It's Time for Workplace Reform

By Mark Wooden

The Australian Financial Review,
13 January 2005, p. 47

The Coalition went to the 2004 federal election with a workplace relations policy which, with only a few exceptions, made relatively few significant commitments. Does this then mean that the Howard Government is no longer so interested in pursuing further changes to industrial relations arrangements? I think not. Rather, the pre-election debate was shaped by the expectation that further reform would continue to be stymied by a hostile Senate. Of course, as we now know, the election result turned out very differently the Coalition gained control of the Senate.

The highest priority on the Governments workplace relations agenda is clearly reforms intended to assist small business. The Fair Dismissal Reform and Small Business Employment Protection bills, which exempt small businesses from the unfair dismissals provisions of the Workplace Relations Act and from having to make redundancy payments, were both re-introduced to the parliament late last year. Such legislation, however, will be of little significance if restricted to employers covered by Federal awards, since most small businesses are covered by State jurisdictions. Thus I expect to see the reintroduction of a bill which would extend the coverage of the federal unfair dismissals jurisdiction to all corporations, and not just those covered by federal awards or agreements.

Predicting other change is more difficult, but the Coalitions pre-election commitments suggest that we can expect to see: (i) the introduction of new legislation intended to protect the status of independent contractors; (ii) further legislative change that will help facilitate and simplify agreement-making; and (iii) the introduction (on a trial basis) of a new alternative mediation service for small business. Such changes reflect an agenda which is consistent with a more decentralized system, but nevertheless is modest in scope and so unlikely to result in dramatic changes in the Australian industrial relations landscape.

But is more radical change off the agenda? I certainly hope not. While Australias economic progress over the last decade or so has been impressive, there are still large numbers of working-age Australians not in employment, many of whom are no longer looking for work and thus not counted in the official unemployment figures. Furthermore, in a rapidly changing world, no government can afford to become complacent. Remaining competitive in todays world means that the process of reform is never ending.

In any case, it is not difficult to identify things that need to be changed. Due to space limitations I will limit myself to just three aspects of our current system that are ripe for a further overhaul.

First is the role of the Commission in establishing minimum wages. Since the famous Harvester decision of 1907, federal tribunals have assumed the responsibility for ensuring that workers received a wage that would enable a worker and his family to live in frugal comfort. But does this still make sense in the 21 st century? Over the course of the last 40 years or so Australia has developed an extensive system of income support, and if the primary justification for minimum pay is one based on need, then surely decisions about pay should be made in tandem with other decisions about income support arrangements. Indeed, current income support arrangements ensure that increases in minimum wage increases are not very effective in raising household incomes, especially for families with children. A full-time minimum wage worker with a non-working spouse and two young children, for example, would actually earn less income after the wage increase, not more!

Considerable scope for improving the effectiveness of income support arrangements exists, but only if the same body is responsible for both transfer payments and minimum, which effectively means transferring the power to set minimum wages to the Government (perhaps with some new expert body acting in an advisory role).

Second, the Commission also continues to influence workplace outcomes through other types of award variations. Under the current Act, awards are meant to be a vehicle for setting minimal standards for a handful of basic conditions. In practice, however, awards continue to be used in ways that undermine the need for enterprise bargaining (e.g., through the use of test cases). There is thus a need for further streamlining of the types of matters allowable under awards.

The third area for change, but one where consensus is likely to be more forthcoming, concerns achieving greater harmony between the federal system and the five different State systems. The Howard Government has clearly indicated a desire for a move in this direction, though at this stage it has only committed itself to examining ways in which this might be achieved. It would be unfortunate if the next term was spent on investigation without actually achieving any substantive change.

Finally, it is worth noting that history indicates that control of both houses of parliament is a relatively rare event, so the window of opportunity for change may be relatively brief. In short, if the Howard Government really does believe that workplace relations reform is a key priority, then the time for change is now.

Mark Wooden is Professorial Fellow and Deputy Director of the Melbourne Institute of Applied Economic and Social Research, University of Melbourne