INDUSTRIAL RELATIONS DOWN UNDER – WHERE TO FROM HERE?

In 2015, Australia is experiencing lower growth and higher unemployment – especially for younger Australians. The slow growth across the Western world suggests this is a global problem but many see Australia as increasingly uncompetitive as a trading nation. Australian columnist Judith Sloan believes Australia’s industrial relations system leads to lower economic growth and higher unemployment. The Secretary of Unions NSW, Mark Lennon, disagrees and maintains that the system is not in need of reform. On Monday 15 June 2015, Mark Lennon and Judith Sloan addressed The Sydney Institute to put their diverse views.

INDUSTRIAL RELATIONS DOWN UNDER – WHERE TO FROM HERE?

MARK LENNON

Thank you very much for the opportunity to speak to you tonight at The Sydney Institute. I wish to start by acknowledging the traditional custodians of the land on which we stand and pay my respects to their elders past and present. I am honoured to be here representing 600,000 NSW workers and their families who toil hard each day, and help create the fabric of this nation.

When we talk about today’s topic – industrial relations or economic reform – when we talk about structural change and productivity, too often we hear only from those at the very top; business and union elites, the politicians, the academics. The voices of working people are rarely heard with clarity and their stories of the daily reality of the workplace are rarely told.

But of course they and their well-being are the whole point. The working people who clean offices, who collect garbage, who keep the streets safe, who teach children, who work as doctors and nurses in hospitals, who look out for the elderly. The people who build the roads and bridges and make coffee and serve lunch. Having a growing prosperous economy that improves the lives of these working men and women and their dependents is what we unionists seek.

But it is an economy that has underpinning values. The defining Australian value has always been egalitarianism. We are a nation that prides itself in having thrown off the elitism of the old world and put the well-being of the average working person as a benchmark of our greatness as a nation.

In the context of discussing the future of the industrial relations system it is my contention that these underlying values do not change. But that does not mean that the nature, structure and organisation of work are not changing. There is no doubt they are. But the values that underpin the workplace that of efficiency and equity do not.

Structural change in the workplace and indeed the community is a constant.  In the workplace, the most obvious change of the past half a century would be the growth in the services sector, which now employs over 70 per cent of the Australian workforce. Compare this to 1960 when that figure stood at only 50 per cent. And the trend continues.

Industries that once commanded the economy in terms of employment numbers manufacturing (-4.3) over the next five years and agriculture (-0.9) continue to decline.

Over the next five years the largest growth industries for employment will be health and community services (16.3%), education (13%) and professionals (10%). And of course the pace of change and the exponential march of technology means we cannot be sure of what the jobs of the future will look like beyond the next five years.

There is talk that half the jobs that presently exist will be gone by 2030. Advances in technology and mobility are indeed opening up opportunities for “digital disruption”. That is where digital technology occurs so fast that it disrupts established ways of doing things.

It is too easy to be beguiled by the elegance these systems seemingly offer on a macro level. But we do not want to leave out of the picture the very real men and women who are at risk of exploitation and potentially exposed to unfair wages and conditions. This channeling of technology – to ensure it serves the interest of all and not just wealthy consumers – is perhaps the defining challenge for society and our movement.

The rise of digital technologies is a positive for most working people in that it can make for better more engaged and creative workplaces but it is also changing the nature of work.  For instance our work is becoming harder to escape from because we always have our jobs with us in our pockets with our smart phone. Further, there is this growing expectation that working people are available around the clock creating a 24/7 economy where weekends and the 38-hour week will cease to exist.

One of the biggest challenges for the union movement is adapting and transitioning to this new economy and organising this growing fluid workforce that is driven by rapid advancements in technology. Our role in the union movement is to adapt to the changing nature of organisations in this new digital world and develop ways to reach and protect these employees.

So what are the implications of this for our industrial relations system? Firstly, we have to ask whether we still have an industrial relations system is the right term or have we moved beyond that to a workplace relations system or indeed an employment relations system. Our Fair Work legislation, as did its predecessor WorkChoices, makes it clear that the rights in our system are those of the individual and not of the collective. The focus is on the employee. The role of industrial organisations is clearly that of agent not principal.

Conservatives argue that the appropriate response to the changing world is to dismantle regulation, dismantle the IR system as we know it and this will enhance economic growth. They urge that businesses be freed up and allowed to better compete by amongst other things negotiating directly with employees.
This thinking manifests itself in submissions to the Productivity Commission inquiry into our workplace relations system by various employers that seek to reduce conditions. In particular, by:

• Reducing work security, making it easier to dismiss people
• Removing penalty rates
• Cutting the minimum wage
• Greater use of individual contracts

The Australian Chamber of Commerce and Industry wants to get rid of the Award system entirely, in favour of a stripped back safety net with restrictions on enterprise bargaining. Of course we argue this approach lacks fairness and empathy with average workers. It assumes that individual workers are in a position to negotiate. It remains our argument that it is difficult for working people to act as free economic agents.

But this does not mean that we should do away with a strong system of industrial regulation. Today, perhaps unlike the 1980s, it is now just as easy to argue it is economically irresponsible to be seeking to reduce wages and conditions.

Last Wednesday, new data released showed Australia’s GDP grew faster than expected over the first three months of the year. An increase of 0.9 per cent. Wages grew by just 0.5 per cent in the same three month period. Indicating a considerable slowdown in growth and the lowest increase over a 12-month period since the data started to be collected in 1998. This is following a longer term pattern that has seen the split in national incomes towards profits and away from wages. The wages’ share was 65.6 per cent at the turn of the century and has reduced to 59.7 per cent in 2012.

