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    Essential Information on an Essential Issue

    Letter No.71

    9 January, 1998

    The French cut their working week

    January 1st 1998 brings into force new laws stripping under-18 year-old school-leavers from entitlements to student allowances, job search allowances, and training allowances.

    People under-18 years are not entitled to the unemployment benefit and the new law is expected to affect 10,000 young people and increase their dependence on their parents. All people under-25 years were previously eligible for student allowances, depending on their parents' income.

    The new law was originally drawn up under the assumption that the school-leaving age would be raised to 17 years, one of the major recommendations of the Employment Taskforce. However, six months ago, the government announced it has postponed indefinitely any moves to raise the school leaving age.

    Source -- The Dominion 1 January 1998 "Law strips under-18 student benefits" by Cathie Bell
    The government also is expected to get tougher on Domestic Purposes Beneficiaries early this year. The Word in Wellington is that the work test for the DPB is set to be ratched up another notch -- to extend to sole parents whose youngest child has started primary school.

    Last April, work testing for the DPB parent was introduced requiring them to be available for paid work when their youngest child is aged 14 years. Those who fail to take up a job or training opportunity without "good or sufficient reason" face a regime of temporary cuts to their benefits. Social Welfare Minister Roger Sowry says: "We want people who have school-age children to be asking the question whether they are available for part-time work..."

    Source -- Sunday Star-Times 21 December 1997 "Sole-parent beneficiaries to get message on jobs" by Ruth Laugesen
    The Hamilton City Council is preparing to become a major contributor to the government's work-for-the-dole scheme. A council delegation has met with Employment Minister Peter McCardle to register its interest, and Council staff are presently working out the details. Hamilton mayor Margaret Evans says she supports the scheme as long as it provides worthwhile work and does not reduce the number of jobs otherwise available. Evans: " The community has always said in surveys they want us to become involved in creating employment opportunities..."
  • Meanwhile, the Hamilton Organisation for Local Democracy is condemning the council's interest in work-for-the-dole schemes. President Warren Brewer says that the council has sacked hundreds of staff over the past 18 months, and now wants to foist a "failed American welfare model" on Hamilton. Brewer also says the workfare scheme breaches the Universal Declaration of Human Rights which states that everyone has the right to free choice of employment and to just and favourable work conditions.
    Source -- New Zealand Herald 5 January 1997 "City keen on using dole workers" by Sue McCabe
    While all eyes before Christmas were on the tariff cuts affecting the car assembly industry, hundreds of employees in the clothing, textile, footwear and carpet industries were also watching the tariff axe hovering over their own heads. Manufacturers fear that the government's determination to cut tariffs to 15% by 2000 will just as seriously affect the job prospects of the 25,000 people directly or indirectly working in the textile sector.

    Apparel and Textile federation chief executive Marcia Dunnett predicts that at least half the jobs and business will go if the government took the same approach as for cars and rapidly moved to zero tariffs between 2000 and 2002. The Minister of Commerce John Luxton is said to favour a more rapid reduction of the tariffs. The whole sector is waiting for the current review of tariffs by the government, which will be completed in March and announced in May.

  • What is at stake here? James Gardiner reports in the New Zealand Herald that the textile sector employs 10% of our industrial workforce. The sector achieves sales of $2.5 billion, of which exports amount to $0.5 billion. Women make up 74% of the employees in this sector, and 32% of the employees are Maori, Pacific Islanders, or Asian. The cost to consumers of retail import duty amounts to about $1.50 for each item of general clothing. For a t-shirt it is about 50c, for a pair of briefs about 15c, and $2 for each pair of shoes.
    Source -- New Zealand Herald 20 December 1997 "Industries shudder at tariff-cut outlook" by James Gardiner
    The Canterbury Manufacturers Association annual survey of firms shows that jobs with electronic companies will account for more than a third of the new manufacturing jobs in Canterbury next year. The CMA survey estimates 110 new jobs likely in this sector next year -- in skilled design engineering and semi-skilled assembly work.

    Christchurch prides itself in being known as "the electronics capital of NZ" -- earning over half a billion dollars of foreign exchange each year. But the sector says it has had difficulty filling job vacancies because too few students, parents and teachers see electronics as a career choice.

  • Tait Electronics is the largest commercial employer in Christchurch with 750 local staff and 250 overseas staff. Company head Angus Tait told the New Zealand Herald that a lack of suitably skilled people is a serious threat to his company's growth. He quoted the ratio of law to engineering graduates in NZ being about nine-to-one, whereas in Finland, a world leader in communications, this ratio is reversed.
    Source -- New Zealand Herald 23 December 1997 "Lack of skill causes concern" by Ivo Wynn-Williams
    The secondary teachers' union says that the teaching profession is reaching a "crunch time" as teacher morale and numbers plummet. A recent PPTA survey links the decline to growing social problems and the increasing verbal and physical abuse that teachers are having to face in the classrooms.

