NEW ZEALAND'S UNIONS FLEXING THEIR MUSCLES

UNCLAS SECTION 01 OF 03 WELLINGTON 000387

SIPDIS

SENSITIVE

STATE FOR DRL/IL AND EAP/ANP

E.O. 12356: N/A
TAGS: ELAB ECON PHUM NZ
SUBJECT: NEW ZEALAND'S UNIONS FLEXING THEIR MUSCLES


(U) Sensitive but unclassified -- please protect
accordingly.


1. (U) Summary: After a decade of quiet on the labor front,
New Zealand's unions are again walking the picket line
against a spectrum of industries. Emboldened by union-
friendly legislation enacted in 2000 and 2004 and anxious to
grab a bigger slice of the country's recent prosperity,
organized labor has in recent months launched a series of
work stoppages in pursuit of higher wages. The stoppages
are expected to continue through the Southern Hemisphere
winter, possibly affecting the national election campaign
that will start sometime within the next 100 days. The
timing of labor's newfound restiveness does not please the
Labour government, which had thought it had appeased workers
by legislating stronger protections for employees, raising
the minimum wage, increasing annual leave and providing paid
parental leave. End summary.

Striking for more pay
--------------

2. (U) In February, the Engineering, Printing and
Manufacturing Union (EPMU) -- New Zealand's largest union
with 50,000 members -- began a "Fair Share - Five in 05"
campaign, seeking a 5 percent annual increase in wages. The
campaign was endorsed by 32 other unions, all members of the
Council of Trade Unions. Organized labor sees the campaign
as the most important since 1991, when a National government
crippled the union movement by abolishing compulsory
unionism (closed shop) and national awards, which set
minimum pay rates and conditions in a particular industry
for all workers, even those not in a union.


3. (U) Metal workers on March 15 began a series of one-day
strikes in the first industrial action in pursuit of the
first national employment agreement in a decade. Other
workers -- including university staff, bank workers, bus
drivers, miners, hospital workers, furniture and
manufacturing workers and security guards -- have followed
in step. Most have engaged in brief work stoppages and
rolling strikes. A Colgate-Palmolive plant in Petone,
outside Wellington, was struck beginning April 4 for the
first time in its 50-year history. Coal miners walked out
nationwide for 48 hours starting April 21, their first
strike in more than 10 years. Staff members at the National
Bank of New Zealand held a one-day strike on April 22, their
first industrial action in almost 20 years. In April,
strikes were called at a rate of almost one a day. There
were only 34 work stoppages in all of 2004, when losses in
wages and salaries attributed to work stoppages fell to
their lowest levels since 1970.


4. (U) Unlike any year since 1991, this year's strikes are
hitting a broad cross-section of New Zealand industry,
according to labor and business leaders. "It feels like the
old days" of militant unionism, said Phil O'Reilly, chief
executive of Business New Zealand, which represents the
interests of businesses and employers. The recent strikes
may reverse a downward trend in work stoppages that started
in the late 1970s.


5. (U) The metal workers originally sought a 7 percent
annual pay raise, but in early May settled for something
less -- a 5 percent pay increase over 15 months. That works
out to an annualized increase of about 4 percent. The
agreement covers 70 companies so far and more than 1,000
workers. EPMU expects the industrial actions to continue
through the New Zealand winter, according to Peter Conway,
economist and policy/industrial director for the Council of
Trade Unions (CTU). The council's members represent about
88 percent of New Zealand's organized labor, or 300,000
workers.

Feeling strong, but discontent
--------------

6. (U) Two factors help explain the recent rise in labor
actions, according to business and union representatives.
First, organized labor is feeling empowered by two pieces of
legislation passed by the Labour government to spur union
membership. The Employment Relations Act of 2000, which
repealed the National government's 1991 labor relations law,
promotes and supports collective agreements rather than
individual contracts that had become the norm for New
Zealand workers. An amendment to the law, enacted in late
2004, makes it easier for unions to negotiate multi-employer
collective agreements and harder for companies to opt out of
such negotiations. The amendment "put more tools in unions'
hands," O'Reilly said.


7. (U) Second, workers also have become disgruntled watching
their wage rates grow more slowly than the New Zealand
economy. Average wage rates increased just 2.5 percent in
2004, amid an economy that grew 4.8 percent. Executives'
average salaries rose 5.2 percent last year, and company
profits -- based on tax data -- jumped 19 percent. (Even
Conway conceded that actual company profits may have been
less, since the data included new companies and reflected
some deferred losses.) With unemployment in 2004 at 3.6
percent, the lowest in the developed world, workers are
feeling emboldened to seek higher wages.


