Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2005 19
‘A FAIR GO ALL ROUND’: WORKPLACE
RELATIONS IN THE TWENTY-FIRST
CENTURY
KINGSLEY LAFFER MEMORIAL LECTURE
2004
HEATHER RIDOUT∗
It is a great honour and a pleasure to be invited to deliver the Kingsley Laffer
Lecture this evening.
As a graduate of the Faculty of Economics (now Economics and Business) at
the University of Sydney it is also something of a homecoming.
I am conscious of the prominence of earlier Laffer Lecturers. These include
a former Prime Minister, a member of the High Court of Australia, ACTU
Presidents and numerous other distinguished persons.
As Chief Executive of the Australian Industry Group, I am also very pleased to
be following in the footsteps of Bert Evans, one of my predecessors and a mentor,
who delivered the Laffer Lecture in 1994.1
I well remember that lecture. It was something of a watershed for the Ai Group
(then the Metal Trades Industry Association). It marked the final capitulation of
our defence of Australia’s centralised industrial relations system.
The Ai Group had been a fervent supporter of this system. Our members had
long experienced the damaging effects of wages leapfrogging and union campaigns
for shorter hours and other improved conditions. The industrial harmony that
prevailed during the accord years in the 1980s was a welcome respite.
By mid-1994, the Ai Group’s position on the shape of Australia’s workplace
relations system had shifted dramatically. It had shifted with the recognition that
Australia and Australian industry had taken a new path of global integration where
international competitiveness was the benchmark and when a ‘uniquely Australian
approach’ to markets and their reform would be fundamentally challenged. Bert
made the comment that ‘things will never be the same again’ and when I look
back, he was clearly right.
That speech also explored how viable and relevant the Australian concept of
‘fairness’ was to the conduct of industrial relations in Australia. This was juxtaposed against the challenge of trade being conducted not between countries of
similar real wages and per capita GDP levels as had characterised the 1960s and
1970s, but between countries of very unequal cost and regulatory regimes.
∗ Chief
Executive, Australian Industry Group.
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In my comments tonight, I would like to revisit the concept of the ‘fair go all
round’ and its relevance and meaning in the context of the influences shaping the
Australian economy and society in the twenty-first century.
In recent years, we have seen very strong and relatively stable improvements in
Australian living standards.
This suggests that the series of changes we have made to our approach to industrial relations have passed the basic economic test. There is widespread recognition that Australia’s aggregate economic successes owe much to the full range
of liberalising reforms introduced over the past couple of decades.
Notwithstanding the benefits of greater productivity and prosperity, we face
calls for re-regulation; we hear arguments for a reinforcement of the sway
of centralised institutions and we face a range of applications to extend the
reach of central regulation. At the core of all of these lies a concern with the
fairness of outcomes under the transformation to our current workplace relations
system.
A fundamental feature of the Ai Group’s approach to workplace relations has
been, and remains, our commitment to a uniquely Australian approach. This
approach is characterised by the aspiration of ‘a fair go all round’. It involves the
maintenance of a strong role for the Australian Industrial Relations Commission
and a fair safety net of minimum conditions. It also involves the acceptance of
legal, social and ethical responsibilities by employers.
We take fairness very seriously, and in tonight’s address, I will argue that we
should not re-regulate industrial relations in the name of fairness. In fact, I will
argue the opposite: just as a return to more centralised approaches does not make
sense in terms of economic arguments, neither does it make sense from the point
of view of fairness.
Our legitimate concerns with fairness do, nevertheless, require an active
approach—the trickle-down model is not convincing. We require, instead, a new
emphasis on the enablers that underwrite the creation of opportunities and improved access to those opportunities. We need an acceptance of diversity and we
need to put in place ways to cater to that diversity. We need, in short, a richer
and deeper policy agenda that allows us to build ‘a fair go all round’ in its most
profound, dynamic sense.
MAJOR FORCES AT WORK IN THE TWENTY-FIRST CENTURY
Of course, workplace relations do not evolve purely under their own steam; rather,
they form part of much broader economic and social processes. To set the scene, I
would like to sketch some of the major elements of the broader processes that will
condition the conduct of our workplace relations over the next hundred years.
Globalisation
Just as throughout the twentieth century we saw an extraordinary intensification
of globalising forces, in the twenty-first century these forces are set to continue
and, if anything, exert even more influence.
The industrialisation of China is on everyone’s lips. There are numerous
mind-boggling statistics.
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China currently has 15000 highway projects underway covering 162 000 km
of road—enough to circle the equator four times;
• China will produce 325 000 engineers this year. This is five times as many as
in the USA; and
• In 2003, China accounted for 40% of global cement consumption; it accounted
for 30% of the growth in oil demand; 90% of the growth in steel demand and
99% of the growth in demand for copper.
There is also a growing awareness of the impact that India will make on
global production and consumption. To these we can add the next phases of
South East Asian development—which will surely include that of our closest
and largest neighbour Indonesia. South America, Eastern Europe and at least
some of the African countries also seem likely to accelerate in importance and
influence.
The twenty-first century is set to bring forward major changes in international
competition as new sources of cheap labour and raw materials are tapped and
transformed into goods and services supplied to the global market. At the same
time, if history is any guide, these same developments will be associated with
increases in living standards and increasing demand for goods and services within
these countries.
Australia, as a medium-sized, open economy has little choice but to adapt as
these forces play out. In broad terms, we will see a magnification of the challenges
and opportunities we are now experiencing as a result of the rapid changes in
China and that we have previously experienced in the face of the industrialisation
of Japan, Korea and South East Asia.
The general contours of these developments are fairly clear. Over the next
20 years, we are very likely to see two countries, each over 60 times our size
and both well within reach, go through extended growth spurts. Beyond that
we are merely guessing. The best we can say is that our success in the face of these
opportunities and these challenges will depend on our adaptability—how well we
can switch out of and into areas of activity according to the vicissitudes of global
markets.
•
Demography
Over the past few years, we have all become much more conscious of the powerful
domestic demographic forces that are already well in train and that will exert their
accumulating influence over the century ahead.
In short, the combination of falling birth rates—particularly over the past
40 years—and the continuing increases in longevity that have characterised the
whole industrial era, carry two broad implications.
First, the proportion of people above workforce age will steadily rise.
• The number of Australians aged 65 years or more will increase from approximately 2.5 million today to 6.2 million in 2042—a rise from approximately 13%
to 25% of the total population.2
• Second, the growth in the number of people of workforce age will fall.
• In fact, in approximately 40 years, the absolute number of people of working
age is set to stop growing altogether.3
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Figure 1 Average GDP growth and volatility.
Source: Ken Henry, Policy Strategies for Future Growth, address to The Australian Industry Group’s
National Industry Forum, Canberra, 9 August 2004.
The publication in 2002 of the Intergenerational Report4 has highlighted the
implications of this for the Commonwealth budget. The suggestion is that, under
admittedly contestable assumptions, a structural budget deficit of approximately
5% of GDP could emerge by 2042.
This evening, however, I am not concerned with the budgetary ramifications
but rather with the implications of these demographic forces for continued growth
in Australian living standards.
• According to work done in the Commonwealth Treasury, over the past
40 years, the growth in the number of people of working age contributed
an average of 2 percentage points to annual GDP growth.
• This is a very substantial contribution and is more than half of the annual real
GDP growth since the end of the 1950s.
• In the next 40 years, if age-specific participation rates remain unchanged, we
are looking at an average annual contribution of only 7/8 of a percentage
point. Moreover, this average contribution will decline over that period and
will have all but disappeared by the middle of the century.5
All these facts and figures may appear quite remote from the topic of workplace
relations. In fact, the opposite is the case.
I think I can take for granted that we share the view that our children and future
generations should experience improvements in living standards and opportunities approaching those we have enjoyed over the past half-century. If this is right,
our demographic destiny requires us to find alternative sources of productivity to
replace the diminishing contribution to improved living standards delivered by
growth in the number of working-age Australians.
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If we do not find alternatives, we will face something like the experience of
Japan in the 1990s—a period referred to as ‘the lost decade’—in which growth
averaged approximately 1.5% per year.
Two such alternatives are higher rates of participation in the workforce and
greater rates of productivity growth. Workplace relations are central to both of
these and, as the demographic forces build momentum, pressures are also building
to adapt our workplaces to better generate improved productivity and greater rates
of participation.
