Will workers have Moore's or less bargaining power?

Des Moore is one of the more prolific supporters of “free market” industrial relations. He runs the Institute of Private Enterprise and is an active member of the HR Nicholls Society. Moore misses no opportunity to denigrate the role of the Australian Industrial Relations Commission and refutes the fact of bargaining inequality for individual employees. He repeated his assertions in The Australian, June 13, 2005:

… the tribunal has a long record of decision making in workplace relations based on its self-promotion as an independent umpire supposedly needed to correct an imbalance of bargaining power between employers and employees.

Its latest decision is partly rationalised by asserting that many employees have low bargaining power and low paid ones are unlikely to be able to demand above award pay and conditions. By ruling out the operation of market forces the commission awards itself a role as protector of the low paid.

Des Moore says, “It is surely clear that there is nowadays no serious inequality of bargaining power in favour of employers and no prospect of that developing”. His argument that there is no inequality of bargaining power between individual employees and employers is this:

• Employees have available a range of alternative sources of income either from employment or from social security or from both;
• The bargaining parameters have been fundamentally altered by the transformation in the economic and social structure over the past 25 years and so regulation is unnecessary;
• The combination of a limited supply of labour and of competition between employers prevents exploitation. For example, sub-contractors on building sites that actively compete against other sub-contractors earn an average annual wage of around $40,000 without any “protection” other than their own bargaining power and trade skills;
• Employers increasingly see employees more as partners and employees are increasingly accepting that there is a mutual interest in establishing a co-operative workplace.

The other side of Moore's argument on bargaining power is that the balance lies against employers. He argues, “Despite their greater wealth, individual employers are not generally able to dictate terms and conditions of employment or to ‘compete down’ the general wage level”. Furthermore he argues employers own bargaining position is limited because of their vulnerability to “workplace disruption or underperformance”.

Moore concedes there is a need for suitable employment agreements, particularly against the minority of “bastard” employers who may try to take advantage of employees. He proposes a voluntary arbitration model along the lines of the UK Advisory Conciliation and Arbitration Service.

Moore also argues that common law is a coherent and viable alternative to regulation. Again, he relies upon the contention that there is a power equity between employer and employee: “The key principle under common law is that the worker and employer should basically be free to decide on the content of their relationship because both parties expect to benefit from entering a contract.”

What does Moore base his argument on? Before the House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, he argued, “The labour market operates in an environment where labour demand and supply are equated by competition for the labour services of over 10 million workers, between over a million businesses” (emphasis added).

According to Moore, competitive labour market conditions in the 1990s led to stability in the share of national income going to labour while average real wages increased strongly (compared with most of the 1980s and 1990s), and this provides a basis for challenging the concept of inequality of bargaining power. Employers, on the other hand, are doing it hard:

Take also the “imbalance of bargaining power” argument. There are more than 1.1 million Australian businesses with virtually no scope to exercise monopsony powers. They compete for the services of a workforce of 10 million, which has as a backstop generous social security. No valid argument can be mounted that, without prescriptive regulations, employers as a group would force wages down or impose unfair conditions on their employees.

Moore's vision is perversely utopian and based on a uni-dimensional vision of a perfect labour market without the hindrance of regulators and trade unions or the vagaries of the economy. Moore's labour market takes no account of such factors as the skills, occupations, regional distribution, personal characteristics and age of workers. The labour market is neither unified nor homogenous. His supposition that the bargaining power of employees and employers is equal is naive. If he really believes in this myth, Moore has no idea what goes on in workplaces. Individual contracts (Australian Workplace Agreements) are rarely negotiated with individual employees.

The reality of the system the Howard Government intends foisting on most Australian workers, and which Des Moore says does not go far enough in its deregulation, is a “No Contract - No Start” system. This completely abrogates the Liberal Party’s traditional commitment to freedom of choice (pdf file 128KB) and Moore's apparent support of that principle.

Mitchell and Fetter (pdf file 312KB) provide an empirical case against the power equity myth in their analysis of the substantive content of Australian Workplace Agreements that Des Moore would want to be further deregulated. In their study of 500 AWAs, they found there was overall an emphasis on cost reduction rather than productivity enhancement. This would suggest that employers were having their own way rather than there being a balanced give-and-take in the process of negotiation:

… the Act pays lip service to the idea that an AWA is a result of negotiation: it provides for the parties to appoint “bargaining agents” and to take protected industrial action in the course of negotiations. However, the Act anticipates that more commonly the employer will draft the AWA and present it to the employee on a take-it-or-leave-it basis. The employer is required to give the employee a copy of the AWA together with an information statement prepared by the EA and must explain the effect of the AWA to the other party. There is a minimum cooling off period (five days for existing employees; fourteen days for new employees) before signing. The only recognition of the imbalance of bargaining power is found in the legislative prohibitions against duress, misleading information, threats and intimidation.

The answer to the question at the head of this piece is that Des Moore's utopian vision of a power balance between individualised employees - especially those on poverty wages and without job security - and employers propagates, through endless iteration, a myth about the employment relationship. That myth is self-serving for managerial fundamentalists and their acolytes.

For most Australian workers it is a doubly cruel myth as John Howard slashes away at worker protection by further undermining the Commission’s role.