The Industrial Relations Act 1973 was a recognition of the change to direct bargaining. Importantly, it provided a mechanism for unions and employers to either bargain directly or use the old conciliation and arbitration model with a few modifications. Furthermore, an incentive was provided for unions to register by allowing registered unions to legally enforce agreements that were the result of direct bargaining.
At this point it is worth considering the position of the public service. The state is and always has been the largest single employer in New Zealand , but it has not historically been an especially generous one. Public servants formed their own union, the Public Service Association (PSA) in 1913. The previous year had seen a disorganised and disparate public service managed by a number of different ministers merged into one central organisation, headed by a Public Service Commissioner who was responsible for staffing matters.
In 1927, the Public Service Act 1912 was amended to require the commissioner to make appointments on the basis of merit rather than seniority. The system lasted reasonably well until 1962, when the State Services Act replaced the Public Service Commission with the State Services Commission, which was responsible for employing and determining the working conditions of all state servants. In 1969, the State Services Remuneration and Conditions of Employment Act provided for comparisons to be made between pay and conditions in the public sector and those in the private sector, with a view to establishing and maintaining a degree of equity between them. This was refined again in 1977 to allow for annual incremental salary increases on the basis of occupational class.
The 1970s and early 1980s were a turbulent time for New Zealand , economically and politically. Worldwide oil shortages in the mid-1970s placed considerable strain on the costs of production at all levels. Not only were our own goods expensive to produce, but goods produced by other countries became very expensive to buy, and the cost of transportation was almost prohibitive.
Prime Minister Robert Muldoon resorted to greater and greater levels of regulation and protectionism in an effort to stem the tide of economic misfortune. Muldoon imposed a complete wage freeze from 1982 until 1984. At the same time, massive amounts of public money were spent on projects trying to develop alternative sources of energy. These became known as the ‘Think Big’ projects. Overseas borrowing to finance these projects reached record proportions. New Zealand was rapidly heading for bankruptcy.
A Labour Government was elected in 1984 – but with little idea of the financial crisis it was inheriting. Desperate and urgent reform was necessary at almost every level of the economy. And desperate and urgent reform was precisely what the country got.
The reshaping of employment relations was part of a much wider story. To understand what happened to employment relations during this time and during the years between 1991 and 2000, it is necessary to understand the massive economic and resulting social changes that occurred in New Zealand.
Before 1984, New Zealand had one of the most regulated and protected economies in the western world. The Government intervened in most economic interactions in one way or another. Tariffs (a kind of tax) were charged on imports to artificially increase their prices so they would not compete with locally produced goods. Tariffs were applied not only to imported cars and vehicles, but all sorts of goods including chocolate, wine, dairy produce, textiles and so on.
At the same time, many export industries were actively assisted; when overseas prices for their goods fell below a certain minimum level, government subsidies would be paid to make up the difference. Farmers were subsidised if the price of lamb, or wool, or butter or other dairy products fell.
In the domestic market, the Government regulated both the prices at which some goods and services could be sold and the number of those goods or services that could be produced. The most dramatic and extreme example came when a complete freeze on wages and prices was imposed in 1982. But in fact there was very little free wage bargaining between 1971 and 1984, as the Government adopted a variety of less direct ways to restrain wage increases.
In 1984, the Labour Government set about systematically dismantling the protected and highly-regulated economy that New Zealanders knew so well. Controls and regulations were lifted from the domestic economy. In one example, interest rates were floated and initially skyrocketed, before dropping and then forcing the banking sector to become considerably more competitive in the mortgage market.
Alongside this dramatic deregulation, state assets were sold, amidst much controversy. A number of non-core government functions were corporatised. The core government departments that remained were dramatically restructured in line with the view that they should operate as businesses, and be more accountable to their respective ministers and the Treasury for their spending.
In little more than six years, New Zealand became one of the most deregulated economies in the western world.
These changes had an enormous effect on labour relations, but the infrastructure governing those relations remained relatively intact until 1990, at least in the private sector.
Within the public sector, however, it was a different story. Of the three primary pieces of employment relations legislation from that period, two brought fundamental changes to the working relationship between the state and its employees. The combined effect of the State Owned Enterprises Act 1986 and the State Sector Act 1988 was to push public sector labour relations much more into line with what was happening in the private sector.
Both the remodelled state sector and the private sector fell under the jurisdiction of the Labour Relations Act 1987. This Act kept the fundamental framework of annual awards and what became known as the Arbitration Commission in place, but also encouraged employers and workers into direct bargaining. There was a sharper focus on negotiations in particular workplaces or industries rather than occupational classes. One effect was that workers and managers began to negotiate single collective contracts for all the workers employed within a particular business, rather than a variety of different contracts covering (for example) mechanics, machinists, caterers, security staff, and so on. In the event that disputes arose which could not be resolved before the Arbitration Commission, the new Labour Court would determine the matter.
The Labour Relations Act was a disappointment to the captains of industry who had lobbied hard for deregulation within the labour market. The unions, if not happy, were at least kept from outright revolt. During this time of upheaval there were two areas the Labour Government dared not touch in any meaningful way. These were the labour market and the social security system.
But although the labour market appeared relatively unaltered, this was far from the case. Industries succumbed to the pressure of foreign competition and collapsed. New Zealand lost a viable automotive industry, for example. Literally thousands of people became jobless. Farmers and others who had enjoyed generations of state protection fell upon increasingly hard times as they too felt the force of the international marketplace.
In the state sector, massive restructuring followed both the sale of state assets and the corporatisation of state businesses. This resulted in the loss of thousands more jobs.
In 1984 the number of registered unemployed was approximately 110,000. By 1990 this had almost doubled to 200,000. For those who remained in the workforce, real wages and conditions were reduced quite dramatically. There was a sharp increase in people working part-time or on short-term contracts. The days of having a job for life had disappeared. With them went a great many assumptions about the role of work and an individual’s expectations of their employment relationship and of their employer.
Against this backdrop the influence of the unions waned. When a National Government was elected in 1990, a different lobby group would hold sway.
