The politics of IR policy

The politics of industrial relations has seesawed since the promulgation of WorkChoices in April 2006.

Initially, the Government left themselves exposed to attack by grossly overplaying the economic benefits and under-playing the social costs and insisting there was no other way to achieve good employment outcomes for fringe workers.

The international experience makes it clear that once a country achieves the high level of labour market freedom which Australia enjoyed prior to 2006, any further employment gains from deregulation are likely to be small at best. Last year’s improvement in workforce participation rates (0.4 per cent) is not much of a guide as it is not far out of line with the trend growth of earlier years; and the regional variations in participation improvements suggest the resources boom is clearly the main driver.

As for productivity (output relative to inputs), one should not read too much into last year’s slow down (with growth at less than 1 per cent) as there are so many variables at work in the short term - but it is not that surprising, as there is no evidence from overseas to suggest that individual bargaining leads to more sustained productivity gains than collective (union or non-union) enterprise bargaining, even in the medium term.

On the social front, the Government’s claim that WorkChoices would have no effects on the earnings or quality of life of low-paid working Australians was always laughable. International experience overwhelmingly shows that harsh measures like WorkChoices, which increase employer autonomy on a wide range of fronts, tend to hurt the most disadvantaged workers in the community (those with least bargaining power). And the evidence on the ground, although inconclusive, indicates that it is starting to happen here.

Then there was the Government’s claim that WorkChoices offered the “only way” to achieve good employment outcomes for low-educated, low-skilled workers. This was nothing short of dogma. Alternative policy strategies focused on investing in human capital (such as through education, training and early childhood development) have been shown to have comparable or better effects on workforce participation (albeit with higher taxes).

When a government engages in such over-the-top political spin, it becomes vulnerable to attack. Labor and the Trade Unions, while leaving unchallenged the “no other way” argument (perhaps because it does not easily lend itself to the cut and thrust of political debate), did a good job over the past 12 months of undermining the economic and social claims of the Government. The recent refusal of the Howard Government to publish the available information on individual bargaining outcomes had the effect of heightening suspicion that it was hiding something.

In this climate, industrial relations (IR) became a potential vote-switching issue for many Australians. Helped along by the election in December 2006 of a fresh looking, articulate and intelligent leader, the ALP took a big lead in the polls.

Then, a few weeks ago, the IR debate started to go sour for Labor.

First, as details of Labor’s IR proposals began to be released, they proved so complex and so full of ambiguities that they easily lent themselves to misrepresentation - arousing fears that their proposed IR structure was “unconstitutional”, that “compulsory unionism” was being introduced, that unions would be allowed to engage in “pattern bargaining”, that the use of arbitration to settle workplace disputes would encourage “union militancy”, and so on.

Most of these fears proved quite wide of the mark but they gave Howard and his Workplace relations Minister Joe Hockey an opportunity to launch their own counter-attack.

Second, Australian Business lost its temper. While it would never have been easy to win the support of business leaders - most of whom are red-hot Coalition supporters - it might have been possible, with sensitive handling, to neutralise many of their concerns. However, business was not given a chance to comment on the detailed proposals before their release and became really concerned about some of them, so it went on the warpath.