Employment Relations Reforms and New Zealand’s ‘Productivity Paradox’

Abstract

In Australia, it has been debated whether the Fair Work Act (FWA) has a negative or positive impact on productivity growth. Likewise, in New Zealand, there has also been considerable interest and debate about that country’s so-called ‘productivity paradox’, though this has yet to be linked to employment relations legislation in recent debates. This is surprising since it has been an explicit aim to raise productivity growth of the two last employment relations reforms. This paper will focus on how employment relations has been supposed to impact on productivity growth during the Employment Contracts Act 1991 and the Employment Relations Act 2000 periods. It will discuss why employment relations reforms have yet to shift the productivity growth and explanations of the ‘productivity paradox’ so far. This includes how employer attitudes and behaviours may be part of the productivity ‘paradox’ as well as a brief overview of the research and approaches of the Productivity Commission. The paper suggests that, while employment relations can play a part in lifting productivity levels, what is crucial are contextual factors and how employment relations and other policies combine to reinforce each other.

JEL Classification Codes: E24,  J24,  J5,  J8