Changes in households and the role of the state
For all the tremendous technological, economic and global changes during the
twentieth century, perhaps the most dramatic changes of all occurred closer to
home—in fact they occurred within our homes. These changes have occurred side
by side with far-reaching extensions of the redistributive state in supplementing
market outcomes.
The general story is well known.
• Housework has been transformed with technology and innovations in energy
and water supply, greatly reducing the direct demands on the time of household members.
• In combination with increases in the real purchasing power of wages, social
attitudes and law have evolved to improve both the opportunities and the
attractiveness of opportunities available to women outside the home, relative
to those available within.
• Households have increasingly ‘outsourced’ some of the activities previously
supplied privately. They have outsourced both to the market and to the state—
the role of which has extended into providing education, health care, child care,
family assistance, student assistance, carers’ assistance, income support for
older Australians, aged care and income support for single parents, for instance.
• Partly a cause and partly as an effect of these developments, family sizes have
fallen as women now have fewer children and, more recently, as fewer women
have children.
These changes have broadened the range of choices that families have—in terms
of their consumption possibilities, in terms of their discretion over their time and
in terms of their workforce participation.
Not surprisingly, Australians have responded in a great variety of ways to this
unprecedented expansion of choices. People now have much longer and more
varied periods of study; they have more leisure time and more leisure activities;
they have children on their own; they have much higher levels of consumption;
they dissolve their marriages; they remarry; they remain unmarried; they change
jobs more often; they work on a part time or casual basis much more; they appear
to be permanently leaving the workforce at an earlier age; and, of course, women
participate much more in the paid workforce.
These changes represent a great legacy of the twentieth century and there
should be little doubt that they will continue to develop and exert their influence
in the twenty-first century. Their influence on workplace relations is far from
the least of these.
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The increased diversity of circumstances and preferences is now a fundamental
feature of the Australian workforce. We have come a long way since Justice Higgins’ in the Harvester Judgement described a typical member of the workforce as
a husband supporting a wife and three children.
This model was never a totally satisfactory characterisation of the Australian
workforce and has become less and less appropriate over time. Today, with everincreasing diversity, there is no comparable ‘social norm’ around which we can
construct a simple characterisation of the Australian workforce.
Just as we have yet to come to terms completely with the increased diversity of
the workforce, our industrial relations system is still well short of adjusting to the
much greater role the State has come to play in meeting equity objectives by supplementing the outcomes of the private economy through our highly progressive
taxation and income support systems.
These shortcomings are highlighted by the difficulties the Commission has in
accommodating in its decisions the interplay between the annual safety net adjustments to minimum wages and the income tax and income support systems.
WORKPLACE RELATIONS
These themes of globalisation, demography, increased workforce diversity and
the wide role of the redistributive State all bear closely on the conduct of our
workplace relations in the twenty-first century. They all point to the continuing
need to adapt and to modernise.
This was a central message in addresses at the Australian Industry Group’s
National Forum a few weeks ago by both the Prime Minister and the Leader of
the Opposition.
Mr Howard stated:
. . . of all of the policy issues in the economic area with which I have been connected
and identified . . . none has seemed to me to be more important than the need to reform
and to maintain the reform of our industrial relations system, because deep down it’s
an expression of the modernisation and the embracing of the modern relevance of
the Australian economy.
Mr Latham made the following remarks:
I believe that Australia needs a second round of productivity gains and improvements.
We can’t just rely on the reforms of the 80s and 90s to secure our competitive success
for the coming century. We need to do more. We need to recognise that the reform
process is ongoing. We need a second wave of economic change.
Against this background of the ‘need for more reform’, I would like to explore
the directions of change in workplace relations and their relationship with ‘a fair
go all round’.
Productivity and participation
The dual challenges of globalisation and demography demand the pursuit of
a high-productivity path. Current generations are enjoying the opportunities
created by rising incomes and expanding opportunities. In fairness to future
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generations, we must retain this emphasis and ensure that these opportunities
continue to expand in the future.
Workplace relations are a central element in this.
• The evidence of the past decade or so is that the more decentralised and
flexible features that have entered into our approach to workplace relations
have coincided with strong increases in productivity. Although not the only
factor, it is difficult to sustain the argument against the positive contribution that enterprise-level bargaining can make in generating productivity
improvements.
• A fundamental ingredient in further productivity increases is the development and acquisition of skills linked to building innovative enterprises. We
need to build a deeper culture of skills development among employers and
employees. A key to this is for our workplace relations system to better facilitate investments by employers and employees in skills development and
acquisition.
This too requires flexibility and it requires cultural change, both on the part of
employers as well as employees and federal and state governments including in
relation to a commitment to lifelong learning.6
As with productivity, improved rates of workforce participation are critical—
both at the economy-wide level and at the level of the individual enterprise. Many
individual enterprises are finding a much slower stream of new recruits flowing
through traditional recruitment paths. This pattern will only grow in intensity
and become more widespread with demographic changes.
Businesses, governments and workers themselves will need to accommodate
older and more diverse entry into positions and much greater re-training and
re-skilling for new positions. This is also a core ingredient in our ability to build
‘a fair go all round’.
At the same time as businesses need to search, recruit and train in new ways,
they also face the increasingly diverse requirements of the workforce—a diversity
that reflects different family and personal responsibilities and different needs and
preferences.
Businesses need to look more broadly for people to fill positions and they need
to be able to offer a broader range of positions to suit the diverse circumstances
of the workforce.
All the while, the increased variety of work design still needs to be coordinated
into overall schedules that meet the technical, logistical and customer prerogatives
faced by individual enterprises.
To meet these various objectives, employers and managers need to be able to
combine a mix of full-time, part-time and casual work and they need to be able to
offer flexible mixes within these categories. The sort of detailed planning around
these often-idiosyncratic parameters is best accommodated in decentralised
negotiations between employers and their workforces.
There is a tremendous contrast between these demands for diversity on
the one hand and the paternalism that appears to inform contemporary
drives to standardise and to regulate work design and work practices on the
other.
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Some shortcomings with the current approach
I have suggested that decentralised negotiation in workplace relations has a significant role to play in securing productivity gains, in facilitating more appropriate
education and training opportunities and in improving workforce participation.
Each of these has a role to play in building ‘a fair go all round’.
Against this background, I would like to point to two particular features of
our current system that act to undermine the ability of enterprise bargaining to
contribute to these important objectives.
Claims to extend centrally enforced entitlements
Over recent years we have seen a concerted attempt to extend the reach of the
centralised system into new standardised entitlements. I am thinking of attempts
to impose stringent ‘one size fits all’ regulations on working hours, to extend
redundancy provisions, to entrench a selective suite of entitlements in the name
of work/family balance and attempts to constrain the employment of workers on
a casual basis.
The shift to an award system which operates as a safety net should have resulted
in there being far fewer test cases and other applications to vary the awards and
far less likelihood of the onus of proof being satisfied when applications are made.
This occurred for a few years after the award changes were introduced, but in
recent times the unions seem to have realised that the 20 allowable matters in
awards cover all of the significant terms and conditions of employment and that
the Commission is prepared to entertain a wide range of applications to vary the
level of the safety net.
Under the centralised industrial relations system, the ACTU could be expected
to pursue a test case every few years. More recently, the ACTU appears to have
formed the view that the union movement’s interests are best served through
the pursuit of numerous test cases relating to issues of broad public appeal such
as hours of work, redundancy pay, work/family balance and outsourcing. Recently, three major federal test cases and one major NSW State test case were
all going on at the same time—the Redundancy Test Case, the Family Provisions
Test Case, the 2004 Safety Net Review Case and the NSW Secure Employment
Test Case. The Australian Industry Group devotes substantial resources to all of
these major cases and their proliferation presents challenges for us as well as the
Commission.
The wisdom behind the unions’ claims in many of the test cases can be questioned. For example, in the Reasonable Hours Test Case which was heard by the
AIRC in 2001 and 2002, the unions endeavoured to impose very costly ‘across the
board’ additional paid leave and penalty payments if employees worked beyond a
specified number of hours. The claim was intended to discourage the working of
significant amounts of overtime.
Detailed evidence was presented to the Commission by employers setting out
how the claim, if granted, would seriously threaten the viability of their operations.
Evidence from employees was also presented to the Commission in the form of
an independent focus group study carried out by ANOP—commissioned by the
Australian Industry Group.
