radiographers and medical laboratory workers.
The Press reported that senior doctors were threatening industrial action and wereaccusing District Health Boards (DHBs) of failing to retain or attract enough highquality specialists. The senior doctors’ association - the Association of Salaried
Medical Specialists - claimed that patients were falling through cracks in the healthsystem, created by under funding. In an unprecedented move, the Association voted
overwhelmingly to hold a national stop work meeting if no solution was found to theircontract negotiations. The Association’s Executive Director Ian Powell claimed thatthe DHBs had ignored the country’s serious recruitment and retention of seniordoctors. Mr Powell also cited the increase in DHB chief executive salaries of an
average of 13.5 per cent to $299,000 in a two year period. By comparison, he said,senior doctors had been offered increases worth an average of 2.4 per cent a year. A
negotiator for the DHBs said that the senior doctors had been offered an extra 10.1 percent over three years. The offer was worth $60 million and could be used to fund amix of pay increases and improved conditions.
Radiographers continued their industrial action when 260 radiographers ‘walked off
the job’ for a period of ten days. The DHBs and the radiographers’ union, theAssociation of Professional and Executive Employees (Apex), said they were willingto keep negotiating over the union’s bid for higher pay but no date was set for further
negotiations. Once again, there were concerns that the strike would endanger thesafety of patients. In a response to the strike, members of the Canterbury DHB voted
unanimously in favour of a motion to outlaw strikes by hospital workers on the basisthat public hospital workers should be deemed essential services providers, such aspolice, who are not allowed to take industrial action (see October Chronicle). The
motion also called for a clear national process for settling disputes in the health sector.
101

New Zealand Journal of Employment Relations (2007), 32(1)Yet another group within the health sector gave notice of strike action. Medicallaboratory workers gave notice of a seven-day strike from November 29, with thestrike likely to affect laboratories throughout the country and the New Zealand Blood
Service. The Press noted that the Medical Laboratory Workers’ Union shared its
contracted negotiator, Deborah Powell, with the radiographers’ union, which wascurrently on strike in seven District Health Boards. The National President of theLaboratory Workers’ Union Stewart Smith said that the pay rates were already low
and staff were not prepared to accept the offer of 1.5 per cent for the first year and 2.5
per cent for the second. Talks to prevent the strike failed and the NZ Herald reported
that private and public hospitals cancelled virtually all scheduled surgery, because
blood work and transfusions were unavailable. Health commentators claimed that the
strike was probably more disruptive than the junior doctors’ national strike in August.
However, the negotiations been junior doctors and District Health Boards (DHBs)
finally came to a close. After nearly a year of negotiations and a nationwide strike(see October Chronicle), 2500 junior doctors working in public hospitals voted toaccept a settlement. The package was estimated to cost DHBs $10 million over 18
months and included a 5.6 per cent pay rise.
The Press reported that mediation had started in the long running contract
negotiations between the Christchurch City Council and the union representing 1100
staff in an attempt to negotiation blockages, including pay rates and flexible hours ofwork. A Council spokesperson said the council was seeking to redress an imbalancein the salary structure where workers on lower grades were paid well above themarket rates, while those in the higher grades were well below market rates. A Union
spokesperson said that the union was seeking a settlement of around 4 per cent. The
council was also seeking more flexibility over starting and finishing times but theunion had concerns that some staff, such as working mothers, would not be able tomeet such demands.
Finsec (the financial sector union) started its campaign for industry-wide parity in pay
and conditions amongst the banks. The union’s ‘Better Banks’ campaign was
targeted at improving working conditions as well as staff training and customer
services. Campaign director Andrew Campbell said it was the first time that bankworkers had worked together across the industry to promote change since
employment awards were removed in 1990. He also said that bank employees were
not looking for a return to a single multi-employer collective agreement but wereaiming to standardise claims across the industry. Finsec estimated that, over the past
10 years, staff levels had been reduced by 9 per cent, income per employee had
increased by 103 per cent and bank profits had collectively increased by 170 per cent.
Around 100 staff at the Colgate Palmolive factory in Petone, Wellington were told
they had lost their. The National Secretary of the engineer union - EPMU - Andrew
Little said that the intended closure of the factory was a huge blow to the process
workers, most of who would struggle to find new jobs. Mr Little suggested theclosure represented the ‘ugly face of globalisation’: despite making good profits andperforming well, the Petone plant was to be superseded by imported goods from
Australia and Malaysia. The NZ Herald added that the closure was the latest
demonstration of how far New Zealand had lost control of its own economic destiny.
