Beware: “Comparative Wage Justice” is back!

STONE the crows! Things are awfully like the early 1980s as the industrial relations system atrophies.

With a high dollar, industry argues productivity improvement is essential to stay competitive and that the country cannot afford to reverse the deregulation of the Hawke, Keating and early Howard years.

According to the Business Council of Australia, “the experience of BCA members over the past two years has been that there has been a re-emergence of attitudes more fitting to the 1970s than the realities of businesses and preferences of employees and workers in the 21st century.”[i].

The ACTU does not agree, arguing falling productivity has nothing to do with industrial regulation:

The rate of productivity growth has been falling for at least a decade. The causes of Australia’s slowdown do not lie in industrial relations legislation; it would be short-sighted to look there for the cure.[ii]

Academics also argue that the productivity surge of the 1990s is a bit of myth. According to Keith Hancock:

Productivity performance since 2004-05 has been poor. If it were due to the extra union clout under the Rudd-Gillard regime, why did the deterioration set in several years earlier? There is a better fit with the inception of Work Choices, but talk of a causal link seems far-fetched. The Australian Bureau of Statistics has published industry-level analyses of productivity covering the period since 1994-95. It is clear that the productivity record differs radically between industries. In the long term, the crucial factors in productivity growth are innovation, rising quality of the labour force and growth of the capital stock. In the short term, we need to look at the special factors. Attempts to find the causes of good and bad productivity performance in IR are misconceived

It strikes the Crows as something of a stretch to suggest changes to employment law have no impact on how productive people are. But so what?

While they are not especially numerate, the Crows can count and know the electoral arithmetic shows the chance of any deregulation of the recently re-regulated industrial relations system is somewhere between buckleys and none.

The decisive issue in the 2007 election was the ACTU’s brilliant campaign against the Howard Government’s economically sensible, but stupidly sold, Work Choices system. Just as it took the better part of a decade from John Hewson’s inept attempt to explain a goods and services tax to get the GST up, industrial relations reform is off the agenda until the popular memory of Work Choices fades.

As Tony Abbott admitted before the last election:

I believe in workplace freedom but never at the expense of fairness. I am a conviction politician but never in defiance of the electorate. I have well and truly absorbed the lessons of the past and on workplace relations policy I understand that the Coalition has to re-establish trust. Words won’t re-establish trust. Trust will only be restored by demonstrating, over time, that the Coalition again has the steady hands in which people’s job security and pay and conditions can once more safely rest. [iii]

Which is why nobody should be surprised that, with re-regulation under way, pattern bargaining is back.

For anybody who came in after the economic absurdities of the old IR regime ended, albeit only for a while, pattern bargaining occurs when a union imposes wages and conditions across an industry, regardless of the circumstances of individual businesses.

It was once such a burden on business that Julia Gillard assured industry “the Rudd Government’s workplace changes will not usher a return to old-style pattern bargaining by unions”. [iv]

And, true to her word, Julia Gillard’s Fair Work Australia Act forbids pattern bargaining when a negotiator seeks to impose “common terms” in two or more enterprise agreements and on two or more employers.” [v]

Except, and it is an exception so enormous it puts the union movement back in the business of imposing uniformity, if a “bargaining representative” is “taking into account the individual circumstances of an individual employer”. [vi]

Just what “taking into account” means confounds the Crows, but they suspect it does not prevent imposing working conditions across firms providing the same goods or services, regardless of their circumstances.

In fact, FWA authorises exactly that, permitting the quasi-court that enforces the act to determine what goes on in “low-paid” workplaces as long as it will promote “productivity and efficiency” and is in “the public interest”.[vii]

Again, this can mean whatever the FWA tribunal wants it to mean. What it meant for part-time workers in the hospitality industry was less work when an industry-wide award led to businesses cutting opening hours because they could not afford to pay staff.

According to Restaurant and Catering Australia, member bankruptcies increased by 37 per cent in the year after FWA was established. And, what is bad for business is equally awful for employees:

Many employees in this industry are students and the only time they can work is at nights and weekends; however due to the high cost of hourly wage rates, fewer people are employed on weekends. This means that students who would like to work additional shifts at their normal rate of pay, cannot, and as such are taking home less money. Many people are willing to work for a rate that is less than the high hourly penalty rates prescribed by Modern Awards on weekends and should be allowed to waive these rates by individual agreement.[viii]

It is even easier to apply standardised wages and conditions to low income earners in the public sector – as occurred last month when FWA jacked up the pay of people, mainly women, employed by welfare agencies but paid by government.

