Scott Morrison
(Image: AAP/Mick Tsikas)

So the prime minister, business advocates, the media and the employer lobby group reckon our industrial relations system is not “fit for purpose” and Scott Morrison is cleverly putting aside ideology to engage all parties in an attempt to fix it. Cue comparisons to Bob Hawke and the Accord.

It would be such a pity if actual evidence intruded on that consensus (speaking of Hawke) about the industrial relations system.

Or if journalists who cover politics actually remembered longer than five minutes ago rather than swimming, goldfish-like, round and round the bowl of the perpetual present.

The Coalition has insisted since it was first proposed as a bill by then-deputy PM Julia Gillard that the Fair Work Act 2009 was a disaster. In 2012 opposition leader Tony Abbott claimed: “We have a significant workplace relations problem developing: there is a flexibility problem, there is a militancy problem, and above all else there is a productivity problem.”

So in 2014 the industrial relations minister Eric Abetz — who had forecast a wages explosion earlier that year — and treasurer Joe Hockey had the Productivity Commission review the industrial relations system.

Business hopes were high. The review was “an opportunity to redesign a stable workplace relations system that’s fit for purpose for the modern Australian economy”, the Business Council’s Jennifer Westacott said. That phrase again.

Tragically for them all, reality intervened. The Productivity Commission — “economically rigorous and socially sensitive”, according to Abetz — found that the Fair Work Act was actually “fit for purpose” after all:

Contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated. Strike activity is low, wages are responsive to the economic cycle and there are multiple forms of employment arrangements that offer employees and employers flexible options for working. Set against that background, Australia’s [workplace relations] system is not dysfunctional — it needs repair not replacement.

Remember, this was the Coalition’s own inquiry, backed by business lobby groups and the “economically rigorous” Productivity Commission. The business lobby was enraged. The PC “has fallen short of addressing what is required in a modern economy”, the Business Council complained.

The PC did identify a number of areas for repair. Many were procedural ones about the Fair Work Commission and its processes. It recommended replacing a better-off-overall test with a no-disadvantage test, and changed procedures for greenfields agreements — issues that linger on the agenda of employer groups. It also recommended cuts to penalty rates which the Turnbull government — as it was by then — endorsed.

Just to show the PC can get it wrong, the penalty rate changes turned out to be a dud: cutting penalty rates, hurting tens of thousands of casual workers in industries like hospitality and retail, didn’t create any jobs.

And buried at the end of the second volume was another, more troubling, conclusion: the PC doubted there was much link between industrial relations reform and productivity.

“Despite strong theoretical grounds for expecting productivity effects from [workplace relations] reform, Australian studies have found little evidence of such a relationship,” it concluded.

“Economically significant productivity effects of reform may nonetheless be empirically unidentifiable, given the ‘noise’ in the productivity data, the multiple factors that contribute to productivity growth and the fact that the effects of policy changes occur with a lag, potentially over many years.”

But it makes sense that the PC found the Fair Work Act was working well, whatever the ideological grievances of business and the Coalition. It had delivered strong labour productivity growth — at exactly the moment Abbott was claiming there was a productivity problem — with private sector gross value added each hour worked reaching levels not seen since the late  ’90s, and multiple quarters of plus-1% growth under Labor.

It delivered strong wages growth for workers, double what it is now. And it delivered far lower rates of industrial disputes than under the Coalition’s industrial relations system.

But that report was in 2015. What about now? Productivity growth has vanished and wage stagnation has set in, although industrial dispute levels are lower than five years ago. And worker exploitation — which the PC also said was a problem — has become widespread. More than a quarter of businesses in some industries are ripping off their workers.

The key changes in industrial relations since then have mostly disadvantaged workers, not employers who have enjoyed strong profit growth off stagnant or falling real wages.

Has the same system that delivered such great outcomes before 2015 suddenly, inexplicably, become dysfunctional? Or are other factors at play? The massive increase in foreign students and illegal immigrants in recent years? The continuing decline of unions and the consolidation of corporations that give them not just greater power in their markets but greater power over workers? Cuts to penalty rates and lack of government support for minimum wage rises? The relentless demonisation and bespoke legislative targeting of unions by the Coalition?

All that apparently is too complicated for the government, business and the media. The system is simply not “fit for purpose”, and if you say it often enough people will believe it.

In fact, according to them, the system has never been fit for purpose. They’re hoping everyone forgets the evidence. Too bad a lot of journalists really have.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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