Institute for Private Enterprise

Home page Newsletters

February 2000 Newsletter

The Institute for Private Enterprise promotes the cause of private enterprise and a reduction in the role of government. Subscribers receive copies of all publications including a monthly newsletter complete with attachments.



















Why Industrial Disputes are Surging


The OECD's survey of the Australian economy published just before Christmas contained a revealing graph (reproduced below, albeit imperfectly) comparing Australia's rate of industrial disputation with that in other OECD countries. Although there are differences between countries in the definition of what constitutes a "dispute", the graph scarcely supports claims that our "system" is better at preventing industrial disputation. The Australian line is the top one and clearly shows a higher rate than in less regulated labour markets such as the US (the bottom solid line), New Zealand and the UK.






Since the OECD report, our rate has surged further "ahead". Latest ABS data   shows that, in the 12 months ended November 1999, there were 43% more disputes than in the previous 12 months. The number of employees and working days lost also increased (up 59% and 32% respectively). The increase shown in the following graph mainly reflects increased disputation in the NSW public service - which the NSW Opposition does not appear to have been able to use to help restore its fortunes, however.

It may be no coincidence that the upsurge in industrial disputes is occurring at a time when union membership has fallen dramatically - the union movement has its back to the wall. In the year ended August 1999, membership dropped by no less than 8.5 per cent to 25.7 per cent of total employees. In the private sector, membership fell below 20 per cent for the first time. Even though this fall occurred in the face of an ACTU membership campaign, there have been only limited references to it by I/R journalists - and no suggestion that it represents an ACTU failure.



Since November, the focus has switched to Victoria. In an article in The Age on 18 Feb (unedited version attached), I argued that the upsurge in industrial disputation reflects a determined attempt by the union movement to undermine the trend to enterprise and individual bargaining, and that the focus on Victoria partly reflected the fact that it is the home of the industrial relations club. Interestingly, The Age edited out of the article my suggestion that the industrial relations club includes "the panel of judges that specialises in industrial relations issue and that comprises many ex-union barristers".


This suggestion picked up from an important editorial in the AFR on 7 February (also attached) on the decision by Justice Gray to grant an injunction requiring BHP to stop offering individual contracts to its iron ore workers. In something of an under-statement, the editorial noted "the growing tendency for the Federal Court to interpret the Workplace Relations Act in ways that help unions pursue their agendas".


Comments that are perceived as bringing the judiciary into disrepute risk a contempt of court action, as HR Nicholls found. But, one does not need to make any such comments in interpreting the recent stream of Federal Court decisions. There is simply no doubt that unions have seen them as increasingly putting employers on the back foot and as providing a golden opportunity to step up the pressure and, inter alia, force a return to industry wide bargaining. At least until recently, employers have been showing some inclination to resist. But the latest batch of Federal Court decisions has thrown into severe doubt their capacity to sustain resistance.


 It is particularly worrying that these latest Federal Court decisions seem to have delivered the coup-de-grace to attempts by employers to obtain access to common law remedies. Hitherto, that was an important safety valve. In effect, the Federal Court has made a take-over bid for the State Supreme Court role in industrial disputes - and appears to have won.


There is thus now an urgent need for the Government to again take up the cause of fundamental reform of the regulation of employer-employee relations. The immediate grounds would be that the "club" has rendered the Workplace Relations Act dysfunctional and the common law ineffective.


As readers of this newsletter will know, my proposal is to convert the AIRC into a voluntary advisory/mediation service (with subsidised services for low wage earners) and substitute legislation that codifies common law that would normally apply to contractual relationships between employers and employees. While such a codification would still be open to judicial "interpretation" favourable to unions, the scope would be greatly reduced. The present situation actually provides an opening for the Government to put workplace relations reform back on the agenda as a serious national issue.


Labor's Employment Policy Flop


The Government could not be but helped in such a venture by the total flop of Labor's long awaited employment policy, which (staggeringly) completely omitted to mention regulation of employer-employee relations. My article in the AFR of 24 February (attached) outlines why the policy announced the previous day cannot be taken seriously.


