Prime Minister John Howard is a conservative, as is Industrial Relations Minister Kevin Andrews. They are against change for its own sake. They are, however, also politicians who want to remain in power and know that the key to doing so is sustaining economic growth. Their workplace reform agenda illustrates both characteristics. It is not a radical initiative in concept or detail.
Every proverbial backyard galah has been squawking about the need for workplace reform for more than 20 years. Australia developed, behind protective tariff walls, one of the most restrictive systems of workplace regulations in the world. It was a system developed primarily to redistribute wealth rather than create it.
Once the protective walls were pulled down -- by, let us not forget, Labor governments -- the writing was on the wall for the Australian industrial relations system.
Ideally, reform of the labour market should have preceded liberalisation of the goods and capital markets. Unfortunately, Labor governments could not get the sequencing of the big-picture reforms right. As result, workers bore a disproportionate share of the cost of structural adjustment in the form of higher unemployment and lower wages.
The Hawke and Keating Labor governments did recognise the need to move to a more flexible system. The union movement, in the face of a declining industrial base and the need to be internationally competitive, also recognised the need for change. But the labour movement has proven to be incapable of reforming the system. Labor, in government federally, made numerous attempts at reform of the industrial relations system, but all were modest in scope and incremental in effects.
The Keating government's Industrial Relations Reform Act of 1993 did introduce an enterprise-based bargaining stream, but it turned out to be little more than a top-up arrangement. Moreover, the act introduced unfair dismissal rights, which significantly increased the risk of hiring.
The Howard Government, under Peter Reith, tried to introduce more radical reform of industrial relations laws in 1996. However, his attempts were in the large part thwarted in the Senate. The subsequent act did introduce an individual agreements stream (Australian Workplace Agreements) and a more wide-ranging enterprise-based agreements system. While these changes were positive, they were modest in impact as the act retained many restrictions to their application. Reith also failed, after many attempts, to rectify the burgeoning growth of unfair dismissal claims.
At the state level, IR reforms followed a similarly thwarted path. Following failure to get its proposed reform through Victoria's upper house, the Kennett government gave up and handed the state's industrial relations powers to the commonwealth. In Western Australia, the Court government's reforms were eliminated in the end by its Labor successor, the Gallop Government.
During this period of thwarted reforms, just about every independent research group, including the Organisation for Economic Co-operation and Development, the World Economic Forum, the Productivity Commission and the Business Council of Australia, argued for more reform of Australia's industrial relation systems.
Moreover, while Australia has been going down a slow path to reform, other countries such as New Zealand and Britain have been more radical and successful in reducing unemployment. On the other hand, countries such as Germany and France, which have maintained highly restricted labour laws, suffer high rates of unemployment.
Thus even a conservative must conclude that the IR system is in need of significant reform. Howard has known this for decades and would have been pilloried in posterity if, on gaining control of the Senate, he failed to carry out the task. Not just because it's the right thing to do but also because only his Government can do it. The Labor Party, because of its ties to the union movement, is incapable of effective reform of the labour market.
During the past decade Australia's economy has boomed, producing near-record levels of employment growth. Indeed, Australia has outperformed just about all other developed countries, with the possible exception of the US and Ireland, onthese scores. While the labour movement has said this shows there is no need for change, in fact it does the opposite.
The key message from the past decade is that market-based reforms are good for growth and good for retaining political power. Indeed, the many warnings of economic shut-down or the creation of 20-80 society (with 20 per cent employed and 80 per cent unemployed) that dominated the scribbling of our social commentators and academics such as Robert Manne in the 1990s have proven to be fundamentally wrong. The IR reforms in the past have helped, but more would have been better. Indeed, most of the growth in jobs during the past decade has taken place despite the existing system.
Moreover, with the economy booming, there are sectors, in particular the manufacturing and construction sectors, that are being held back by our IR system. Manufacturing, which has long been the apex of the IR system, is facing a do-or-die challenge from rising competition from China. It will need to reinvent itself to survive, which it is failing to do under the existing IR system.
Why then has Howard not been more radical? After all, he has a once in a generation chance to reform the system. And Howard's proposal is not radical. The Australian Industrial Relations Commission stays and retains significant powers; there will be minimal changes to award conditions; the new base-line for minimum conditions is generous, with high minimum wages. Indeed, the changes concentrate on providing greater access to, and negotiating space under, individual contracts. His proposal is far milder than the systems being applied under Labour governments in New Zealand and Britain.
In large part, the mild approach emanates from Howard's conservative nature and his desire not to get too far ahead of popular opinion. He is, I think rightly, also betting on the popularity of greater self-responsibility and empowerment that will spring from the changes.
The labour markets of the future will be sellers' markets. Thus award minimum standards will gradually become less important.
The greatest growth in new workers will come from women re-entering the work force and from older people staying employed on a part-time basis. These trends will put a premium on flexible and personally tailored working arrangements.
More important, people are increasingly demanding greater control over all facets of their life, from education through health to retirement. And this, if allowed, will include work.
In large part this trend emanates from the market-based reforms put in place during the past 20 years. Thus, while the reforms may be conservative, they aim to tap into radical underlying changes in society.
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