Posted by: euzoia | March 28, 2009

ACTU and IR’s reform

Unions may yet rue Rudd’s IR reforms | The Australian

THE Rudd Government’s Fair Work Australia Bill represents payment for services rendered by the ACTU as part of the bargain to oust John Howard. But unintended consequences could undermine the longevity of both partners.

The high-profile nature of the Work Choices campaign run by the ACTU before the 2007 election means Rudd has no alternative but to address its key concerns.

The danger for Rudd is that he may well have to face the economic and political consequences of a policy that goes further than necessary to eliminate the ideological components of Work Choices.

The public rejected Work Choices because it was perceived to be unfair. The unfair dismissal provisions and the dramatic reduction of award protections clearly caused anxiety among the workforce. The Coalition’s hastily organised retreat on the no-disadvantage test was too late to stop the return of so-called Howard battlers to Labor. Howard had betrayed their trust and they sought and achieved retribution.

While employers are right to be concerned about the new unfair-dismissal provisions, if they contain a workable 12-month probation period they should provide plenty of scope for small businesses to operate successfully. The real sticking point will be on the issue of operational reasons for unfair dismissal.

As the Pacific Brands outsourcing demonstrates, this could be used to frustrate productivity improvements.

You could argue that it’s unfair for workers to be dismissed because a firm chooses to outsource its production overseas but it’s another thing to claim the dismissals themselves, as a matter of business strategy, are unfair. The Government needs to clarify this quickly.

The irony is this could see firms choosing to expand production overseas to avoid rigid unfair dismissal processes that hamper responsiveness to competitive pressures.

The extensive union right of entry provisions are a potential problem for employers but it is hard to argue against protection for workers who choose to belong to a union. Equally, it’s hard to justify unfettered right of entry for unions to workplaces where they have no members.

Enforcement of statutory entitlements is the responsibility of government. This government legislation sets the standards it should to provide neutral enforcement.

The real problem with the legislation is its model of collective bargaining. This model is more than a restoration of the pre-Work Choices or even pre-Workplace Relations Act arrangements. It goes much further.

Even the ACTU acknowledged this was unprecedented in its Your Rights at Work Campaign update for summer 2008-09, when it said: “The new collective bargaining laws introduced by the federal Government will, when they are passed by the parliament, represent one of the most momentous overhauls of industrial relations in this country for 100 years.”

The introduction of compulsory “good faith” bargaining with a new arbitral body, Fair Work Australia, means that an effective broad re-regulation of the labour market is likely. This overturns not only Work Choices but also important reforms made in labour market regulation under the the Hawke and Keating Labor governments.

Good faith is extremely difficult to establish in practice and will result in less pressure for enterprise agreements and more arbitrated outcomes. Industrial arbitration, by its nature, tries to please everybody and quite often, as a result, pleases nobody. In an environment where business certainty is critical, workplace productivity could suffer. The old system of arbitration was buttressed by protectionist tariffs.

The claim by the ACTU and the Government that this model will deliver higher productivity is mere window-dressing. Industrial arbiters are not skilled to arbitrate on productivity and business strategy. The only way this could possibly work is if an independent body, such as the Productivity Commission, were resourced to provide advice on the productivity impacts of decisions made by Fair Work Australia. The unions inevitably would resist this.

Fair Work Australia cannot be allowed to replace enterprise management in developing business strategy. This would be an unmitigated economic disaster.

The Government faces challenges in being seen to deliver its part of the bargain with the ACTU while avoiding an array of productivity reducing rigidities that undermine economic performance. It is the Government, not the ACTU, that will be held responsible. The Australian public wanted fairness reintroduced into the labour market, not greater business and job uncertainty.

The ACTU also faces the prospect of a Pyrrhic victory in the medium run. The campaign it ran against the Howard government’s Work Choices provided it with a much needed sense of purpose and a convenient explanation for its declining membership.

When the Australian Bureau of Statistics released data last April showing trade union membership had fallen by 5 per cent, or 89,000 people, in the year to August 2007, ACTU president Sharan Burrow, claimed it showed “unions have successfully survived Work Choices”.

Burrow may really believe this but, more likely, it was convenient spin. The data in fact shows that the net decline in actual union membership between 1996, the year Howard was elected, and 2007, the year he was defeated (11 years) was 414,000. In the six years from 1990 until 1996 under Bob Hawke and Paul Keating the decline was 465,000. In other words, there was a greater absolute decline in membership under Labor’s pre-Work Choices legislation.

While industrial legislation and employer attitudes may play some part in declining union membership, it is not the main part. Structural change in the economy is clearly the overriding factor.

Alarmingly for unions, they have not captured the hearts and minds of young people and continue to be over-represented in the public sector and declining industries. By making the basic system fairer and removing the Work Choices ogre, unions may have removed any reason for workers to become members.

The passing of the Fair Work Australia Bill may reduce the incentive for workers to join unions and restrict employer flexibility and national economic competitiveness at a crucial time.


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