Contents Page: NZJER 32(3)NameGail Pacheco

Title

Page
Number

The Changing Role of Minimum Wage in
New Zealand

2-17

18-30
Prue Hyman

Pay Equity and Equal Employment
Opportunity: Developments Between
2004 - 2007 and Evaluation

Goldie Feinberg-Danieli andGeorge Lafferty

Unions and Union Membership in New
Zealand: Annual Review for 2006

31-39

Bill Cochrane, Michael Law &Gemma Piercy

Industry Training Organisations in
Changing Times:
New Research Possibilities

40-55

John Gibson

Public Sector Pay Premium andCompensating Differentials in the New
Zealand Labour Market

56-68

Thomas Lange

Commentary Revisiting the Job
Guarantee: Ten Propositions towards a
Model for New Zealand

69-82

Colin Ross & Erling
Rasmussen

Chronicle June 2007 to September 2007

83-

1

New Zealand Journal of Employment Relations 32(3): 2-17

The Changing Role of Minimum Wage in New Zealand
GAIL PACHECO*
Abstract
This article provides a descriptive portrait of the changing characteristics of workers in
New Zealand earning at or below the minimum wage in the last decade. With
substantial increases made to both the adult and youth minimum wage over the last 10
years, the variety of impacts the minimum wage can have on a labour market need to be
explored. Much of the increase in the adult and youth minimum wage in NZ has
occurred post 2000. This therefore, presents as a unique opportunity to compare two
key time periods of pre and post 2000 in order to highlight which sub-groups ofindividuals are more at risk (in terms of their employment status) when the minimum
wage is raised. One of the main findings is that age appears to be the most importantfactor in determining minimum wage status.

Introduction and Background
Minimum wage legislation represents the role of the state in regulating the level ofwages in the labour market. It is one of the oldest and most basic forms of income
protection. Such legislation usually has tremendous public policy implications. Thiscan be seen by the sheer number of workers that are affected by changes in theminimum wage. In the United States (U.S.), in 1995, nearly 2 million workers received
the $4.25 federal minimum.1 It is also estimated in the U.S., “that more than 60% of all
workers have worked for the minimum wage at some time during their careers” (Cardand Krueger, 1995:5).
While a rise of the statutory minimum wage can lift the income levels of low paid
workers, there may also be negative employment effects. Consequently, whether or not
to increase the minimum wage is a common question debated by politicians. In a 1990
survey of New Zealand (NZ) economists, 72% of respondents generally agreed oragreed with reservations that a higher minimum wage increases unemployment among
young and unskilled workers (Coleman, 1992). An even higher proportion of
economists were concerned about the ill effects of minimum wage rises in the U.S. andAustralia. In a 1990 survey of over one thousand economists in the U.S., 78.9% agreed,or agreed with provisos, that a minimum wage increases unemployment among young
and unskilled workers (Alston et al, 1992). Similarly, in a 1992 survey of Australian
Economics Professors, 84.9% was the comparable figure for agreeing or agreeing with
provisions2 to the same proposition (Anderson and Blandy, 1992).
These beliefs by the majority of economists are more than likely rooted in the standard
textbook prediction that a binding wage floor such as an effective minimum wage
reduces employment of the affected workers. These workers are generally believed to*

Dr Gail Pacheco, Department of Economics, Faculty of Business, Auckland University of Technology,
Private Bag 92006, Auckland 1142, NZ, gail.pacheco@aut.ac.nz

2New Zealand Journal of Employment Relations 32(3): 2-17

be younger and less skilled. This expectation of dis-employment is based on the longheld assumption that labour markets are competitive, and is also backed by numerous
empirical studies (e.g. Brown et al, 1982) finding a negative relationship between
minimum wages and employment levels in the low-wage labour market. However,
several studies since the early 1990s have emerged that do not find significant negative
employment effects of the minimum wage, and in some cases, even find positive
employment effects. Studies such as Wellington (1991), Katz and Krueger (1992), Cardand Krueger (1994, 1995) question the theoretical basis for negative employment
effects. Most new research along this vein has relied on quasi-natural experiments andcross-sectional or longitudinal data, in comparison to the time-series evidence producedin the past3.
Other studies have found negative employment effects from the minimum wage, (e.g.
Neumark and Wascher, 1992; Kim and Taylor, 1995) that are more in line with thetraditional view. Overall, research into the effects of the minimum wage has mostdefinitely experienced an upsurge, and writers on either side of the debate haverigorously questioned each others findings (e.g. Card et al, 1994; Neumark andWascher, 1995; Deere et al, 1995)4.
In the NZ context, there has been limited research into the impacts of the minimum
wage in this country, which also has produced inconsistent results. Issues with paststudies5 have been lack of data, difficulty in choosing the appropriate model
specification and not knowing which groups of individuals are most likely to be
impacted by rises in the minimum wage. It is therefore understandable why one of themain motivations for carrying out the work contained within this study is the ability toaccess individual unit-record data from the Household Labour Force Survey – Income
Supplements (HLFS-IS) from June 1997 to June 2004 in the secure data laboratory of
Statistics NZ. The use of this data over this time period allows determination of which
individuals earn minimum wage or below it. As already stated, the other motivation forthis analysis is the large increases in the minimum wage for both adults and youth inrecent years. To date, there has been only one study on the youth minimum wage since
its introduction in 1994 (Hyslop and Stillman, 2004). The lack of past studies on theimpact of the minimum wage in this country is hard to understand since the relative
minimum wage6 in NZ has been higher than the comparable measure for the U.S. since
the mid-80s and has also experienced more variation (Pacheco, 2007). Therefore, the‘bite’ of the minimum wage in this country certainly seems to be larger than the U.S.,
where the bulk of the minimum wage research emanates from.
NZ was in fact the first country to introduce minimum wage regulation in 1894,
through its establishment of arbitration boards with the Industrial Conciliation andArbitration Act. During this early time period, minimum rates for men and women
differed. For example, in 1949, the Arbitration Court set the minimum rate for womenat 70% of the male rate. By the 1983 Minimum Wage Act (MWA), both men andwomen were on equal footing.
Section 4 of the 1983 MWA stipulates that the Governor General may “by Order incouncil, prescribe the minimum rates of wages payable to any class or classes ofworker” (s4, MWA). Class is defined as a particular age group in this Act. The Act

3

New Zealand Journal of Employment Relations 32(3): 2-17

initially set a binding wage for all workers aged 20 years old or above, and in 1994, theyouth minimum was introduced for 16-19 year olds.
During this time, and through most of the twentieth century, a system of occupational“awards” determined wages and governed employment relations. Basically, employers
were expected to adhere to the minimum wages and other conditions contained within
an award and all workers had to be a member of the union that negotiated the wages
and conditions. This system was weakened with the introduction of the Labour
Relations Act (LRA) in 1987 and met its final demise with the Employment Contracts
Act in 1991. With the ending of the award system, the statutory minimum wage haspossibly become more effective as a wage floor, in comparison to under the prior award
system (Chapple, 1997). This is because, if most workers were covered by an award
and the minimum wage fell below award minima, then statutory minimum wages werelikely to have had little influence on the wages of low paid adult workers.
Workers in NZ “must be paid no less than the statutory minimum wage for your age
whether you are a full-time, part-time or casual employee, a home-worker, or paid
wholly or partly by commission or on a piece rate” (Contract, May 1994:12)7. There
are very few exemptions from paying the minimum wage in this country. It does not
apply to those who hold under rate permits8, and until June 2003, didn’t apply topersons undergoing training recognised under the Industry Training Act.
The remainder of this paper is organized as follows: Section 2 provides a summary of
the changes to the minimum wage since the introduction of the 1983 MWA and overthe last 20 years. Section 3 presents a brief outline of the unit record data that allowed
in-depth analysis into the characteristics of minimum wage workers and also illustrates
the changes to the minimum wage that have occurred over the sample period understudy (1997 to 2004). Section 4 investigates the changing size of the number of workers
affected by the minimum wage over the period of 1997 to 2004 and summarises someof the main impacts affected workers and their employers may experience with
continued rises in the minimum wage. Section 5 then investigates the changing
characteristics of minimum wage workers in NZ, to show which types of workers aremost at risk in recent times, and section 6 of this paper finishes with summarising themain conclusions.

Changes to the minimum wage
Figure 1 illustrates the trends in the real minimum wage (in constant June 1999 dollars)
for the three main age categories (youth: 16–17 years, 18-19 years, adults: 20+ years)
over the period 1984 to 2004. The diagram displays a common trend in the real
minimum wage, where legislated increases in the minimum are quickly eroded byinflation. This appears to be particularly prevalent for the adult minimum in the 1980s
when the yearly inflation rate averaged at 11.9%, compared to the 1990s when thecorresponding average inflation figure was 2.1% in NZ9.
The real minimum wage figures graphed in Figure 1 are produced using the consumer
price index as the deflator. The reason why the minimum wage increases are notbenchmarked against the average wage, which is commonly done in overseas studies, isdue to the difficulty in finding reliable average wage information in NZ for specific age

4New Zealand Journal of Employment Relations 32(3): 2-17groups prior to the introduction of the Income Supplement in 1997. Up until 1989 theDepartment of Labour collected the information and then there was a break in the data
series as Statistics NZ began to collect average wage information.
Figure 1: The real minimum wage for adults since 1984 and youth since 1994
9

Real minimum wage ($)

8
7
6
5
4
3
2
1

real min wage (adult: 20 + years)
real min wage (18-19 years)

Dec. 2003

Dec. 2002

Dec. 2001

Dec. 2000

Dec. 1999

Dec. 1998

Dec. 1997

Dec. 1996

Dec. 1995

Dec. 1994

Dec. 1993

Dec. 1992

Dec. 1991

Dec. 1990

Dec. 1989

Dec. 1988

Dec. 1987

Dec. 1986

Dec. 1985

Dec. 1984

0real min wage (youth: 16-17 years)

Source: Minimum wage levels supplied by the labour market policy group (Department of Labour),consumer price index from the Reserve Bank of NZ.
Note: Nominal adult minimum wages over the period 1984:4 – 2004:2 and nominal youth minimum
wages over the period 1994:1 – 2004:2 are deflated by the consumer price index, with a base year of
1999:2.

As Figure 1 indicates there are two periods of large increases in the real adult minimum
wage. They are September 1985 to March 1987, and December 1996 to March 2004.
There was approximately a 50% increase in the first time period. The real minimum
was then allowed to slowly decline during the 1990s until increases in 1997, 2000 andevery year since then have reversed this effect and put the real minimum for adults
slightly higher than it was in September 1985.
Figure 1 also highlights the importance of investigating the impact of the youth
minimum. The leaps the real minimum for youth has taken since it was first introducedin March 1994 equate to an increase of around 52%. Additionally, the group of
teenagers aged 18 – 19 year olds have experienced a 91% rise in their real minimum,
since they were initially able to receive a minimum as part of the youth group in March
1994.

Data
Unit record data from the Household Labour Force Survey (HLFS) and its supplement,
the Income Survey (IS), over the period 1997 to 2004 is used in this study. HLFS is an
excellent source for the purpose of this study, in that it is a large sample of 16-32000
households surveyed per quarter10 since 1986. Since minimum wage incidence is

5New Zealand Journal of Employment Relations 32(3): 2-17

relatively low, a large sample helps improve the accuracy of analysis conducted here.
The IS is an annual supplement run in conjunction with the HLFS every June quarter
since 1997 to provide detailed wage information. Such earnings information allows
isolation of the groups of workers earning at or below the minimum wage. This study
therefore uses the HLFS-IS over the period for which they overlap and are available(June 1997 to June 2004). Access to the micro-data for this time period was provided
through the use of a secure data laboratory on Statistics NZ premises, as Statistics NZ
is legally required to protect confidential individual and corporate information under
Statistics Act 1975.
Table 1 shows the nominal minimum wages for the three age groups of interest for the
sample period under study here.
Table 1: Nominal hourly minimum wage changes between 1997 and 2004
Date of change
Age groups
16-17 years
18-19 years
20 years +March 1997
4.20
4.20
7.000
March 2000
4.55 (8.3)
4.55 (8.3)
7.550 (7.9)
March 2001
5.40 (18.7)
7.70 (69.2)
7.700 (2.0)
March 2002
6.40 (18.5)
8.00 (3.9)
8.000 (3.9)
March 2003
6.80 (6.3)
8.50 (6.3)
8.500 (6.3)
March 2004
7.20 (5.9)
9.00 (5.6)
9.000 (5.6)

Information supplied by the Labour Market Policy Group, Department of Labour. All
figures for nominal hourly wages are gross $ per hour. The statistics in parenthesis are
the percentage change in the nominal hourly wage.
As Table 1 shows, from March 1997, there was no change to the nominal minimum foreither youth (16-19 years) or adults (20 years plus) for three years. After which, tworeforms to the youth minimum took place: (i) in March 2001, the youth minimum for
16-17 year olds increased from 60 to 70% of the adult minimum and 18-19 year olds
(previously receiving the youth minimum) became part of the adult minimum group,(ii) in March 2002, the youth minimum for 16-17 year olds further increased to 80% of
the adult minimum wage.

Impacts of minimum wage increases
Based on a regular usual hourly earnings measure derived from the IS, two wagegroups are set up to focus on: (i) Individuals earning below current minimum wage(“sub-minimum workers”) and (ii) Individuals earning more than or equal to the current
minimum wage but less than 10% above that minimum (“minimum wage workers”).
This separation of workers was done for all eight years of data from the IS. Figure 2
shows there is a steady decrease in the fraction of all workers classified as subminimum or minimum wage earners over the time period 1997 to 1999 when no
increases were made to the nominal minimum. There were also significant increases in
the proportions of these groups relative to the sample size for each year, from 2000
6

New Zealand Journal of Employment Relations 32(3): 2-17

onwards. This corresponds to the time period when annual increases were made to theminimum wage for both adults and youth and there was a noticeable upward trend in
the relative minimum wage for most workers. By 2004, affected workers, which
comprise all workers earning at or below the minimum wage, made up 8.12% of theworkers in this sample.
Figure 2: Affected wage groups as a percentage of data sample in each year: June
1997 to June 2004
9
8
7
6
5
4
3
2
1
0
1997

1998

1999

2000

Sub-minimum workers (%)

2001

2002

2003

2004

Minimum wage workers (%)

Source: HLFS and IS data. Author’s compilation.

At first, it is difficult to understand the increasing fraction of sub-minimum workers
over the period 2000 to 2004, because exemptions from the minimum wage in NZ are
few and far between, with close to full coverage for minimum wage legislation in thiscountry. Consequently, the level of enforcement of the statutory minimum wage is thenext logical question, to check the existence and significance of any illegal uncovered
sectors in the labour market. In terms of enforcement, if an employee is receiving a
sub-minimum wage they can make a complaint to a Department of Labour Inspector,
who are charged with the duty of enforcing the 1983 MWA. Data pertaining to theenforcement of the minimum wage in Pacheco (2007)11 showed a substantially higher
average number of minimum wage complaints and investigations per year from 2000
onwards, versus 1998 to 1999. Therefore, if it is assumed that an increased number ofenquiries and complaints are due to poorer enforcement of the minimum wage, thenthis explains the increasing size of the sub-minimum group from 2000 onwards.
To further investigate which types of individuals are earning below minimum wage, thefollowing graph (Figure 3) splits the bulk of the sub-minimum workers into four age
categories – 16-17, 18-19, 20-24 and 25-29 year olds.

7New Zealand Journal of Employment Relations 32(3): 2-17

Figure 3: Sub-minimum workers for 16-17, 18-19, 20-24 and 25-29 year olds
Percentage of age subgroup earning below
the minimum wage

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1997

1998

1999

2000

2001

2002

2003

2004

Time
16-17 year olds

18-19 year olds

20-24 year olds

25-29 year olds

Source: HLFS and IS data. Author’s compilation.

Figure 3 shows that earning below minimum wage is increasing for 16 to 19 year olds
over the time period 1997 to 2004, but remaining steady for 20 to 29 year olds.
Specifically, the percentage of 16-17 and 18-19 year olds earning below the minimum
wage increased from 4.67% and 2.39% to 18.84% and 11.3% respectively, from 1997
to 2004. This is in comparison to 20-24 and 25-29 year olds, where their comparable
percentages actually decreased from 4.67% and 3.17% to 3.35% and 1.99%
respectively. These figures obviously assume complete accuracy in the earnings andhours information in the ‘cleaned’12 final sample used in this analysis. However, it isworth noting that similar trends were observed by Hyslop and Stillman (2004) in theiranalysis of youth over the time period 1997 to 2003. Such a large increase in thenumbers of sub-minimum workers in recent years may include employers who are notaware of current minimum wage levels or take longer than three months to adjust
wages to the minimum statutory levels (this is because increases are usually legislated
in March and the IS is conducted in June) or are aware of the legal minimum but refuse
to comply with it.
Card and Krueger (1995) who conducted a similar analysis for the U.S. also foundevidence of a sub-minimum group, which was proportionately larger for teenagers. In
particular, they found that 7.4% of working teenagers earned less than the prevailingfederal minimum wage in 1989. They also found that after two consecutive annual
increases in the federal minimum in April 1990 and 1991, by the second quarter of
1991, 17.4% of teens earned less than the prevailing minimum.
Given the rising numbers of workers and consequently proportion of the working age
population affected by the minimum wage in NZ, it is necessary to outline its potential
impacts. Pacheco (2007) has covered many of these impacts (using the HLFS-IS data)
in more detail. In summary, the main findings are that a higher minimum wage:

8

New Zealand Journal of Employment Relations 32(3): 2-17

May affect the number of households living in poverty
The minimum wage is often touted as an anti-poverty tool. Pacheco (2007)13 did find astrong link between affected workers being located more heavily in low householdincome deciles. However, simulations showed that even in a best case scenario, whereindividuals receiving a higher minimum wage are assumed to suffer no loss in hours
worked, the poverty rate for the sample only fell 0.46%. Consequently, questioning theanti-poverty effect of raising the minimum wage.
May affect wage inequality
Several studies in the U.S. (e.g. Card and DiNardo, 2002) find wage inequality being
inversely linked to the level of the real minimum wage in the 1980s. Similarly, Pacheco(2007)14 accepted the hypothesis that large rises in the real minimum wage forteenagers (16-19 year olds) had a significant negative influence on the level of wage
dispersion for this group from 2000 onwards.
May affect employment propensity
Pacheco (2007) attempted to isolate the impact of the minimum wage on individuals
expected to find the minimum wage binding. In doing this, negative employment
effects were generally found for most groups within the overall category of 16 to 29
year olds. 16-17 year olds and Maoris stood out as sub-groups most adversely affectedby a higher minimum wage.
May affect educational enrolments
Pacheco and Cruickshank (2007) found for 16-19 year olds that minimum wage rises
have a statistically significant negative effect on enrolment levels. This result also helps
to explain the link found between higher minimum wage levels and increased labour
force participation rates.
May affect shareholder’s wealthThis could occur through reduced profit expectations for low wage employers. Pacheco
and Naiker (2006) actually found that investors in low wage firms seem to find news ofminimum wage rises irrelevant, resulting in an insignificant impact on profit
expectations for low wage employers by investors.
Given the myriad of outcomes affected workers may experience when the minimum
wage is increased, it is useful to examine who these workers are and how they arechanging, given the recent increases in the adult and youth minimum wage in NZ. This
is investigated in the following section.

Changes in characteristics of all workers affected by the minimum
wage
This section provides analysis of the key demographic, household, educational andindustry characteristics of individuals who are affected by the minimum wage. By
comparing two time periods of 1997-1999 and 2002-2004, we are able to see whattypes of individuals are most ‘at risk’ when the minimum wage increases. These time
periods are used because in the first there were no changes to the nominal minimum
wage for any age group, whereas in the latter period, two reforms to the youth
minimum wage had occurred and yearly increases were being made to the nominal
9

New Zealand Journal of Employment Relations 32(3): 2-17

minimum for both adults and youth. Past research by Card and Krueger (1995) alsotabulated wage data against other characteristics of individuals to find which subgroup(s) of workers were more at risk when the minimum wage was raised15. However,they viewed one time period of just before the April 1990 increase in the minimum
wage. This analysis goes one step further and compares two important time periods in
NZ’s unique situation to show exactly which groups were more affected by a risingminimum. Most importantly, it provides policymakers with a better picture of whichgroups of individuals are most likely to be impacted when they decide to further
increase the minimum wage.
The descriptive statistics provided in the following table (Table 2) is shown for each of
the two three year time periods, as averages across the merged data give moreconsistent and robust results, rather than individual year snapshot estimates.
Table 2: Characteristics of all sub-minimum and minimum wage workers: 19971999 and 2002-2004(1997-1999)(2002-2004)
SubMinimu Subminimu
m wage minimu
MinimuCharacteristics of workers
mworkers m
m wageworkers
workers workers
Total (% of sample)
2.63
1.71
3.07
4.46
Individual characteristics:
Average age (years)
Percentage aged 16 – 17
Percentage aged 18 – 19
Percentage aged 20 – 24
Percentage aged 25 +Percentage female
Percentage Maori
Percentage Pacific Islander
Percentage NZ born
Average years in NZ

Education (highest qualification):
Percentage
withnoschoolqualifications
Percentage with school certificate
Percentage with Sixth Form or
Bursary
Percentage with diploma
Percentage with bachelor’s degree
Percentage with masters degree

Hours of work
characteristics:

&

40.25
1.46
0.57
7.92
90.04
61.97
21.24
7.00
84.26
3.07

38.98
0.68
0.00
12.27
87.05
65.80
16.50
8.67
79.70
3.40

32.08***
16.02***
14.91***
12.16***
56.90***
59.09***
15.37***
4.96***
80.30***
2.45***

31.45***
12.00***
16.74***
17.58***
53.67***
67.55***
14.01***
6.65***
81.36***
1.70***

43.74
12.96

47.18
14.15

31.89***
22.25***

32.86***
23.26***

9.01
28.26
3.80
2.22

14.64
20.80
3.23
0.00

19.16***
21.31***
4.55***
0.85***

20.96***
18.76***
3.42
0.74***

Earnings

10New Zealand Journal of Employment Relations 32(3): 2-17

Percentage working full-time
Usual total weekly hours
Usual overtime weekly hours
Hourly wage as a proportion of
relevant minimum wage
Real average usual hourly wage
exclusive of overtime ($)
Real usual weekly overtime earnings($)
Share of household income from
earnings of main job (%)
Share of household income from
earnings of all wage and salary jobs(%)
Percentage receiving any transfer
income

60.40
31.57
0.10

56.71
29.81
0.05

44.64***
25.78***
0.13***

49.76***
26.40***
0.21***

0.74

1.05

0.81***

1.04***

5.05

7.24

5.97***

7.79***

4.23

3.08

4.68

2.71**

29.99

40.32

26.74***

30.33***

30.13

40.47

27.45***

31.11***

32.61

34.03

20.77***

23.10***

751.9060.49
4.50

713.1465.07
4.39

907.06***43.68***
6.87***

999.35***42.54***
4.61

14.54

12.78

15.51***

16.83***

48.80
3.17

49.31
3.09

51.85***
3.44***

47.26***
3.43***

13.27
11.86
4.85
1.34
14.85

12.60
18.07
2.36
1.13
25.35

9.52***
7.24***
3.80***
2.26***
22.36***

9.68***
11.23***
2.77***
2.40***
29.63***

3.63
4.77

6.98
2.62

9.53***
2.84***

15.00***
1.68***

4.76
14.13
7.98
8.47
1.09

0.98
8.12
6.61
7.28
0.51

3.49***
6.36***
8.15
10.32***
3.07***

1.47***
4.28***
4.23***
11.03***
1.90***

Household characteristics:
Real average weekly householdincome ($)
Percentage married
Percentage one person households
Percentage single-parent householdswith dependents
Percentage two-parent householdswith dependents
Average household size

Industry characteristics:
Percentage in eachcategory working in:earnings

Agriculture, Forestry and Fishing
Manufacturing
Construction
Wholesale trade
Retail trade
Accommodation,
Cafes
and
Restaurants
Transport and Storage
FinanceandInsuranceandCommunication Services
Property and business Services
Education
Health and Community Services
Cultural and Recreational Services

11New Zealand Journal of Employment Relations 32(3): 2-17

Personal and Other Services
Other Services

6.02
2.50

3.25
4.16

9.36***
1.55***

3.40***
0.95***

Sample size

848

550

1179

1713

Source: HLFS and IS data. Author’s compilation.
Note: *10%, ** 5%, ***1% significance level difference in characteristics of sub-minimum andminimum wage workers between 1997-1999 and 2002-2004.

