unions

“National’s Employment and Workplace Relations Policy is a gift to employers wrapped in the language of 'reasonableness',” said Laila Harré, National Secretary of the National Distribution Union in response to the release of the policy today.

Union Relevance in Aotearoa in the 21st Century

Laila Harré
National Secretary
National Distribution Union

The European Union's highest court struck down a German law that shielded Volkswagen from takeover, paving the way for Porsche to take majority control of Europe's biggest carmaker.  The ruling is a major boost for the European Commission in its crackdown on so-called golden shares, or strategic stakes that give governments special influence over listed companies.

"The Court confirmed that public authorities should not have special rights in private companies. Special rights have become an ever more endangered species on their way to extinction," Commission spokesman Oliver Drewes told a briefing in Brussels.

The law's demise could also end decades of cosy ties between management and labour at VW in a system called co-determination that gives workers a major say in how the company is run.

The court ruled as expected that the Volkswagen Law broke EU rules on the free flow of capital because it capped voting rights at 20 per cent and let VW's home state of Lower Saxony veto strategic decisions with just 20 per cent of the votes.

Porsche welcomed the ruling that lets the maker of 911 sports cars exercise all of its VW voting rights via its nearly 31 per cent stake in Volkswagen ordinary shares.  Porsche has said it has secured enough options to let it "significantly" raise its holding in VW but has declined to say whether this meant it could already gain majority control.  "There is no decision on how we will proceed. We will take the decision to the supervisory board and this will be a decision for the supervisory board," Porsche spokesman Frank Gaube said in Luxembourg.

The next meeting of the sports car maker's supervisory board is set for November 12, he said, adding he could not say whether the VW issue would be on the agenda.  One source familiar with the matter said it was unlikely Porsche would increase its stake before the end of this year. 

Analysts suspect it may await the outcome of Lower Saxony state elections on January 27 before making its next move.  This put an immediate dampener on shares of Volkswagen, which fell 3.3 per cent to 174.52 euros by 1224 GMT after briefly rising as much as 2.5 per cent following the court's decision.  Shares in Porsche were up 4.8 per cent.

VW said it would examine the ruling's impact on its statutes, while the powerful IG Metall engineering workers union called on the Berlin government to ensure labour representatives on VW's board could still block plant closures or transfers.  "The verdict puts the interests of capital markets above those of employees and Lower Saxony," IG Metall local chief Hartmut Meine said.

The 1960 VW law stipulated that Germany and Lower Saxony were each entitled to appoint two members to VW's supervisory board as long as they owned shares.  The German federal government is no longer a VW stockholder, but Lower Saxony is its second-biggest investor and said it intends to keep its VW stake of 20.1 per cent.

Porsche said it would be in favour of Lower Saxony's two board representatives remaining in their positions.  Both Berlin and Lower Saxony said they accepted the court's decision. The German justice ministry said it would immediately start the process of amending the legislation.  The EU executive is using the court to stop member states using strategic stakes in companies to thwart takeovers.

In June it gave Portugal a final warning to scrap special rights the country holds in two energy companies – Energias de Portugal and GALP Energia.  It also started legal action against Poland over a law giving the state special rights in 15 companies.  And it warned Romania over its share in the country's biggest oil and gas firm, Petrom, a unit of Austria's OMV.

Unions are discussing streamlining political campaigning during next year's election by combining their cash in a centralised fund.  The idea, under preliminary discussion, comes as government looks to clamp down on third party campaigning.

Increased transparency around third party campaigning is designed to restrict activities such as Exclusive Brethren's $1m anti-Labour/Greens election leaflet drop, but has led to accusations that Labour is protecting a key source of income by favouring the unions.

The Council of Trade Unions' (CTU) president Ross Wilson said the centralisation idea was not in reaction to the proposed changes but had been pitched because unions had become more united.  He said there were also "clear threats to workers' rights. We gained a lot in seven years for workers ... a lot of things we have helped to campaign around and all those things are at risk if the centre-right parties continue to support their current policies".

Under the CTU proposal, unions would direct money to the single fund which would be used to inform members on parties' policies. It could also be used for external advertising, but that would have to be declared under Labour's proposed reforms.

However the Post Primary Teachers' Association (PPTA) - which National MP Murray McCully calculated spent $373,000 on advertising during the last election campaign - is unlikely to endorse the idea.

