Since the Fair Work Act commenced on 1 July 2009, employer complaints have got louder and louder. Employers claim the new industrial laws impede workplace flexibility and have a negative impact on productivity.
Last Friday was the deadline for submissions to the Fair Work Act review currently underway. Unsurprisingly employer groups have used the review as an opportunity to once again ventilate these largely unfounded claims. For example, according to the Australia Industry Group’s 183-page submission, "there is much common ground between the major industry groups on key problem areas and a shared view that the [Fair Work Act] is hampering productivity growth, workplace flexibility and competitiveness."
These submissions show that it is a particularly narrow understanding of flexibility which is being advanced by the industry groups — one which equates flexibility with a return to unilateral decision-making by employers. What’s more, the link between more employer-driven flexibility and improved productivity remains highly questionable, with almost no rigorous economic analysis provided to demonstrate this assertion.
Although employer demands cover plenty of ground, the range of proposed reforms can be categorised into three main areas.
The first main change that employer groups seek is the restoration of the ability to make individual statutory agreements. They know this is futile given Labor’s opposition to individual agreements — so employer groups have taken to calling for a reform of "individual flexibility agreements" (which are currently allowed under the Fair Work Act) which would work in much the same way as individual statutory contracts.
The second group of changes that employers are agitating for is tighter regulation of the enterprise bargaining process to allow for the exclusion of unions. They want limitations to be placed on the terms that parties could seek in an agreement as well as further restrictions on employees’ right to take strike action in pursuit of their claims.
Finally, employers want limitations on the ability of employees to access the unfair dismissal and the new "general protection" jurisdictions. These provisions are what protect a range of workplace participants from unfair and discriminatory practices.
Demands for greater "flexibility" in the workplace reveal nostalgia for a bygone era where employers could make business decisions independently of union and employee involvement — and without review by an independent body. Industrial regulation has evolved in the last hundred years or so to erode the concept of management prerogative. This period has also heralded the recognition that employees have a broader stake in a range of workplace decisions.
The primacy given to enterprise bargaining under the Fair Work Act has particularly raised the ire of the business lobby because in industries where employees have been able to flex their industrial muscle, employers have had to cede some control over workplace decisions to employees, such as the decision to engage contractors or outsource ancillary functions as a device to drive down labour costs.
The last three decades have amply demonstrated that increasing employer-driven flexibility leads to short-sighted "downsizing", circumvention of existing labour regulation, a lowering of employment conditions in the pursuit of short-term cost savings and an intensification of the workload of surviving employees.
Although the term "flexibility" is commonly misused to advance a particular agenda, it is worth noting that businesses have a legitimate interest in being flexible given the global competitive environment in which many of Australia’s industries now operate.
Organisational flexibility is an essential component of being able to adapt to market fluctuations in demand for goods and services, the ever-increasing pace of technological development and change in market structures that require increased firm efficiency. If labour is a significant part of a company’s production inputs, then it stands to reason that employment relations will be an important factor in its productivity.
However, the notion of flexibility needs to be purged of ideological content and re-envisaged as a mutual process, one which requires both employers and employees to determine how the company can adapt to market exigencies. As the submissions made by industry groups reveal, employers haven’t done this.
There is no shortage of studies that point to the fact that if the actual objective of business is to improve labour productivity, seeking any necessary flexibility in a cooperative manner with its workforce is more likely to yield additional efficiencies. Lifting productivity is about being able to produce more goods or services by using the same inputs, including labour. Cooperation between workplace parties rather than unilateral dictates by management will often do better achieve genuine productivity gains and ensure long-term success.
Upon closer inspection, what these calls for a return to management prerogative reveal is that employers are less concerned with workplace productivity than with profitability.
In industries where union penetration is high, the new enterprise bargaining framework has been used to great effect by employees to obtain better pay and conditions.
Enterprise bargaining though has not able to deliver a more egalitarian wage structure for those employees that face significant impediments to collectively organising. But in industries such as mining, where employees have been able to use the new system to their advantage, employers have been forced to share a greater portion of their profits. It is no surprise that calls for reform of the Fair Work Act have been the most vociferous from these industries.
Demands for greater flexibility in workplace regulation also ignore the mountains of evidence that show that macroeconomic factors have more to do with productivity improvements than industrial regulation. Appeals for reform of the Fair Work Act proceed on the basis that a weakening of employee protections will automatically result in productivity growth.
There is only very superficial evidence to back this view, and increasingly, even bastions of neo-liberal economic theory such as the IMF and World Bank which once uncritically advocated labour market "deregulation" have begun to back away from this position.
According to its own terms, the main object of the Fair Work Act is to "provide workplace relations laws that are fair to working Australians, are flexible for business, promote productivity and economic growth for Australia’s further economic prosperity and take into account Australia’s international obligations."
Granting employers unimpeded power to transfer the risks associated with running a business to employees will not yield in any productivity improvements in the workplace and provide for the long-term economic health of the country. On the contrary, working with employees in a cooperative manner, ensuring substantive and procedural fairness in the workplace and demonstrating real management leadership is much more likely to result in competitive and productive enterprises.