    Over 90% of the teachers surveyed cited an increase in the number of students experiencing social, family or financial difficulties which effect the student's performance or behaviour at school. These conditions have led to more suspensions, and even attempts to register some students as identifiable hazards under the Occupational Safety and Health Act.

    According to the PPTA, fewer younger teachers are staying in the profession, leading to fears that there will be an even more serious teacher supply problem early next century. The percentage of teachers aged under-35 is dropping steadily: in 1990 this group was 27% of all teachers, but it has dropped to 22% this year.

    Source -- The Dominion 29 December 1997 "Number of young teachers plummeting survey shows" by Alan Samson
    The government is setting a net migration target of 10,000 people a year, will relax its English language tests and will promote more business-investor migrants. The Immigration Minister announced these new targets just before Christmas. In the year to June 1997, 57,700 people left NZ long-term, while 74,500 migrated to NZ, leaving a net gain of 16,800. Bradford says the new goals will create a modest population gain of 0.2% a year.
    Source -- The Dominion 20 December 1997 "Government moves to attract new migrants" by Helen Bain
    The Jobs Gathering, scheduled for August this year, is planning to be an opportunity for people from many different sectors to come together and focus on issues of employment, training, and the changing nature of work. The organisers are the same Auckland-based network of academics, researchers and church and community activists who brought together the "Beyond Poverty" conference in March last year, and are staging the "Social Responsibility" conference at Massey University Albany next month. They say the Jobs Gathering will focus on work issues "in a way that hasn't occurred in NZ for a number of years..." and are presently calling for speakers and papers. Dates: Thursday 13 -- Sunday 16 August 1997 Contact: The Jobs Gathering, P.O.Box 423, Auckland 1 phone 09-302-2496
    Source -- Common Ground December 1997 "The Jobs Gathering"
    More than 50 businesses are interested in becoming a part of a new group being set up to challenge the Business Roundtable's view of social policy. The new group, Businesses for Social Responsibility, will be launched this month by Dick Hubbard, the governing director of Hubbard's Foods.

    Hubbard challenges the Roundtable view that businesses should only be concerned with maximising the return for shareholders. He believes that what businesses do also has implications for employees, other businesses and the wider community. Hubbard: "Socially Responsible Business is good business. Long-term companies that take social responsibilities seriously are more stable and more profitable..."

    Hubbard denies his group will be left-wing or political. But he says it will be more than a networking group -- it will have its own small staff to prepare position papers and lobby government. The group is being modelled on a similar network in the United States.

  • Business Roundtable executive director Roger Kerr told NZPA that he was frustrated that Dick Hubbard seems unwilling to debate the issues he raises. He says he has written to Hubbard several times last year but it yet to receive a reply.

    Kerr says that the Roundtable encouraged businesses to be good employers, which was in everyone's interests. It's primary role, however, was to provide goods and services to consumers at the cheapest possible price. And Kerr says that if businesses did not make profits, then this was a waste of NZ's scarce resources such as capital, labour and materials.

    Source -- The Daily News 23 December 1997 "Businessman plans to form Roundtable rival" by NZPA
    "Who said that knowledge is power? Knowledge is power only if it doesn't depress you so much that it leaves you an immobile heap at the end of your bed..." -- Paula Poundstone

    Have you started the New Year by upgrading to the latest new computer? Will it save you time? A British survey has found that every employee who uses a personal computer can lose up to three weeks of working time a year tackling technology problems on their desk. The survey, by British software company SCO and Harris Research, found that most time was lost through PC malfunction or misuse.

    The survey of 400 PC users in medium-sized and large companies in Europe found that personal computers caused stress, with employees feeling that they had to work harder than ever before. Nevertheless, employee attitudes toward PCs were broadly positive, with over 90% of respondents saying computers were vital to their working life.

    Source -- Reuters 19 September 1997 "PCs Could Waste Three Working Weeks a Year"
    The "NAIRU" is economic jargon used by mainstream economists and Treasury in their modeling of the economy. It refers to the "non-accelerating inflation rate of unemployment" and is often referred to as the "natural" rate of unemployment. The NAIRU is defined as the lowest point that the unemployment rate can fall to before pressure from demand for more workers will lead to greater wage rises being offered to those workers. This in turn will cause inflation to rise.