Where is that profit gap going? It’s not going into investment in the industry, because those figures are down too. Wages grew by just 2.3 percent in the year to March. That’s the smallest growth since 1998 when the series began. The gap between profits and wages is growing wider as the years progress. This is not only unfair – considered commentators at all levels are starting to wake up to the fact that it is economically unwise. Inequality is rapidly becoming the defining challenge of our time.

It hurts economic growth, denies workers their fair share and robs families of their hopes for a better future. A lack of job opportunities, low wages and inadequate social policies are at risk of leaving a generation behind. A thriving economy needs empowered consumers. Inequality robs the economy of that dynamic. That is the debate taking place across the Western world.

Growth, whilst reducing inequity, is the clarion call. The OECD in Chapter 5 of a paper entitled “Economic Policy Forums 2012” addressed this issue. It concludes that strategies to have economic growth whilst at the same time reducing inequality include a high minimum wage, collective bargaining rights, protections for temporary employees, a good tax and transfer system and of course education amongst other things. Importantly it talks of strengthening unions as a means of improving collective bargaining.

It has been proven that countries with a large percentage of employees who collectively bargain for wage outcomes have lower wage inequality. Unions and collective bargaining reduce inequality by raising wages floors. This creates a stronger economy, but – more importantly – it creates a better society.

Of course, coming from NSW, we would argue also that the Fair Work Commission should be empowered with genuine arbitration rights. Further deregulation will only exacerbate the socially damaged two-tier system of workers we have created: permanent and casuals.

Since the 1980s, employers have demanded greater flexibility in working arrangements. What we’ve seen is an explosion of insecure work. Casual, short-term contracts, labour hire and sham contracting. Organisations are now more and more frequently utilising contractors over permanent employees so they can avoid the conditions and rights fought for through collective bargaining. It’s rife in the service sector where our economy and our jobs are growing.

It’s difficult to pinpoint exactly how many people are affected. But it’s estimated that 24 per cent of Australian workers are insecurely employed. That’s one fifth of our workforce, 2.2 million who don’t have access to holidays, sick leave or the guarantee that they will have a job next week. For them securing a mortgage is difficult. They are, in economic terms, second-class citizens. And the push for further deregulation will create more of them.

But we should call out casual, short-term contract work for what it is – a way for employers to transfer risk onto employees. We need to look at how these types of employment relationships are regulated and what protections are in place.

Penalty rates, for example, are a vital bulwark against sliding living standards. They are something of a safeguard to protect casual employees. Poll after poll shows the overwhelming majority of Australians understand this despite relentless campaigning from powerful business lobbies. They should drop it – and leave penalty rates alone.

We need our governments to take action in upholding more secure forms of employment. We must adapt and develop ways to organise these workers so we can ensure their rights are protected in this increasingly insecure workforce.

The first step for government would be to lead by example. Governments have a social responsibility and should not be contracting out government services where many of these jobs become short-term contracts or casual work.

The consequences

Any talk of reforming our economy needs to focus squarely on improving the living standards of working people. The middle and working classes are the engine room of our economy. Not only do they do the work that boosts our GDP but they’re the consumers that we need to rely on.

People need to feel secure and confident in their work so they can feel confident to spend. If consumer confidence rates are still down, there is a problem.  And it is certainly not fixed by employers given free reign over “flexibility”.

The way forward

The best way we can move forward is ensuring that the legislation is flexible enough to ensure it is able to regulate the continuing evolving nature and type of work. We certainly don’t need don’t need to throw out our industrial relations system. Quite the opposite.

The values this system represents are perhaps more important than they have ever been. We do not need to scrap protections, but adjust them to ensure they are capable of offering appropriate protections for a new generation of modern workers. Interns or working people here on temporary visas as an example.

Flexibility is too often a euphemism for stripping away rights. But genuine flexibility in our IR system would allow sufficient movement for our system to adapt to changes that will affect how work is performed.

Union rights

Yes, I have bias in this. But the best way to ensure wage equality is to be a union member. Even the International Monetary Fund recognises that inequality has risen at the same time as union density has fallen in developed countries. It’s not hard to put meat on the bones. Superannuation, pensions, health, childcare, the minimum wage, the 38-hour week, secure work, public health and education – all are union initiatives. All facilitate a flatter, fairer society.

Unions are central to reducing inequality through collective enterprise bargaining, and the award and minimum wage systems. We also have and continue to push for strong social safety nets, lobbying governments on our members’ behalf to make sure that no one falls through the cracks.

Consequently, if we want to tackle inequality we need to protect workers’ rights to freedom of association and the right to collective bargaining. For unions to be more successful in tackling rising inequality, we need to have the right to appropriately represent workers, be recognised as the advocates for workers. This means changes to IR laws that provide unions with stronger right of entry access. So, in summary, our system needs to:

• Ensure it can meet the twin goals of enhancing growth and removing inequality;
• Has scope to protect all those who are in a working relationship;
• Enhances flexibility through the process of collective bargaining;
• Acknowledges an enhanced role of the Fair Work Commission.

And we should always argue that the laws should encourage a greater spirit of cooperation.

When industrial relations are bad it’s bad for productivity, it’s bad for morale; it’s bad for both working people and for business. This requires employers, unions and governments of all levels working together. Any notion that Australia’s workplace practices are holding us back is nonsense.  Over the last 30 years, the cornerstone of our success.

They can likewise be the key to economic greatness in the twenty-first century