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Interestingly, it was clear from the study that many employees were extremely
hostile to the ACTU’s claims which they perceived, quite accurately, would limit
their opportunities to work overtime and derive the lifestyle benefits which flow
from the additional income. In the words of some of the employees:
Contrary to what you hear on the press and radio, it’s bollocks that people are working
too much. No one’s going to knock back overtime.
and
Philosophically, it’s a good idea. The French did it. But the French don’t live in
Sydney with six figure mortgages.
and
If I want to push myself that’s my decision—just as long as I can say ‘no’.
A strong point that came out in the evidence and in the ultimate decision of
the Commission was that a ‘one size fits all’ approach just does not work. Another
strong theme which flowed through the evidence was that employees want to
preserve their ability to make lifestyle and career choices as individuals, rather
than being forced to fit into a paternalistic view of what their preferences should
be.
This strong desire by employees to retain the right to make their own decisions
was reinforced again in the Metal Industry Casual Employment Case. In this case,
the unions sought to impose sweeping, across-the-board restrictions on the engagement of casuals. These included a requirement on employers that employees
engaged on a regular casual basis for 4 weeks would automatically be deemed to
be a permanent employee.
The case continued between 1999 and 2001 and the Commission eventually
decided to establish a right for casual employees to request to convert to full-time
or part-time employment after 6 months of regular employment. The right of an
employer to refuse an employee’s request to convert was preserved so long as the
refusal was ‘reasonable’.
What has occurred since the metals award was varied may surprise some, but
the results were entirely predictable. The results expose the flaws in many of
the arguments commonly made about casuals. The Commission’s decision entitled many thousands of casuals in the metal industry to request to convert
to full-time or part-time employment. Very few decided to do so. The reasons are obvious. Many employees prefer casual employment because of the
flexibility it provides and because of the extra income that results from casual
loadings.
Last year, the labour hire company Manpower gave evidence to the AIRC that
only two of its 500 employees who were eligible to request to convert had chosen
to do so.
Next week, formal hearings commence in the AIRC’s Family Provisions Test Case.
Once again, the ACTU has made a series of claims seeking to impose prescriptive,
across-the-board requirements on employers. For example, the unions are seeking
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to double the period of maternity leave and create an absolute right for employees
to return to work on a part-time basis after maternity leave regardless of the
circumstances of the relevant business.
In its submissions, the ACTU asserts the existence of a new ‘social norm’ in
society and, through its applications in the Case, it is attempting to define leave
and part-time work preferences of households that conform to the alleged norm.
Such an approach is inherently flawed. The wide diversity of household types,
work patterns and family and leisure preferences, defies the concept of a ‘social
norm’.
In contrast, our approach is that the award system can best meet the large
variety of preferences for work by allowing the high degree of flexibility required
for employers and employees to reach agreement over working hours, leave and
other matters. This is similar to the sensible approach the Commission has taken
to date on work/family balance matters.
In support of our arguments, the Ai Group has filed witness statements from
approximately 20 companies with the Commission. It is very apparent from the
evidence that most employers—small and large—endeavour to accommodate the
genuine needs of employees to balance their work and family responsibilities.
The issue is typically dealt with in a cooperative no-fuss way in workplaces. The
ACTU’s prescriptive approach threatens this cooperation and could generate
negative attitudes among employers towards the work family/balance agenda.
This would be very unfortunate when so many positive developments are currently
occurring in this area.
There is also the impact that the additional costs would have on the competitiveness of employers. In the words of one witness in the case—the female owner
of a third-generation, family-owned company in operation since 1920:
We accept that we are responsible for our own performance and are striving for excellence in our product development, manufacturing and marketing activities. Where
we have control over methods and resources invested we are achieving excellent
outcomes. However, there are impediments to success beyond our control that are
frustrating and divert important resources . . . The ACTU’s claim for additional regulations will, if successful, involve additional overheads and administration as well as
other direct and indirect costs that we cannot afford. They will make manufacturing
in Australia simply too difficult. It will be easier to do as our competitors have done—
cease manufacturing and instead import Asian product for resale.
Large annual safety net increases
A fundamentally similar argument applies to the very large increases in safety
net minimum wages of recent years. Year after year, the AIRC hears arguments
to raise minimum award wage rates by amounts often greater than justified by
productivity increases.
In recent years, in particular, the Commission has granted increases that easily
outstrip general productivity improvements and indeed outstrip the general rate
of wage increases.
These increases in money wages achieved through the centralised institutions
may appear fair and reasonable—at least from the standpoint of a full-time worker
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in secure employment. Of course, that is a very narrow reading of ‘a fair go all
round’ and it overlooks several important dimensions.
• It overlooks, for instance, the unfairness for those workers who, as a result of
the higher wage rates, are either excluded from a position altogether or unable
to find the number of hours of work they would prefer.
• It also overlooks the unfairness of the reduced scope for negotiations at the
enterprise level when such negotiations could be channelled into a better
accommodation of the diverse needs of individual workforces for improved
training and for more flexible and more family-friendly work design.
There is irony here too. In the Family Provisions Test Case, the ACTU bemoans what it sees as an inequitable slow spread of family-friendly provisions
to lower-paid workers. There is, of course, no recognition of the role that the
ACTU itself has played in channelling productivity improvements into higher
wage rates for award workers. Once productivity increases have been used in
this way, they cannot also fund the introduction of a more family-friendly work
design.
BUILDING ON THE UNIQUELY AUSTRALIAN APPROACH
I have argued the advantages of a decentralised, enterprise-based approach to
workplace relations and I have pointed to some important shortcomings in our
current system.
In view of these arguments, I would like to return to the theme of ‘a fair
go all round’ and put forward some suggestions about building on the uniquely
Australian approach to workplace relations.
Fairness, like workplace relations, is about a lot more than the immediate size
and distribution of material outcomes—although these should remain part of any
consideration. Fairness is also about creating opportunities; it is about holding
open the door to opportunities to all; it is about recognising and accepting diversity; it is about encouraging and rewarding achievement and it is about the
exercise of individual and corporate responsibilities.
Our education and training capabilities; our tax, income support and saving
systems and our general regulatory environment are all clearly relevant to how
we go about developing individual and social fairness.
In considering ‘a fair go all round’, we cannot quarantine our considerations
from the significant contributions that are made to the incomes and opportunities
of the workforce from outside the workplace relations system. We need to look
also at our provision of training and education and at the general redistribution
of social income for instance.
One of the advantages of the centralised elements of our workplace relations
system is the ability to incorporate broader, national issues and goals into the debate. Examples of this advantage in operation include the contribution to lowering
inflation in the 1980s and the role the centralised institutions played in assisting
the development of enterprise bargaining and equal pay for women.
It is true that our system does not always achieve all that it might when considering of these broader issues. However, this does not mean that we cannot
improve its ability to take a broad approach. There are, of course, improvements
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that should be made. I would like to mention three improvements in addition to
those I have already touched upon.
Fairness does not necessitate complexity
Australia has a Medusa-like workplace relations system with a breathtaking array
of intertwined and inconsistent state and federal employment laws and industrial
instruments. We have six separate workplace relations systems—the federal and
five state systems.
The current situation is unfair to both employers and employees. Fairness does
not necessitate complexity: indeed fairness is often impeded by complexity. It is
almost impossible for businesses to know fully what is required of them under
the employment laws in Australia. Companies operating across state and territory
boundaries need to grapple with:
• The Federal Workplace Relations Act and Regulations;
• Broad state and territory industrial relations Acts, together with many other
specific pieces of legislation dealing with leave and other entitlements;
• The 2200 federal awards and a further 2000 state awards;
• OHS Acts in each state and territory, together with associated regulations,
Codes of Practice and numerous detailed Australian Standards called up in
the legislation;
• Workers’ compensation legislation in each state and territory;
• Anti-discrimination Acts in every state and territory;
• The Federal Sex Discrimination Act, Racial Discrimination Act and Disability
Discrimination Act, plus the new Age Discrimination Act which was recently
enacted despite the fact that age discrimination legislation exists in every state
and territory; and
• Training legislation in every state and territory.
The situation would not be quite so bad if the legislation was consistent across
the different state and federal jurisdictions. Of course, it is not.
It is difficult for employers and, far from protecting employees, the existing
massive degree of overregulation hinders employers in their need to understand
their obligations and implement high standards.
