Workplace reform: inequity, more stress, less choice

Professor Pollin said, "There are many indexes that give a profile of a state's business climate [and] states that have a high WEI ranking provide an economic climate for business that is at least as attractive, if not more attractive, than states that are undesirable for workers".

Consider American retailer, and behemoth, Walmart. It typically pays below the minimum wage and actively discourages unionisation, even authorising supervisors to call senior executives if they believe staff are meeting at home with a view to forming a union. Wages are so low that many employees have to be funded by the taxpayer through income-support programs. In other words, Walmart’s profits are being subsidised by the average US citizen.

And recall that more than a decade ago then chairperson of President Clinton's Council of Economic Advisors, Laura d'Andrea Tyson, emphasised the importance of guaranteed rights of individual employees and Robert Reich, then Secretary of Labor, emphasised the importance of strong commitment to training and education and the institutionalisation of labour-management co-operation in improving skills and productivity which would pay off in higher profits and higher wages. (Alan S Binder (editor), Paying for Productivity, The Brookings Institution, 1993).

There is other experience: New Zealand, Ireland and Europe offer insights. New Zealand passed the Employment Contracts Act in the early 90s. As a result employers pushed individual contracts in 1991 and productivity and wages fell. Productivity rose by 5.2 per cent between 1987 and 1998 compared with Australia’s 21.9 per cent growth from 1990 to 1998. (Nick O'Malley, Sydney Morning Herald, July 21, 2005, reporting on a study by Paul Dalziel.)

Ireland, which has become the economic powerhouse of Europe has capitalised on a highly educated workforce. In the 1998 IMD World Competitiveness Report, Ireland was ranked first in the world for the "fit" between its educational system - with its high output of third-level graduates in computer science and engineering - and the needs of a competitive economy. According to recent analysis, "[P]ast national strategies for investing in education and training have paid off in terms of faster productivity growth and higher levels of productivity at the aggregate level, and higher earnings and employability at the individual level". (The boundaryless cluster: Information, communications & Ireland by Roy Green, James Cunningham, Imelda Giblin, Mike Maroney & Leo Smyth, Evatt Foundation November 2003).

Then there is Europe - high unemployment and slow growth - it is said. John Buchanan of Sydney University’s acirrt (speaking on ABC Radio National’s The National Interest  July 24, 2005) gave the example of German and British hotels. Germany runs four star hotels with half the staff of British hotels: hotels which are comfortable and have friendly staff. Employers have worked out creative ways to do this with less staff. But “as you reduce the minimum wage structure, you simply give employers the soft option and don’t make them confront the hard issues, which is how to actually produce more with less”. As to high unemployment in Europe: “The other thing that’s really retarded employment growth across Europe has been the very contractive monetary policies of the European Central Bank.” So it isn’t high wages or unionisation after all!

Sydney Morning Herald economics editor Ross Gittins’ recent articles have shown the changes will do nothing to reduce the complexity arising from multiple systems of state and federal employment arrangements (according to Professor Mark Wooden, Melbourne University's Melbourne Institute), and handing over wage setting to the Fair Pay Commission likely would lead to an erosion of the minimum wage over time (October 10). Wooden believes that only very small businesses are likely to be put off by the unfair dismissal provisions. Larger companies have the resources and personnel to avoid selection mistakes and to ensure people are sacked only after due process (October 15).

It is highly uncertain how far the minimum wage - asserted by some to be too high at almost 60 per cent of median full-time earnings - would have to fall before the attraction of employing more people would kick in (October 15). And the ageing population will lead to falling participation and slower employment growth which will lead to upward pressure on wages (October 17). Gittins has also consistently drawn attention to the need for better balance of work life and family life, a balance shown up by studies of happiness (studies not to be laughed at) but discouraged by the reforms.

In the Australian Financial Review of October 10 economic commentators gave their opinions. Productivity gains arising from the workplace changes would be marginal compared with increasing investment in upgrading workforce skills, new infrastructure and reviving other micro-economic reforms; the reforms are supported more by anecdotal as opposed to “hard” empirical evidence and recent declines in productivity “could partly be blamed on the lack of "any significant productivity growth-enhancing reforms since 1998, and to two areas in which government policies have seriously stifled productivity security and corporate governance" (ANZ chief economist Saul Eslake).

Skill shortages should be addressed and attention given to retraining or immigration (Commonwealth Bank's senior economist, Michael Workman): "productivity should be continually enhanced by more education and training, which isn't happening enough" (HSBC chief economist John Edwards).

(While) Howard continues to rattle on about boosting productivity and generating more jobs and higher wages, Heather Ridout of the Australian Industry Group bemoans the recent decline in productivity, Peter Hendy of ACCI complains the reforms don’t go far enough and the Business Council calls for workplace reform along with reduction in government red-tape, tax cuts and infrastructure renewal. (How can you have tax cuts and infrastructure renewal?). The comment of John Buchanan is critical: “As you reduce the minimum wage structure [can we add, “or other simple changes”], you simply give employers the soft option and don’t make them confront the hard issues”. A Business Council report of years ago (now forgotten by BCA Presidents Morgan and Cheney) said, “emphasis is increasingly being placed on teamwork, workplace cultures with mutual trust, and the alignment of personal and organisational objectives and values”.

Through these reforms Australia will be driven down economically to a marketplace dominated by minimum conditions and low wages, a marketplace in which Australia cannot compete, a marketplace affected by currency exchange rates over which we have no control. Clear thinking, detailed study and careful analysis are ignored by Howard, Andrews and their supporters. Meanwhile the need for education and workplace co-operation will be passed by. The workplace reforms are another Howard Government policy based on untruths at best and downright lies at worst.