Workplace better off without Fair Work

The Australian Financial Review

As former vice-president of the ACTU, Anna Booth says, Australia’s industrial relations system is outdated and adversarial, and aims to institutionalise conflicts between workers and their bosses, rather than build productive workplaces.

When a former stalwart of the union movement describes our industrial relations system in such scathing terms, the Labor government and the union movement should pay attention.

In The Australian Financial Review’s Workplace of the Future series starting today, we look at why the industrial relations system must change if our enterprises and workplaces are to be competitive.

We need a more modern, simpler system which emphasises flexibility, where workers can strike individual bargains with their employers over wages, working hours and other conditions.

The current industrial relations system is a historical remnant of compulsory wage arbitration, a policy which was formulated in an era when labour and capital were at loggerheads, the same period in which the “White Australia” policy, and industry protection were dominant. But 108 years later we are no longer in the Industrial Age where the masses of downtrodden, unskilled workers must band together to prevent exploitation by big capital.

The overarching philosophy of the current Fair Work Act and even its conservative predecessor, Work Choices, are built on the outdated edifice of the need for labour monopolies and collective action to match the bargaining power of big business.

Prime Minister Julia Gillard speaks of the New Economy, but in today’s economy there is a labour shortage. And to the extent that we have unemployment, it is largely due to labour market rigidities and inadequate education and skills training.

For the most part, workers are educated and have trade, technical and professional skills that are in demand. Thanks to the mining boom, skilled blue collar workers are in many cases earning more than ever, and the opportunities for other skilled and professional workers in the services sector are relatively robust.

People are happy to work as contractors or consultants, and are moving from job to job more easily. Workers have power which is based more on their skills and knowhow than on their ability to organise and collectively withdraw their labour.

Employers and employees alike want flexibility. The strong Australian dollar may have made consumers wealthier, but it has also made Australia a high-cost producer, which means that many businesses need more flexibility to employ their workforce in new ways to drive innovation and productivity.

However, given their diminishing relevance, with less than 20 per cent of the workforce unionised, it is in the interests of unions to continue to preserve the 19th century adversarial workplace culture and to insert themselves as intermediaries into the relationships between employers and employees.

Unfortunately former prime minister John Howard poisoned the workplace relations debate when he brought in Work Choices and removed the “no disadvantage test” for workers who were to be offered individual contracts. But Labor’s “modernised” award system and Fair Work Act give unions more power to intervene in management decision-making by widening the range of issues they can bargain over. Layered upon this archaic structure is the absurd ban on individual contracts, which were a successful feature of the Work Choices regime, and which were gaining ground.

Prominent business leaders, including BHP Billiton’s Marius Kloppers and Toyota Australia’s Max Yasuda, have pointed out that the Fair Work Act makes it harder to reach deals and change the work culture, jeopardising investment, while Business Council of Australia president Tony Shepherd says this is the biggest policy problem facing Australian business.

Our political leaders should push for an industrial relations system that enhances the economy’s competitiveness, by allowing workers and employers to reach mutually beneficial deals. Unfortunately the Labor government is still a captive of the union movement, which in turn is entrenched in the industrial relations structure. It claims that management is to blame for the lack of cultural change in the workforce. And yes, we do need better management, but the system renders cultural change out of bounds.

Some of Australia’s best companies are getting around these hurdles to build productive workplaces. But one of the most successful companies, high tech ear implant maker Cochlear, has hit an industrial relations brick wall and is still caught in a protracted dispute with the Australian Manufacturing Workers Union over using individual common law contracts which would give it more flexibility to deal with competition and the high dollar.

Business in all sectors must be allowed to better respond to the needs of customers and use their workforces as a competitive tool. Australia has to create a new culture of competitiveness and collaboration between workers and employers, but it needs a simple, more modern industrial relations system which is not based on a century-old view of Australian society and its economy

The Australian Financial Review