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Where do we want workplace relations to be in five years time?

27 February 2005 - Full text of Minister Kevin Andrews' speech on February 25 2005

Where do we want workplace relations to be in five years time?

Speech To Committee For Economic Development Of Australia
Zinc, Federation Square, Melbourne

"The people's good is the highest law." (1)

Ivan Deveson, Ladies and Gentlemen can I start by acknowledging the important work that CEDA do encouraging Australia’s economic and social development through discussion, events such as today’s and research such as CEDA’s 2005 Economic and Social Overview.

I am pleased that today’s forum addresses what I regard as a very important issue with manifest economic and social consequences, namely what is the best system of workplace relations to ensure that Australians enjoy continued prosperity in the years ahead.

Introduction

Australians take pride in giving and receiving ‘ a fair go’ and Australia’s workplace relations system has its genesis in these sentiments. Over a century ago, these aspirations of our founding fathers were evident when one of them wrote that the new system "…usher[s] in a new province for law and order … conciliation, with arbitration in the background, is substituted for the rude and barbarous processes of strike and lockout…; all in the interests of the public." (2)

Those involved in the field of workplace relations remain passionate about what they do because workplace relations laws and practices affect the daily lives of all Australians.

The workplace relations system is inextricably linked with the social good of job creation, which in turn is a foundation and expression of human dignity. Why, because "…[t]he laws… which regulate rights and responsibilities between private employers and employees affect jobs, investment, productivity, competitiveness and economic activity…[ and] these all affect living standards." (13)

Responsible government is about making the necessary reform so that, in a world of relentless competition, with a rapidly ageing population and looming demographic challenges, generations to come will have jobs and a high standard of living which we would want for them.

As a result employment and maximising the opportunities for those without work to find it should always be a primary focus of national policy in this important portfolio.

For me and for the Howard Government there can be no higher goal. Indeed the greatest gift we can give to future generations is a future.

Since 1996 the Howard Government’s workplace relations policies have contributed to a stable and low inflationary climate. Combined with higher productivity, this has ensured increasing real wages and low interest rates for Australian workers and their families.

For almost a decade now the Commission has operated under the provisions of the Workplace Relations Act. The intention was to achieve a statutory framework for promoting the workplace flexibility necessary for increasing productivity and economic growth through agreement making.

To this end the Workplace Relations Act gives primary responsibility for workplace relations and agreement making to employers and employees at the enterprise and workplace levels. However, the Workplace Relations Act was never meant to be a definitive statutory framework but an evolutionary step to a more dynamic and flexible labour market.

During last year’s election campaign the Howard Government committed itself to the necessary task of ongoing reform of the workplace relations system to improve flexibility and productivity which are the key to jobs.

The Government recognised that reforming the workplace relations system was an ongoing task in order to ensure that more Australians were able to share in the benefits of our current strong economic growth.

The Howard Government is committed to further reform of the workplace relations system to make it as flexible and productive as possible.

Where have we come from?

The economic reform process of the last 20 years has demonstrated that the Australian economy is more than capable of embracing and adapting to substantial change.

During this period, we have seen the deregulation of financial and capital markets, a significant reduction in the level of protections for industry, a freeing up of markets for goods and services and workplace relations reform. Of these reforms, it is in the area of workplace relations that the job is only half done.


Our current system is " still burdened by the restrictions of 30 years of inertia caused by timidity, self-interest or obstructionism." (4)

Before turning to why ongoing reform of our workplace relations system is necessary it is worth considering the circumstances of the birth of the federal system in the context of the current debate about the next phase of its evolution. The original limitations placed upon it meant its role and focus was necessarily restricted. These limitations still shape its current shortcomings.

No national government in the twenty first century would seek to establish an institution which limited itself to industrial disputes extending beyond the borders of more than one state. No government would limit the powers of this institution to conciliation and arbitration. No government would introduce a system which was predicated on the creation of disputes in order for them to be solved.

These were the inherent limitations placed on the original system, and the inherent limitations which still inhibit it now.

For much of the last century, these oddities of the system were accepted rather unquestioningly. Industrial relations was the one facet of the economy that had its own unique culture and way of doing things. Its very complexity seemed to infuse it with some sort of unique mystique.

As long ago as 1983, in his ground-breaking article "The Industrial Relations Club", Gerard Henderson acknowledged that the age of the system…was seen as a convincing argument against its reform.

Despite the introduction of the Workplace Relations Act in 1996, which among other things provided greater scope for individual workplace agreement making, Australia still has in place a system which is predicated on the principles developed in the last century and for the ‘old economy’.

