Out Of Here, Under-Paid, And Over There
By Bernard LaganJune 28, 2012
Australia’s boom may be drawing Kiwis, but New Zealand’s lower wages are increasingly pulling businesses — and blue-collar jobs — the other way.
In Girgarre, a hamlet in Victoria's lush north, some people no longer buy much of anything made in New Zealand — Australia's near neighbour.
"I don't care to buy it," says Jan Smith, a member of Girgarre's development board, who has stayed in the town, seeking new ways to keep Girgarre alive while its jobs have leached away, most recently to New Zealand.
When the cheese factory closed nearly 23 years ago, tossing scores of townspeople out of work, Girgarre hit its knees; the local school roll fell to fewer than 30 children as families packed up and left to seek work elsewhere. Jan Smith was one of those who rescued the Goulburn Valley town by helping to lure global food manufacturing giant H J Heinz to Girgarre, where it established a tomato-sauce factory at the site of the former cheese works.
The factory employed about 150 and sustained Girgarre's tiny population of under 200 for the next two decades — until, at the end of last year, Heinz ceased production on Winter Road. The food maker had decided to shift the Girgarre plant's sauce-making facilities to New Zealand, putting 146 people out of work, leaving the factory idle and closed — and so it stands.
Heinz had joined a growing list of Australian companies which are finding cost savings by moving jobs off-shore — but no longer exclusively to far-off, low-wage, less developed countries. New Zealand's slower economy, less unionised work force and the lower value of its dollar — in comparison to Australia's run-away currency — have combined to establish our trans-Tasman neighbour, for the first time, as a serious low-wage competitor to Australia.
Other Australian employers which have taken their positions-vacant lists to New Zealand include Woolworths, which last year shifted 40 call-centre jobs eastwards, and Imperial Tobacco, which is in the throes of moving its Sydney-based cigarette-manufacturing operations to Wellington. It has invested $45 million in a New Zealand plant that will be capable of producing 8,000 cigarettes a minute and enable a quadrupling of New Zealand cigarette exports to Australia. The previously Tasmanian-based vegetable processor McCains shed 200 jobs at Smithton in Tasmania's northwest when it completed a relocation of its plant to New Zealand last year.
New Zealand's finance minister, Bill English, has lauded the flight of jobs from Australia and claims more Australian firms are considering doing the same.
While food processors have led the drift of jobs across the Tasman over the past 18 months, the June decision by Australian publisher, Fairfax Media, to shift scores of Australian newspaper sub-editing jobs to New Zealand demonstrates that the move across the Tasman by some Australian employers may not be limited to low-skilled manufacturing jobs.
Fairfax, which already has a strong presence in New Zealand through its daily newspaper holdings there and its majority ownership of the online trading site Trade Me, will be able to make cost savings by transferring editing jobs to New Zealand.
While Heinz's decision to put 150 Victorians out of work by shifting its tomato-sauce factory to New Zealand attracted little opposition — save for the bitter taste it has left in Girgarre — the Fairfax move has drawn national attention to the shifting employment rolls. The NSW Parliament passed a motion condemning the move, while Fairfax staff passed a motion of no-confidence in the company's chief executive.
Concerned Australian union leaders will meet with their New Zealand counterparts in August in an effort to stem the eastward flow of jobs — though it is unclear how much effect any union action can have on corporate decisions to relocate operations offshore.
Jennifer Dowell, of the Australian Manufacturing Workers' Union food division, cites New Zealand's lower labour costs as the prime mover behind Australia's job losses: "Clearly it's lower wages, secondly it's their industrial relations system which pretty much allows them [employers] to do whatever they like, and the third issue is that many of those jobs that go over there [to New Zealand] are then filled with people from places other than New Zealand, such as the Pacific Islands."
Her opposite number across the Tasman, Dairy Workers' Union secretary James Ritchie, agrees: "It's quite simple really, it's simple economics. At the moment New Zealand wages are about 30 per cent behind Australian wages, so companies are moving jobs to New Zealand to basically take advantage of cheaper labour costs. It's the flip side, if you like, of thousands of New Zealanders, going mostly to Western Australia and Queensland in search [of jobs] in the mining industry."
You would think that given New Zealand's unemployment rate of 6.7 per cent (Australia's is 5.1 per cent), New Zealand would welcome any additional jobs which might help stem the huge outflow of its own workforce to Australia, a stream of people now running at the record rate of 53,000 a year.
