Unfair Privileges: The Fair Employment Trade Union Rescue and Revival Bill and how it will damage Victoria

EXECUTIVE SUMMARY

The Bracks Government, under the guise of supposedly defending low-paid workers, is proposing new industrial relations laws which will put onerous burdens on small business, damage business generally, drive investment from the State and discourage employment.

The so-called Fair Employment Bill, to cover working employees not under Federal awards, is actually a program to shore up unions, deserted by a third of their members since 1990, by giving them legislative privileges.

The Bill sets up a whole new industrial relations apparatus, costly to employers, which would seriously subvert the law of contract and almost certainly cost jobs.

This coercive Bill would give unions wide powers to enter workplaces.  It sets up a tribunal whose orders could override contracts, even rewrite contracts.

Any contract not under federal jurisdiction would be covered.

The following facts reveal the true purpose of the Bill:

• About 560,000 employees not under Federal awards are covered by Schedule IA of the Workplace Relations Act.  And that Schedule delivers higher average wages than Federal awards.
• Labor tried to rush the Bill through with no parliamentary committee examination.
• Unions have tried to resist employers taking higher wages in return for conditions that the employees would rather "cash out".  In this, the unions have failed.
• Union membership in Victoria has collapsed from almost 720,000 in 1990 to fewer than 460,000 now.
• With no State industrial tribunal, the Trades Hall Council has become largely irrelevant.

So the Bill is designed to try and resuscitate the ailing union movement on which Labor relies for funding and personnel.

Industrial Relations Minister, Monica Gould, has said that the Bill (after revision) mirrors the Federal Workplace Relations Act.  So business is entitled to ask:  why bother with this State Bill?

Anyone running a business in Victoria, or thinking of doing or so, should oppose this Bill, whether it affects them directly or not.  It would affect businesses they are likely to deal with, raising costs and risks, and discouraging investment,

It certainly will not help those working people likely to lose jobs.

The Government should drop the Bill or, failing that, the Parliament should reject it in its entirety.

UNFAIR PRIVILEGES

THE STORY SO FAR ...

In 1992, the newly-elected Kennett Government passed industrial relations reform legislation which created major new opportunities for workers to escape from the cost burdens imposed on them by State workplace regulation -- burdens which had helped Victorian unemployment rates rise from below to above the national average even before the recession of the early 1990s.  The Kennett legislation was predicated on the election of a Coalition Federal Government in 1993.  When the Keating Government was re-elected, the Victorian Act became a dead letter.

Subsequently, in 1996, the Kennett Government referred most of its industrial relations powers to the Commonwealth Government.  The State industrial relations tribunals were abolished -- saving Victorian taxpayers millions of dollars a year -- and those Victorian employees not covered by federal awards were placed under Schedule IA of the Workplace Relations Act.

The Bracks Government came to power in October 1999 with an industrial relations policy which included a commitment to if necessary, re-establish a State industrial tribunal and independent umpire with State common rule awards.  In April 2000, Victorian Industrial Relations Minister Monica Gould announced the establishment of the Industrial Relations Taskforce to review regulation of the Victorian industrial relations system.

The Taskforce was chaired by Professor Ron McCallum from the University of Sydney Law School.  Its report, released in August 2000, contained 106 recommendations plus supporting statistical and analytical work from the Australian Centre for Industrial Relations Research and Training (ACIRRT), also at Sydney University Professor McCallum had previously argued, in his 1997 Whitlam Lecture (available on the ACTU Website) that the fall in union membership had been a result of labour market liberalisation and that the labour market needed to be re-regulated if the union movement was to revive.  The Taskforce recommended creation of a Fair Employment Act which would include establishment of a Fair Employment Tribunal;  set a range of working conditions in legislation;  and widen the definition of "employee" and "employer" so as to ensure wide coverage for the new regulatory system.

