IR reform horse has fallen at the first hurdle

The Canberra Times
30th May 2005

The continuation of extensive regulation indicates the Government has been spooked by Opposition and union scare tactics, says DES MOORE

In recent months Prime Minister Howard gave many undertakings to effect extensive reforms to workplace relations. This raised expectations that the announced changes would be accompanied by predictions of significant increases in employment.

But, by retaining much of the machinery of restrictive employment regulations, and leaving considerable scope for troublesome judicial intervention (although what courts will handle the interpretation of legislation and agreements is unclear), the Prime Minister can do no more than claim the changes as providing the basis for continued job growth.

Budget forecasts of a slower growth in employment in 2005-06 (and apparently of no increase in workforce participation out to 2008-09) are not being upwardly revised.

The refusal to respond directly to the Opposition’s argument that reform could make some workers worse off reveals deficiencies in thinking that are reflected in the changes. Reform should have been based on the fact that a freer labour market would be fairer because it would increase the ability of those at the bottom of the income scale to gain jobs and their own incomes.

This in turn would more than offset any paring of conditions of existing workers. However, the Coalition’s apparent inability to deal with the "worse off" scare has led it retain regulations that will continue to protect existing workers from competition from those on low incomes.

Hence the astonishing six negative rationales Minister Andrews gives for the changes, viz they will not cut wages, not abolish awards, not stop workers joining unions, not prevent strikes, not outlaw union agreements and not abolish the AIRC. A seventh could have been added - they will not improve workplace relations much either.

In reality, following the Coalition’s failure in the budget to reverse the unwarranted expansion in government spending since 1996, these weak-kneed changes in workplace regulation confirm that it appears unable to seriously espouse the liberal cause. Prime Minister Howard has seemingly forgotten that as the Jobsback shadow minister in 1992 he proposed more extensive changes from a much less favourable political situation.

Sadly, clichés proselytised by a politically powerless Opposition and a union movement representing a diminishing minority of workers have largely won the day. The worse-off scare, based on unsubstantiated assertions of an imbalance of bargaining power between employers and employees, has frightened the Government not only into retaining special employment regulations but promoting union bargaining rights and increasing to three the number of bodies laughably described as independent umpires.

True, the determination of the minimum wage and of other existing wage rates now set under awards (but to be reviewed by a task force) have been transferred from the economically-ignorant Australian Industrial Relations Commission to a new Fair Pay Commission modelled on UK arrangements. But there the recommended minimum wage rate continues where it started, viz at an employment deterring 43 per cent of full-time median earnings. Appointees to our FPC will operate under legislative parameters apparently requiring no reduction in any wage and "reasonable and sustainable increases" in the minimum.

Thus, despite Australia’s high employment-deterring minimum of 58 per cent relative to its median, the FPC will have limited scope to make sensible economic and social decisions. One wonders who will accept an appointment.

By failing to abandon the minimum wage, or at least requiring its reduction to the OECD low of 33 per cent of the median, the Government’s reform horse has fallen at the first hurdle.

Almost all of those 2 million mainly unskilled Australians who say they would like a job (or increased hours of work), but who cannot legally offer themselves at a wage lower than the current minimum of $24,000 pa, will continue to have difficulty accessing the job market.

But they will be eligible to receive taxpayer-funded social benefits ranging from $10-13,000 pa. As budget estimates show, welfare spending will thus increase further from existing record high levels and the much-touted welfare to work program will be ineffective.

In practice, and however negotiated, employment agreements still have to comply with many legislative requirements in addition to the minimum wage(s).

The application of the unfair dismissals regime to fewer businesses, and the conversion of the award system to an option, are improvements - but why retain such special regimes and outdated processes at all?

The retention of even an optional process for collective agreements simply encourages unions to push employers into making unjustified concessions.

And with the AIRC continuing to have some (unclear) form of jurisdiction over industrial disputes and the right to strike inexplicably retained, albeit under a secret ballot, employers will not easily escape union action.

Thus, while the new legislative requirements will be less restrictive than at present, and while the more restrictive State legislative and judicial intrusions will (if the legislation is constitutionally well-founded) be avoided, the benefits from these changes will be limited.

The continuation of extensive regulation, extending even to wage rates, indicates the Coalition has lost its way and its nerve.