Tuesday, 29 November 2011

Labor's pro-union system isn't working

I was on a panel with Jeff Lawrence, Secretary of the ACTU, last week to discuss industrial relations.

Jeff comes across as a genuine sort of bloke and we had a robust discussion. Even if we spent hours debating various points, Jeff would not be moved from his basic position on how the labour market should operate. But that is not to say that public discussion does not have an impact.

In his speech, Jeff criticised the H R Nicholls Society (HRN), which was founded in 1986. This was water off a duck's back. The Society was named after Henry Richard Nicholls, the 82-year-old and widely respected editor of the Hobart Mercury. Henry wrote an editorial critical of the President of the Commonwealth Court of Conciliation and Arbitration. He was charged with contempt of Court, found not guilty and became even more celebrated in Hobart for speaking his mind about a person in authority.

The HRN was far more influential on the Labor Party than any union or Labor official could ever acknowledge. The HRN played a key role in Paul Keating's conversion to the concept of enterprise bargaining. Keating was driven to his advocacy of enterprise bargaining by the high unemployment (it reached 11.4 per cent at the end of 1992), his awareness of the destructiveness of militant unionism and the force of the intellectual argument for a more deregulated labour market.

There were many advocates for reform including economic rationalists within the Labor government, some business groups (although not those who were committed to the IR club), some state governments, and advisers from treasury and the Reserve Bank. But the key individuals like Charles Copeman, Ray Evans, Des Moore and John Stone all gave the reform a lot of intellectual fire power and they were key players in forming the HRN.

No wonder that 25 years after its formation, a secretary of the ACTU is still complaining about the HRN. It's not because it was intent on making workers worse off as is the usual ACTU response to any reform; Jeff's real complaint is that it was so successful.

The Coalition IR policy was also influential. Its "Fightback!" policy was launched in November 1991. Keating's oft quoted speech to the Australian Institute of Company Directors was April 1993, just after the 1993 election when he attacked the Coalition's IR policy. Fightback! was, in many ways, more radical than any labour market reform proposals then or since.

When first launched on November 21, 1991, Fightback! was incredibly popular. It triggered the downfall of the then-treasurer, John Kerin (on December 9, 1991) because he was simply not up to challenging the Fightback! agenda. It finished the political career of prime minister, Bob Hawke and opened the door for Keating to become PM on December 20, 1991.

Gareth Evans once said that opposition gave him a condition now best known as "relevance deprivation syndrome", but actually Fightback! proves that an opposition worth its salt can dominate policy, remove a PM and a Treasurer and set the country on a better path simply by the strength of its policy.

So the economic turmoil post-1989, described by Keating as "the recession we had to have" was a spur to reform. The calls for reform were acknowledged by Keating whereas the calls for reform today are dismissed. Not just by Labor but, so far, by the Coalition.

To be successful, governments have to be responsive to genuine matters of concern. Some issues can't be ignored. Ignoring an issue is still making a decision, albeit by default. Keating did not ignore the obvious. If Gillard fails to address this issue it will be her biggest mistake yet.

The calls and the reasons for change are already loud. Paul Keating set the scene last Sunday when he said that the economic turmoil we may face coming from Europe is the biggest challenge he has seen in his time in politics. David Murray, chairman of the Future Fund, says that the reregulation of the labour market is repeating the mistakes of Europe.

Tony Shepherd, the head of the BCA, says that he sees "industrial relations as probably the biggest single issue facing Australia" and "The FWA has some quite serious flaws which need to be remedied" (AFR November 25, 2011).

The Productivity Commission has produced a compelling case on the retail industry to demonstrate problems that are apparent across the economy and the Reserve Bank has nominated labour market reform as a key issue.

In addition, disputes like Qantas's are demonstrating the growing militancy of key unions whilst employers are struggling with the consequences. Jeff Lawrence says that employers are to blame.

In the case of Mermaid Marine as reported last week, union members went on strike for 14 days. They gained a 27 per cent increase in pay and crane and waterside workers will be earning around $180,000 pa, including allowances and superannuation. The chairman said his company had acted in good faith, but were still burned by the strike. He said "Ultimately this [the Act] will have an impact on Australia's competitiveness as it becomes increasingly expensive to do business here" (AFR November 25, 2011). This sort of comment has also come from BHP, Rio Tinto and senior people, like Michael Chaney, amongst others.

But still the Labor Government can only respond with the usual empty comments. Minister Evans said that employer comments are just the "same rhetoric that they've done for years".

Minister Evans is under pressure from the unions to reregulate the labour market even more. He has not announced who and how the Fair Work Act is to be reviewed. It will be amazing if he does not have a good idea of the outcome of the report on the day he announces the details of the Review.

An independent review would be the more sensible approach to adopt. The prospects are that the operation of the act will be an even bigger issue next year. An independent review could serve a useful purpose in finding a way ahead and also for placating the unions if they do not like the outcome.

Some important agreements will be up for negotiation in 2012. Big employers like Woolworths, Telstra, Wesfarmers, Toll Holdings, Qantas and Virgin, OneSteel, Leighton Holdings and Origin Energy will all be sitting around the table looking to settle new agreements for the 560,000 employees covered under these existing agreements.

These negotiations may not, and should not, necessarily lead to industrial action, but the rising numbers of days lost to strikes during 2011 suggest it could be a difficult year. And the ACTU is urging unions to push for what they call job security clauses and what management sees as attempts by the unions to run their business.

The one thing that is certain is that the public can see more and more that Labor's pro-union system is not working and something needs to be done to rebalance it. Let's hope that reform makes a start in 2012.

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