The Howard government's industrial relations agenda
Warwick McDonald
From the amount of front page publicity generated since the October 2004 election, you would think that the most pressing problem facing Australia is industrial relations 'reform'. As Professor Julius Sumner Miller used to ask, 'Why is this so?'
The conservative definition of IR 'reform' has never been adequately challenged by the labour movement. The workplace should indeed be continuously subject to analysis and reform. But this federal government has cut back on any vigorous study of the workplace since its election nine years ago.
The 1970s and especially the 1980s saw increased questioning of the old IR structures, with teams of employers, union officials and government representatives looking at IR systems here and internationally. It became common ground that productivity at work would be improved by better selection, training and motivation of staff, and by flatter hierarchical structures being introduced to encourage more decision-making by workers themselves. Greater emphasis was to be given to developing customer-consciousness among employees and empowering them to offer more suggestions and make more critical decisions. Workplace teams were encouraged with varying levels of self-management. The more sophisticated larger businesses with specialist Human Resources and Training and Development staff embraced these ideas and became what could be called 'islands of Best Practice'.
The first and only studies of the Australian workplace in the twentieth century took place in 1990 and 1995. Known as the Australian Workplace Industrial Relations Surveys (AWIRS), the first surveyed about 2000 Australian workplaces with five or more employees and involved about 4500 interviews. The second Survey covered interviews with general managers and employee relations managers at about 2700 workplaces with more than twenty employees. 1500 union delegates and the impressive figure of 19000 employees from these workplaces were also surveyed. Salient findings from the 1990 Survey included 42 per cent of managers indicating they felt no IR constraints in carrying out their role and that awards, and union delegates amounted to only 14 per cent of their total constraints. Many more managers (56 per cent) said they felt constrained by other management and various other issues. 1 In 1995 only 27 per cent of managers answered that they felt awards/agreements, unfair dismissal laws and employee/union delegate resistance impeded efficiency changes, whilst a total of 65 per cent listed financial/economic, head office management or lack of autonomy as constraining efficiency changes.2
In 1996 a group of five leading US academics published an assessment of good work practices. Titled "What Works at Work" they concluded that innovative HR practices could improve productivity through enhanced worker participation and flexible work design, that participatory work practices have positive effects, that while most US businesses had adopted some innovative practices, only a small percentage had adopted a full system of related improvements, and that the diffusion of workplace innovation is limited, especially among older firms.3
In 2001 the Business Council of Australia supported a study to identify what makes an 'excellent' Australian workplace.4 The study sought to examine leading workplaces which were exemplars of productivity growth and to crystallise what made them 'excellent'. Sixteen separate workplaces from 10 companies were identified with the assistance of the BCA. Fifteen key drivers of excellence were identified: quality of the working relationships; workplace leadership; being able to have a say; clear values; being safe; good built environment; recruitment; reasonable pay and conditions; effective feedback; autonomy and uniqueness; ownership and identity; learning; passion; fun; and community connections. Significantly, three qualities were found as being points of indifference in achieving excellence, in other words, qualities that did not really matter in creating an excellent workplace. They were: working arrangements and representation; characteristics of the business (greenfield/brownfield) and workforce composition. The first of these is extraordinary in that the study clearly showed that having strong unions and even historical industrial conflict did not prevent such workplaces from being excellent. The excellent workplaces had a mixture of collective and individual work contracts. Some followed award provisions whilst others extensively negotiated for enterprise agreements. Unfortunately the BCA has not since publicised the findings of this study and it doesn't even appear on its web-site.
Since its election in 1996 the Howard government has conducted no serious study of the modern workplace. But it vigorously advances a program of IR change based on its own prejudices. In 2005 the government's control of the Senate has emboldened its most hairy-chested members to plan for a federal takeover of IR laws via what is referred to as the 'corporations power' - the Commonwealth's Constitutional right to make laws pertaining to corporations. This power was famously used by the Hawke government in the 1980s to over-ride the more conservative states in the area of protective environmental laws. As most employers have an incorporated structure, it is estimated that this may mean that 85 per cent plus of employers could thus be covered by a single new federal system of industrial regulation. The remaining small minority would include non-incorporated bodies and micro-businesses with few, if any, employees.
This national consolidation of the Australian industrial relations regime would be a revolutionary step, even if there were no plans to change working relationships prevailing now. But it is clear that the proposed revolution extends much further, with legislation being drawn up to achieve everything the Liberal-National Coalition has been frustrated in achieving in the past nine years. Additionally, a whole raft of new proposals are being considered which, if introduced, would radically alter the balance of power at work in Australia and could achieve a laissez faire employment system more akin to a developing country or the southern states of the USA. Why is this so?
Chicago-school economists and their media proponents have been calling for what they call industrial relations 'reform' for over twenty years. They have probably not bothered to read the findings of the AWIRS Surveys or other in-depth studies such as the BCA-sponsored study of excellent workplaces. They instead fervently believe that the market for labour is similar to any other market and would everywhere work best with little or no regulation. Thus we have witnessed action to achieve 'deregulation' and 'flexibility' in the labour market. Industry-standard awards have been stripped back and localised agreements - with the emphasis on individualism - have gained ground. The dramatic feminisation of the workforce accompanying these moves has led to more than a third of the workforce now working either as part-timers or casuals or both. Reserve Bank statistics show that as a result of these trends workers' share of GDP has declined from 66 per cent in 1974 to 54 per cent in 2004.5 Within one generation the old award system based on a 'basic' or minimum wage together with additional pay for skill and/or experience has declined from being the prime determinant of Australian living standards to now playing only a peripheral role. Wages are now more dispersed, employment security has been reduced, hours are longer and extend over a wider range, and the protection provided by unions has been greatly diminished with their rapid decline.
