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Workplace Reform - A New Approach

The Australian - 9 December 1999

With the effective rejection by the Democrats of the "second wave" of workplace reforms, it is becoming increasingly clear that major deregulation of existing arrangements is unlikely to be achieved by concentrating on legislation changes alone. What is required is a package that combines legislative deregulation with measures that provide assured protection for those at the bottom end of the income spectrum.

At the same time, the Government needs a concerted campaign that highlights both the inefficiencies and inequities of existing arrangements. These occur principally because existing arrangements, now probably unique in the world in the extent of third party intervention in employer-employee relations, are a significant deterrent to employment compared with less regulated countries overseas.

It is surely impossible any longer to ignore the staggeringly successful operation of the US labour market. If Australia employed the same proportion of its working age population (15 to 64 year olds) as the US, we would have another 750,000 employed. Yet, arguably, Australia's more literate work force should allow a higher proportion to be employed than in the US. Less regulation of employer/employee relations would provide employment for many of Australia's 700,000 unemployed and the million or so who would like to work but who are deterred from actively looking for it under existing arrangements.

True, deregulation would likely result in some lowering of wages at the bottom end and such a prospect is a principal cause of the political opposition to it. But there are ready answers to this perceived problem.

First, it is clearly more equitable to have working poor than unemployed poor. Second, as most low paid live in higher income households, there is no need for anyone to determine a "livable" wage for them. Third, the minority of low paid workers living in low income households generally also benefit from social security and other government assistance. Indeed, wages decreed by the AIRC do not assure a "livable" income for the low paid - it is those benefits that do. Fourth, most low paid move up the income scale over time. Finally, employers would not be able to drive down the general level of wages and conditions because there are 1.1 million businesses in Australia competing with one another for labour.

Such answers would probably not be sufficient on their own, however. Part of any package would therefore need to include measures to ensure that the living standards of any "losers" in low income households would be protected through the social security system. While Australia's relatively generous social security system would provide offsetting increases in means tested benefits for many, some low wage earners would need an adjustment to existing benefit arrangements. Additional budget expenditure could be financed by reducing the benefits of $20 billion plus presently going to middle and upper income groups.

Naturally, deregulation would not mean no regulation. Both employers and employees would be protected by the common law and normal courts, and by agreements between them. With both parties expecting to benefit from a contract, workers and employers would largely be free to decide on the content of their employment relationship.

However, the common law would protect workers against abuse of the process of contracting, such as from coercion or misrepresentation, and employers against disruption of trade by unions. With the alternative sources of income available in modern societies, and with so many employers competing for labour, the bargaining power of workers would at least equal that of employers.

Employers and employees would establish their own dispute resolution procedures instead of relying on an umpiring process that apparently deters industrial action and offers fairness but, in reality, encourages disputation and poor management. Existing interventionist arrangements have helped keep Australia's rate of industrial disputation above that in less regulated labour markets.

To ensure those on low incomes would not be disadvantaged in bargaining, the AIRC would become a body offering on a subsidised basis advisory and mediation services, plus a range of standard employment contracts with dispute resolution procedures included. Employers would also be able to access such services.

Such a body, the Advisory Conciliation and Arbitration Service (ACAS), has operated successfully in the United Kingdom for 25 years. By contrast with Australian arrangements, ACAS has established a voluntaristic approach to settling collective and individual disputes - and built a reputation for impartiality. It now settles the great majority of collective disputes and nearly half of individual disputes; and, while providing extensive advisory services at no charge, its annual budget is only around 26 million pounds.

To prevent the "regular" courts adopting similar interventionist practices to the AIRC new Federal legislation based on the corporations power would affirm the rights of employers and employees to contract without constraints, or subject only to specified constraints consistent with the common law.

An approach along these lines would offer a new start for a new century.