A Light Goes out in New Zealand

By Baird, Charles W. | Ideas on Liberty, September 2000 | Go to article overview

A Light Goes out in New Zealand


Baird, Charles W., Ideas on Liberty


I have often referred to New Zealand's 1991 Employment Contracts Act (ECA) as a model of voluntary unionism that we in the United States would be wise to emulate. Notwithstanding its shortcomings-including its mandatory personal grievance provisions, its creation of the specialist Employment Court, and its failure to do anything about the minimum-wage law-the ECA made the employment relationship in New Zealand a matter of voluntary exchange for most workers and most employers on most issues.

It stripped unions of most of the special privileges and immunities they enjoyed before 1991, which placed them above the rule of law. Unions, like everyone else, were made subject to the common law of property, contract, and tort. Unions could represent only their voluntary members, and workers could choose union or nonunion third parties to represent them or could choose to represent themselves. Like unions, nonunion third parties could represent only those workers who contracted with them to do so. Bargaining was wholly voluntary. No unions, nonunion representatives, employers, or individual workers could be forced to bargain with any other party against their will. There was true freedom of association, which includes the right not to associate, for all parties in New Zealand labor markets. Freed from compulsory unionism, most New Zealand workers chose to be union-free. Between 1991 and 1999 the percentage of workers represented by unions fell from 50 to 20 percent. Employment growth accelerated, unemployment plunged, average real wages increased, and strikes almost disappeared. Public opinion polls indicated substantial and growing support for the ECA throughout the period.

The Unions Strike Back

Union leaders, of course, abhorred ECA. Their declining market share meant fewer and fewer dollars came into their treasuries and more and more workers, journalists, and politicians were losing interest in what union leaders had to say about anything. Threatened with penury and irrelevance, union bosses pulled out all stops to return the Labour Party to power in the 1999 elections. They were assisted by the incumbent National Party government that seemed to have run out of all its reformist energy and had nothing new to offer. Labour and its coalition partner, the Alliance, won the election, giving the impression they would make only minor changes to ECA. However, it didn't take long for the union bosses to present their IOUs. At the unions' behest the coalition government cobbled together the Employment Relations Act (ERA), which became law August 1.

ERA turns the clock back to the days of special privileges and immunities for unions. Its authors adopted many of the bad features of our National Labor Relations Act (NLRA) and came up with some equally bad features of their own.

Worker Choice. Unlike NLRA, ERA still permits individual workers to opt out of union representation, but it stacks the decks against that option. ERA says that a union may consist of as few as two employees; and all employers, whether unionized or union-free, are forced to allow union organizers on their property to recruit workers. Unions, and only unions, have this privilege.

Once two workers join up, the employer becomes unionized and is forced to bargain with the union in good faith. Only unions may engage in collective bargaining and enter collective agreements with employers. Where a collective agreement is in effect, all newly hired workers are made subject to its provisions for 30 days, after which a worker may opt out of the collective agreement, remain union-free, and work out an individual contract with the employer. However, notwithstanding any terms in an individual contract, an employer must allow every union-free worker to join the union and become subject to the collective agreement at will. So most employers are likely to be forced to bargain with unions, and union-free workers will find it difficult to avoid the blandishments of union organizers. …

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