This was sold as a gender equity issue but it was also a productivity sapping pattern bargain. While Canberra and the states pay the wages, this does not mean all agencies are equally efficient or have the same costs. But, by treating them as if they do, the deal removes any efficiency incentive.

Not to mention creating political precedents. As the dissenting member of the FWA bench, Graeme Watson put it:

To selectively extract an entire industry from the enterprise bargaining legislative framework is a change of mammoth proportions. … The precedent it creates for many other industries that cannot afford to pay significantly above the award and are female dominated highlights the need for great caution. It is not an overstatement to suggest that the future status of enterprise bargaining in this and other industries with similar attributes is at stake. [ix]

But industry wide wages and conditions are not confined to low pay industries.

Judith Sloan suggests that agreements covering electrical contractors in Victoria demonstrate “the constraints on pattern bargaining are completely ineffective.” [x] And there are allegations of a pattern bargaining breakout in the Western Australia construction industry. [xi] As Heather Ridout alleged last year:

Pattern bargaining is rife in some industries and the unions have been able to include a wide range of highly unproductive and inflexible provisions in pattern agreements and impose these on employers given the breadth of the “permitted matters” under the Act and the ability for parties to include non-permitted matters in agreements. [xii]

So if this is what happens in booming states as well as industries where the state picks up the wages bill or where the industrial arbiter feels sorry for staff what is to come?

Graeme Watson appears to have a fair idea. He argued that because the basis of the welfare case was that workers were paid less because they were mainly women and deserved more money to bring them into line with public servants in similar jobs it “has more in common with a case based on comparative wage justice than equal pay” [xiii]

Now where have the Crows recently heard that golden oldie, “comparative wage justice”? Why in a report of Tax Commissioner Michael D’Ascenzo’s request for $300,000 a year more to bring his pay into line with the heads of other agencies, such as ASIC and the ACCC. Michael D’Ascenzo argued for the rise on the grounds of “comparative pay justice”.

Sound absurd? It did to Labor’s Senator Mark Butler who heard it in a Senate committee hearing: “I was part of the negotiations where we were told enterprise bargaining was the future, comparative advantage was dead,’ he told the commissioner. “To my knowledge it hasn’t been revived. ”[xiv]

Just like the Fair Work Act wasn’t supposed to revive pattern bargaining, but has.

Comparative wage justice is on the way back. It’s a phrase to fear.


[i] Business Council of Australia, “Submission to the Review of the Fair Work Act,” nd, 24 @ recovered on February 18

[ii] Australian Council of Trade Unions, “Working by numbers: separating rhetoric and reality on Australian productivity,” October 2011, 22 @ recovered on February 18

[iii] Tony Abbott, “Leader of the Opposition address to the LNP Conference,” July 17 2010 @ recovered on February 18

[iv] Brad Norington, “Pattern bargaining is out: Gillard,” The Australian December 9 2008

[v] Commonwealth of Australia, Fair Work Act 2009 S412 1b,1c @ recovered on February 18

[vi] FWA, ibid

[vii] FWA, op cit S262, 1,4,5

[viii] Restaurant and Catering Australia, “Fair Work Act Review,” February 17, 9 @ recovered on February 18

[ix] “Decision of Vice President Watson: Fair Work Australia Decision, Equal Remuneration Case,” February 1 2011 @ recovered on February 18

[x] Judith Sloan, “Fair Work Act a spanner in works,” The Australian, December 30 2011

[xi] Peter Kerr and Jonathan Barrett, “Costs spiral as unions drive hard bargains,” The Australian Financial Review, December 22 2011

[xii] Heather Ridout, “The Fair Work Act – The barriers to productivity improvement need to be addressed: Speech to the 10th annual Workforce Conference” September 5 2011, @ recovered on February 18

[xiii] Decision of Vice President Watson ibid

[xiv] Peter Martin, “Tax boss wants $300,000 pay rise,” The Age, October 21 2011