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IR reforms herald prosperity

By Paul Gollan - posted Friday, 30 September 2005

While the Australian Council of Trade Unions is being urged to consider a 25 per cent increase in annual dues to combat the Howard Government's workplace changes, what is beyond argument is that Australia is on the edge of a new era in industrial relations.

Minister for Employment and Workplace Relations Kevin Andrews is expected within the next week or two to announce details of an IR package that will finally end a system that has governed the Australian workplace for more than a century.

The centrepiece of the package will be the creation of a new statutory body: the Australian Fair Pay Commission (AFPC) which will replace the Australian Industrial Relations Commission (AIRC) in deciding minimum wage rates in awards. It will be required to base levels on economic and labour market fundamentals rather than on ambit claims by vested interests. These include profit levels, labour market conditions, the business cycle and the level of youth unemployment.


It is important that the AFPC will also play a part in encouraging skills in the labour market by setting minimum apprentice and trainee wages.

Many in the business community have applauded the apprenticeship reforms announced by Prime Minister John Howard last week as a welcome relief to a skills-starved economy. A recent report by BIS Shrapnel predicts that the severe skills shortages and consequently greater labour costs will increase interest rates to 6.5 per cent in 2006, which underscores the importance of providing greater skills in Australia.

Business has argued that the relatively high-level apprenticeship wage used in state awards is a disincentive for employers in taking on more apprentices and creates ambiguities in apprentice pay, further undermining mobility and flexibility. This is especially important given the overall skills shortages in sections of the economy.

Providing the AFPC with a role of setting apprentice and trainee wages will encourage greater take-up of apprentices and increase skills capacity in the economy, leading to higher workplace productivity and a more affordable and sustainable apprenticeship system.

In the AIRC, unions endeavour to bargain up wages as a means to increase wage levels for those skilled workers in trades where unions have high membership. Union involvement also restricts the number of apprenticeships in order to increase the market rate for trades people and to increase over-award payments.

The result of all this is artificially high wages and a lack of skills in the labour market.


Changes to unfair dismissal laws will also be a major element in the forthcoming IR package and could be the litmus test for the eventual success of the reform package as a whole.

An important issue in the changed dismissal laws will be the definition of "employee". Will this include casuals and temporary workers in addition to the permanent part-time and full-time staff?

If an employee is defined as only one in permanent arrangements, it potentially increases the impact of the changes by exempting many businesses that employ a large proportion of casuals or temporary workers, thus excluding many more workers from unfair dismissal laws.

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First published in the Australian Financial Review on September 27, 2005.

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About the Author

Dr Paul J. Gollan is an associate professor, Department of Business, Macquarie University and an associate fellow in the Employment Relations and Organisational Behaviour Group at the London School of Economics. He is co-editor to Partnership at Work published by Pluto Press.

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