Institute for Private Enterprise

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Senator Andrew Murray
Workplace Relations Spokesperson
Australian Democrats
Parliament House
Canberra
ACT 2600

27 October 1999

Dear Senator

Thank you for e-mailing me your speech to the Industrial Relations Conference on 21 October, which I read with considerable interest.

Your assessment of the five tests of the 1996 Act suggested by Bob McMullan concluded that each test showed a positive result except on whether a fairer distribution of wage outcomes and benefits has occurred. In that case you concluded that, although real increases have occurred in wages (including for the low paid), "the ABS reports that the distribution of income in Australia continues to become more unfair each year, a trend unchanged from Labor's years."

However, I would draw your attention to the 1997-98 ABS report on Income Distribution (6523.0). That publication states on page 3 that "the degree of inequality in the income distribution of all income units remained almost unchanged between 1994-95 and 1997-98… The shares of total income received by the income quintile groups changed slightly over the four years, but the changes are not statistically significant. The Gini-coefficient in 1997-98 was 0.446 and not significantly different from that of the previous year." (In fact, the table on page 4 shows that the share of income going to the lowest quintile actually increased fractionally between 1994-95 and 1997-98).

Later in your speech you express concern about the declining percentage of workers covered by awards, suggest the need for a pro-active Government funded Employee Ombudsman to protect workers in award-free workplaces, and argue that "these issues are far bigger and far more important than the issues in Peter Reith's third wave bill."

May I be permitted to offer two observations on the question of protecting workers?

First, it would seem important that any protection of those in employment does not have adverse effects either on the unemployed or on the one million of those not in the work force (and therefore not counted as unemployed) but who say they would like to work. You will doubtless be familiar with the notion that excessive regulation protects the "insiders" at the expense of the "outsiders." There seems little doubt that that has been happening in Australia and, through the award system and other regulations, continues to happen. But you do not address this important issue.

Second (and related to the previous point), income protection is provided to low paid workers through the social security system, which automatically adjusts many benefits if other incomes (such as wages) change. That system also provides a basic income support through unemployment and other benefits for those unable to obtain or retain jobs. Given the obvious potential for wage protection to have adverse effects on employment, would it not be more appropriate for the social security system to continue to be the basic provider of income protection?

To the extent that a case can be made for that system to be adjusted, let us look at those possibilities rather than press for increased employment protection with all the potential that has for having adverse effects on employment. In short, rather than think of having an Employee Ombudsman it might be better to contemplate an Income Protection Ombudsman to advise Government on possible adjustments needed to social security benefits to protect incomes of low wage earners.

I do agree with what I understand you to be saying about the limited nature of the Bill, viz, that the issue of ensuring protection of workers' living standards is more important than the fine-tuning amendments proposed by Minister Reith. However, consideration of that issue does not seem to me to require the stopping of further measures to increase the capacity to negotiate flexible employment relationships and thereby enhance the potential for increasing employment and reducing unemployment. Rather, the income protection issue would better be dealt with separately in consideration of possible reforms to the social security system.