Table 2 reveals several interesting trends in characteristics of affected workers, in termsof their demographic, education, hours of work and earnings, household and industry
information. To indicate which characteristics changed significantly t-tests were also
conducted. This was done to test whether the average characteristics of affected
workers were significantly different between 1997-1999 and 2002-2004.
The results of the t-tests for sub-minimum and minimum wage workers show many
characteristics changed significantly between the two time periods16. Specifically, thepercentage of minimum wage workers aged 16-17, 18-19, 20-24, all increased
significantly at a 1% level. It is very noticeable that barely one-percent of the subminimum or the minimum wage workers group (1.46% and 0.68% respectively) wereaged 16-17 in the time period 1997-1999, whereas by 2002-2004, 16-17 year olds
accounted for 16.02% and 12.00% of these two wage groups. Similarly, large increases
in the number of 18-19 and 20-24 year olds as a proportion of the sub-minimum andminimum wage workers group were also witnessed. At the same time, as expected, theproportion of workers over 25 earning the minimum wage significantly decreased(from 87.05% to 53.67%).
There was a small increase in the proportion of minimum wage workers that arefemale, (significant at the 1% level), and a small fall in the proportion of these workers
that are Maori or Pacific Islander (both again significant at the 1% level). The latter
result is somewhat unexpected. Given the higher incidence of Maori or PacificIslanders in general in the minimum wage group over the time period of the sample,
relative to their incidence in the full sample of workers, it would be normal to expect
these ethnic minorities to be more likely to receive the minimum wage in the second
time period of 2002-2004. Since this is not the case, this may be an indication that age,rather than ethnicity, is more important in determining an individual’s minimum wage
status.
There are six levels of highest educational attainment that are consistent across the
sample period. The first being individuals with no school qualifications. Just above thisare individuals with a school certificate and then individuals who have either completed
sixth form or bursary (the last two years of schooling). The next three levels encompass
post-school qualifications, namely a diploma, Bachelor’s degree and finally a Master’s
degree. Table 2 provides evidence of the increased minimum wage in NZ impacting
further up the wage distribution in the latter time period due to the change in the
educational characteristics of the affected workers. In 2002-2004, both sub-minimum
and minimum wage workers were much more likely to have more educational
qualifications compared to the affected group in 1997-1999. This is shown by asignificant fall in affected workers having no qualifications, and corresponding

12New Zealand Journal of Employment Relations 32(3): 2-17

increases in the proportion of affected workers with school certificate or with sixth
form or bursary as their highest qualification.
The next noteworthy trend is in the Hours of work and Earnings characteristics sectionin Table 2. The percentage of affected workers working full-time has fallen
considerably for both sub-minimum and minimum wage workers. The usual total
weekly hours has also fallen between the two time periods, and the decrease issignificant at the 1% level. These two findings may be an indication that the recent
rises in the minimum wage have reduced the hours for affected workers and forcedsome into part-time employment. Although, it is also likely that this is not abehavioural effect, but a compositional effect, (i.e. since minimum wage earners are
more likely to be teenagers and young adults in the second time period, this may bewhat results in minimum wage earners being comprised of more part-time workers andhaving fewer hours of employment).
Minimum wage workers are also contributing less to their household income than
before. Previously, their earnings from their main job accounted for close to 40% of thehousehold income, whereas in the time period 2002-2004, it only contributed to30.33% of the weekly household income. However, this finding is not complemented
by significant increases in the percentage of affected workers receiving transfer income.
In fact, these figures have decreased significantly, at the 1% level. Therefore, a possible
explanation for this may be that in the latter time period, other household members
increased their work hours and hence, their contribution to the household income. Thismay have been motivated by the higher minimum wage levels in the labour market atthat time, or also by the considerable economic growth NZ experienced during thistime. Again, it may be possible that compositional effects dominate any behaviouraleffects induced by the higher minimum wage (i.e. since minimum wage earners are
more likely to be teenagers in the latter time period, this is possibly what causes thedrop in average contribution to household income from minimum wage workers).
The household characteristics of the affected workers have also changed between 19971999 and 2002-2004. Firstly, the real average weekly household income hassignificantly increased. It is impossible to say how much of this rise for households
affected by the minimum wage is due to minimum wage increases, and how much canbe attributed to the growth in NZ at that time or due to compositional effects of therising minimum wage. There was also a significant fall in the proportion of minimum
wage workers that are married. This corresponds to the significant increases in youth
affected by the minimum wage.
Lastly, the industry characteristics of affected workers in Table 2 have alsosignificantly changed. Minimum wage workers are noticeably less likely to work inagriculture, forestry and fishing and manufacturing. They are more likely to work inretail trade and accommodation, cafes and restaurants. Once again, these findings are
more than likely due to the increase in youth affected by the minimum wage, i.e.
compositional effects17.

13

New Zealand Journal of Employment Relations 32(3): 2-17

Conclusion
This paper presents a brief look at the rising number of workers affected by theminimum wage in New Zealand. It provides a summary of the ways in which workers
receiving at or below the minimum wage may be affected and presents a descriptive
analysis of the changing characteristics of minimum and sub-minimum workers in NZ.
The descriptive analysis points to two important outcomes. Firstly, the characteristics
of minimum wage workers change over time. Given the vast changes exhibited in justan 8 year time span, talking about a ‘typical’ minimum wage worker is made difficult.
Secondly, age appears to be an important factor in determining minimum and subminimum wage status. This seems to be more important than other individual
characteristics such as belonging to an ethnic minority, educational attainment,household characteristics and also industry characteristics.

References
Alston, R., Kearl, J.R and Vaughn, M.B. (1992). Is There A Consensus Among
Economists in the 1990s? American Economic Review. 82(2): 203-209.
Anderson, M. and Blandy, R. (1992). What Australian Economics Professors Think.
The Australian Economic Review. 100, 17-40.
Brown, C., Gilrow, C. and Kohen, A. (1982). The effect of the minimum wage on
employment and unemployment. Journal of Economic Literature. 20(2): 487-528.
Card, D., Katz, L. and Krueger, A. (1994). Comment on David Neumark and Willian
Wascher. Employment effects of minimum and sub-minimum wages: panel on state
minimum wage laws. Industrial and Labour Relations Review. 46(3): 487-96.
Card, D. and DiNardo, J. (2002). Skill-Biased Technological Change and Rising Wage
Inequality: Some Problems and Puzzles. Journal of Labour Economics. 20(4): 733-83.
Card, D. and Krueger, A.B. (1994). Minimum wages and employment: a case study ofthe fast-food industry in New Jersey and Pennsylvania. American Economic Review.
84(4): 772-93.
Card, D. and Krueger, A.B. (1995). Myth and measurement: the new economics of theminimum wage. Princeton, New Jersey: Princeton University Press.
Chapple, S. (1997). Do minimum wages have an adverse impact on employment?
Evidence from New Zealand. Journal of Labour Market Research. 2: 25-50.
Coleman, W. (1992). Concord and Discord Amongst New Zealand Economists: theResults of an Opinion Survey. New Zealand Economic Papers. 26(1): 47-82.
Contract. (1994). The report on current industrial relations in New Zealand. Vol. 9.
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Deere, D., Murphy, K.M., and Welch, F. (1995). Reexamining methods of estimating
minimum-wage effects: employment and the 1990-1991 minimum-wage hike.
American Economic Review Papers and Proceedings. 85(2): 232-37.
Department of Labour. 2006. Retrieved March 15, 2006 from the World Wide Web:http://www.ers.govt.nz/pay/disabled.html.
Hyslop, D. and Stillman, S. (2004). Youth minimum wage reform and the labour
market. Working Paper 04/03. The New Zealand Treasury: Wellington.
Katz, L., and Krueger, A.B. (1992). The effect of the minimum wage on the fast-foodindustry. Industrial and Labour Relations Review. 46: 6-21.
Kim, T. and Taylor, L. (1995). The employment effect in retail trade of California’s
1988 minimum wage increase. Journal of Business and Economic Statistics. 13: 175182.
Maloney, T. (1995). Does the adult minimum wage affect employment andunemployment in New Zealand? New Zealand Economic Papers. 29(1): 1-19.
Maloney, T. (1997). The ‘new economics’ of the minimum wage? Evidence from New
Zealand. Agenda. 4(2): 185-96.
Neumark, D. and Wascher, W. (1992). Employment effects of minimum and subminimum wages: panel data on state minimum wage laws. Industrial and Labour
Relations Review. 46(1): 55-81.
Neumark, D. and Wascher, W. (1995). The effect of New Jersey’s minimum wage
increase on fast-food employment: a re-evaluation using payroll records. NBER
Working Paper. No. W5224.
Neumark, D. and Wascher, W. (2006). Minimum Wages and Employment: A Review
of Evidence from the New Minimum Wage Research. NBER Working Paper. No.
12663
Pacheco, G. (2007). Minimum Wage in New Zealand: An Empirical Enquiry. Doctoral
Dissertation. University of Auckland.
Pacheco, G. and Maloney, T. (1999). Does the minimum wage reduce the employment
prospects of unqualified New Zealand women? Journal of Labour Market Research. 4:
51-69.
Pacheco, G. and Cruickshank, A. (2007). Minimum wage effects on educational
enrollments in New Zealand. Economics of Education Review, 26(5): 574-587.
Pacheco, G. and Naiker, V. (2006). Impact of the Minimum Wage on Expected Profits.
International Review of Applied Economics, 20(4): 469-90.

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Statistics NZ (2007) Retrieved August 1, 2007 from the World Wide Web:http://www2.stats.govt.nz/domino/external/omni/omni.nsf/outputs/new+zealand+incom
e+survey.
Wellington, A.J. (1991). Effects of the minimum wage on the employment status ofyouths: an update. Journal of Human Resources. 26(1): 27-46.

Notes
1

This estimate is based on data from a National Longitudinal Survey of Youth.
Specifically, Card and Krueger (1995) tracked a 1964-birth cohort between 1979 and1991 to estimate the percentage of workers who were ever paid within five cents of thefederal minimum
2

There is no further detail on what ‘provisions’ Australian Economic Professors
considered when answering this survey question3

See Neumark and Wascher (2006) for a review of this recent research on minimum
wages and employment.

4

See also the UK low pay commission for recent deliberations on the effects of theminimum wage.

5

See Maloney (1995 and 1997), Chapple (1997), Pacheco and Maloney (1999) andHyslop and Stillman (2004). A review of all these studies (summarising findings andindicating potential issues) is provided in Chapter 4 of Pacheco (2007).
6

Relative minimum wage = minimum wage for workers aged 20 or over / median wage
for fulltime employees aged 20 or over.
7

Contract is ‘The Report on Current Industrial Relations in New Zealand’ produced by
the Department of Labour.
8

An under rate permit lets a person work for less than the minimum wage. It is granted
by Labour Inspectors to a person with a recognised disability that significantly slows
down their work and who is incapable of earning the minimum wage (Department ofLabour, 2006).
9

Source: Historical inflation rates from the Reserve Bank of New Zealand (Seewww.rbnz.govt.nz).
10

The HLFS sample frame uses a rotating panel for every eight quarters (i.e. one eighthof households are rotated out each quarter). For a detailed explanation of the selectionof a household in the sampling frame see Statistics NZ (2007).

11

See Chapter 2 of this reference for further details on minimum wage enquiries,
complaints and investigations over the period 1997 to 2004.

16

New Zealand Journal of Employment Relations 32(3): 2-17

12

The HLFS-IS data was cleaned to remove outliers, individuals with missing
information and possible cases of measurement error.
13

See Chapter 6 of this reference for further details.

14

See Chapter 7 of this reference for further details

15

Specifically, the 1990 increase in the U.S. federal minimum.

16

Note that other factors besides the level of the minimum wage have changed between
these two time periods, such as increasing educational attainment of the workforce,changing composition of employment between industries, etc. These factors may also
explain changes in the composition of minimum wage workers that are observed.
17

For example, sectoral shifts in the labour market over the time period under study in
NZ have resulted in the agriculture, forestry and fishing industry employing a lower
proportion of the working age population and the retail trade and accommodation, cafes
and restaurants sector employing a higher proportion. Consequently, this then makes it
understandable why more youth would be employed in the latter industry.

17

New Zealand Journal of Employment Relations 32(3): 18-30

Pay Equity and Equal Employment Opportunity:
Development Between 2004 – 2007 and Evaluation
PRUE HYMAN*
Abstract
My 2004 LEW paper (Hyman, 2006) argued that given the plethora of studies andreports in this area in New Zealand and overseas, the most urgent priority waspractical development and piloting of means of implementation of pay andemployment equity. There are positive developments, including the establishment andwork of the Pay and Employment Equity Unit within the Department of Labour.
However, progress is inevitably slow even in the public sector, and many indicators,
such as the low representation of women in areas varying from the modern
apprenticeship scheme to Directorships of Stock Exchange listed companies show
how far there is to go. Meanwhile carers and cleaners, where Maori and Pacificwomen predominate, still fight for a living wage. This paper examines and evaluates
developments during 2004-2007.

Introduction
This paper examines and evaluates developments in pay equity and equal employment
opportunity in the last two years. It focuses mainly on gender issues but also touches
on other dimensions of equal employment opportunity (EEO), including age,disability and ethnicity. The case for eliminating discrimination in employment isbased on these and other personal characteristics and has now been enshrined inlegislation for many years, and is generally accepted as desirable on both equity andefficiency grounds. However, the criteria for what constitutes discrimination, and inparticular equity, equality, equal employment opportunity, and pay equity, are more
contestable and any increased regulation in these areas tends to be opposed by
employers as too interventionist and costly. These issues are discussed briefly below(and for more detailed discussion, see Hyman, 1994). However, the position of thispaper is that attempts to enhance the position of less advantaged groups in the labour
market on both equity and efficiency grounds are desirable.

The Pay and Employment Equity Unit
The establishment of the Pay and Employment Equity Unit in the Department ofLabour (DoL), in accordance with recommendations from the 2004 Taskforce on Pay& Employment Equity in the Public Service, Public Education and Public Health, hasbeen an important development. However, its work covers only about 10% of thelabour force and any flow on to the private sector is likely to be slow. The Unit’s
initial work covers development of tools and guidelines, together with training for:*Prue Hyman is Adjunct Professor in Gender and Women’s Studies at Victoria University, Wellington

18(i) pay and employment equity reviews (to be followed by response plans);(ii) job investigations;(iii) pay evaluation.
Pay and Employment Equity Reviews
The Unit assisted with two pilot reviews in 2005, at the National Library and the
Auckland University of Technology, and has developed a Review Workbook (New
Zealand Department of Labour, 2006). It also provides training on the tools andprocesses for review committees and project managers and is developing case studies
to assist participants. The report on the pilot concluded that the review tool was robust
and full reviews have followed. Seven public service organisations started theirreviews within the eight months to August 2006, further thirteen were in active
preparation, and some are now completed. The Director of the Unit commented that“... the core of the approach adopted is that sustainable change depends on
active engagement in partnerships of employers, employees and unions inworkplaces in identifying equity issues and agreeing on response plans toaddress them” (Hall, 2006).
The Unit’s factsheet 2 states that a pay review “assists organisations to find out if:•

women and men have an equitable share of rewards•

women and men participate equitably in all areas of organisations• women and men are treated with respect and fairness”.
(www.dol.govt.nz/services/PayAndEmploymentEquity/factsheets/fs2-plan.asps)
The workbook will assist review committees in gathering evidence on the impact andresults of organisational policies and practices. These need to be equitable for womenand men, but not necessarily the same. While the focus of the review is on gender, theprocess can also be used to consider other characteristics, such as ethnicity, age ordisability. The final step is developing a response plan to address the employment andpay equity issues identified as priorities.
In explaining the equality/equity concepts, the workbook states:“The distinction between equality and equity is important to bear in mind.
While equality refers to being equal or the same, equity refers to being just,fair or impartial. In the employment equity context, equity refers toproportionality between differences in relevant characteristics of people andjobs and how they are treated” (New Zealand Department of Labour, 2006:10).
Further, “… any gender difference in the distribution of organisational rewards,
participation levels and experience of respect and fairness should be explainable andjustifiable” New Zealand Department of Labour, 2006: 10). But this is quickly
followed by the equal pay definition of the 1960 Public Sector Equal Pay Act (similar
to that in the 1972 Act covering the private sector) which has been interpreted in the
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New Zealand Journal of Employment Relations 32(3): 18-30
courts as requiring equal pay for only identical or highly similar work, not work ofequal value.
The theoretical and practical meaning of most of this terminology is highly
contestable. Equality and equity, proportionality with respect to differences incharacteristics and resulting treatment, and what constitutes explainable and evenmore so justifiable differences in treatment are the stuff of argument, not a science.
The proof of the pudding will be in the eating. It is too early to assess results, andwhether they will challenge the historical undervaluation of female dominated work is
an open question. The review may be better able to deal with clear EEO matters thanwith equal value issues.
Pay Investigations and Remedial Pay Settlements
Pay investigations may be conducted using the gender-neutral job evaluation tool.
They are intended to provide a systematic and rigorous process for evaluating jobs insetting remuneration and may be recommended in a review response plan or initiatedby employers or through bargaining. They will focus on factors affecting job size,
including skills, knowledge and qualifications, as well as conditions, and also coverother factors affecting remuneration, including market influences, performance
payments, and other employment conditions.
If, in spite of the issues discussed above, systemic undervaluation of female
dominated work is revealed by pay reviews and/or pay investigations, a key issue is
how this would be remedied and financed. Here the role of government as employer,
directly or indirectly as funder through contracts, becomes crucial and nervousness
over cost can be detected. Factsheet 2 states that:“… the employer(s) and union(s) can negotiate the solutions throughcollective bargaining... The Government has decided that claims for additional
funding for remedial pay settlements arising from pay and employment equity
reviews will be considered within existing Budget processes, advised by atripartite process. Claims need to be supported by a business case establishingclear evidence that there is pay inequity (preferably based on a rigorous pay
investigation), whether organisations can fund the claim through reprioritisation and how relativities based claims will be managed.”
Government is clearly concerned with the possibility of extra public sector
expenditure. A remedial settlement ‘preferably’ requires a pay investigation not just a
review (and so is confined to 70% or more female work), and the section provides
warnings and incentives to strengthen employer resistance. Strong union expertiseand commitment, matched by that of the relevant groups of employees, will benecessary if evidence is to be converted to action and a real remedy. No organisation
has yet reached that stage. The bipartite approach seen as essential by the Unit isdependent not only on union expertise but also on the commitment of organisations tounion involvement, which will almost inevitably be variable.
A useful case study is that of librarians. Mary-Jane Gleeson, an Australian expert on
pay and employment equity with experience in its applications to librarianship, visited20New Zealand in 2005 to assist the Unit and participants in pilot and subsequent
reviews. She was earlier involved in the New South Wales Library case which
resulted in a 16% average pay increase for public sector librarians, a heavily female
job category in both countries. This arose from re-assessment and documentation of
the skills being applied in different jobs. Observing that women tend to use plain
English language which undervalues their work, she noted that this had led tooversimplification of complex skills involved in librarian jobs.
The National Library pilot audit report, signed by management and union
representatives, stated that it was intended to develop a comprehensive picture of the
Library’s gender profile and to focus attention and resources on areas with the mostimpact in bringing about pay and employment equity for women. It found a genderearnings gap of 11%, but noted particularly that Librarians, a female dominatedgroup, earned 24% less than Digital Innovation Technology Services staff, the only
male dominated occupational group in the workplace, despite equivalent Job
Evaluation points. It also concluded that the current Job Evaluation system was
outdated, not accurately measuring all current functions, reinforced by inadequate roledescriptions. Hence, it argued the need for a sector wide occupational audit, with theundervaluing of librarian occupations tested and found to have substance. A concern
expressed was that that the audit did not have the capacity to address the issue of pay
and employment equity for librarians as an occupational group. Hence the Library’s
ability to influence gender equity for librarians would continue to be constrained.
This reinforces the issues raised above.
Job Evaluation
The Gender Neutral Job Evaluation tool is of course not the first attempt at such an
exercise in New Zealand. The Equity at Work job evaluation scheme (Burns andColeman, 1991) was developed under the auspices of the Employment Equity
Commission and completed after its abolition. That Commission was establishedunder the Employment Equity Act passed and repealed in 1990. A generic scheme, it
was designed to be gender neutral and adaptable to specific needs. The new scheme(to be renamed Equitable Job Evaluation) has been developed and tested inconjunction with Mercer and Top Drawer consultancies. National’s Industrial
Relations spokesman Wayne Mapp labelled the payment of $121,000 to these two
firms for work on the scheme “a wasteful and irresponsible use of taxpayers’ money”,(Dominion Post, 26 June, 2006), and argued that the PEEU should have done thework itself. Department of Labour Chief Executive James Buwalda defended theexpenditure on the basis of the small size of the unit and the need to draw on expertisein particular areas, given the concern to eliminate gender bias, an emphasis notcommon in job evaluation. The criticism of such a small expenditure by comparison
with high consultancy fees paid by all governments in a wide range of areas might beseen as provocative and perhaps inspired by the gender emphasis of the work.
The scheme is at its final stage of development after undergoing three tests. The final
test on jobs at the Ministry of Social Development is comparing the rank order withthat produced by existing systems. The factor plan and guide (including questionnaireand evaluation record) are being prepared for publication, while an education andtraining kit is being jointly developed with the New Zealand Council of Trade Unions
and the State Services Commission.

21

New Zealand Journal of Employment Relations 32(3): 18-30

Another initiative under way on job evaluation is development of a Gender Inclusive
Job Evaluation Standard, to assist in identifying and addressing gender bias.
Standards New Zealand released a draft for public comment and is currently
considering the submissions. The process has involved input from business, unions,job evaluation providers, the Human Resources Institute of New Zealand and gender
equity experts. Given extensive critiques of most standard job evaluation systems forcontaining gender biases (for example Burton, 1988, Hyman, 1988) this Standard isneeded. It has the potential for the work of the Unit to extend beyond the 10% of theworkforce covered by its core responsibilities.

Contestable FundThis fund makes grants to organisations involved in implementing the Action Plan. It
was oversubscribed in the 2006 funding round, with twenty applicants applying for a
total of $2.9m but only $1m was available. Among the criteria used were partial not
full reimbursement, value for money and substantial expected gains toward
implementing pay and employment equity, and funding only for new work on thereview process. Successful applicants included ten government departments as well as
public health organisations (five District Health Boards involved in reviews). With
such a high proportion of funding going to government departments to appoint project
managers for the audit process, it seems appropriate to ask whether a commitment toequity would indicate that such staff should be paid from core departmental funding.
Union participation in the reviews also received funding. The New Zealand Nurses
Organisation is engaging members, delegates and staff at all levels in the Plan of
Action. The Public Service Association has appointed a pay and employment equity
advisor and its funding will help build capacity in the area for all three sectors.
Independent of the Taskforce report and subsequent work of the Unit, some tradeunions have continued to use equal value arguments in their pay claims. While there
is no legislation requiring anything stronger than equal pay for equal (effectively
identical) work, such claims in collective bargaining have had some success. The pay
settlement for public hospital registered nurses in 2005, in which equal value
arguments were a strong part of the union case, has been the most important exampleof this type. However, it has not been comprehensively passed on to other workplaces
employing such nurses, many of which are therefore experiencing staff shortages anddissatisfaction. And related female dominated caring work requiring lower
qualifications, but where the skills involved are still clearly undervalued, is a major
problem area (Burns et al, 1999).

