Now that Tony Abbott has been forced into an industrial relations policy — recall that he literally had no policy on the issue last year, in a mostly successful attempt to defuse the threat of WorkChoices — it will be intriguing to see how the Liberals sell the need for industrial relations reform.
As Crikey has repeatedly pointed out, so far Labor’s IR framework has accommodated the return to near full employment without any surge in wages growth or rise in industrial disputation levels. Under the Fair Work regime, the economy is producing hundreds of thousands of jobs with no wages explosion and no surge in strike action as workers and employers tussle over the spoils of the recovery.
Rather than deal with actual data, IR reform advocates have retreated to nebulously claiming that the Fair Work regime is hampering productivity, although without providing examples. A classic case is Alan Mitchell’s op-ed piece in today’s AFR (which, even more than The Australian, reflexively advocates IR reform without any evidentiary basis). “Gillard’s industrial relations reforms will add something to wage inflation,” says Mitchell, but provides no further elaboration or evidence to back it up.
The only IR reform advocate to try to furnish an example has been veteran conservative spinner Ian Hanke, who in writing for the HR Nicholls Society claimed Fair Work Australia’s decision on 90 minute shifts demonstrated the inflexibilities of the current system. The problem is, the decision demonstrated quite the opposite, which is why employers welcomed it.
What about other examples of the problems of Fair Work? Well, Hanke didn’t wish to, or couldn’t produce, any. He tries to link the number of long-term unemployed and under-utilisation of labour to the current regime, without acknowledging that other factors, like the continuing decline of the manufacturing sector, or the flatness of the retail sector, might also account for under-utilisation.
Reform advocates cite no less an authority than Productivity Chairman Gary Banks on the importance of IR reform. And indeed, last December, Banks declared that IR regulation was crucial to productivity. It is “vital to ensure that regulations intended to promote fairness in Australia’s workplaces do not detract unduly from their productivity,” Banks said. Well, indeed — this is merely a statement of the obvious. But Banks didn’t give any examples either.
Indeed, he doesn’t specifically address the Fair Work framework. Banks’s biggest complaint about IR reform is the lack of regulatory impact statements made for them — a complaint that could be directed more at the Howard government, which treated its own RIS requirements with casual contempt, than the current government.
Labor in office has further strengthened RIS requirements — which perversely are some of the most productivity-sapping internal requirements that public servants face — without any clear benefit, primarily because the RIS process is a particularly elaborate game of tickabox that does nothing to constrain politicians’ desire to regulate.
If IR advocates can’t produce any evidence to back up their calls for reform, let’s reverse the argument and look at what the last round of reform accomplished. WorkChoices was in place for two years, from March 2006 to March 2008. It was the all-you-can-eat option for IR hardliners, unconstrained by Senate crossbenches or, as it turned out, political common sense. What did it accomplish?
First thing to note is that there was a reduction in industrial disputation under WorkChoices — unsurprising, given it was a direct assault on unions and the right to strike. Under WorkChoices, days lost to industrial disputes fell to their lowest level ever record. But, interestingly, they did so in the December 2007 quarter, when the number of days lost was 49, 700. The previous quarter, September 2007, was the second lowest ever, 79, 600 days. Was the nadir of industrial disputation caused by WorkChoices, or by the union movement holding its fire to ensure nothing would endanger a Labor victory? The industrial dispute figures for the first year of WorkChoices are at the same level of higher than current levels under Fair Work.
And some historical context is needed. Just how big a problem is industrial disputation now? Let’s look at days lost to industrial disputes going right back to the time of the Accord and Bob Hawke:
So industrial disputation is now not even the issue it was in the wake of Peter Reith’s reforms in 1997.
What about the cost of labour? This is the ABS’s index for private wages, excluding bonuses, since 1997.
This entirely boring line shows little difference between the rate of private sector wages growth now and under WorkChoices or, for that matter, before WorkChoices. The only interruption to the smooth increase was the impact of the GFC.
What about the more nebulous issue of productivity? Were Australians made to work harder under WorkChoices? That’s the logic coming from IR reform advocates, that more “workplace flexibility” means higher productivity. In February, the Grattan Institute examined the problem of Australia’s falling productivity, finding inter alia that the problem was economy-wide rather than, as some have suggested, a particular problem occasioned by the massive increase in capital investment in the mining industry and utilities.
While the report doesn’t explicitly consider the issue of IR reform, its data on productivity gives us a snapshot of productivity under WorkChoices. The Institute’s five-year rolling average trend for productivity shows that, for the two years of WorkChoices, labour productivity in Australia fell off a cliff, fell further in 2009, and has since recovered slightly.
Now, one can argue that WorkChoices wasn’t given long enough to really yield significant benefits, that a two-year experiment wasn’t long enough, and cruelled by the Howard government reimposing a safety net feature under political pressure. And there’s a case for arguing that the big drop in productivity under WorkChoices was more because of capacity constraints in a booming economy and the entry into the workforce of lower-skilled, less productive workers because employers faced a tight labour market — as long as you’re prepared to identify the same contextual factors at work under the current system.
But the problem is that IR reform, as the chart for industrial disputes shows, is now the lazy reform option. Attacking unions’ rights and empowering business to gouge unskilled workers — the two basic features of WorkChoices — aren’t going to restore Australia’s flagging productivity. The Hawke, Keating and early Howard government got all the low-hanging reform fruit.
Now there are more complex challenges like infrastructure investment (and charging for infrastructure), lifting the return from our health and education investment and the “human capital agenda” which the Howard government, under pressure from the Bracks government, belatedly recognised as important to lifting productivity.
That said, there may indeed be a case for overhauling aspects of the Fair Work regime. No legislative framework is perfect. The problem is, IR reform advocates keep insisting it’s broken, but can’t or won’t say how or provide any evidence for it.