Two recent speeches to the Sydney Institute, one by a current and the other by a former key figure in the labour movement, have drawn attention to the low-profile but economically important issue of industrial relations reform.
On August 3, opposition employment and workplace relations spokesman Brendan O’Connor delivered a considered address in which he advocated a further regulation of the labour market. He did so in line with Bill Shorten’s emphasis on what Labor maintains is growing inequality in Australian society. Before entering the House of Representatives, O’Connor was the assistant national secretary of the Australian Services Union.
On August 9, Martin Ferguson, a former senior minister in the Rudd and Gillard Labor governments, gave a well-structured address to the same forum in which he argued for reform of the Fair Work Act. He did so when launching the Mineral Council of Australia’s report Australia’s Workplace Relations Framework: The Case for Reform. Before entering parliament, Ferguson was president of the Australian Council of Trade Unions.
Ferguson, who is doing work for the minerals and tourism industries, focused his address on the need to increase productivity by reforming the industrial relations system, which has not changed in a decade.
In their talks, O’Connor and Ferguson expressed support for the low paid and unemployed in Australian society. The former regards government as capable of bringing about a situation where real wages will grow and unemployment will decrease. The latter believes government can do little to increase productivity and hence real wages and employment. This, Ferguson maintains, is a job for the private sector.
The one-time ACTU president comes to this debate with the authority of success. The Australian minerals industry is hi-tech and high paying. Mineral jobs pay on average $140,000 a year — this is about 75 per cent higher than the average in other industries. Also minerals, primarily coal and iron ore, account for about two-thirds of Australia’s merchandise trade exports.
Workers in the mining industry have to be highly skilled and readily adaptable.
Ferguson is not about reducing wages and conditions in the sector. His is a case for practical and pragmatic reforms that will reduce the interference of trade union officials in what should be management decisions and make the system more flexible.
For example, Ferguson believes that employees earning about $140,000 annually should be given the freedom to negotiate their own individual agreements with their employers. Currently this is prohibited. The case for reform in this area is that it would benefit workers and businesses.
O’Connor, on the other hand, wants to re-regulate the Australian labour market in certain areas to the situation that existed before the reforms of the Hawke and Keating Labor governments in the late 1980s and early 90s.
O’Connor did not rule out Labor overturning the one important reform of Malcolm Fraser’s Coalition government, which outlawed secondary boycotts in industrial disputes. Such boycotts exist when, in a dispute between a union and an employer, a second union intervenes by preventing supplies to the business.
It might be that a Shorten Labor government would leave the present secondary boycott provisions unchanged, as did the administrations led by Kevin Rudd and Julia Gillard.
But the extent of Labor’s revisionist agenda is clear in O’Connor’s commitment to “restoring penalty rates in awards and legislating that they can never be cut again”.
The reference is to the Fair Work Commission’s decision of last March to reduce certain Sunday and public holiday penalty rates in the hospitality and retail sectors. Some examples illustrate the decision. The Sunday penalty rate will be reduced from 175 per cent to 150 per cent under the hospitality award. And the public holiday penalty rate will be reduced from 250 per cent to 222 per cent under the pharmacy award.
In his address, O’Connor described the argument that wages should be lower as a “conservative view”. But most of the FWC commissioners who brought down the recent penalty rates ruling were Labor appointees, including FWC president Justice Iain Ross, a former ACTU assistant secretary.
The FWC decision was motivated by the evidence that suggests high Sunday and public holiday penalty rates are a disincentive to employers engaging workers, especially in some regional and rural areas.
The FWC is also well aware that, under trade union negotiated enterprise agreements with key employers such as McDonald’s, penalty rates have been reduced already.
The reason for this double standard? Well, most employees at McDonald’s are union members. The lower penalty rates in enterprise agreements encourage employment and, consequently, facilitate trade union memberships. Whereas employees in a nearby fish and chip shop are unlikely to be unionised and the trade union movement is not concerned about their job security.
In his address, Ferguson said that a bar attendant in Australia working after 7pm on a public holiday gets $52 an hour, while the comparable rate in the US is $14.50 and in Britain $11.25.
Australia is a high wage country. It makes good economic sense for employers to pay their workers as high a wage as possible consistent with the economy in general and productivity in particular.
The essential problem with Australia’s industrial relations system is that it’s highly centralised. A Sunday penalty rate affordable at a coffee shop at Double Bay, South Yarra or Mermaid Beach may be impossible to pay in Nowra, Morwell or Mount Isa.
It’s much the same with the national minimum wage. In June, the FWC increased the national minimum hourly rate by 3.3 per cent to $18.29 — at a time when inflation is running at about 2 per cent.
Many businesses can afford this increase but some will find an above inflation pay rise difficult to implement.
Yet, under the centralised system, it must be paid by the companies that make high profits or experience losses.
What’s fresh about Ferguson’s initiative is a proposal to deliver greater flexibility and reduce trade union involvement in one of Australia’s most efficient and high-paying industries.