Equal Employment Opportunity – Public Sector
The State Sector Act, 1988, requires Public Service CEOs to operate as ‘good
employers’ which inter alia involves a proactive Equal Employment Opportunities
programme, covering at a minimum: Maori; women; ethnic minority groups; andpersons with disabilities. However, the Taskforce considered that “stronger
mechanisms are required to ensure that the issues are not only identified, but also
acted upon” (Taskforce, 2004: 74) which the process discussed above is intended tofulfil, at least with respect to gender. In the meantime, the State Services Commission

22

publishes an annual EEO Progress Report for the Public Service, which tends to bethorough on statistics but cautious with respect to analysis and recommendations. The
2005 report, reviewing progress from 2000 to 2004, referred to positive trends
including increased representation of Pacific peoples and Asians in the PublicService, increased representation of all the EEO groups in the managerial occupationgroup, and improved representation of women in senior management. It also correctly
noted areas of concern, including pay gaps and low representation in senior
management for several of the EEO groups. There was little change to the pay gap
between female and male public servants (State Services Commission, 2005).
Universities are an interesting case study, since they strongly defend theircommitment in theory and practice to merit criteria for appointments and promotion,and since most had EEO programmes and policies at an early stage. However, senioracademic staff are still highly male dominated, with only 16.9% of Associate
Professors and Professors being women in 2005, up marginally from 15.8% in 2003
(Human Rights Commission and New Zealand Centre for Women & Leadership,2006). The lowest proportion is 6.3% at Canterbury University, where a case wastaken in 2004 to the Human Rights Commission by Sue Newberry over her nonpromotion to Associate Professor. Canterbury’s response defended the university’s
promotion procedures and argued that there was no sex discrimination involved inthis case or in general. Sue Newberry has been lost to New Zealand, having obtained
her Associate Professor position at Sydney University. The HRC Director ofProceedings had advised her of the potential difficulties in proving the alleged
discrimination. While she could point to a series of disingenuous and illogical events,
it was much more difficult to show that the primary operating factor was gender
discrimination. As so often, the standard of proof required makes establishing gender
discrimination, direct or indirect, very difficult.
Nevertheless, after 30 years or more of documentation of the issues, suspicion ofsubtle gender bias remains strong. A 2004 report on gender and academic promotionsat Massey, surveying 619 staff members, showed that perceptions of barriers topromotion and lack of feedback on failure still remained more common among
women. Massey academic women were five times more likely than men to believethat having time away from the workforce is a barrier to promotion, and three times as
likely to mention the lack of affordable childcare. Women were only half as likely as
men to feel they had reached the academic level to which they aspired. More womenthan men identified barriers to promotion such as high teaching loads and a lack oftime for research (Doyle et al, 2004).
Canterbury’s Pro Vice Chancellor
acknowledged in response to the report that there might be at all our universities alack of parity with regard to gender that can be extremely subtle.

Equal Employment Opportunity – Private Sector
In the private sector there are many indicators showing that there is a long way to go
to achieve gender equality. The Modern Apprenticeship scheme is mainly a maledomain with the female proportion having increased only from 6.6% in 2003 to 8.5%
in March 2006. Women were over one third of participants in tourism, public sector,
retail, hospitality and seafood, but a miniscule proportion in the male traditional areas(10 out of 1430 in engineering and 6 out of 1315 in building and construction, the two

23

New Zealand Journal of Employment Relations 32(3): 18-30
largest groups overall). Clearly thirty years of work to encourage women into these
trades has had little impact. To increase female participation, the scheme has
incorporated industries that are more traditionally ‘female’ – such as retail – butwhich still tend to be lower-paid and with less developed career paths than the
traditionally ‘male’ skilled trades. The EEO Commissioner Judy McGregor warns that
this approach to gender-balancing the scheme reinforces stereotypes, and will not see
more women in high-skill, high-paid technical jobs, perpetuating occupationalsegregation.
At the other end of the spectrum is the underrepresentation of women in private sector
boardrooms. The top 100 firms on the New Zealand Stock Exchange still had only 7%
women directors in 2006, up from 5% in 2003. (Human Rights Commission and New
Zealand Centre for Women & Leadership, 2006).
The only legislative underpinnings for EEO in the private sector are the anti
discrimination provisions of industrial relations and human rights law. Despite thedifficulties outlined above in establishing discrimination on specific grounds (gender,
ethnicity, age etc) to the standard of proof required, there has been one recent successin the Talley case. Caitlin Lewis claimed that Talley’s discriminated against womenby not giving them a chance to do higher-paid work and this was upheld by the
Human Rights Review Tribunal. Talley’s hiring process was described by the Officeof Human Rights Proceedings as ‘a drafting gate’, with men automatically steered
into higher-paid fish filleting jobs and women into lower-paid trimming jobs. Its
Director, Robert Hesketh, said that the case “establishes quite clearly that [Talley’s]
was practising sex-discrimination in the way it allocated its roles and that the decision“... is going to require larger employers with a varying workforce and varying
tasks, to audit what they do and make sure that any divisions along sex lines
are for sound reasons, not for historical reasons that aren’t relevant. One of thereasons that Talley’s gave for preferring men in the [higher paid] filleting role
was that it involved lifting heavy containers of fish. The lie that you can put tothat, was that the woman plaintiff in the Talley’s case was a six-foot, strongly
built woman who would have had no difficulty whatsoever, as she put it,‘huffing’ bins of fish”. (National Equal Opportunities Network, 2007).
Good EEO information and resources are available on the web, with the developmentby the Human Rights Commission and the Equal Employment Opportunities Trust of
the National Equal Opportunities Network (NEON) site quoted above. NEON’s
resources include profiles of EEO groups, information about EEO issues, advice for
Crown entities on being a ‘good employer’, national and overseas news, and researchand case studies, as well as links to others working in EEO. The Trust’s own site isalso a useful resource (www.eeotrust.org.nz/).
Various minimum code provisions, such as the minimum wage and parental leave,
together with some government programmes, such as provision and subsidies forchild care, as well as policies, for example on breastfeeding in the workplace, also
have EEO impacts. Those which particularly affect parents with dependent children
have major gender impacts in practice, since women continue to take the major role infamily related responsibilities. Hence the extension of paid parental leave to 14 weeks
and the inclusion of self employed parents are positive developments, although24further improvements to eligibility, particularly for casual and seasonal workers, andto the length of leave and level of payment are desirable. On breastfeeding, the
Human Rights Commission has recommended the provision of a legal framework forthe right to breastfeed at work but this has not been taken up.

Age, Disability and Ethnicity
Age discrimination (against both the youngest and oldest in the labour force) is
another issue rightly receiving increasing attention. There is a substantial irony withrespect to the position of older workers. On the one hand, labour force participation
among this group has been increasing quite rapidly, pulled by greater longevity,
improved average health levels, and the wish by some, including women who have
had periods out of the labour force, to remain in paid work longer for financial andother reasons. It has also been pushed by the increase to 65 for eligibility for New
Zealand Superannuation and by fears that this may rise further with population ageing
and concern over the rising proportion of the government budget taken by NZS. Yet,despite human rights legislation making discrimination on the basis of age unlawful,
there is evidence of substantial prejudice against older workers by employers. Clearlyhigher employment levels are good for the economy, given labour shortages. We need
to use all our human capital, particularly the experience and skills among this group.
The EEO Trust’s Work and Age Survey explored what 6,484 respondents want fromwork as they get older and what would encourage them to continue to contribute theirskills and experience at work. For most working people, the ideal transition from fulltime work to retirement would involve part-time work or more flexible working
hours. About one in three respondents said they had experienced discrimination atwork due to their age (EEO Trust, 2006). A recent study of barriers to entry for theolder worker used a field experiment (written applications and resumes to apply for
75 advertised positions), a short listing simulation, and interviews with employers andrecruiters. “Younger workers were seen as more suitable and were significantly more
likely to be short-listed…[For example]…for low demand (HR administrative)
positions, the resume of a 25+ year old worker was six to twelve times as likely to be
short-listed as the equivalent resume of a 55+ worker” (Wilson and Kan, 2006: 2).
An EEO Trust on-line survey of disability and employment with 368 responses
highlighted the achievements, commitment and talents of disabled people. Despitehigh awareness of their strengths and skills, many respondents had found it hard to
get a job and had come up against barriers that prevented them from making thecontribution they were capable of at work (EEO Trust, 2005).
On ethnicity, statistical indicators show ongoing disadvantage in the labour market for
Maori and Pacific people. A recent study of the settlement experiences of immigrants
and refugees in New Zealand documents a growing literature in the area, in which“regrettably, the experience of discrimination, exclusion and prejudice figures
prominently” (Butcher, Spoonley and Trlin, 2006, p.v). In focus group discussions,“… participants noted that the discrimination they experienced was subtle, rather thanovert and explicit”, (ibid, p.v.) but nevertheless strong. Employment was a major
focus with repercussions in other areas. Significant issues in acquiring employment
and on the job included: “… the recognition of overseas qualifications; the25New Zealand Journal of Employment Relations 32(3): 18-30
desirability of New Zealand qualifications and work experience; application
procedures; the sense of being an outsider; and language and accent,” (ibid, p.vi).
Flexibility in employment is an important issue not only for older workers, but also
for other groups, especially those with significant family responsibilities. Creating
family friendly workplaces and assisting individuals to secure a satisfactory work life
balance is now a common mantra, although there has probably been more talk thanaction. The latest substantive move is the introduction of the Employment Relations(Flexible Working Arrangements) Amendment Act 2007. This Act further enshrines
the legal precedent on employers’ duty to accommodate reasonable requests forflexible working arrangements. It is based on similar 2003 UK legislation underwhich many applications have been made and around 90% of them agreed to by
employers. While tenor of the legislation is more about requesting rather than
imposing major obligations, the change in climate could make a real difference.

Other Legislative and Policy Initiatives with Potential Impacts on
Pay and Employment Equity – Low Paid Work and Union Action
Realism dictates acknowledgement of the problems of achieving satisfactory
outcomes from specific gender and ethnic anti-discrimination and equality policies, as
discussed above, despite their symbolic importance. In most circumstances, thegeneral economic and employment relations environment and legislation have greater
impact on pay and employment equity than more direct approaches. The level of theminimum wage thus has an important role in protecting lower waged workers,
particularly when collective bargaining is weak. The CTU estimates that of the 91,000
workers for whom the latest minimum wage boost directly led to a pay rise, 61,000
were women. The relativity of minimum to average wages has fluctuated widely over
the years in New Zealand with extremes of 83% initially (in 1947) and 30% in 1984
(Hyman, 2004). Minimum wage rates have been raised more since 1999 underLabour-led governments than in previous years but by 2006 had only partiallyrestored relativities to a rate of about 50% of the average wage, with the hourly
minimum wage rate raised to $10.25 and the youth rate for 16-17 year olds
maintained at 80% of the adult rate or $8.20 per hour.
However, in 2007, the private member’s bill, Minimum Wage (New Entrants)
Amendment Bill, was introduced and comes into effect on 1st April, 2008. It replaces
the youth minimum wage rate, which is currently $9.00 per hour, with a new entrant’s
minimum wage. The actual rate for the new entrant’s minimum wage will depend on
the outcome of the minimum wage review that government is currently undertaking.
Those 16 and 17 year olds who work fulltime will now be able to reach the adultminimum wage within 5 weeks, while those who work part time while pursuing theireducation will receive the adult minimum wage after three months. This means thatmany 16 and 17 year old workers will have already completed their qualifying time
when the Bill comes into effect, and will be able to move immediately to the adultminimum wage rate, which will be increased to $11.25 per hour on 1st April 2008 –an increase of a dollar per hour (NZ Government Press Release, 6th September,2007).

26

Unions have also been campaigning for a higher minimum wage, and for the abolitionof the lower youth wage. In addition, unions have been seeking general wage
increases and improvements in specific industries, especially the lowest paid areas.
Strike action has been used more than in recent years in both professional (eg juniordoctors) and blue collar areas. The CTU is calling for the statutory minimum wage to
be set at two thirds of the average wage, and then indexed at this level. They havecalled for an immediate increase to $12.00 per hour, rather postponing the lesser
increase of $11.25 to 2008. In addition, a Workers Charter launched in 2005 has a listof ten demands aimed at guaranteeing workers’ rights is a resource for the campaigns,
while its associated monthly newspaper launched in February 2006, has called for aminimum wage as high as $15 per hour. With average hourly earnings in June 2006
about $20, the $12 target would mean a 60% relativity, while a 2/3 ratio would
require $13.33 per hour.
The tight labour market is among the reasons why workers and unions are able toreassert some muscle after a comparatively quiet period. While some recent
campaigns are detailed below, it is noticeable that the latest Victoria University of
Wellington’s survey of union membership shows that union density remains stagnant
in the year to December 2006, despite total union membership reaching its highest
level since 1994. Thus, there are still concerns associated with low paid work in
private sector service organisations.
The campaigns for general wage increases and improvements in low paid industries
include the Fair Share campaign, launched in 2005 to fight for a general 5% wage
increase, Supersizemypay.com, and campaigns in cleaning, aged care, fast food andretail. The campaigns gained momentum with strong support among and forsupermarket warehouse employees locked out by Progressive Enterprises, owned byAustralian retailing giant Woolworths when seeking national pay parity. The eventual
three-year settlement achieved the union aim of equal pay across Auckland,
Palmerston North, and Christchurch distribution centres. While not achieving one
national agreement, the three documents were based on national bargaining. The
unions hailed a victory, claiming major public support and strong solidarity.
The Clean Start – Fair Deal for Cleaners campaign of the Service and Food Workers’
Union (SFWU) has called on the government to look closely at the inequalities
suffered by Pacific Island and Maori workers employed as cleaners in Auckland andWellington CBD office blocks. The Fair Share for Aged Care campaign of the New
Zealand Nurses Organisation and SFWU aims for increased government funding forthe sector, targeted to fair pay for the predominantly female caregivers, nurses andsupport workers, safe staffing levels, better training opportunities, and recognition oftraining in improved pay. Noting that profits have soared for Aged Care operators,
now almost all controlled by multi-national corporations, unions and employees areconcerned with what they see as the employers’ consistent refusal to pass-on a fairshare of huge annual profits. The work of caregivers is intensified with greater elderly
dependence - but wages have scarcely increased for many years with $12 per hourcommon in this female undervalued occupation.
Another union campaign focused on defeating the Employment Relations(Probationary Employment) Amendment Bill which would introduce a 90-day

27

New Zealand Journal of Employment Relations 32(3): 18-30
probation period for new employees. Its purpose was stated to be to enable employers
to take a chance with new employees, without facing the risk of expensive andprotracted personal grievance procedures. This Bill couldn’t secure sufficientparliamentary support and was withdrawn in 2007. Its intent is likely to resurface,
however, if the National Party is in government after the 2008 General Election andthis could mean that there would be no right of appeal against an unfair dismissal in
the first 90 days of an employment agreement.

Conclusion
In a world economy where dominant transnational corporations can locate andoutsource in pursuit of minimum employment costs, it is hardly surprising that New
Zealand governments and business place emphasis on labour market flexibility,
minimising compliance costs, and avoiding new legislative regulations. In thisenvironment, any stated commitment to gender and ethnic equality is likely to havelittle teeth. Achievements by women are often portrayed as being at the expense ofmen and special provisions to lift the position of Maori and other ethnic groups or
women are regarded with suspicion. Reductions in gender and ethnic inequality in
educational and other human capital acquisition have nevertheless occurred and willcontinue given social change, pressure from the groups previously denied equal
access, and the economic imperatives to use all our labour resources fully. However,some groups are slow to benefit. Equal opportunity is therefore far from a reality,
while the undervaluation of many types of female dominated work can only be
remedied by requiring systematic processes throughout the labour market. Research
and monitoring remains essential.
Continued monitoring is essential if legislative and policy commitments are to behonoured and improved and to avoid any erosion of past gains on the basis that allthat is necessary has already been done. It is to be hoped that confidentiality does notprevent the experience of organisations undertaking public sector, health andeducation pay reviews or using equitable job evaluation being built on – wide
dissemination of the planned case studies and research on the efficacy and possible
use elsewhere of the review process is highly desirable.

References
Burns, J. and Coleman, M. (1991). Equity at work – an approach to gender neutral
job evaluation. Wellington: State Services Commission and Department of Labour.
Burns, J., Dwyer, M., Lambie, H. and Lynch, J. (1999). Homecare workers: A casestudy of a female occupation. Wellington: Ministry of Women’s Affairs.
Burton, C. (1998). Redefining merit. Canberra: Affirmative Action Agency
Commonwealth of Australia. Monograph, No.2
Butcher, A. Spoonley, P. and Trlin, A. (2006). Being accepted: The experience of
discrimination and social exclusion by immigrants and refugees in New Zealand.
Palmerston North: New Settlers Programme. Massey University. Occasional
Publication, No.13.

28

Dominion Post (2006), "Job scheme `a success' — but no one's keeping count" byAnna Chalmers, 26 June.
Doyle, A., Wylie, C. and Hodgen, E. with Else, A. (2004). Gender and academic
promotion: A case study of Massey University. Wellington: New Zealand Council for
Educational Research.
EEO Trust. (2005). Disability and Employment – Online survey analysis. Auckland
EEO Trust. (2006). Work and Age Survey Report. Auckland
Hall, P. (2006). New Zealand’s Proactive Pay and Employment Equity Plan of Action.
Paper to International Association for Feminist Economics Conference, Sydney.
Humans Rights Commission and New Zealand Centre for Women and Leadership,
Massey University. (2006). New Zealand Census of Women’s Participation
Hyman, P. (1998). Equal pay for work of equal value – job evaluation issues. New
Zealand Journal of Industrial Relations. 13(3): 237-255
Hyman, P. (1994). Women and Economics: A New Zealand feminist perspective.
Wellington: Bridget Williams Books
Hyman, P. (2004). Significant increases in the minimum wage: A strategy for gender
pay equity? Women’s Studies Journal. 18(2): 11-24
Hyman, P. (2006). Pay equity and equal employment opportunity: Policy, rhetoric andreality in the 2004 New Zealand Labour Market. In Proceedings of Eleventh
Conference on Labour, Employment and Work. eds. S.B Blumenfeld and G. Lafferty.
283-288. Wellington: Victoria University of Wellington.
National Equal Opportunities Network (2007) retrieved from www.neon.org.nz.
New Zealand Department of Labour. (2006). Working towards Pay and Employment
Equity for Women in Public Health, Public Education and Public Service.
Wellington.
NZ Government Press Release, (2007) Questions for Oral Answer - 6 September
2007
Thursday, Office of the Clerk, Volume 641, Week 54: 11645, Wellington
State Services Commission. (2005). EEO Progress in the Public Sector 2000 – 2004:
The Data Stories. Wellington.
Taskforce on Pay and Employment Equity. (2004). Report on Pay and Employment
Equity in the Public Service and Public Health and Public Education Sectors.
Wellington.

29New Zealand Journal of Employment Relations 32(3): 18-30
Wilson, M. and Kan, J. (2006). Barriers to entry for the older worker. Auckland:
University of Auckland Business School.

30

New Zealand Journal of Employment Relations 32(3): 31-39

Unions and Union Membership in New Zealand: Annual Review
for 2006
GOLDIE FEINBERG-DANIELI* and GEORGE LAFFERTY**
Introduction
This paper continues the series of annual surveys by the Industrial Relations Centre (IRC) on
trade union membership in New Zealand, which began in 1991 when the Employment Contracts
Act (ECA) ended the practice of union registration and the collection of union data. Although
the Department of Labour began collecting official union data again in 2002, the IRC hascontinued to survey union membership under the Employment Relations Act 2000 (ERA). This
year we report on changes in union membership, composition, and density from December 2005
to December 2006.
Some of the more significant findings for the period are:•

A modest increase in overall union membership of 5,190 (just under 1.4%). This
indicates a significant slowing in membership growth, which in 2005 increased by
6.6% (23,290 members), and which had grown by 25% since 1999.
• A slight decline in union density, from the 2005 figure of 21.9% down to 21.7% in
2006, within the context of an increase of 2.6% in the overall number of wage andsalary earners, from 1,719,500 to 1,764,500.
• An increase in private sector union membership of 4,945 members (2.8%), with a loss
in public sector membership of 4,538 members (2.3%), although the public sector
remains much more highly unionised.
• A substantial increase in membership – 24% (3,520 members) – in retail, wholesale,
restaurants and hotels, reversing the trend of recent years, although union density inthe area remains low (4.5%). On the other hand, in the already lowly-unionised area offinance, insurance and business services membership declined by a further 18% (2,421
members).
• A steady, if gradual, concentration of membership in CTU affiliated unions: in 2006,
CTU affiliates accounted for 89% of all union members, up from 88.4% in 2005.

Methodology
Our survey included those unions registered as at 31 December, 2006, as per the Department ofLabour website of registered unions (see www.ers.dol.govt.nz/union/registration.html and theDepartment’s Annual Report 2006). In late January 2006, each of the registered unions was senta survey requesting membership numbers as at 31 December 2006. One hundred and five unions
responded. For those that did not, we obtained details either through telephone contact or*Goldie Feinberg-Danieli is the Research Fellow for the Industrial Relations Centre, Developing Human Capability
Project at Victoria University, Wellington**
George Lafferty is the Professor of Human Resource Management & Industrial Relations and the Director of theIndustrial Relations Centre at Victoria University, Wellington.
This study is part of a larger project which receives funding from the Foundation for Research, Science andTechnology (Contract no. Vic X0301). The authors are grateful to all the union officials who contributed to thisresearch; and to Priya Maheshwari, Adam Malanchak, James Upton, and Jennifer Halli for their assistance with data
entry and publication.

31

New Zealand Journal of Employment Relations 32(3): 31-39
drawing on the Department’s Annual Report 2006. In the time between last year’s survey andthe return of this year’s survey, nine unions deregistered and five new unions registered,bringing the total number of unions to 166 (see Appendix for explanation of union registration
under ERA). Five unions out of nine voluntarily deregistered due to amalgamation.

Trade union membership and density
Table 1 summarises the historical trend in trade union membership and union density (defined as
the proportion of potential union members who belong to a union1) for the period 1991-2006.
While we provide relevant figures for the total employed labour force (which includes, among
others, the self-employed and unpaid family members, who are very unlikely to be union
members), the most meaningful measure of union density is the proportion of wage and salaryearners.
In our review for 2005, we had reported on the largest single increase in union membershipsince the IRC surveys began – 6.6% (23,290 members). This year, however, the growth inoverall numbers has been considerably less impressive, at under 1.4% (5,190 members).
Whereas in 2005 union membership outstripped growth in wage and salary earners, in 2006
union membership again fell behind the growth in wage and salary earners, leading to a small
decline in union density to 21.7%, from 21.9%. Overall union density has remained within the
narrow range of 21 to 22% 1998, indicating a remarkable level of stability.
Table 1: Trade Unions, Membership and Union Density 1991-2006
Year

Potential union
Union Density
membership
Total
Wage and(1) / (3)(1) / (4)employedsalary%%labour force
earners
(1)
(2)
(3)
(4)
(5)
(6)
51432566
1518800
1196100
33.9
43.0
Dec 1991
42816058
1539500
1203900
27.8
35.6
Dec 1992
40911267
1586600
1241300
25.8
33.0
Dec 1993
37590682
1664900
1314100
22.6
28.6
Dec 1994
36220082
1730700
1357500
20.9
26.7
Dec 1995
33896783
1768200
1409300
19.2
24.1
Dec 1996
32780080
1773200
1424000
18.5
23.0
Dec 1997
30668783
1760900
1399100
17.4
21.9
Dec 1998
30240582
1810300
1435900
16.7
21.1
Dec 1999
318519134
1848100
1477300
17.2
21.6
Dec 2000
329919165
1891900
1524900
17.4
21.6
Dec 2001
334783
174
1935600
1566400
17.3
21.4
Dec 2002
341631
181
1986100
1598700
17.2
21.4
Dec 2003
3540581702073800
1676200
17.1
21.1
Dec 2004
377348175
2105600
1719500
17.9
21.9
Dec 2005
382538166
2109800
1764500
18.1
21.7
Dec 2006
Source: Statistics New Zealand, Household Labour Force Survey, Table 3, Table 4.3, Unpublished, 2006.
Industrial Relations Centre Surveys.

Note:

Union
membership

Number ofunionsFigures in columns 3, 4, 5 & 6 are different to those reported in years prior to 2004, due to a population
rebase by Statistics NZ in June 2004 (see HLFS population rebase: June 2004 quarter, July 2004).