However, union research conducted on both sides of the Tasman suggests that many of the jobs that depart Australia for New Zealand not only turn into lesser paying jobs, but also become less-permanent positions. That is, many tend to reappear in New Zealand as part-time or casual work.
"Overlaying all of this is the shift from decent work to precarious or insecure work," says Ritchie. The emergence of this pattern is confirmed by the Australian Manufacturing Workers' Union's Jennifer Dowell, who estimates the 150 full-time jobs that disappeared when Heinz closed its Girgarre factory turned into about 40 full-time jobs in New Zealand.
Unions in both countries point out that while successive Australian and New Zealand Governments have put much effort into establishing a common trans-Tasman market for goods and services, the labour markets in each country are separately regulated. As a result, they still have widely differing standards, with Australia at the costlier end of wages and conditions.
At their August meeting, Australian and New Zealand unionists will discuss strategies for bridging the differences between the two countries in wages and conditions for full- and part-time workers. At a time when the Australian economy, driven by the resources boom, is out-performing New Zealand's, that might be a big ask. The New Zealand Government has been trying to achieve similar goals for some time — to make staying in New Zealand more attractive to its own workers — without success.
The extent of its failure is made clear by the latest available International Labour Organisation comparative statistics, which show that Australian manufacturing workers are paid about USD35 an hour while the New Zealand rate remains less than USD20 an hour. It's this disparity that is causing the still uneven but now two-way traffic across the sea; it encourages tens of thousands of New Zealanders annually to migrate to Australia and makes it attractive for more Australian employers to transfer jobs to New Zealand.
The situation can't go on without causing antagonism in both camps, says James Ritchie of the New Zealand Dairy Workers' Union.
"It is only going to cause growing resentment on both sides. On the one hand, New Zealanders are being exploited [with] lower wages and conditions and, on the other, Australians are becoming increasingly annoyed about New Zealanders going to Australia and picking up jobs, particularly lucrative jobs in the mining industry."
The New Zealand sociologist Professor Paul Spoonley, who has long studied trans-Tasman flows, says that advances in technology — as well as wage disparities between nations — are driving the relocation of jobs. Technological advances, he says, allow Fairfax Media to shift sub-editing jobs to New Zealand because the sub-editors can now work remotely on text that's produced in Australia. He suggests that in the same way that technology has allowed American medical doctors to transfer their back-office functions to the Caribbean, New Zealand is beginning to forge a back-office relationship to Australia.
However, says Spoonley, the reverse effect is that Australia has become an even more attractive destination for formerly New Zealand-based businesses to establish their headquarters, and then to list on the Australian stock exchange, where they can raise more capital than they can access on its New Zealand counterpart. So it could be said that New Zealand's brain drain is becoming more pronounced: while New Zealand gains lower-level jobs from Australia, higher-quality New Zealand jobs have moved to Australia, including research and development positions and senior management jobs.
A parallel trend identified by Spoonley is the transfer of Australian food manufacturing to New Zealand. In this area he believes that New Zealand's lower wages and more casualised workforce only partly explain the shift. The transfer of facilities is also being encouraged by New Zealand's weather, which is less drought prone and therefore more reliable for food growers than Australia's. New Zealand has also gained technological efficiencies in food production, particularly in the manufacture of dairy products.
The recent shift of jobs from Australia to New Zealand has sparked clashes between New Zealand's conservative National Party finance minister, Bill English, and his Labour Party opponent, David Parker.
English has welcomed the jobs and claimed more Australian firms are considering relocating to New Zealand, although he has declined to name them.
"There is a trend," English said last month. "More Australian businesses who find themselves struggling with the high exchange rate … are looking around and we are an attractive place to invest."
While New Zealand's conservative Prime Minister, John Key, has championed ever closer economic ties with Australia (he recently relaxed rules for Australian investment in New Zealand) the country's opposition Labour Party has become increasingly anxious about the transfer of low-wage jobs from Australia.
Labour's finance spokesman, David Parker MP, last month committed a diplomatic faux pas, offending the Mexican government with his comment, "Labour does not want New Zealand to become Australia's Mexico, yet with lower-value jobs, such as making cigarettes, that is exactly what is happening."
While his comparison to Mexico prompted a rebuke from the New Zealand Government and a stiff letter of complaint from the Mexican Embassy in Wellington, Parker's central observation has gone unremarked upon; Australia is exporting low-wage jobs across the Tasman, as New Zealanders are leaving in record numbers in search of higher-wage jobs in Australia.
Read Bernard Lagan’s feature on the exodus from New Zealand — Kiwis are leaving in record numbers for Australia.