The Ai Group has long supported the goal of achieving a unitary workplace
relations system in Australia. A unitary system is inherently logical and the barriers
to achieving it are not legal ones—they arise due to vested interests. Those with
a vested interest in the current system will always focus on the complications
and not on the opportunities. Vested interests will make the achievement of a
unitary system difficult in the short term but that is no reason to abandon the
idea.
The idea that we need to maintain 2200 federal awards to preserve a fair safety
net is just nonsense. One set of minimum conditions applicable to employees up to
the trade or the equivalent level, with more flexible safety net provisions applying
to supervisory, professional and managerial employees may be all that is required.
Alternatively, one set of minimum conditions could apply to each major industry—
not, for example, the more than 300 awards that apply in the manufacturing
sector.
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Some argue that the safety net should be legislated. However, decisions made by
politicians are inevitably based on political factors. The better approach is for the
safety net to be maintained by an independent tribunal which hears submissions
from all of the parties, is willing to commission independent research and which
can arrive at a fair and sensible outcome. I would suggest that even politicians
themselves would not be too keen to take on responsibilities for maintaining the
safety net given the political pressure they would face.
Inadequate adjustment for the larger role of the state
With surprisingly few exceptions, the considerations of the AIRC—particularly
in relation to its role in impacting on broad social equity outcomes, have not
adequately adjusted alongside the growth of the role of the redistributive State in
shaping overall social equity.
The place of the centralised industrialised relations institutions in overall equity
has paled alongside the emergence of a world-leading income support system. At
the same time, the State has come to assume roles in providing health services,
education and training and science and research infrastructure. The provision of
these services is supported by a highly progressive taxation system.
It is fair to say that we have not reassessed the role of the centralised workplace
relations institutions in the light of these developments. Through its role in considering the needs of the low-paid, for example, we still call on the centralised
institutions to have regard to the equity of overall social outcomes.
At the same time, there is a growing awareness of the difficulties of performing this role by adjusting pre-tax wages. In recent years, the Commission has
acknowledged that:
• the incidence of low-paid secondary earners in middle and higher income
households undermines the effectiveness of using the wages system to achieve
social equity objectives; and
• there is a disturbingly low benefit-to-cost ratio associated with increases in
safety net increases.7
The recognition of the limitations of using centralised adjustments to minimum wages to shape social equity outcomes objectives is a major development.
It suggests that the time has now come for a major reassessment of the capacity
and the appropriate role of our centralised wage institutions in the achievement
of overall social equity.
Such a reassessment needs to grapple with the considerably more effective and
considerably less wasteful ways of meeting this important responsibility, which are
available to the State than are available to the central wage-fixing institutions. It
also needs to grapple with the important interplays between wages and conditions
and the broader social safety net.
Giving the Commission the right tools to deliver fairer outcomes
Under the Workplace Relations Act, the Commission is required to maintain a safety
net of ‘fair’ minimum wages and conditions.
Fairness is rarely straightforward, however, and it usually requires a thorough
analysis of the inter-relationships between a variety of economic and workplace
relations’ considerations.
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In maintaining the safety net of minimum conditions, it is essential that the
Commission focus on the broader economic and social context in which its decisions are embedded. Matters that come before the Commission should not be
dealt with simply on the basis of case law and a narrow suite of industrial relations
implications.
Just because the unions make an application to the Commission for a new or
adjusted test case standard and generate significant publicity about their application, it is essential that the Commission not take this as a signal that the safety net
needs to be adjusted. The safety net should only be varied if there are powerful
economic reasons or social reasons that outweigh the sorts of economic and social
costs associated with the extension of the safety net discussed this evening.
A further important issue is that, in maintaining the public interest, the Commission needs to focus not just on the case at hand but on the totality of the changes
made to the safety net over recent years. For example, in considering the impact
on industry of the ACTU’s prescriptive claims in the Family Provisions Case, it
must not overlook the large safety net adjustments which it awarded in the 2003
and 2004 Safety Net Review Cases and the substantial increases in redundancy
pay which it have just been awarded in the Redundancy Test Case.
Given the economic challenges facing Australia over the years ahead, there is a
powerful argument that at least some of the members of the Commission should
have expert economic experience and qualifications, rather than simply being
drawn from the ranks of those operating in the workplace relations field. After
all, the annual safety net review cases are focused almost entirely on economic
theories, statistics and forecasts.
These represent important challenges for the Commission and for Governments who make appointments to the Commission.
Healthy public debate about our institutions is essential and is at the cornerstone
of a democratic society. My comments should not be taken as a lack of support for
the Commission. Despite the challenges, the Australian Industry Group remains
a strong supporter of the Commission.
The AIRC has served Australia well over time and it is essential that it continue
to do so in the future. The Commission has come to be part of the Australian social
fabric and it imparts to our overall conduct of workplace relations a particular
flavour of fairness and a widely held perception of fairness.
CONCLUDING COMMENTS
Workplace relations in the current century will assume at least as important a role
as in the twentieth century.
This evening I have outlined some of the more important forces that our workplace relations practices and institutions will need to grapple with over the coming
century. Our response to these forces is shaped by our commitment to the Australian aspiration of a ‘fair go all round’.
The pressures of globalisation of demography and the increasing diversity of
work requirements among our workforce call for an approach in which greater
emphasis is placed on decentralised, enterprise-based management of workplace
relations.
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A more decentralised, enterprise-based approach is more compatible with the
need to achieve highly productive and flexible work practices and work places.
We need to be much more aware of the trade-offs between central safety net
decisions and the scope for decentralised bargaining. We also need to be much
more aware of the choices we are taking—and the options we are closing off—
when we extend general entitlements or agree to steep rises in minimum wage
rates.
We need to reassess the role and effectiveness of the safety net as an instrument
of overall social equity and consider how best to deal with the interactions between
safety net considerations and the much broader and much more comprehensive
social safety net of income support and service provision funded by progressive
taxation.
I have pointed to the importance of reforms that take us towards a simpler
system. I have argued that the Commission should have access to expertise that
goes beyond the narrow realm of industrial relations and covers a broader range
of disciplines.
Alongside these points, I have also argued for a concept of fairness that is more
than the growth of material living standards from year to year. The concept of
fairness should also focus on building opportunity and catering for diversity.
I do not suggest that we have already taken all the steps that we can take. Clearly,
this is not the case. Our education and training systems provide an obvious example
of an area where we can and indeed must go further. Just as obviously, great strides
still need to be taken before we can say we have come to terms with the increasing
diversity of our workplaces.
I have argued that these objectives: economic objectives and the objectives of
building opportunity and catering for diversity will be impeded and not assisted
by a return to a more centralised and more standardised system of workplace
relations.
Finally, I have suggested that the pursuit of fairness, just as the pursuit of
higher productivity, requires a new and deeper reform agenda. It is an agenda
that goes beyond the usual suspects in the structure of our workplace relations
system. This embraces training and education, lifelong learning, work and family,
income support and innovation.
ENDNOTES
1. A C Evans, A New Generation in Industrial Relations, Second Annual Kinglsey Laffer Memorial
Lecture, 1994.
2. Commonwealth of Australia, Australia’s Demographic Challenges, 2004.
3. Commonwealth of Australia, Australia’s Demographic Challenges, 2004.
4. Commonwealth of Australia, Intergenerational Report, Budget Paper No. 5, 2002–2003 Budget
Papers.
5. Ken Henry, Address to the Melbourne Institute’s 40th Anniversary Dinner, February 2003.
6. One element of the necessary cultural change is a changed perception of the merits of the traditional trades as a career path. At the Australian Industry Group’s National Forum in Canberra
earlier this month, the Prime Minister lamented our society’s fixation with higher education to
the detriment of the traditional trades. This is a problem that affects us all—the manufacturing
and construction industries, for instance, are experiencing severe skill shortages and the problem
is set to worsen. The solutions are multi-faceted and not straightforward. For example, training
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and skill formation needs to be delivered in more contemporary ways. Four-year apprenticeships
are no longer attractive to employers or employees.
7. On the one hand, employer costs are inflated by increases in the wage-related costs that flow
from safety net adjustments (such as payroll tax, workers compensation payments and employer
superannuation contributions). On the other hand, benefits to workers are diluted by the combination of the income tax system and the means testing of income support payments. Generally,
for every dollar of additional cost to employers, wage earners receive less than 50 cents.
