When Billy Met Sally

When Billy Met Sally

This article by John Lloyd first appeared in the April 2019 edition of the IPA Review.

ACTU Secretary Sally McManus told the ALP National Conference on 18 December 2018 that the trade union movement “was the early warning system for this nation”. She went on: “We are sounding the alarm now. We see the unfairness; we see the fair go being crushed with growing inequality. It is time to listen and to act. And Australian Labor, Bill Shorten, is doing just that.”

Speeches to a packed hall of comrades are always laced with hyperbole. So it is important to probe what this may mean for Australia if a Shorten ALP Government comes to power this year.

First, let us hope that for the sake of the trade union movement the early warning system works better than in the past.

The ALP and union agenda has more in common with the 1920s than the 2020s. The 1920s saw brutal industrial disputation as union influence grew. Bitter and in many cases protracted strikes were invoked by seamen, waterfront workers, miners and police.

Such entrenched disputation constrained the capacity of the Australian economy to cope with the Depression.

The public justification of much of the ALP and ACTU policy agenda in 2020 emanates from a scare campaign around the dubious notion of insecure employment. An important and underlying rationale for the agenda is to increase the power and influence of trade union leaders at a time when their membership is extremely diminished.

The concern with their plans is more than the hurly-burly of political and industrial power plays. The real concern is the harm ACTU and ALP policies would do to our labour force and economy.

In 1984 there were three million trade union members. Today, there are 1.5 million trade union members. During that time the Australian labour force has almost doubled from 6.5 million to 12.6 million workers.

It appears that at least once every year the ACTU launches a well-targeted membership drive. And every year trade union membership density continues to fall. This pattern of repetitive failure would alarm a more robust organisation.

It is clear the ALP and the ACTU need each other more than ever, as both are suffering membership declines. Trust in our political leaders has been declining and most Australians do not embrace or respect trade union leaders, and do not give their positions and agitation much weight as they go about their daily lives.

Trade union numbers are higher in the public sector, with 38 per cent of staff belonging to a union. The state public sectors are the bedrock of the modern union movement. The large workforces in teaching, health, police and emergency services have been convinced it is in their interests to belong to a union. In one sense, this is curious because state governments are among the most benevolent employers in the country in terms of conditions of employment, but organised unions’ leverage over political processes—particularly when the ALP is in government—means the benefits of collective action can be rewarding, even if the burden ultimately falls on the taxpayer.

The private sector, on the other hand, does not operate as unions would like. Trade union membership in the private sector has fallen to an astounding nine per cent of workers. The more dynamic private sector, because of financial and competitive pressures, is willing to embrace innovative workplace strategies such as employing casuals, part-timers, independent contractors, and staff from labour hire firms.

The problem for the ACTU is that these innovative work methods attract people who are not inclined to join trade unions. They simply operate too far away from the old notions grounded in the nine-to-five Monday-to-Friday precepts.

The ACTU and ALP response is to move these innovative work forms into the traditionally regulated labour market. They must not be allowed to exist and grow beyond the influence of union leaders and industrial tribunals. Both bear the hallmark philosophy of the regulated labour market: we know what is best for you. Union plans to shift the new workers to the traditional labour market is justified under the deceptive banners of insecure work, wage theft and inequality.

The unstated objective is to make it easier for the unions to influence and organise the innovation workers. They will be bombarded with the message that only the union leaders can protect them from exploitation by rapacious employers, job insecurity and low remuneration. The unions and ALP hope the final outcome will be a halt in the fall in union membership. Membership might even grow with a boost to union and therefore ALP finances as we move towards the fantasy of a workers’ nirvana.

Well, the bad news for the ACTU and the ALP is that Australian workers can see through the selfish self-interest of union leaders. Employers and innovative workers will continue to find ways to work around the restrictions inherent in the old labour market. If they fail in this endeavour, then Australia will be at a serious disadvantage in the future.

The big challenge is that there is no consensus about the changes needed for workplace relations to meet the contemporary and future environments. The unions and the ALP want to increase union influence, extend the right to strike, expand arbitration, and severely regulate new forms of work. The employers and the Coalition favour less regulation, better direct engagement with employees, and embracing new ways of work with minimal regulatory impediments.

Australians expect the ALP and the Coalition to introduce policies that favour their constituencies, but clearly the ALP has in recent years been more aggressive in this contest. It makes no apologies in going hard at re-regulation of the labour market in favour of the unions.

In contrast, the Coalition has – with some exceptions – been extremely cautious following the electoral backlash against the WorkChoices approach of the Howard years. The return of the ABCC and the creation of the Registered Organisations Commission were welcome. But generally its workplace relations policies are cautious and its opposition to union and ALP strategies timid. In coming years it will rue the wasted opportunities of the past few years, and will have no alternative but to develop a new and more coherent approach to reform. The legacy of its inaction will be a system that has major flaws and contributes to Australia’s reduced international competitiveness and lack of productivity growth.