The association's president Robin Duff refused to detail exactly how much was spent in 2005 but said it was "significant". Duff said the money was not party political but spent on advocating a "first class" education system: "For me all governments should come with a health warning, and all parties", he said.  Duff said he would probably not support a central fund because the PPTA did not want to be part of a "bland campaign" that could be regarded as pro-Labour.

Leaked details around the suggested reforms include the capping of "third party" spending per year to $60,000, with those who spent more than $5000 nationally needing to register with the Chief Electoral Office. Groups such as unions and companies would be exempt if they were communicating with their members or employees.

During the last election campaign unions donated $160,000 to Labour and the CTU spent a further $83,000 on campaign advertising. Union officials helped with campaigning and some also advertised, including the EPMU which spent around $40,000.

Electoral Commission records show Labour got $930,000 from donations, with the unions and Sydney-based New Zealander Owen Glenn's $300,000 donation making up half the money. National received $1.88m, $1.75m of it anonymous or channelled through trusts.

Under the proposed reforms, Wilson said unions should still be able to tell their members directly about, for example, which parties it believed had the most favourable employment policy. It would be a "grey" area if that sort of advertising was broadcast to a wider public through radio or television, but "communicating with your members ... I don't see how that could be restricted in any way".

National deputy leader Bill English has accused Labour of structuring the proposed reforms to protect the unions, but Wilson said "the amount that we contribute as a direct or indirect campaign contribution is minimal ... it is often stated as though unions are the equivalent to corporate donations, but that is not the case".

The unions are still discussing the impact of the proposed reforms and the CTU plans to hold a public meeting on electoral funding on May 1 at Auckland University. Speakers include Nicky Hager, author of The Hollow Men and Dr Raymond Miller, head of the University's politics department.

The City's new breed of wheeler-dealers, it is claimed, demoralise and devastate every company they buy - the AA among them. Danny Fortson spent a day on the road with the 'fourth emergency service' to see if that reputation can be rescued

As on most mornings, Vincent Rodriguez, a patrolman for the AA, was assigned last Tuesday to the London "posh patrol" starting out in Victoria. When the day's first call lit up his on-board computer at 6.58am, he had already been scouring the streets for an hour, on call for members of the UK's biggest auto club.

The dashboard console gives the vitals: Lots Road. Green Nissan. Won't Start.

As he wends his way through the deserted streets of Chelsea - with The Independent on Sunday in tow (thankfully, not literally) - it is rather less dramatic than the auto club's commercials, where patrol men and women appear from hillsides and glens to come together in an impromptu chorus singing "You've got a friend".

In a few minutes, he comes upon the stricken Figaro coupé parked at the roadside and its young female driver. The problem is, after a few cursory checks, quickly apparent: she forgot to put the automatic car in "park".

Vincent gently informs her of the problem. She chuckles meekly, signs a few papers, and just like that the job is done - another satisfied customer of the UK's so-called fourth emergency service.

Before she has even turned the corner, Vincent is punching a code into the computer to request the next job. By that time, the AA has already answered 3,315 roadside-assistance calls throughout the UK - well on the way towards the daily average of around 10,000.

But on this morning after the Easter bank holiday, there is no response to Vincent's request. So it's off to Starbucks.

As we sip coffees in the yellow van, the streets are eerily still. Watching the occasional jogger or dog-walker pass by amid the beeps and bleeps of the onboard computer, a couple of minutes turn into an hour, and Vincent reveals a few insights that he has gleaned on the job.

On dead batteries: "The husband blames the wife, the wife blames the kids."

On differences between the sexes - especially where stricken vehicles are being pulled on a towpole and the motorist has to steer in the same direction as the rescue van: "Women are the best to tow as they read the instructions. Men assume they know what they are doing and end up making the most mistakes."

On motors: "You buy a German car if you want something flashy. Get a Honda if you want something reliable."

It is a bubble of early-morning serenity, and it could not feel further removed from the firestorm that has raged over the AA in the past two and a half years. In 2004, private equity firms CVC and Permira bought the company for £1.75bn from its previous owner, Centrica.

Since then, it has been held up by unions as Exhibit A for everything that is wrong with private equity. These firms, claim trade unions, buy companies and then strip the assets with little regard for workers or customers. And then they sell them on for huge profits.

Long before the public furore over private equity erupted in the wake of the failed takeover of J Sainsbury earlier this year, the AA was the unions' cause célèbre. Nowhere is the clash between the two sides more emotionally charged.