RELATIONS IN THE TWENTY-FIRST
CENTURY
KINGSLEY LAFFER MEMORIAL LECTURE
2004
HEATHER RIDOUT∗
It is a great honour and a pleasure to be invited to deliver the Kingsley Laffer
Lecture this evening.
As a graduate of the Faculty of Economics (now Economics and Business) at
the University of Sydney it is also something of a homecoming.
I am conscious of the prominence of earlier Laffer Lecturers. These include
a former Prime Minister, a member of the High Court of Australia, ACTU
Presidents and numerous other distinguished persons.
As Chief Executive of the Australian Industry Group, I am also very pleased to
be following in the footsteps of Bert Evans, one of my predecessors and a mentor,
who delivered the Laffer Lecture in 1994.1
I well remember that lecture. It was something of a watershed for the Ai Group
(then the Metal Trades Industry Association). It marked the final capitulation of
our defence of Australia’s centralised industrial relations system.
The Ai Group had been a fervent supporter of this system. Our members had
long experienced the damaging effects of wages leapfrogging and union campaigns
for shorter hours and other improved conditions. The industrial harmony that
prevailed during the accord years in the 1980s was a welcome respite.
By mid-1994, the Ai Group’s position on the shape of Australia’s workplace
relations system had shifted dramatically. It had shifted with the recognition that
Australia and Australian industry had taken a new path of global integration where
international competitiveness was the benchmark and when a ‘uniquely Australian
approach’ to markets and their reform would be fundamentally challenged. Bert
made the comment that ‘things will never be the same again’ and when I look
back, he was clearly right.
That speech also explored how viable and relevant the Australian concept of
‘fairness’ was to the conduct of industrial relations in Australia. This was juxtaposed against the challenge of trade being conducted not between countries of
similar real wages and per capita GDP levels as had characterised the 1960s and
1970s, but between countries of very unequal cost and regulatory regimes.
∗ Chief
Executive, Australian Industry Group.
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In my comments tonight, I would like to revisit the concept of the ‘fair go all
round’ and its relevance and meaning in the context of the influences shaping the
Australian economy and society in the twenty-first century.
In recent years, we have seen very strong and relatively stable improvements in
Australian living standards.
This suggests that the series of changes we have made to our approach to industrial relations have passed the basic economic test. There is widespread recognition that Australia’s aggregate economic successes owe much to the full range
of liberalising reforms introduced over the past couple of decades.
Notwithstanding the benefits of greater productivity and prosperity, we face
calls for re-regulation; we hear arguments for a reinforcement of the sway
of centralised institutions and we face a range of applications to extend the
reach of central regulation. At the core of all of these lies a concern with the
fairness of outcomes under the transformation to our current workplace relations
system.
A fundamental feature of the Ai Group’s approach to workplace relations has
been, and remains, our commitment to a uniquely Australian approach. This
approach is characterised by the aspiration of ‘a fair go all round’. It involves the
maintenance of a strong role for the Australian Industrial Relations Commission
and a fair safety net of minimum conditions. It also involves the acceptance of
legal, social and ethical responsibilities by employers.
We take fairness very seriously, and in tonight’s address, I will argue that we
should not re-regulate industrial relations in the name of fairness. In fact, I will
argue the opposite: just as a return to more centralised approaches does not make
sense in terms of economic arguments, neither does it make sense from the point
of view of fairness.
Our legitimate concerns with fairness do, nevertheless, require an active
approach—the trickle-down model is not convincing. We require, instead, a new
emphasis on the enablers that underwrite the creation of opportunities and improved access to those opportunities. We need an acceptance of diversity and we
need to put in place ways to cater to that diversity. We need, in short, a richer
and deeper policy agenda that allows us to build ‘a fair go all round’ in its most
profound, dynamic sense.
MAJOR FORCES AT WORK IN THE TWENTY-FIRST CENTURY
Of course, workplace relations do not evolve purely under their own steam; rather,
they form part of much broader economic and social processes. To set the scene, I
would like to sketch some of the major elements of the broader processes that will
condition the conduct of our workplace relations over the next hundred years.
Globalisation
Just as throughout the twentieth century we saw an extraordinary intensification
of globalising forces, in the twenty-first century these forces are set to continue
and, if anything, exert even more influence.
The industrialisation of China is on everyone’s lips. There are numerous
mind-boggling statistics.
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China currently has 15000 highway projects underway covering 162 000 km
of road—enough to circle the equator four times;
• China will produce 325 000 engineers this year. This is five times as many as
in the USA; and
• In 2003, China accounted for 40% of global cement consumption; it accounted
for 30% of the growth in oil demand; 90% of the growth in steel demand and
99% of the growth in demand for copper.
There is also a growing awareness of the impact that India will make on
global production and consumption. To these we can add the next phases of
South East Asian development—which will surely include that of our closest
and largest neighbour Indonesia. South America, Eastern Europe and at least
some of the African countries also seem likely to accelerate in importance and
influence.
The twenty-first century is set to bring forward major changes in international
competition as new sources of cheap labour and raw materials are tapped and
transformed into goods and services supplied to the global market. At the same
time, if history is any guide, these same developments will be associated with
increases in living standards and increasing demand for goods and services within
these countries.
Australia, as a medium-sized, open economy has little choice but to adapt as
these forces play out. In broad terms, we will see a magnification of the challenges
and opportunities we are now experiencing as a result of the rapid changes in
China and that we have previously experienced in the face of the industrialisation
of Japan, Korea and South East Asia.
The general contours of these developments are fairly clear. Over the next
20 years, we are very likely to see two countries, each over 60 times our size
and both well within reach, go through extended growth spurts. Beyond that
we are merely guessing. The best we can say is that our success in the face of these
opportunities and these challenges will depend on our adaptability—how well we
can switch out of and into areas of activity according to the vicissitudes of global
markets.
•
Demography
Over the past few years, we have all become much more conscious of the powerful
domestic demographic forces that are already well in train and that will exert their
accumulating influence over the century ahead.
In short, the combination of falling birth rates—particularly over the past
40 years—and the continuing increases in longevity that have characterised the
whole industrial era, carry two broad implications.
First, the proportion of people above workforce age will steadily rise.
• The number of Australians aged 65 years or more will increase from approximately 2.5 million today to 6.2 million in 2042—a rise from approximately 13%
to 25% of the total population.2
• Second, the growth in the number of people of workforce age will fall.
• In fact, in approximately 40 years, the absolute number of people of working
age is set to stop growing altogether.3
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Figure 1 Average GDP growth and volatility.
Source: Ken Henry, Policy Strategies for Future Growth, address to The Australian Industry Group’s
National Industry Forum, Canberra, 9 August 2004.
The publication in 2002 of the Intergenerational Report4 has highlighted the
implications of this for the Commonwealth budget. The suggestion is that, under
admittedly contestable assumptions, a structural budget deficit of approximately
5% of GDP could emerge by 2042.
This evening, however, I am not concerned with the budgetary ramifications
but rather with the implications of these demographic forces for continued growth
in Australian living standards.
• According to work done in the Commonwealth Treasury, over the past
40 years, the growth in the number of people of working age contributed
an average of 2 percentage points to annual GDP growth.
• This is a very substantial contribution and is more than half of the annual real
GDP growth since the end of the 1950s.
• In the next 40 years, if age-specific participation rates remain unchanged, we
are looking at an average annual contribution of only 7/8 of a percentage
point. Moreover, this average contribution will decline over that period and
will have all but disappeared by the middle of the century.5
All these facts and figures may appear quite remote from the topic of workplace
relations. In fact, the opposite is the case.
I think I can take for granted that we share the view that our children and future
generations should experience improvements in living standards and opportunities approaching those we have enjoyed over the past half-century. If this is right,
our demographic destiny requires us to find alternative sources of productivity to
replace the diminishing contribution to improved living standards delivered by
growth in the number of working-age Australians.
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If we do not find alternatives, we will face something like the experience of
Japan in the 1990s—a period referred to as ‘the lost decade’—in which growth
averaged approximately 1.5% per year.
Two such alternatives are higher rates of participation in the workforce and
greater rates of productivity growth. Workplace relations are central to both of
these and, as the demographic forces build momentum, pressures are also building
to adapt our workplaces to better generate improved productivity and greater rates
of participation.