8. (U) Unions are presenting their demand for a 5 percent
wage increase as simply a means to provide workers with a
"fair share" of the economic growth of the last five years,
Conway said. O'Reilly criticized the EPMU's 5 percent
campaign for failing to consider differences between
industries. Some companies just cannot afford a one-size-
fits-all wage increase, he said. Conway noted that the rate
was based partly on 2.7 percent inflation in 2004 as
measured by the Consumers Price Index.


9. (U) Organized labor also is betting that its well-
publicized activism will revive interest in unions and boost
sagging membership. Union membership fell by half in the
eight years between the National government's 1991 reforms
and 1999. Unionized workers numbered 340,413 last year, or
21.5 percent of the workforce, compared to 51 percent of the
workforce in 1991, the last year when unions could bargain
for a closed shop. The Employment Relations Act of 2000
helped arrest the decline in membership, with unions gaining
40,000 new members since then. But that increase in
membership has not kept pace with strong employment growth
in recent years. The 2004 amendment could help make a
difference: It requires nonunion workers to pay a
"bargaining fee" to obtain wage rates and conditions
negotiated by a union. While the nonunion workers can
choose not to pay the fee, they then would have to negotiate
their own contracts. Employers expect that provision to
boost union membership, O'Reilly said.

Biting the hand that fed it
--------------

10. (U) The timing of the unions' campaign is odd, with the
economy showing signs of slowing and with workers' political
ally, the Labour Party, seeking a third term in this year's
election. Conway explained that, six months ago when the
unions were planning their strategy for wage hikes, the
economy still was booming. It is not unusual for pay
demands to lag economic reality, O'Reilly said.


11. (SBU) The unions also did not have the Labour government
foremost in its thoughts as it planned its drive for wage
increases. When the Prime Minister was asked by reporters
about the campaign, she reacted coolly, suggesting that any
pay negotiations should take into account the tax relief
that the government was providing to low- and middle-income
families beginning April 1. Conway acknowledged to post
that the EPMU had failed to adequately brief the Prime
Minister.


12. (U) Several government ministers have complained to the
EPMU about the campaign, Conway said. The ministers worry
that the industrial actions will become a campaign issue --
that the government will be blamed for low wages or for the
inconvenience the strikes cause, particularly a bus drivers'
action that repeatedly disrupted Auckland's commuter flow.
The opposition National Party already has blamed the
government's policies for the disruptions, claiming that tax
cuts would be a more effective way to raise incomes for all
New Zealanders.


13. (U) The ministers also worry about the effect on public-
sector negotiations, with several contracts coming up for
renewal later this year. The CTU is sensitive to these
concerns, Conway said. For example, it has cautioned the
striking bus drivers' union, which does not belong to the
CTU, that it risked alienating the public with its week-long
strike and rejection of a wage offer that appeared to be
reasonable.


14. (U) Nonetheless, Conway asserted that recent labor
activism was the result of the government not going far
enough in reforming the nation's labor law and not making it
easier to spread wage increases across industries. The
unions had hoped the 2004 amendment would institute a multi-
employer award system, similar to that in Australia. But
the unions realized they would not win such a provision in
the face of employers' strong opposition to even "mild"
elements of the amendment, Conway said.


15. (U) Meanwhile, government ministers are reported to be
mystified at what some see as labor's ingratitude. Since
1999, in addition to the legislated protections for workers,
the Labour government has provided an extra week of annual
leave, for a total of four weeks' paid leave; boosted the
minimum wage each year; increased wages for working on
holidays; and, introduced paid parental leave.

Comment
--------------

16. (U) Old-time labor leaders can still recall when their
unions could slam the brakes on the New Zealand economy and
even bring about changes in political power. But those
memories are fading. Today's reality is that labor unions
wield limited political power and a marginal economic
impact. As a result, they are pursuing a bid to revive
their fortunes as shapers of the New Zealand economy and its
social fabric. With the effects of the 2004 amendment still
to be seen, it is too early to tell whether organized labor
can convert such legislative victories into significant
increases in public support and union membership. But the
unions' actions -- coming soon before general elections and
at what Finance Minister Cullen warns is the start of a long-
predicted economic downturn -- could hardly have come at a
worst time for the government.

SWINDELLS