It is not hard to understand why. Soon after the 2004 takeover, new management led by chief executive Tim Parker instituted a restructuring. As a result of redundancies and the disposal or closure of AA businesses such as garages and tyre-replacement services, 3,400 jobs were eliminated. The GMB union, which had represented the company's workers since the 1980s, was marginalised. In its place came the AADU, the group's newly recognised union which was set up by former GMB officers and took most of that union's members with it.

The GMB claims the AADU was welcomed by its private equity owners because it was weaker, making it easier for them to "bully and harangue" employees into longer hours and worse conditions.

Meanwhile, CVC and Permira loaded the company with debt and paid themselves a £500m special dividend.

However, some three years on, profits have nearly doubled and turnover has increased. An aggressive marketing campaign, including the "You've got a friend" commercials, has succeeded in increasing membership.

But the AA did recently lose its position as preferred breakdown service to rival RAC, as ranked by researcher JD Power. The GMB says this is further evidence of the company's decline.

Indeed, since the takeover, a very public and vicious debate has raged about the AA, with both sides rolling out wildly diverging numbers to back their arguments. At times, it is as if they are speaking of different companies. The GMB, for example, says that 1,400 patrols have been eliminated; the AA says there are only 600 less than before the takeover. The GMB says waiting times have increased; the AA says they are slightly less. The GMB claims it represents around a third of the company's 7,200 workers; the AADU says it only has a handful on its rolls and thus its claims, motivated by bitterness at losing hundreds of thousands of pounds in union fees, should be summarily dismissed as "complete rubbish".

Rumours bubble up regularly about CVC and Permira looking to float the company or sell it for as much as £3.5bn. Finance director Paul Woolf said, however, that the company does not plan to look at such options until next year. But what will the next owner, or the stock market get - a hollowed-out husk of its former self, or a leaner, more efficient group thanks to a much- needed dose of tough love from its private equity backers?

The AA earnt £251m on £794m in turnover last year. Those numbers are up on the £129m profit and £742m in turnover delivered before the 2004 takeover.

The view of the GMB is decidedly different. Paul Maloney, the GMB national secretary who has led the union's campaign against private equity, says: "They have got 1,400 patrols less than when they bought it, but they have a bigger customer base. Members are having to wait longer and pay more for services. The AA is a failing company. Despite the best efforts of its staff, that's what it is."

In an effort to tell its side of the story, the company invited The Independent on Sunday to ride with a typical patrol to get a better sense of how things truly are at the company. To avoid accusations that the AA had hand-picked a patrolman to represent the firm, it was agreed that the AADU should select the driver.

The early-morning Starbucks reverie is interrupted by the next call: Brompton Road, Seat Ibiza, Black. Won't start. Vincent Rod- riguez puts his now-empty latte in the cup holder and is off to help another of the group's 15 million members. This time it's a dead battery. He attaches jumper cables from a suitcase-sized charger, and waits as the contraption breathes life back into the battery.

He has been at the AA for five years. A former GMB member and current AADU member, Vincent is an earnest employee who clearly loves his job. He paints the changes that have swept through the company as a necessary house-cleaning. "Hand on heart, I think that most of the [workers made redundant] couldn't be bothered. You have two types of people, the 'can't dos' and the 'won't dos'. The patrols that moan are the ones that preferred the old ways, where they could sit in the caff all day drinking tea. I don't understand all the screaming and crying. Now people are having to earn their wage, and that's what I tell the lads," he says.

On this day, Vincent has a light load. But he admits that generally he works harder.

"Those old eight-hour shifts used to take for ever. But in the last 18 months we have been so busy. Now it is job after job after job. I just get on with it. It is more financially rewarding now. There is more opportunity for bonuses."

One way to hit bonuses is to try to recruit new members to the rescue service. Patrolmen are encouraged to spend down-time between jobs in petrol station forecourts or supermarket car parks pitching memberships to passers-by.

Vincent says cold-selling isn't his strong point, but he has caught on. "I picked up on it pretty fast."

It is little surprise that the AADU chose him to represent the company: he is extremely dedicated. A trainer of fellow patrolmen, he tells his team of 55 workers that they can call him any day, holiday or not, from 6 am to midnight on the mobile if they ever have any questions.

