Social Dividend. Ross Wilson to Business NZ

Changing Gear: delivering the social dividend. 6 December 2001

I have been asked to address the conference "for no more than 10 minutes" on the key question of how to obtain buy-in across the wider community to growth strategies that could deliver benefits to all New Zealanders.

First of all I welcome the implicit acknowledgement that community "buy-in" is a pre-requisite to achieving a growth strategy.

I think it was Craig Norgate who made the point at the Knowledge Wave Conference, that change leaders "must take everybody along".

This is not a day for looking backwards but I will do so briefly to explain the significant level of cynicism in the community about new ways to prosperity.

New Zealanders have been through tremendous change during the past decade.

In my own case I negotiated many of those changes in rail and ports. In ports in the late 1980s I persuaded our union to positively embrace and negotiate change. Our members accepted that and re-structured long-standing agreements and work practices to deliver huge efficiency gains in ports, but with some productivity sharing incentives for the smaller workforce which remained.

And then many of the same employers used the ECA to unilaterally vary the deals which had been done and reduce the wages and conditions again.

That has been a common experience during the past decade.

More than anything else I think workers felt that they were not respected, because they were seen as a cost rather than an asset.

And those of us who have read Paul Dalziell's comparative study will know that his view is that the overall effect of the 1990s policies was negative. Although the NZ & Australian economies tracked along the same prior to 1984, they diverged markedly after that. If the New Zealand economy had grown at its previous trend rate, or matched Australia over the same period, output would be a third higher than it is now. The amounts of personal and public income associated with this are staggering. At current tax rates the extra income would have generated an extra $11 billion of tax revenue per annum - enough to halve net government debt, or double spending on health and education.

The point I am making is that there is a general feeling, and considerable evidence, that the NZ experiment failed. Any suggestion that it should be resurrected, as some speakers seemed to suggest at the Knowledge Wave Conference, would be strongly resisted.

Having said that, it is not true to suggest that unions do not support economic growth. I was intrigued by Simon Carlaw's claim in the invitation letter I received that "business is the only group in the community that unequivocally backs growth".

So I dug out a CTU publication from the early 1990s. "A Quality Future; Working Together for Growth in New Zealand".....published in October 1992.

The report identified the following commonalities in successful nations and enterprises:

-An emphasis on co-operation and consensus -Recognising competition and change as a challenge -Changing technology -Quality at all levels -Less Hierarchical management -Flexibility in the face of a constantly changing world -An educated and engaged workforce -Innovation and creativity at all levels

It also noted that:

New Zealand needs a clear sense of direction. A government which sticks to a rigidly "hands off" approach to economic management cannot provide the necessary leadership".

In a speech this week Simon Carlaw welcomed the Government "transition from unthinking hands-off to helping hands". I agree.

The CTU has also been heartened by the increasing emergence of a more balanced approach both at the national policy level from government, and from many businesses. At the Government level, we have seen a Treasury paper on the Inclusive Economy, a document on social indicators, a focus on economic transformation through investment, science and innovation, economic development with industry and regional dimensions, and greater consideration of the component parts of a sustainable development strategy. At the level of the firm, we observe increasing interest in triple bottom line accounting principles.

We are not naive enough to believe that this means that costs do not matter. Cost will always matter -- all other things being equal. But as we know, all other things are not equal. Therefore there needs to be more focus on revenue generation, new ideas, investment in people, research and development, and social inclusion.

So - we are interested in an investment and development approach to economic growth. We are not keen on jobless growth. We are not happy seeing some $7 billion a year as our investment income deficit due partly to repatriation of profits overseas. Imagine how much lower our current account deficit would be if the investment deficit was substantially reduced.

Even if we set aside the uncertain outlook in terms of a global recession, there are still some major economic issues to address in this country.

Problems with physical infrastructure, investment income deficit, low real wages, poverty, income disparity, and pressures in relation to health and education expenditure - also high levels of emigration to Australia.

The CTU has for many years advocated a high wage, high skill policy environment. This would involve interest and exchange rates that support employment growth, industry policy that promotes quality exports and import substitution, a more active role for government, and significant investment in skill development. Such an economic policy needs to be underpinned by an adequate floor of rights in the labour market, and improvements in the social wage.