The Fair Employment Bill was introduced into the Legislative Assembly on 25 October 2000.  In its original form, the Bill set up a Fair Employment Tribunal, gave union officials wide powers of entry to workplaces (including private homes) and defined "employee", "employment" and "employer" so widely that any contract for services not directly about transfer of land or under the aegis of Federal jurisdiction would be covered by the proposed law.  It was accompanied by a strong campaign from government, union, church leaders and other public figures, that the Bill should be passed as quickly as possible, preferably without debate.  (Generating a wave of moral indignation is a well-established technique for paying off special interests).  It was passed by the Legislative Assembly and introduced into the Legislative Council on 16 November.  The Opposition majority in the Legislative Council has deferred consideration until mid-March 2001.

The lack of a Government majority in the Legislative Council, and strong opposition from business, rural and other interests, has led the Government to offer a range of amendments.  A Bill which was so urgent it needed to be passed immediately has since become an ambit claim open to negotiation.

The failure of the Bracks Government to follow elementary procedures of accountability in the introduction of this legislation is noteworthy, particularly given how strongly the Labor Party campaigned on the issue of accountability while in Opposition.  There has been no attempt, for example, to use the Committee structure of Parliament to consider, for instance, the implications of the Bill for the Victorian economy.

THE PUBLIC JUSTIFICATIONS FOR THE BILL

The public justification for the Fair Employment Bill was set out by Professor McCallum in an interview on 3LO on 7 July 2000 with Terry Lane:

you've got 30% of the Victorian workforce, the bottom 30%, who aren't receiving community standards.  They're receiving less minimum terms and conditions of employment than other employees throughout Australia.

As the Professor went on to complain, beyond the minimums set out in the Workplace Relations Act for Schedule IA employees (all those Victorian employees not covered by federal awards),

it's up to the employer and employee to determine.  Moreover, there is no agency which can go into bat on their behalf and prosecute employers who breach the law.

The particular benefit which has been picked on as the rallying cry for Victorian re-regulation has been bereavement leave.  Thus the Professor stated,

These Schedule IA employees ... don't even get bereavement leave or personal carers' leave.

He goes on to admit that no employer would actually deny a person the right to go to their mother's funeral but, the problem is,

there's no right that an employee has.  The aim was to ensure those on Schedule IA aren't the sort of lumpen proletariat second-class citizens in Victoria.

Statements by others in defence of the Bill have all been variations on the themes set out by Professor McCallum in this interview.

The Bill sets up a wide range of prosecutable offences.  As can be seen from the summary of provisions, this is a Bill which goes way beyond the circumstances of low-paid workers.

Summary of Provisions:  Fair Employment Bill

§§	Provision in Original Bill	Change (if any)
4	Defines an employee for Chapter 3 of the Bill (workplace grievances and related matters) as including a person engaged to perform work under a contract for services
	Defines an employer for Chapter 3 of the Bill (workplace grievances and related matters) as including those for whom services are contracted
5	Defines as an employee any person who is in a partnership larger than three	Dropped
	Defines outworkers as employees
6	Gives Tribunal power to declare persons to be employees	Restricted to natural persons who apply in writing
	Restricts right to make applications to Minister, to recognised organisation or peak body
7	Declares those in receipt of labour hire services to be an employer of individual providing services
8	Defines as outworker to include clerical workers working from home
15-44	Defines a series of minimum conditions (including paid bereavement leave)
45	Establishes a legislative right to long service leave
49	Provides very extensive definiton of "one employer" for long service leave
51	Provides very extensive definiton of "continuous service"
53	Provides additional consideration for long service leave for casuals
71-73	Regulates termination of employment
74-76	Gives Tribunals wide power to vary regulated conditions
74	Restricts applications to Minister, to recognised organisation or peak body or (by leave) employer or employee
77-88	Gives Tribunal wide powers to make industry sector orders
77	Voids any contract provisions which are less man those of an industry sector order
78	Restricts applications to Minister, to recognised organisation or peak body or (by leave) employer or employee
89-95	Regulates employee remuneration
93	Makes the principal contractor liable for remuneration payable to employees of a subcontractor	Has been announced will be restricted to outworkers
101	Establishes a broad definition of a workplace greivance
107	Gives Tribunal broad powers to resolve such grievances
108	Gives Tribunal power to rewrite contracts deemed unfair	Has been announced will be restricted to owner- drivers, security guards, childcare workers and cleaners
109	Gives Tribunal partial power to override Fair Trading Act for contracts deemed unfair
110	Provides six year limit for former employees to bring a workplace grievance action
114	Gives Tribunal wide ambit for conciliation and mediation services
155	Gives Tribunal wide investigative powers
225-9	Grants extensive powers of entry, etc to registered organisations (such as unions] including into private homes	Reduced to those under Workplace Relations Act

