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Deregulation of the New Zealand labour market

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Abstract

The neo-classical rationale for deregulation of the labour market argues that capital and labour should have greater choice in their relationship with each other, in particular employers should have greater flexibility to affect wages and conditions in accord with specific product markets and local conditions. Decentralised decision making, it is argued, will lead to greater market efficiency than a centrally controlled system of employment relations and wage setting. Such was the rationale for the Employment Contracts Act (ECA) in 1991. Although it did even out the relative power granted to capital and labour the Employment Relations Act (ERA) introduced a decade later preserved the general thrust of the 1991 legislation. The ECA completed the dismantling of centralised regulation of employment relationships in New Zealand. But over ten years later there is still no clear consensus on its labour market impact. The immediate effects of the legislation on unionisation and levels of work stoppages are relatively easy to document. However, outcomes related to the functioning of the labour market as a whole – unemployment rates, labour force participation rates, wage levels, labour productivity and on-the-job-training – have proved far more difficult to tie directly or even indirectly to the ECA. It is argued here that the impact of the ECA on efficiency and growth has been extremely modest and that any net improvement in conventional labour market measures has been negligible. Rather the Act has been more influential in redistributing available paid work, including the redistribution of a greater share of the surplus from labour to capital itself. Any categorical conclusions on the impacts of the ECA and the ERA require a far more carefully specified research design than has been applied to date.

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  1. Institute of Geography, School of Earth Sciences, Victoria University of Wellington, New Zealand

    Philip S. Morrison

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Morrison, P.S. Deregulation of the New Zealand labour market. GeoJournal 59, 127–136 (2004). https://doi.org/10.1023/B:GEJO.0000019971.50309.ff

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