Job Summit: What did it really achieve?
- 06 March, 2010 22:00
Expectations were high; the rhetoric laden with words such as "practical", "achievable", "flexibility" and "goodwill". To fight a deepening recession, the newly elected Government was promising a "rolling maul of initiatives" from its jobs summit, held a year ago last week. Jobs would be saved; new employment would be created.
"You are here because you are doers, " Prime Minister John Key told 250 hand-picked CEOs, directors, union leaders and other hangers-on.
"If anyone doubted that this process would generate practical, concrete ideas, they were wrong, " he said.
"Our task is to come up with practical, achievable steps we can take to save and create as many jobs as possible." Summit chairman, NZX boss Mark Weldon, was equally enthusiastic.
Last February, he told summit participants the task was "about identifying the steps we need to take, now and in future, to create meaningful, productive employment of New Zealanders in healthy, growing businesses, from farms to factories and every sector in between. These are extraordinary times that demand breaking out of the old way of developing, consulting on and implementing policy." What a difference a year can make.
Nowadays, Weldon isn't talking and appears to have distanced himself from the summit and its outcomes. His PR person says he decided to step back after the event, has had no watching brief since then and has nothing further to say.
In the past year, what exactly has been achieved? Has the Government, in its own words, maintained the momentum by crafting concrete job opportunities from the two or three big-ticket ideas emerging from the summit?
Or, instead of the promised rolling maul, has it dropped the ball?
In the year since the summit, unemployment has jumped from 4.6 per cent (105,000 people) to 7.3 per cent (168,000 people). Youth unemployment, for those aged 15-19, is 26.5 per cent. For Maori in the same age bracket, the figure is a "shocking" 38.7 per cent, Business Roundtable executive director Roger Kerr observed last week.
Figures from Key's office show the summit cost taxpayers $52,000. On top of that, union leaders, and directors and senior managers from some of our biggest companies donated hundreds of hours' preparation before the summit even began. But did it deliver by saving or creating enough jobs to justify the time, effort and expense? Or was it, like the Labour government's ill-fated Knowledge Wave conferences in 2001 and 2003, just another expensive talk-fest?
Hard to determine, says a group of business leaders, unionists and economists contacted by The Independent. For one thing, it's difficult to assess the counter-factual - ie, how high unemployment might have gone had the summit not occurred.
But most say despite the lack of practical outcomes, the summit was critical in endorsing the sort of employer/employee flexibility and goodwill needed if initiatives like the nine- day fortnight were to get buy-in from both camps.
"This made a huge contribution to savings jobs, " says Alasdair Thompson, CEO of the Employers & Manufacturers Association (EMA). "We could not have achieved [the nine-day fortnight] in a unionised workplace without the blessing of the jobs summit." The nine-day fortnight - or, as it later became known, the Job Support Scheme - was one of only two of the summit's 21 initiatives that, a year later, appears to be still on track.
To help cut job losses when company earnings were plummeting, the Government agreed to subsidise workers and workplaces of more than 50 employees. So far 50 companies have joined the scheme, including Fisher & Paykel Appliances and Summit Wool Spinners in Oamaru. According to figures released last week by the Ministry of Social Development, the total jobs saved is a paltry 623 - a far cry from the 20,000 union and business leaders estimated at the summit. In fact, Labour MP Chris Hipkins in a recent blog estimates the Government's whole recession stimulus package has produced just 2300 jobs - "not that many when you consider 3500 people queued outside a single new supermarket in South Auckland a few weeks back to apply for the 150 jobs going".
Similarly, progress on the planned $50 million cycle-way - the summit's other big initiative - has been disappointing and is yet to create a single job (a year ago Weldon estimated the cycle-way would create 3700 jobs, spread around the country). Initial plans to build a paved cycle track from Cape Reinga to Bluff have morphed into a network of "Great Rides", similar to the Otago Rail Trail. At most, Hipkins believes between 160 and 280 will be created.
The summit's third big hope - the creation of a $1 billion equity fund for small to medium-sized companies (SMEs) to be run commercially in partnership with the big four trading banks - has died a quiet death. Business lending remains tight and the SME market - about 95 per cent of Kiwi companies - remains focused on cost-cutting and debt repayment rather than expanding their businesses and hiring more staff, Thompson says. David Lowe, the EMA's employment services manager, says its surveys of members show economic recovery is tentative, fragile and "not being felt on a widespread basis".
