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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.
SURGING INDUSTRIAL DISPUTATION - UNIONS RESPOND TO LOSS OF MEMBERS - AND TO THE FEDERAL COURT TAKE-OVER - WITHOUT FURTHER URGENT REFORM SITUATION MAY WORSEN LABOR'S
EMPLOYMENT POLICY - WHAT A FLOP! INTEREST RATES
UP - BUT INFLATION? VICTORIAN
GOVERNMENT SERVICES - SOME AGE RE-ASSESSMENTS? ELECTORAL FRAUD
- DID LABOR REALLY WIN IN 1993? DAVOS -TOO MUCH
HOT AIR? ABORIGINAL
PROBLEMS - SOLVED DOWN SOUTH? 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? 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). THE
NEW UNION STRATEGY 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 ·
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.
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).
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