Friday, April 27, 2012

Conventional wisdom

The triangulation of three jobs/industrial relations stories provides a glimpse of how desperate New Zealand political elites are to look good by facilitating jobs growth - any job growth - even if those jobs add to the sum of casual, insecure jobs that increasingly characterise the New Zealand economy. The first is the sordid tale of the government's casinos-for-a-convention-centre deal with SkyCity in Auckland; the second is the sale of Dunedin's Hillside railway workshops by state-owned enterprise KiwRail and its sister story the Ports of Auckland dispute; and the third is the news that some Australian companies are moving operations to New Zealand.

A convention centre for pokies

As widely reported, the heart of this deal is that the government gets the convention centre it alleges Auckland needs in exchange for relaxing the rules on the number of gaming machines that SkyCity can install. The convention centre has been costed at $350 million, a considerable sum SkyCity has offered to pay in full if they get the pokie machine concession. The whole tender process has been dodgy and looks like yet another National pork barrel deal, as can be seen by this timeline. The benefit to ratepayers is also highly suspect. SkyCity only returns about 3% of its pokie takings to the community and to date hasn't been pursued too rigorously by the Gambling Commission to adhere to its host responsibility programme, even though this is a condition of their licence.  
But of more interest here is SkyCity's claim that the convention centre will create 800 jobs: indeed, the government was so sure we would be grovellingly grateful for this crumb that they seemed to assume the deal would go ahead with little opposition. Curiously, however, the Herald has reported that a larger convention centre in Melbourne employs only 133 full-time staff and 273 casual staff, and 800 is "four times the staffing levels of other convention centres compared in a 2009 feasibility study for the former Auckland City Council".  
So what sort of jobs? Some will be full-time, but most will be part-time, casual, low-paid service jobs of the sort that dovetail so well with National's drive to force sole parent beneficiaries into work. These crappy jobs serving canapes and coffee will be subsidised by problem gamblers predominantly from Auckland's low-income suburbs.
According to the conventional wisdom prevailing in policy circles, Auckland really needs this convention centre for its economic development, and because we don't have a real international-sized convention centre. But do we need one, and can we justify it? A 2009 Bloomberg article showed that in the US the building of convention centre floor space had far outstripped demand. Every city and town wants a convention centre, all for the same reasons as Auckland. But in reality, in a de-industrialising economy convention centres are throwing in the economic development towel. They say 'we can't make our own money so we'll host people who do make money and hopefully get some of theirs'. John Key's bizarre vision of New Zealand as a global financial transactions processing centre carries the same message.  
Then there is the issue of demand. There are those who say 'build it and they will come', but Mysak's article clearly shows building convention centres is no guarantee that anyone will come. A 2005 paper by the Brookings Institute described the fixation for convention centres as the "convention centre space race" and found "convention centres themselves are expensive, money-losing propositions". The report noted that despite substantial (often public) investment, the number of conventioneers was falling. And this was in 2005 well before the Great Slump.
The graph shows the number of short-term visitors to New Zealand who put the reason for their visit as 'Convention/Conference'. In the year ending December 2011 this was about 1,500. Will another 2,000 people per annum come to a country at the bottom of the world with no ready access to illicit drugs and hookers when they could go to Vegas, Anaheim or Melbourne? (My apologies to the minority of conventioneers who are women). Plus, those places are closer to home and cheaper to get to. Auckland will also be competing with Australian cities which have convention centres. The difference is they're richer and have better public transport for visitors to move around. Auckland is terrible for pedestrians, downright dangerous for cyclists (it is easy to hire a good bike and ride around Melbourne), and has no public transport any conventioneer wants to use. If a convention centre is going to work as envisaged by local and central government, it needs to be done as part of a broader plan ungrading central Auckland's public transport, including a rail link to the airport, and much easier access to tourist facilities. We're a long way from any such integrated vision, and the only good thing about this SkyCity proposal is that it won't (at least on the information we have so far) be a white elephant for Auckland's ratepayers.  
Go away SkyCity, John Key and anyone else involved in this shonky deal, and think about coming up with a plan for some real economic development.

