IR system needs top gear, not reverse

The Jobs and Skills Summit starting today could be a talkfest or lead to industrial relations reforms, with awards and bargaining in particular deserving a close eye, argues Morry Bailes.


Sep 01, 2022, updated Sep 01, 2022
Photo: AAP/Bianca De Marchi

Photo: AAP/Bianca De Marchi

It is widely accepted that the Australian industrial relations system is not fit for purpose.

Ever since the introduction by Julia Gillard, then Employment and Workplace Relations Minister, of the Fair Work Act and modern award system under the then Rudd government, the system has been inefficient and hampered Australian productivity. This column has critiqued the Fair Work Act before with its many problems, led by its complete inflexibility come the Covid era. At the start of the pandemic an employer lacked even the legislative power to direct an employee to stay away from the workplace, even whilst State laws required it.

Spooked by the Howard government’s ill-fated attempt to amend our IR system late in that government’s innings, industrial relations reform seemed to represent some sort of uncrossable taboo to the iterations of the former Coalition government. It was one of the greatest failings of that era of government that the Fair Work Act remained largely intact and unamended.

Enter the Albanese Government and one of the first orders of the day appears to be our industrial relations system, under the guise of a jobs summit, with a bitterly complaining union movement talking up a lack of real wages growth.

Lack of wages growth is explicable for several reasons. We are still in an economy with low productivity notwithstanding inflation. That low productivity is not only a product of the operation of the Fair Work Act but owing to a world economy that is busy automating as much as it possibly can, reducing our reliance on labour. That is a global phenomenon that has been at play for at least a decade, and is guaranteed to continue apace. The mere fact that we find ourselves in a high inflation environment does not diminish that fact. It is also something embraced by business, because the more Australian labour costs the more business will go to all lengths to avoid employing it, a fact that seems to have eluded the union movement who are admittedly only concerned about the pay and conditions of its own members, not plainly the economy as a whole.

So here we are on the brink of a jobs summit that may be mere talkfest, or which may throw up a surprise in the area of industrial relations reform that has a positive or negative effect on our country’s economic fortunes. We should all be watching very closely indeed.

Industrial relations is the law’s attempt to introduce fairness into the Australian workplace; to have a level playing field that allows business to go about it’s enterprise unimpeded and employees to avoid exploitation and benefit equally as businesses prosper. It is of course a playing field that is not only legal, but it does rely heavily on the existence of a fair legal framework to engineer mutual benefits to employers and workers.

Within the bounds of reasonableness, the balance the law needs to strike is between sufficient flexibility, to allow enterprise to operate unimpeded, and the workforce to be protected and derive fair recompense for its effort.

There is an inherent danger to expecting the law to achieve economic reform. In short, it cannot. As this column has reasoned before, we cannot legislate for economic prosperity. That said, what the law enables and prevents can have an impact on workplace flexibility and a direct impact thereby on productivity. What we ought not to allow to continue are the problematic legacies of the Fair Work Act, including uncertainty of meaning, awards that are too broad in application, unwieldy enterprise agreements that are not fit for purpose, and immense complexity. Some rate ours the most complex industrial system on Earth! Many would prefer ripping up the Fair Work Act and starting over, versus walking into a jobs summit with the trade union movement and the government seemingly already in lockstep.

Cue the alarm from employers then, when the ACTU recently intimated a desire for the reintroduction of an industry wide award system, followed by the now Employment and Workplace Relations Minister indicating the government is ‘open’ to the idea.

Representing a very small minority of privately employed workers (in the order of 12 and at most 15 per cent), this is the latest attempt by the union movement to find relevancy in the modern Australian workplace. The difference between this government and the former is of course the fact that Labor draws many of its own parliamentarians from the union movement including our own Premier, boasts depressingly few formerly self-employed people in its ranks, and openly receives union donations from even the most unlawful of the trade unions, the CFMEU. Little wonder that business is alarmed at such talk. That said all trade unions cannot be placed in the same basket as the CFMEU.

Precisely what jobs will be created by a jobs summit that embraces the return of an award system that one depressingly recalls from the 1980s  is a bit unclear. For employees in the private sector it should be largely academic. The truth of our industrial relations system is that once the rules are set, the vast majority of our workforce deal amicably and successfully with their employers, as you might expect from a mature society respectful of the rule of law. The trade union movement plays little or no part in the daily lives of most Australians.

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However in industries where they have a stranglehold, construction and wharves for instance, we are faced with major problems and massive challenges to productivity. Australians are being held to ransom by those unions, and our laws are inadequate. But any attempt to rein in the power of rogue unions and the economic harm they cause is actively being watered down by the present government as it dismantles in law the powers of the Australian Building and Construction Commission. This particular law reform will take Australia back 20 years.