INCONVENIENT FACTS

The second volume of the McCallum Report is entitled Statistical Research on the Victorian Labour Market.  Its primary author is Ian Watson from ACIRRT.

According to that study:

• about two-thirds (1.1 million) of Victorian employees are covered by Federal awards and about one-third (561,000) are under Schedule IA.

Schedule IA:

• covers 54% of Victorian workplaces;
• 94% of workplaces covered have 9 or fewer employees.

Compared to federal awards, Schedule IA

• provides higher average wages;  and
• provides higher average earnings for every skill category except labourers.

Moreover, according to the ACIRRT study, Schedule IA employees are, compared to those under Federal awards:

• more likely to be employed full-time and less likely to be casual;  and
• more likely to be metropolitan and less likely to be from a non-English speaking background.

Much has been made of the number of low-paid workers under Schedule IA, but, depending on how one draws the line, there are either as many or almost as many low-paid workers under federal awards as there are under Schedule IA, while Schedule IA employees are proportionately more likely to be in the higher wage brackets than federal award employees.

The report also sets out the degree to which particular benefits are available to Schedule IA employees -- higher pay for overtime to 41% of Schedule IA employees, penalty rates for working weekends to 24%, shift allowances to 6%, and annual leave loadings to 35%.  It makes no comparison with the actual availability of such benefits to employees under federal awards, simply saying such benefits are "standard".  But as a crucial question is whether standards set by regulation are actually adhered to, this is hardly adequate.

The complaint is made even weaker since the report shows there is no difference in coverage of benefits between New South Wales and Victorian employees.  The Report makes much of the fact that Victorian benefits used to be comparatively higher:  but so was Victorian unemployment.  (Victoria's unemployment rate has recently returned to the national average from having been considerably greater).

• Employers were equally likely to rate Federal awards and Schedule IA as fair to their employees (81% for both) and almost equally likely to rate it as fair to their organization (70% for federal coverage, 66% for Schedule I A).

This is not a picture of a system doing dramatically worse than Federal award coverage.  In fact, on average, it was doing better.  The McCallum Report is a case of people so apparently ideologically blinkered they cannot even see what is obvious from their own data.

Moreover, the higher wage rates but apparently lower levels of benefits for Schedule IA employees suggests that such benefits have been "cashed out".  Where employees and employers deal directly, it is in the interests of both parties to have the remuneration as simple as practicable, to minimise administrative costs.  Where one or both deal through agents, it is in the agents' interests to separate out remuneration into as many different "bits" as possible.  That increases the needs for the administrative services of such agents and enables agents, such as union officials, to "laud" their achievement in getting (or frustrating) the latest "bit".

The reality is that all the costs of labour -- whether they be leave entitlements, payroll tax, PAYE tax, long service leave, superannuation payments or workers compensation -- are borne by the worker regardless of who signs the cheque.  Employers, be they in small or large businesses, make decisions on hiring new employees or contractors on the basis of the difference between the total cost of hiring, and the estimated contribution the new worker will make to the business.  This is so regardless of how the costs of the new employee or contractor are distributed.