Last November, the EMA asked 759 businesses (420 of them with fewer than 20 workers) whether they would hire more permanent employees this year. For the first half of 2010, 32 per cent indicted they would, while 68 per cent said no. For the second half of this year, the figures were 40 per cent and 60 per cent respectively.
The EMA repeated the exercise last month with the results expected next week.
"Very few businesses are feeling confident enough to take on long-term increases to their cost structure, " Lowe says.
Thompson points out that his organisation began working with private sector employees in May 2008 - nine months before the jobs summit - to help cut payroll costs by introducing flexible work practices, such as shorter hours and wage freezes as the recession began to bite. "SMEs had to attack all their costs and the biggest one was labour, " he says. "If you could reduce your labour costs to match the reduced level of demand, you could stay in business. You may not be making a profit but at least you weren't shutting your doors."
The big contribution of the jobs summit was to make it possible for unionised employers to deal with their staff. This "officialised" the nine- day fortnight. "It was incredibly successful, " Thompson says.
As the summit ended, CTU president Helen Kelly, too, was bullish. "This package [the nine-day fortnight] and the amount available provide a real basis for business and unions to work to save jobs, " she said at the time. "We are pleased to see the practical discussions turn into real policy so quickly, since time is of the essence in dealing with growing threats to employment." A year later, does she still feel the same?
Since the summit the Government has taken its focus off jobs, she says. But while that's disappointing, she thinks the summit was important as it showed the government was able to focus when faced with a real employment crisis.
"It was a very important thing to do at that time, " she says. "I am not prepared to criticise the summit as an event as it was worthwhile." But had the Government not dropped the ball on job creation, "you would not be asking the question [as to whether the summit was a success]".
Fellow union boss Andrew Little, of the EPMU, is equally equivocal. He says it's "hard to say" if the summit helped to save and create jobs, noting that many participants (including the Business Roundtable's Roger Kerr) were keen to discuss labour market policy but that was firmly off the agenda.
It created a climate of co-operation between business and union leaders, Little says, "but it had a minimal effect in terms of job creation and there has been little concrete to show for it".
Kerr's take on the summit one year later is not surprising for someone who castigated the Government last February for failing to address the underlying issue of labour market reform.
Because of a prior agreement between the Government and union leaders, there could be no discussion of significant and difficult labour market issues such as reviewing the Holidays Act and repealing or amending the Employment Relations Act.
"It was billed as a jobs summit but really it was a mini-economics summit, " Kerr said at the time. "Preserving jobs in a recession is all about removing barriers to hiring." A year later?
"None of the outcomes ranked in terms of a serious strategy to deal with the risks of rising unemployment, " Kerr said last week. "In political terms, it was a sensible move. The Government set a tone early of being prepared to reach out and deal with all sorts of parties, contrary to the tribal habits of the previous government which just froze out anyone it didn't want to deal with, and the summit was consistent with that.
"But it was not well focused. It is not a reference point anyone looks back on."
Auckland Mayor John Banks says the summit was "useful for people to get together and talk about maximising the economy". But he thinks job creation is still being stifled by bureaucracy in Wellington.
"I can think of a number of initiatives I can put on the table that would substantially increase the work opportunities for people in South Auckland [in a better way] than a talk-fest, " he says.
Banks cites a potential scheme involving the Manukau DHB, which is trying to establish an outreach tertiary training centre at Middlemore hospital for people who would, for example, find it difficult to travel from South Auckland to the AUT nursing school in Takapuna each day but could easily manage a 10-minute bus trip from their home to Middlemore.
Wellington, Banks says, "doesn't want it to happen". This is "an indication of our small-minded thinking" when it comes to providing work opportunities.
"I am not critical of good people talking about working opportunities but there needs to be proactive engagement between Wellington and places like South Auckland."
Sidebar: Employers confident, but not rehiring staff
Text: Creating jobs is all about business confidence and access to affordable credit.
Both, in tandem with consumer confidence and a greater willingness of households to crank up spending, are needed to give employers the courage to start rehiring staff post-recession and to borrow to upgrade their plant and machinery.
