Some trade unions are revolting against the decision of Kevin Rudd and his deputy, Julia Gillard, to allow authorities to coerce evidence from employees in the building and construction industry where criminal activity is suspected. Some employer organisations are concerned that the Rudd Government will weaken industrial relations restrictions on companies that bid for government-funded construction projects. Which suggests an overall compromise is likely.

Compromise lies at the heart of Labor’s approach to industrial relations. Rudd and Gillard have retained some of the Howard government’s legislation while junking many provisions and weakening others. Rudd and Gillard are both keeping the trade union movement under control and re-regulating the industrial relations system.

It remains to be seen how far the Government will go. This is the first move to wind back the labour market deregulation begun by Paul Keating and extended by John Howard and Peter Costello.

The Coalition’s Malcolm Fraser was prime minister at the time of the 1981-82 recession. Fraser and his treasurer, John Howard, were aware that the highly centralised industrial relations system had worsened the extent of the economic downturn. Fraser, always a centralist, learnt little from the experience. But Howard became an advocate of deregulation.

As prime minister, Bob Hawke successfully took on the pilots’ union. However, he was not into industrial relations deregulation and, in fact, increased the influence of the union movement. But Keating understood that across-the-board wage increases obtained by the metal workers union in the early 1980s had made the recession worse than it otherwise would have been.

When Keating became prime minister in December 1991, the next recession was already under way. Labor survived the 1993 election primarily due to the political incompetence of the Liberal leader, John Hewson. Keating could see how the centralised industrial relations system had made government-initiated responses to the recession more difficult to achieve than otherwise would have been the case. So, early in his administration, Keating introduced some flexibility into the labour markets. Itwas to be his most significant reform as prime minister.

Figures published by the Australian Bureau of Statistics last week indicated that employment has held up relatively well, even though the economy has not grown over the past nine months. This is primarily due to labour market flexibility. In the early 1980s, and again a decade later, the inflexible system made it difficult for employers to retain their workforces.

This time around it is much easier for employers to reduce available hours of employment and so share jobs. The ABS figures indicate that the prime cause of increasing unemployment turns on workforce growth rather than job cessation. There has been an increase in underemployment, which is causing some economic distress, yet a job is better than no job at all for individuals and for the budget bottom line.

In the current climate it would make sense for Labor to put industrial relations changes on hold, at least until the global financial crisis is over. This is not the approach adopted.

Gillard’s Fair Work Australia legislation significantly reregulates the labour market and re-introducing unfair dismissal legislation for small businesses provides a real disincentive to take on full-time staff.

As the Organisation for Economic Co-operation and Development warned in April, this legislation hits particularly hard on young job seekers. This is an issue the Rudd Government does not want to know about. On ABC TV’s Insiders last month Wayne Swan was asked about the OECD report; the Treasurer replied he did not accept that assessment.

Gillard has adopted a more realistic approach to the consequences of the Government’s decision that the Industrial Relations Commission should rationalise awards in some industries. She has asked the commission totreat restaurants differently from the rest of the hospitality industry. But there is still genuine concern about labour cost increases driven by the commission in such areas as fast food, pharmacy and retail without reference to the capacity of individual businesses to pay.

Some unions and their supporters in the ALP caucus are complaining about the intention to continue to vet criminal activity in the construction industry. Rudd and Gillard are certain to hold the line on this. Labor has followed the recommendation of a former Federal Court judge, Murray Wilcox, QC. He is no opponent of trade unionism; he presided over a decision in favour of the Maritime Union of Australia during the waterfront dispute a decade ago.

The opposition from the left-wing ALP backbencher Doug Cameron diverts attention from Labor weakening the successful initiatives set in place by the Howard government to reduce criminal activity in the construction industry. There is evidence aplenty that unlawful activity has a deleterious effect on an industry central to the economy and which sustains many jobs.

What are the Liberals saying about all this? Nothing. Or practically nothing.