US embassy cable - 05WELLINGTON387

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