This was the old economy which was heavily regulated and protected, providing a central and dominant role for government, trade unions and big business.

In such an environment, protected interests flourished and there was little if any need for the Australian economy to be either competitive or productive. Wages were set through a centralized system and commensurate increases in productivity and efficiency were not considered necessary.

Workers were provided with minimal choice or flexibility in how they determined their wages and conditions. The majority belonged to trade unions and this afforded unions a mandated and privileged role in the system.

Unions behaved as any rational individual or organization would do in such a position and they utilised their power. The problem was that this power led to the institutionalization of restrictive and unproductive work practices which to this day still impede the Australian economy from reaching its full capacity, both in respect to output and other economic and social goals, such as lowering unemployment and increasing workforce participation.

By the 1970’s Australia began to pay dearly for its lack of competitiveness and productivity. The need for greater efficiency and an open and competitive economy became a priority. However, economic growth faltered badly with real per capita incomes growing at less than 1% in the second half of the decade.

Up until the late 1980’s and early 1990’s business also played its part, displaying little urgency or willingness to be innovative in the way they organized and ran their workplaces. Such innovation was after all unnecessary given the level of protection from international competition that many sectors of the Australian economy enjoyed. Despite the dissenting voices of the few who could see that this was a recipe for economic stagnation, the status quo remained.

It is easy to look back with the benefit of hindsight and criticize governments, unions and business for not initiating major structural reform earlier. However, many of the leaders and decision makers of that era were creatures of the old economy and its static institutions.

The system was rooted in the paradigm of disputes which privileged third parties over employers and employees and totally overlooked what should be the aim of any Government looking to the needs of future generations, namely to actually encourage the creation of jobs for those outside the workforce and to reduce regulatory barriers to employment.

The goal of the system in 1904 was simply to conciliate and arbitrate the rights of existing employers and employees. One hundred years later the goals of our workplace relations system must be much broader. They should be focussed on creating work for those who want it, ensuring that the system encourages and rewards productive and efficient work practices, and adequately reflects the national nature of the modern Australian economy.

As we consider the ideal shape of the future workplace relations system in 2010, we need to consider future challenges facing the Australian economy and devise practical and workable solutions to these challenges.

As we ask ourselves the question ‘[W]here do we want the workplace relations system to be in five years time’, we must move beyond the thinking which said that conciliation and arbitration somehow enjoy some sacrosanct immunity from economic progress and go back to first principles by asking what are the fundamental goals of a workplace relations system for the twenty first century. What sort of workplace relations system should we have by 2010?

After a decade of sustained economic growth and a dramatic reduction in unemployment to the lowest level in almost 30 years, Australia now has a once-in-a-generation opportunity to lock in low unemployment and higher workforce participation for decades to come, but we risk missing this opportunity if the workplace relations system and its institutions fail to keep pace with the evolution of the economy. Why? Because:

"[D]espite past reforms aimed at making Australia’s workplaces more flexible and responsive to change, overly complex, operationally detailed and prescriptive awards remain at the heart of Australian workplace relations." (5)

 

These are not the remarks of a politician during a media interview or debate in parliament but the representatives of organisations that employ in excess of 1 million Australians, the Business Council of Australia. A recent editorial from the Australian Financial Review neatly illustrates the case for ongoing workplace relations reform:

"The historic shift away from centralised determination of wages and conditions to enterprise bargaining grew out of the deep recession of the early 1990’s…The case for further workplace reform is that we still have a long way to go to catch the most productive countries in the world, that global competition is becoming more intense and that we have to entice more people into the workforce to compete in such a climate with an ageing population. The only way to do that is to reduce and eventually eliminate barriers to the creation of jobs-prescriptive awards, unfair dismissal laws and arbitral interference in agreement making, disputes and minimum wages.." (6)

In the context of this debate and where we want the workplace relations system to be in five years time much is often said of the need to focus the workplace relations system on fairness. This is, and must be a focus of Government but, and as the Business Council of Australia recently argued, an emphasis on fairness only leads to regulatory excess and inefficiency that reduces productivity and discourages job creation.

"…[R]egulatory excess in the name of fairness is misconceived. It protects those in jobs at the expense of those without-who are most at risk of poverty-and it ultimately reduces the wages of those in work by hampering economic growth. The case for finishing the job of deregulating the labour market actually rests on fairness." (7)

No government, especially a government that wants to maximise productivity, increase workforce participation and secure high wages, should introduce regulation which creates barriers to people being able to enter the workforce.