In reality, my article was rather "kind" to the policy, which effectively suggests a form of manpower planning (that was formally abandoned in Australia shortly after World War 11 but continued in the Soviet system). Thus, Workforce 2010 envisages the development of skills "profiles" which will "enable early intervention by government and/or private providers in addressing skills deficits before workers become unemployed. It will, for the first time, bring a genuine preventative approach to the unemployment problem in Australia." It is difficult to understand how anyone could seriously believe that a capacity exists to pick winners and losers along these lines.


An AFR report that the Executive Director of the Business Council "expressed disappointment at the reaction to the Labor initiative" reinforces concern at the direction being taken by that body. He reportedly described Workforce 2010 as an important initiative because it focuses on the need to develop Australia's skills base.

But nobody denies that need - the question is how to develop it, the answer to which is nowhere  to be found in Workforce 2010.



Interest Rates Up - But  Inflation?


As expected, the Reserve Bank increased official interest rates after its February Board meeting, following which I attended an Economic Society lunch addressed by Governor Ian Macfarlane. At question time, I failed in my attempt to obtain elucidation from the Governor as to why the increase was effected when the Bank's prior statements on inflation appeared to indicate that underlying prices were expected to stay within the target range of 2-3 per cent.


It seems extraordinary that the Bank can operate an anti-inflation policy in which changes in policy take 12-18 months to impact on spending and/or inflation but yet it issues no forecast of inflation for that period ahead. If it does not do so voluntarily, it should be required to.


Victorian Government Services - Some Age Re-Assessments?

The Age published a summary of and comments on the Productivity Commission's (PC)Report on Government Services 2000, which made various comparisons of State Government services in 1997-98. Comments by Tim Colebatch implied some (modest) backtracking on his previous criticisms of the Kennett Government's performance. For example, his main comment on hospitals was confined to "Victoria runs one of the most economical hospital systems of any state" (emphasis added).


In fact, the PC's stats show that both Queensland and South Australia had lower expenditure per patient and Tim's colleague in Canberra, Darren Gray, spilt the beans  when he highlighted that Victorian hospitals see urgent patients quicker than any others and that they also see a higher proportion of emergency patients within the target time of ten minutes. Also, "it is unclear which state is best to be waiting for public hospital surgery" and Victoria "compares well with other states on a range of public health measures".


Could it be that The Age now thinks that health was not so badly run under the Kennett Government after all? Could it be that the case-mix system, introduced under Joan Kirner, actually worked well under Jeffrey? We await the next instalment.


Electoral Fraud - Did Labor Really Win in 1993?


It will be recalled that the 1993 Federal election was extremely close in terms of votes. In the event, Labor won by 1550 votes across Australia. Elections that involve wins by very close margins in a number of seats inevitably raise the question of whether there could have been any manipulation of votes.


The scope for such manipulation was brought home to me during a recent meeting of the HS Chapman Society, a body which has been pointing out for some time now that Australia's voting system is wide open to many fraudulent devices (it now has a video on them). Two of many possible devices are by voting at more than one booth on election day and/or by registering people as voters in the last week before an election when they are not genuine residents of the electorate and there is no time for the electoral authorities to check. About 400,000 were enrolled in the last week before the 1993 election, for example.


A presentation to the Society by a Liberal Party candidate who was defeated by less than 200 votes in the 1993 election certainly left me with the clear impression that he should not have lost his seat.  To give just two examples, he ascertained after the election that 315 of Jehovah's Witnesses and Plymouth Brethren were recorded as having voted even though, as a matter of "conscience", they did not vote; and there were around 300 who voted in his electorate even though they were resident elsewhere! Legal "procedural" difficulties prevented this material being used to obtain a re-election.


There is clearly a need for major electoral reform to, at a minimum, improve verification at the time of both enrolment and of voting. The Government has had legislation in the pipeline for some time but it appears to have got bogged down. It clearly needs to be upgraded.


Davos and The Hot Air Problem


The Prime Minister has copped flak for failing to attend the annual Davos talk-fest -unkindly called Davo's by some! But he seems to have been well out of it judging by D's nomination of climate change as "the greatest challenge facing the world at the beginning of the 20th century"!  Too much hot air in the Swiss Alps?


 Aboriginal Problems -Solved "Down South"?


