Improving productivity is one of the major planks of the Labour Government’s economic policy. It wants New Zealand’s economic performance to rank among the OECD’s top 10.
To do this the Minister of Labour, Paul Swain, claimed in response to questioning in the House, that the proposed changes to the industrial relations legislation would improve the nation’s productivity on the basis that happy workplace is productive workplace. It is no doubt probable that happy workplace can be productive workplace, but it doesn’t seem likely that the proposed legislative changes will help.
The Minister has also established Workplace Productivity Working Group (WPWG) to advise the Government. The terms of reference are wide indeed and range from advising the Government on the current situation to possible future policy options for lifting workplace productivity. The WPWG met in March, organised workshop last month to test and develop ideas, and will meet every fortnight or month and report to Cabinet in July. That’s very tall order.
The Minister has appointed some clever people to the WPWG. I would be surprised, however, if any of the group have ever planned or implemented productivity improvement programme in any organisation.
Furthermore, there is no one from the small to medium business sector of the economy, which is surprising considering 95 percent of New Zealand enterprises fall into this category. SMEs comprise the one sector where improvements must be made if we are to lift our game.
I don’t dispute that any effort to improve productivity should be welcomed. I am simply not sure that another working group is the answer, particularly as the Small Business Advisory Group’s views on holidays and annual leave were largely ignored.
Productivity improvement is not difficult concept. To improve productivity, an organisation must increase sales/output or reduce costs or better still, do both.
Reducing costs does not necessarily mean reducing the number of people in an organisation. The Japanese showed the world decades ago how to improve productivity and the techniques are well documented. The problem is to get people to accept the challenge because it requires effort.
Structural change is needed to make the productivity improvements required to meet the national targets. Firstly, penal rates: I do not have problem with penal rate after an individual has worked the standard hours. In manufacturing for example, it is critical to have expensive machines or other technology operating for as many hours as possible. The problem is that regardless of employees’ enthusiasm for flexible working hours, union organisers insist on applying penal rates for the weekend days even when the individuals have worked only 40 hours or less.
Some readers will remember when the first flexible agreement was made in an Auckland carpet company some decades ago. The union movement sent some staunch people along to join the workplace and the arrangement was dropped. It is time to move and allow people to arrange the hours that suits them and their employers. There will not be real move in productivity in the manufacturing sector until there is far greater flexibility.
Secondly, the changes to the provision for holidays: It is difficult to follow the logic of paying people the productivity-based incentives when they are on leave. The payments are based on output and there is no output when people are not at work.
Finally, the proposed four weeks annual leave: While the idea of providing generous rest-time is great, the reality for those at the lower end of the pay scale is that they cannot afford to go on leave for four weeks.
Those in business will be very aware that it is difficult to get people to take all their current leave entitlements let alone an additional week. (And large leave balances are real financial liability.) Employees may be delighted to take the extra week’s leave in cash – contrary to the Government’s rationale for the new provision.
Clearly there are number of actions the Government can take in workplace arrangements which will do much more to improve the nation’s productivity rather than another study group. Sadly it seems highly unlikely that they will take the political risk.
David Moloney FNZIM is retired president of NZIM Wellington and former director of the Interlock Group.
