Neither side of politics is telling the truth about industrial relations.
Here's the truth as I see it.
Were it not for the changes to Australia’s industrial relations system we would be enjoying nothing like the extraordinarily good economic times we are living through.
What happened in the past was that whenever workers became scarce in a particular industry or region (perhaps as a result of a boom in the mining industry) those employers offered them higher wages and the centralised wage-fixing system pushed those wage increases through to all the workers doing that job in every part of the nation.
The result was inflation, which brought on interest rate rises and killed the boom.
The current treasurer Peter Costello describes what happened this way:
“Every time Australia had an improvement in its terms of trade from the Korean wool boom on - you had wage settlements in profitable areas of the economy being transmitted across the general economy, you had general inflationary outbreaks, and you had the inevitable response”.
“If we still had centralised wage fixation, if trades were getting big wage settlements in the mining industry and then transmitting them across the general economy you would be having a general wages and inflation breakout by now. If a fitter working in the mine at Hammersley who can justify a pay increase because the mine is so expensive had a variation to the Metalworker’s Award which went back into Moorabbin and went back in to Mooloolaba and went back into every small metal shop – you would have general wages breakout, you would have inflation.”
Peter Costello gives the impression WorkChoices killed centralised wage-setting early last year. But it didn’t...
Centralised wage-setting was strangled more than a decade earlier when the Labor Prime Minister Paul Keating and his Industrial Relations Minister Laurie Brereton rammed through a new system of enterprise-by-enterprise bargaining.
It didn’t make him popular with the union movement or with the Industrial Relations Commission. As he said this year:
I was the guy who had to get the ACTU in a headlock and pull its teeth out with a pair of pliers. It was like administering, pulling a set of rotten teeth out. Comparative wage justice couldn't last”.
In introducing the enterprise bargaining legislation Brereton proclaimed a “break with the past”, putting “the onus on the industrial parties to take responsibility for their own industrial relations.”
From then on, to use Treasurer Costello’s example, if the fitters in the mine at Hammersley wanted a pay rise they could try to get it from their bosses. They couldn’t pass it on to fitters in Moorabbin and Mooloolaba.
It is that switch away from Australia-wide wage fixing, a switch far more radical than the move to Workplace Agreements under WorkChoices, that has to be protected at all costs if our low-inflation prosperity is to continue.
If Labor removed AWA’s, the balance of bargaining power within workplaces would change. It will move back towards workers and their representatives and away from their employers. (Right now an individual worker often faces a company’s entire human resources department). But wage setting would continue to take place at the enterprise level.
The big advance industrial relations, the one rightly identified by our current Treasurer as essential to our present prosperity, would stay.
But what if Labor also had a semi-secret plan to wind back enterprise bargaining? The government certainly isn’t talking about one, perhaps because it does not want to emphasise how really important the Labor reforms of the early 1990’s were.
Professor Mark Wooden fears he sees such a plan. The acting director of the Melbourne Institute, and one of Australia’s leading experts in the dynamics of labour markets, he isn’t too worried by Labor’s promise to abolish AWA’s.
But he has told me he is extremely concerned by one little-understood clause in Labor’s new industrial relations policy.
Headed “Labor’s fairer system” the clause confirms that Labor’s new umpire Fair Work Australia would ensure that the process of enterprise bargaining and the resulting enterprise agreements were fair.
But then it adds: “Fair Work Australia may also facilitate multi employer collective bargaining for low paid employees or employees who have not historically had access to the benefits of collective bargaining.”
“Multi-employer collective bargaining” is a new and unexplained term in Australia’s industrial language. On its face it opens the door for a return to centralised bargaining away from the enterprise, undoing Australia’s most important industrial relations reform.
The Labor document also says that “where more than one employer and their employees or unions with coverage in the workplaces voluntarily agree to collectively bargain together for a single agreement they will be free to do so”.
The use of the word “single agreement” sounds alarm bells to the likes of Keating and Wooden. As a clearly concerned Keating put it in his Lateline interview last month when talking about Labor’s industrial spokesman Julia Gillard: “She doesn't quite understand the difference between the centralised system I inherited, the old rigid system of compulsory arbitration and comparative wage justice, the leapfrogging, and the enterprise bargaining system of 1993.”
If union leaders such as the secretly-taped John Robertson make good their pledge to “pull Kevin Rudd on once he's prime minister” the big danger would be that they pulled on a move back to Australia’s pre-1993 system of wage fixing. Julia Gillard’s policy document appears to give them room.
Much what passes for political debate about industrial relations policy is of little consequence economically.
Both sides support the idea of an umpire setting minimum wages. Labor would call it Fair Work Australia; the Coalition calls it the Fair Pay Commission. It hands down a decision this week.
John Howard claimed unwisely that WorkChoices would “unleash a new burst of productivity growth”. It hasn’t, but then serious economists didn’t think it would.
Mark Wooden said at the time: “There is not a lot of evidence that individual contracts produce productivity. The biggest gains for productivity still revolve around a system which is collective based, okay? Enterprise agreements, with or without unions.”
Employment has grown (although not by as much as in the financial year before WorkChoices) and our national income has soared. But that’s to be expected given the worldwide surge in prices for the things Australia sells. Our terms of trade have soared by more than any other country’s since 2001, including the oil-rich ones.
More of that income is going to profits and a lower proportion to wages than ever before, and that may well be due to WorkChoices. But economists aren’t too interested in such things. They’re about dividing the cake up rather than baking it.