Guest Report

Arch Bevis on the Illusion of Choice

By the Federal Opposition's Industrial Relations Spokesman

I'm delighted to have the opportunity to be with members of the New South Wales Industrial Relations Society for a number of reasons, but two in particular.

Firstly, as a body of the best informed IR practitioners in NSW, you meet at a time when the debate on the future direction of our nation's IR system is at the forefront of national political debate. Industrial relations have always been an important political, as well as economic and commercial issue. Throughout the years though, there has usually been agreement between the two main political parties on a core of values - reflected in a shared support for certain procedures and structures underpinning the IR system. We meet at a time when that is no longer the case.

The gulf between Labor and Liberal IR policies now goes to the very heart of not just the IR system, but the very nature of the society we want for ourselves and our children.

Secondly, most of you have the unique experience in Australian IR of practicing in two very different systems;

1. A state system based on collective representation and negotiation underpinned by a strong independent Commission; and

2. A Federal system increasingly focused on individual negotiation in which the role of an independent umpire has been eroded, and in some cases totally removed.

There is not a better group to meet with to discuss these competing ideas.

So let's have a look at the Reith/Howard changes.

'Choice'

This Government's changes are predicated on the publicly stated view that Government intervention in IR should be either removed or reduced. This has been shrouded in rhetoric about 'choice' and 'rights'. That rhetoric is both false and misleading.

The Minister has constantly demonstrated that if he doesn't approve of agreements made between unions and employers, he will happily seek to have their choice of agreement replaced by his. The Liberal government has used s. 109 of the Act to intervene in matters on a number of occasions, contrary to the expressed wishes of all parties to an agreement.

To illustrate the point lets look at a couple of examples. We saw the Minister's unwarranted intervention in the Federal Pastoral Award. This Award was simplified by consent between the NFF and AWU following 18 months of negotiation - however despite being acceptable to both sides taking into account the contemporary reality of the pastoral industry in Australia, the Minister decided that he knew better and would intervene.

One of the interesting aspects of this case is the parties involved. The NFF are not shrinking violets in the IR world. They hardly need Mr Reith's comforting hand on their shoulder to negotiate an agreement, especially in a core area of activity. And as their involvement in the Dubai/Patrick's fiasco showed, they are more than willing to go on the offensive when it suits them. Clearly though, their right to choose the best terms for a key industrial agreement come second to Peter Reith's real agenda - a matter I will return to.

In 1997 the Minister attacked the National Australia Bank for coming to an agreement with the Finance Sector Union that provided a 12.8% pay increase over three and a half years. After this uninvited and unwelcome intervention, Don Argus wrote to the Minister to advise why the bank had chosen this particular type of agreement. That the head of one of the most profitable corporations in Australia felt it necessary to "please explain" to Minister Reith casts a serious shadow over the Minister's 'choice' rhetoric and should be of concern to both unions and employers.

Only last week we witnessed his latest intervention seeking to overturn the choice made by union and employer representatives. In his home state of Victoria, the Minister is trying to have an agreement altered between unions and employers for the Federation Square project. We now know that Mr Reith wrote to his Federal colleague and fellow Victorian, Arts Minister Peter McGauran saying that if the industrial agreement were signed the Federal Government would not hand over the $50m for the cinemedia component of the project.

Again the participants are significant. I am reliably informed that officers of the Kennett government were closely involved in the progress of these particular negotiations and whilst not parties to it, were quite happy with the outcome. The Kennett government can hardly be described as babes in IR, or as some sort of pushovers much less lackeys for unions.

Little wonder Jeff Kennett responded saying,

"I don't think it is right for Mr Reith or the Federal Government to be holding a gun at Victoria's head".

This case is now set to play out in the courts with one of the affected unions, the ETU taking legal action against Mr Reith claiming a breach of Section 170NC of the Act. This section makes it an offence for a person to take any action coercing another person to change an enterprise agreement. This promises to be a very interesting case well worth watching.

Similarly, we have seen attempts for some years now by the Minister, to cajole construction industry companies into taking action against unions. This has extended to altering Commonwealth Government contracts to facilitate extended disputes without head contractors incurring the usual penalties.

Apart from the obvious ideological agenda that drives this obsession, it is difficult to see the advantage to the industry or our nation. Indeed management consultants McKinsey & Company rate the Australian construction industry as amongst the best in the world. They report:

"The industry's productivity is close to world-best practice. It stands at about 95 per cent of US levels which is comparable with France and Germany, and more than 25 per cent ahead of Sweden and Japan. ...The Australian construction industry's performance is impressive"

That's hardly a description of an industry in such desperate straits that industrial relations Armageddon is warranted. I can't resist the temptation to note that Minister Reith's latest exhortation to this sector at the Master Builders Association last week in Sydney was reported in the media as having been received in silence without "a single clap forthcoming".