But one of the keys to growth from our perspective is skill development.

Given that over 80% of the workforce of 2010 are already in the workforce of today, we ignore their skill development at our economic peril.

We recognise that we must be part of what some now call the "knowledge wave". This does not mean that we have to accept the characterisation of the knowledge society that others might impose. Our concerns about the Knowledge Wave Conference included criticism of the tendency to focus on a more ?lite, highly educated group with specialist skills, rather than on skill development at every level. We were also critical of the failure to address the question of what sort of workplace is required to not only ensure that lifelong learning is a reality, but that knowledge is productively applied on a day-to-day basis.

I suggest that this will be a workplace characterised by information sharing, respect for employees, a teamwork approach to getting the job done, a concern about quality of life issues - and with good pay and conditions.

Put simply, workers need to be seen as an investment, not solely a cost. We are starting to detect a change in attitude. A training culture is emerging. Many employers from the late 1980s had been able to source skilled labour from those displaced through the state sector restructuring, privatisation process, and the closure of the so-called protected manufacturing sectors. But that is no longer possible and there is now an acute awareness of not only current skill shortages but also the fact that the age profile of those formally trained has risen.

For the worker of today - job security is not just about the current job. It is about lifelong learning ensuring that the combination of relevant skills and experience ensures employability in a global labour market.

So how do we obtain that buy in to a growth strategy? How do we, to use Craig Norgate's words "take everybody along with us"?,/p>

There must be:

Leadership

From Government, business and from unions. We have a job convincing union members that there will not be a re-run of the 1990's sometime in the future. Workers and their unions did get burnt in the 1990s. They believe the attack on unions was an attack on their social and employment conditions.

But we have to move on, and as the largest democratic organization in New Zealand with a quarter of a million affiliated union members, the CTU does have the capacity to influence many people in our communities. In fact communicating at that level is our busiess.

Whether we can commit ourself to a particular growth strategy raises the second principle:

Integrity

There must be a mutual trust and commitment. A genuinely inclusive approach. I think we need a social partnership under which the CTU and Business New Zealand, and perhaps other organizations, actively engage with each other and with government to devise innovative and sustainable solutions.

The successful country models like Ireland, Finland and Singapore show that the systematic involvement of the social partners at national, industry and enterprise level can yield the best results in terms of long-term economic and social reforms, balancing flexibility with security, enhancing competitiveness and the quality of employment and promoting economic and social security.

In its most successful forms social partnership implies the replacement of an adversarial relationship, and expands beyond the workplace into broader economic and social-policy making bodies and labour market institutions.

It promotes a more cooperative relationship based on mutual trust and respect and the appreciation of each other's concerns and objectives.

An ILO study published last year documented the remarkable economic and labour market recovery made by four small European countries; Austria, Netherlands, Denmark and Ireland.

The study shows that social partnership and the efforts of social partners and governments to arrive at new solutions played a critical role in their economic and labour market success.

Process and Commitment

But process is important too.

If there is to be a social partnership approach we have to put it up there in black and white. What are we committing to and what are the expected mutual obligations and returns?

In countries like Ireland the partnership objectives and commitments are formalized into quite detailed national agreements which are then debated and ratified by workers in votes at workplace level.

But there is no "best model" and we would have to develop our own.

The essential question is whether there is an ability for either the CTU or Business N Z to commit to such a model with integrity.

For our part I would have to acknowledge that we would have lively debate within unions if we proposed a social partnership with Business N Z and the Government.

People are bruised by the 1990's experience.

They have observed a strong employer attack on the Employment Relations Bill and now an attack on proposed changes to improve health and safety at work.

True, Bill English acknowledges that he would not go back to the ECA but Simon Power has told us that they would remove the current recognition and role of unions in the Act. So we are still a target for political attack.

Can we move on to a more mature relationship? We both have our cowboys. There are pockets of resentment from the 1990's. For example, there is no doubt that the current couldron of dissatisfaction among nurses and other health workers in Christchurch is directly related to the actions, and aggressive style, of the health sector employers down there during the past decade.

I think it is your choice more than it is ours but, like any partnership, it would require a genuine joint commitment to make it work. I think we could deliver. Could you?