IR reform - these are not radical changes

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 proved 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. Therefore 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. So, while the reforms may be conservative, they aim to tap into radical underlying changes in society.