KiwiRail sells the Hillside workshops

National was apoplectic when Labour bought back the railways prior back in 2008. They have certainly never accepted that the purchase was generally approved by the public, and Bill English's constant whining about the price paid failed to get the traction he obviously wanted. So upon entering government National appear to have decided that rather than selling KiwiRail they would reprise the role of its previous private sector owners, and simply run it into the ground. This is being achieved by expecting KiwiRail to survive with no government subsidies by returning to profit through its so-called "turnaround plan". It is rare internationally for rail to be profitable, and a good discussion of the dilemma of whether to subsidise or not can be found here. Other, more sensible jurisdictions use the profitable parts of the rail to cross-subsidide the less profitable parts in the interests of maintaining a coherent and cohesive rail network, and because it keeps some proportion of freight off the road. For New Zealand's economic fundamentalists, cross-subsidisation is, of course, a Bad Thing unless it's a convention centre being cross-subsidised by low-income problem gamblers.
Part of the turnaround plan involves selling its Dunedin Hillside heavy engineering workshops. Apparently the Hillside workers were just paid too much for the workshops to be profitable so KiwiRail has put the workshop on the market. From the news reports it appears no one seriously thinks the workshops will find a local buyer, which means if this arguably strategic asset is bought at all, it will be bought by overseas interests. Much as the Auckland Council has managed to wash its hands of the Ports of Auckland industrial dispute, the government has pleaded this is an operational matter and refused to step in to save the workshops and the jobs. While the Ports of Auckland locked out its workers to try to force them onto casual contracts with stevedoring companies, the Dunedin workers will be lucky if they keep their jobs, and if they do it will likely be under much reduced pay and conditions. This will make the workshops 'competitive'. With...who, exactly? 
The drive to strip Auckland's port workers of pay and conditions, and the likely redundancy of Dunedin's Hillside workers suggests that while not actively undermining labour conditions, the government is happy to let wages and conditions for ordinary workers fall with a nod and a wink to employers. The disgrace here is that those employers are publicly-owned companies. Similarly, the government's lack of interest in the bitter, ongoing AFFCO dispute (which seeks to reduce conditions for meatworkers) also suggests they are happy for workers to have less pay and job security rather than more.  
While all this was happening, the Prime Minister was in Singapore telling anyone who would listen - hand on heart - that: "We want to increase the level of earnings and the level of incomes of the average New Zealander and we think we have a quality product with which we can do that." This desire to increase incomes stands in stark contrast to the Prime Minister's indifference to the proletarianisation of an ever-increasing number of professions and workers. Interesting also that it is unionised labour that is at the heart of these disputes. The New Zealand experience since 1991 has been that the fragmentation and de-unionisation of the workforce has led to lower wages, more precarious employment, and reduced capital investment as employers have substituted cheap labour for technology. Which means if you want to increase your level of earnings and make the PM happy, you should probably move to Australia.

We're competitive alright - with Bangalore

The last corner of the triangle comes from the news - welcomed by the government and political elites - that jobs have started moving across the Tasman from Australia to New Zealand.
According to the DomPost, Heinz Watties and Imperial Tobacco are moving production across to New Zealand from Australia. Woolworths is also moving 40 jobs to New Zealand. Why? According to Hastings Mayor Lawrence Yule, this is because New Zealand has a "more holistic" view of employment. What can this mean? According to Mr Yule, lower levels of unionisation, the ability to operate outside traditional daytime hours, and greater use of seasonal employees. A non-unionised, low-paid, casualised labour force, in other words. 
Is this really the best we can do? Really really? 
And what of the 40 Woolworths jobs? They're call centre jobs. Normally Australians send their call centres to the Philippines or India. But the fact we speak (sort of) real English and we're cheap means that Woolies is sending its call centre here rather than Bangalore. According to the latest Household Labour Force Survey there's about 155,000 unemployed New Zealanders. Bill English might be happy for us to be the Australia's Mexico but it's going to take a lot of call centre jobs to make a dent in our unemployment rate.
Yep, we're competitive alright: English-speaking, cheap, and pathetically grateful for crumbs from the global labour market. It almost makes one wish for the naive optimism of the knowledge economy.

Proletarianising employment

Jobs! Jobs! A convention centre for jobs! Here in New Zealand the government witters away about a high growth, high wage economy and practices an industrial relations policy that will lead us in exactly the opposite direction. As the long grind of the Great Slump takes its toll on families and people become more desperate for work, any job will do. Even if it's part-time, casual and involves jollying along Woolies' Australian customers. The government has stated its goal is to enhance New Zealand's competitiveness, and its plan for this seems to be building roads, cutting welfare and providing the conditions for employers to secure cheap labour. It's an odd sort of competitiveness for a government that bangs on about knowledge and skill. The reality is we're setting ourselves up to be a low-skilled precariat, vulnerable to global economic booms and busts.
Convention centres, casual contract labour and the sale of strategic assets are all signals New Zealand is playing a game it can't win on someone else's terms. We should leave the table while we still can.