32

New Zealand Journal of Employment Relations 32(3): 31-39

Union membership and employment by industry
This section of the paper provides a summary of wage and salary earners and union members,
according to the Australia New Zealand Standard Industry Classification, during the year to
December 2006, in order to indicate the areas of relative union strength and weakness (Table 2).
There continue to be wide variations in union membership according to industry, with publicand community services, despite a small decline, remaining the contemporary union heartland.
In December 2006, the largest numbers of New Zealand wage and salary earners were in publicand community services (425,400); retail, wholesale, restaurants, and hotels (410,000);
manufacturing (243,400); and finance, insurance and business services sectors (237,000). Union
membership was overwhelming concentrated, in public and community services (203,513),
followed by manufacturing (75,588 and transport, storage and communication sectors (42,538).
All other industry groupings registered fewer than 19,000 members, with several sectors having
fewer than 5,000 members. For example, only 18,335 members of the total retail, wholesale,
restaurants and hotels labour force of 410,000 (the largest private sector grouping) are unionised.
However, this is the largest gain (24%) we have seen in this industry since we started reporting
this information, which mainly due to one union’s big campaign. Construction and building
services gained 7% this year; with the exception of last year’s loss (-9%), this is consistent withthe last seven years. The finance, insurance and business services grouping continues to see
declines in members (18%) although at more modest rates than last year.
The last column in the table illustrates each industry’s contribution to the change (loss or gain)
in total union membership. The largest gains were in public and community services(particularly in health and education) and retail, wholesale, restaurants, and hotels. These threeindustries accounted for 83, 48 and 68% respectively, of the increase in new members.
Conversely, manufacturing and finance, insurance and business services mitigated the increase
in total union membership by(-50%) and (-47%) respectively.
Table 2: Distribution of union members and wage and salary earners across industry
sectors
Industry Group

Union
membershipDec 2006

Agriculture, fishing, forestry etc
3015
Mining and related services
1436
Manufacturing
75588
Energy and utility services
3346
Construction & building services
5555
Retail, wholesale, restaurants, hotels
18335
Transport, storage and communication
42538
Finance, Insurance and business services
10934
Personal and other services
18278
Public and community services
203513
Govt administration & defence
33049
Education
81070
Health and community
89394
TOTAL
382538Source: Industrial Relations Centre Survey, 2006

Change inmembership2005-2006
(%)
-11
-7
-3
-8
7
24
0.4
-18
2
3
-1
3
5
1.4

Labour force Change inNew
Dec 2006
labour force members
2005-2006 breakdown
(000)
(%)
(%)
82.3
7.2
-7
6.7
6
-2
243.4
-2.7
-50
8.4
6
-6
132.0
16.5
7
410.0
1.2
68
104.2
0.5
3
237.0
3.8
-47
115.3
-0.9
7
425.4
4.1
127
89.0
7.9
-4
154.2
-0.6
48
182.2
6.3
83
1764.5
2.6
100

33

New Zealand Journal of Employment Relations 32(3): 31-39

Table 3 summarises how union density has changed in 2006, according to industry grouping.
The only areas in which density has increased are retail, wholesale, restaurants and hotels,
personal and other services, and (within the public and community services grouping) education.
Significant falls (in relation to their already low levels) have occurred in agriculture, fishing andforestry, mining and related services, energy and utility services, construction and building, andfinance, insurance and business services.
Table 3: Change in union membership across industry groupings
Industry group

Approx. density Approx. density
2005
2006
(%)
(%)

Agriculture, fishing, forestry etc
Mining and related services
Manufacturing
Energy and utility services
Construction and building services
Retail, wholesale, restaurants, hotels
Transport, storage communication
Finance, insurance and business services
Personal and other services
Public and community services
Govt administration & defence
Education
Health & community services
Source: Industrial Relations Centre Survey, 2006

4.4
24.5
31.3
46.1
4.7
3.7
40.9
5.9
15.4
48.3
40.6
50.7
49.8

3.7
21.4
31.3
39.8
4.2
4.5
40.8
4.6
15.9
47.8
37.1
52.6
49.1

In our surveys, we ask our union respondents how many of their members work in the private
and public sectors respectively (Table 4). This year, we have included the additional ‘not for
profit’ category (4,783 union members) for the first time – this inclusion has had acorresponding impact on the figures for private and public sectors. Despite the slight increase inunion membership in private sector and a slight public sector decline, the public sector retains
the majority of all union members, with a much higher density (68 to 13, see Table 5).
Table 4: Public, private and not-for-profit union membership
Sector

Dec-05

Membership private sector
175415
Membership public sector
201933
Not for Profit
N/A
Source: Industrial Relations Centre Survey, 2006

Dec-061803601973954783

Change2005-2006
4945
-4538
N/A

Change2005-2006
(%)
2.82
-2.25
N/A

The relative strength of New Zealand public sector unionisation and the weakness of private
sector unionisation is underlined by a comparison with the main Anglophone nations. New
Zealand’s high public sector union density helps to bring it to an overall level slightly higher
than Australia’s, although New Zealand private sector union density is lower than the othercountries, with the exception of the United States (Table 5). A regeneration of private sector
membership remains a major challenge for New Zealand unions.

34

New Zealand Journal of Employment Relations 32(3): 31-39

Table 5: Public/private sector union density – international comparisons
Country

Union density Public sector Private sector Public/Private
Ratio
New Zealand
22
68
13
5.2
Australia
20
43
15
2.9
Canada
30
71
17
4.2
UK
26
59
16
3.6
USA
12
36
7
5.1
Sources: Statistics New Zealand, QES March 2006;, Australian Bureau of Statistics, 2007; Statistics Canada, 2007;
Dept. of Trade and Industry, 2007; Bureau of Labor Statistics, 2007, Industrial Relations Centre Survey, 2006.

Gender and ethnicity
The composition of New Zealand membership has changed massively since the era of
predominantly male, full-time employment. As in 2005, women comprised the majority (54%)
of union members in 2006, although they constituted only 46% of the New Zealand labour force.
(Statistics New Zealand, 2006: HLFS Table 3). Major contributory factors to this change include
the high representation of women in public and community services and the decline intraditionally unionised areas of male employment such as manufacturing and mining.
New Zealand’s labour force has also become more ethnically diverse. This year 27 unions
provided data on ethnicity. These unions covered 283,182 employees or 74%t of total union
members. Given that the sample may not be representative of the overall composition of union
membership and that the ‘Other’ category may contain a number of employees for whom unions
possess no ethnicity information, the data in Table 6 should be approached with some caution.
Nonetheless, our sample of union members indicates considerably lower representation of NZ
European/Pakeha than in the general labour force, with Maori slightly over-represented among
union members and Pacific Peoples having a considerably greater presence among union
members than in the general labour force.
Table 6: Ethnicity by sample and labour force 2006
Ethnic group
NZ European / Pakeha:
Maori:
Pacific Peoples:
Asian:
Other:
Total

Survey sample Total labour force*
(%)
(%)
63.7
75
11
10
7.6
4
2.8
n/a
14.9
11
100
100

∗ Statistics New Zealand, Household Labour Force Survey, December Quarter 2006, Table 5. No breakdown given
for Asian working population

Trade union numbers, distribution of membership by size, and affiliation
Over the past two decades, three legislative regimes have had a major impact on overall union
membership and on the number and size of individual unions. The Labour Relations Act 1987
required that unions must have a minimum membership of 1,000, providing a stimulus for union
amalgamations. There was a related drop in the number of unions during the later years of the
1980s: by 1990 there were only 104 unions, whereas there had been 259 in 1985. However, theEmployment Contracts Act 1991 removed the ‘1,000 member rule’, permitted groups of
employees (not only registered unions) to negotiate collective contracts, and abolished35

New Zealand Journal of Employment Relations 32(3): 31-39
registration requirements. Consequently, a considerable number of smaller unions were able toemerge during the 1990s, often within a single workplace, although the largest (10,000+) unions
still retained the great majority of union members.
The Employment Relations Act 2000 stipulated that only registered unions could participate incollective bargaining, but its setting of a low membership threshold for registration at 15
members has seen the number of registered unions more than double, with a proliferation ofsmall, often weakly resourced unions. While in 2006 there were 129 unions with fewer than
1,000 members, the substantial majority of union membership remains concentrated in thelargest unions, with eight unions accounting for 71% of overall membership. Table 7 shows thenumber of trade unions, categorised by size, at the commencement and conclusion of the ECA
period (1991 and 1999 respectively), and for 2006.
Table 7: Membership by union size 1991 – 2006, selected years
Membership
range
Under 1000
1000 - 4999
5000 - 9999
10000+
Totals

(#)
4
39
9
14

Dec 1991
Members
2750
87119
76489
347967

(%)
1
17
15
68

(#)
48
22
3
9

Dec 1999
Members
12703
43709
19669
226324

(%)
4
14
7
75

(#)
129
22
5
8

Dec 2006
Members
20358
53199
38375
270606

(%)
5
14
10
71

66

514325100

82302405100

166382538100

Av. Size
7793
Source: Industrial Relations Centre Surveys

3688

2437

In the wake of the ECA, the New Zealand union movement fell into some disarray, leading to amajor split which saw the emergence of two competing peak organisations, the Federation ofLabour and the Council of Trade Unions. The number of CTU affiliated unions dwindled
throughout the 1990s, from 43 in 1991 to 19 in 1999; the proportion of union members coveredby CTU affiliates also declined, from 86.5% to 78%. Following the 1999 election of a Labourled government, the TUF reunited with the CTU in 2000. The number of unions affiliated to the
CTU has risen under the ERA to 39 in 2006, while the proportion of union members belonging
to union affiliates has increased to 89%.
Table 8: NZCTU affiliation 1991 – 2006
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

NZCTU Affiliate unions
43
33
33
27
25
22
20
19
19
26
32
34
36
38
37
39

Members
445116339261321119296959284383278463253578238262235744273570289732293466297440310451333395340281

Percentage of total m'shipin CTU affiliates
86.5
79.2
75.8
78.9
78.5
82.2
77.4
77.7
78.0
85.9
87.8
87.7
87.1
87.7
88.4
89.0

Source: Industrial Relations Centre Surveys

36

New Zealand Journal of Employment Relations 32(3): 31-39

Discussion
At first glance, union membership appears to have been remarkably stable since the late 1990s.
Yet this picture of overall stability obscures considerable fluctuations at the industry level and in
the fortunes of individual unions. For example, in recent years impressive gains have beenachieved by unions in very different contexts, such as UNITE and the Service and Food
Workers Union among mostly younger, part-time and casual workers in the service sector, andthe New Zealand Nurses Organisation in the already highly unionised health sector. However,any substantial increase in overall union density seems improbable without stronger legislativeintervention to reduce the incidence of free-riding. The December 2004 amendments to the
Employment Relations Act appear to have had little impact in this regard, as unions continue toface a high threshold to demonstrate that passing on to non-union employees has occurred(Blackwood, Feinberg-Danieli, Lafferty and Kiely, 2007).
Last year’s report indicated that the re-election of a Labour-led government in September 2005
had given unions an opportunity to consolidate previous gains and seek legislative andinstitutional improvements. In 2005, we saw the largest increase in union membership in asingle year since the Industrial Relations Centre commenced its surveys. This year, there has
been a significantly lower gain in overall numbers, with a slight decline in density, while theoutlook for unionism in most of the private sector remains bleak. Nonetheless, in recent years
there have been definite signs of growing confidence from unions and members, as exhibited byseveral high-profile campaigns, such as the EPMU’s ‘5 in 05’ and UNITE’s ‘SupersizeMyPay’.
The fact that such activity has been prominent across a range of occupations (for example,
cleaners, retail workers, teachers, public servants and doctors) is encouraging for unions, since
it indicates the possibility of a broader resurgence, within the relatively benign legislativeenvironment provided by the Employment Relations Act.
A change of government could lead to a rapid worsening of that environment, though, especially
if current levels of public and community sector employment were not retained. The mainprinciple of National’s policy is that there is excessive regulation of the employment
relationship, and that employees and employers ‘no longer have the freedom to makeagreements that suit their own circumstances (New Zealand National Party, 2005). National’splans for industrial relations include the repeal of the December 2004 ERA amendments, ending
unions’ guaranteed role as the sole collective bargaining agents, and tighter restrictions on union
access to workplaces. As Ross Wilson, outgoing President, noted in his opening speech to the
CTU’s Biennial Conference (October 2007), “it is still not clear that the National Party respects
the role of unions as social partners in modern democratic society”. Yet the result of the recent
Australian election may merit some reflection in this regard. Union and broader community
opposition to Work Choices no doubt contributed substantially to the Howard government’s
demise, and radical changes to industrial relations in New Zealand may be met with comparable
opposition.
Thus it remains difficult to predict future union trends. On one hand, the environment of recent
years may be as good as it gets for unionism in the foreseeable future. On the other, the notable
gains made by unions can provide a substantial platform from which to counter prospective
political threats.

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New Zealand Journal of Employment Relations 32(3): 31-39

References
Australian Bureau of Statistics (2007). Employee Earnings, Benefits and Trade Union
Membership, Australia. (cat. no. 6310.0). Canberra: ABS
Blackwood, L., Feinberg-Danieli, G., Lafferty, G. and Kiely, P. (2007). Employment
Agreements: Bargaining Trends and Employment Law Update. Wellington: Industrial Relations
Centre.
Bureau of Labor Statistics. (2007). Union Members Summary, Washington, DC: BLS
Department of Labour (2007) Unpublished data, Wellington; Department of Labour.
Department of Trade and Industry. (2007). Annual Report on Trade Union Membership.
London: DTI
Employment Relations Service Website. www.ers.dol.govt.nz/union/registration.html.
New Zealand National Party. (2005). National's Plan of Employment Law. National Party:
Wellington.
Statistics Canada. (2007). Unionisation: Table 1. Ottawa: Statistics Canada.
Statistics New Zealand. (2002, 2003, 2004, 2005, 2006). Household Labour Force Survey.
Unpublished reports.
Statistics New Zealand (2006) Quarterly Employment Survey. March 2006.

Appendix One
The Employment Relations Act and Trade Union Registration
The objects of the Act with respect to the recognition and operation of unions are:••••

To recognise the role of unions in promoting their members’ collective interests
To provide for the registration of unions that are accountable to their members
To confer on registered unions the right to represent their members in collective
bargaining
To provide representatives of registered unions with reasonable access to workplaces forpurposes related to employment and union business.

In pursuit of these objectives, the ERA establishes a union registration system, and grants
registered unions bargaining rights together with rights of access to workplaces (specified in
sections 19-25). To gain registration, a union must have more than 15 members, and provide astatutory declaration that it complies with the requirements of s14 of the Act regarding rules,
incorporation, and independence from employers. The Act requires the statutory declaration to
stipulate that the union is “independent of, and is constituted and operates at arm’s length fromany employer” (s14(1)d). The Registrar of Unions may rely on the statutory declaration toestablish entitlement to registration. Only registered unions may negotiate collective
agreements, and collective agreements apply only to union members whose work falls within the
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New Zealand Journal of Employment Relations 32(3): 31-39
agreement’s coverage clause, and to new workers whose work falls within the agreement’s
coverage clause for the first 30 days of their employment.

Notes
1

The measure of potential union members used to calculate union density varies from country tocountry and there is no agreed ‘correct’ method. Consistency in reporting so that results can becompared year on year is, though, a priority.

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New Zealand Journal of Employment Relations 32(3): 40-55

Industry Training Organisations in Changing Times:
New Research Possibilities
BILL COCHRANE, MICHAEL LAW and GEMMA PIERCY*
Abstract
The tertiary education reforms have placed considerable pressure on Industry Training
Organisations (ITOs), which are now required to assume “new roles as strategic leaders inskills and training needs for the industries under their coverage” (Ministry of Education
2003a:21). This paper argues that the Statement of Tertiary Education Priorities (STEP)
requirement can lead to productive relationships between ITOs and established researchorganisations. It considers the new context within which ITOs now operate and offers an
illustrative case study of the sort of research that can result from collaborative relationships.
Specifically, it reports on research commissioned by the New Zealand Industry Training
Organisation (NZITO), which covers dairy manufacturing, meat processing, and leather
processing, as part of its strategic planning. The research reported includes: an analysis of theindustries covered by the NZITO and their economic significance; the impact of an ageing
workforce and other demographic on the labour market and its implications for NZITO
industries; the impact of technological change on the labour market; and some of theconsequences of the continuing integration of the global economy.

Introduction and Background
This paper considers the emergence of Industry Training Organisations (ITOs) as lead bodies
in education and training. Its specific purpose is to examine the possibilities that role provides
for productive relationships between ITOs and established research institutions, such asuniversities. The paper first discusses aspects of the broader policy framework; it then draws
on a case study that illustrates research possibilities.
For the last two decades, tertiary education in New Zealand has been subjected to an almost
continuous process of “reform,” the explicit intent of which has been to reconcile better
formal education and the perceived skill needs of the labour market. The latest chapter in thecurrent phase was the second Tertiary Education Strategy (TES) and the associate Statementof Tertiary Education Priorities (STEP) (Ministry of Education, 2006).
As we discuss more extensively elsewhere, the reform process has moved through three
distinct phases, each of which has been driven by a particular ideological perspective; thesecan be loosely categorised as: “residual labourist” (1987-1990); “neo-liberal” (late 1990 tolate 1999); and “third way” (late 1999 to present) (Law, 1994, 1996a, 1996b, 1998, 2003a,*

The researchers are members of the Centre for Labour and Trade Union Studies, Department of Societies andCultures, Faculty of Arts and Social Sciences, University of Waikato, Private Bag 3105, Hamilton

40New Zealand Journal of Employment Relations 32(3): 40-55

2003b; Law and Piercy, 1999, 2000a, 2000b, 2000c, 2004; Piercy, 1999, 2003, 2005). Each
phase has been pursued by a particular government (Labour, National, and Labour-led) and,of course, has been tied inextricably to each government’s broader industrial relations policy.
With respect to workers’ education and training, the present, third way phase is characterised
by steering mechanisms, a qualified tripartite (employers, unions, and government)
framework, and a measure of understanding of the wider social context and associatedbroader learning needs.
A common theme throughout the reform process since 1987 has been a determination on thepart of successive governments to involve key stakeholders more directly in both theformulation and implementation of their particular tertiary education strategy. However,Labour and National parties have differed as to who constitutes “a key stakeholder”.
In the late 1980s, the Labour Government promoted an inclusive notion of stakeholders that
included workers and their unions. Thus its notion of an “industry-led” approach retained asignificant residue of the tripartite framework that had long characterised the vocational
training sector. The 1990s National Government broke with that tradition. Its neo- liberalapproach placed a much stronger emphasis on employer leadership, voluntary participation, amarket model of delivery premised on competition between education providers, and the“new” human capital perspective that regarded skills and knowledge as a “private good”(Marginson, 1993, 1997).
As elaborated below, we hold that the 1990s was a wasted decade for industry education andtraining. Framed by a market model of educational demand and deliver, National’s 1992
Industry Training Act (ITA) was hampered by a lack of any strategic policy direction, theinherent weakness of ITOs, and the limitation of their role. Furthermore, as a directconsequence of both the neo-liberal voluntarist approach and the impact of the 1991
Employment Contracts Act (ECA) unions were, to varying degrees, steadily sidelined, even inindustries, such as dairy manufacturing, that had remained substantially unionised (Law,
1998, 2003a; Law and Piercy, 2000c; 2004; Piercy, 2003).
We further hold that by the end of the decade, there was widespread agreement that themarket model was failing. This was captured in Labour’s 1999 election manifesto which
foreshadowed a more “hands-on” approach to industry training.

The Policy Background and the Changing Role of ITOs
What distinguishes the present, third phase from the 1990s is the new role envisaged for ITOs.
Very early in the reform process (the late 1980s), ITOs were seen as the appropriate vehicle toprovide strategic leadership to worker education and training. However, the change ofgovernment at the end of 1990 not only delayed the enabling legislation it also resulted in a
retreat from a strategic approach and the favouring of a market model of demand andprovision. Not surprisingly therefore, the Industry Training Act 1992 (ITA), which provided

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New Zealand Journal of Employment Relations 32(3): 40-55

for the establishment of ITOs, differed quite significantly from Labour’s draft legislation.
Under the ITA, an ITO could be formed by two or more enterprises that had similar inputs
and outputs. Further, unions had no statutory right to ITO membership; their participation was
effectively determined by employers (Law and Piercy, 2000a; Murray, 2001; Piercy, 1999). A
number of ITOs did include union representation.
National’s voluntaristic approach led to a very ad hoc development of ITOs. In practice, their
responsibility was to design education and training for an industry and to purchase its delivery
from separate providers. These could include polytechnics but there was considerable
government encouragement to use and build private training establishments (PTEs). ITOs
have also been responsible for monitoring trainee’s progress through their training
programmes (Green, Hipkins, Williams and Murdoch, 2003; Murray, 2001; Piercy, 1999).
Under National, funding was inadequate. Again, the market model assumed that employers
and, increasingly, learners would pay for much of the training. The extension of the student
loan scheme was linked to this “new” human capital perspective that viewed the acquisitionof skills as a private good (Piercy, 1999, 2005).
As noted earlier, by 1999 there was a widespread recognition that the market model had failed(Doyle, 1999). Labour’s (1999) manifesto document 21st Century Skills: Building Skills for
Jobs and Growth outlined its views on the limitations of National’s industry training systemand foreshadowed its subsequent more directive approach, its quite strong inclination towards
legislation and semi-regulatory underpinnings and a more pronounced, “third way” notion ofpartnership (Cochrane, Law and Piercy, 2004b; Law, 2003a, 2003b; Law and Piercy, 2004;
Piercy, 2003; 2005).
The Education (Tertiary Reform) Amendment Act 2002 provides the legislative framework
for the establishment of the Tertiary Education Commission (TEC), the adoption of five-year,
tertiary education strategies, and the creation and implementation of the STEPs. Each STEP,
published at least every three years, outlines the priorities that are needed to work towards theGovernment’s six strategies (Ministry of Education, 2002a). The current Minister for Tertiary
Education, Michael Cullen, called for submissions on the shape of the new TES and next
STEP (Ministry of Education, 2006). Submissions closed in October 2006. These resulting
changes build on those established by the first three STEPs outlined below.
The three STEP documents published to date demonstrate the impact of the TES on ITOs.
The first STEP (2002-2003) outlines the extent to which elements of the market model havebeen retained in order to ensure responsiveness on the part of Tertiary Education
Organisations (TEOs). However, future-oriented statements in the first STEP and in the two
subsequent STEPs signalled the Government’s intention to provide a more certain andsupportive policy climate in order to promote collaboration between key stakeholders(Ministry of Education, 2002b). Briefly, the current charters and profiles process requires
TEOs to focus on the achievement of both the TES and the six national goals while thediscussion around the “distinctive contribution” of TEOs effectively defines their nature andscope (Tertiary Education Commission, 2004a, 2004b).

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For the most part, the priorities in STEP 2003-2004 remained largely unchanged from thefirst, given that the reform process had not yet finished (Ministry of Education, 2003a). But
for the purposes of this paper, a significant shift in emphasis allowed for a greater leadershiprole for industry training and its stakeholders: ITOs, employers and unions (Ministry of
Education, 2003b).
The key priority for the period covered by the third STEP, 2005-2007, is to improve “thequality and relevance of tertiary teaching, learning and research” (Ministry of Education,
2005:1). This longer term STEP “focuses on securing the shifts that the education reforms
were designed to bring about” by reiterating more firmly how funding via the profile process
will be linked to an organisation’s ability to provide relevant courses (Tertiary Education
Commission, 2005:1), This statement makes it clear that the development phase is over andthat organisations involved in the provision of tertiary education (which now includes
industry training and adult and community education) will have to demonstrate the ability tomeet targets or risk losing public funding. It also created impetus for the re-development of
the funding system and a new emphasis on student completions (Cullen, 2006).
Those involved in the provision of education and training related to industry training have theopportunity to benefit significantly in this new environment; the Government has made quite
clear that through increased funding it will give priority to TEOs that support research andinnovation that contribute to social and economic development (Piercy, 2005).

