Will the heat and smoke engendered by WorkChoices – the Howard government’s root and branch changes to Australian industrial relations law – soon dissipate? Will the issue fail to trouble the political heat sensors come the next federal election, now that the legislation has passed the Senate?
Howard is counting on it. Hardheads at the highest levels of the federal opposition believe the issue will fade.
Running its own race, the ACTU has embarked on a marathon strategy to keep the issue square in front of public opinion through to the next federal poll. If the heat and smoke is emanating from thousands of small personal fires – some smouldering, some blazing – in working families across the land, the issue will be potent still.
Today, Australia’s award system is clinically dead. If the new laws survive the pending High Court challenges, and especially if remedial change does not follow the next federal election, the century old and uniquely Australian way of fixing a labour market floor is finished.
Thanks to Scratch
If the new laws stick, Howard writes himself into Australian history as the man who put the award system to the sword. He becomes the Prime Minister who did what Stanley Melbourne Bruce could not, who junked national collectivism and remade the nation on the ancient anvil of freedom of contract. Arbitration and the award system – which Howard sees as the nursery of the union movement and his political opponents – will be an historical relic.
The pain of this will be borne hardest by low paid workers – among them our daughters and sons, our nieces and nephews – for decades to come. The heightened insecurity will ripple up through families in the middle reaches of the wages distribution.
The ostensible justification for these changes is national economic performance, the need for continued productivity growth.
But – provided they are set at reasonable levels – a country’s economic prosperity and progress is not determined by its labour market minimums. Australia’s award system did not inhibit the electrification of the nation early in the twentieth century nor slow its adoption of the digital revolution at its close. Nor is the modern Australian economy the product of this antipodean experiment with wage arbitration. Our social fabric owes much to it, but not our economic structure.
The advance of scientific knowledge and technological change combine with a nation’s natural resource endowment to drive economic progress, not effective labour market floors. A nation’s social endowment matters greatly for growth and progress – skills, mores, institutions. These can be created and destroyed.
Australia’s highest ever productivity growth was recorded during the great global boom for 25 years after World War II – when our arbitration system was at its most regulatory and intrusive.
Some instability in the award system did emerge in the 1970s (when Howard cut his political teeth and first was elected to parliament) but comprehensive overhaul of awards from the mid-1980s put an end to it. In a program of profound regulatory reform, ‘award restructuring’ delivered nationally consistent wage minimums across job classifications, eliminated narrow job definitions that encouraged petty demarcation wrangles, and championed skills acquisition as the sure route to rising real earnings throughout working life. The resultant award safety net supported rapid growth of enterprise bargaining.
All this is as well documented as it is poorly appreciated and little remarked upon by the nation’s commentariat.
Along with non-discriminatory immigration and the fall of the tariff wall, award restructuring has underpinned the past fifteen years of sustained economic growth, with low inflation. Australia’s employment growth has topped the world league tables and our recorded productivity growth has bettered most – including the USA. The award system has been no fetter on economic performance.
Australians work longer hours each year than the citizens of every other nation in the developed world, and we also have the second highest share of part-time work in total employment. Australia’s overall jobs rate – the share of the working age population in employment – is respectable on any international comparison – above most of Western Europe, slightly below the deregulatory USA, which in turn is well short of the highly regulatory Scandinavians. Here too, the award system has been no fetter on adaptation, innovation, or work ethic.
Relative to community standards, Australia has the highest minimum wages in the developed world. We did not need the ‘five economists’ plan and its 4-year freeze on minimum wages, to return a 5% unemployment rate within a decade.
Thirty-five years ago and through the award system, Australia led the world in ending pay discrimination against women, at no discernible cost to their employment.
There is no credible evidence that Australia’s high minimum wage levels impede the growth of jobs. The evidence has been dissected in successive national wage cases over the past decade. (See ‘Safety Net Reviews’ at www.airc.gov.au.) And like the dogs that didn’t bark, the proponents of economic rationalism have been deafeningly silent in support of the government’s proposals.
The fact is that the government’s changes are not deregulatory, but are highly restrictive and prescriptive. They specify in exhaustive detail what can and can not be included in bargaining; apply heavy sanctions for breaches; shift bargaining power decisively from workers to employers; and substitute a closed minimum wage fixing mechanism for an open one.
Effective labour market minimums do promote productivity growth on the labour demand side, ensuring that inefficient firms do not survive and tie up scarce resources on a strategy of undercutting labour costs. And they assist on the supply side too, in ‘making work pay’ – ensuring that the return from work is a better prospect than perpetual reliance on social security.
But their main function is in protecting the living standards of low paid workers – those with elementary work and life skills, little industrial muscle, whose ‘voice’ goes little reported and virtually unheard in our public debate. This group is comprised of child care workers, cleaners, security guards, shop assistants, factory hands, intermittent agricultural workers, drivers, store-workers, hospitality workers, office assistants. And these jobs are performed by: many women; many naive teenagers entering the world of work; many employed by small business; older workers for whom a job has never proven to be a step on the ladder of opportunity but just another round on the perennial hurdy-gurdy of life. Few amongst them are union members.
Full-time minimum wage workers earn between $25,000 and $40,000 a year, or $500 to $800 gross per week . These are the workers who have missed out on income tax cuts under the Howard government. Straight indexation of the tax thresholds since 1996 would deliver a greater tax cut to these low paid full-time workers than the government has delivered to them since coming to office. They are paying more tax on their income because of inflation, as well as paying GST whenever they spend.
These are the workers who have benefited from the annual rises in minimum wages won over the past decade by the ACTU, in the face of stiff opposition from the Howard government. These wage rises were won under the Australian Industrial Relations Commission (AIRC) after it had regard to the submissions of? all parties, unions, employers, governments, community groups. The crucial difference between the AIRC and the body that replaces it in fixing minimum wages – the ‘Australian Fair Pay Commission’ [AFPC] – is that the AIRC was required by statute to set fair minimum wages having regard to the needs of the low paid.? It was required to gauge fairness in the context of generally prevailing Australian living standards, and without causing adverse economic consequences.? The AFPC – despite its name – is simply required to set minimum wages in the interests of economic prosperity.? The new statute does not require that these minimum wages be fair; nor does it direct the AFPC to consider the needs of low paid workers.
It is a mark of a fair society that it keeps its weakest members in touch with the pack. Howard’s package gives effect to the John Hewson dictum that the weak will pull us down to their level if we reach out to them with a helping hand (Hansard, 20 August 1992, page 396). WorkChoices cuts them loose. The only additional flexibility it delivers is downwards – reductions in wages and working conditions below existing minimums. Every other form of flexibility exists at present.
For small business proprietors especially, the allure is a promise of higher profits at the expense of wages paid to their employees. Howard is banking on more votes from the former, and no less from the latter.
The most astute and cunning conservative politician of his generation, Howard’s attempted finesse looks to dud low paid workers and have their pain go unheard, unremarked. It might deliver more affordable, menial domestic help to high income earners; cruel the nursery of Labor politicians; and write him an epigraph for the history books.
The high-risk downside is rising social polarity and further attrition of our social cohesion. WorkChoices weaves a US style social fabric for our children and grandchildren, where those who have are ipso facto deserving of it, and only the indolent want.