May 15, 1991 marked the dawn of a new system of employment that utterly transformed the world of work. The Employment Contracts Act dramatically deregulated the labour market, struck a huge blow against the union movement, and reshaped the economy. Alex Braae looks back.
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Originally published on May 15, 2021.
When Faith Harrison began working at the supermarket, she didn’t do weekends. Nobody did, because the store was closed.
That was 44 years ago, when Countdown was Foodtown. She took a job in the butchery department at the Onehunga store and has been there ever since, rising to a position of managing her team in that time.
At first, she loved the freedom her working life allowed, and felt almost rich on the money coming in. “I was heavily involved in sports, so it was a good place to be at the time, because we only did Monday to Friday,” she said. Working late on Friday night meant extra pay, thanks to the penal rates.
Today she works Tuesday through Saturday, every week, nine hours a day. “No weekend shopping, oh I miss those days, it should still be the same. You know, family time’s gone out the door.” Raising five kids, her earnings have sometimes left her barely able to get by. Harrison makes it clear that Progressive, owner of the Countdown chain, has always been good to her, as far as employers go.
But her life story gives a snapshot of how much a single piece of legislation changed the nature of work in New Zealand. It’s a story about modernisation, and what gets gained and lost in the process. It’s a story of fighting over the fundamental relationship between employees and employers. And it’s a story about how unity among working people can be the difference between them winning and losing those battles.
Sweeping away the system
By a quirk of history, the Employment Contracts Act was originally meant to be passed through parliament on the first of May, 1991. May Day is internationally celebrated as a day to mark working class struggles.
As it happened, the National government passed the ECA later in the month, exactly 30 years ago today. The ECA massively deregulated the labour market, and can be seen as part of a continuum of reforms started by the previous Labour government, often described as Rogernomics, after the free-market finance minister of the time, Roger Douglas.
The ECA swept away the system of “national awards” that had previously governed employment. Under the awards, whole industries would have the same baseline pay and conditions, which were hammered out every year by union and employer representatives. Before 1991, unionism had been effectively compulsory.
Harrison had been involved with awards arbitration. She used to go down to Christchurch for meetings that took place over three days, with a mediator sitting between the two sides. At the end of it, she’d take the offer back to members to vote on, and they would have the choice of either taking it, or taking industrial action.
The 1991 changes meant that every employee would either be on an individual contract, or on a single-employer collective agreement. “At least with the award, we kept our penal rates, our laundry allowance, and you had long service [bonuses]”, said Harrison. “If you were going to another job, at least you knew what your rate was. Whereas now, you have to negotiate that rate.”
Negotiations for collective agreements after 1991 could be a lot more intense. Harrison recalls one round of negotiations in which the union simply refused to leave the table, or agree to what was being offered – in the end everyone had to keep thrashing it out until four in the morning.
The policy development for the Employment Contracts Act took place when National was in opposition. Jim Bolger, under whose prime ministership the legislation was enacted, told The Spinoff he didn’t consider himself anti-union by any stretch, but the law change was necessary because of the impact strikes had on the country, a view formed by his experience as the labour minister under Rob Muldoon.
“I spent virtually all my time as minister of labour resolving and arbitrating strikes in my office. This was disaster territory that I inherited and worked my way through. Yes, we did other things, but it dominated everything,” said Bolger. Many of the strikes seemed to him like “unbelievable nonsense”, he said.
“The Employment Contracts Act was designed to introduce a different structure to work relations. And it dramatically changed the landscape in terms of stoppages and strikes.” Bolger added that “what we mustn’t do is romanticise the past. It was a terrible system.”
The ECA was always intended to be an “employers charter”, said Otago University associate professor Brian Roper, a staunch opponent of the changes at the time who has made a name for himself researching how business lobbies government ever since.
“It was really the largest defeat suffered by the union movement in Aotearoa since the maritime strike of 1890, and it fundamentally reshaped the legislative framework for employment relations.”
Roper said the ECA reforms took place in part because unions had already been weakened, and high unemployment had diminished their bargaining power. He argues that when unions are particularly strong, businesses lobby for centralised systems to determine wages, to deter union militancy and strike action. But when unions are weak, employers can offer poorer wages and conditions, so decentralisation suits them better.
There was heavy lobbying from the Business Roundtable and Employers Federation for the ECA. Much of it is detailed in journalist Rebecca Macfie’s new book about the life of union leader Helen Kelly. A letter written at the time by Roundtable executive director Roger Kerr included a claim that the draft law was having a “big effect in policy circles. We should see the returns for this and other past efforts in the next couple of weeks. My expectation is that much of our framework will emerge, but with some blemishes.”
When the Employment Contracts Act passed, Maxine Gay was working for a union that doesn’t exist any more. She was an organiser for the Clerical Workers Union, as well as being a regional secretary for the Council of Trade Unions in Manawatu. Ultimately, the CWU became “one of the casualties of the act”, said Gay. “It de-unionised 20,000 primarily female workers.”
Gay tells the story of a clothing worker in Hāwera, who had a baby in 1990 and left the workforce, earning “something like $13 an hour – she was a sample machinist, so was paid reasonably well.”
“She came back to work in the same factory 16 years later, on less money than she had left on when she had a baby.” The minimum wage, which in 2006 was $10.25 an hour, had become the new floor for what workers could expect, said Gay.
Full circle with fair pay agreements
Industrial relations laws went most of the way round a full circle last week, with the announcement that fair pay agreements would be introduced. These will set minimum standards for industries, bearing some resemblance to the old national award system.