The Role of Research in the New Environment
One of the most obvious limitations of the reforms is the assumption that all TEOs, including,for the purposes of this paper, ITOs, have the immediate capacity to provide the strategic
leadership expected of them. There are at least two aspects of this issue that concern us here.
First, the assumption that each ITO represents an “industry” is unsound on at least three
counts: (a) while there has been some rationalisation of ITOs, there is still a patchwork ofcoverage with some serious overlaps; (b) employer participation remains voluntary; and (c)many employers appear to lack a commitment to industry training. Second, even where ITOs
have good industry coverage and employer participation, it is optimistic to assume that they
have the immediate capacity to exercise the strategic leadership that is now expected of them.
Fortunately, we do have a very good, recent example of what a sector/industry strategy mightlook like. In August 2006, the Government’s Food and Beverage Sector Taskforce released its
forward-looking report: Smart food, cool beverage: New Zealand’s future in the food andbeverage sector. In June, that taskforce’s Skills Working Group released a companion
document: Skills action plan for the food and beverage sector. Together, those reports offer
both a strategic direction and an associated skills development policy. In that sense, the tworeports illustrate what can be achieved when resources are dedicated to fund reasonably
adequately, sensible, focused research that informs a committed team of sector stakeholders.
But in another sense, the two reports highlight just how much work is required if other sectors

43New Zealand Journal of Employment Relations 32(3): 40-55

and industries are to accept the Government’s challenge to adopt integrated strategies with ahigh level of industry ownership.
The Skills action plan for the food and beverage sector report highlights some of the practicalchallenges facing the sector. For example, it emphasises as a high priority the need for betterlabour market information. The report also identifies an encouraging range of research thateither has been undertaken or which is underway. Under the broad heading, “More strategic
investment in training,” it explores a number of areas that require more investigation.
Examples include: the exploration of industry best practices with respect to skill development;
exploration of ways to improve the ability of the skills and training system to adapt rapidly tochange; and the review of the quality and relevance of sector qualifications. Of considerable
interest to us are the suggestions in the report that the sector takes advantage of thepossibilities inherent in the very exciting New Zealand Council of Trade Union’s (CTU)“Workplace Learning Representatives” project. The report also notes the challenges posed bymultiple ITOs: “of the approximately 40 ITOs that have been in operation since 2002, eightare important in facilitating industry-specific training relevant to the food and beverage
sector” (Food and Beverage Task Force (Skills Working Group), 2006:40).

Case Study
Background
It is against the broad background sketched above that we now focus on some of our work
which we present here as an abbreviated case study. That research dovetails quite neatly with
the Food and Beverage Taskforce’s reports in that we have had two commissions from amajor food and beverage ITO, the New Zealand Industry Training Organisation (NZITO) to
undertake labour market research with respect to dairy manufacturing. The first study was ademographic report on the NZITO’s trainee profile (Cochrane, Law and Piercy, 2004a). The
second study, which is discussed here, examined the possible impact of contemporary labour
market trends on industries covered by the NZITO (Cochrane, Law and Piercy, 2006).
Demographic Change
The first task was to provide the ITO with easily understood information about demographic
change. This information should be useful, of course, for almost all ITOs.
It is well known that western societies are under going significant demographic change withdeclining fertility and mortality contributing to the median age in these societies increasing
markedly from around 28 in 1950 to a projected value of about 39 in 2020 (U.S. Census
Bureau, 2000). New Zealand is no exception, though the comparatively high fertility rates ofthe Maori and Pacific Peoples has moderated this effect when compared to some northern
European and Asian societies, with the proportion of the New Zealand population aged over
65 projected to increase from around 12% in 2001 to nearly 20% in 2026 (Statistics New
Zealand, 2005). The changes occasioned by these demographic trends are likely to be both44

New Zealand Journal of Employment Relations 32(3): 40-55

broad and profound with two effects in particular being of significance to industry training
organisations.
First, the decline in the proportion of persons aged under 15 years implies a reduction in thein-flow of new workers to the labour market and raises the possibility of pervasive labour
shortages. This supply side problem can be mitigated in two ways, increasing labour market
participation by peripheral and non-traditional groups1 and increasing productivity. In respect
to the former point should non-traditional and peripheral groups be drawn into labour market
participation the challenge for ITOs will be to develop training programmes that address the
specificities of these groups and recognise the factors that have hitherto, and no doubt
continue to mitigate against their participation in the labour market.
It should be noted that the demographic changes alluded to above will not proceed in an evenfashion. Spatially the age structure, migration, fertility and mortality of different regions canvary greatly resulting in marked heterogeneity in the sub-national experience of ageing. This
will magnify the labour supply problems of those industries, the meat processing industry andto a lesser extent dairy manufacturing being examples, which are generally located inperipheral regions subject to large out migration flows in the prime working age groups andappreciably higher rates of ageing. Equally it is important to note that the process of age
structural change does not proceed in a linear fashion in which an ordered array of cohorts
moves through the age structure with the larger “baby boom” cohort leading. Rather the
population size in an age group can change quite radically over a five-year period as
differently sized population cohorts move through the population structure creating wave
effects. These wave effects can result in marked fluctuations in the size of cohorts at ages withhigh propensities to engage in training hence ITOs can be confronted with substantial
fluctuations in the demand for training driven by purely demographic factors (see Lepina andPool, 2000; Pool and Cheung, 2003; Rindfuss, 1991 for a discussion of this effect).
In terms of the productivity effects of population ageing it has been estimated that the effectsof these demographic changes will be equivalent to, approximately, an annual reduction of
0.24 percentage points in labour productivity growth; that is, from around 1.5% to 1.26% perannum (Guest et al., 2003). Given the magnitude of this decline it would seem plausible thatthe rate of productivity growth could increase sufficiently to compensate for this decline.
However achieving an increase in long run productivity growth will require a considerable up
grading of the skill levels of the labour force. Moreover, given the reduced inflows of newworkers this upgrading of human capital must be made in large part with the (ageing) stock ofexisting workers (Albrecht et. al., 2006).
This brings us to the second effect of population ageing of relevance to ITOs. ITOs will be
training, and frequently retraining, older workers which, while sharing many of thecharacteristics of their younger counter-parts, also have a number of specific characteristics
that will have to be accommodated. For instance, the physiological consequences of ageing
impact on the productivity of individual workers.

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There is evidence that while older workers remain highly productive within a field that theyknow well and where long experience is beneficial, when they perform work where they are
required to reorient themselves to new task requirements and to solve novel problems theirperformance is below that of younger workers. This effect appears to be compounded by thework/task complexity; that is, as task complexity increases mental agility becomes more
important compounding the age-induced productivity effect (Myerson et al., 1990), This canbecome particularly problematic, as the pace of technological change increases theimportance of being able to assimilate new techniques and adapt to new ways of working(Skirbekk, 2003:7-8), However at least for some skills, such as literacy skills, there appears to
be a “use it” or “lose it” dynamic with workers who are employed in environments that
require continual learning being less susceptible to a decline in their ability to acquire newskills (OECD, 1998:138), This implies that any tendency for the ability to acquire new skills
to decline with age can, at least in part, be ameliorated by continued training.
Technological Change
We have also attempted to examine technological change.
Technological change has been a pervasive feature of modern life with every indication thatthe pace of this change is unlikely to decelerate in the near future. In terms of specifictechnologies that are likely to become widely adopted in the immediate future, Karoly andPanis (2004) have identified three key areas; continued development of current integrated
circuit technology (ICT), nanotechnology and biotechnology.
The current technologies used in the manufacture of integrated circuits have not yet reachedtheir limits and are unlikely to do so for 10 to 20 years. Continued development of ICT will
facilitate the development of more sophisticated manufacturing robotics which in turn will
support the adoption of agile manufacturing strategies; that is, strategies built round rapidly
reconfigurable or retoolable machines that can switch between producing a wide variety of
products in response to consumer demand. This implies major changes in the fields ofmanufacturing logistics and inventories (Anderson et al., 2000) which themselves will bepromoted by the introduction of faster and more flexible technology. In addition, theincreasing sophistication of robotic systems will allow the automation of routine tasks ofrelatively high levels of complexity. For instance, in the food processing sector there isincreasing use of robotics with the development of robotic, primal cutting systems in the pork
processing industry (Purnell and Brown, 2003), similar systems for scribing (Li and Hinsch,2003) and for brisket sawing beef carcasses (Templer et al., 1998), Y-cutting mutton
carcasses (Hurd et al., 2005) and the boning of fish fillets (Malone et al., 1994).
Nanotechnology refers to technologies that are able to manipulate matter at an atomic level.
This has obvious applications in the development of esoteric materials; however the full
impact of the technology spans the fields of biology, chemistry, physics, engineering, andcomputer science. Initially, that is over the next 10-15 years, it is likely that nanotechnology
will be used to enhance existing technologies through, say, the production of lighter, tough,harder and more flexible alloys.2 In the longer term, the ability to manipulate basic molecular

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New Zealand Journal of Employment Relations 32(3): 40-55

structures, such as proteins and nucleic acids, will allow the creation of novel chemicals andpharmaceutical products and the combination of organic and synthetic materials to merge
biological functions with other desirable material properties (Karoly and Panis, 2004: 96-97).
The science and technology consultancy, Helmut Kaiser (2004), estimated that the market for“nano-products” in the food and beverage packaging sector alone would increase from 2004
US $860 million in 2004 to over 2004 US $30 billion, around 25 per cent of the market, overthe next decade.
Biotechnology broadly refers to “techniques that use organisms or their cellular, sub cellular
or molecular components to make products or modify plants, animals, and micro-organisms tocarry desired traits” (Paugh and Lafrance, 1997:9). This technology is frequently controversial
as it encompasses areas such as genetic engineering, the mapping of the human genome, theextension of human life and even the creation of artificial life forms. All of these applications
raise tremendous ethical issues (see Sherlock and Morrey, 2002, or Burley and Harris, 2002
for introductions to the ethical implications of biotechnology). However should theseobjections be overcome the increasing understanding of the nature of complex organic
processes will allow substantial gains in productivity and the creation of new applications andproducts. For instance in dairy, this could range from the production of hardier more prolificpasture plants, to the use of enzymes to improve the efficiency of cows in converting pasture
to milk or the suitability of milk for further processing.
These innovations all have the potential to profoundly reshape the labour market. Karoly andPanis (2004:102) have identified a number of likely, changes:
•
•
•
•
•
•

Automation and investment in new technology may lead to higher productivity but
reductions in the size of the work force.
Demand for workers with higher levels of education is increasing as some jobs,
particularly those cannot easily be automated, become more specialised and require
greater analytic and problem-solving skills.
Increasingly remuneration is increasingly being tied to skill with the result that the pay
differential between those with higher levels of skills and those with lower levels of skill
is increasing.
With greater specialisation and work products that can be digitised and distributed overelectronic networks, it becomes possible to redistribute workers across geographicallydispersed work sites rather than requiring workers to be collocated.
The incorporation of new technologies requires the reorganisation of work to account for
the new responsibilities and level of decision making required of workers in various
occupations.
Adapting to technological change often requires retraining workers so that they are able towork with the new technology and within new organisational structures.

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New Zealand Journal of Employment Relations 32(3): 40-55

Discussion: Relating Impacts to High Performance Work
That list of likely impacts has some direct crossover to the work our expanded research teamis currently undertaking with respect to high performance workplaces systems (hpws) (seeCochrane et al., 2006; Cochrane, Dharmalingam, Harris, Law, and Piercy, 2005; Cochrane,
Law and Piercy, 2004c; Cochrane et al., 2005a, 2005b; Law and Cochrane, 2004), Fonterra,
along with other forward-thinking manufacturing companies worldwide, recognises theadvantages of hpws. However there is considerable evidence in the literature that we havereviewed to suggest that successful worker participation in such systems is more likely when
a genuinely co-operative approach is employed to both introduce and sustain those systems.
The notion of “worker voice” appears to be quite significant as there is also evidence tosuggest that such systems work better in unionised environments and with active union
involvement.
Ashton and Sung (2002) identify four dimensions of haws: “employee autonomy andinvolvement in decision-making support for employee performance, rewards for performance,
and the sharing of information and knowledge” (p.12). From our preliminary work we havedeveloped a better appreciation of the collective nature of workers’ learning, knowledge andattributes. Many writers hold that considerations of professional identity, work identity, andgroup identity – including that of union member – are all of critical importance whenattempting to understand the nature and acquisition of workplace skills. Our review of theresearch literature led us to conclude that the majority verdict with respect to haws, although aconditional one, is that haws provide net gains to both employers and employees. This
majority verdict also seems to hold that for haws to succeed, they require an environment inwhich all parties to the employment relationship are committed to the success of the project
and work in good faith for its achievement.
Further, the relevant learning literature challenges an instrumentalist approach to theintroduction and implementation of haws and the education and training associated with such
systems. It also underscores the collective dimension of workplace culture and the learningthat takes place at work. In the context of the industries covered by the NZITO and within theexisting employment relations setting, the majority verdict on haws noted above, especiallywhen read in conjunction with the selected insights provided from the workplace learning
literature, implies that for haws to produce “win-win” outcomes, the employer, the union andthe workforce as a whole must act together to promote the necessary trust and cooperation.

Conclusion
The point of this paper has been to highlight the research possibilities that have opened up asa result of the tertiary education reforms. In particular, we have focused on the challenges
faced by ITOs as they assume responsibility for providing strategic leadership with respect toskills development and training. In this paper we take the view that possibilities can only beappreciated and taken advantage of when the context is clearly understood. To that end, we
have not only sketched the context but also made a number of observations about the political

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economy of education and training. We have argued that recent work in the Food andBeverage Sector highlights not only what can be achieved when resources are dedicated tosystematic inquiry but also the further research that needs to be funded if the full value of thatwork is to be realised. Our brief discussion of recently completed research commissioned by
the NZITO illustrates the contribution that can be made, at a more micro level, by quite small
research units, such as the University of Waikato’s Centre for Labour and Trade Union
Studies. Finally, we also indicate how such work can be linked to other relevant, current
research.
Finally, although we have not discussed this possibility above, we hold that there is much to
be gained from closer trans-Tasman co-operation around research topics of common interest.
For example, we have developed links with colleagues in Australia who are investigating the
adoption by Australian workplaces of the same hpws that we are studying in Fonterra.
Another productive line of inquiry is the possible application to New Zealand of the notion of“skills ecosystems” and the recommendations made by John Buchanan (2006) in a report for
the New South Wales Government. An emerging researcher associated with our Centre,
Victoria West (2006), has been exploring those recommendations in relation to the Food andBeverage Sector Taskforce’s skills report.

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Notes

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New Zealand Journal of Employment Relations 32(3): 40-55

1

See Bryant et. al. (2004) for a discussion of this in respect of prime age women and the moregeneral discussion in the papers arising from the treasury participation and productivity
workshops (The treasury, 2004, 2005)
2

An early example of such a usage was the announcement by an Israeli firm, ApNano, thatnano-engineered armour five times stronger than steel and twice as strong as any impactresistant material used in protective gear would enter volume production as early as 2009
(World Tribune, 2006)

55

New Zealand Journal of Employment Relations 32(3): 56-68

Public Sector Pay Premium and Compensating Differentials in
the New Zealand Labour Market
JOHN GIBSON*
Key Words: compensating differentials, propensity score matching, public sector

Abstract
In this article, propensity score matching (PSM) methods are applied to data from the 2005
International Social Survey Program Work Orientations (ISSP-WO) survey to examine thepublic sector pay premium in New Zealand. Taking account of a wide range of worker
characteristics and attitudes, job attributes, and the effects that jobs have on workers andtheir family life, there appears to be a pay premium from working in the public sector of
17-21%.

Introduction
The rising public sector wage bill is a key feature of the New Zealand labour market. This
reflects not only the growth of the public sector,1 but also improvements in remuneration
for public sector workers. For example, according to the Quarterly Employment Survey(QES), for the decade prior to the current Labour Government’s election in 1999 average
private sector wages were at least 80% of those in the public sector. Since then there has
been a steady decline in pay parity, with average private sector wages being below 75% of
public sector wages since 2005.2 There have also been improvements in non-wage benefits
for the public sector, including the State Sector Retirement Savings Scheme which since2005 has provided 3% matching employer contributions to employee retirement savings;
well before and well above the level of employer contributions for other workers under
KiwiSaver.
Some analysts have suggested that this rising remuneration for public sector workers
reflects an asymmetry in employment relations between the public and private sectors.
Since governments have statutory power to raise taxes, with large tax surpluses in the
recent New Zealand case, they may not face the same financial pressures that inhibit wage rises
in many private firms. This asymmetry also reflects the difficulty for taxpayers, who are theultimate employer of public servants, to ensure that they are well represented in the wage

negotiation process (Grimmond, 2007). Moreover, bureaucrats may have both a supply and*John Gibson is a Professor at the Department of Economics, Waikato Management School, University ofWaikato. Acknowledgements: I am grateful to David Grimmond for assistance and to Chris Hector and Trinh
Le for helpful comments. The results in this study and any errors contained therein are those of the author.

56

New Zealand Journal of Employment Relations 32(3): 56-68

demand role since they can influence the size of public sector employment, and hence faceless of a trade-off between wage increases and employment than do other workers(Dahlberg and Mörk, 2006). Finally, since many public sector services are essential, an
inelastic product demand contributes to inelastic labour demand, providing more scope forunion activity to raise public sector pay. Therefore, it is unsurprising that unions havehigher membership rates in the public sector than the private sector (Gregory and Borland,1999).
However, improvements in the relative pay of public sector workers may also reflectchanges in skill demands and job attributes between public and private sectors. These
differences in job attributes have been found to account for much of the pay difference
between public and private sectors in the U.K. (Bender and Elliott, 2002). However, otherstudies find that fringe benefits, such as holiday allowances, job security and pension
schemes, are more generous for public sector workers (e.g., Poterba and Rueben, 1998),
and that overall job satisfaction is higher (Demoussis and Giannakopoulos, 2007) socompensating differentials would imply lower public sector wages to offset these morefavourable job conditions.
Since workers may choose to work in the sector that best suits their mix of observable andunobservable characteristics, any evaluation of the net advantages of public sector
employment also needs to take such selection into account. For example, Bellante and Link
(1981) find that public sector employees are more risk averse than their private sector
counterparts. Therefore statistical methods used to estimate the public sector pay premium
should compare public sector workers only with similar workers from other sectors. Such a
comparison should also control for differences in productivity-related characteristics and in
the positive and negative features of jobs that give rise to compensating pay differentials.
In this research note, propensity score matching (PSM) methods are applied to data fromthe 2005 International Social Survey Program Work Orientations (ISSP-WO) survey to
examine the public sector pay premium in New Zealand. These PSM methods involve
matching public sector workers to similar workers in other sectors to estimate the public
sector pay premium once worker and job characteristics are controlled for. The ISSP-WO
data are uniquely suited to this purpose since in addition to recording sector of
employment and standard characteristics like age, education, gender and ethnicity they also
record job attributes such as stress, insecurity, and interference with family life. The othermain surveys for studying workers in New Zealand (the Income Survey, formerly known
as the Income Supplement to the Household Labour Force Survey, and the three-yearlyHousehold Economic Survey) do not record sector of employment and have no details on
job characteristics.

57

New Zealand Journal of Employment Relations 32(3): 56-68

Data
ISSP Work Orientations Survey
The ISSP surveys are carried out each year in approximately 30 countries, with a common
set of questions asked of a probability-based, nationwide sample of adults. The topics ofthe survey change each year, with work orientations previously studied in 1989 (when
New Zealand did not participate) and in 1997 (when the coding for sector of employment
appeared to be different to other years).3 In each participating country, samples of between
1000 and 2000 adults are collected, with 1309 respondents in the New Zealand survey.
While the ISSP data are often used for labour market studies (for example, see Sousa-Pozaand Henneberger, 2002) they have not previously been used in New Zealand. Moreover,
the results from the 2005 ISSP-WO have only recently become available to researchers.
Descriptive Comparisons of Public Sector Workers and Job Attributes
The ISSP-WO data include detailed information on the characteristics of respondents andtheir general attitudes to work. For those working for pay, their job attributes and the effectof their main job on the respondent and their family life are also recorded. The attitudinal
and job attribute variables are recorded using five-point Likert scales. A description ofthese four sets of characteristics for public sector workers and other workers is reported inTable 1. The sample is restricted to those respondents that were working for pay at the timeof the survey and had non-missing values for all of the variables in Table 1 (n=786).
There are a number of differences between public sector workers and other workers in bothobservable characteristics and attitudes, as outlined in table 1. The public sector workers
are more highly educated (by 1.3 years on average), are more likely to be female (70%versus 46%) and to reside in the Wellington region. They are also more likely to believethat an important feature of a job is that it is useful to society. However, contrary toprevious overseas findings (for example, Bellante and Link, 1981), there is no significant
difference across sectors in workers’ attitudes to job security.
The attributes of jobs and their effects on workers and their family life also differ
significantly between sectors. Public sector workers are more likely to find that their jobs
are interesting, helpful to others and useful to society (in each case as evaluated by theworker themselves) and are less likely to do hard physical work. Offsetting these positive
attributes of jobs, public sector workers report that they are less able to work
independently, are more likely to find that their jobs are stressful and that their work
interferes with family life.4
The survey also asks respondents to report their own pre-tax yearly income from all
sources (using ten income brackets), with an additional question on their householdincome. While there is no question on earnings, for the respondents who are currently
working most of their annual personal income should come from labour earnings. The
logarithm of annual income is therefore used as the proxy measure of pay in this study.
58

New Zealand Journal of Employment Relations 32(3): 56-68

This same proxy is used in New Zealand studies based on Census data (e.g. Maani, 1996)
and is also used in international comparative studies using ISSP data (e.g., Blanchflower,
1996). According to this proxy, the raw premium for working in the public sector isapproximately 11%.5
Table 1: Differences between Public Sector Workers & Other Workers
Public Sector Workers

Other
Workers

p-valuefor equalmeansaMeanStandard
Deviation

MeanStandard
Deviation

43.43015.289
0.296
0.800
0.644
0.200
0.178

12.091
2.518
0.458
0.401
0.480
0.401
0.384

42.49613.969
0.536
0.808
0.667
0.287
0.086

13.225
2.804
0.499
0.394
0.472
0.453
0.281

0.421
0.000
0.000
0.833
0.623
0.025
0.008

Job attributes (1=strongly agree, 5=strongly disagree)
My job is secure
2.193
1.096
My job is interesting
1.867
0.853
I can work independently
2.148
0.943
In my job I can help others
1.659
0.693
My job is useful to society
1.630
0.751
Job helps improve my skills
1.956
0.929

2.316
2.077
1.880
2.071
2.298
2.077

1.046
0.850
0.816
0.855
0.954
0.905

0.160
0.005
0.003
0.000
0.000
0.110

Effect of work on the respondent (1=always, 5=never)Come home exhausted
2.667
0.898
Do hard physical work
3.859
1.094
Find work stressful
2.704
0.865
Face dangerous conditions
3.867
1.132
Interferes with family life
3.237
0.940

2.799
3.498
2.998
3.952
3.421

0.872
1.276
0.864
1.179
0.976

0.125
0.002
0.000
0.309
0.037

Personal characteristics
Age
Years of education
Male
European/Pakeha
Married or de facto
Reside in Auckland region
Reside in Wellington region

Job is just a way to earn money
Job security is important to me
Job helping others is important
Job that is useful to society isimportant

3.615
1.652
1.896
1.785

1.113
0.746
0.756
0.651

3.496
1.688
1.994
2.098

1.151
0.679
0.708
0.776

0.258
0.443
0.127
0.000

Pre-tax annual income (log)10.5800.634

10.476

0.769

0.099

Sample size (% of total)

135(17.2)

651(82.8)
59

New Zealand Journal of Employment Relations 32(3): 56-68

Propensity Score Matching Estimates of the Public Sector Pay Premium
Public sector workers differ from other workers in many observable and unobservableways, so simple comparisons of mean earnings are unlikely to provide an unbiased
estimate of the premium that would accrue to a given worker moving from the private to
the public sector. While ordinary least squares (OLS) regression is a method that cancontrol for differences in average characteristics, many studies show that this method isless successful at dealing with the sample selection problem that occurs when subjects in
non-experimental studies cannot be randomly assigned to “treatment” and “control”
groups. Such problems are relevant to attempts to measure the public sector pay premium
since workers may choose their employment sector according to where their various talents
will be most rewarded.
Propensity-score matching (PSM) is an increasingly popular non-experimental evaluation
method, with proponents claiming that it can replicate experimental benchmarks whenappropriately used (Dehejia and Wahba, 2002). Using PSM to estimate the public sector
pay premium requires first estimating a probit equation for the probability of a worker
being in the public sector. The resulting propensity score then allows each public sector
worker to be matched only to those private sector workers whose characteristics give themsimilar predicted probabilities of being in the public sector. A comparison of the two
matched samples then gives an estimate of the “average treatment effect” which in thiscase is the premium that would accrue to a given worker moving from the private to the
public sector. In other words, PSM offers a way of structuring non-experimental data tolook like experimental data, where for every subject in the “treated” group, the researcher
finds comparable subjects in the “control” group. Several matching approaches areavailable, including matching each treated observation, i to the nearest neighbour (orneighbours) from the control group, and kernel matching where a weighted average of the jcontrol group neighbours is taken with weights proportional to the closeness of propensity
scores for i and j.
To implement the PSM estimates of the public sector pay premium, allowing fordifferences in productivity-related characteristics and the positive and negative features ofjobs that give rise to compensating pay differentials, a series of probit equations were
estimated. In each case the dependent variable was an indicator variable for whether the
ISSP-WO respondent was working in the public sector. The first probit equation explained
this choice of employment sector using only the personal characteristics of the worker
listed in Table 1. The resulting propensity score and matching estimates of the public
sector pay premium therefore are only able to control for worker characteristics. The
second probit equation includes job attributes along with personal characteristics and sogives a way of seeing how the estimated pay premium changes once the most obvious
sources of compensating differentials are accounted for. The third probit equation includes
the effects of the job on the worker and their family, which may give another source ofcompensating differentials. The fourth probit equation includes worker attitudes along with60

New Zealand Journal of Employment Relations 32(3): 56-68

personal characteristics, while the fifth includes all four sets of variables (i.e., all of thosedescribed in Table 1).