Denis Burke, Chief Minister of the Northern Territory, has also copped flak over the mandatory sentencing issue, but seems to have responded pretty well. Without delving into that particular issue, I rather liked the following:


"So many people down south think you can solve Aboriginal problems by some declaration of reconciliation, or by native title rights, or 'give then their land back and everything will be fine'. They're dying from all the good things the do-gooders have gotten for them - social security payments in cash, where its going on booze instead of basic stuff. Southern Australia says: 'Aren't we wonderful, we've signed this declaration', or 'on May 27, we'll all join hands, walk across the Harbour Bridge and say we've reconciled'. Bullshit. Non-Aboriginal Australia is pissed off that the programs aren't working, pissed off that the money is seen to be going to the wrong areas, and too much of it, when they're suffering similar problems themselves. You only have to look at the Hanson movement to see that if you can't see the middle average Australian in that Hanson movement, you're blind. No one's saying it's right, but you can't ignore the perception" (The Age, 19 Feb).





By Des  Moore* (unedited version of article published in The Age, 18 Feb)


The sour note on which Bill Kelty departed the ACTU, along with the long foreshadowing of the departure of President Jennie George, confirms that new ACTU Secretary, Greg Combet, has effectively been running the show for some time. It will be recalled that he cut his teeth in the 1998 waterfront dispute and established something of a reputation there as a strategist. Close followers of the industrial scene detect that Combet's steadily increasing hold on the ACTU reins has coincided with the development of another carefully planned union strategy. 


Once it became clear that the Senate would reject further reforms in workplace relations legislation the strategy apparently went into full action mode. Importantly, the rejected reforms would have tightened Section 127 of the Workplace Relations Act 1996 and provided much better protection for employers against union exploitation of the right to strike once a bargaining period is declared. They would also have made it difficult for unions to bargain on an industry-wide basis.


This failure to achieve further reform has provided the ACTU with the opportunity to attempt to reverse or at least halt the trend towards enterprise and individual bargaining by sponsoring a campaign for industry wide bargaining concentrated in Victoria. The decision to focus on Victoria mainly reflects the fact that it is the home of the union movement and the industrial relations club, including the panel of Federal Court judges that specialises in industrial relations issues and that comprises many ex-union barristers. But the union movement also envisaged that a new State Labor Government, particularly one whose Ministers include many ex-trade unionists, would find it difficult to adopt a tough line against what unions would present publicly as legitimate bargaining.


Against this background, it is pertinent to assess some of the publicly expressed views of Greg Combet and how he may be attempting to attract sympathy to the union case through the media. For example, in the Financial Review of 15 February Combet suggested that it is necessary to "see what are the fair and reasonable standards" that should apply in the context of an economy achieving improving rates of growth and productivity. Continuing the ACTU campaign started last year on job insecurity and reasonable hours of work, he argued that "this should not mean great insecurity for people, more casual jobs and less permanent jobs".


This theme has undoubted appeal at a time when unemployment remains high despite the strong economic recovery. Implicit is the notion that, while we should continue to advance on the economic front, that has already involved a lowering of standards for workers which should not be allowed to continue. In this way the unions seek to establish public support for their campaign.


Closer examination, however, suggests that there is little substance in the Combet thesis.  Many contra points can be made


  • Job insecurity as measured by the average duration of jobs has not increased in Australia since the early 1980s and less regulated labour markets overseas have slightly longer average job durations;


        Perceptions that job insecurity has increased derive importantly from stories about "down-sizings" that overlook the many new additions to employment. In Australia, the Morgan Survey which has been conducted since 1975 shows that only in the recession of the early 1990s has the proportion regarding their job as safe dropped below 70 per cent ;


        While the proportion of employees classified as "casual" increased from 19 to 27 per cent between 1988 and 1998, "casual" is normally defined, rather misleadingly, as  those who do not receive both sick and holiday pay. This includes not only self-employed but also those who have permanent jobs and have simply  "cashed out" their leave entitlements;


        Average working hours continue to decline naturally. Proposals to increase employment by limiting working hours wrongly assume perfect exchangeability between employed and unemployed and could actually worsen unemployment ;


        Those who work long hours and/or unpaid overtime are predominantly (over 70 per cent) in managerial or professional positions. The number working unpaid overtime has actually decreased in recent years;


        Although over 20 per cent now work more than 49 hours per week (up from 17 per cent in 1978), 74 per cent are satisfied with their working hours or want to work longer hours. Those who would prefer to work less per week are mostly in professional/ managerial positions or self-employed and many of those are reducing the length of their working lives;


        Major changes in the structure of "industry" and consequent changes in the kinds of work performed, including a major reduction in physical labour and the stress from that ;


        Health generally continues to improve as does life expectancy.



