Telecom's creative destruction: When job losses have an upside

Every cloud has a silver lining, but can it be replicated over 1,500 clouds?
Written by Darren Greenwood, Contributor

Last Thursday, the opposition Labour Party's ICT spokeswoman Clare Curran warned that Telecom New Zealand would be dumping up to 1,500 workers.

And she castigated our National-led government for having a "hands off" approach to the ICT sector, saying that it should intervene and help create jobs there.

Ms Curran's comments certainly stirred up debate, especially as commenters on various blogs noted the role of the former Labour government in Telecom's "destruction".

That government, under Helen Clark, forced the operational separation of Telecom, a process continued by its successor, the National-led government, which saw the creation of Chorus in 2011.

But what struck me, was the reaction in the ICT business community in New Zealand that the job losses might actually be "good news".

It does seem odd, but there could well be something creative in Telecom's impending jobs destruction.

Followers of economics, especially the Austrian variety, may well be aware of Joseph Schumpeter and his theories of "creative destruction", that once something is destroyed, the market will put something more creative in its place.

As Ms Curran lamented the prospect of skilled workers sitting idle, or even moving to Australia, a couple of holes appeared in her arguments.

Just last week, Statistics New Zealand revealed rapid growth in the country's ICT sector — about 15 percent over two years. We also heard renewed cries of skills shortages, and tales of websites listings of 1,500 or so ICT jobs going begging.

Indeed, tech companies are "lining up" to take on the soon-to-be ex-Telecom staff, with several major firms seeking hundreds of workers. It's almost as if New Zealand's ICT companies are vultures hovering over the carcass of a once mighty monopolist.

Ian McCrae, the boss of Orion Health, a software company enjoying major success in the United States, believes that the impending redundancies at Telecom will have an "upside" to the New Zealand economy, as staff will be transferred from a utility to growth orientated, export-led enterprises.

With some senior Telecom NZ staff reported to be behind a plan to buy the ISP Orcon, it certainly looks like there is more potential for former Telecom staffers to be involved in something more innovative than working for a relatively stodgy telco.

Indeed, as David Farrar of the right-leaning Kiwiblog also noted, a more nimble and competitive Telecom will only be good for the consumer and the wider economy, despite the tragedy of individuals losing their jobs.

And as I said last month, we can only look at how these job losses came into being from the regulatory changes that governments have imposed on Telecom in recent years.

Thus, while Clare Curran's former Labour government can take much of the blame for the job losses that are on the cards, perhaps we should also give Labour some credit for the creative, competitive forces it has helped unleash.

And let us hope that the optimists are right, that Telecom's "creative destruction" of so many jobs will deliver a competitive and innovative "upside" to the greater benefit of the wider New Zealand economy.

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