According to the National Bank's monthly business confidence barometer, released late last week, business confidence has hit a decade high. A net 50 per cent of survey respondents expect better times ahead, up 11 percentage points on December last year, says chief economist Cameron Bagrie.
"Confidence is strong across the manufacturing, construction and service areas. Profit and employment expectations have also started the year with a positive tone."
But how does this translate into jobs? And why do many banking economists predict that despite this apparent leap in business confidence, unemployment will rise from the current 7.3 per cent to 7.5 per cent later this year?
And do the steady hikes in jobless rates during the past year mean last February's employment summit, aimed at creating and/or saving jobs as the recession began to kick in, was a failure?
Not necessarily, says Westpac economist Dominick Stephens. While the effects of the summit are impossible to quantify, and one in every 30 workers has lost a job since then, the business community appreciated the chance to link directly with the Government.
The summit also served to "lower expectations appropriately for the coming year", Stephens says.
"Unemployment came to the front of the brain for employers and employees alike."
"[The summit] didn't come out with much of great substance but there were no plans with any long- term high costs attached, either. It almost avoided the knee-jerk reactions that can happen during crises where governments do things that are silly."
As examples, Stephens cites the Australian Government's decision to make cash grants to first-home buyers (and hiking up residential house prices in the process, especially in Sydney) and the ill- conceived baby bonus.
Westpac's economists believe unemployment has peaked. Their prediction for the next quarter is a drop from the current 7.3 per cent to 7.1 per cent. Bagrie and the National Bank reckon the figure will be 7.5 per cent but that will be the peak. "Things are turning but not enough to soak up new entrants to the job market, " he says.
The most worrying trend is the drop in the number of hours worked. Normally the figure is around 36-37 per week; now it stands at 33. So while employment numbers are slowly rising, firms will initially work existing staff harder and longer, rather than hiring new employees.
"It will be a jobless recovery for a while."
The jobs summit had an indirect impact on employment by trying to instil confidence in the market and stabilising the situation as the crisis deepened, Bagrie says. "It encouraged firms to hold on to that marginal worker and cut [employees'] hours instead, " he says. "[The number of] hours worked has been a big shock absorber."
ASB chief economist Nick Tuffley expects unemployment to remain unchanged in the March quarter but to rise to 7.5 per cent later in the year. He says net job losses have stopped but labour participation rates are rising as jobseekers begin searching seriously for work.
During the depths of the recession, these people gave up hope of finding a job. The "discouraged worker" effect has been present for most of the recession, he says, but did not register in official unemployment numbers. Like Bagrie, Tuffley says the number of employed will rise in the short term but job creation is not fast enough to absorb the jobless.
On the success of the summit, he says it's hard to determine how many jobs might have been saved as a result.
In calendar year 2009, 53,000 people lost their jobs (compared with about 20,000 during the Asian crisis of 1997-1998) "and I would have expected job losses for the past year to have been 20,000 higher than they were", he says. Because 20,000 jobs were "somehow" created in 2008, despite Labour Department figures showing a 37 per cent rise in unemployment in the 12 months to December that year, the net job loss between the end of 2007 and the end of 2009 was 33,000.
Overall, Tuffley describes last year's job losses as "moderate" given the depth of the recession and a 3.3 per cent contraction in the economy - the biggest since the 1970s.
"The summit showed more flexibility by workers and bosses to agree on other ways to share the pain, " he says. "The measures seemed to have made quite a difference. The pain was spread thinly across a large number of people rather than being concentrated [within a smaller group]. When the downturn kicked in in late 2008-early 2009, there was more buy-in from people to take some fairly unusual measures.
"The summit could have helped contribute to that."
But what of those business confidence figures?
Be wary, says BNZ chief economist Tony Alexander. He suspects an "upward bias" in the numbers - a "sigh-of-relief" factor when the economy didn't completely collapse. Retailing is improving "but nothing remotely approaching a traditional post- recession boom", he says, and businesses and households are focused on reducing debt rather than borrowing.
During the December quarter, business debt dropped by $2.7 billion compared with the same period in 2008 when it grew by $2.4b. In 2009, business debt fell 7.9 per cent while farming debt grew only 8 per cent, compared with 22.2 per cent in 2008.
People are not willing to gear up until the jobs market strengthens, Alexander says. The three big elephants in the housing market - tax, debt and dwelling supply - mean uncertainty will continue until well into 2011.