Bereavement leave is just another parcelling out of the income available to workers -- in this case, by an arrangement which "pools" the benefit (that is, some workers will receive it, others won't, but employers will have to incorporate the cost in what they offer any worker).  Adding extra costs raises the threshold below which a job will not be offered.

That Schedule IA provides lower average rates for labourers is also a point in its favour, given that unemployment tends to be concentrated among the least skilled.  A higher premium for skill also encourages skill-acquisition.

The Report's own data also shows there is little difference between the proportion of low-wage employees in New South Wales and Victoria:

• 10.5% of Victorian employees are on less than $10 per hour, compared to 7.8% of New South Wales employees and 8.7% nationally;
• For labourers, the proportions are even closer:  15.0% for Victoria, 14.6% for New South Wales and 14.7% nationally.

The Report strains mightily to identify "problem" areas, but its own data show that back in 1989 Victoria also had a higher proportion of low-wage employees.  It also makes no attempt to identify possible reasons for the patterns it notes (for example, many of its results are consistent with a particularly competitive Victorian restaurant market).

Victoria was economically successful during its experience of a less regulated labour market.  From 1993-94 to 1998-99, it had the highest growth of any State in final demand, in housing investment, in housing prices and the largest drop in the unemployment rate.  From August 1993 to August 1999, Victoria had the second-highest increase in its employment/population ratio of any State, both for the State as a whole and for non-metropolitan areas.  Only Queensland did better (and, for State capitals, only Sydney did better than Melbourne).  Yet the Bracks Government is proceeding with this Bill.

WHY THIS PATH?

There is nothing in either the foregoing data, the Report, or the claimed justifications for action which compels the setting up of a State Tribunal and associated regulatory system.  It is entirely open for applications to be made to the Australian Industrial Relations Commission to change rates or benefits under the Schedule.  The Small Claims Tribunal can deal with claims of breaches of contract.  It is open to Victoria to arrange with the Commonwealth to fund, directly or indirectly, greater resources to enforce the law.  Besides, this is an area where unions should be able to offer their services to employees.  It is even open to the Victorian Government to subsidise specific low-income earners if it wishes.

Clearly, however, the public justifications, and the use of the "Fair Employment" terminology, make it a great deal easier to "sell" the Bill by appealing to the moral vanity of commentators and to the concern for fairness in the general community.  (Use of the words "fair" and "fairness" by politicians and legislators should be treated with great scepticism, as vested interests seeking to preserve or enhance their privileges are likely to be lurking behind them.)

Critics of the Bill can, and have been, castigated for being against "fair employment" and in favour of "exploitation".  Such propagandist claims should not, however, be mistaken for the real purpose of the Bill.

That the public justifications for the Fair Employment Bill are not its real purpose can be seen in the provisions of the original Bill, most obviously in its provision (since deleted) that any member of a partnership greater in number than three will be deemed to be an employee.  Clearly, this has absolutely nothing to do with low-paid rural labourers or outworkers, that is, the groups frequently nominated as requiring legislative assistance, particularly as Victorian labourers are as likely to be earning under $10 per hour as New South Wales labourers or those across the nation.

It does make more sense, however, if the purpose was to set up an industrial relations regulatory net so broad that no mode of participation in the workforce would allow people to escape from it.  But why would one want to do that?

THE REAL GAME

To have membership of Victorian unions fall from almost 720,000 in 1990 to less than 460,000 now must be a deeply shocking experience for union officials (and a major concern for a Labor Party still dependant on union support, particularly in fundraising and for election campaign workers).  The lack of a Victorian industrial relations system has undermined, almost completely, the reason for existence of the Victorian Trades Hall Council and its officials.

That the ratio of union officials to members trebled between 1968 and 1996, that amalgamation of unions into "super unions" did not result in a single cut in the number of officials and that union membership fees rose faster than wages from 1971 to 1989, points to some of the problems now besetting unions, and why so many workers no longer value union membership.  Unions simply do not provide services of sufficient value for workers at prices that workers are willing to pay.  The combination of declining service value, and rising membership fees, makes it easy to understand why workers are abandoning trade unions, particularly when doctrines of class struggle and class exploitation now appear as museum rhetoric.