In another of those twists of history, Jim Bolger accepted an offer from the Labour-led government to chair the working group on FPAs. He said the goal of that report was to “support workers and firms to drive productivity growth and share the benefits”. He doesn’t agree, however, with the view that FPAs will undo the work of his government on the ECA.
“What we wanted to do in that report is in fact to stop us having some employers totally undercut others who are trying to be fair and decent. Some employers went to what’s called the living wage quite early on – it’s hard to argue against the concept of the living wage.” He added though, that some people will “always try to screw the worker”.
FPAs will also entrench unions as the key bargaining parties on the side of workers, a role that has been steadily eroded over the decades. “This is what working people in unions have been campaigning for; a more balanced employment relationship between working people and employers,” said CTU president Richard Wagstaff in welcoming the plans.
Over the last three decades, the changes in the ECA, combined with a range of social and economic forces, saw the power of unions steadily fade and inequality grow, with workers often missing out on the fruits of productivity. “Real wages have been rising appreciably more slowly than productivity measured as added value per hour worked,” said CTU economist Bill Rosenberg, in a piece of research published in 2010.
After Labour got back into government under Helen Clark in 1999, the Employment Contracts Act was repealed and replaced with the Employment Relations Act. But some of the key provisions were kept.
One of these was around the concept of “free-riding” – in which non-union members are able to take advantage of the gains negotiated by the union. Immediately following the passing of the ECA, union density collapsed. In 1991 there were more than 500,000 union members in New Zealand. The next year it was just over 400,000. Despite the population of the country growing rapidly, that number has stayed pretty much static ever since.
Associate professor Roper said the ECA “undermined union membership and bargaining power through the legislative entrenchment of free-riding.” That provision wasn’t repealed in the ERA.
Was weakening unions an intended outcome of the ECA? Bolger said he “strongly supported” an end to compulsory unionism. “The unions were substantially a political movement, and the requirement that you had to join a political movement to get a job doesn’t ring well in a free society.”
In her capacity as a union delegate, Harrison said she still sees the impact of this routinely. There can be tensions between those on the collective, and those on individual agreements.
“Some people will say we’re bullies, some will say nah, that’s just the way it is. Because it can cause a rift between staff.” This is particularly true when those on the collective get their pay rise several months before it filters through to those on individual agreements, even though that is basically the only difference between the two categories.
The fight before and after the ECA
Opposition to the Employment Contracts Act was fierce and widespread, but more muted than many would have liked. Many in the union movement had been shocked at the speed and scope of Rogernomics, and feared what would happen next.
Massive protests took place in both big and small centres, with hundreds of thousands of people involved in demonstrations. Roper was in Temuka at the time, a town just to the north of Timaru. “When I heard that there had been a protest of 3-400 people in Temuka, I knew it was huge.” At the time, the town’s population was around 3000.
Some believe that by going further and harder, the trade unions could have defeated the ECA, particularly if every union under the banner of the CTU participated in a general strike. “There were signs that the government was starting to panic,” said Roper. But some senior unionists decided that a general strike would alienate unions from public support, and so worked to prevent it.
Bolger strongly disagrees that the government could have been swayed. To an extent, that was simply because of the crushing majority National enjoyed in parliament after the 1990 election. But even so, Bolger said he had no memory of feeling threatened by the possibility of a general strike.
“There were some quite large protests, but they were totally predictable. And they didn’t – I don’t think they really played into our calculation of it,” said Bolger. “And to go back to what I said earlier, we had written most of this because we knew we had to make change and move quickly.”
For Harrison, her fears began to be realised about two years after the ECA passed, particularly when she started understanding how differently collective agreements would be negotiated compared to the old awards system. “As time went on, it started chewing up all our penalties. We were losing this, and this. In some cases people were seeing the dollar signs, but not seeing further than that.”
While the frequency of strikes has gone down dramatically since 1991, they still happen when unions are strong enough to believe they can win. Harrison was involved in one in 2006, when workers at Progressive distribution centres went on strike – and were then locked out by the company.
The dispute centred around more than just pay rates, with distribution workers attempting to also get a nationwide collective agreement. Her department wasn’t involved, but Harrison and her union colleagues joined in solidarity. She said something like 20 buses went to the company’s head office to protest. “It affected all of us, regardless of which department you were in,” she said. “We didn’t move until the company met us.”
At the height of the dispute, supermarket shelves started to run out of food. Given the importance of supermarkets to daily life, the dispute garnered significant national attention. Other unions gave financial support to locked out workers, and some threatened to take industrial action of their own in support.
In the end, a compromise was reached. There was no nationwide collective, but pay rates were equalised across the country, and a pay rise of 4.5% was achieved. Progressive was able to claim victory, in the sense that they got back to business as usual. But the unions perhaps won the bigger victory, because they showed they still had muscles to flex.
A new generation
“Don’t take this the wrong way, but I find your generation totally different to us,” said Harrison, to the Spinoff reporter born in the early 90s. “They don’t know any better. The young ones – we can go on and on about what it used to be like, but it just goes over their head.”
For better and worse, the workforce is now largely made up of individuals trying to navigate through as best they can. And for anyone who started working after 1991, that’s all they will ever have known. The social impacts of that, in how people relate to work, have been profound.
Throughout it all, there’s one thing from the old awards that Harrison has been able to hang on to. She still gets the laundry allowance, having refused to sell it as part of new contracts being negotiated. Nothing of the sort is offered to those who come in on individual agreements now, but Harrison said she’s always been “too much of a tight-arse” to let it go.
“Five dollars ain’t much,” she said of what she gets. “But it was better in my pocket than their pocket, as far as I was concerned.”