Labor's IR Vision: Chaos, then regression

Australian Financial Review

18th September 2007

The ALP's new workplace relations plan is not much different from the old one, writes Des Moore

Although both major parties enunciate workplace relations policies involving extensive labour market regulation, such policies are currently often portrayed as reflecting their only major difference.

Labor's implementation plan, released last month, has to be read with the April statement on Forward with Fairness. While it sets out transitional arrangements before the new policy becomes operative in January 2010, assessing both statements together leaves considerable uncertainty about policy both pre and post 2010. Yet with the possible failure to obtain Senate approval of necessary legislation, this is largely overlooked in public commentary to date.

Thus, while the August statement outlines retentions of some existing policies, important policy changes in the April one are buried. These include the union entrees obliging employers to bargain in good faith which, with the abandonment of Australian Workplace Agreements (AWAs) and the disincentive to negotiate common law individual agreements (due to condition requirements and susceptibility to industrial action), would inevitably push employers into potentially costly collective bargaining processes, even on one employee's request. Although Shadow Minister Gillard claims non-union collective agreements would be "possible", in reality there would be virtual compulsory union bargaining.

By contrast, WorkChoices contains no obligation to bargain in good faith, leaves it open to employers and employees to decide whether to bargain on a union or non-union basis, and allows individual agreements that meet fewer conditions and protection from industrial action.

Again, the August statement fails to explain how policy would work in the transitional period prior to January 2010. Astonishingly, the Australian Industrial Relations Commission would be asked to modernise the many awards it created - but failed twice before. And as the new Fair Work Australia body would not operate until 2010, the AIRC would seemingly also assume responsibility for administering the existing award "system".

In short, for two years Australia would return to the AIRC days of yore, including the use of de facto compulsory arbitration powers. Contrary to claims by Labor spokesmen, considerable uncertainty would then arise about employment arrangements under AIRC decisions, the likely content of new legislation applying from January 2010 (on which public consultations are promised), and the content of new awards. Previous attempts to rationalize awards faced the politically insurmountable hurdle that, unless acceptable to reduce wages and/or conditions under many existing awards, rationalisation would result in inappropriate increases from both a micro and macro perspective. The absence of guidance on this important issue leaves a major gap in Labor's policy and highlights the basic problem with an award system.

Under WorkChoices there would be no uncertain transition period and no additional role for the AIRC. Nor need the award system create problems as, minimum wages aside, there would be freedom to negotiate additions to employment agreements without potential union involvement regulated through an outside body.

Labor also claims its policy of "a fair system, a simple system, a flexible system" would be based on "driving productivity in our private sector". But how could a policy having ten minimum legislated standards, industry awards with up to a further ten minimum standards, the setting of "minimum annualised wage or salary arrangements" and a return to an unfair dismissals regime produce anything other than an extremely complicated and inflexible system not conducive to increasing productivity?

Moreover, as under that system "collective agreements will be able to override award entitlements provided the agreement means employees are genuinely better off overall", how would aggregate wage increases be prevented from exerting upwards pressures on prices and interest rates where unions would have much increased bargaining powers? Ms Gillard assures us that "wage movements will be founded on productivity increases", but past experience shows industrial tribunals are more sympathetic to union claims than to adverse price or employment effects.

In reality Labor's policies are truly frightening, threatening an environment more conducive to inflationary wage increases and applying the most extensive set of regulations ever stipulated in legislation. An all-powerful outside body with an extensive decision-making role would, with the backing of millions of budgetary dollars, administer a new compulsory system armed with an industrial police force. Yet most individuals now have the capacity to reach their own decisions in employment bargaining and the notion of a vast imbalance of bargaining power in favour of employers is outdated. Labor's policy would be a serious backward step in modernising the economy.