But to suggest that workers are leaving unions because they are no longer providing services that workers want at prices they are willing to pay is not a welcome argument for union officials.  That workers may, in economic terms, be considerably better off without them is an argument that is even less welcome.

How much more congenial to be told that it is the evils of deregulation which have done this and that the solution is to re-regulate the labour market.  Re-introduce a Victorian industrial relations regulatory system and Trades Hall will again have an arena of its own.  Set up a State Tribunal and union officials can attempt to use their role within the new system as a basis to recruit members.  They can even "forum shop" between the State and Federal systems (and seek to complete their careers as Tribunal members in either State or Federal jurisdictions).

But there is a potential problem here.  Conventional full-time, permanent employment is in decline.  Other modes of workforce engagement -- part-time, casual, contract, labour hire and other forms of self-employment -- are on the increase.  All these modes of workforce engagement are more difficult for union recruitment.  That union officials have often been highly critical of workers thus employed, has hardly helped recruitment of such workers.

As the regulatory complexity surrounding conventional employment expands, other modes of workforce engagement become more attractive as ways of avoiding the escalating costs such regulatory complexity imposes on both workers and businesses.  Even within conventional employment arrangements, many companies, most notably within the mining industry, can offer their workers significantly higher remuneration for contract employment because such arrangements avoid the extra costs and onerous complexities of award employment.  They can, and do, cash out the complexity and thereby achieve a win-win situation for workers and businesses.  And there are considerable benefits available -- even in the US, whose labour market is generally more lightly-regulated than ours, the overall cost of regulation has been estimated to be as high as 19% of GDP.

Union officials will resist this simplification to the utmost because their expertise lies in creating and then dealing with complexity as intermediaries between employers and employees.  Attempts by union officials to resist such simplifications in the mining industry and elsewhere have seen dramatic drops in union coverage, as employees have walked away from unions which have strenuously resisted increases in their income.  Employees opt out of regulatory complexity because they can earn more, and opt out of unions because they operate in the interests of their officials, not their members -- which is why there are so many former union members and a falling number of new union members.

The attempt to protect unions by creating new legislative privileges for them by re-regulating the labour market is not restricted to Victoria.  New laws re-regulating the labour market have been introduced in Queensland and New Zealand.  There have also been attempts to introduce them in New South Wales and Tasmania.  It is Labor Party policy to do so in WA.  Federal Labor Policy now says:

• The protection of the industrial relations system should be extended beyond a narrow definition of employees to include those in employment type relationships.

The justificatory claims about the Victorian situation are only the local excuses to push a re-regulation agenda which extends around the country and across the Tasman to address a common problem -- the rapid decline in the reputation of trade unions within the community at large, and the workforce in particular, the most visible manifestation of which is falling union membership.

The unions, and Professor McCallum, have realized that it would clearly not solve the unions' problem if a Victorian IR system were to be set up which, by increasing the cost and legal complexity of permanent employment, further encourages people to shift to other modes of workforce engagement -- more casualisation, more contract work, more use of labour hire from agencies.

The solution to this problem in the Bill has been a breathtakingly simple one:  define "employee", "employment" and "employer" so widely that all imaginable modes of workforce engagement were covered.

The Bill not only sets up a new and unnecessary bureaucracy, it attempts to redefine contract and company law -- for only one reason, and that is to provide a statutory crutch to a poorly performing and increasingly irrelevant and unpopular union movement.

But doing that means placing arrangements which have grown up under conventional contract law under an entirely new mode of regulation.  To attempt effectively to rewrite contract law at a stroke was bound to cause major problems.  Which is why the Government has since had to engage in amending the Bill "on the run".