Further, it is unclear how our pending jobs summit will promote the cause of the gig economy. Thanks to the High Court and recent decisions reaffirming that a person who wishes to be self-employed is in fact able to in this country, the union movement having been trying every which way to extinguish the gig economy, or pretend that the self-employed are actually employed workers, as the very existence of gig workers further diminishes trade union relevancy in the modern Australian economy.

Monday’s news that the ACTU has reached an understanding with the Council of Small Business Organisations Australia that small business can be exempt from an industry wide awards system and engage in a simpler form of enterprise agreement than is presently provided for in the Fair Work Act, is seemingly good news for frustrated businesses who have laboured under the yoke of the unreasonableness of the Fair Work Act for far too long. They were, until now, no doubt terrified by the prospect of entering an all encompassing award system. Nevertheless the devil will be in detail, and as the Australian economy is built on the back of small and medium enterprise, what size business is exempt is a critical consideration. Again, the relevance of the trade union movement to 85% of the Australia’s SME sector is negligible, so all this makes inherent sense to put them beyond the reach of what may be an inflexible award system.

What we are left with is either micro or more significant reform of the existing Fair Work Act, which sadly seems not destined for repeal but only subject to further tinkering in an effort to put lipstick on the pig, so to speak, and a two speed industrial relations system: one for the big end of town and one for smaller enterprise. If we think this is doing anything but bolstering the trade union movement and that it represents any attempt at productivity gain, we’d be wrong.

Let’s call the Australian trade union movement for what it is. Where it can force itself into particular industries it does, and has an immediate and detrimental impact on productivity, as we can clearly see from the hopeless inefficiencies on our wharves. At play at this moment is legal reform to further empower such unions. Trade unions have relevance in the public sector largely because our State industrial relations systems were not dismantled in favour of a federal system, with the exception at the time of Victoria. Finally, even with paltry union membership numbers, unions hold an undemocratic sway over large business. Reading the tea leaves, that is where their current efforts are aimed, letting the little fish swim away.

The stars have finally aligned for the trade union and labour movement in Australia. We have the most socialist government since Whitlam, an inflationary environment that bolsters an argument that as real wages are not keeping up reform is required to the wages system, and a distracted Australian public too concerned about their own pay packet and listening with self interest as unions discuss their apparent plight. Whilst the law is only a tool in this unfurling saga, it may be used to take the Australian industrial relation system in precisely the opposite direction of what we need and back at least a couple of decades.

The cause of productivity of Australian business will not be enhanced and may be further hampered. The trade union movement, a largely spent and irrelevant force in modern Australia, will be empowered yet again to influence Australian workplaces well beyond its own authority, courtesy of a sympathetic federal government.

The right response to address the problem of real wages is first to point out that anything gained in wage inflation will be lost as the RBA further raises rates to combat the problem, and second to concentrate on that most ephemeral of ingredients that in truth is the only answer to better living conditions, and that is to achieve increased productivity as a nation. That is unlikely going to be the case by amending law to further empower unions, or to introduce awards that pick up whole industries even if small employers are out. That is the antithesis of flexibility and entrenches, as is intended, the disproportionate power of the otherwise largely irrelevant trade union movement.

If we are asked to draw some assurance that employers may take solace in an enterprise bargaining system enacted by a government comprising former trade union leaders and financially reliant on union donations, as advised by the ACTU, heaven help big business.

The failure of past Coalition governments to tackle this problem, or at least go down trying, is as reprehensible as the current attempt to hoodwink Australians into thinking that the jobs summit will necessarily lead to jobs, and that what we are going to see is reform of a positive rather than regressive nature. The law is used for many things. On this occasion the fear is that it will used to dial back to an era pre-Hawke and Keating, and that we will all be worse off for it.

The friend of productivity is flexibility. A mature and inherently fair Australian workplace has demonstrated that given adequate flexibility employers and employees can work out a deal that suits all sides, and promotes growth in jobs and increases pay packets. That is how 85% of business and industry is run in this country. The enemy of productivity is inflexibility, which is ever present if awards and enterprise agreements are inflexible. A Labor government led by Bob Hawke has done it before. But is Anthony Albanese a reformer or a pretender, and what laws will follow?

Australian industry and business needs the shackles taken off. Australians are a resourceful, capable and hard working people, entrepreneurs and workers alike, and all working Australians would benefit with a simple and decent industrial relations system. The time for the talk is over for this government. What industrial relations standards will it give us? Is it captive to the trade union movement or can it act in the interests of us all? Can it create jobs or is it really just protecting its mates in the union movement? Attention is on the Jobs Summit starting today, with the hope our questions are answered, and a further hope, that of a more productive Australia.

Morry Bailes is a senior lawyer and business advisor, past president of the Law Council of Australia, a past president of the Law Society of South Australia and a former office-holder in the Liberal Party.

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