When I took an offshored gig with Fairfax, I found myself playing an unwitting role in the rise of New Zealand as a low-wage economy, writes Rachel Buchanan.
ANALYSIS: The orange star on the tailgate tilted and dipped, wobbling. The plane dropped low over the sea, ready to hit the short, sodden runway, but at the last instant swooped up again.
"Failed! The Aussie pilot failed to land!" I shouted. "They’ll be spewing."
My kids rushed over to look. The walls of our house screamed as the pilot readied for another go. The plane nosed down towards the enormous grey waves that were smashing over the breakwater but again the pilot pulled back, tucked the wheels up inside the plane’s battered belly and flew off north.
It was spring, 2012. Seven months earlier, we had touched down on that same wicked runway, a family of five who had left Melbourne to spend a year or so in Wellington close to my parents.
Money was tight and I had reluctantly taken a job as a subeditor with Fairfax Editorial Services. I sat in an office in Wellington and edited newspapers in regional and rural New South Wales. My job existed because Fairfax had sacked 66 production journalists in Newcastle and Wollongong and replaced them with 40 others in Wellington. I was on NZ$65,000, about half of what someone with my experience would have earned in a metropolitan Australian newsroom less than five years ago.
(This trans-Tasman pay disparity exists in any field you can think of, including the airline industry. In 2010 a first officer employed by Qantas subsidiary Jetconnect was paid NZ$77,978 while a Qantas first officer earned the equivalent of NZ$126,815. In 2011, Fair Work Australia rejected the Australian Pilots Association test case on the issue.)
Project Hermes
By taking the offshored Fairfax job, I had become enmeshed not only in the imminent death of newspapers but also the rise of New Zealand as a low-wage economy (save at least 30 percent in costs over here folks), a little rival to the Philippines and India (save 70 percent or more over there).
The staff on Project Hermes – Fairfax’s codename for the NZ offshoring plan – worked in a windowless basement on Boulcott Street. One night, while I was having fish and chips with my relatives, I joked about my work conditions (zombie journalists, typing robots and crypts). Rather than laugh sympathetically at my tales of drudgery and bewilderment, my uncle Bill expressed his pleasure at New Zealand’s ability to compete.
I respect Uncle Bill. He’s a really lovely guy, but he is also the Deputy Prime Minister. I’m not betraying any confidences here.
What Bill (English) said to me is the same as what he has said in public. In his role as Finance Minister, Bill has welcomed Australian investment in New Zealand and the jobs that come with it.
The logic goes that while lower wages are not good, they do allow New Zealand to compete, and competition is one way to close the gap in wages between the two countries. As yet, there is no evidence that this is happening.
I finished at Fairfax in late December 2012 and we returned to Melbourne the next month. Since then, the offshoring of Australian work to New Zealand has received plenty of media attention. In Australia, much of it has been negative. One theme is that New Zealand is somehow betraying its Anzac mates by stealing Aussie jobs, but the situation is messier than that.
In the 1990s, hundreds of jobs in food, clothing, cosmetics, pharmaceuticals and software manufacturing left New Zealand for Australia. Now, New Zealand Council of Trade Unions economist Bill Rosenberg says jobs were moving in both directions as companies cut costs across the region by getting closer to bigger markets or cheaper raw materials and workforces.
Production shifted
This is true of factory work. In 2009, McCains shifted frozen food production from Smithton, Tasmania to Hastings, Hawke’s Bay (200 jobs lost). In the same year, Cadbury closed its factory in Auckland and shifted production to Australia and Thailand (265 jobs lost).
Similarly, in late 2011, Heinz closed its factory in northern Victoria, cut staff at two others, and moved production of canned beetroot, tomato sauces and some meals to another factory in Hastings (340 jobs lost). In 2012, Unilever closed its New Zealand washing powder factory and moved production back to Australia (58 jobs lost).
But when it comes to office work, offshoring seems to be moving in one direction across the Tasman, with Australian companies attracted to the cheaper wages, rent and power bills in New Zealand. They like the loose industrial relations system, the very low compulsory superannuation payments (3 percent) and the hardworking and obedient staff who speak good English.
Business process offshoring (BPO) is an industry term for what is going on. It encompasses skilled and unskilled work: architectural drafting; accounting; legal services; sub-editing and graphic design; making and receiving phone calls; answering emails; and working with social media.