UNINTENDED CONSEQUENCES

Already, the brief history of the Bill demonstrates that the intentions of legislators are no protection against unintended consequences.  The ambit of the Bill can be seen in its definition of an employee.  The Bill excludes those earning $71,200 per annum (indexed) or more from its industry sector orders (the new awards) and workplace grievance claims, thus using the same cut-off as that for unfair dismissal claims under Federal legislation.  Chapter 3 of the Bill covers workplace grievances and other employment-related matters.  For the purposes of this Chapter, an employee includes a person engaged to perform work under a contract for services.  This gives the Tribunal the power to inquire into, amongst other things, the fairness of the contract for services.  In other words, almost any commercial contract other than one concerned specifically with the transfer or use of land or provisions which turn out to be excluded by coverage by Federal law (no doubt a matter for future litigation) will come under the ambit of the Tribunal, a Tribunal that can make its own mind up about "fairness".  (The dispute between Melbourne airport and taxis would be covered, for example.)  This provision gives union officials a statutory lever of great power.  The massive second-guessing of contract arrangements involved will make entering into ordinary business contractual arrangements in Victoria much more uncertain and risk-laden than entering into matrimony.  Such uncertainty will have a seriously deleterious impact on business and investment activity in the State.

For all purposes, the original Bill included in the definition of employee each person, being 1 of 4 or more persons who are, or claim to be, partners working in association in an industry.  That raised the spectre of partnership disputes (such as those for family farms organised as partnerships) ending up in the Tribunal, with a disgruntled family member suddenly claiming "back pay" entitlements.  This provision has since been dropped.  A classic case of, in the words of Professor McCallum himself, "when governments hurriedly pass laws often they don't mesh together".

Under the original Bill, the Tribunal was given the power to declare a class of persons who perform work in an industry under a contract for services [the term used to described traditional contractual relationships] to be employees.  More uncertainty is thus introduced into business arrangements via the overriding of the choices of free individuals.  This provision has since been restricted so that it can apply only to a class of persons each of whom has consented in writing to being included in the class for the purposes of being declared an employee which restricts the application of the power, but still allows the changing of fundamental aspects of an arrangement after it has been entered into and without the consent of one of the parties (in this case, those hiring the said services).

This new restriction is more apparent than real, since all contracts for service are still covered by the workplace grievance provisions.  And even with the restriction, a business could still enter into contractual arrangements, then find that the other party or parties had signed such a consent order and suddenly have its relationship governed by the Tribunal without its consent.  Again, the increased uncertainty must discourage business activity by raising the risks that businesses face.

Under the Bill an outworker is defined as a person engaged, for someone else's industry, in or about a private residence or other premises that are not necessarily business or commercial premises, to (a) pack, process, or work on articles or materials;  or (b) carry out clerical work.  What counts as "clerical work"?  If, as appears to be the drafters' intention, it is defined according to award definitions, then it includes everyone from routine clerical workers to people operating with minimal supervision with significant computing, administrative, specialist or financial skills (provided they earn less than $71,200 a year).  On the other hand, if it follows the Macquarie Dictionary definition it covers those employed in office, shop etc. to keep records and accounts, to keep correspondence &c. one who keeps the records and performs the routine business of a court, legislature, tribunal &c.  Either way, the capacity of the Tribunal to interfere arbitrarily in arrangements after they have been freely entered into is very large.

The breast-beating about outworkers is particularly ironic in the light of history.  Over 100 years ago, in the 1890s, Henry Bournes Higgins, later the second President of the Arbitration Court, was claiming in the Victorian Parliament that an industrial inspectorate, with powers of entry into private homes, would stop the exploitation of outworkers.  A century later and they are again being used as the overt justification for a new regulatory empire.  That the original Bill can confer such extensive powers of entry to its inspectors and union officials -- since wound back to those under the Workplace Relations Act -- show such ambitions are still alive.

