Rigid system a recipe for disaster

Australian Financial Review

2nd April 2008

(square bracketed words deleted by Ed)

Although Labor may be having second thoughts about some election-time policies, Workplace Relations Minister Gillard maintains her steel-like commitment to implementing “all our election policies on workplace relations”. Even though unions publicly pretend they are not satisfied, Gillard’s attitude is hardly surprising given the Opposition’s inability to determine its post-election policy.

However, the business community may be starting to realise it faces the most extensive and detailed legislative regulation of relations between employers and employees ever applied by the federal government. The government’s business advisory council has already expressed concern about the second batch of legislative changes to be passed later this year.

And a prominent legal firm recently portrayed the proposed resurrection of the award system [(by its failed creator the Australian Industrial Relations Commission)] as a return to the 1970s -- “back from the dead”. The determination of wages and conditions by bureaucratic or quasi-judicial authorities would [indeed] be mediaeval.

Developments under coalition arrangements provide no justification for re-regulation. From the mid 1990s the unemployment rate halved from around 8% to 4% and the proportion of the working age population employed jumped from 66% to 72%, adding probably close to 900,000 employees. Australia moved to having similar proportions to the US and UK and well above the Organisation for Economic Cooperation and Development average employment proportion.

But that’s not all. Wage and salary earnings per employee increased by 1.6 -1.7% a year in real terms (sufficient to double earnings in 40 years) and average hours of work and industrial disputation fell.[Australia’s less regulated employees clearly experienced no weakening in their bargaining powers.]

Important improvements in other economic policies, such as the adoption of an anti-inflationary monetary policy, also contributed.

Although Labor claims its proposals are simply based on the conclusion of decentralised enterprise agreements, all agreements will be subject to extensive centralised legislated regulation as to wages and conditions, to detailed judicial and administrative interpretations and applications of such regulation, and to an increased role for unions in bargaining. The reason? An alleged imbalance of bargaining power between employers and workers.

This shows how far Labor is behind the eight ball. In today’s modern economy, more than 800,000 businesses compete for the services of over 10 million workers. Employers as a group cannot force wages down or impose “unfair” conditions on employees as a group. When working conditions are unacceptable to either party, each side has alternatives that prevent businesses as a group from being enforcers but allow workers to make decisions about their jobs.

[Indeed,] each year about 1.4 million employees leave their jobs voluntarily, around 20 per cent because they assess their working conditions as unsatisfactory. Only about 11 per cent of job leavers were retrenched in 2005-06.

Unless Labor re-thinks its proposed legislative and institutional changes, there will be adverse effects on employment and productivity as well as unwarranted increases in union power and infringements of personal and employer freedom.