The final example I will raise in this address, although I should add it is not an exhaustive list, is the vehicle industry. If promoting industrial trouble in the construction industry is difficult to explain, then doing it in the Australian automotive industry is simply stupid. Nonetheless, that is exactly what we have seen with a page one newspaper report in April of just such a plan.

I have confirmation of this absurd plan from two separate sources. Although; this was not a totally unexpected tactic given the Minister's comments in his leaked letter to the Prime minister in which he complained that wages in this industry are too high. It would seem the automotive industry's choices don't conform to Peter Reith's. Thankfully his zeal for confrontation is not shared by the industry.

It's little wonder that a report in last week Business Review Weekly described Peter Reith as,

"... possibly the most interventionist industrial relations minister in Australia's history ..."

This description followed a report that Peter Reith was unhappy with the national agreement that whitegoods manufacturer Email was seeking to establish to cover its Australian operations. In this case the company and the AMWU want to provide an agreement that covers all of Email's employees across Australia. If 'choice' in IR means anything, surely it includes the right of these parties to make a judgement whether this is the most appropriate industrial agreement in their circumstances.

At the other end of the spectrum we have seen the Hunter Valley No. 1 mine dispute drag on much longer than it should have, precisely because this government's IR laws prevented the Commission from settling it earlier.

The lesson from this is that where a dispute or agreement meets with this government's political agenda, then the actions of the participants - or at least one of the participants - will be supported. Where they don't, the parties will face intervention, cajoling or pressure to conform to a government strategy.

Clayton's Intervention -

(The intervention you have when you're not having intervention)

In his second reading speech on the 1996 bill, Peter Reith said;

'... this bill is about providing employers and employees with much greater choice about how to regulate their relationships..."

That is simply untrue. It's time this government's approach to IR was tagged for what it is. This is a government that has increased intervention in IR, not reduced it. But it has done that in a most partisan and divisive manner.

The most widely understood example of this was the Dubai/Patrick's fiasco. As noted by David Peetz Head of the School Of Industrial Relations at Griffith University;

"So closely was the Government working with Patrick that legislation establishing a levy on port users to pay for waterfront redundancies had been drafted and was able to be introduced within hours of the Patrick workers being ostensibly made redundant. The amount and nature of the material was sufficient to persuade Justice North and, on appeal, the full benches of the Federal and High courts, that there was a case to answer that Patrick, the Government and others had engaged in a conspiracy to breach the freedom of association provisions of the Workplace Relations Act. The parties settled rather than let the claim go to trial. These were not the actions of a government intent on letting the parties at enterprise level sort things out for themselves."

As that case demonstrated, the reality of government intervention goes well beyond a personal attitude of the Minister. The present IR legislation, and to an even greater extent, the announced second wave of changes, strip the Australian Industrial Relations Commission of powers that are then transferred to other people or structures. The ACCC, the Employment Advocate and the Minister himself are the great beneficiaries of this power transfer.

The real effect of the Howard/Reith model is to shift Government intervention to other places where they believe decisions will be made that better suit their ideological preference.

In his leaked letter to the Prime Minister, the Minister complained that the AIRC had granted 'generous' increases in the minimum wage. He foreshadowed his approach to such situations by proposing to set up a new tribunal selected from Treasury, the Productivity Commission and Reserve Bank. Clearly they were to set a new (and no doubt lower) minimum wage. The strategy is plain. It is not less intervention, simply a different type of intervention.

Office of Employment Advocate

One of the big winners in this power shuffle has been the Office of the Employment Advocate. I don't intend to beat around the bush. This has become the political arm of government in IR. Its role in the construction industry, its promotion of AWA's (much loved by Peter Reith and Jeff Kennett, but patronised by few others), its media campaigns and its public polling are tainted with the core political agenda of this government.

The appointment earlier this year of Peter Reith's former senior staffer, Jonathan Hamberger to head that office does nothing to dispel this image.

Last week the Minister told the Master Builders Australia Symposium;

"The government created the Office of the Employment Advocate to assist in the enforcement of aspects of the Workplace Relations Act."