Results
The propensity scores for public sector workers from the first probit equation, which
controls for personal characteristics, range from 0.027 to 0.567. The propensity scores forother workers range from 0.002 to 0.552, and have a much lower mean. Figure 1 illustrates
these in the form of kernel densities. It is apparent that there while some private sector
workers have characteristics like those of public sector workers many others do not, giventhat the highest frequency of propensity scores for private sector workers occurs around0.1, while the propensity scores for the majority of public sector workers are above 0.25.
Therefore in all of the results that follow, estimation of the average treatment effect isrestricted to the area of common support, where the two distributions overlap. Thus,
private sector workers who are quite unlike public sector workers are not used in thecomparisons.
Figure 1: Propensity Scores for Public Sector and Other Workers
5

4

3

2

1

0
0

.2

.4

.6

Predicted Probability
Public Sector Workers

Other Workers

61New Zealand Journal of Employment Relations 32(3): 56-68

The estimates of the average treatment effect, which is the gain in log income accruing to agiven worker moving from the private to the public sector, are reported in Table 2.6 These
come from a kernel matching procedure where the log income of each public sector worker
is compared with a weighted average of the log incomes of those private sector workers
whose propensity scores are similar. To interpret the results it is useful to recall that theraw premium for working in the public sector is approximately 11% (based on a differencein log income of 0.104).
When age, education, gender, ethnicity, marital status and location are accounted for, thepremium for working in the public sector is estimated as 13%. This is derived from atreatment effect for log income of 0.122. Since this is slightly larger than the raw premium
it implies that the pay gap between the public and private sector is not due to differences in
the average level of productivity related characteristics for the workers in each sector.
Table 2: Propensity Score Matching Estimates of the Average Treatment Effect of
Public Sector Employment on (log) Annual Income
BootstrappedStandard
Error

95% ConfidenceInterval

0.122
Personal characteristics only
(age, education, gender, ethnicity, marital
status, location)(0.058)0.002 – 0.233

Personal characteristics
0.188+ job attributes(job is: secure; interesting; improves
skills; helps others; useful to society;allows independent work)(0.084)0.003 – 0.338

Personal characteristics
0.122+ effects of the job on the worker(come home exhausted; hard physicalwork; stressful; dangerous; interfereswith family life)(0.064)-0.003 – 0.226

Personal characteristics
0.128+ worker attitudes(important for job to: be secure; to help
others; be useful to society; job just a
way to earn money)(0.074)-0.001 – 0.283

Personal characteristics+ job attributes+ effects of the job on the worker+ worker attitudes(0.072)0.005 – 0.295

Control Variables

Average
Treatment
Effect0.158

Source: Author’s calculations from 2005 ISSP data for New Zealand.

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New Zealand Journal of Employment Relations 32(3): 56-68

The estimated public sector pay premium is considerably larger, at 21%, when job
attributes are also controlled for. Thus the public sector premium does not appear to be due
to compensating differentials. Public sector workers benefit from having jobs that are moreinteresting, skill-augmenting, useful to society and helpful to others (as evaluated by theworker), so compensating differentials would require them to be paid less not more. Since
they are paid more, accounting for job attributes makes the unexplained premium forworking in the public sector even larger.
Neither the effect of jobs on the worker nor worker attitudes make much difference to theestimated treatment effect. Specifically, the estimated public sector pay premium is almost
unchanged, at 13% and 13.7%, when these two sets of variables are used to calculate thepropensity scores in addition to personal characteristics. When all four sets of variables areincluded, the average treatment effect is 0.158, which implies that the pay premium forworking in the public sector is 17%. Since this estimate is based on comparisons only withprivate sector workers who have similar characteristics and attitudes, and similar job
attributes and effects, it should be a valid estimate of what a given worker would gain
when moving from the private to the public sector.

Conclusions
The study outlined in this research note has used data from the 2005 International Social
Survey Program Work Orientations (ISSP-WO) survey to examine the public sector pay
premium in New Zealand. Recent commentary has highlighted the improvement in relative
remuneration in the public sector compared with the private sector. However, such changes
might just reflect changing skill composition and job attributes for the public and private
sector so they are not a reliable estimate of the pay premium that would accrue to a given
worker moving to the public sector.
Therefore it is necessary to use micro data on worker characteristics and job attributes andan estimation method that can identify the public sector pay premium even when there isself-selection of workers into public or private sectors. The ISSP-WO data and propensity
score matching techniques used here should provide reliable estimates of the public sector
pay premium. Taking account of a wide range of worker characteristics and attitudes, job
attributes, and the effects that jobs have on workers and their family life, there appears to
be a pay premium of 17-21%, which is not due to compensating differentials.

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New Zealand Journal of Employment Relations 32(3): 56-68

References
Bellante, D. and Link, A. (1981). Are Public Sector Workers More Risk Averse thanPrivate Sector Workers? Industrial Labor Relations Review. 34(3): 408-412
Bender, K. and Elliott, R. (2002). The role of job attributes in understanding the publicprivate
wage differential. Industrial Relations 41(3): 407-421
Blanchflower, D. (1996). The Role and Influence of Trade Unions in the OECD.
Discussion Paper no.310. Centre for Economic Performance. London School of
Economics.
Dahlberg, M. and Mörk, E. (2006). Public Employment and the Double Remployment andthe Double Role of Bureaucrats. Public Choice. 125(3): 387-404.
Dehejia, R. and Wahba, S. (2002). Propensity Score Matching Methods for Nonexperimental Casual Studies. Review of Economics and Statistics. 84(1): 151-161
Demoussis, M. and Giannakopoulous, N. (2007). Exploring Job Satisfaction in Private andPublic Employment: Empirical Evidence from Greece. Labour. 21(2): 333-359
Gregory, R. and Borland, J. (1999). Recent Development in Public Sector Labor Markets.
In Handbook of Labor Economics. (eds). O, Ashenfelter and R, Layard. 3573-3630. North
Holland: Amsterdam
Grimmond, D. (2007, October 4). Generous to a Fault. Dominion Post.
Maani, S. (1996). Private and Social Rate of Return to Secondary and Higher Education in
New Zealand: Evidence from the 1991 Census. Australian Economics Review. 113(1): 82100
Poterba, J. and Rueben, K. (1998). Fiscal Institutions and Public Sector Labor Markets.
Working Paper 6659. National Bureau of Economic Research. Cambridge, Mass.
Sousa-Poza, A. and Henneberger, F. (2002). An Empirical Analysis of Working-house
Constraints in twenty-one Countries. Review of Social Economy. 60(2): 209-242

64

New Zealand Journal of Employment Relations 32(3): 56-68

Appendix A: Probit Estimation Results Used to Construct Propensity Scores

Years of education
Age
Age squared
Male
MarriedPakehaAucklandWellington
My job is secure:
Disagree
Neither agree nor disagree
Agree
Strongly agree
My job is interesting:
Disagree
Neither agree nor disagree
Agree
Strongly agree
I can work independently:
Disagree
Neither agree nor disagree
Agree
In my job I can help others:
Disagree

Personal
characteristics (PC)

PC
PC
PC
+
+
Job + Effect of WorkerAllattributes
Work
Attitudes
variables

0.120(5.37)**
0.052(1.74)+-0.000(1.29)-0.586(5.08)**-0.164(1.27)-0.143(0.98)-0.358(2.54)*
0.261(1.52)

0.119(4.80)**
0.048(1.44)-0.000(1.07)-0.561(4.28)**-0.023(0.16)-0.075(0.46)-0.427(2.68)**
0.355(1.92)+

0.110(4.46)**
0.049(1.48)-0.000(1.06)-0.668(5.20)**-0.141(1.03)-0.113(0.72)-0.383(2.57)*
0.280(1.55)

0.135(5.48)**
0.061(1.96)+-0.001(1.59)-0.559(4.55)**-0.129(0.97)-0.100(0.65)-0.341(2.37)*
0.298(1.69)+

0.129(4.60)**
0.053(1.61)-0.000(1.19)-0.601(4.26)**
0.014(0.09)
0.041(0.23)-0.530(3.05)**
0.393(1.94)+-0.312(1.96)+-0.195(0.94)-0.352(1.51)-0.063(0.18)-0.357(2.21)*-0.197(0.86)-0.491(1.96)*-0.340(0.91)-0.399(2.16)*-0.601(2.25)*-0.395(1.06)
0.175(0.29)-0.480(2.50)*-0.737(2.68)**-0.566(1.36)
0.925(1.69)+

0.571(3.13)**
1.170(4.48)**
1.432(5.25)**

0.597(2.94)**
1.128(3.76)**
1.477(5.06)**-0.005(0.03)-0.005(0.02)
65

New Zealand Journal of Employment Relations 32(3): 56-68

Neither agree nor disagree
Agree
My job is useful to society:
Disagree
Neither agree nor disagree
Agree
My job helps improve my skills:
Disagree
Neither agree nor disagree
Agree
Strongly agree
Come home exhausted:
Often
Sometimes
Hardly ever
Never
Do hard physical work:
Often
Sometimes
Hardly ever
Never
Find work stressful:
Often
Sometimes
Hardly ever
Never
Face dangerous conditions:Often-0.171(0.57)-0.276(0.61)-0.298(0.92)-0.353(0.86)-0.756(3.80)**-1.282(5.12)**-1.676(4.49)**-0.654(2.78)**-1.057(3.36)**-1.356(3.43)**

0.214(1.19)
0.305(1.26)
0.899(2.96)**-0.328(0.47)

0.192(1.11)
0.259(1.00)
1.106(3.20)**-0.356(0.47)-0.084(0.32)-0.302(1.14)-0.137(0.44)-0.368(0.73)-0.171(0.61)-0.319(1.07)-0.076(0.22)-0.436(0.81)

0.351(0.92)
0.712(1.92)+
1.094(2.85)**
0.950(2.42)*

0.204(0.54)
0.754(2.02)*
1.124(3.06)**
1.110(2.90)**-0.519(1.82)+-0.517(1.84)+-0.498(1.59)-1.206(2.22)*-0.600(1.89)+-0.570(1.82)+-0.523(1.47)-1.655(3.09)**-0.031-0.17966

New Zealand Journal of Employment Relations 32(3): 56-68

Sometimes
Hardly everNever

Job interferes with family life:
Often
Sometimes
Hardly everNever

Job is just a way to earn money:
Agree
Neither agree nor disagree
DisagreeStrongly disagree
Job security is important to me:
AgreeNeither agree nor disagree
DisagreeStrongly disagree
Job helping others is important:
Agree
Neither agree nor disagree
Job useful to society is important
Agree
Neither agree nor disagree(0.08)-0.161(0.47)-0.303(0.87)-0.728(2.07)*(0.41)-0.387(0.95)-0.447(1.07)-0.805(1.94)+

0.272(0.68)
0.322(0.83)
0.372(0.92)
0.147(0.34)

0.005(0.01)
0.147(0.36)
0.249(0.60)-0.162(0.35)
0.142(0.47)
0.564(1.84)+
0.166(0.59)
0.168(0.56)

0.020(0.06)
0.388(1.15)
0.027(0.09)-0.135(0.41)-0.108(0.87)-0.323(1.25)-0.410(0.99)
0.744(0.83)-0.148(1.05)-0.591(1.66)+-0.299(0.66)-0.093(0.11)-0.010(0.06)
0.352(1.58)

0.081(0.43)
0.394(1.57)-0.211(1.25)-0.714(3.24)**-0.133(0.72)-0.453(1.79)+

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New Zealand Journal of Employment Relations 32(3): 56-68

Constant
Zero-slopes test (chi squared)
Pseudo R-squared-3.525(5.23)**
61.7**
0.101-3.089(3.93)**
177.5**
0.248-3.308(3.57)**
115.4**
0.160-3.881(5.09)**
100.0**
0.140-2.985(2.95)**
194.2**
0.316

Notes:
Robust z statistics in parentheses; + significant at 10%; * significant at 5%; ** significant at 1%. N=786.
The dependent variable is an indicator for whether the worker is employed in the public sector. With the exceptionof age and education, all other explanatory variables are dummy variables. Excluded category for each variablemeasured with a Likert scale is the response coded “1”, which is typically “strongly agree” or “always” dependingon the context. Dummy variables are dropped from the estimation if they perfectly predict the dependent variable.

Notes
1

According to Statistics New Zealand’s Labour Market Statistics 2006 there were 45,000
more full-time public sector employees in March 2006 than in March 2000. This growth of
24.7 percent compares with 22.7 percent in the private sector. Details are at:
http://www.stats.govt.nz/analytical-reports/labour-market-statistics-06.htm

2

These averages are for ordinary time hourly earnings of both sexes combined (INFOS
codes: EESQ.SASG9A (public) and EESQ.SASH9A (private)) and are reported in
Grimmond (2007).

3

Specifically, in the New Zealand component of the 1997 survey, 58% of those currently
employed are given a code of “Not Available” for the question on sector of employment.

4This interference with family life does not appear to stem from any difference in work
hours, with the mean work week reported as 37 hours by respondents in both sectors.

5This is calculated from the difference in the logarithm of pre-tax annual incomes (10.58010.476=0.104). The percentage difference is then: 100 [exp (0.104) – 1] = 10.96%.

6

The results of the underlying probit equations used to generate the propensity scores are
in Appendix A.

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New Zealand Journal of Employment Relations 32(3): 69-82

Revisiting the Job Guarantee: Ten Propositions towards a Modelfor New Zealand
THOMAS LANGE*
Abstract
This policy commentary complements the research report on Transition Assistance for Young
People, released by the New Zealand Mayors’ Taskforce for Jobs. It provides a snapshot at
the international evidence concerned with job guarantee and welfare-to-work initiatives.
Against this background, ten policy propositions are presented to inform the design of a
Guarantee-style programme that meets the needs of New Zealand’s dispersed and spatiallyunbalanced labour market.

Introduction
In June 2006, the New Zealand Mayors’ Taskforce for Jobs released a research report on
Transition Assistance for Young People (Higgins et al. 2006). In the Taskforce’s 2007
Annual Report, Mayors and local government officials expressed their commitment to “using
the information [of the report] to inform future policy and activities particularly around youthtransitions and keeping young people engaged in our communities” (Mayors’ Taskforce for
Jobs 2007:9).
This commentary revisits one of the report’s primary objectives: to examine the possibility of
introducing a guarantee for all people under the age of 25 to be in paid work, training,education or in useful activities in our communities.
A snapshot at the international evidence of related job guarantee initiatives is being provided
with the intention to inform the ongoing deliberations of relevant policy makers. Whilst
Mitchell, Cowling and Watts (2003) already draw on experiences in Norway (Hummeluhr
1997) and the Netherlands (van Berkel 1999; Brodsky 2000), this paper, without attempting
to be exhaustive, complements their arguments by reference to selected experiences in North
America and the United Kingdom.
On this basis, ten propositions are offered to provide a platform for further debate,challenging the conventional wisdom and promoting the design of a Guarantee-styleprogramme that is best tailored to New Zealand’s labour market conditions.

*Thomas Lange is Professor of Economics at AUT School of Business, Auckland University of Technology,
Auckland, New Zealand.
An earlier version of this paper was presented to the Mayors’ Taskforce for Jobs and served as a supplement of
the Transition Assistance for Young People research report. Financial support from the Employment Catalyst
Fund of the Tindall Foundation is gratefully acknowledged.

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New Zealand Journal of Employment Relations 32(3): 69-82

Job Guarantee: Old Wine in New Bottles?
In much of the OECD, concern about the changing composition as well as the numbers ofyoung and long term benefit recipients has been growing. Whereas most claimants somethirty years ago were considered unavailable for work due to disability and illness, forexample, the majority of working age claimants is now available for work but not employed.
The weight attached to different explanations has changed over time (including labour
taxation, employment protection, trade union activity, and systems of unemployment support;
see e.g. Kluve and Schmidt 2002) and in recent years politicians and policy makers haveattributed growing importance to the problems faced by particular claimant groups – mostprominently the long-term unemployed and the young. As both, the scale and duration ofunemployment spells for these target groups reached unprecedented and persistently highlevels in a number of countries, the focus on welfare-to-work and job guarantee initiatives
sharpened.
At the outset, it is unremarkable to state that such programmes are not new. A wide range of
local, regional and national policy instruments has been employed to reduce the barriers into
paid employment, and various forms of training and work creation schemes have beendeveloped, often through a combination of voluntary incentives and mandatory requirements(for example, the UK’s New Deal programme; Ontario Works; British Columbia Benefits;
British Columbia Youth Work, the Alloa Initiative in Scotland as well as a range of otherlocal pilot programmes). At the same time, more demand-responsive initiatives, which
include employers within local partnerships providing job or interview guarantees for
programme participants, were developed as a means of delivering training and employmentthat is relevant to the needs of the labour market and provides security and long-term benefits
for job seekers (e.g. Hoogvelt and France 2000; Adams et al. 2001). As a consequence andthroughout OECD member states, a consensus emerged asserting that economic recovery will
not on its own resolve the societal ills of youth and long-term unemployment and respective
welfare dependency.
Against this background, a policy proposal to target youth and long-term unemployment has
gained in prominence: the Job Guarantee (Mitchell 1998; Mitchell and Watts 2002; Mitchell
et al. 2003; Quirk et al. 2006). Developed and advocated by economic policy research centresin Australia (the Centre of Full Employment and Equity (CofFEE) at the University of
Newcastle), North America (Centre for Full Employment and Price Stability – CfEPS,
Kansas City) and Europe (CofFEE Europe, Maastricht) the proposal encompasses two policy
initiatives:
1. A Job Guarantee for all long-term unemployed; and2. A Youth Guarantee, comprising opportunities for education, technical training, and/or aplace in the Job Guarantee program for all 15-19 year olds who are unemployed.
Specifically, under this proposal the Federal Government maintains a “buffer stock” of jobs
available to policy target groups. What is more, the Guarantee“…would be funded by the Commonwealth but organised on the basis of local
partnerships between a range of government and non-government organisations.
Local governments would act as employers, and […] workers would be paid theFederal minimum award. Any unemployed teenager (15-19 year old) who was notparticipating in education or training would receive a full-time or part-time job.
Equally, all long term unemployed persons would be entitled to immediate70

New Zealand Journal of Employment Relations 32(3): 69-82
employment under this scheme […] positions could be taken on a part-time basis incombination with structured training.” (Mitchell, Cowling and Watts 2003:7)
Such an initiative would thus be funded centrally and made operational at the local level. In
Australia, and specifically in the Hunter region, this proposal was unanimously endorsed by
local businesses, the Hunter Region Organisation of Councils and the Trades Hall Council
and adopted as official policy by Newcastle City Council. With this growing momentum, theJob Guarantee’s underlying principles have also attracted the attention of policy makers andpolicy interest groups elsewhere, including the Mayors Taskforce for Jobs in New Zealand.
This interest should come as no surprise. Based on quarterly New Zealand Household Labour
Force Survey data, youth unemployment in New Zealand is more than quadruple the generalunemployment rate. For example, during the four quarters between September 2006 and June
2007, youth unemployment rates for the 15-19 year olds averaged 14%, compared with ageneral unemployment rate in New Zealand of 3.7% during the respective period. In a similarvein, long-term unemployment remains a stubbornly persistent phenomenon. Of the total
number of people unemployed, 16.7 percent were in the long-term unemployment category in
the June 2007 quarter, up from 15.2 percent recorded in the June 2006 quarter.
However, two important questions remain largely unexplored. Can the Job Guarantee
proposal be emulated for application in New Zealand? What lessons have been learned frominternational job guarantee experiences elsewhere?

The Public Sector as Employer of Last Resort?
One of the crucial, underlying assumptions behind the Job Guarantee model is that much
unemployment occurs due to demand deficiencies and that the jobs on offer would be drawn
from a pool of public sector jobs that support community development and advanceenvironmental sustainability. As such, publicly created demand would meet unfulfilled
supply, and workers would participate in community-based, socially beneficial activities thathave intergenerational payoffs, including urban renewal projects, community and personalcare, and environmental schemes. It is claimed that much of this work is both worthwhile andlabour intensive, and would require little in the way of capital equipment and training.
Moreover, it would be of benefit to communities experiencing chronic unemployment. It is in
this sense that the proposal is being presented as a new paradigm in employment policy.
Whilst the envisaged scale and focus of the proposed initiative on excluded communities
probably deserves the new paradigm description, some of its building blocks draw heavily on
previous experiences, such as Britain’s Community Programme for the unemployed, which
was introduced during the early 1980s (Finn, 1988). Not unlike the Guarantee proposal,
participation in the Community Programme was open to both, the young and the long-term
unemployed. Until October 1987, participation was aimed at unemployed people aged over
25 who had been without work for more than twelve months and at 18 to 24 year olds who
had been unemployed for six months. Equally, the work carried out had to be additional toconventional jobs and services and was primarily focused on projects of community benefit.
The elements of a guaranteed job and payment at a fixed rate (the Federal minimum award)
represent the most significant differences between both initiatives. In Britain, by contrast, not71New Zealand Journal of Employment Relations 32(3): 69-82
everyone who wanted to participate was able to do so1, and Community Programme workers
were paid the going wage rate for the job (at least, until the 1986 Social Security Act when
the controversial “Benefits Plus” package was introduced).
Notwithstanding the similarities and differences between previous programmes, however,what remains truly unclear is the extent to which the proposed model, if thought to bebeneficial, can be emulated in other countries, including New Zealand.
At a time when unemployment in New Zealand is amongst lowest in the OECD, sufficientnumbers of employment opportunities of the described nature may be available to meet thelikely demand for them. Even then, however, the distribution of available jobs may be
uneven. Some localities may find it relatively easy to identify and offer community
development jobs, but others may not. And even if local asymmetries could be ignored, it
remains far from certain as to whether there is sufficient public sector capacity toaccommodate respective job requirements if the count of the jobless increases. In such aworld, it is important to examine if the model can also be applied, at least in part, to job
guarantees in the private as well as the public sector.
Whilst international approaches are without clear and consistent guidelines over time andwhilst the question of compatibility with other countries’ labour markets has thus far
remained largely untested, a number of interesting findings have nevertheless come to light.
A summary of selected findings and their policy repercussions are brought forward in thefollowing pages.

