Jim Childerstone has trouble with the maths and the logic of the proposed Hillside lay-offs.
A virtual hornets' nest has been disturbed in Dunedin with the potential loss of jobs due to Chinese and other Asian workers' being paid peanuts compared with our own workforce.
Dunedin's Hillside KiwiRail workshops are about to fire 40-odd factory hands qualified in the art of building rail rolling stock, carriages and locomotives. Many have years of experience, and yet the country is bereft of workers with such practical engineering skills.
It went down to the wire when KiwiRail neglected to give Hillside the opportunity to put in a bid to build 500 flatbed railway wagons. Instead the contract went to China.
The excuse, according to KiwiRail bosses, was it was a "commercial decision" to buy foreign-built locomotives, wagons and containers which "were critical to improving the business". Workers had described the move as an "unbelievable kick in the guts".
The South Dunedin workshop will be down to 132 employees, and could lose even more qualified workers if this is the company's future policy.
As I understand it, KiwiRail is a state-owned enterprise of which every man, woman and child is a shareholder. But what it all boils down to is that qualified Chinese workers are on much cheaper rates than Kiwis.
But can any economist capable of some lateral thought come up with some basic maths taking into account the total effect on the NZ economy?
From my simplified version of costs involved (OK, I failed maths in third form), labour costs at Hillside may be two or three times those in a Chinese plant. (This is par for the course for most local manufacturing firms).
So the completed wagons are rolled out at the Hillside workshop directly on to rail lines and pulled to where they are needed, presumably mostly in the North Island, possibly picking up empty containers at Port Chalmers to be filled on the journey north.
What are the costs, if any? The input of raw materials at Hillside would involve some costs for materials and components (mostly from other local businesses) plus energy to produce the finished items.
But this must also apply to the Chinese plant, which then has to package and transport the finished wagons to a port for export. What are these costs? Then there is the shipping costs to get the wagons to a New Zealand port, plus possible carbon credit payments, depending on how an international ETS is implemented.
What does it cost for bulk shipments (FOB) by the time the wagons are unloaded at, say, Port Tauranga? Any calculations on wharfage handling costs?
By this time the extra money paid our Hillside workers, I imagine, would have been mitigated, plus some dollars to go towards upgrading of plant. There will have to be redundancy payments to the workers, dole payments while they seek further work, plus family benefits accruing in many cases. And no guesses as to where the money will come from - thanks to Mr and Mrs taxpayer.
We could lose many of these workers to Aussie and elsewhere. And who can blame them. Then there are add-ons such as discretionary spending by workers on full employment keeping local supply businesses economically viable, as well as other downstream benefits which would disappear if workers move overseas or have to remain on the dole. Can accountants put a value on this?
Did the KiwiRail bosses include these factors in their so-called commercial decision? I very much doubt it. It is typical of accountants' spreadsheets and tunnel vision, with nil regard to wider economic benefits or the sociological and human aspects of such decisions. And this is happening throughout the land.
Many major manufacturers say they are unable to compete unless by moving offshore. Why? Economists opine the per-employee production rate is too low. How come, when most modern plants are highly mechanised? Perhaps some head-office staff need to don overalls and have a session in the workshops.
Which all brings me to the final point. There is some talk from opposition political parties that the minimum wage be hiked to $15 per hour. A big no-no has come from the Business Roundtable and other business commentators. It will create more unemployment. Fuel an economic disaster. Increase the deficit. And so on.
Well, the question I have to ask is: how come the minimum wage in Aussie is far more generous than in New Zealand, yet it is still internationally competitive in producing goods and services? By keeping our minimum wages just above the politically deemed poverty level, how the heck are we supposed to catch up with Australia's standard of living? Does this apply to the full cross-section of employees, or just those on high income levels?
Perhaps Act New Zealand's Don Brash and Prime Minister John Key may have some answers, but to this writer nothing seems to add up.
• Jim Childerstone is a local writer and commentator.
