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Shared understanding is what’s missing in productivity debate

Productivity” is starting to sound a little “gourmet” — a word that means very different things to different people. But unlike the spiced-up kitchen combat of master chefs, the productivity battleground has assumed a predictable flavour, and seems to serve up the same old meal.

This week saw two new entries into the debate — Fair Work Australia’s vice-president Graeme Watson, and celebrity unionist Paul Howes. While Watson directed his attention to the “adversarial relations architecture” of Fair Work Australia, which he claimed was propped up by too many union appointments to that body, Howes urged big business to end their fantasies about a “peasant workforce” of cheap, disposable labour. While Watson sees the productivity problem as structural, Howes settles on ideology.

It is true, as Watson suggests, that the contested terrain of industrial relations can distract industrial parties (and policy makers) from the sort of mature discussions about productivity that Howes is keen to kick-start. As well, limiting the workplace relations to a focus on preventing violations and providing remedies can have the perverse effect of allowing companies to overlook their responsibility to contribute to a positive environment for workers and communities. This can inhibit the sort of best-practice approach that Watson espouses.

But the real point of ideological contention is not just the form of the industrial relations system, but the unwillingness to accept a legitimate place for unions within it.

Past productivity reforms reflected a shared understanding about the need to respond collegiately to structural challenges in the national economy, not just by affording unions a role, but by prescribing them an equal place in shaping a shared system. Significantly, these reforms took place against the backdrop of a strong industrial relations framework and were supported by public policy that backed industry reform and provided assistance when needed.

It might be a little disingenuous to suggest that a collegiate approach is totally non-existent today — in some sectors some of that former maturity (or at least recollections of it) remain. Still there appears to be much more appetite for the oft-repeated critique of productivity that just blames unions and wages policy straight up.

This is curious in light of a recent World Bank report that showed that respect for workers’ rights, supported by high rates of unionisation is conducive to business in general and to the profits, income and productivity of individual companies in particular.

Howes’ big-picture productivity plea may be a little nostalgic, but what’s the alternative? It’s certainly true that back then — as now, there were economic winners and losers (just ask a textile worker). But if past approaches taught us anything, it was about the need for creative and integrated policy responses. To date, many productivity-related issues have been dealt with in a very fragmented way — a bit of assistance here, a package there and some skills funding to the side.

There are also issues that are yet to appear on the productivity horizon and where the right policy response today may well fuel the productivity boom of the future — things like decent work, pay equity, labour standards and job security. A renewed focus on skills, training, technology and infrastructure is important but arguably these matters should be part of a modern economy and not allowed to lapse to the point of dragging productive capacity down.

Australia should also look further afield and see what new policy approaches are delivering overseas: there is after all a global contest for manufacturing business around the world and overseas responses are instructive. In Ontario, the government recently invested $80 million to create and retain jobs, innovate and diversify the economy. It has also developed an $8 billion CleanTech sector that continued to grow during the worst recession the country has experienced, and is now contributing $1 billion in exports.

Likewise in Brazil — a country that shares many of our problems like a strong currency and growth in commodities — has found some policy space to abolish the 20% payroll tax for manufacturers in four labour intensive industries, replacing it with a turnover tax of 1.5 to 2.5%. To supplement these measures, the Brazilian government took quick action on dumping and introduced public procurement rules that allow the government to pay up to a quarter more than the lowest price to secure a local supplier. France has opted for a sovereign wealth fund to invest in industry, while the UK has rolled out a renewable energy program along its coastlines.

Such policies do need to be integrated across the economy: a world-class manufacturing sector, for example, needs a world-class education and training system right alongside it. Likewise, the central place of manufacturing in contributing to science, technology and innovation needs to be better understood — especially the link to growth sectors such as health which, after all, is the biggest sector in our economy.  Worker health is also important — a global survey of manufacturing leaders placed health care No.10 on the list of factors that inform where global manufacturing businesses locate their firms.

And if industry assistance is on the cards, then taxpayer handouts should come with a guarantee that recipient businesses behave in environmentally and socially responsible ways by signing to global standards and publicly disclosing their approach to labour and environmental management.

While these topics are yet to find their way into contemporary productivity debates in this country, they certainly give us something to chew over and might provide a pleasant reprieve from what’s typically served up.

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  • 1
    Hamis Hill
    Posted Friday, 25 May 2012 at 9:23 am | Permalink

    Adam Smith’s assertion that high wages in turn create a demand for labour
    saving devices is a productivity principle unheard of by the
    commentariat.The alternative, slave societies of ancient Greece and Rome
    while having the intellectual capacity to produce labour saving devices
    instead relied on unproductive slave labour. So it follows that the low -
    wage push for more productivity is, less productive, in so far as it avoids
    the use of labor saving devices. This is the moronic policy direction of
    the soon to be re-enacted “Work Choices ” legislation, a precursor of
    the inevitable “Abbott Depression” which will do a great deal to advance
    productivity won’t it?A clue to the low wages push is the subsequent
    high interest caused by the lack of savings possible in a low wage
    economy and the scarcity and higher cost of money. Strange how
    rewards to capital have no impact on productivity while wage costs do.
    An educated citizenry, according to Adam Smith, could easily see
    through “the interested complaint of faction” the faction in this case of
    productivity having an interest in high interest rates.
    Hence an interest in this action to reduce education spending etc,etc.
    From the Age og enlightenment to the Age of Darkness.
    Mediocracy is excellence to the mediocre and the debate will remain so
    while ever the medicre experts dominating it remain George Bernard
    Shaw’s “specialist idiots”.

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