Fair redundancy
The Engineering, Printing and Manufacturing Union (EPMU) have just made an interesting proposal calling for government legislation to ensure redundancy payments for workers. I think the argument in favour of looking at this as part of Minister of Labour’s advisory group that has just been been set up to examine the adequacy of redundancy laws is strong.
Currently if a company is struggling financially there are three groups of people who are likely to suffer; the company’s customers, the company’s investors and the company’s workers. Customers are normally in the best position as, unless they are dealing with a monopoly of sorts, at least they can take their custom elsewhere. The investors face a risk if they stick with a struggling company, but they also normally have the liquidity to escape quickly and invest their money elsewhere if they need to. In fact if anything investors have the most potential to exacerbate a situation for struggling businesses if they get too speculative and short term in their investments.
Workers on the other hand cannot easily transfer their loyalty from one company to another. Finding a new job can be a months long project in good economic times and nigh on impossible in a local economy as that economy tightens and a major employer like PPCS, Fisher & Paykel or Carter Holt Harvey announces mass redundancies. And the consequences for workers who lose their jobs are on average far more significant to them and their families and communities than they are to the customers and investors of that same company.
If employment laws are about ensuring fair outcomes and protecting those exposed to unfair risk, then redundancy is a crucial area to examine. Because that is when workers (as well as investors) are most exposed to risk. At the moment it doesn’t seem fair that everybody can potentially flee the scene of the crash except the workers who have the most at risk.
May 18th, 2008 at 6:44 pm
Frog
Is it your goal to totally destroy business in NZ?, legislation such as this will simply ensure that we have no manufacturing in NZ.
May 18th, 2008 at 8:13 pm
The ones exposed to unfair risk are the families who mortgage their own home to start and run a small business. What fair redundancy do they get? Small enterprise makes up the lions share of NZ’s economy. Maybe the EPMU should set itself up in a business…
May 19th, 2008 at 2:16 am
frog, The IRD’s infamy as the stroppiest “creditor” in this country must have slipped your mind when you wrote “In fact if anything investors have the most potential to exacerbate a situation for struggling businesses if they get too speculative and short term in their investments.”
Otherwise, a good post.
May 19th, 2008 at 7:13 am
Those potential redundancy payments would have to sit as a liability on the balance sheet.
How many companies would be solvet with that amount of money sitting on the balance sheet?
Would that money be better off being reinvested to provide growth and better/more job opportunities for the union members?
As the countries biggest employer the State will have to show this liability on the balance sheet. Wonder if Cullens upcoming budget will make provision for it.
Be an interesting figure to see on paper how much redundnacy money would be needed to show up in the budget as a redundancy provision (seeing some state servants are earning well over the $200.000).
Money that should be spent on health, education, etc.,etc.
Very little thinking going on at the Labour party strategist. For the proposal to be fair and encompassing you would need to include every state servant, every CEO,
Like I said, it would be a fair exercise to carry out to have the liability sitting on the public and private employers balance sheets and then see if the place is still solvent, plus able to pump money back in for growth.
May 19th, 2008 at 8:36 am
Or workers could take out income protection insurance.
May 19th, 2008 at 8:36 am
Frog how come you just gloss over the investors risk and then focus entirely on the worker. While an investor hopefully has a liquid market in order to decouple themselves from the investment it doesn’t mean the investor has walked away scott free. What if the investor had brought shares in the company at $50 and they are now trading at $25, if he walks away he just lost half his investment and it could be more. You also seem to completely ignore the creditor’s as there are in fact 4 parties not 3.
Why did the federal reserve step in to bail out bear sterns was it the workers, the customers or the investors. Nope it was none of those 3 groups it was in fact the counterparties as bear sterns failure would of sent a ripple effect of failures throughout the counterparties.
All this legislation will do is force the company into bankruptcy faster and then everyone looses but I supose thats the point of socialist policy to make sure at the end of the day everyone is equal.
I would like to see the green party one day with a large share of the vote but I am also scared at the idea’s of some of the people in the party, try getting out of the political science (insert any other liberal arts major) leacture theater hall and enter the real world for a change.
May 19th, 2008 at 9:52 am
I didn’t know that redundancy payments weren’t mandatory in NZ. What kind of a lame country is this?
Samian: If you risk your house on a venture you are, as they say, betting the farm. You may win, you may even win big, or you may lose the lot. If the gamble is too big, then don’t gamble, its that simple.
If you are proposing that people who take such risks should be protected, and that is not an unreasonable position to take, then as their losses are limited, so should be their winnings. Isn’t that the communist way?
May 20th, 2008 at 1:45 am
BB- New Zealand is actually pretty liberal (in the Right-wing sense) in terms of labour laws right now. Employers have relatively few responsibilities to their workers, and we’ve only just started to move towards the international average in the last Labour term. I’d hardly call that “totally destroying business in NZ”.
dbuckley- quite. While I like the idea of this policy, I doubt workers would really want to take the wages hit it would imply given the current state of the global economy.
May 20th, 2008 at 7:37 am
Actually Ari NZ is pretty liberal full stop. What I mean by that is most NZ’rs probably think that the labour party lines up with the democratic party here in the US. This is not true and national probably lines up more with the democratic party and NZ doesn’t really have a party that lines up with the republicans maybe one of the small Christian parties in NZ.
May 20th, 2008 at 7:36 pm
turnip28 Says:
May 19th, 2008 at 8:36 am
> Frog how come you just gloss over the investors risk and then focus entirely on the worker.
An investor gets the chance of getting much more if the company does well, and in return the investor takes a calculated risk of losing everything if the company goes bankrupt. The worker does not get this windfall profit if the company does well, so shouldn’t be expected to take the same risk.
May 20th, 2008 at 7:39 pm
# turnip28 Says:
May 20th, 2008 at 7:37 am
> Actually Ari NZ is pretty liberal full stop. What I mean by that is most NZ’rs probably think that the labour party lines up with the democratic party here in the US. This is not true and national probably lines up more with the democratic party and NZ doesn’t really have a party that lines up with the republicans maybe one of the small Christian parties in NZ.
The United States is the outlier there, not New Zealand.