The Politics of IR


The politics of industrial relations has seesawed since the promulgation of WorkChoices in April 2006.

Initially, the Government left themselves exposed to attack by grossly overplaying the economic benefits and under-playing the social costs and insisting there was no other way to achieve good employment outcomes for fringe workers.

The international experience makes it clear that once a country achieves the high level of labour market freedom which Australia enjoyed prior to 2006, any further employment gains from deregulation are likely to be small at best. Last year’s improvement in workforce participation rates (0.4 per cent) is not much of a guide as it is not far out of line with the trend growth of earlier years; and the regional variations in participation improvements suggest the resources boom is clearly the main driver.

As for productivity (output relative to inputs), one should not read too much into last year’s slow down (with growth at less than 1 per cent) as there are so many variables at work in the short term but it is not that surprising, as there is no evidence from overseas to suggest that individual bargaining leads to more sustained productivity gains than collective (union or non-union) enterprise bargaining, even in the medium term.

On the social front, the Government’s claim that WorkChoices would have no effect on the earnings or quality of life of low-paid working Australians was always laughable. International experience overwhelmingly shows that harsh measures like WorkChoices, which increase employer autonomy on a wide range of fronts, tend to hurt the most disadvantaged workers in the community (those with least bargaining power). And the evidence on the ground, although inconclusive, indicates that it is starting to happen here.

Then there was the Government’s claim that WorkChoices offered the ‘only way’ to achieve good employment outcomes for low-educated, low-skilled workers. This was nothing short of dogma. Alternative policy strategies focused on investing in human capital (such as through education, training and early childhood development) have been shown to have comparable or better effects on workforce participation (albeit with higher taxes).

When a government engages in such over-the-top political spin, it becomes vulnerable to attack. Labor and the Trade Unions, while leaving unchallenged the ‘no other way’ argument (perhaps because it does not easily lend itself to the cut and thrust of political debate), did a good job over the past 12 months of undermining the economic and social claims of the Government. The recent refusal of the Howard Government to publish the available information on individual bargaining outcomes  had the effect of heightening suspicion that it was hiding something.

In this climate, industrial relations (IR) became a potential vote-switching issue for many Australians. Helped along by the election in December 2006 of a fresh looking, articulate and intelligent leader, the ALP took a big lead in the polls.

Then, a few weeks ago, the IR debate started to go sour for Labor.

Thanks to Luke Henning

First, as details of Labor’s IR proposals began to be released, they proved so complex and so full of ambiguities that they easily lent themselves to misrepresentation arousing fears that their proposed IR structure was ‘unconstitutional,’ that ‘compulsory unionism’ was being introduced, that unions would be allowed to engage in ‘pattern bargaining,’ that the use of arbitration to settle workplace disputes would encourage ‘union militancy,’ and so on. Most of these fears proved quite wide of the mark but they gave Howard and his Workplace Relations Minister Joe Hockey an opportunity to launch their own counter-attack.

Secondly, Australian Business lost its temper. While it would never have been easy to win the support of business leaders most of whom are red-hot Coalition supporters it might have been possible, with sensitive handling, to neutralise many of their concerns. However, business was not given a chance to comment on the detailed proposals before their release and became really concerned about some of them, so it went on the warpath. The subsequent punch-up left an ugly public impression and bodes badly for the future. Business leaders can be powerful political enemies because they have easy access to and credibility with the media and their warnings of economic doom can frighten many ‘little capitalist’ middle-class voters.

Thirdly, Howard, the supreme pragmatist, backed down and watered down the WorkChoices legislation, presenting himself as a listener who responds to public opinion. Together with Peter Costello’s Budget, which targeted low income workers, this may help him win back some battlers. The changes to WorkChoices also gave the Coalition another pretext to use taxpayer funds to advertise its new laws (often misleadingly) a corruption of democracy, but one that voters don’t seem to get too fired up about.

As a consequence, Rudd lost some of the political momentum on IR. This is not yet reflected in opinion polls but it could be a slow burner.

Labor now needs to urgently clarify and simplify its industrial relations policies and make some concessions to business on individual agreements, without retreating on basics like unfair dismissals, the right to collective (union or non-union) bargaining if requested by a majority of workers, and a broader safety net for workers.

Once this is done, Labor can again argue its ‘fairness’ case forcefully on several fronts. Although Howard’s new safety net for people with incomes below $75,000 has not yet been properly explained (for example, what kind of ‘non-money’ compensation will be acceptable?), it is clear that it will be full of holes those already hit in the last twelve months will not be compensated, firms ‘experiencing economic difficulty’ will be let off the hook, and workers will be given no greater control of their working hours. Labor is also entitled to question the real independence of the renamed Workplace Authority, given its performance so far as the Office of the Employment Advocate.

If the Government is serious about making employers comply with its new Fairness Test (which it is saying ‘ will be conducted in a similar fashion to the old no-disadvantage test’) , the enforcement and monitoring process through the Workplace Authority and the newly created Workplace Ombudsman (a renamed and beefed up Office of Workplace Services) will require an army of bureaucrats to assess each case carefully. This will drive business mad, creating a real risk that either the new changes will not be policed effectively or the ‘no disadvantage’ provision will be quietly abandoned after the Federal election.

Labor should also be able to promote its alternative strategy of investing in human capital as a more socially acceptable and productive way to enhance workforce participation. This is not necessarily incompatible with Rudd’s ‘conservative’ fiscal goals of not increasing tax relative to GDP and no net borrowing, over the economic cycle, even for capital projects. Apart from rearranging Budget priorities, Labor could promise that any surplus (windfall) revenue in the future (and any net borrowing during a downturn in the cycle) would be used principally for investment in human capital rather than for tax cuts. This would be good economics as well as being in tune with community preferences.

In short, the politics of IR remains potentially positive for Rudd. But it is much muddier than a month ago. A further complicati
on is that the Murdoch press has decided to brutally and unashamedly campaign against Labor, especially on IR. Editorials are of no consequence but the way news is presented each day (especially on page 1) does have a significant influence on public opinion.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.