Changes in households and the role of the state
For all the tremendous technological, economic and global changes during the
twentieth century, perhaps the most dramatic changes of all occurred closer to
home—in fact they occurred within our homes. These changes have occurred side
by side with far-reaching extensions of the redistributive state in supplementing
market outcomes.
The general story is well known.
• Housework has been transformed with technology and innovations in energy
and water supply, greatly reducing the direct demands on the time of household members.
• In combination with increases in the real purchasing power of wages, social
attitudes and law have evolved to improve both the opportunities and the
attractiveness of opportunities available to women outside the home, relative
to those available within.
• Households have increasingly ‘outsourced’ some of the activities previously
supplied privately. They have outsourced both to the market and to the state—
the role of which has extended into providing education, health care, child care,
family assistance, student assistance, carers’ assistance, income support for
older Australians, aged care and income support for single parents, for instance.
• Partly a cause and partly as an effect of these developments, family sizes have
fallen as women now have fewer children and, more recently, as fewer women
have children.
These changes have broadened the range of choices that families have—in terms
of their consumption possibilities, in terms of their discretion over their time and
in terms of their workforce participation.
Not surprisingly, Australians have responded in a great variety of ways to this
unprecedented expansion of choices. People now have much longer and more
varied periods of study; they have more leisure time and more leisure activities;
they have children on their own; they have much higher levels of consumption;
they dissolve their marriages; they remarry; they remain unmarried; they change
jobs more often; they work on a part time or casual basis much more; they appear
to be permanently leaving the workforce at an earlier age; and, of course, women
participate much more in the paid workforce.
These changes represent a great legacy of the twentieth century and there
should be little doubt that they will continue to develop and exert their influence
in the twenty-first century. Their influence on workplace relations is far from
the least of these.
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The increased diversity of circumstances and preferences is now a fundamental
feature of the Australian workforce. We have come a long way since Justice Higgins’ in the Harvester Judgement described a typical member of the workforce as
a husband supporting a wife and three children.
This model was never a totally satisfactory characterisation of the Australian
workforce and has become less and less appropriate over time. Today, with everincreasing diversity, there is no comparable ‘social norm’ around which we can
construct a simple characterisation of the Australian workforce.
Just as we have yet to come to terms completely with the increased diversity of
the workforce, our industrial relations system is still well short of adjusting to the
much greater role the State has come to play in meeting equity objectives by supplementing the outcomes of the private economy through our highly progressive
taxation and income support systems.
These shortcomings are highlighted by the difficulties the Commission has in
accommodating in its decisions the interplay between the annual safety net adjustments to minimum wages and the income tax and income support systems.
WORKPLACE RELATIONS
These themes of globalisation, demography, increased workforce diversity and
the wide role of the redistributive State all bear closely on the conduct of our
workplace relations in the twenty-first century. They all point to the continuing
need to adapt and to modernise.
This was a central message in addresses at the Australian Industry Group’s
National Forum a few weeks ago by both the Prime Minister and the Leader of
the Opposition.
Mr Howard stated:
. . . of all of the policy issues in the economic area with which I have been connected
and identified . . . none has seemed to me to be more important than the need to reform
and to maintain the reform of our industrial relations system, because deep down it’s
an expression of the modernisation and the embracing of the modern relevance of
the Australian economy.
Mr Latham made the following remarks:
I believe that Australia needs a second round of productivity gains and improvements.
We can’t just rely on the reforms of the 80s and 90s to secure our competitive success
for the coming century. We need to do more. We need to recognise that the reform
process is ongoing. We need a second wave of economic change.
Against this background of the ‘need for more reform’, I would like to explore
the directions of change in workplace relations and their relationship with ‘a fair
go all round’.
Productivity and participation
The dual challenges of globalisation and demography demand the pursuit of
a high-productivity path. Current generations are enjoying the opportunities
created by rising incomes and expanding opportunities. In fairness to future
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generations, we must retain this emphasis and ensure that these opportunities
continue to expand in the future.
Workplace relations are a central element in this.
• The evidence of the past decade or so is that the more decentralised and
flexible features that have entered into our approach to workplace relations
have coincided with strong increases in productivity. Although not the only
factor, it is difficult to sustain the argument against the positive contribution that enterprise-level bargaining can make in generating productivity
improvements.
• A fundamental ingredient in further productivity increases is the development and acquisition of skills linked to building innovative enterprises. We
need to build a deeper culture of skills development among employers and
employees. A key to this is for our workplace relations system to better facilitate investments by employers and employees in skills development and
acquisition.
This too requires flexibility and it requires cultural change, both on the part of
employers as well as employees and federal and state governments including in
relation to a commitment to lifelong learning.6
As with productivity, improved rates of workforce participation are critical—
both at the economy-wide level and at the level of the individual enterprise. Many
individual enterprises are finding a much slower stream of new recruits flowing
through traditional recruitment paths. This pattern will only grow in intensity
and become more widespread with demographic changes.
Businesses, governments and workers themselves will need to accommodate
older and more diverse entry into positions and much greater re-training and
re-skilling for new positions. This is also a core ingredient in our ability to build
‘a fair go all round’.
At the same time as businesses need to search, recruit and train in new ways,
they also face the increasingly diverse requirements of the workforce—a diversity
that reflects different family and personal responsibilities and different needs and
preferences.
Businesses need to look more broadly for people to fill positions and they need
to be able to offer a broader range of positions to suit the diverse circumstances
of the workforce.
All the while, the increased variety of work design still needs to be coordinated
into overall schedules that meet the technical, logistical and customer prerogatives
faced by individual enterprises.
To meet these various objectives, employers and managers need to be able to
combine a mix of full-time, part-time and casual work and they need to be able to
offer flexible mixes within these categories. The sort of detailed planning around
these often-idiosyncratic parameters is best accommodated in decentralised
negotiations between employers and their workforces.
There is a tremendous contrast between these demands for diversity on
the one hand and the paternalism that appears to inform contemporary
drives to standardise and to regulate work design and work practices on the
other.
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Some shortcomings with the current approach
I have suggested that decentralised negotiation in workplace relations has a significant role to play in securing productivity gains, in facilitating more appropriate
education and training opportunities and in improving workforce participation.
Each of these has a role to play in building ‘a fair go all round’.
Against this background, I would like to point to two particular features of
our current system that act to undermine the ability of enterprise bargaining to
contribute to these important objectives.
Claims to extend centrally enforced entitlements
Over recent years we have seen a concerted attempt to extend the reach of the
centralised system into new standardised entitlements. I am thinking of attempts
to impose stringent ‘one size fits all’ regulations on working hours, to extend
redundancy provisions, to entrench a selective suite of entitlements in the name
of work/family balance and attempts to constrain the employment of workers on
a casual basis.
The shift to an award system which operates as a safety net should have resulted
in there being far fewer test cases and other applications to vary the awards and
far less likelihood of the onus of proof being satisfied when applications are made.
This occurred for a few years after the award changes were introduced, but in
recent times the unions seem to have realised that the 20 allowable matters in
awards cover all of the significant terms and conditions of employment and that
the Commission is prepared to entertain a wide range of applications to vary the
level of the safety net.
Under the centralised industrial relations system, the ACTU could be expected
to pursue a test case every few years. More recently, the ACTU appears to have
formed the view that the union movement’s interests are best served through
the pursuit of numerous test cases relating to issues of broad public appeal such
as hours of work, redundancy pay, work/family balance and outsourcing. Recently, three major federal test cases and one major NSW State test case were
all going on at the same time—the Redundancy Test Case, the Family Provisions
Test Case, the 2004 Safety Net Review Case and the NSW Secure Employment
Test Case. The Australian Industry Group devotes substantial resources to all of
these major cases and their proliferation presents challenges for us as well as the
Commission.
The wisdom behind the unions’ claims in many of the test cases can be questioned. For example, in the Reasonable Hours Test Case which was heard by the
AIRC in 2001 and 2002, the unions endeavoured to impose very costly ‘across the
board’ additional paid leave and penalty payments if employees worked beyond a
specified number of hours. The claim was intended to discourage the working of
significant amounts of overtime.
Detailed evidence was presented to the Commission by employers setting out
how the claim, if granted, would seriously threaten the viability of their operations.
Evidence from employees was also presented to the Commission in the form of
an independent focus group study carried out by ANOP—commissioned by the
Australian Industry Group.