102

New Zealand Journal of Employment Relations (2007), 32(1)The Manawatu Standard reported a confidential settlement between a teacher and his
employer. The teacher had lodged a personal grievance case after complaining that
his students bullied him because of anti-American feeling. The teacher claimed thatthe school failed to provide a safe working environment by refusing to address student
misbehaviour and instead blamed his “character flaws”. In a separate complaint to the
Human Rights Commission (which could not proceed), the teacher claimed he was a
victim of xenophobia and a scapegoat for antipathy against US foreign policy.
A survey by the ANZ Bank showed that the internet now carried more job
advertisements than newspapers, with the overall total of job ads is rising. In thethree months to September, the combined number of job advertisements in papers andonline in New Zealand topped 170,000 for the first time, up more than 7 per centcompared to the previous three months.
There were 78,000 newspaper
advertisements in the quarter and more than 92,000 internet-based advertisements.
According to the Independent Financial Review, a Massey University study argued
that the new workplace-based unions formed under the Employment Relations Act
2000 were an employee-led phenomenon with little evidence of employers
dominating or precipitating the process. This argument contradicted other scholars
who had argued that employers had played a significant role in the formation of
workplace-based unions since the introduction of the ERA in 2000. Overall, the New
Zealand Union movement had been marked by the rapid formation, registration andproliferation of new, small, workplace-based unions, in contrast to prevailing trends inmost Western industrialised countries where organised labour was in decline.
December 2006
The Government discussed plans to change legislation to ensure greater patient safety
when health workers go on strike (see November Chronicle). Health Minister Pete
Hodgson conceded that patient safety might have been at risk in a series of strikes byHealth workers. The Minister of Labour Minister Ruth Dyson announced that she
intended to make changes to the Code of Good Faith in the Employment Relations
Act with specific reference to the health sector. The Code of Good Faith required
health providers to provide for patient safety during industrial action by ensuring life
preserving services were maintained. But the schedule did not explicitly mention
permanent disability, leaving it open as to whether life preserving services meant
preventing death and nothing more. It was claimed that clarification would go a long
way towards protecting the right to strike in the health sector.
As the strikes dragged on in the health sector the NZ Herald reported on further calls
to outlaw stoppages by health workers (see November Chronicle). The Medical
Council and the Orthopaedic Association argued that health workers’ right to strikefor pay rises should be replaced by compulsory arbitration. Health sector unions said
that compulsory arbitration or related approaches have failed in the past, mostrecently under labour laws repealed by the National Government in 1991. Dr
Deborah Powell, Chief Executive of the Medical Laboratory Workers Union, said thatthe root cause of the unrest was that there was not enough money in the sector to pay
health workers.

103New Zealand Journal of Employment Relations (2007), 32(1)Prime Minister Helen Clark entered the fray when she singled out Dr Powell as thecommon link behind a rash of strikes disrupting the health sector. In a Dominion Post
article, the Prime Minister stated that it was interesting that it was Dr Powell who
represented the various groups of health workers who had taken industrial action thisyear. The Prime Minister stated that “the records would show that there’s been more
willingness to negotiate by other unions in the sector than there is with these ones led
by the same person”. In response, Dr Powell said the Government and District Health
Boards were using her as a scapegoat and to deflect public attention from healthworkers’ reasonable demands for more pay.
The Press reported the angry response to the Prime Minister’s comments by thehealth sector unions. Health sector strikes were due to inadequate pay offers notindividuals, said unionists who disagreed with Prime Minister Helen Clark’s public
criticism of Dr Powell. District Health Board negotiator Nigel Murray told the Press
that he did not want to comment on Dr Powell specifically, but said the prime minister
had made “some good points”. Unions led by Dr Powell had jointly taken 30 days of
strikes and issued 150 notices for less disruptive action which had been “designed todisrupt patients and their treatment”, Mr Murray said. He also added that “you would
be hard pressed to find an observer that didn't say these series of strikes are not insome way co-ordinated”.
Reporting on the background to the seven day strike by 1200 laboratory workers, theDominion Post suggested that the industrial action in the health sector started whennurses received a substantial pay increase. Since then, other health workers had
lobbied their employers (in effect, the Government) for pay increases arguing thatthey too had skills that were scarce and deserve reward. Like the nurses, radiation
therapists, radiographers and laboratory workers had a strong case, although thearticle concluded that no matter how much money the Government “threw” at district
health boards, they would be constantly “strapped” for money.