With these major changes achieved, why then does the government continue to put IR 'reform' at the top of its agenda? I think it's because of the origins of most twenty first century Tories. First and foremost is Howard - son of a petrol-station operator from Earlwood, suburban lawyer and endorsing top-down authority all his life. His 1950s values are mocked by his opponents, but they easily explain his obsession with reducing employee rights. Many of the type of small business people he represents believe that good management is being able to boss around a compliant workforce. They never develop into big-business people. They are forever complaining about having to pay (any) taxes and see little or no role for government regulation of their activities. They want to deal one-on-one with their employees - knowing such a discourse can never be equal. What they detest most bitterly is having to deal with employees collectively because the arrival of a union on the scene tends to even up the discussion. Howard has always hated unions because of his background. Costello may act with a little more sophistication. But as another small-time lawyer he joined the HR Nichols Society and enthusiastically took part in union-busting activities in the 1980s. Many of the government's other leading lights are from similar stock - ex-small business people with limited horizons or upwardly mobile lawyers. Certainly the ranks of their back-bench are dominated by such small-time thinking. They have appointed as their advisors and senior bureaucrats people of a similar ilk - intelligent ideologues who believe that reducing employee bargaining powers will somehow improve productivity by reducing wages and working conditions.
This is the sort of 'reform' that lies before the Australian workforce in the next few years if the Commonwealth succeeds in grabbing the IR powers of the states. Vital objectives include: the right to hire and fire at will and fairly or unfairly dismiss staff, effectively preventing union representatives from meeting workers on-site and other limitations on the right to organise, removing all but a few conditions from the provisions of awards and agreements, and having monetarist economists determine minimum wage levels. The Australian industrial landscape will be determined by the narrow thinking of government members advised by ideologues of the right.
On the matter of eliminating workers' rights to take action about being unfairly dismissed, one would imagine from the number of times this 'problem' is identified that it is a major issue. In fact the government spuriously continues to claim that doing away with this impedance to small business would "create 70,000 new jobs". In the NSW Industrial Commission only about 4000 such applications are made each year. Eighty per cent are finalised before conciliation, 10 per cent at conciliation and only 10 per cent after conciliation.6 Considering there are hundreds of thousands of NSW employers and more than two million workers covered by the NSW system, the NSW experience with unfair dismissal actions doesn't seem excessively onerous.
Not only will unions have been reduced to an insignificant and severely limited rump, the basic protections provided by the present State-based compliance measures will be wiped out. For example, the NSW Office of Industrial Relations reports that it completed over 7800 investigations of suspected state award breaches affecting over 49000 employees between July and December 2004. The Office conducts educational campaigns in the industries and regions historically identified as having high levels of non-compliance. These include the (smaller scale) retail trade; accommodation, cafes and restaurants; property and business services; agriculture; and the health and community services sector. Significantly, these are sectors that are labour intensive, with most having higher than average percentages of female workers. By concentrating on these areas the Office - even with limited resources - is able to educate many smaller business about their legal responsibilities and recover lost wages for many disadvantaged workers. The Commonwealth's efforts in checking on employer compliance with the federal IR law is miniscule by comparison. Only a tiny number of employers are prosecuted across the whole of Australia. The transfer of State powers to the Commonwealth is highly likely to see the closure of even the limited compliance activities in these lower paid State-regulated sectors.
The prospective workplace in five years could more readily resemble TV's "Survivor" program, with individual workers pitted against each other for jobs, little security and downward pressure on minimum wages and conditions. It sounds scary, but there is little doubt this is the direction the government is determined to take us.
Warwick McDonald is a member of the board of the Evatt Foundation. He is a former Director General of the NSW Department of Industrial Relations, Acting General Manager of the NSW WorkCover Authority and Chair of the Dust Diseases Board. He was President of the Industrial Relations Society of NSW between 2001 and 2003. He is also a member of the Advisory Board of ACIRRT at the University of Sydney and the Committee of Management of the APHEDA Cuba Children's Fund. The illustration is by Ward O'Neill from the Australian Financial Review, and is reproduced with kind permission.
1. Callus R, Morehead A, Cully M, Buchanan J, Industrial Relations at Work, The Australian Industrial Relations Survey, AGPS Canberra, 1991, Table 4.10 'Major constraints with respect to Industrial Relations' p. 98.
2. Morehead A, Steele M, Alexander M, Stephen K, Duffin L, Changes at Work - The 1995 Australian Industrial Relations Survey, Longman, Melbourne, 1997, Table 13.12 'Reasons why efficiency change could not be made, small business and larger workplaces, 1995' p. 313.
3. Ichniowski C, Kochan TA, Levine D, Olsen C, Strauss G, What Works at Work; Overview and Assessment, Industrial Relations, Vol 35 Number 3, July 1996, pp 299-333.
4. Hull D, Read V, Simply the Best Workplaces in Australia, Australian Centre for Industrial Relations Research and Training (ACIRRT) Working Paper 88, December 2003.
5. Reserve Bank, Non-farm wages percentage share of non-farm Gross Domestic Product March quarter, quoted in Megalogenis G, Hiding Behind Skirts, The Weekend Australian, 12/13 Feb 2005.
6. Industrial Relations Commission of NSW, Annual Report - Year ended 31 December 2003, Table A, Matters lodged and disposed since 1999 p. 12.
Also on the Evatt site:
· One hundred years of arbitration: A novel institution, by Stuart Macintyre
· Priority issues, by Doug Cameron
· Isolating workers, by Sharan Burrow
Comments