Wage pressure danger lurks on both roads

In a speech to the Institute of Public Affairs last Thursday, the Prime Minister reaffirmed what most of the electorate took for granted: that one of the key areas of policy difference defining the Coalition and Labor Party is workplace relations.

According to the PM, the Labor Party policy platform will be inflationary with obvious consequences for interest rates and jobs. He highlights three particular features of their policy for attention: removing the option of Australian Workplace Agreements; forcing employers into unwanted collective agreements; and reimposing unfair-dismissal laws on small business.

Little more needs to be said about unfair dismissal laws. New laws will effectively raise costs for small business and so adverse effects on hiring could be expected. The magnitude of such effects, however, is anyone's guess.

In recent times it has been AWAs that have attracted most public scrutiny, especially from the union movement. It is my view, however, that AWAs are no longer something that significantly separate the two parties.

While it is clear that the increase in uptake of AWAs has been one of the major achievements of Work Choices (according to the Workplace Authority, more than 9 per cent of employees are covered by AWAs), the Government has already sown the seeds of their demise.

AWAs were introduced as part of the Workplace Relations Act of 1996, but for most of the next decade employers showed relatively little interest in them. Work Choices set about increasing the attractiveness of AWAs to employers, both through making the approval process simpler and, more importantly, by removing the "no disadvantage test". That is, provided the agreements met the five basic minimum standards with respect to wages, hours and leave, and provided the employee signed the agreement, they would be approved.

Employer interest in AWAs has, not surprisingly, grown sharply since March 2006. It also should be no surprise that there was a serious public backlash, led by the union movement. The Government has subsequently watered down its approach to AWAs, effectively reintroducing an old-style no-disadvantage test in May of this year.

And if that wasn't enough, it replaced the Office of the Employment Advocate with a new, larger and much better resourced Workplace Authority, assigning it with the responsibility of checking that all new AWA applications complied with the new fairness test. In contrast, under the old model the employment advocate was generally only able to provide a much more cursory examination of most applications.

I can only conclude that in the event the Coalition is returned to office, the interest in AWAs will gradually dwindle, returning to pre-Work Choices levels. Furthermore, while Labor will abolish statutory individual contracts, they are not entirely abandoning individual approaches to agreements.

All workers earning more than $100,000 a year will be free to reach an agreement on pay and conditions without reference to awards, while workers on collective agreements will be able to negotiate individual flexibility clauses (though it appears they will be subject to a form of no-disadvantage test).

What about their respective approaches to collective agreements? Under Work Choices, agreements must be specific to firms or workplaces and unions can be involved only where they have members present. Under the Labor policy, called Forward to Fairness, the same is mostly true. Nevertheless, the document released in April this year suggests Labor will allow agreements to extend beyond the boundaries of individual firms, which potentially would represent a return to the bad old days of multi-employer bargaining that the PM warns us of.

Specifically, it is stated in Forward to Fairness that "where more than one employer and their employees or unions with coverage in the workplaces voluntarily agree to collectively bargain together for a single agreement, they will be free to do so".