Responsibilities and the Importance of Job Preparation
Some form of reciprocal agreement between the government and the individual is usuallyrequired for any kind of active labour market policy intervention. It follows that active labour
market policy interventions carry responsibilities for Government to be active in reducing
barriers to work, not just the claimant. However, it is noteworthy that some of the existing
programmes are more active than others; indeed, some find it difficult to be enforced. In
some American states, for example, lone parents have been exempted from schemes because
the states did not provide a guarantee of adequate childcare. Until they did, the courts ruledthat mandatory participation could not be initiated (McCormack and Oppenheim 1998).
The mix between government and individual responsibility also varies. For example, OntarioWorks was a mandatory programme offering three streams of Employment Support,
Community Placement and Employment Placement (Government of Ontario 1992; 1997).
The programme’s mission was to secure the ‘shortest route possible to a job’. According tothose who designed the programme, if an employer offered a job, which did not actuallyrequire basic literacy and numeracy skills, the Province did not consider it had a
responsibility to provide training to those who lack such skills. Despite Guarantee
proponents’ claims that the guaranteed public sector jobs require little in the way of skills andtraining, it is doubtful that many such jobs paying minimum wage and meeting minimum
standards will be available. As such, the Ontario experience is revealing: it shows a laying offof risk onto the individual where neither the employer nor the government considers it their

1

However, it is worth noting that in 1986/87, the Community Programme provided jobs for over 307,000
unemployed claimants at an overall cost in excess of £1 billion.

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New Zealand Journal of Employment Relations 32(3): 69-82
responsibility to invest in a second chance of basic education. Whilst it may be possible tosecure a job without these skills, the odds are against keeping it and moving into a better job.
If this risk is to be reduced, publicly funded investment in job preparation is arguably
essential. This then indicates that finding the shortest route to paid employment may notnecessarily be a suitable and sustainable approach for all participants. Some may need tomove through a number of stages before they will be in a position to hold down a job. The
Ontario experience together with what is known from other countries (including research
evidence from the UK and Australia on the barriers of the long term unemployed and themost disaffected in the labour market) holds some important lessons for any attempts in New
Zealand to introduce a job guarantee initiative. It may be in no-one’s interest if the firstdestination for a group of the most disaffected is formal training, full-time, or even a parttime job. Some participants will face numerous hurdles in their lives implying that work,
training and learning are simply unrealistic first options. Care leavers, the homeless, thosewith drug and alcohol problems and young offenders are among those most at risk of being
unable to hold down one of the options without co-ordinated effort to address the otherbarriers.
In a number of countries, these concerns have been taken seriously. What is more, they havealso been acted upon. Added at a late stage to plans for the UK’s New Deal, for example, the“Gateway period” offered up to four months of job preparation before the core options(employment, training) commenced. It certainly had the potential to make a Guarantee
initiative work for some of the most difficult to reach target groups. A wage subsidy is little
compensation to the employer, including Local Government, who recruits someone lacking
in the basic skills required in the labour market. Without these as the building block, many
will be reluctant to invest in job-specific skills even if a training allowance covers respective
costs. If the young unemployed are to be offered the guarantee of a job with training andfurther learning opportunities, private or public sector employers will also seek a guarantee of
employability. It is therefore vital that something like a “Gateway Period” is included,
tailored and appropriately resourced.

Focus, Timing and Targets
Given what is known about the link between poor educational attainment and long-term
benefit reliance, it is commonly agreed that the most poorly qualified should be encouraged
to join early. Longitudinal panel analysis in British Columbia influenced the Province’s
decision to open its Youth Works programme to 16 to 18 year olds where appropriate, eventhough they fell outside the original target group. Moreover, it became apparent that those
who dropped out of school early should not be forced to complete their education before
being allowed to work. A period of work experience may act as a route back into learning. If
a family member, career adviser or income support officer advises a young unemployed to go
back to school, the latter is likely to take only limited notice. However, the incentive may bedifferent if a youngster has gained some work experience and if the respective employer
advises to complete the educational qualification, and then to come back for a guaranteed job.
It should therefore be possible to move away from a Job Guarantee towards a Generic
Guarantee initiative for the young (and potentially for those as young as 14 or 15 who haveall but given up on formal education or training) and to offer a mixed package of work
experience, education, assisted job search and ultimately the take-up of sustainable
employment for those under-18s who are, at any rate, likely to join a work creation or73

New Zealand Journal of Employment Relations 32(3): 69-82
Guarantee scheme in the coming years. As for the targeted age brackets, it should also be
noted that the original Guarantee proposal concurs entirely:“A person who can remain attached to paid employment has greater prospects or
upward mobility, than if they languish for years in long-term unemployment. A
teenager who is engaged in useful activity at an early age is less likely to be “lost”
from the system of paid work in later life.” (Mitchell, Cowling and Watts 2003: 29)
Early intervention should thus become a guiding principle, with a “Gateway period” offering
a range of options to test job readiness, including employment ‘tasters’. This could be basedon the best practice example of the 1996-97 Pre-Vocational pilots undertaken in 60 areas ofBritain. These offered a range of basic skills, job preparation and team-work activities topeople of all ages unemployed for more than six months. The methods used by one training
and work project have been described as a world away from the job-specific training found in
output-driven funding regimes (Crighton 1997).
Following periods of preparation, pre-vocational training can commence and is likely to work
best where it is related to the workplace. Drawing on the experience of work trials would
have the advantage of bringing employers into contact with the Guarantee initiative without
either side having to commit too early. Such a programme could place job-ready people whohave been registered unemployed for at least six months with an employer for three weeks.
Research by White et al (1997) confirmed the effectiveness of such endeavours, reportingthat the chances of securing employment at the end of trial periods increase fivefold.

Local Partnerships
A further issue concerns the condition of local labour markets. Utilising “buffer stock”
employment and local partnerships, and using local government as an employer for local
target groups, as advocated by the Job Guarantee proposal, provides a promising alternative
to a centrally designed, controlled and executed monopoly. It also serves as a possible
explanation for the success of local pilot schemes, where nation-wide programmes havefailed. However, local labour market asymmetries raise concerns about the capacity of the
public sector to supply all of the jobs required.
Local unemployment is sensitive to local labour market conditions. It would thus be wholly
unreasonable to expect an unemployed person in Dunedin to take up public sector
employment in or around Auckland, or vice versa, especially if community employment is
low pay or temporary. Spatial mismatch is an issue that cannot be ignored and one that calls
for localised solutions in partnership with private sector employers. A recent project in Alloa,
Scotland, for example, has shown that locality-sensitive and partnership enabled solutions
can be highly successful (McQuaid, Lindsay and Greig 2005). It is also an example ofinvolvement from the private sector.
The Alloa Initiative was charged with implementing a local programme in partnership with
Tesco, the UK’s largest retail chain, in preparation for the opening of one of the company’s
retail superstores in Alloa in central Scotland in July 2002. The outcome of this project was
the placement of 109 disadvantaged job seekers into positions at the store, and proved
particularly effective at targeting the long-term unemployed and those with limited
experience of the retail sector.
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New Zealand Journal of Employment Relations 32(3): 69-82
A genuine local partnership model was at the heart of the initiative. The Alloa Initiative
linked the private sector employer with relevant policy actors in the Alloa and wider local
areas, including: Clackmannanshire Council; Jobcentre Plus; Scottish Enterprise Forth Valley(the Local Enterprise Company); and Triage Central (a private sector organization which has
led the delivery of the New Deal in the area since 1998). The Employability Training Course(ETC) was at the centre of the Initiative’s approach. The ETC programme provided a rangeof training provision, including: team working; personal presentation; retailing skills andcustomer care; stock control and security; workplace health and safety; and communication
skills (including written communication). In total, 184 unemployed local residents took up
new jobs. The initiative’s eight-week Employability Training Course (ETC) was designed toprovide a route into work for local unemployed people who would not otherwise have foundemployment with the company. 119 individuals were recruited to the course, with 109
completing the programme and taking up work at the store. The success rates were thus
impressive and represented a course completion and job entry rate of 92 per cent.
To be fair, evaluations of such small samples make generalising successes a difficult task.
Equally, it may be impossible to realise private sector, large scale job guarantee programmes
in New Zealand’s dispersed labour market (or in other countries’ labour markets for thatmatter), especially in rural areas. However, it is conceivable that the concept of job
guarantees in a large retail chain can be replicated through “buffer stock” type employment
opportunities within local government agencies together with pockets of guaranteed
employment opportunities in private companies.

Utilising the Shadow Economy
However, despite evidence of localised partnerships and respective employment successes,
the Guarantee initiative may need to go beyond ‘mainstream’ thinking and the usual politicalconstraints if it is to deliver lasting results in the most excluded communities, where even“buffer stock” employment opportunities through local government agents may be difficult torealise (in terms of both, scale and scope). As such, a more controversial proposition may be
warranted.
This author contends that in many of New Zealand’s lowest income neighbourhoods, thriving
networks of cash-in-hand trading can be found. This assertion is borne out by recent
estimates (Schneider, 2007), which place the value of the hidden economy for New Zealandin 2004/05 at around 11% of GDP – an increase from 9% over the period 1990-1993(Schneider and Enste, 2000).
In most cases this is a response to market failure. Unless people pay their neighbours what
they can afford to provide childcare, the home and car repairs and other basic services, they
will go without. Few people can earn enough to make a living in this way. The modest
amounts of extra cash available should be distinguished from the dark end of the shadow
economy characterised by drug dealers and loans sharks rather than baby-sitters and windowcleaners.
The standard response of politicians is to attack benefit fraud. Government is charged withthe responsibility of policing people’s benefits but that should not mean the choice isrestricted to work in the formal sector or full-time inactivity. Involvement in the informal
economy is often the result of careful risk assessment, reflecting entrepreneurial talents andthe kind of commitment, which governments and employers wish to see being incorporated
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into formal education and training. It follows that the informal economy is probably too large
and certainly too important to ignore.
Alternative employment support services should be given the resources – at arms-length fromgovernment – to identify the skills and half-skills developed in this part of the economy.
Innovative programmes might then enable claimants to combine training with trading anddevelop skills, which would attract mainstream employers or sustain a new business. Whilst
local governments in New Zealand will not have policy-making powers over the Departmentof Labour or Income Support agencies, they could negotiate a number of pilot projects to test
the effect of higher disregards on claimants’ earnings (providing incentives to declareactivities).
This does not mean that benefit fraud is being condoned. Rather, I seek a new focus on theskills that people in New Zealand actually have, including the ones they are forced to hide. A‘skill-seeker’s amnesty’ on a trial basis might enable the Guarantee to reach further than itotherwise would.

Criticisms and Responses
Thus far, then, this analysis identified a number of the crucial issues for the success of a
Guarantee initiative in New Zealand. However, in recognition of the plethora of scepticalcommentaries it is equally important to turn our attention to some of the fundamental
criticisms, which have been levied at welfare-to-work and job guarantee programmes.
Mitchell, Cowling and Watts (2003) already address in some detail the accusations that a job
guarantee initiative would negatively affect price stability, balance of payment, economic
efficiency, work incentives and national competition principles, and we do not need torecapitulate at length.
Only a modest boost to aggregate demand is expected because the design of the Job
Guarantee at a fixed wage rate sets a wage floor and does not disturb the private sector wage
structure (Mitchell 1998). In a similar vein, only a modest increase in import spending isenvisaged due to slightly higher disposable incomes for Guarantee participants, which will
not generate any chronic external instability. As for competition and economic efficiency, theGuarantee proposal and related research provides persuasive evidence that themacroeconomic costs of unemployment dominate any realistic measure of the costs of
microeconomic inefficiency (Productivity Commission, 1999). Direct macroeconomic
intervention is thus justified on this basis. Finally, research has demonstrated that the
Guarantee would not create disincentives to work (Mitchell and Watts 2002). Whilst it was
shown that claimants would prefer benefits to Guarantee rates, the same individuals would
prefer private sector employment to Guarantee job opportunities. This, in turn, justifies abalanced policy mix, in which Guarantee employment would be provided to those target
groups who would then not have access to benefit payments.
In view of previous arguments, however, another area of criticism merit some renewed
attention. Whilst the Guarantee proposal is based on public sector, additional employment
opportunities, the present analysis already raised the concern about the required public sector
capacity to absorb the likely supply of workers, especially if unemployment increases. In
response, it was proposed that private sector employment could, at least in part, fill the gap.
However, with the introduction of private sector employment, potential substitution,
deadweight loss and displacement effects will need to be addressed. Deadweight describes
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the situation where subsidised employment is used to hire people who would have been hired
in any case. Substitution occurs when the subsidy displaces other workers in the employing
organisation. Displacement describes the possibility that the subsidy allows the recipientorganisation to undercut other providers thus causing an indirect loss of jobs (for a moreformal treatment of these effects, see Lange and Shackleton 1998). In combination, theliterature also refers to these effects as “churning”.
Despite careful monitoring, some degree of substitution or deadweight in the private sector
may be unavoidable. However, the situation is not as damning is it first appears to be. In fact,
it is reasonable to assume that at least some proponents in Government circles do not muchmind churning effects. The reasoning is that churning reduces the average duration ofunemployment for any given aggregate level, and thereby reduces the NAIRU2, on theassumption that the short-term unemployed have more effect upon wage behaviour than dolong-term unemployed.
There is considerable merit in this argument but it ignores a potential political problem: thepublic acceptance of the proposal. There is a danger that publicity about substitution andchurning will discredit the initiative in the public mind. It is for this reason that public sector
employment should remain the preferred option for Guarantee jobs and that private sector
employment, whilst potentially necessary to boost capacity, be used as a “top-up” only andkept to a minimum.

Ten Propositions for New Zealand
Against the above background of significant labour market complexities and various
indicators of successes as well as failures, several questions emerge about how a potential
New Zealand guarantee initiative could make a real and lasting difference. Without being
exhaustive, the following ten propositions are suggested:
1. Persuade employers.
There is an asymmetry at the heart of the Guarantee. While the young unemployed can beforced to take part or have their benefits cut, government cannot compel employers,
especially those in the private sector, to take on the target group of claimants. Employers whoare sceptical about the job-readiness of the Guarantee client group are unlikely to be
persuaded by this or further reductions in their non-wage labour costs. The international
evidence suggests that most employers want to recruit those who already have the core skills
and do not expect to share responsibility for pre-vocational training (Finn 1997). If the
Guarantee is to succeed for those who are least likely to find jobs and keep them, excellent
pre-vocational training programmes are needed. The Gateway zone may thus prove to be themost important part of the employability strategy. Both, private and public sector employers
should be given incentives to become involved in the design of Gateway activities at an earlystage. An active Gateway could offer a series of options encompassing teamwork, community
volunteering, creative writing, family learning and work trials (on a part-time basis for a few
weeks in the first instance). The last of these will provide a ‘low risk’ means ofexperimenting for employers as well as the claimant.
2. Include under-18s.

2

The so-called ‘non-accelerating-inflation rate’ of unemployment; when unemployment falls below this rate,inflation is thought to accelerate indefinitely.

77New Zealand Journal of Employment Relations 32(3): 69-82
The Gateway zone must also be flexible. There is now agreement in a number of countries
that young people with disabilities, care leavers, young offenders and other people withmultiple problems should not have to ‘queue’ for any considerable period before entering
publicly supported employment while their chances of getting a job erode even further. Thisis entirely sensible. But there is a further issue about the age at which young people canreceive assistance. Most governments’ objective is for all 16 to 18 year olds to remain insome form of education or training. Whilst the intention is the right one, it raises the questionof where and how disaffected young people should continue learning if existing provision
through schools and colleges is failing them. A start would be to extend the Guarantee tounder 16 year olds on a discretionary basis. This would also follow the lines of thought of the
Job Guarantee proposal where eligibility for the young is aimed at all 15-19 year olds.
3. Start at School.
Even then, one is left with the question of how to provide the best services for those as young
as 14 who have all but rejected formal education. It may be more productive to support theirtransition into the world of work – probably on a part-time basis and only if there iscommitment to training. To allay fears that this amounts to ‘giving up’ on this group,
employers could offer work experience to young people for six months or a year, and thenmake the offer of a longer-term job conditional on achieving agreed educational goals. The
signal that is sent by a good employer might raise motivation in a way that even the mostcommitted teacher, parent or career adviser could not.
4. Include the Private Sector.
The Job Guarantee proposal is based on truly additional, public sector enabled jobs in suchareas as urban renewal projects, community and personal care, and environmental schemes
and has demonstrable merits. However, some questions remain about the capacity of the
public sector in New Zealand to meet the envisaged demand. Whilst ‘additionality’requirements are easier to enforce in the public arena, private sector employers should
nevertheless be included in the model, if only to serve as “top-up” options when there ispressure on community employment opportunities.
5. Include Part-time Options.
Whilst the Guarantee proposal already allows for part-time combinations, the importance of
this point deserves re-emphasising. It would be hard to demonstrate why under a Guarantee
initiative the unemployed should be required to choose between full-time education ortraining and full-time work. A mixed-economy approach combining part-time education andpart-time employment or even a stand-alone part-time option for 12 months would provide anappealing and flexible alternative without imposing higher costs. It might also have the effectof reducing some of the gender barriers that remain in the New Zealand labour market, by
preparing young men in particular for work that does not always come packaged as ‘fulltime’.
6. Reduce Cherry-Picking.
A number of problems have been identified in the international literature with existing,publicly funded employability schemes, not least the drive for output-related funding or evensurplus generation among operators. This has created strong incentives to ‘cherry-pick’ themost employable who will generate more successful outcomes. It follows that the publicly
supported employment and training markets have in part come to mirror existing inequalities(and perhaps made them worse) rather than reducing them. An alternative structure ofincentives is needed for operators to overcome these risks. A start would be to replace shortterm, empirical targets with longer-term, qualitative measures of success and link part of the78New Zealand Journal of Employment Relations 32(3): 69-82
budget for agencies to clear evidence of successful job outcomes in the longer-term. Bonus
payments could also be offered upon placement in the competitive labour market of thoseindividuals with multiple labour market disadvantages.
7. Measure Added Value.
The occurrence of deadweight loss and substitution effects will need to be monitored closely
to ensure added value and net employment growth. Targeting Guarantee employment
opportunities primarily at the community/voluntary sector and the public sector can reducethese risks. However, the task becomes more complicated with private sector employers.
Local watchdogs (including economic development departments of local government
authorities and local economic development agencies) will have a role to play to ensure thatfunded jobs comply with ‘additionality’ requirements as far as possible, thus ruling out publicfunding for jobs which would have been on offer in the absence of the Guarantee. This is notan easy task and policy makers will need to be aware that some degree of displacement isprobably unavoidable.
8. Tailor the Guarantee to Geography.
A locally sensitive approach is needed in the Guarantee. In the relatively tight local labour
market of Canterbury (with low unemployment), for example, supply-side constraints may be
the most important barrier to a more inclusive local economy. In other parts of the country,
however, the priority may be to create or identify additional community jobs as well as tackle
some of the transport difficulties, which result in exceptionally weak linkages between areasof job availability and long-term unemployment (the problem of spatial mismatch).
9. Reach into the Shadow Economy.
It would be wasteful to give up on those individuals engaged in New Zealand’s economic
shadowlands. The stock response that cash-in-hand trading involves unskilled workers inbreaking the benefit rules misses the point. Studies in Ireland show employers more willing
to recruit informal economy workers than inactive benefit claimants (Lange and McCormack1998). Whilst governments are responsible for policing the benefit rules, alternative
employment support services can get on with identifying the skills developed and maintainedin the shadow economy.
10. Don’t Forget Demand.
This could be the mantra of Job Guarantee advocates of how the Guarantee initiative has
been designed. Despite some limited involvement by the private sector to boost capacity, theprinciple of demand-side intervention to create jobs for the less skilled cannot be ignored. By
international standards, if the Guarantee manages to provide a platform for one-third ofparticipants to be placed eventually in competitive employment it will have been a success.
The corollary, by virtue of multiple labour market disadvantages, is that it is not unreasonable
to expect some members of the target group to be unemployed again when the dedicatedbudget has been spent. The key question then is whether Government chooses tocontinuously pay them to undertake socially productive work, which the market is otherwise
unlikely to perform, or return to the ‘actively seeking work’ requirement even where there arechronic demand side deficiencies. Policy makers, if and when they support a Guarantee
initiative in New Zealand, will have to address this question sooner rather than later. The
biggest challenge will be to design and pay for a programme of socially productive job
opportunities in excluded communities – for as long as it is needed – and avoid the mistakesof the past.

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Concluding Remarks
The intention to develop a Job Guarantee for the young (and long term unemployed) in New
Zealand is, without doubt, a laudable one. Moreover, the Job Guarantee proposal provides a
promising platform for adoption and further development in a New Zealand context. By
drawing on the experiences in a number of other developed countries, this commentary
identified some crucial factors for the success of a Guarantee proposition. In particular, itemphasised the importance of private sector involvement, albeit limited, to boost anotherwise potentially constrained public sector capacity, a well-designed partnership initiativeacross various policy actors, flexible and mixed approaches to full and part-time options, prevocational preparations, the need for early interventions in New Zealand’s labour market, and– above all – a long-term policy commitment to the Guarantee.
Unless these issues are taken seriously and acted upon, the danger may re-emerge that despite
good intentions the Guarantee creates little more than an environment where the participant ismore than likely to be back on income support quickly and will continue, at best, to cycle on
and off benefits in the long-term. In this context, Britain’s Community Programme provides
powerful warning signs. Despite the varied criticisms that have been identified and assessedover the years (in particular, lacking pre-vocational programmes and a lacking long-term
commitment by changing governments), most of the Community Programme workers werepositive about aspects of their experience and were hopeful that it would help them back into
the competitive labour market. Sadly, according to respective survey analyses (Finn 1988), at
the end of the programme nearly three-quarters of participants went back into the dole queue.
Notwithstanding these critical observations, this short commentary concludes with acautiously supportive verdict on the possibility of introducing a Guarantee initiative in New
Zealand. At a time when New Zealand’s official unemployment rate stands proud as one of
the lowest amongst OECD member states and as the Government’s caseload is falling, thisauthor believes that, based on the arguments presented, a Guarantee initiative, combined witha period of job or training preparation in a localised partnership context, will quickly reachthe hardest to employ. Maintaining low levels of unemployment and tackling residual
problems of joblessness are claimed to be central to the economic strategies and programmesof the major New Zealand political parties, and despite some fundamental differences inapproach and philosophy, they all acknowledge the accelerating decline in well-being
experienced by those without work for extended periods. A broad consensus thus exists about
the necessity for special measures and new initiatives designed to alleviate the position of
those worst affected by unemployment. This should be taken as a window of opportunity totarget more resources on these individuals.
At a time when the two major political parties in New Zealand, as part and parcel of their2008 election campaigns, identify youth concerns as a primary political challenge, theproposition of a Guarantee initiative is ideally placed to generate renewed political activism
and, it is hoped, new ideas and a lasting policy commitment.