Paul Maloney at the GMB describes Vincent as a "stooge" and alleges that inviting along a journalist to shadow a member of the AADU on a traditionally slow day is part of an elaborate ruse to craft a falsely positive image of the AA.

"They set you up with an AADU stooge patrol on a cushy day to show that everything was relaxed. We don't believe in fiction," he comments.

Whatever the truth may be, CVC and Permira are in line to trouser what will surely be a massive profit when they decide to unload the business. That is based purely on the willingness of a buyer, or the public markets, to value the company at more than what it was worth before.  For now, that is exactly what seems likely will happen.

Wage growth gathered speed in the last three months of last year, good news for retailers but not for a Reserve Bank looking for consumer spending to cool down.

The bank's preferred measure of wage inflation, the Labour Cost Index's private sector all salary and wage rates, rose 0.9 per cent in the December quarter, lifting the annual increase to 3 per cent from 2.9 per cent in September.

With overtime rates excluded, the increase was 1 per cent, up from 0.8 per cent in September, which pushed the annual increase to a record 3.2 per cent.

The public sector continues to outstrip the private sector, with central government salaries rising 3.8 per cent over 2006.

The labour cost index attempts to measure changes in pay rates for the same quantity and quality of work. It excludes promotions, service increments, bonuses or other recognition of increased productivity.

The unadjusted measure, which leaves those in, is a better indicator of what is happening to payroll costs. It rose 1.3 per cent in the December quarter and 4.9 per cent over the year.

The annual rate peaked at 5.7 per cent last March and has been slowing since then.

In the December quarter, the average increase was 5.2 per cent and the median 4.2 per cent.

Meanwhile another labour market indicator, Statistics NZ's quarterly employment survey, also released yesterday, also recorded robust growth.

Wage and salary earners' incomes rose 9 per cent over 2006, reflecting more people in jobs, longer hours worked and higher hourly pay.

Filled jobs rose 1.8 per cent in the quarter. Statistics New Zealand does not seasonally adjust that data.

Total paid hours rose 0.9 per cent (seasonally adjusted) making 3.8 per cent for the year.

That would substantially outstrip the increase in economic output over the year, implying declining labour productivity and employers hoarding workers.

"The acceleration in wage inflation will be a concern to the Reserve Bank," ANZ National Bank chief economist Cameron Bagrie said.

It had expected the drop in CPI inflation and the corresponding fall in inflation expectations to keep wage inflation contained. Its December forecasts had wage inflation remaining close to 2.9 per cent until the middle of this year, then easing.

"Today's wage inflation numbers will give them a large sense of discomfort as it suggests the combination of a tight labour market, past high headline inflation and possibly some spillover from higher public sector wage growth is seeping into wage-setting behaviour. Given the Reserve Bank's concerns about medium-term inflation pressure, they will be wary that the acceleration in wage inflation will find its way into general consumer prices."

The money market now sees an 80 per cent probability the bank will raise the official cash rate 25 basis points on March 8.

Council of Trade Unions economist Peter Conway said wage increases were modest for a labour market with widespread shortages.

The market has been tight for six years but there was little evidence that wage rises were having a major impact on inflation.

"For instance, the Labour Cost Index shows that ordinary time wages have gone up by 6.3 per cent in the past two years compared with a 25.3 per cent increase in median house prices in that period," he said.

"Consumer prices rose by 2.6 per cent in 2006 but with lower inflation forecast this year, hopefully workers can see wage rises that provide a more significant boost to real incomes."

Many unions would also be seeking employer contributions to superannuation.

"To close the 30 per cent gap with Australian wage levels, we need decent wage rises every year for the foreseeable future," Conway said.

"That will require continuous improvements in labour productivity alongside more widespread collective bargaining."

Dozens of workers about to be laid off from a Southland timber mill have no collective employment agreement and face no relief in terms of redundancies.

Milling company Bright Wood, at Otautau about 40km northwest of Invercargill, has announced it is closing the mill and 99 jobs will be lost as a result.

Otautau, a township of about 750 people is expected to suffer as a result of the closure and the Engineering, Printing and Manufacturing Union (EPMU) said there would be no relief in terms of redundancy payouts.

EPMU national industry organiser for timber, Alan Clarence, said the staff, half of whom were union members, were given four weeks' notice.

They would be paid for those weeks if laid off immediately, but otherwise would stay until the remaining work ran out, meaning there could effectively be no severance pay at all.

