What price economic growth and progress? Taylorism revisited

Older people remember the Charlie Chaplin film, “Modern Times”, Chaplin emerging from a manhole with a red flag to unknowingly lead a march of striking workers. It is easy to think we are not much further advanced in our understanding of industrial relations, getting a productive and satisfying workplace and intersection of work with life.

In July the Business Council of Australia (BCA) released a report commissioned from Access Economics. It asserted that the ALP Industrial Relations Policy had negative economic consequences: the interventions proposed would mean significant losses of jobs. Access Economics’ Report assumes that present economic wellbeings are due to the application of recent workplace reforms including particularly individual agreements on wages. A key paragraph in AE’S report says:

“Indeed, economists are firmly of the view that efficiency is maximised with appropriate micro (and, to a lesser extent, macro) policies including a flexible labour market. Whilst the current Australian workplace relations system is working well… the IMF and others have suggested improvements to Australia’s labour market flexibility that would further benefit Australian living standards. These suggestions for reform, if implemented, would take the current system in the opposite direction to that proposed by the ALP workplace relations platform.

“Greater flexibility in workplace arrangements allows for a greater supply of flexible jobs from employers (where there may be no job otherwise available). That is vital, as the demand for such jobs is growing, as Australians attempt to gain a better balance of family, education and other commitments. This flexibility is also important for those easing themselves into retirement or caring for ageing parents.”

Chairman of the BCA’s Employment and Participation Taskforce Michael Chaney (Managing Director of Wesfarmers and just appointed to the Board of the National Australia Bank of which he is to become Chair in September 2005) lauded the AE Report’s conclusions. “The research reveals the major risk from implementing such a platform will be a weakening in the productivity growth achieved by Australia in the last 10 years.” The AE report concludes that the re-empowerment of the Industrial Relations Commission and proposed changes to the Workplace Relations Act threaten to reverse important cultural and attitudinal changes that have enabled employees and local workplaces to be more accountable for performance, productivity and rewards.

Mr Chaney continued, “Moving the Federal system closer to that operating in the States will truncate the flexibility available to employees and employers – in the same way that abolishing AWAs will limit opportunities for employees and employers.”

But had he read the report?

I want to focus on two issues. First, does the data in the Access Economics Report actually support the assertions it makes. Second, what do we know about the way workplace conditions influence firm performance.

Do the data use by Access Economics support the conclusion?

The short answer is no. This is just as important as the arguments about what it is that does lead to productivity because it would suggest, yet again, that there are some serious flaws in the way that political leaders and business people consider evidence.

Two graphs in Access Economics’ report purport to show a relationship between productivity growth on the one hand and flexible contracts (positive) and reliance on awards (negative) on the other. In both cases there is in fact no statistically significant correlation between the variables. And in both cases the regression line does not have a statistically acceptable level of significance.

In the tables as in the graphs AE promotes a relationship between reform and productivity growth. Thus, a table listing annual growth in GDP per head in different countries is headed “reform has seen growth in Australian living standards rebound” and a graph of the data is similarly labelled. Australia’s performance has varied but the table shows little difference from the other countries except for Ireland and Finland, differences that are not explained. What is their IR regime? To suppose that the only, or even principal, reason for productivity variation is wage flexibility does seem somewhat simplistic considered across a wide range of industries, to put it mildly.

These recent statements of the Business Council can be contrasted with previous BCA positions. Four years ago, Campbell Anderson, then President of the BCA, launching “A Unitary Industrial Relations System: Unfinished Business of the 20th Century” in November 2000, said, “The days of master/servant relationships are long gone and the boundaries between managers and other employees are increasingly blurred. Emphasis is increasingly being placed on teamwork, workplace cultures with mutual trust, and the alignment of personal and organisational objectives and values.”