Contrast that with the way it was presented to a wary public by the then Liberal Opposition. It was to be the workers advocate - a type of workers ombudsman. They even claimed the Employment Advocate would provide 'support for young people, women and people from non-English speaking backgrounds'. There's been precious little of that!

The Minister is no longer trying to hide what he expects the OEA to do.

At the last election, my predecessor, Bob McMullan undertook to abolish that office. It won't surprise you to learn that I intend to do the same thing.

Jobs and IR

The spin the government has put on its IR changes to sell them to Australian workers is that they create jobs. Now is not the time to go into an exhaustive debate on this issue. However, given the pivotal role this point plays in the government's PR pitch for change in industrial relations, it is necessary to make some comment.

The government's claims of job growth based on lower minimum wages flies in the face of international experience.

The ILO has noted;

"... the unemployment rates among least skilled workers evolve to a large extent independently of changes in their remuneration."

Within Australia, the AIRC has considered this issue in the course of recent national wage cases. They too concluded;

"... moderate increases in the wages of the low paid, of themselves, do little or nothing to diminish their job prospects. "

This has been authoritatively demonstrated by Card and Krueger in their study of fast food employment in New Jersey, where minimum wages rose 19 per cent in 1992 opposed to results in Pennsylvania where it was unchanged. There was no negative effect on jobs as a result of a substantial wage increase. In fact jobs grew in New Jersey.

More recently, US researchers Bernstein and Schmitt published the results of their analysis of the last two minimum wage increases in the US in October 1996 and September 1997. Four different tests failed to find any systematic significant job losses. Not only were the estimated employment effects generally small they were almost as likely to be positive as negative.

More recently and closer to home the Editorial of the Mercer- Melbourne Institute Quarterly Bulletin of Economic Trends published this year said;

"... further IR reform is unlikely to result in a significant reduction in unemployment."

For those interested in pursuing the matter, Dr David Peetz has an excellent article in the December 1998 Journal of Industrial Relations. That article identifies a number of other studies confirming these findings.

Regulation vs De-regulation

Whilst I think it is clear that deregulation of the labour market is more a marketing mantra than a practice for this government, there are some who advocate it as the future direction we should take. They too ignore the facts.

A Flinders University study looking at the international experience on this very question produced interesting findings. The study concluded;

"The most recent evidence suggests no statistically significant relationship between measures of macro economic performance and different types of bargaining systems (with the exception that the centralised systems produce less earnings inequality) ."

Interestingly, this research was commissioned by a major employer group not known for their support of organised labour the Australian Mines and Metals Association.

The ILO, in a paper to the G7 Employment Conference in April 1996 concluded;

"As regards the role of labour market institutions, and especially that of collective bargaining and wage setting mechanisms, it has been argued that there is a positive correlation between trade union power or trade union membership and unemployment. There is no evidence to support this hypothesis. "

In fact the evidence in the regulate/deregulate debate goes further, acknowledging the positive role unions can play.

A study conducted by Lisa Lynch of Tufts University and Sandra Black of the New York Federal Reserve, in a survey of 1,500 workplaces in the United States, found that on average unionised workplaces recorded productivity levels 16 per cent higher than the base line firm which was not unionised. The study found that the majority of unionised firms had adopted what were described as high performance management techniques.

In contrast the non unionised firms who had also adopted high performance management techniques yielded only a 10 per cent better productivity performance over the base line firm.

The message is clear. De-regulated labour markets do not produce improvements in employment or other key economic indicators. Moreover, progressive high quality management and union leadership working together in a collective environment produces the best outcomes.

New Zealand - Our Future

The government and some of their more vocal supporters cite New Zealand as proof of the success of their policies and an example we should emulate.

You don't have to look too closely at New Zealand to know how wrong they are. New Zealand's record in a number of key areas is less than impressive. A comparison of the critical measure GDP per head reveals the real situation in New Zealand.

At 1990 prices and exchange rates in $US the New Zealand rate increased from $12,869 in 1985 to just $13,835 by 1996. That's an improvement of slightly less than $US 1,000 in more than a decade.

In comparison, the Australian figures are $15,991 in 1985 and $19,351 in 1996. That is an improvement of more than $US 3,300 over the same period - a period in which the Hawke and Keating Labor governments set economic, social and IR policies.

The New Zealand performance would look even worse, was it not for the substantial net negative migration. Between 1984/85 and 1995/96, there was a net migration of negative 25,019 people. If the 150,000 Kiwis who came to Australia in those years were still in New Zealand, the GDP per head figures would be even less flattering.

In spite of what some on the right of the Australian debate may say, the Kiwis have voted with their feet.

