The politics of IR policy

The subsequent punch-up left an ugly public impression and bodes badly for the future. Business leaders can be powerful political enemies because they have easy access to, and credibility with, the media and their warnings of economic doom can frighten many “little capitalist” middle-class voters.

Third, Howard, the supreme pragmatist, backed down and watered down the WorkChoices legislation, presenting himself as a listener who responds to public opinion. Together with Peter Costello’s Budget, which targeted low income workers, this may help him win back some battlers. The changes to WorkChoices also gave the Coalition another pretext to use taxpayer funds to advertise its new laws (often misleadingly) - a corruption of democracy, but one that voters don’t seem to get too fired up about.

As a consequence, Rudd lost some of the political momentum on IR. This is not yet reflected in opinion polls but it could be a slow burner.

Labor now needs to urgently clarify and simplify its industrial relations policies and make some concessions to business on individual agreements, without retreating on basics like unfair dismissals, the right to collective (union or non-union) bargaining if requested by a majority of workers, and a broader safety net for workers.

Once this is done, Labor can again argue its “fairness” case forcefully on several fronts.

Although Howard’s new safety net for people with incomes below $75,000 has not yet been properly explained (for example, what kind of “non-money” compensation will be acceptable?), it is clear that it will be full of holes - those already hit in the last twelve months will not be compensated, firms “experiencing economic difficulty” will be let off the hook, and workers will be given no greater control of their working hours.

Labor is also entitled to question the real independence of the renamed Workplace Authority, given its performance so far as the Office of the Employment Advocate.

If the Government is serious about making employers comply with its new Fairness Test (which it is saying “will be conducted in a similar fashion to the old no-disadvantage test”), the enforcement and monitoring process - through the Workplace Authority and the newly created Workplace Ombudsman (a renamed and beefed up Office of Workplace Services) - will require an army of bureaucrats to assess each case carefully. This will drive business mad, creating a real risk that either the new changes will not be policed effectively or the “no disadvantage” provision will be quietly abandoned after the Federal election.

Labor should also be able to promote its alternative strategy of investing in human capital as a more socially acceptable and productive way to enhance workforce participation. This is not necessarily incompatible with Rudd’s “conservative” fiscal goals of not increasing tax relative to GDP and no net borrowing, over the economic cycle, even for capital projects. Apart from rearranging Budget priorities, Labor could promise that any surplus (windfall) revenue in the future (and any net borrowing during a downturn in the cycle) would be used principally for investment in human capital rather than for tax cuts. This would be good economics as well as being in tune with community preferences.

In short, the politics of IR remains potentially positive for Rudd. But it is much muddier than a month ago. A further complication is that the Murdoch press has decided to brutally and unashamedly campaign against Labor, especially on IR. Editorials are of no consequence but the way news is presented each day (especially on page 1) does have a significant influence on public opinion.