Ambition Comes First For Paul Howes

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Paul Howes, the young boss of the venerable Australian Workers Union, is no stranger to controversy. In the short few years he has been a public figure, he has shown a talent for making headlines.

Back in 2011, for instance, he was telling top executives at mining company Rio Tinto that “we’re coming for you,” in a fiery speech which featured epithets such as “shiny arses”, “monkeys” and “slimy, grubby mates in the Coalition”. Three years later, his tone has changed considerably. In a speech this week to the National Press Club, the union leader was sounding more like a member of a boardroom.

“The eternal truism of leadership is that you define the environment lest it define you,” he intoned, before setting out a sweeping new plan for a “Grand Compact” between the unions and big business, echoing Bob Hawke’s famous Accord of the early 1980s.

To the dismay of many of his colleagues, Howes seems to agree with the concerns of top executives and Employment Minister Eric Abetz that high wages are damaging the competitiveness of Australian industry. “There has been a pattern of unsustainable growth in wages in some isolated parts of the economy,” he conceded.

“The leap-frog wage outcomes in the offshore sector in particular are not going to be sustainable for the long-term — we could be pricing ourselves out of the market.”

That’s not the kind of rhetoric you normally hear from a union leader. At one point, he even claimed that “Labor has always been the party of the free market,” a remark that would see radical unionists of yore spinning in their graves.

Understandably, many on the left were unimpressed. At the very time the Coalition and the big end of town are spoiling for a new round of industrial relations combat, here comes a prominent union leader lending credence to their arguments.

Labor leader Bill Shorten’s response was to question whether there was any appetite for a bargain from business and the government. “I'm just not going to engage in some fantasy that Tony Abbott is going to change his spots,” he told ABC radio. “How can you sit down and form an accord with a series of organisations that you want to have a royal commission into? It's not real.”

It does seem unlikely that any grand bargain will be struck in the industrial relations arena. As Howes himself noted, IR in Australia is a perennial battleground, trapped in an endless see-saw between capital and labour, as first one major party and then the other seek to tilt conditions their way.

The Hawke-Keating years were marked by both industrial accord and labour market deregulation, but the election of the Howard government in 1996 quickly saw brutal industrial battles break out on the waterfront, culminating in the MUA-Patricks dispute.

The 2004 election enabled the Howard government to control the Senate, and it responded by introducing WorkChoices — legislation it later came to regret, as a massive grassroots campaign by unions played a key role in the election of Kevin Rudd. By 2009, Labor had passed the Fair Work Act, which removed WorkChoices, re-regulated many aspects of industrial relations, and tilted the industrial relationship back towards organised labour. Now the Abbott government is signalling that it would like to deregulate again.

Howes has a good point when he observes that this constant tug-of-war has been great for the partners at Freehills and Slater and Gordon, but not so great for the overall economy. Academic productivity experts argue that the best way to innovate for businesses is with management, workers and customers all contributing together in a virtuous circle of constant improvement.

But do we need a “grand compact” anyway? A look at the data suggests the problems Howes points to are not that big a deal. Industrial disputes are at decade-low levels currently, and wage rises have largely tracked inflation. On most big-picture analyses, Australia’s IR system is not broken.

Indeed, you might argue that what we really need are higher wages and stronger unions. In industries where labour is not organised and has little bargaining power, whether it be contract cleaners or freelancers in the creative industries, wages are low and conditions are precarious.

The experience of the United States, where free-market philosophies have pushed the power of capital to the forefront, suggests that too little labour power results in stagnant real wages and a collapsing middle class. The chart below, from the Economic Policy Institute, shows what happens when wages are kept low in the name of “competitiveness”.

In the United States, wages and productivity growth has decoupled since the 1970s. The result: a shrinking middle class. Source: Economic Policy Institute, Reuters.

The shrinking middle class is now as much of an economic problem as a social problem in America. The US has a very flexible labour market with very low rates of unionisation. As a result, wages have not kept pace with productivity growth since the 1970s. Who captured those productivity gains? Bosses and shareholders.

The US has seen profits as a share of the overall economy rise quickly since the global financial crisis, while employment has only crawled slowly back. According to the Economic Policy Institute, the share of US corporate revenue going to profits (as opposed to labour and other costs) is at its highest level ever. But ordinary consumers have less in their pockets to spend. The result is a very weak recovery.

In comparison to the US, Australia has done a much better job of sharing economic growth around. We’ve protected much of our welfare state, and kept a reasonably high minimum wage. The Australian industrial relations system is a key component of that safety net, allowing organised labour to bargain with capital to share profits with workers. The real victims of Australian inequality are those people outside the formal economy, or out of the workforce.

Looked at from this perspective, it’s hard to see what a grand compact could achieve. Getting together with a conservative government and big business to strip away protections and hold wages down will only hurt ordinary Australians, at a time when corporate profits are riding high.

Paul Howes is an up-and-comer, a man who clearly harbours strong political ambitions. But this speech is all about politics, when Howes should be concentrating on the interests of his members. They won’t be served by further concessions to industry, or sitting down at the table with a government determined to attack trade unions as a progressive social force.

Ben Eltham

Ben Eltham is New Matilda's National Affairs Correspondent.

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