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Interestingly, it was clear from the study that many employees were extremely
hostile to the ACTU’s claims which they perceived, quite accurately, would limit
their opportunities to work overtime and derive the lifestyle benefits which flow
from the additional income. In the words of some of the employees:
Contrary to what you hear on the press and radio, it’s bollocks that people are working
too much. No one’s going to knock back overtime.
and
Philosophically, it’s a good idea. The French did it. But the French don’t live in
Sydney with six figure mortgages.
and
If I want to push myself that’s my decision—just as long as I can say ‘no’.
A strong point that came out in the evidence and in the ultimate decision of
the Commission was that a ‘one size fits all’ approach just does not work. Another
strong theme which flowed through the evidence was that employees want to
preserve their ability to make lifestyle and career choices as individuals, rather
than being forced to fit into a paternalistic view of what their preferences should
be.
This strong desire by employees to retain the right to make their own decisions
was reinforced again in the Metal Industry Casual Employment Case. In this case,
the unions sought to impose sweeping, across-the-board restrictions on the engagement of casuals. These included a requirement on employers that employees
engaged on a regular casual basis for 4 weeks would automatically be deemed to
be a permanent employee.
The case continued between 1999 and 2001 and the Commission eventually
decided to establish a right for casual employees to request to convert to full-time
or part-time employment after 6 months of regular employment. The right of an
employer to refuse an employee’s request to convert was preserved so long as the
refusal was ‘reasonable’.
What has occurred since the metals award was varied may surprise some, but
the results were entirely predictable. The results expose the flaws in many of
the arguments commonly made about casuals. The Commission’s decision entitled many thousands of casuals in the metal industry to request to convert
to full-time or part-time employment. Very few decided to do so. The reasons are obvious. Many employees prefer casual employment because of the
flexibility it provides and because of the extra income that results from casual
loadings.
Last year, the labour hire company Manpower gave evidence to the AIRC that
only two of its 500 employees who were eligible to request to convert had chosen
to do so.
Next week, formal hearings commence in the AIRC’s Family Provisions Test Case.
Once again, the ACTU has made a series of claims seeking to impose prescriptive,
across-the-board requirements on employers. For example, the unions are seeking
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to double the period of maternity leave and create an absolute right for employees
to return to work on a part-time basis after maternity leave regardless of the
circumstances of the relevant business.
In its submissions, the ACTU asserts the existence of a new ‘social norm’ in
society and, through its applications in the Case, it is attempting to define leave
and part-time work preferences of households that conform to the alleged norm.
Such an approach is inherently flawed. The wide diversity of household types,
work patterns and family and leisure preferences, defies the concept of a ‘social
norm’.
In contrast, our approach is that the award system can best meet the large
variety of preferences for work by allowing the high degree of flexibility required
for employers and employees to reach agreement over working hours, leave and
other matters. This is similar to the sensible approach the Commission has taken
to date on work/family balance matters.
In support of our arguments, the Ai Group has filed witness statements from
approximately 20 companies with the Commission. It is very apparent from the
evidence that most employers—small and large—endeavour to accommodate the
genuine needs of employees to balance their work and family responsibilities.
The issue is typically dealt with in a cooperative no-fuss way in workplaces. The
ACTU’s prescriptive approach threatens this cooperation and could generate
negative attitudes among employers towards the work family/balance agenda.
This would be very unfortunate when so many positive developments are currently
occurring in this area.
There is also the impact that the additional costs would have on the competitiveness of employers. In the words of one witness in the case—the female owner
of a third-generation, family-owned company in operation since 1920:
We accept that we are responsible for our own performance and are striving for excellence in our product development, manufacturing and marketing activities. Where
we have control over methods and resources invested we are achieving excellent
outcomes. However, there are impediments to success beyond our control that are
frustrating and divert important resources . . . The ACTU’s claim for additional regulations will, if successful, involve additional overheads and administration as well as
other direct and indirect costs that we cannot afford. They will make manufacturing
in Australia simply too difficult. It will be easier to do as our competitors have done—
cease manufacturing and instead import Asian product for resale.
Large annual safety net increases
A fundamentally similar argument applies to the very large increases in safety
net minimum wages of recent years. Year after year, the AIRC hears arguments
to raise minimum award wage rates by amounts often greater than justified by
productivity increases.
In recent years, in particular, the Commission has granted increases that easily
outstrip general productivity improvements and indeed outstrip the general rate
of wage increases.
These increases in money wages achieved through the centralised institutions
may appear fair and reasonable—at least from the standpoint of a full-time worker
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in secure employment. Of course, that is a very narrow reading of ‘a fair go all
round’ and it overlooks several important dimensions.
• It overlooks, for instance, the unfairness for those workers who, as a result of
the higher wage rates, are either excluded from a position altogether or unable
to find the number of hours of work they would prefer.
• It also overlooks the unfairness of the reduced scope for negotiations at the
enterprise level when such negotiations could be channelled into a better
accommodation of the diverse needs of individual workforces for improved
training and for more flexible and more family-friendly work design.
There is irony here too. In the Family Provisions Test Case, the ACTU bemoans what it sees as an inequitable slow spread of family-friendly provisions
to lower-paid workers. There is, of course, no recognition of the role that the
ACTU itself has played in channelling productivity improvements into higher
wage rates for award workers. Once productivity increases have been used in
this way, they cannot also fund the introduction of a more family-friendly work
design.
BUILDING ON THE UNIQUELY AUSTRALIAN APPROACH
I have argued the advantages of a decentralised, enterprise-based approach to
workplace relations and I have pointed to some important shortcomings in our
current system.
In view of these arguments, I would like to return to the theme of ‘a fair
go all round’ and put forward some suggestions about building on the uniquely
Australian approach to workplace relations.
Fairness, like workplace relations, is about a lot more than the immediate size
and distribution of material outcomes—although these should remain part of any
consideration. Fairness is also about creating opportunities; it is about holding
open the door to opportunities to all; it is about recognising and accepting diversity; it is about encouraging and rewarding achievement and it is about the
exercise of individual and corporate responsibilities.
Our education and training capabilities; our tax, income support and saving
systems and our general regulatory environment are all clearly relevant to how
we go about developing individual and social fairness.
In considering ‘a fair go all round’, we cannot quarantine our considerations
from the significant contributions that are made to the incomes and opportunities
of the workforce from outside the workplace relations system. We need to look
also at our provision of training and education and at the general redistribution
of social income for instance.
One of the advantages of the centralised elements of our workplace relations
system is the ability to incorporate broader, national issues and goals into the debate. Examples of this advantage in operation include the contribution to lowering
inflation in the 1980s and the role the centralised institutions played in assisting
the development of enterprise bargaining and equal pay for women.
It is true that our system does not always achieve all that it might when considering of these broader issues. However, this does not mean that we cannot
improve its ability to take a broad approach. There are, of course, improvements
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that should be made. I would like to mention three improvements in addition to
those I have already touched upon.
Fairness does not necessitate complexity
Australia has a Medusa-like workplace relations system with a breathtaking array
of intertwined and inconsistent state and federal employment laws and industrial
instruments. We have six separate workplace relations systems—the federal and
five state systems.
The current situation is unfair to both employers and employees. Fairness does
not necessitate complexity: indeed fairness is often impeded by complexity. It is
almost impossible for businesses to know fully what is required of them under
the employment laws in Australia. Companies operating across state and territory
boundaries need to grapple with:
• The Federal Workplace Relations Act and Regulations;
• Broad state and territory industrial relations Acts, together with many other
specific pieces of legislation dealing with leave and other entitlements;
• The 2200 federal awards and a further 2000 state awards;
• OHS Acts in each state and territory, together with associated regulations,
Codes of Practice and numerous detailed Australian Standards called up in
the legislation;
• Workers’ compensation legislation in each state and territory;
• Anti-discrimination Acts in every state and territory;
• The Federal Sex Discrimination Act, Racial Discrimination Act and Disability
Discrimination Act, plus the new Age Discrimination Act which was recently
enacted despite the fact that age discrimination legislation exists in every state
and territory; and
• Training legislation in every state and territory.
The situation would not be quite so bad if the legislation was consistent across
the different state and federal jurisdictions. Of course, it is not.
It is difficult for employers and, far from protecting employees, the existing
massive degree of overregulation hinders employers in their need to understand
their obligations and implement high standards.