The move to enterprise and individual bargaining, started by Labor in 1993, needs to continue if improvements in productivity and growth are to be sustained. The public should not be fooled by the Combet strategy into accepting the union line that, as this is undermining working standards, the system must revert to old style union-employer bargaining that proved so damaging in the past.



* Des Moore is Director of the Institute for Private Enterprise.



Federal Court needs overhaul

AFR Editorial 7 Feb 2000


Last week's Federal Court decision to grant an injunction requiring BHP to stop offering individual contracts to its iron ore workers could have serious advers implications for workplace reform.


On Justice Peter Gray's interpretation, unions have an arguable case that BHP has discriminated against union members in agreements negotiated with individual employees. BHP is appealing this decision and says it will continue to seek to implement individual agreements. Almost half its Pilbara work force has accepted such agreements and BHP claims that other workers are interested but not willing to commit.  


At the same time, it has agreed to talks with unions and chief executive Mr Paul Anderson says he is not opposed to collective bargaining if BHP can secure the same outcomes as from individual agreements.


Reports suggest that if BHP succeeds, several leading companies could jump on the bandwagon, which explains the ACTU's leading role in organising opposition to the threatened major reduction in the collective power of unions.


Justice Gray's injunction decision highlights the growing tendency for the Federal Court to interpret the Workplace Relations Act in ways that help unions pursue their agendas.


But it is the clear right of employers to offer individual agreements, as BHP has chosen to do. It can scarcely constitute discrimination against union members for the company to offer higher rates of pay to its whole work force and then grant increases to all those who choose to accept. No question of discrimination is raised under the award system when, as is not uncommon, employees doing similar jobs are paid different rates through over-award payments.


Nor is BHP reducing any worker's terms of employment, and it does not require workers to give up union membership. While some employees taking the new deal may choose to resign from their union, the employer can hardly be regarded as thereby discriminating against unions.


The Federal Court has dozens of judges, most appointed by the previous Labor Government and imbued with the folk-lore that employees and unions need special protection because employers have superior bargaining strength. Yet there are more than 1 million businesses in Australia, all competing actively for labour services. By contrast with the apparent absence of any significant employer monopoly power, and notwithstanding reforms of recent years, the system still allows unions to maintain inefficient and employment-reducing work practices. 


In theory, Justice Gray's decision restrains BHP only until union claims of discrimination are fully tested. But with other interventionist decisions, it highlights the difficulty for even large employers to effect changes needed to improve efficiency - a need which unions now appear to concede in the Pilbara. For smaller companies which cannot afford to stand up to union targeting, let alone the uncertainties of the existing "system", risk-taking remains severely inhibited, and this keeps employment down.


The Federal Court problem is crystallised in Justice Gray's rejection of BHP's petition to hear the case in Western Australia. He based that rejection, importantly, on Melbourne having a panel of specialist industrial relations judges (nearly all former union barristers) and lawyers representing unions. Thus, the industrial relations club continues. The Federal Court Chief Justice needs to change this cosy arrangement, which has effectively re-created the previous Industrial Relations Court of Australia. 


And the BHP situation also should be a reminder of the need for the Federal Minister for Workplace Relations, Mr Peter Reith, to further pursue his proposed reforms, including some blocked in the Senate.


Most urgent of these is the need to transfer Federal Court jurisdiction on workplace relations matters to State Supreme Courts and promoting resort to the common law to deal with union resistance to workplace reforms.


Bur for BHP the events of last week will be closely watched by the investment community and other companies which are considering breaking out of the entrenched industrial practices of the past.


BHP's  decision since the injunction to talk with the unions raises concerns that the company has not yet thrown off its habit of compromising with unions for the sake of peace. The ACTU's bottom line will be to offer concessions in return for an agreement not to enter any new individual contracts. Other companies have been "persuaded" into such agreements.