Section 93 of the Bill makes principal contractors liable for the remuneration of employees of subcontractors, greatly increasing the risks of such contractual arrangements, thereby reducing their attractiveness.  Under pressure, the Bracks Government has since announced that this provision will apply only to outworkers.  Again, the risks involved in such arrangements will be increased, discouraging their use.

Similarly, the Government has announced that unfair contract review provisions will be limited to owner-drivers, security guards, childcare workers and cleaners.  These industries will be "blessed" by having their contractual arrangements made more uncertain due to the potential for unilateral re-writing of contracts by Tribunal officials who are in no way responsible for the consequences of their decisions.  Again, the risks involved in contractual arrangements in this industry will be increased, discouraging their use.

This trend of narrowing the ambit of the Bill speaks volumes for the inherent problems of the exercise (and shows how spurious were the claims that the Bill should be passed urgently).  The Government is now claiming as a virtue the much decreased coverage of the Bill which, according to the Minister for Industrial Relations, is "merely trying to bring 13 per cent of the our workforce up to minimum standards".

Minister Gould's media release of 29 January 2001 goes on to say:  "the minimum conditions ... mirror the minimum conditions currently found in the Workplace Relations Act.  'Right of entry conditions for authorised union officials are exactly the same as those in the federal Act ... and the power of the Information Service Officers in the legislation also mirror the powers of inspectors under the Workplace Relations Act'."

Which, of course, raises the question:  why bother if the Workplace Relations Act is merely being "mirrored"?  Particularly when Victorian taxpayers will have to fork out at least $10m a year for this new regulatory empire.  The answer is because it provides a new Industrial Relations jurisdiction in which union and Trades Hall officials can seek to operate for their own benefit.  In particular, the operation of "industry sector orders" provides a means for ramping up of specific benefits to display how valuable the services of unions are, regardless of the implications for Victorian employment and business activity.

Once the basic structure has been implemented, the Government can hope to extend its ambit back towards the Bill as originally introduced if favourable circumstances develop.

RESTRICTION OF WORKERS' CHOICE OF REPRESENTATIVE

The Bill carefully restricts applications before the Tribunal to a recognised organisation, [that is, a trade union or employer's association], a peak body or the Minister in some provisions (such as a declaration as to who is an employee) and allows employers or employees, only if given leave by the Tribunal, to apply in some others (such as minimum conditions and industry sector orders).  Such restrictions increase the role of the approved agents and limit the capacity of private advocacy service providers, such as lawyers, to compete with unions to provide services to employees.  It is a clear case of granting legislative privilege to protect unions:  a union movement which is very important in providing funding and workers for the ALP -- both directly and through supporting campaigns such as that run by the teachers -- and which has 60% of the votes at the ALP's State Council.

CLEARLY UNNECESSARY

Returning to Professor McCallum's justifications for legislative action, it is clear that none of them stand up.  Professor McCallum alleges that:

you've got 30% of the Victorian workforce, the bottom 30%, who aren't receiving community standards.  They're receiving less minimum terms and conditions of employment than other employees throughout Australia.

• Actually, on average, their pay is higher than federal award recipients, and the Government is now making much of the fact that the Act will only set conditions for 13% of the workforce.

it's up to the employer and employee to determine.

• And, on the evidence, they generally seem to do so at least as satisfactorily as happens under Federal awards.

there is no agency which can go into bat on their behalf and prosecute employers who breach the law.

• This does not require a vast new regulatory structure to fix.  Furthermore, if there is a demand for such services, this provides a recruitment opportunity for unions.

These Schedule IA employees ... don't even get bereavement leave or personal carers' leave.

• It is perfectly open to employers to provide such leave under Schedule IA, just as it is open to make an application to the AIRC for the right under Schedule IA.  (Nor did the ACIRRT study for the McCallum Task Force bother to report whether, and to what extent, such leave is provided to Schedule IA workers.)

The aim was to ensure those on Schedule IA aren't the sort of lumpen proletariat second-class citizens in Victoria.

• But, on the McCallum's Task Force's own evidence, they are not.

