Concrete plans needed from jobs summit

Richard Baron/Businessday

Unemployment rate over the past 20 years plus projections to 2011 according to a recent NZ Business report.

Change in unemployment by industry sector from December 2007 to December 2008 and the breakdown by gender and race of current unemployed New Zealander's

New Zealand's rank in the global unemployment stakes as at December 2008

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Prime Minister John Key has so far failed to tell New Zealanders precisely what they can expect from tomorrow's jobs summit.

We've been assured the government wants "win-win" solutions and that the gathering will be a "do-fest" rather than a "talk-fest".

According to Key, the goal is "maintaining the highest possible levels of employment while we weather the downturn". There is no magic bullet to end the recession but "we need to draw out the best and brightest ideas from those at the job market coal-face - leading thinkers in business and industry, training, trade unions, iwi, central and local government, and elsewhere".

But beyond these platitudes and generalities, nowhere does Key say exactly what the summit is expected to achieve.

And critics of the summit are asking how such a gathering, with many participants operating far from the coal-face, can be expected to deliver concrete outcomes. There are too few women, especially those with experience in actually owning and running businesses, and too many lawyers, local body politicians, accountants, and people from sharemarket operator NZX and management consultants McKinsey - people, in other words, not directly involved in creating and retaining jobs.

The future of Key's government hangs on the summit delivering outcomes. Concrete, practical proposals that can be effected within relatively short time-frames are what's wanted, not another round of endless surveys, reports, committees and meetings.

Signs that Kiwis are panicked by job insecurity emerged this week, with two separate surveys indicating one in five New Zealanders is living in fear of losing his/her job and that one-third of companies believe they have surplus staff.

The most worried are those earning between $100,000 and $150,000 (32 percent) and those earning between $20,000 and $30,000. It's not exactly a recipe for kick-starting consumer and business confidence, and getting the housing market moving.

In fact, the level of job-fear is more than twice as high as the forecast unemployment rate of 7 percent by the end of this year, says Peter Neilson of the NZ Business Council, which commissioned one of the surveys. "This may have a chilling effect on investment and spending."

Unemployment is clearly the biggest economic, political and social issue of the year - not just here but in all international markets.

So the focus of tomorrow's summit should be firmly on the labour market.

But on the eve of the summit, some participants are criticizing its agenda, saying the topics for the six working groups (to be discussed in semi-closed sessions) are too broad.

Says one, who doesn't want to be named: "A job summit is not a general economic summit. It's not about productivity and growth. It's about retaining and growing employment. So if it is to be jobs summit, then it's all about the labour market and this includes thinking about whether it has been harmed by successive court and government decisions. A rigid labour market is a sure-fire way to create unemployment."

So if the jobs market is where everybody's energies should go, why are summit participants talking about topics such as liquidity and the capital markets, and business investment and tax? Related and critical, sure, but not directly on point.

The latest unemployment rate, for the December quarter, is 4.6 percent. A total of 105,000 are now unemployed with 2009 projections ranging from 7 percent (150,000 to 180,000 people) through to 11.2 percent.

The speed at which unemployment is rising means flagging business confidence becomes critical.

The ANZ-National Bank releases its monthly business confidence figures this afternoon - its first this year - and the news isn't expected to be pretty. Business confidence, as measured by the survey, hit historical lows in December.

"This economy is a country mile from stabilizing," says the bank's chief economist Cameron Bagrie. The optimal solution is for consumers to "hold our hands and spend" as suggested last month by Reserve Bank governor Alan Bollard. But because this is impossible to co-ordinate, and the recession has gone beyond falling sales and a drop in demand, firms have been cutting their productive capacity (ie, investment and jobs) and strengthening their own balance sheets to ensure they're lean and well-placed for any recovery.

"There are also a lot of people out there kidding themselves [about the seriousness of the recession], Bagrie says.

ANZ has shaved its already downbeat view of the economy, predicting a 3 percent contraction (previously 2 percent) for the 2009 calendar year. It sees unemployment rising near 8 percent this year in the context of an economy on a "losing trifecta" of a global recession, heavy reliance on offshore capital and the need to de-leverage, along with a current account deficit that is far too high.

How serious is the situation? As Nobel prize-winning economist Paul Krugman wrote recently in The New York Times: "It's had to exaggerate how much economic trouble we're in."

Roger Kerr, executive director of the NZ Business Roundtable, is among tomorrow's participants. He's attending the Workplace and Labour Markets working group and is clear about what he wants to see from the summit.

Labour costs are two-thirds of all production costs, he says. He wants a working group to be set up, similar to the group set up to consider changes to the Resource Management Act, with a view to reporting quickly on the legislative changes necessary to grow the job market.

Two issues that might be considered (and which the government has already flagged) are removing the unions' monopoly as agents for collective bargaining and a review of the Holidays Act.

Others would like to see the separate jurisdiction of the Employment Court removed so personal grievance cases are heard through the regular District Court system. The unions, they say, need to realize that for the first time in nine years, employers hold the upper hand.

Elsewhere, the US unemployment rate is 7.6 percent with 598,000 jobs lost last month and 2.6 million lost during calendar year 2008. UK unemployment is projected to rise from its current 6.3 percent to 9.5 percent by the middle of next year, Australian economists are predicting nearly 8 percent (currently 4.4 percent) by the end of this year.

- © Fairfax NZ News