Coalition sells out supporters

The Howard Government's new Fairness Test legislation has just officially ended Australia's flirtation with serious labour market reform for small business.

The legislation is seriously flawed. It will be too hard and expensive to use Australian Workplace Agreements in order to operate profitably and compete.

What is surprising, given Prime Minister John Howard's acute political antennae, is that the way it is being done will be damaging politically.

Apart from the fact the Government has done the ACTU's dirty work to effectively end AWAs, most businesses - having gone the hard yards to make the necessary changes to implement AWAs - will find it almost impossible to continue employing new people under the same conditions as existing employees.

Even worse, by the time they eventually realise the scope of the changes, there will be a significant retrospective penalty.

A Government trump card has been the public opposition to a return to the union system proposed by Labor leader Kevin Rudd. A key plank of Labor's policy is that AWAs will be replaced by Collective Workplace Agreements (CWAs).

If the AWA system is clogged to paralysis, the door is open for Rudd to have an epiphany and agree to retain them under a revised (“even fairer”) Fairness Test. Howard could hardly attack Labor's plans to destroy workplace reform. They did it themselves.

The real political damage of this proposed Fairness Test legislation can be likened to what Mark Latham tried to do to the Tasmanian forestry workers.

His plan was to destroy a few hundred jobs to curry favour with Greens voters in Melbourne and Sydney.

Everyone realised Latham was selling out his core constituency and, if you're prepared to do that, how can you be trusted with anything?

Howard's agreement to legislation which will severely damage a loyal part of his small business constituency, to assuage a group who won't vote for him anyway, is most uncharacteristic.

The Federal Government has spent $40 million of taxpayers' money trying to coax businesses to implement changes in their workplaces and introduce workplace agreements.

About 50,000 businesses, mostly small, in the conservative heartland have spent time and money with consultants to help manage change.

A key to this is flexibility - working outside the 40-hour 8.30am to 5pm, Monday to Friday work week, with commensurate security and opportunity to work longer and earn more.

This means significantly altering or getting rid of the effect of penalty rates with the workers' consent.

Half a million workers on AWAs and probably as many again on WorkChoices CWAs have seized that opportunity to negotiate mutually acceptable rates. The Fairness Test now takes that choice away: the core assumption and rationale for workplace change has been thrown out the window.

The new fairness test may be half-workable for maybe 80 per cent of new business proposing to change the penalty rate effect using AWAs. However, a quirk of how these tests are constructed is that a majority of those businesses that already have AWAs will fail the test.

This will be punitive because it is retrospective. On Friday, May 5, these 50,000 small businesses were advised that as of midnight two days later, all their new AWAs would be subject to a fairness test. It was as though they had suddenly all been discovered rorting the system.

There were no details available and the penny hasn't dropped yet as to how it will apply to the 5,000 to 10,000 new AWAs that have been created each week since May 7.

The fairness test will be far less flexible than the old No Disadvantage Test. It will be months before we see the first results when the vast majority of businesses discover that, except in isolated circumstances, new employees will have to be paid at a higher rate than their existing workers.

You can hardly pay one new employee at a higher rate than existing employees, and the Fairness Test legislation says you can't dismiss the new, higher-paid, employee, so you would have to increase everyone's pay as a matter of commercial practicality.

Workplace Relations Minister Joe Hockey says the new worker's “fairness test”rate will be back-paid to commencement. This means that, to keep faith with the workforce, the employer will have to back pay everyone or deal with a riot. This is the unintended, retrospective effect on a core Coalition constituency.

Unless Howard amends the legislation, particularly for businesses with AWAs already lodged, it will be politically disastrous.

Everyone, as with Latham's betrayal, will notice that the Coalition has sold out its own supporters for cheap (unattainable) votes elsewhere.