    The mainstream economic theory is this: We can never achieve an unemployment rate lower than the NAIRU for more than a brief period. This is because as soon as the rate falls below the NAIRU, then inflation starts to accelerate, and its only a matter of time before the Reserve Bank uses higher interest rates to discourage demand in order to get inflation under control again.

    The theories behind this tool of economic management continue to be a matter of difficult debate. It is also difficult to be sure at what level economists are calculating the NAIRU to be. Professor Jane Kelsey, author of the bestseller "The NZ Experiment" says that NZ officials are defining the "natural" rate of unemployment as around 6%. In Australia, Owen Covick of the South Australian Centre for Economic Studies says that Australian economists are putting the Australian NAIRU at 7.5%-- 8.5%.

  • One of the reasons for such a high NAIRU figure: high long-term unemployment. In a recent article on the Australian NAIRU, the Melbourne Age says that employers tend to use the length of time someone has been unemployed as a measure of their likely productivity. This means that, when demand for workers starts to grow again, employers are more likely to compete with each other for the short-term unemployed, or to bid the already-employed away from other employers.

    This also means that the long-term unemployed cease to be seen as part of the effective supply of labor. Economists then determine that inflationary pressures are emerging at a higher level of total unemployment than when the pool of long-term unemployed was smaller. The Age: "It's the build-up in the numbers of the long-term unemployed in the aftermath of the deep recessions of the early '80s and '90s that probably does most to explain why the NAIRU is now so high..."

    Source -- The Melbourne Age 22 November 1997 "Why growth alone is not enough to get the jobless back to work..."
    A new book by a senior staff member of Business Week is grabbing attention in the executive bookshelves, if only because its writer is accusing western business leaders of selling out its own working class. William Wolman is the chief economist at Business Week and is the co-writer of "The Judas Economy: Triumph of Capital and the Betrayal of Work".

    The book argues that there is no historical evidence that sacrificing growth for lower inflation is worth the price we pay in stunted growth, lost jobs and stagnated pay. Even if there was such evidence, it says that the policies still amount to a deliberate sacrifice of the interests of people who earn their living from work, in favour of the interests of investors.

    Wolman says that, since the collapse of communism, business leaders in the west have unhooked their traditional partnership with workers. And he points out that as capital relentlessly chases the lowest costs, "knowledge work" is becoming no more sacrosanct than the industrial work it replaced.

  • His example: Bangalore in India, which is fast becoming a powerhouse of international computer software development. Because of its enormous cost advantages, Bangalore is capturing thousands of jobs a year that would otherwise belong to "knowledge workers" in the developed world. Wolman: "Western capital is no longer wed to the idea that western labour -- even well-educated labour -- has to be a partner in the brave new world of twenty-first century capitalism..." "The Judas Economy: Triumph of Capital and the Betrayal of Work" by William Wolman and Anne Colamosca (pub Addison Wesley)
    Source -- Atlanta Business Chronicle Executive Bookshelf "'Judas Economy' turns up dark view of world market" by Terry O'Keefe
    "I predict that 1998 will be marked by a stark contrast in political style and direction between those who can deliver an optimistic and successful future for NZ, and those who through their negativity will cause NZ'ers to lose confidence and opportunities [...]

    "It is in the social policy area that we will see the greatest debate and the most significant leadership from this government.

    "We will lead the debate on social responsibility, focussing on what governments can and should do, and what families must do for themselves. We must talk with each other, not at each other, to find the answers.

    "We'll be working case by case to see that people who have an ability to work are encouraged to do so, at least part-time, in order to avoid the long-term welfare dependency trap.

    "NZ is still one of the best places in the world to live and raise a family. We can be as successful as we choose to be. That requires energy, determination, a clear sense of purpose and a commitment to succeed..."
    -- Jenny Shipley, Prime Minister

  • "After the coalition-inspired blunders and betrayals over the past 12 months, I would not be surprised if NZ'ers are looking to the 1998 political year with a sense of foreboding [...]

    "The economy is slowing sharply. One forecasting agency, Berl, picks unemployment, which in the June quarter was 6.6% to rise to 9% by 1999. There have recently been big layoffs, with more to come as the government eliminates tariffs at a suicidal rate.

    "Working people are mobilising against Max Bradford's plans to cash up and sell holidays. The proposed commercialisation or tertiary education is causing real anxiety in that sector. State tenants are fuming about the ever-increasing burden of market rentals. And Mrs Shipley and Mr Peters are on a collision course over superannuation: she wants to means test it; he won't.

    "There is plenty of scope for 1998 to be another tumultuous year. Throughout it, Labour will continue to focus on the key issues concerning ordinary people: health, education, housing, jobs and superannuation. Major policy work is being undertaken..."
    -- Helen Clark, Leader of the Opposition

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