Labor’s IR policy creates a dangerous apartheid

So much for democracy. So much for individual choice. So much for individuals determining their own futures. So much for individuals choosing whether or not to engage or be involved with unions.

But Labor does not care about choice or democracy. It cares about jobs for the union comrades.

If this policy achieves nothing else for the Australian people, it will achieve that. You won’t have a choice in the matter.

But even more importantly, the imposition of the arbitrary $100,000 figure removes one of the greatest powers an employee has: to bargain on their own behalf on the back of their own talent for better pay.

This one-size-fits-all policy ignores the aspirations of a young and upwardly mobile middle class to negotiate on their own behalf without the interference of union organisation to ensure they are rewarded for their personal performance and not ham-strung by the inefficiency of others.

Labor’s policy reinstates the unfairness of collective bargaining. Collective agreements prevent individuals who are more successful, more productive and more highly skilled from earning more money: money they rightly deserve.

The theory is well-supported by empirical evidence. Studies have shown (PDF 636KB) that the presence of unions in an economy reduces the returns to skilled workers in an economy. In particular, the wage differentials between skilled and unskilled workers and the private return to education are reduced when unions and collective bargaining are present. This means that the return on investing in your own skills and education is diminished because collective bargaining reduces the ability of individuals to negotiate returns for their labor based on their productive capacity and performance.

Labor’s policy also ignores the fact that employers respond favourably to individual bargaining. For example, by the use of incentive arrangements to promote productivity Telstra says it has experienced significant increases in productivity in many parts of the business.

Recently, media commentators, most of whom have become extremely sympathetic to Rudd and the Labor Party, have been eager to point out that the diminishing power of unions over the past years due to declining union membership will mean that unions won’t have that much power in the collective bargaining process carried out under Labor’s policy. It is said, therefore, that a return to a collective bargaining regime will not necessarily be union-dominated.

This is not the case. Rudd’s policy restores the power that the unions have lost by the decline in membership. It enshrines union involvement in the collective bargaining process since non-union agreements will only be available to an enterprise where no union members are employed. As long as one employee is a member of a union, the union will have a role in the collective bargaining process. While Labor has been at pains to express that unions have “no right” to enter employment premises, in the context of collective bargaining the union will be the central player, regardless of the interests of the employees who are not union members.

But collective bargaining under Labor’s policy is not only bad because it removes individual choice - which is reason enough to oppose it - collective bargaining intrinsically bad. They result in higher wages at the expense of a number of parties.

First, consumers. Under collective bargaining consumers pay higher prices for goods because the costs of higher wages are passed on and the wage rises are not met with more efficient production.