Another EPMU representative said the union had fought in the past to get members on to a collective agreement but the company had made it as difficult as possible.

Bright Wood New Zealand is owned by Bright Wood US and all the timber processed at the mill is exported to the United States.

The news of the closure came as a directive from management in the US yesterday at 1pm.

"The company has no community stake-holding or responsibilities, they've basically plundered and bailed," Mr Clarence said.

"The fact that we were not consulted about this at all shows how little the company values its workers and their union."

Bright Wood president Kevin Stovall said the strong New Zealand dollar and "aggressive" tactics by the Reserve Bank to curb consumer spending were hurting the export sector.

Rapidly rising electricity costs and increased operating costs resulting from the introduction of a fourth week of compulsory leave this year were also cited as reasons for the demise of the mill.

BUSINESS FORUM - ROSS WILSON
I agree with Phil O'Reilly of Business New Zealand that we should not be legislating minimum wages. We should not have to. But this action is necessary because of the entrenched low-wage legacy from the Employment Contracts era of the 1990s.

Minimum wage increases are certainly good news for more than 100,000 working New Zealanders who rely on them for a wage increase. The minimum wage has gone up by 61 per cent since 1999. Not bad compared with the 14 per cent increase in the previous decade. And it looks almost certain to go to $12 in 2008.

The increase to $11.25 will mean the minimum wage is about 50 per cent of the average wage. It is often forgotten that there is still a trainee rate (currently $8.20 and by April $9) for a person of any age who is being trained in at least 60 credits on our qualifications framework.

And Sue Bradford's bill removing discrimination against 16 and 17-year-old workers on a lower minimum wage still maintains the trainee rate, recognising the investment employers make in skill development in those cases.

But low-paid workers should not have to rely on statutory minimum wage increases to lift them out of poverty.

Though it is true that we need major change to achieve the highly skilled, high-wage economy we aspire to, there are both equity and productivity reasons for lifting wages to close the 30 per cent gap with Australia in average pay.

We need to lift our investment in modern infrastructure, skills, new technology and improving workplace practices to provide a sustainable base for continuous improvements in labour productivity. But the benefits need to be shared.

Statistics New Zealand has noted that in the measured sector, which excludes the public sector, banking and some other areas, labour productivity went up by 56 per cent between 1998 and 2005. But real wages hardly increased in that period. This is totally unacceptable. We need productivity to lift but we also need the benefits to be distributed.

Part of the solution is much more widespread collective bargaining. Only 9 per cent of private sector workers are covered by collective agreements. This is not because there are few collective agreements. There are 1800 of them. But each covers an average of only 150 workers.

We need more industry-based and multi-employer agreements which can set base pay rates and conditions for large groups of workers while still retaining flexibility for individual conditions that are not inconsistent with industry standard.

We also need a change in employers' attitudes. The labour market has been tight for six years. We have constant pressures by employers for more migrants to be brought in and we know wages are 30 per cent higher in Australia.

We have had a golden period for most of the past six years in terms of profits, increases in directors' fees, executive pay rates, and yet wages are still lagging a long way behind.

The labour market experience is in sharp contrast with the housing market. Both are markets where there is high demand. But house prices have doubled in the past five years, whereas nominal wages went up by 23 per cent.

It should also be of concern that the amount of debt held by households also doubled, as have interest payments. On average, people are using 13.1 per cent of their income to service debt. We have a current account deficit of $14.4 billion for the last year – $11.7 billion of this deficit is from the effect of investment income leaving New Zealand rather than coming in.

The twin effect of bank borrowing to fund household mortgages and remittances of profits to the overseas owners of New Zealand-based companies is the largest part of our current account deficit and dwarfs the balances on exports and imports of goods and services.

This means we need more domestic savings. But it is hard for workers to save out of a low wage packet. KiwiSaver will help. But in our submission on the Business Tax Review, the CTU argued for one part of any cut in company tax to be offset against a compulsory employer contribution to KiwiSaver.

What we need for the new year is a formula to lift wages, productivity and savings. Multi-employer collective bargaining, a cooperative approach to industry standards, a more positive attitude from employers toward lifting pay, a lift in investment in people, technology and infrastructure, compulsory employer contributions to KiwiSaver, and more effort to create New Zealand- owned companies would be good places to start.

* Ross Wilson is the president of the Council of Trade Unions.