The Ai Group has long supported the goal of achieving a unitary workplace
relations system in Australia. A unitary system is inherently logical and the barriers
to achieving it are not legal ones—they arise due to vested interests. Those with
a vested interest in the current system will always focus on the complications
and not on the opportunities. Vested interests will make the achievement of a
unitary system difficult in the short term but that is no reason to abandon the
idea.
The idea that we need to maintain 2200 federal awards to preserve a fair safety
net is just nonsense. One set of minimum conditions applicable to employees up to
the trade or the equivalent level, with more flexible safety net provisions applying
to supervisory, professional and managerial employees may be all that is required.
Alternatively, one set of minimum conditions could apply to each major industry—
not, for example, the more than 300 awards that apply in the manufacturing
sector.
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Some argue that the safety net should be legislated. However, decisions made by
politicians are inevitably based on political factors. The better approach is for the
safety net to be maintained by an independent tribunal which hears submissions
from all of the parties, is willing to commission independent research and which
can arrive at a fair and sensible outcome. I would suggest that even politicians
themselves would not be too keen to take on responsibilities for maintaining the
safety net given the political pressure they would face.
Inadequate adjustment for the larger role of the state
With surprisingly few exceptions, the considerations of the AIRC—particularly
in relation to its role in impacting on broad social equity outcomes, have not
adequately adjusted alongside the growth of the role of the redistributive State in
shaping overall social equity.
The place of the centralised industrialised relations institutions in overall equity
has paled alongside the emergence of a world-leading income support system. At
the same time, the State has come to assume roles in providing health services,
education and training and science and research infrastructure. The provision of
these services is supported by a highly progressive taxation system.
It is fair to say that we have not reassessed the role of the centralised workplace
relations institutions in the light of these developments. Through its role in considering the needs of the low-paid, for example, we still call on the centralised
institutions to have regard to the equity of overall social outcomes.
At the same time, there is a growing awareness of the difficulties of performing this role by adjusting pre-tax wages. In recent years, the Commission has
acknowledged that:
• the incidence of low-paid secondary earners in middle and higher income
households undermines the effectiveness of using the wages system to achieve
social equity objectives; and
• there is a disturbingly low benefit-to-cost ratio associated with increases in
safety net increases.7
The recognition of the limitations of using centralised adjustments to minimum wages to shape social equity outcomes objectives is a major development.
It suggests that the time has now come for a major reassessment of the capacity
and the appropriate role of our centralised wage institutions in the achievement
of overall social equity.
Such a reassessment needs to grapple with the considerably more effective and
considerably less wasteful ways of meeting this important responsibility, which are
available to the State than are available to the central wage-fixing institutions. It
also needs to grapple with the important interplays between wages and conditions
and the broader social safety net.
Giving the Commission the right tools to deliver fairer outcomes
Under the Workplace Relations Act, the Commission is required to maintain a safety
net of ‘fair’ minimum wages and conditions.
Fairness is rarely straightforward, however, and it usually requires a thorough
analysis of the inter-relationships between a variety of economic and workplace
relations’ considerations.
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In maintaining the safety net of minimum conditions, it is essential that the
Commission focus on the broader economic and social context in which its decisions are embedded. Matters that come before the Commission should not be
dealt with simply on the basis of case law and a narrow suite of industrial relations
implications.
Just because the unions make an application to the Commission for a new or
adjusted test case standard and generate significant publicity about their application, it is essential that the Commission not take this as a signal that the safety net
needs to be adjusted. The safety net should only be varied if there are powerful
economic reasons or social reasons that outweigh the sorts of economic and social
costs associated with the extension of the safety net discussed this evening.
A further important issue is that, in maintaining the public interest, the Commission needs to focus not just on the case at hand but on the totality of the changes
made to the safety net over recent years. For example, in considering the impact
on industry of the ACTU’s prescriptive claims in the Family Provisions Case, it
must not overlook the large safety net adjustments which it awarded in the 2003
and 2004 Safety Net Review Cases and the substantial increases in redundancy
pay which it have just been awarded in the Redundancy Test Case.
Given the economic challenges facing Australia over the years ahead, there is a
powerful argument that at least some of the members of the Commission should
have expert economic experience and qualifications, rather than simply being
drawn from the ranks of those operating in the workplace relations field. After
all, the annual safety net review cases are focused almost entirely on economic
theories, statistics and forecasts.
These represent important challenges for the Commission and for Governments who make appointments to the Commission.
Healthy public debate about our institutions is essential and is at the cornerstone
of a democratic society. My comments should not be taken as a lack of support for
the Commission. Despite the challenges, the Australian Industry Group remains
a strong supporter of the Commission.
The AIRC has served Australia well over time and it is essential that it continue
to do so in the future. The Commission has come to be part of the Australian social
fabric and it imparts to our overall conduct of workplace relations a particular
flavour of fairness and a widely held perception of fairness.
CONCLUDING COMMENTS
Workplace relations in the current century will assume at least as important a role
as in the twentieth century.
This evening I have outlined some of the more important forces that our workplace relations practices and institutions will need to grapple with over the coming
century. Our response to these forces is shaped by our commitment to the Australian aspiration of a ‘fair go all round’.
The pressures of globalisation of demography and the increasing diversity of
work requirements among our workforce call for an approach in which greater
emphasis is placed on decentralised, enterprise-based management of workplace
relations.
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A more decentralised, enterprise-based approach is more compatible with the
need to achieve highly productive and flexible work practices and work places.
We need to be much more aware of the trade-offs between central safety net
decisions and the scope for decentralised bargaining. We also need to be much
more aware of the choices we are taking—and the options we are closing off—
when we extend general entitlements or agree to steep rises in minimum wage
rates.
We need to reassess the role and effectiveness of the safety net as an instrument
of overall social equity and consider how best to deal with the interactions between
safety net considerations and the much broader and much more comprehensive
social safety net of income support and service provision funded by progressive
taxation.
I have pointed to the importance of reforms that take us towards a simpler
system. I have argued that the Commission should have access to expertise that
goes beyond the narrow realm of industrial relations and covers a broader range
of disciplines.
Alongside these points, I have also argued for a concept of fairness that is more
than the growth of material living standards from year to year. The concept of
fairness should also focus on building opportunity and catering for diversity.
I do not suggest that we have already taken all the steps that we can take. Clearly,
this is not the case. Our education and training systems provide an obvious example
of an area where we can and indeed must go further. Just as obviously, great strides
still need to be taken before we can say we have come to terms with the increasing
diversity of our workplaces.
I have argued that these objectives: economic objectives and the objectives of
building opportunity and catering for diversity will be impeded and not assisted
by a return to a more centralised and more standardised system of workplace
relations.
Finally, I have suggested that the pursuit of fairness, just as the pursuit of
higher productivity, requires a new and deeper reform agenda. It is an agenda
that goes beyond the usual suspects in the structure of our workplace relations
system. This embraces training and education, lifelong learning, work and family,
income support and innovation.
ENDNOTES
1. A C Evans, A New Generation in Industrial Relations, Second Annual Kinglsey Laffer Memorial
Lecture, 1994.
2. Commonwealth of Australia, Australia’s Demographic Challenges, 2004.
3. Commonwealth of Australia, Australia’s Demographic Challenges, 2004.
4. Commonwealth of Australia, Intergenerational Report, Budget Paper No. 5, 2002–2003 Budget
Papers.
5. Ken Henry, Address to the Melbourne Institute’s 40th Anniversary Dinner, February 2003.
6. One element of the necessary cultural change is a changed perception of the merits of the traditional trades as a career path. At the Australian Industry Group’s National Forum in Canberra
earlier this month, the Prime Minister lamented our society’s fixation with higher education to
the detriment of the traditional trades. This is a problem that affects us all—the manufacturing
and construction industries, for instance, are experiencing severe skill shortages and the problem
is set to worsen. The solutions are multi-faceted and not straightforward. For example, training
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and skill formation needs to be delivered in more contemporary ways. Four-year apprenticeships
are no longer attractive to employers or employees.
7. On the one hand, employer costs are inflated by increases in the wage-related costs that flow
from safety net adjustments (such as payroll tax, workers compensation payments and employer
superannuation contributions). On the other hand, benefits to workers are diluted by the combination of the income tax system and the means testing of income support payments. Generally,
for every dollar of additional cost to employers, wage earners receive less than 50 cents.