We Need IR Reform — But Not the Kind this Government is Imagining

Australia’s economy needs more collaboration, inclusion and equality, not less

By Giri Sivaraman and Jim Stanford

During its “miracle” re-election campaign, the Coalition didn’t breathe a word about industrial relations and labour rights. In the wake of widespread frustration with Australia’s record-weak wage growth and stagnant living standards, their strategists rightly concluded that calling for employer friendly changes in IR would have been a vote loser. But now they’re back in power (to their own surprise as much as anyone else’s), they are quickly cobbling together a far-reaching plan, backed by business lobbyists, to shift the balance of power in Australia’s labour market even further in favour of employers.

The government’s emerging agenda for so-called labour “reforms” sounds very familiar: more restrictions on unions, more “flexibility” for employers, less security for workers — like watering down unfair dismissal laws.

Three backbench Liberal MPs recently wrote that the government’s reforms would boost productivity, create more good jobs, lift wages, and boost international competitiveness — all at once. Everyone will have “control over their destiny.” They forgot to mention that every child will get a new pony.

We agree Australia’s IR system needs to change. The original objectives of the Fair Work Act to encourage collective bargaining, establish firm minimum standards for all workers, and better share the wealth produced in our economy, clearly have not been met. But far from constituting a fresh new start in IR policy, the direction being quickly mapped out by the government — reinforced by increasingly aggressive demands from business — will make matters worse in Australian workplaces, not better.

Amazingly, conservatives and business lobbyists claim the current system is union-dominated. But union membership, union activity, and enterprise agreement coverage have all declined dramatically. In the private sector, just one in eight workers now has the benefit of a current enterprise agreement. Where unions are absent, wage theft and the erosion of employee protections are rife; ethical businesses that comply with the law are placed at a competitive disadvantage.

The government claims IR reform will produce higher-quality, higher-wage jobs. But union jobs are higher quality: offering wages that average 25 percent higher than non-union jobs, more stability, and more entitlements.

The problem has not been an absence of productivity growth: our productivity can always be improved, but real wages already lag far behind what productivity growth is occurring. The bigger problem is the failure to share the fruits of productivity growth. And the international evidence is clear that stronger worker rights and collective bargaining also tend to result in a better distribution of income, both among workers and between workers and firms. In other words, better worker rights lead to a larger economic pie that gets more evenly distributed.

The Coalition and its business allies would turn the clock back to a labour market even more dominated by the unilateral power of employers to hire and fire, unilaterally set wages, and take maximum advantage of the desperation of an underutilised, precarious workforce.

Australia’s economic performance has been disappointing on many fronts. GDP growth over the past year was as slow as any year since the turn of the century — and workers’ share of that slowly-growing pie has shrunk to the lowest point since the 1950s. For years we relied on the sugar hit of the mining and housing booms, both of which predictably deflated. Lack of leadership from both business and government in innovation, new technology, and real capital investment are having long term consequences. Our inability to nurture home-grown, globally competitive, technology-intensive firms and industries will undermine our success in global trade for decades to come. And government’s confused response to the slowdown, still obsessing more about attaining a meaningless surplus than stimulating jobs and spending power, is making matters worse.

Can this deep, multidimensional failure possibly be laid at the feet of an IR system that supposedly allows workers and their unions to demand too much, and cause too much trouble, for employers?

Tell that to the Germans, the Swedes, the Dutch, and the Japanese — places where collective bargaining is accepted and even nurtured as a normal, positive economic feature. Where workers are automatically entitled to collective voice and representation. Where wage norms and fair treatment are enshrined in agreements and practices that apply evenly across entire industries.

Countries with more collaborative, balanced IR systems are eating our lunch in international competition. The solution to that challenge cannot be to suppress wages even further, to disempower and fragment workers even more. If we really want to build a collaborative, innovative, inclusive, dynamic economy, the reforms we badly need in labour law are exactly the opposite of those advanced by the suddenly-vocal warriors of the business community, and its friends in this government.

Giri Sivaraman is Principal in Employment Law at Maurice Blackburn Lawyers. Jim Stanford is Economist and Director of the Centre for Future Work.