The Press reported that a Christchurch businessman issued formal notice of his
intention to sue for manslaughter if health strikes caused a fatal delay in his wife’s
cancer treatment. The man said that if his wife’s treatment was delayed as a result of
ongoing strike action he would sue those responsible. He issued formal notice to theCanterbury DHB and the New Zealand Blood Service as well as union officials andunion members.
Strike action on Interislander ferries was averted after senior crew agreed to a new
employment deal with Toll NZ. Merchant Service Guild members had threatened to
strike over delays in a settling a new collective agreement.
A Hastings meat works, which had set up a hi-tech smoking room for its employees,
got involved in a bizarre court case. The company had a special problem because
hygiene requirements meant that the clothes and equipment given to workers at thestart of each shift could not be worn outside protective clothing areas. If workers
wanted to smoke they had to change their clothes to go outside. In an effort toovercome this problem, the company had made a smoking room within the protective
clothing area. The Ministry of Health prosecuted, alleging that the company had
failed to take all reasonable steps to ensure that no one smoked in the workplace. The
District Court agreed with charge and the High Court upheld the decision on appeal.
104New Zealand Journal of Employment Relations (2007), 32(1)An editorial in the Dominion Post questioned whether Business NZ chief executive
Phil O'Reilly and Business Roundtable chief executive Roger Kerr, who both argue
that paying $11.25 per hour minimum rate would make it hard for New Zealand tocompete internationally, would be as enthusiastic if they were receiving $410 a week
to clean the toilets of high-earning executives. The editorial claimed that the position
taken by critics of the statutory minimum wage increase ignored the reality of low
paid employees. The minimum wage rise was expected to affect about 110,000 adult
workers. For many employees the minimum wage was all they were likely to receivein the foreseeable future. The article concluded that many workers were insulted thatthey had to rely on state regulation to deliver pay increases.
A survey conducted by the Employers and Manufacturers Association (Northern)
found that a quarter of businesses pay off ‘problem employees’ to avoid court
litigation. The report estimated that more than 70 per cent of personal grievanceswere settled outside official channels such as the Labour Department’s mediation
service. The report argued that it was cheaper and less risky for an employer to pay
off a worker with $3,000 than face a minimum cost of $5,000 for court action.
An expert in sexual harassment policies advised employers to have at least one sober
person at Christmas parties to keep an eye out for drunken sexual behaviour. Jan
Eggleton, a training consultant in harassment prevention, said that Christmas parties
were a source of the rise in sexual harassment complaints. Ninety two per cent sexual
harassment cases the commission receives were about men harassing women with the
majority of men aged mid-to-late forties and the average complainant was a 21 to 23year-old woman.
The Dominion Post reported on a workforce survey, which found that although New
Zealand workers are less happy than four years ago, they still think their employers
are okay. The international survey by Kelly Services, a staffing and recruitmentcompany, found that 19 per cent of New Zealanders who suffered discrimination felt
it was because of their age. The survey report recommended that employers needed
to understand the differing needs and psyche of older employees.
January 2007
Yet more strike action occurred in the Health sector with cancer patients having theirtreatment disrupted when radiation therapists went on strike (see November 2006
Chronicle). Last ditch talks between the District Health Boards (DHBs) and thetherapists’ union Apex were held but were unsuccessful. Thus, strikes inChristchurch, Wellington and Auckland went ahead. Once again the strike was over
pay with union secretary Deborah Powell arguing that DHBs had not offered a pay
increase that matched the increased cost of living. In response, the DHBs claimed
that therapists’ salaries had increased by more than 25 per cent since 2001. In further
reports in the Dominion Post and the NZ Herald, radiation therapists called on the
Government to intervene in their pay dispute accusing the DHBs of refusing tonegotiate in good faith.
The dispute between the DHBs and the radiation therapists was settled later in themonth but the Dominion Post reported that tensions between the DHBs and the union
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New Zealand Journal of Employment Relations (2007), 32(1)negotiators remained. Further strikes were called off after the union agreed to a
reduced offer and a longer agreement period. The settlement included a 1 per centpay rise backdated to April 2006, a further 1.5 per cent backdated to October 2006
and another 2.5 per cent from July 2007. The agreement will run until June 2008.
Apex’s National Secretary Deborah Powell commented that after nine months ofnegotiations the agreement “should do the trick” for members.
Meanwhile, there were developments in the Air New Zealand dispute with 1,700 of
its passenger and ground-handling services employees (see October 2006 Chronicle).
