Who Cares? And Who Profits?

- Alastair Duncan

Alastair Duncan is a long time CAFCA member and works as an advocate for the Service and Food Workers Union (SFWU).

Forget Hollywood. When it comes to overseas corporations taking an interest in New Zealand the amount of Government and private money in the aged care sector makes the Jacksons and the Camerons from Wellywood look like small potatoes. In 2013, as it did the year before, the Government handed over a billion dollars to the aged care sector, an industry increasingly dominated by offshore interests. The money underwrites the employment of an estimated 30,000 carers but on a pro rata basis keeps staff – well, most - under a living wage. Now some of that corporate money may well be the deciding factor in one of the most high profile election band wagons this year. If the offshore money men and their NZ based CEOs played their cards just little more carefully they could be on to a winner in aged care but, to date, the sector seems unwilling to fully commit to support its staff in their battle for a fair share with the Government as funder.

Equal Pay

In 2013 a Lower Hutt caregiver Kristine Bartlett made history when her union, the Service and Food Workers Union (SFWU), took a groundbreaking equal pay test case on her behalf.  Kristine won and, while the case is now before the Court of Appeal, nearly 3,000 other women have filled out authorities to take their employers to court and join the case. In December 2013 the union targeted the large offshore chains believing they had the clout to shape the Government response. Now the case is extending to other domestic rest home providers.

After the first hearing Kristine’s employer, a company called Terra Nova, handed over the running of the financing to the industry lobby group, the Aged Care Association. The ACA employs former Labour staffer Martin Taylor as its Wellington lobbyist and represents most, but not all, of the large and small providers, including most of the offshore operators. Taylor and the ACA have a curious track record when it comes to pushing for funding increases. Seven years ago the ACA took the Labour government to court, successfully arguing that, by directing district health boards (DHBs) to “pass on” an additional $1 an hour to caregivers through collective bargaining, it had interfered in the operation of the DHBs. In 2010 ACA commissioned accounting firm Grant Thornton to look at profitability in the sector. Thornton argued providers should expect returns of between 11.3 and 12.6% – a rate of return far ahead of that offered in most other investments. Thornton also argued that: “Wage inflation will be persistent from 2015 onwards as demand for aged residential care picks up”.

Rent Strike

Four years on Thornton’s prediction may be coming true. Share prices for the listed providers are skyrocketing and the equal pay case has sharpened the wages conversation. Money sits at the heart of the sector whether the providers are corporates or community groups. But under the current Government funding has been tracking downwards, even as the baby boomers hit retirement age and demand starts to bite. And, increasingly, the sector is dependent on overseas recruited care staff from South Asia and the Philippines to cover the skills gap in the domestic workforce. This follows an early and still large dependence on Pasifika women to do the work.

In June, a week before the 2014 Budget, the NZ Aged Care Association started a rent strike. After being offer a miserable 1% increased funding by the DHBs the ACA announced it needed 6% and would be refusing to sign its provider contracts with the DHBs unless the Government delivered. As the industry lobby group for Aged Care the ACA is charged with representing a polyglot membership made up of mum and dad operators, religious and welfare providers and a burgeoning “for profit” sector whose daily fortunes are best gleaned from the Stock Exchange reports.  

Three listed companies show what happens when the baby boomer generation meets retirement, with Metlifecare shares up 86% since 2011, Ryman Healthcare up 204% and Summerset up165%. A look at their annual reports shows some big, big investors, including AMP, HSBC, Citibank and JP Morgan. While not listed on the NZ sharemarket the two largest providers, the UK-controlled BUPA and the Australian-controlled Oceania are keeping their owners happy. BUPA turned a 2012 loss of $7 million into a 2013 profit of $43 million and Oceania, which had overextended itself in recent years, and is rumoured to be about to list on the Stock Exchange, paid down significant debt to its Australian owner by selling six rest homes to BUPA.

But the rent strike collapsed within weeks. Insite magazine, the sector glossy, speculated on the sudden change of tack that “some providers and their representatives did not want to risk jeopardising the new premium charging clauses in the (DHB) contract, which are the result of six years of negotiation”. Premium charges, whereby an operator can charge more for extras such as larger rooms, TVs and other services, have long been seen by some providers as a smart way to increase their profits. Ryman Healthcare, a NZ company with significant offshore owners, suggests it could meet equal pay demands if it could increase its premium charges. Like the other operators Ryman tries to present a "Chinese wall” approach, insisting its construction and sales business is somehow separate from its care services. However even a cursory look at their Websites shows the security of care is fundamental to the property sales.

Parity Not Equity

Then, days after signing the DHB agreement and picking up the 1% funding rise, the ACA began a nationwide election campaign aimed at lifting wages. Yes, the same operators who are fighting Kristine Bartlett in the courts are now spending thousands of dollars calling for pay parity for their staff with those in DHBs. To fund its fight the ACA asked operators to pay $2 per bed. Insite says Terra Nova’s legal fees, now being paid by the ACA, were estimated at $400,000, and based on the large operators’ market share, that should have amounted to $280,000 for the corporates. However Insite reports the ACA raised just $235,000, forcing it to dip into its reserves.

Attempts by Insite and the union to find out just who paid what have mostly met with a blank wall, with some operators privately indicating they did not pay a penny and Insite reporting that not all ACA members’ views were taken into account. Some, but not all. Ryman boss Simon Challies is up front, saying the Employment Court decision is wrong but like others he supports greater funding. Presumably, as long as someone else pays. By contrast, the 2010 Roger Award runner up BUPA, which is not a member of the ACA, has taken a much more constructive approach to the case and is working with the SFWU and NZ Nurses Organisation (NZNO). It has supported elements of the equal pay case.

Parity is, of course, not the same as equal pay but could still lift the wages from an average of around $15 per hour to $18 plus. But the equal pay case could deliver a rise well beyond that with rates above $20. By promoting parity while fighting equity in the courts ACA and, by extension, its owner members run a risky strategy. Their by-line “Your Mum deserves dignity and respect – so does her caregiver” cunningly seeks to flush out the political parties in the lead up to the election (www.whocares.org.nz)

But it’s a dangerous win/lose scenario. Funding for 2014 is already decided and politically only Winston Peters tends to claim to represent the elderly. With 30,000 carers working in the sector, asking staff to back the funding cry while fighting equal pay could backfire if the post-election landscape doesn’t respond. One thing is certain. Offshore investment over the next decade will continue to do nicely out of the aging population down under. But whether the bankers and brokers realise their greatest asset is ultimately their staff is yet to become clear.


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