The society our IR system is building

It is not possible to conduct an IR debate in splendid isolation from other policy matters, nor to link it simplistically with employment and ignore other considerations.

We need to take stock of the social impacts of our IR policies. As flexible hours and increased travel become common and almost mandatory, what assessment is made of the effect this has on family, on children's education, on voluntary group work - in short on those things that make us a community rather than an economy. More often than not, these factors are not even considered, either;

- by workers worried about future job cuts or competing for a job or promotion, or

- by employers trying to improve this years bottom line or

- by unions focused on the latest round of bargaining or wave of legislative change or

- by a government pursuing its ideological and narrow plans

We all have to stand back and have a good look at the consequences of current IR policies. In the short time left I will canvass just a few.

In a revealing survey conducted for the Australian Industry Group (AIG) by Rod Cameron's ANOP, we see an Australia where the concept of mateship has been replaced by the competitive drive for survival or greater wealth. It seems that not even the Prime Minister's preamble can save mateship.

Rod Cameron noted;

"Employees have never competed so ruthlessly against each other for jobs and money ... Loyalty between employer and employee is being eroded across the board and many young Australians don't experience it."

This has serious immediate implications for managers and unions. It has very significant medium term implications for our nation.

The focus on individuals rather than groups, the insecurity from wave after wave of downsizing and restructure and an IR system that tries to isolate workers from their fellow workers and union has produced a workforce that no longer feels loyalty to their work mate or their boss.

Company esprit de corps has not survived the onslaught. And make no mistake; the recent trends in IR have contributed significantly to its death.

A Fair Go for Who

Rod Cameron's research also revealed disquiet amongst Australian workers, many of whom do not feel they are getting a fair go. Comments regularly made by participants in his research such as;

- 'So the economy is meant to be in good shape. Okay. But I'm still struggling' and

- So unemployment is meant to be falling. Okay. But my job isn't safe and job security is a thing of the past'

Cameron concluded;

"Many Australians feel that they are still struggling and that they have received little recognition or reward for their contribution to a more productive and competitive Australia."

And why should they when they see on the news Australian businessmen listed in Forbes Global magazine with pay packets of $US2.59m for Coles Myer boss Dennis Eck. Or $US2.5m for BHP boss Paul Anderson, or $US 1.8m for Don Argus ... and the list goes on. When the BCA proposes wage freezes or restraint, or when ACCI argues that there should have been no increase in the minimum wage at all this year, it is little wonder workers hold the views identified in the ANOP/AIG survey.

To rub salt into their wound, they also know that the tax burden falls unfairly on them. Without wanting to provoke a full-blown GST debate, it should be recognised that they see the GST as just another unfair burden on them.

There is an Alternative

At the next Federal election, the people of Australia will be presented with dramatically different IR policies.

A Liberal/National party proposal based increasingly on individual negotiations, AWAs, a nobbled Commission and a further shift of power to bodies that do not enjoy public trust.

The Labor alternative will be based on the independence and expanded authority of the industrial relations umpire. It will recognise that one size doesn't fit all - that unions and employers should be able to establish workplace, enterprise, or industry agreements where that meets their needs.

It will be instilled with my strong belief that IR works best for those involved and our nation when we work together. To do that we have to improve the knowledge and understanding that key participants have of their own constituency, their enterprise, their industry, wider national issues, and the concerns of other parties in their sector.

The divisive and confrontationist style of this government has taken us in precisely the wrong direction.

The living proof of that difference is here in New South Wales.

At the next election, Australians will have the choice of their wages and working conditions being determined in a Federal system like New South Wales, Queensland or Tasmania on the one hand or to follow Peter Reith and his second wave down the West Australian path.

Those in the IR community should hold on to their hats - it's going to be one hell of a ride.

This speech was delivered to the NSW Industrial Relations Society on Friday

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  Issue 15 contents

»	Labor Council Unveils New Public Face
»	Revealed: New, Meaner Breed of Body Hire
»	Unions Wins Own Safety Prosecution
»	Timor Protest Calls for UN Troops
»	Pay Equity Jitters as Report Gathers Dust
»	Paid Maternity Leave: One Step Forward - One Step Back
»	Court Victory for PNG Workers
»	First For Union With Multicultural Arts Grant
»	Cleaners Clean Up In Backpay Bonanza
»	Unions Join Sorry Ceremony

»	Guest Report
»	Sport
»	Trades Hall
»	Piers Watch

»	Concern at Timor Attitudes

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