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Kluve, J. and Schmidt, C.M. (2002, Oct). Can Training and Employment Subsides combat
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Mayors’ Taskforce for Jobs. (2007). Annual Report 2007: Employment that Works.
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McCormack, J. and Oppenheim, C. (1998). Welfare in Working Order. London: Institute for
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Centre of Full Employment and Equity (CofEE). The University of Newcastle: Australia.
Productivity Commission. (1999). Impact of Competition Policy Reforms on Regional and
Rural Australia. Productivity Commission Inquiry Report, no.8. Canberra
Quirk, V., Allen, E., Andresen, T., Bill, A., Cook, B., Goldsmith, B., Juniper, J., La Jeunesse,R., Mitchell, W., Myers, J., Watts, M., Welters, R. and Wrightson, G. (2006). The Job
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Chronicle
June 2007
An article in the Dominion Post seemed to set the tone for June by predicting thatparents, pupils and patients faced widespread disruption. The article noted that doctors
and teachers were negotiating their collective agreements and the wage increases
sought could be costing over $1 billion. This put the Government in a tricky situationas, on one hand, it was under pressure to prevent industrial action but, on the other
hand, the Government had to head Reserve Bank warnings against “extravagant”
wage rises which would fuel inflation.
The Press reported that primary school principals had started a series of meetings tovote on their pay claim, estimated to be worth $35 million. The President of the New
Zealand Educational Institute (NZEI) Irene Cooper said the claim reflected the“complex and demanding role of principals” and that it would help with recruitment
and retention. The principals were seeking pay increases between 5% and 18% in thefirst year and with 4% increases in the second and third year.
The simmering dispute between hospital orderlies, cleaners and kitchen staff and theiremployers continued to receive extensive media coverage with a series of articles in
the Manawatu Times, the Southland Times, NZ Herald, and the Timaru Herald. The
main theme was that employers had been given a reprieve from threatened strikeaction. The Service and Food Workers’ Union (SFWU) said that the workers had cut
their claim from $16.54 to $15.20 an hour in an attempt to reach a compromise. The
union had issued rolling strike notices (see May 2007 Chronicle) and the main
employer (Spotless Services), responded with lockout notices. A Southland Times
article on 5 June suggested that a compromise was possible with SFWU spokesman
Alastair Duncan saying that last-minute talks had opened sufficient space for a return
to mediation. He was quoted as saying that “the latest offer is an increase of 50c on
the previous rate lifting the entry level rates to $13.60 with a top rate of $15.60”.
Furthermore, the opportunity to audit the District Health Board figures was anotherimportant development.
Industrial action at Southland hospital continued with the Southland Times reportingthat cancer patients waiting for bone scans and patients needing heart scans wereamongst some of the affected patients. About 20 medical radiation technologists hadtaken industrial action and this had affected after-hours radiology services. However,a later article suggested that “a highly productive meeting with district health board
representatives” resulted in the union radiographers deciding not to issue further strike
notices.
Meanwhile, senior doctors were considering their first ever national strike with the
Association of Salaried Medical Specialists (ASMS), representing about 90 per centof senior hospital doctors issuing its first ever countrywide stop work notice.
According to media reports, staffing issues had been behind several recent highprofile medical errors and doctors had raised, therefore, concerns about staffing levels
and patient safety at provincial hospitals. The ASMS was quoted in the Press assaying that the district health boards’ offer of a 3.8% pay increase over four years
would not ease mounting recruitment problems.
83New Zealand Journal of Employment Relations 32(3): 83-92

The Nelson Mail reported extensively on the dispute between Air Nelson andemployees represented by the Engineering, Printing and Manufacturing Union(EPMU). In early June, the paper reported that workers had gone on a four-day strikeas part of the second phase of industrial action after negotiations had stalled again.
Subsequently, the Press reported that the Employment Relations Authority (ERA)
rejected an EPMU claim that Air Nelson used strikebreaking labour to load aircraft(see May 2007 Chronicle). EPMU organiser Strachan Crang said the union wasdisappointed with the outcome of the ERA hearing and planned to appeal the decision
to the Employment Court. Air Nelson then announced that it planned to use volunteer
labour to load aircraft. Predictably, there was a strong reaction from the EPMU withspokesperson Strachan Crang saying “this is Air New Zealand showing its true
colours. In terms of employment it has no regard for the law and will do what it
likes”. However, some compromise was reached by the end of the month with the
Nelson Mail reporting that Air Nelson workers were considering the airline’s latest
agreement proposal after the two parties had met.
In another dispute involving the EPMU, the Press reported that tension had escalated
at two West Coast mines as workers voted to strike after being refused transport to themine entrance. The 139 miners at the Spring Creek Mine, near Greymouth, andTerrace Mine, near Reefton, were due to meet to decide any further action. The union
imposed a national overtime ban and rolling stoppages at Solid Energy mines after abreakdown in collective negotiations. The union was seeking a pay rise of between
5% and 5.5% while Solid Energy had offered 4%.
The Dominion Post reported that Wellington bus drivers employed by NZ Bus weretold they could be “fired” if they talked to passengers about inappropriate topics,
including their thoughts on the company or a person’s appearance. In a memo to its
drivers, NZ Bus said that it wanted drivers to hold general conversations on topics
such as the weather, sport, hobbies and local events such as concerts. But subjects
including sexual references, comments on physical appearance, talking about the bus
company, or using abusive language were inappropriate. It is understood the
instruction was issued after NZ Bus heard about a driver complaining about thecompany in front of passengers.
In an employment issue involving the police, the Dominion Post reported that the
Police Commissioner was appealing to the Court of Appeal a former policeman’s
right to bring a personal grievance claim years after he resigned with a $190,000
payout from the Police Employment Rehabilitation Fund before he could bedismissed. In 2001, a disciplinary tribunal found the former policeman guilty of 31
out of 39 charges. They included sexual harassment, throwing a file at a colleague andpepper-spraying another. He lodged a personal grievance claim in January 2003, welloutside the 90-day period for filing such claims. The Employment Court found thatthrough a misunderstanding with his lawyer, the former policeman thought his ability
to claim for personal grievance was preserved when instead the time to make theclaim had run out. On that background, the Employment Court allowed him to make apersonal grievance claim.
Both the Press and the Dominion Post reported that the unemployment in Australia
had reached a 32 year low of 4.4% and that the average weekly income for an adult in84

New Zealand Journal of Employment Relations 32(3): 83-92
full time work, not including overtime, was $A1,070. But the articles went on to saythat it was “not all rosy on the work front” with Australian working conditions
recently coming under scrutiny by the International Labour Organisation (ILO) for
ignoring international requirements to promote collective bargaining. Australia's
Workplace Relations Minister, Joe Hockey, dismissed Australia’s inclusion on the list
as an election year stunt by the Australian Council of Trade Unions’ leader, Sharon
Burrow, who had lobbied the ILO to look at Australia.
An article in the Dominion Post claimed that, while awareness and legislation had
reduced the incidence of sexual harassment, bullying had replaced it as the workplace
hazard of the new millennium. The article claimed that many managers did not realise
how widespread the problem was and how much human and financial costs wereassociated with workplace bullying. Australian psychologist Evelyn Field, who is anauthority on bullying, feared that bullying was on the increase due to longer working
hours, individual employment agreements and more stressful working conditions. The
latest statistics from the Department of Labour showed that, in the past year, 128
cases of bullying went to mediation, which was almost three times the number ofsexual harassment cases. Interesting, it was found that half of workplace bullies were
women, and that 70% of their victims were female.

July 2007
The Press and the Dominion Post reported that Employment Relations (Flexible
Working Hours) Amendment Bill had won the support of a parliamentary selectcommittee strengthening the likelihood that it would be passed when it came to thefinal vote. The Bill had already won favour from several unions, including nurses andbank workers. However, it had alarmed Business New Zealand with Chief Executive
Phil O'Reilly saying that it would cause “ludicrous outcomes”. The legislation waspartly drafted in response to what was seen as a culture of long working hours, withNew Zealanders working an average of 1809 hours a year, compared with the average
Briton who worked 1672 hours and the average German, who worked 1435 hours.
The Nelson Mail and the Press reported that union members at Air Nelson voted toaccept a revised offer from their employer ending a six-week pay dispute (see May
and June 2007 Chronicle). Under the settlement, union members would get a 9.5%
pay rise over 30 months. An EPMU spokesman said that members had “mixed
feelings” about accepting the offer as a number of new issues had come to light during
the industrial action including rosters, workforce casualisation and the future use ofcontractors which would require future discussion with management.
The bitter dispute between service and food workers at Southland Hospital andSpotless Services appeared to be resolved with the employer “sweetening its offer”
according to an article in the Southland Times. Spotless had agreed to meet theunion's demands to pay existing and new staff $14.25 plus penal rates.
An article in the Press quoted an independent health economist as saying that thequality of New Zealand’s healthcare was under threat unless the Government boosted
salaries. He told the Press the Government must intervene in long-running healthsector pay disputes because employers could not afford to settle claims and the sector

85New Zealand Journal of Employment Relations 32(3): 83-92
was suffering. The economist also claimed that staff working in the public healthsystem were underpaid by international standards and that New Zealand was“bleeding” well-trained medical staff overseas. A spokeswoman for Health Minister
Pete Hodgson said he could not comment on the issue of health sector pay because
there were ongoing negotiations.
The Waikato Times reported on a dispute involving local community group Parentline
and its former Chief Executive Officer (see April Chronicle). The paper stated thatthe “bitterly fought and cripplingly expensive Employment Relations Authority
hearing” had resumed after a three-month adjournment. The article reported that
Parentline had budgeted almost a third of its total expenses for the period April toJune on legal fees and there was a suggestion that it might mortgage its building tohelp pay the legal fees. The paper reported on the daily turn of events throughout July
with accusations from both sides and a comment that the ERA adjudicator Janet Scott
had “often been the real star of this soap opera”.
In a rare judicial step the Sunday Star Times reported that Employment Court chief
judge Graeme Colgan had essentially accused government of allowing the
Employment Court’s powers to be diminished with the introduction of the
Employment Relations Act and its focus on mediation through the Employment
Relations Authority. While the issue was technical and based around what types ofcases could be heard by the Employment Relations Authority and the Employment
Court, the article said that the Judge’s fear appeared to be that legally complicatedcases went to a non-judicial body, which may not be qualified to hear them. In a
judgement Judge Colgan said “the Employment Relations Authority is a lay authoritythat is not presided over by judicial officers. Its members are not required to be, andmany are not, qualified and trained in law”. He went on further to say that the
Employment Court’s authority had been undermined, and said “it is ultimately for
Parliament to determine where cases are to be heard as questions of access to justice.
When Parliament does so again, I respectfully urge it to reconsider these issues.”
Auckland University associate professor of law Bill Hodge said the judge's comments
were born of frustration at long-standing tensions between the Employment Court, theHigh Court, and the Employment Relations Authority.
The Waikato Times reported on a number of approaches that the Waikato District
Health Board had taken to reduce a national $60 million-a-year problem of sick leaveamongst staff. It started by taking the view that it was a symptom of staff being tired.
The board established that its sick rate was heavily influenced by the fact that many of
its nurses, women working shifts, were running a household too. They were taking
sick days because they were busy and tired, rather than skipping work for the sake of
it. Innovations included offering roster changes, child care, budget advice, tai chi
sessions, gym memberships were introduced. The board also made targeted
approaches to staff taking excessive sick leave. After five years sick leave had been
reduced by almost 50%.
The Sunday Star Times noted that Combined Trade Unions (CTU) president Ross
Wilson was retiring after seven years as head of the union movement. Whenquestioned about why more people don’t join unions, Wilson claimed that there wasstill a very hostile employer community in the private sector and that the country was
paying the price of the anti-union strategies of the 1990’s. Despite the lowest

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unemployment in the developed world and labour shortages in many areas, wages had
failed to go up much. He claimed that it was broadly correct that unionised labour got
higher wage increases than others, though this was obscured by the fact that often thewage increases were passed on to non-union people in the same area. While on
opposite sides of the fence, Wilson received praise from Business New Zealand’s Phil
O'Reilly and Auckland Chamber of Commerce’s Michael Barnett who stated that “I
respect him hugely and I certainly don't see him as the enemy.” On some questions heagreed with the union leader such as New Zealand shouldn’t try to make low wages
the basis of its ability to compete internationally. If it does, it will simply join “therace to the bottom”, swapping first-world for third-world wage levels. Wilson was due
to start a new role as chairman of the Accident Compensation Corporation.

August 2007
An NBR article reported that the Minimum Wage (Abolition of Age Discrimination)
Amendment Bill returned to Parliament after a select committee hearing. Green MP
Keith Locke said during the second reading of the Bill in Parliament that the Green
Party stood alongside the country's young workers in their quest for 16 and 17-yearolds to be paid the adult minimum wage of $11.25 per hour. He said that 16 and 17year olds were often chosen by employers in the fast food and supermarket industries
because they were in fact better at their jobs than older workers. Labour Minister Ruth
Dyson said the government had raised the minimum youth rate to 80% of theminimum wage.
The Employment Relations (Flexible Working Hours) Amendment Bill continued its
passage through the legislative chamber. The Dominion Post reported that while
employers were embracing the “family friendly workplace”, staff without children
were worried they were being left to take up the slack without any benefits. One
employee was quoted as saying that she had to work overtime to cover her colleagues’
workload and while she accepted that it must be really difficult for mothers to juggle
work and family “…my own work gets neglected during these times and I also haveto work harder”. The article quoted overseas examples where there was a growing
backlash from childless employees who were concerned they were being polarised in
the workplace saying that while this was not the case in NZ there was “simmering
disquiet”.
The NBR quoted lessons from the UK experience on flexible hours saying that the key
for most employers would be getting the balance right between giving employees theflexibility and control that they want over the hours they work, while meeting theneeds of the business. In the UK, most employers who had fallen foul of thelegislation did not have a process to deal with requests. When challenged, they wereunable to show they had fairly considered an employee’s request or that their refusalof a request was reasonable.
Employment relations became an election campaign issue in the forthcoming
Australian Federal election with Labor leader Kevin Rudd reiterating that if Labor
was elected then it would phase out Australian Workplace Agreements, as well as
committing to a balanced system of flexibility and fairness. Opposition Leader Kevin
Rudd challenged Prime Minister John Howard to a public debate on employment

87New Zealand Journal of Employment Relations 32(3): 83-92
relations, just a day after Labor released its controversial policy on the issue. Mr
Howard claimed the “policy is just as destructive of jobs in the small business sectorastheearlierpolicy.”The secondary teachers’ union pulled out of pay talks with the Ministry of Education,
prompting fears of widespread disruption. The Post Primary Teachers’ Association(PPTA) said that the offer by the Ministry of Education represented a shortfall of$100 million over a three period, money that was needed to retain talented teachers
and attract new people to a beleaguered profession. The ministry offered 3% per year
for three years while the PPTA was seeking 4% and a lower level of improvements. Inlate August, matters got more serious with the Press reporting that secondary teachers
were set to walk off the job in September after the membership had voted
overwhelmingly (99%) in favour of strike action. The Ministry of Education sought
mediation in a bid to avert a national teachers’ strike.
The dispute between senior doctors and their employers simmered with reports by the
Nelson Mail and the Press claiming that senior doctors appeared more likely to takenational strike action after becoming angry at the release by a district health board
negotiator of an ‘exaggerated’ statement about their pay rates (see June Chronicle).
The Press article quoted psychiatrist Joanna Prendergast who said “there was quite a
lot of heated debate about whether industrial action was the way to go ... but theoverall feeling was that if we had to, we had to, for the future benefit of the medical
workforce and quality of care for patients”.
In the Press, the Association of University Staff hailed “an unprecedented increase instaff salaries over the past three years”. Ratification of the latest collective pay
agreement negotiated by the union meant that academics had gained an overall salary
increase of up to 20% over a three-year period.
The Dominion Post reported that Kapiti Coast bus users faced a day of uncertainty
after 40 drivers employed by Mana Coach Service who were members of the
Tramways Union walked off the job for 24 hours. The remaining 100 drivers had
agreed to a contract that provided for a pay increase in return for surrendering an extra
week’s annual leave that was available after five years' service. Tramways Union
secretary Phil Griffiths said his members believed the drivers who accepted the deal
had “sold them out”.
A Maori Health Trust was ordered to pay a sacked doctor more than $10,000
compensation. The NZ Herald reported that Dr Tane Taylor was dismissed by
Raukura Hauora o Tainui in June 2006, after almost 10 years as the “face” of thetrust’s Health Clinic. Dr Taylor was dismissed for “actively undermining” the trust,and for being “antagonistic” and “hostile”. The doctor won his claims of unjustified
suspension and dismissal and was awarded lost wages, as well as $15,000
compensation for hurt and humiliation. However, the award was reduced by a third to
take into account some failures on Dr Taylor’s part.
The Southland Times reported that Yunca Heating and Gas was unsuccessful in its
challenge to a Employment Relations Authority ruling which allowed union officials
to speak to union members collectively during work hours. Yunca took theEngineering Printing and Manufacturing Union (EPMU) to the Employment Court,

88New Zealand Journal of Employment Relations 32(3): 83-92
following a dispute between it and the EPMU (see February Chronicle). Employment
Court Chief Judge Colgan who described the appeal as a test case dismissed thechallenge saying that one of the principal thrusts of the Employment Relations Act
was for collectivism.
The dismissal of prominent University of Auckland political scientist Paul Buchananfeatured prominently. Dr Buchanan was dismissed following an email to Arab student
seeking an extension to an assignment because of her father’s death. The email said
she was “preying on some sort of Western liberal guilt” because her father had died.
Buchanan said he was unjustifiably dismissed and that he needed to be reinstated tomend damages to his reputation.
The Waikato Times reported the conclusion of the drawn-out Employment Relations
Authority hearing between Parentline and its former CEO, 129 days after it opened(see July Chronicle). The article stated that although “the scrap has provided richentertainment for the public, it is shameful it was allowed to get to this stage”. It
criticised the role of the Board saying that irrespective of the outcome the Board of
Parentline should resign. The board’s inability to quietly take care of business was thebiggest failing and that well run organisations do not let their dirty laundry be aired inpublic.
In another high profile hearing, the Dominion Post reported that both Queen MargaretCollege and a terminally ill teacher who claimed his treatment at the school masked
the symptoms of his cancer, claimed victory from an ERA ruling (see May
Chronicle). The former teacher was awarded $5000 compensation, but the ERA foundin favour of the Wellington school on most of the alleged grievances. Authority
member Rosemary Monaghan ruled that Dr Selwood had not been constructively
dismissed, nor had the school acted unjustifiably.
A British survey had found that employees on high salaries were not necessarily
happy with their lot. The survey by City & Guilds, one of Britain’s authorities on
vocational education and training, found that one-third (of a sample of 1000 people)
said they were not particularly happy at work, giving a satisfaction rating of less thanseven out of 10. Among those, human resources managers (2%), lawyers (4%) andsecretaries (4%) scored lowest on the happiness ratings. The Happiness Index wasconstituted by factors that contribute to wellbeing and in the longer term could also
improve productivity.
The Dominion Post reported that Helen Kelly had become the first woman Presidentof the Council of Trade Unions (CTU). Other than three years teaching, Ms Kelly’s
entire working life had been in the union movement, across the gamut of education
unions, from the Kindergarten Teachers Association and Early Childhood Workers
Union to teachers’ union NZEI and the Association of University Staff. She had been
Vice-President of the CTU since 2003.
The Sunday Star Times reported on a group of labourers who were threatened withhaving their pay docked $50 for spitting. Casual workers employed by NZ Labour
Hire in Auckland were given notices saying that littering would cost them $20,
spitting $50, and if they did not turn up for work for two days then they no longer had

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New Zealand Journal of Employment Relations 32(3): 83-92
a job. The company’s operations manager Darryl Painter admitted the company did
not know whether it could enforce the notices.

September 2007
A Dominion Post article featured the Employers and Manufacturers Association
saying that an ACC “partnership” scheme should be treated with caution after meatcompany Affco was billed $1 million for long-term care of a former employee. The
employee was paralysed from the waist down after he was shot by mistake in asuspected gang attack in the car park of Affco’s Wairoa meatworks in 2003. Under
the partnership programme, Affco was responsible for work-related injury claims at
its premises.
In a further development in the ongoing senior doctors’ dispute with District Health
Boards, the Press reported that senior doctors were going to ask the Government forhelp to resolve their bitter pay dispute (see July Chronicle). The Executive Directorof the Association of Salaried Medical Specialists (ASMS) Ian Powell said that theunion had resolved to go directly to the Government in an effort to avoid theotherwise inevitable escalation of the dispute, including possible industrial action.
DHB lead negotiator Nigel Murray said health boards had offered a range of solutions
but they had all been declined.
The secondary teachers were due to meet with the Ministry of Education in a lastditch attempt to stave off a strike. The agreement to resume negotiations came after
the teachers said that they would strike on September 12 if the government did not
improve its pay offer. The ministry, which approached the Department of Labour tomediate in the pay dispute, said it was hopeful that industrial action could be averted.
Meanwhile an article in both the Press and the Dominion Post said that a $120 million
deal for 20,000 hospital nurses had been agreed, despite the nation’s largest healthboard warning of “massive implications” for the sector. The deal gave nurses a pay
rise close to 12% over three years. The New Zealand Nurses Organisation (NZNO),
which had been in pay talks since March said a final response was expected any day.
The Canterbury District Health Board voiced last-minute concerns over the cost of thedeal and the impact on staffing requirements. A representative said the board faced ahuge dilemma over how to retain nurses who were “some of the most important assets
we have” while keeping within the budget.
Canterbury District Health Board maintenance workers called off a week-long striketo head back into negotiations. Around 55 technicians, electricians, fitters, carpenters,
painters and gardeners were due to go on strike but voted to withdraw their strike
notice after the health board signalled it was open to further negotiations. Their union,
the Engineering, Printers and Manufacturing Union, said that the group was seeking asignificant catch-up in pay rates of about 10% after lagging behind comparable trades
for the past decade.
The Press reported that stationery giant OfficeMax was ordered to pay $66,000 incompensation to eleven of its South Island sales staff for its failed bid to force througha commission scheme that would have left them out of pocket. The company was90New Zealand Journal of Employment Relations 32(3): 83-92‘slated’ by the Employment Relations Authority for a “fatally flawed” attempt tochange the commission structure by using a consultation process the authority foundto be a “sham” and done in bad faith. The dispute dated from December 2004 when
OfficeMax sought to change the way sales staffs’ pay was calculated which would
have cut their income by between $7,000 and $25,000 a year. Authority member
James Crighton ruled that although OfficeMax was under a duty to consider the viewsof staff about the plan and to operate in good faith, the staff had no reasonable
opportunity to have an input.
In other industrial action, the NZ Herald reported that waterfront workers had given
notice of a “potentially crippling” two-day strike at the Ports of Auckland after
receiving a “goodwill” pay rise they said they didn’t want. The port company’s new
Managing Director Jens Madsen said yesterday that the Maritime Union had notified
it of a 48-hour strike by about 250 workers across its two container terminals and its
general wharfs from October 2. Mr Madsen said staff had waited far too long for apay rise since their collective agreement expired late last year, so the company had
decided to start giving them the first instalment of a 3.25% increase it had offeredthem for each of the next three years. But union Branch President Denis Carlisle
responded by saying that union members were incensed that the company paid the
money
into
their
bank
accounts
without
theirpermission.
The fallout from the deal reached between the Engineering, Printing andManufacturing Union (EPMU) and Air New Zealand continued (see January 2007
Chronicle). According to the Dominion Post, Air New Zealand planned to sue the
EPMU for disclosing information about outsourcing of its ground handling staff thatthe airline claimed was confidential. EPMU’s National Secretary Andrew Little said
High Court proceedings were formally served against the union yesterday and heexpected to be served with a personal summons today. The court documents called theunion’s actions in telling a parliamentary select committee about its employee
contract renegotiation tactics “unconscionable and without justification”. Court
documents filed by the airline said it had suffered loss and damage to its relationshipwith its workers and to its public reputation as a result of what it called misuse of theinformation.
The Dominion Post reported that University of Otago was ordered to pay more than
$10,000 in compensation to an employee who found working with another staff
member intolerable. The Employment Relations Authority found that, while Carol
Fraser was not, as she claimed, unjustifiably constructively dismissed, there wereactions by the university which disadvantaged her in carrying out her job. Between
1995 and 2006, Ms Fraser was employed as an administrative secretary/personal
assistant in the university’s physiology department. The departmental head, Dr
Patricia Cragg, carried out a performance development review with Ms Fraser inAugust 2005 but would not address any issues related to the other employee. In her
judgment, Authority member Helen Doyle said Dr Cragg’s failure to follow up interms of “obligations of trust, confidence and good” was unjustified because “it was
not what a fair and reasonable employer would have done at the time”. The university
was required to pay $9,000 for failing to provide a good and safe workplace and nottaking reasonable steps to avoid further risk to Ms Fraser’s physical or psychologicalhealth.

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The NZ Herald and the Dominion Post reported that NZ Post was ordered to repay
docked wages to a group of posties who staged a “secret strike” by putting mail backinto post boxes. The ruling was labelled “farcical” by the National Party as it allowed
workers to employ “guerrilla tactics”. The Auckland posties went on the “secretstrike” in July 2006 in a dispute over a new employment agreement. They went totheir delivery branches and helped sort the mail in the morning, took it out on theirrounds and then reposted some letters, which went back to the sorting centres and thedelivery branches. As soon as NZ Post found out what they had done, it suspended
their pay from the day they began the action. But the Employment Relations
Authority ruled that it was illegal to backdate a suspension notice. Postal Services
Chief Executive Peter Fenton told the authority it was “unconscionable” to have to
pay the posties for what he described as an act of sabotage.
The Press reported that Air New Zealand has been ordered to pay over $13,000 to a
Christchurch man it wrongfully dismissed over accusations of viewing internet
pornography at work. Tony Wills was also reinstated in his old job after the
Employment Relations Authority ruled there was insufficient evidence to link theobjectionable websites to him. He was one of five staff dismissed from Air New
Zealand’s warehouse operations in Christchurch in late 2004 and early 2005 for theirinternet usage. Mr Wills said he had not accessed any objectionable websites but wasoften logged on to several computers at once, meaning anyone could visit any site andit would be traced back to him.

Colin Ross & Erling Rasmussen
Auckland University of Technology

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