The Press reported that talks between the Engineering, Printing and Manufacturing
Union (EPMU) and the airline had resumed. The EPMU’s National Secretary
Andrew Little said that negotiations had been formative but there was nothing interms of a way forward. In a later article, the Press reported that Air New Zealandand the unions were likely to strike a deal. The parties were finding common groundafter six days of talks although an agreement between the negotiating parties would
have to be voted on by staff.
The Press reported that the impact of new holiday requirements could drive consumer
prices up, as small businesses looked for ways to recoup the expense of an additional
week’s holiday for staff. Business advisory company Grant Thornton warned that the
new minimum four weeks paid leave for employees, which would come into effect on
April 1, would see some small and medium-size businesses struggle to cope with theincreased expense. Grant Thornton estimated that the drop in productivity fromhaving a worker away for another week of the year would be around 2 per cent for the
average small business. In response, a policy analyst from the Department of Labour
pointed out that British data showed growth in output and productivity from anadditional week’s holiday.
Employers faced with dismissing abusive employees could take heartfrom two recent
court decisions. The Waikato Times reported the case of an employee who had been
dismissed. The employee had been abusive to his employer when he was requested toprovide a medical after he had been on sick leave for a week. After further abuse anda refusal to attend meetings to discuss the issue, the employee was suspended. Whilecollecting his written warning he entered the office when specifically told not to andwas subsequently dismissed. The Employment Relations Authority found thedismissal was unjustified through lack of process but the Authority also noted that if
the employee had behaved decently the employer may not have lost patience with him
and terminated his employment. The employee received no remedies because theAuthority considered that he had contributed 100 per cent to his dismissal. In anothercase involving an abusive employee, the Authority found that an employee, who had
been abusive and threatened to kill other employees, was justifiably dismissed.
Furthermore, the Authority noted that even if the dismissal had not been justified due
to poor process, the employee’s conduct would have resulted in a 100 per centreduction in remedies. The article concluded that where an employee’s behaviour
was totally unacceptable, highly offensive or there was a loss of all trust andconfidence, a 100 per cent reduction in remedies would be appropriate.
Both the NZ Herald and the Dominion Post featured another Employment Relations
Authority case which involved a senior clinician who was judged to be so
incompetent that he would have failed medical school. The foreign trained clinician
106New Zealand Journal of Employment Relations (2007), 32(1)
had spent seven years treating mentally ill patients for four different District Health
Boards. The story became public after the clinician challenged his dismissal as seniorclinician at the Community Mental Health Centre in Otahuhu, Auckland. The
Authority determined that his dismissal “was justified in all the circumstances”.
The Australian Industrial Relations Commission (AIRC) issued a ruling whichallowed cinema company Village Roadshow to dismiss a long-serving manager with
19 years service because the complex, that he had previously managed, had beenclosed. The AIRC’s full bench overturned a successful unfair dismissal claim by the
manager, ruling that Village Roadshow had proved there were ‘genuine operational
reasons’ for the dismissal. President of the Australian Council of Trade Union(ACTU) Sharan Burrow suggested that the ruling demonstrated that the new Work
Choices laws had given employers unwarranted power to dismiss employees at whim.
Mixed workplaces are happier places to work in according to recent British research.
British recruitment consultants Office Angels interviewed 1800 employees about thetypes of people in their workplaces and asked them to describe people’s working
styles, attitudes, philosophies and goals. After analysing the responses, it was foundthat the most productive British workplaces combine every element of the officepolitical spectrum.
Likewise, other research reported in the Dominion Post found that family friendly
policies enhanced employee job satisfaction and productivity as some organisations
were starting to provide family friendly environments and flexible work arrangements
for their staff. The Families Commission and Learning Media Ltd were described as
two organisations that were leading the way in providing family friendly
environments and flexible work arrangements for their staff. The Families
Commission supported staff by providing paid parental leave, facilities at work wherechildren can relax and play or rest if they are unwell, school holiday programs, space
where mothers can breastfeed, and flexible leave options for staff to care for family
members. Employees also had the capacity to work from home and could log into thecentral computer system. Learning Media Ltd provided support to all eligible staff
over and above legislated requirements. This included a lump-sum maternity leave
payout of four weeks of the employee’s gross salary, one week’s paid parental leave
for the partner, as well as the statutory one to two weeks’ unpaid leave, open sick anddomestic leave as appropriate, and flexible working arrangements to meet familyneeds that also ensured business needs are met. Both organisations emphasised thebenefits to the company of allowing “home at work and work at home”.
Erling Rasmussen & Colin Ross
Auckland University of Technology

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