Fair Work Australia: the powerful regulator

It’s a rare day when I agree with the Victorian branch secretary of the Electrical Trades Union Dean Mighell! Yet his recent call for his union to leave the Labor Party is one such occasion. This is not to say I agree with his reasons nor do I want to make a habit of tugging my forelock to industrial muscle - quite the opposite in fact. Labor needs to move beyond rent seekers, if it is to promote the national interest in industrial relations and industry policy.

Mighell argues that Fair Work should be the next contest for the ACTU in their bid to further re-regulate the labour market. His call to arms is for an expanded union movement based on the benefits of joining his brand of industrial muscle, should it be appealing, especially to workers in say restaurants! He says:

I well remember when John Howard ushered in the 1996 Workplace Relations Act. Peter Reith was industrial relations minister and the ACTU denounced the legislation as the ultimate, anti-worker evil. Union anger was at boiling point and Reith was demonised at every turn. Now there is a deafening silence from the ACTU as Labor governs and workers' rights and conditions are attacked.

This view is symptomatic of a wider longing among many unionists and Labor “true believers” for a return of the power that unions had in the 1970s. The kind of power that saw coal mining unions in Britain shorten the availability of electricity to factories to three days a week during the early 1970s strikes there; the kind of hard power that can only come through bitter strikes in key economic sectors.

Mighell adds:

The truth is that Howard's laws at the time, as bad as they were, gave workers and their unions a much better go than Rudd and Gillard's Fair Work Act. When Howard controlled the Senate, he then took it too far and paid the ultimate political price.

That former Prime Minister Howard overstepped the mark with WorkChoices is self evident from the 2007 election results and the general polling on industrial relations. Yet, Kevin Rudd’s Labor sought a carefully crafted middle ground in opposition and indeed the orchestration whereby union leaders like Mighell and Joe MacDonald were stripped of membership masked an overall unwillingness of Rudd Labor to take on the more extreme elements of the trade unions that have substantial power in the Labor Party.

Like many true believers, Mighell genuinely believes in the orthodoxy that a very powerful union movement has created a fairer Australia. His politics and his union are a mechanism to achieve wage rises for his workers, whether they are affordable to business or not, and he does not recognise his danger to wider society. He wants the insiders, his union, to be able to more actively set wages for his members, in spite of the “side effects” this might cause to outsiders like the unemployed and small business.

It is hard to imagine what Mighell wants when the Maritime Union of Australia achieved a $50,000 increase over three years for its members in ports serving the oil and gas industry in Western Australia without any obvious productivity trade-offs. This in spite of Fair Work being worse for workers than Howard’s 1996 laws!

More than 50 years ago “social market” inventor and former German Chancellor, Ludwig Erhard, saw rent seeking as the biggest threat to prosperity and a better distribution of wealth. For him, this was no simple workers versus profits divide, indeed he saw that markets would, over time, deliver the greatest wealth dividend and provide democratic underpinnings to the fragile post-war German society. He therefore saw reform of price controls on wages, rents, foodstuffs and materials as the removal of undemocratic institutions that also inhibited better functioning of the economy benefiting workers and business alike.

Erhard is reported to have said at the time: “I hope you don’t misunderstand me when I speak of a social market economy. I mean that the market as such is social not that it needs to be made social.”

And yet, 50 years on, Fair Work enshrines an outmoded view that markets inherently mean inequality and the best way of getting “balance” is by the powerful hand of regulation. Mighell sees balance as Labor caving into the demands of big business. Yet in the same breath, we see evidence such as the case of the school children who cannot work after school because the relevant award has a minimum three-hour shift.

While in practice most small businesses will probably ignore the minimum three-hour requirement and keep their kids on in after school jobs, this is still the undemocratic nanny-state gone mad. It is the powerful regulator making “decisions” when workers and bosses have agreed “fair” terms. This looks to be an emerging hallmark of Fair Work Australia’s interpretation of the National Employment Standards and the new awards. This could be an overreach, though not as extreme as Howard’s WorkChoices from the other side, but certainly out of kilter with the wishes of Rudd’s working families.

According to Mighell, Rudd Labor “caved-in” to business demands, yet from the point of view of after-school casual workers, such rules and powers are an inflexible restraint on their capacity to participate in the labour market.

This is the space that a re-vitalised Tony Abbott-led opposition is trying to take and one that Rudd Labor should shut down by getting to first. Whether Abbott can steer a course that supports more flexibility without diminishing worker’s pay will be his test.

In recognising that 2,600 awards needed to be reduced to 122, Rudd Labor has understood that awards stop innovation and flexibility in industrial relations.

So, taking this argument to its logical conclusion, there is no reason that the 10 National Employment Standards along with the award wage rates (rather than the conditions) cannot act as an appropriate safety net for workers. Keeping award wage rates would retain penalty and overtime rates but remove the other conditions applying in awards. For Labor this would be a more ideal position than the one they are in.

The centre ground of politics on industrial relations would protect workers adequately and will also remove the nanny-state overreach of such award conditions. People could also be encouraged to work through a negative income tax or tax credits, a real bargain from society that inequality is best solved by the tax and transfers system, not by the cold dead hand of the judicial regulator.

The Union dinosaurs may object, but it’s time for that fight to be had. This would be no return to WorkChoices: it would be the taking of the centre ground, benefitting workers in the service economy to participate and find work.

That working families want their children to move up in life is the very definition of the social market economy. That position is open in this election year.