WRONG WAY, GO BACK

This is a costly and unnecessary Bill which seeks to squeeze what freedom still exists out of an already over-regulated labour market.  Moreover, it will not even provide the assistance to the union movement that it is intended to do.  While the Bill will give union officials and Trades Hall a new jurisdiction in which to play their costly IR Club games, it will do nothing to improve the services that unions offer members.  Union membership was declining before the limited labour-market liberalisations established since 1992 and will continue to decline unless membership of unions is enforced by statute.

What the Bill does is put a series of loaded guns in the hands of entrepreneurial lawyers.  Given that individuals will be given the right to make application to the Tribunal for workplace grievances -- the area of jurisdiction of the Tribunal with the widest ambit -- lawyers and other private advocacy services will be able to provide direct services to employees and others, thereby competing with unions in this arena.

The consequences of the Bill are clear:

• a growing and increasingly popular range of forms of workforce engagement will become riskier;
• the complexity of employment arrangement and the costs to business in compliance will increase for all those covered by the Bill;
• to the extent its regulatory complexity and restriction raises the costs and reduces the benefits of labour, it will discourage employment;
• it will not and cannot increase the returns from hiring labour;  and
• it is an illusion that it can raise the returns to labour itself.

All the costs of labour -- wages, taxes, workers compensation, etc., etc. -- incurred by a business in hiring a worker, are earned by the worker, including benefits such as bereavement leave:  they are just different ways of distributing the income available to workers.  The returns to labour (as distinct from the returns to capital), as always, come from skill, effort and the effectiveness of institutions (what economists call "productivity").  By feeding the illusion that the returns to labour are not dependent on these things, and by reducing the effectiveness of market institutions, the Bill and the Tribunal will simply repeat once again the century-old experience with wage arbitration (see Appendix).  That experiment has shown that wage arbitration serves narrow, vested interests;  that it does not benefit those people it is supposed to benefit -- ordinary workers and the wider Australian society.

Anyone running a business in Victoria should oppose this Bill regardless of whether it will cover their workforce or not.  Even if it does not cover their workforce directly, it will affect businesses they are likely to have to deal with, raising costs and risks and adversely affecting the general business climate in Victoria.

Any business which is likely to be directly affected by this Bill -- remembering that its coverage could easily be broadened by unions, or even entrepreneurial lawyers, seeking to "forum shop" -- should oppose this attempt to make their employment arrangements costlier, more complex and riskier.  There are enough risks in modern business without having such a basic relationship subject to the arbitrary intrusion of unaccountable officials.  There is nothing in this Bill for Victorian workers or Victorian business but increased costs and regulatory burdens and an underlying contempt for the right of Victorians to make their own arrangements.  Victorians did not vote for this in September 1999.  It should not be imposed on them in 2001.

APPENDIX
WAGE ARBITRATION -- THE FAILED EXPERIMENT

In the 1890s, Australia and New Zealand began an experiment, led by Victoria, with trade protection and wage arbitration.  A century later, we can see clearly the experiment was a mistake.  Australia and New Zealand moved from being countries with good economic growth records in the nineteenth century to being the developed countries with the second-lowest and lowest economic growth rates in the developed world in the twentieth century.

Per head economic growth rate compared
with developed world average (%)

Source:  Maddison, OECD.

* 1870 to 1913 for NZ

It is hardly likely to be an coincidence that the two countries which adopted protection and wage arbitration became the two developed countries with the lowest economic growth rates over the twentieth century.

The fall in Australia's and New Zealand's relative standing has been stark, from the per capita richest and third-richest countries in the world to steadily falling below the developed world average.

Per capita GDP
(Developed country average = 100)

Source:  Maddison, OECD.

The policy framework of having officials arbitrarily interfere in workplace relationships entered into by free and responsible people and restricting the use of people's most important economic asset -- their labour -- has not proved to be a happy one.  Re-regulating the labour market, moving back in the direction of a failed experiment, is not the way to go.