Our federal system has three levels setting pay and conditions entitlements: national employment standards, modern awards and enterprise agreements. The principal legislation, the Fair Work Act 2009, contains 1,037 sections. The Act is so complex and detailed that even large employers such as Coles have been found in breach of its provisions.

If Coles—with numerous experts and lawyers—is unable to comply with the Act, what chance do our small employers have?

Against that background, the agenda outlined by the ACTU and the ALP certainly offers a disturbing prospect for what we would see from a Shorten Government.

Some key elements are clear:

  • The right to strike and impose bans (refusing to do certain work tasks) will be expanded
  • Access to arbitration by Fair Work Commission will be expanded
  • New regulations will seek to limit or eliminate use of labour hire, casuals and contractors
  • Companies not satisfying union-dictated standards of behaviour will be precluded from government work
  • Penalty rates will be restored in hospitality and retail industries
  • The ABCC will be abolished, removing the only real constraint on union bastardry in the building industry
  • The Registered Organisations Commission—which ensures accountability of unions to their members—will be abolished
  • All Fair Work Commission positions spilled, with ‘friendly’ appointments made in their place
  • More regulation of the Fly In Fly Out (FIFO) workforce that is the mainstay of Australia’s internationally competitive mining and resources sector
  • Rights to trade union representation of employees and collective bargaining strengthened (an employee’s right to not be represented or pressured by a union will not be mentioned).

This agenda clearly reflects the dogma of union and ALP leaders. Basically, they see Australian workers as innocents abroad who will be dreadfully exploited by the bosses unless they are protected by strong union leaders and regulations.

Meanwhile, some employer associations have expressed concern about the ACTU agenda, but many are absent or timid in their response. Maybe they have a WorkChoices hangover and are worried about retribution if the ALP forms government. Many companies seem fearful of upsetting anybody these days, and at the slightest social media campaign beat a cowardly retreat into silence.

The employer position is conspicuous due to a disturbing absence of any coordinated policy position focussed on the future challenges of the labour market and workplace relations. The reality is that the modern Australian economy operates in a world that is entirely different to the time when unions were in the ascendancy, namely the 1980s.

Businesses and jobs are exposed to disruption. Innovation, adaptability and flexibility are the sources of success. Many men and women shun traditional forms of work. They want to use their skills in a flexible manner to suit their lifestyle, skills and earning capacity. Many place a premium on their independence and a tangible capacity to balance work and family demands. Many embrace contracting and gig platforms as avenues to a suitable work and life balance. Career paths are no longer linear. Workers will engage with numerous employers and opportunities as they grow and retrain. In these circumstances it is anathema to be dictated to by union officials motivated by their own power and influence objectives.

Union leaders and the ALP are campaigning strongly about subdued wages growth and the impact on worker living standards. This is one of the grounds
used to justify their radical agenda. Once again, the reality is different. Wages as recorded by various measures have kept pace with inflation.

Some commentators have expected to see a tightening labour market generate a lift in wages above inflation. A number of reasons are put forward as to why this is not occurring.

A major reason why the wage movements are different to earlier experience is the substantial improvement in conditions of employment and employee protections during Australia’s sustained period of economic growth. The non-wage costs of employment became almost as much again as the wage cost of a worker. In some cases, they may exceed the wage cost of labour.

This is not a surprising outcome. Agreements and awards provide many add-on costs and entitlements. There’s annual leave, annual leave loading, personal and carers leave, long service leave, parental leave, family violence leave, rostered days off, public holidays, weekend penalties, shift penalties, overtime penalties, rights to request reduced hours, site allowances, travelling allowances, superannuation, workers’ compensation, and uniform allowances. In addition to this the employer has to carefully manage the workforce so as not to infringe various protections such as unfair dismissal, unlawful dismissal, adverse action protections, consultation on corporate change, consultation on the use of contractors, labour hire, and casuals.

It is not surprising that employers faced with improved business conditions remain cautious about engaging new staff and offering a lift in wages above inflation. The expansion in conditions and entitlements has led employers to shift the dial to caution. Also, it has led innovative employers to explore new avenues of labour engagement such as gig platform workers and independent contractors.

Now, more than ever, it is vital that employer organisations, policy advisers and the parties of the centre-right set out a policy agenda that can support the dignity of work while driving improvements in productivity and ultimately our standard of living. At the very least, this approach should encompass:

  • minimal regulation of the burgeoning new forms of work such as on-demand workers, independent contractors etc
  • improved arrangements for individually negotiated pay and conditions
  • better system architecture by concentrating on agreements and national employment standards, reducing the role of awards
  • protecting the right of an employee to choose not to join a union
  • mechanisms to ensure conditions of employment are commensurate with the economic circumstances of an employer or the industry
  • ensuring management’s prerogative to run a business are not compromised by undue interference from unions and tribunals.

The lessons are clear. Excessive conditions, regulation and intervention by allegedly benevolent unions and governments will not lead to favourable wages and employment outcomes. It is more likely to cause wage stagnation and unlawful exploitation. Only a positive agenda in which workers and employers are encouraged to create mutually beneficial outcomes can produce lasting results for workers and for Australia.

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