The business campaign for further industrial relations deregulation has suffered a major blow with the release of the review of the Fair Work Act by Bill Shorten today.

The review — conducted by IR expert Ron McCallum, economist John Edwards and former judge Michael Moore — has rejected claims that the FW Act has reduced workplace productivity, which have formed the heart of a business and media campaign to return to elements of the Workchoices IR framework. According to ABS data, labour productivity in Australia has lifted significantly in recent quarters.

On this issue, the review concludes

“After considering the economic aspects of the FW Act the Panel concludes that since the FW Act came into force important outcomes such as wages growth, industrial disputation, the responsiveness of wages to supply and demand, the rate of employment growth and the flexibility of work patterns have been favourable to Australia’s continuing prosperity, as indeed they have been since the transition away from arbitration two decades ago. The exception has been productivity growth, which has been disappointing in the FW Act framework and in the two preceding frameworks over the last decade. The Panel is not persuaded that the legislative framework for industrial relations accounts for this productivity slowdown.”

The review identifies the most frequently-identified reasons for Australia’s poor productivity performance in recent years — the mining boom, the long drought and utilities investment — as key factors in relation to productivity. The review also makes the little-recognised point that IR deregulation, even if relevant, can only ever achieve one-off productivity gains:

“There may be large gains in productivity from a suite of economic reforms, but the reforms will not necessarily lead to continuous productivity enhancements except to the extent they entrench competition and flexibility. To the extent productivity gains arise from removing workplace impediments and restrictions—for example, in over-manning or other restrictive workplace practices—they will also be one-off gains.”

The review also dismisses claims that WorkChoices was good for productivity.

“Productivity growth accelerated under the IR Act post-1993 and the early years of the WR Act but then slowed. Labour productivity continued to grow at a subdued pace under WorkChoices, but multifactor productivity declined under both that framework and the FW Act. Over the two decades labour productivity growth was slowest under WorkChoices, which arguably imposed the fewest constraints on management decisions. Of the four frameworks, the FW Act is most similar to the IR Act post-1993. While productivity flourished in the IR Act post-1993 period, however, it has grown only slowly under the FW Act. Differences between the legislative frameworks evidently do not explain the differences in productivity growth over those periods.”

Also addressed is the argument that wage costs and industrial disputes have been higher under the FW Act. The review concludes if higher wage growth is a problem, it’s one “not only with the FW Act but with the two legislative schemes that preceded it”. On industrial disputes, the review says

“The Panel notes that the number of days lost to industrial action under the FW Act has remained within the band of historically low levels (127,000 in 2010 and just over 240,000 in 2011, compared to an average of around 230,000 over the previous 10 years) that have prevailed over the last decade. Taking into account that the number of agreements being renegotiated in 2011 (8,335) was significantly higher than in 2010 (5,133), the 2011 dispute level is not out of line with recent experience. Of days lost in 2011, one-third were in the education and health category and are likely to have been largely due to teacher and hospital disputes in NSW and hospital disputes in Victoria. The NSW teacher and hospital disputes were not under the FW Act.”

The review also rejected the other key argument of business against the FW Act, that it permitted industrial disputes over matters that are properly the preserve of management. It points out that the types of clauses that were permitted under IR frameworks before WorkChoices but banned under the latter, such as those relating to hiring of contractors, had fallen under FW Act compared to the pre-WorkChoices period:

“The FW Act agreement content provisions have not led to any significant increase in these provisions than when they were last permitted in agreements, prior to WorkChoices.”

Crikey explored this “matters pertaining” issue, and how there’d been minimal change between the FW Act and the Reith-era Workplace Relations Act, back in November. The review conclusion is worth quoting at length:

“The matters that may or may not be included in an enterprise agreement have been hotly disputed in submissions to us and in the media. In the view of the Panel, the matters pertaining formulation, which is the centrepiece of s. 172, accords a fair balance between the prerogative of management to manage and the reasonable desires of employees to jointly govern their terms and conditions of employment. Furthermore, the jurisprudence on this phrase is well known to the parties, and any further refinements should be left to FWA and the courts. Similarly, we believe that the permitted matters in s. 172 concerning the relationship between an employer and a union covered by the agreement address some uncertainties that would otherwise exist as to the outer reach of matters pertaining, and are an appropriate balance between the freedom of employers and the legitimate rights of employees to be represented in the workplace. We do not recommend any changes to s. 172 of the FW Act.

The review does however make a suite of recommendations designed to enhance both equity and productivity. They include:

  • Development of model productivity clauses by high-performing workplaces
  • Technical amendments to make individual flexibility agreements more effective
  • An overhaul of greenfields agreement provisions and the provision of arbitration to expedite resolution of large-scale greenfields disputes
  • A power for FWA to initiative compulsory conciliation
  • Adjustments to the conditions that will apply when employees initiate a transfer to a related entity of their current employer
  • Changes to make unfair dismissal hearings easier and quicker, and for dismissal of proceedings where appropriate, and awarding costs against vexatious applicants
  • Enabling the right to seek flexible work arrangements for a wider range of caring and other circumstances
  • Greater consultation on unpaid leave arrangements
  • Allowing electronic voting in protected action ballots
  • Employers required to provide accommodation even when employees are taking protected industrial action
  • Greater FWA role in disputes over the right of union officials to make workplace visits.

Peter Fray

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