For BHP to proceed down that path would have serious adverse implications for reform at a time when there are concerns that the Federal Government is becoming risk-averse to reform in an effort to bolster its electoral chances for next year's post-GST poll.















High Skills don't always mean more jobs

Article published in AFR of 24 Feb


Labor's employment policy won't lift employers' flexibility to determine workplace arrangements, laments  Des   Moore


Labor 's long awaited employment policy statement, Workforce 2010, keys off the previously published forecast by the Monash Centre of Policy Studies (COPS) that, unless policies are changed, unemployment will average about 8 per cent over the next decade. This forecast leads Labor to argue that, principally by improving training programs, it is realistic to target  unemployment of 5 per cent.


For this purpose Workforce 2010 also adopts COPS' forecasts of employment growth in individual industries and occupations. Opposition Leader Beazley portrays these as a road map for his  "knowledge nation" vision of the future - "a nation that takes the high road to a high wage, high skill economy".


Forecasting a decade ahead is a hazardous business and necessarily depends importantly on projecting recent trends forward. But unpredictable changes often can send forecasts astray. For example, GDP growth has averaged 1.5 per cent pa higher than COPS 1996 no policy change forecast to 2002-03 - even though its employment forecast has been about right so far.


Treasury is forecasting 7 per cent unemployment for 1999-00 and its projections of 2.0 per cent pa employment growth out to 2002-03 are half a per cent a year higher than COPS' forecast, implying lower average unemployment. But the no policy change forecast of 7- 8 per cent average unemployment adopted by Workforce 2010 is within the range of most current  estimates.


Labor is thus correct in suggesting that, in order to reduce  unemployment  significantly and sustainably, major policy changes are needed. The key question is what policy changes.


Policies that increase labour supply by improving education, training and work experience programs can help lower unemployment. This would be achieved principally through a (temporary) slowing in wages growth that would then increase labour demand, leading to higher investment and lower (permanent) unemployment.


But the lowering of wages growth from increased labour supply is likely to be marginal and demand may not increase sufficiently to permanently reduce unemployment. The track record of supply-side programs both in Australia and overseas suggests that, at best, they make only a marginal contribution to reducing aggregate unemployment.


Workforce 2010's supply side strategy envisages that workforce skills profiles be developed and training and retraining programs implemented to target threatened labour surpluses or shortages. But Labor is (rightly) so unsure of such a strategy that it would initially run the skills profiling only as a pilot program in high unemployment regions and expects much of the funding for training programs to come from current allocations!  This strategy certainly provides no justification for targeting 5 per cent unemployment


The reality is that changing circumstances often quickly outdate occupational predictions and governments are unlikely to be able closely target changing jobs and training requirements. In any event, the employment forecasts in Workforce 2010 itself indicate that  the occupations with good employment prospects mostly require no more than either people or computer skills.


Mr Beazley is naive in thinking that reducing unemployment depends primarily on having a "high" skill economy, and his criticism that only 28 per cent have post-school qualifications is wrong. Many jobs will continue to require only basic skills and in 1999 nearly 44 per cent already have post-school qualifications, up from 39 per cent ten years ago. Deregulating restrictions on employment of young people so as to allow on-the-job training may be almost as important.


Of course, Australia must continue to provide educational, job and research opportunities for highly qualified scientists, engineers, and medical people. Arguably, however, a country does not require a large group of such people in order to make innovatory advances.


What is principally required is direct action to increase labour demand by major deregulation of the labour market. This would increase employers' flexibility to determine workplace arrangements. The highly interventionist nature of current regulatory arrangements, coupled with the pro-union bias of industrial tribunals, severely inhibits employers from taking on additional employees at the margin.


Labor's Workforce 2010 makes no reference at all to this vital issue. Other indications suggest that Labor would even re-regulate in ways that would discourage enterprise and individual bargaining. This reflects the agenda of trade unions, to whose apron strings Labor remains tied even though last year's dramatic fall in trade union membership to less than 20 per cent in the private sector emphasises their unrepresentativeness.


The supply side measures proposed by Workforce 2010 represent a poor attempt at an employment policy. Both sides of the equation need attention but the predominant need is direct action to stimulate demand through deregulation.


Des Moore, a former deputy Treasury secretary, is director of the Institute for Private Enterprise in Melbourne.


Home page Newsletters