New Zealand Trade and Enterprise, the government’s trade and investment body, boasted that New Zealand was "rapidly becoming a powerhouse outsourced service provider for the region".
This is an overstatement. In the Philippines, the "contact centre" industry is expanding rapidly and will employ nearly one and half million people by 2016. By contrast, in Australia, there are 200,000 contact centre "seats" and in New Zealand there are just over 32,000.
Most of the Australasian "seats" are filled by people who answer phones and work computers for clients in the same country (or even building) as them. But about 3000 of the seats in New Zealand are for Australian clients based either in New Zealand (outsourcing) or in Australia (nearshoring).
Nearshoring pioneer
Amway was a nearshoring pioneer. The cleaning and cosmetics company set up its regional contact centre in Auckland 12 years ago. Woolworths, iiNet, Lumo, ANZ, Quickflix and L’Oreal have also sent jobs across the Ditch and Fairfax has continued to offshore work to Fairfax Editorial Services, its wholly-owned New Zealand subsidiary.
Last year, about 40 more Australian journalists lost their jobs when the company offshored production of the Australian Financial Review, Good Weekend magazine and other features and sections pages of The Age, The Sydney Morning Herald and The Canberra Times.
John Chetwynd, managing director of Auckland-based Telnet, said his company started doing work for Australia’s Sony Ericsson "some years ago". Australian companies had been sending office work to New Zealand "under the radar" for about a decade but the practice had only been talked about openly for the past year.
Of their 250 staff, 40 worked for Australian companies.
Last year, CallActive and Contact Centres Australia both opened centres in Wellington and Unity4 announced it was bringing "cloud-based" contact centre work to New Zealand too. Public service cuts mean there are plenty of empty offices in the capital. CallActive started with 200 seats on a single floor, but has since leased another floor with 200 more spots.
"We are interested in targeting companies already in the Philippines or India and trying to provide an alternative for them," chief commercial officer Justin Tippett said.
Contact centres spruik New Zealand as a place with a strong cultural alignment to Australia, a "stable, modern infrastructure" and a "stable political environment". New Zealand Trade and Investment is rather blunt about the other appealing factor. "Labour costs are extremely competitive for a first-world country with a highly skilled and educated workforce," it says on a webpage headed "New Zealand’s Investment Advantage".
Temps 'outnumbered'
Every company I spoke with said it paid well above the minimum wage (in New Zealand it is NZ$13.75, in Australia AU$16.37). Most said the hourly rate was NZ$17 to $19 and that permanent staff outnumbered temps, but I have not been able to confirm these claims with employees.
While stability may be a selling point for investors, it is not one for staff. As an outsourcing executive told me, off the record: "This work moves around quite a lot as a company tries to find the best location."
The New Zealand Parliament is now working through various amendments to the Employment Relations Act and these changes are likely to make New Zealand even more attractive to investors (and less attractive for staff). One provision sets up 90-day trials so that for the first three months a new employee has no right to file a personal grievance claim or to appeal an unfair dismissal.
Another removes an employers’ duty to conclude collective bargaining. Meal and refreshment breaks will no longer be an automatic entitlement and employees have to provide proof of sickness or injury from the first day of leave.
At the moment, the only apparent glitch in the offshoring bubble is the New Zealand economy. It is buoyant, due to a post-earthquake building boom and strong dairy prices.
When Fairfax hired me as an offshored sub, AU$1 bought N$1.25, but this year, for the first time, the New Zealand dollar is likely to reach parity – or even eclipse – the Australian one. This may make New Zealand less appealing to Australian investors and less stable for offshored employees who know that being cheap and very hardworking are two requirements of their employment.
When I was an offshored worker, I felt lucky to have my job but I also felt insecure. I had taken the work of Australian colleagues. What was theirs was now mine but what was mine could swiftly become someone else’s.
In 2011, Fairfax sacked 90 newspaper advertising staff in New Zealand and offshored the work to India. Some had worked in the same Wellington building as us. Giddy-up, their empty desks said.
This is an edited version of an article to published online in Griffith Review Edition 43: Pacific Highways.
Rachel Buchanan is the author of Stop Press: The Last Days Of Newspapers and worked for The Age in Melbourne. This article is republished with the author's permission. View her full profile.
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 New Zealand Licence.
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