Michael Chaney, Chairman of the Business Council Taskforce on employment and participation put the challenge facing us all, this way:

"Inevitably those with a vested interest in retaining what is left of the old system will oppose these proposals [for further reform]. More deregulation, they’ll argue will result in a "dog-eat-dog" workplace and a "race-to-the-bottom" for wages and conditions. Most Australians’ direct experience of workplace deregulation is to the contrary. The fact is, if we do not act now or if we wait until our economic performance wanes we will have fewer choices." (8)

As a Government, the most important challenge we now face in the field of employment is that of making sure that all those who can work are properly encouraged and able to do so.

The current system still focuses too much on only one pillar of employment policy, namely the determination of the relationship between the employer and the employee and, in particular, the mechanisms for settling disputes and fixing wages and conditions.

As such, it overlooks the other equally important pillar of employment policy – that of ensuring work for all those who are capable of it. Not only is this an ethical responsibility, it is an economic imperative as our population ages and growth in the workforce contracts.

The Australian Chamber of Commerce and Industry recognises that "[a]s we enter 2005, a conjunction of …events [ such as the lowest unemployment since 1976] provides a unique opportunity for Australia to do something which it has not achieved since the 1950’s – lock in a sustained cycle of high employment and low unemployment through…" (9) further reform to the labour market.

 

The Howard Government is determined to pursue further change to maximise the opportunities for increasing workforce productivity, participation and higher wages. Therefore, with this in mind, let me address the question of today’s function.

What sort of system should there be in 2010?

In the twenty first century we should be mindful that future productivity growth will depend on our ability to build flexible and innovative enterprises around more highly skilled workforces. The successful management of workplaces and work design will require greater attention to the individual needs of an increasingly diverse workforce. In this environment a one-size-fits-all approach is inappropriate and to continue to hanker for a system of detailed industry wide awards is unrealistic.

In approaching this task we should remember that this is not about the pursuit of abstract ideological goals but about implementing practical responses to the challenges that Australia faces in achieving greater workforce participation, greater productivity and a national workplace relations system that accurately reflects the reality of a national economy.

In five years time I would hope that:

Australia would have a system which reduces the barriers to employment and the costs of employment and which has as its fundamental aim the growth of Australia’s productive capacity and the provision of work for all who are capable of it.

there would be a system in which employers and employees are encouraged to determine their own working arrangements by looking to their common interests, rather than being stuck in an adversarial system which encourages the proliferation of disputes and their referral to third parties.

decisions as to the type of employment arrangements entered into, be they part-time, full-time, permanent or casual, or contractually based, would be left to the parties themselves at the workplace level.

there would be an agreement making system which:

ensured agreement making at the workplace was easier and more widely accessible;

reduced delays, formality and costs involved;

prevented unwarranted interference by third parties; and

removed barriers to the effective exercise of agreement making choices

employees would able to increase or decrease their working hours to suit their family commitments.

the union movement will work with employees and employers to:

recognise the requirements of a modern economy and labour market;

assist with the creation of an environment that improves the opportunities of union members being employed in higher paying jobs; and

bring about increasing compliance with the law and decisions of courts and tribunals (who knows maybe the construction unions will be the leaders in this area).

employees will have enhanced freedom of choice through the right to a secret ballot that will:

strengthen the accountability of unions to their members; and

provide a fair, effective and simple process for ensuring the right to protected action is not abused.

Australia would have a system with a simple and genuine safety net, rather than a complex system of prescriptive and competing regulations; and (last but by no means least)

the logic and reasoning underpinning a move to a national workplace relations system will have overcome the vested interests of third parties and static institutions.

In this regard I note that CEDA has said state and federal governments must come to "a new understanding" regarding responsibilities such as "industrial relations" . Let me address those comments in this way.

A national system by 2010?

It is true that a significant challenge that faces us as we look to 2010 is the need for a new system. We must address the increasingly untenable co-existence of multiple state industrial systems in conjunction with the federal system.

Much has been said about a having a single national statutory system to govern workplace relations in Australia. It is undeniable that having six separate legislative systems is often confusing, complex and costly. Much of the public discussion since this idea was floated has centred around state Labor governments preaching the supposed virtues of their own IR systems.

However, the question of whether or not state IR systems are working well fundamentally misses the point. In a modern national economy, the mere fact of overlapping state and federal systems is, in and of itself, a significant cause of inefficiency and economic roadblocks.

Corporations who operate in more than one state are frequently forced to contend with several inconsistent systems of workplace regulation. Even within the one workplace, many employers have to accommodate overlapping state and federal regulations.

If a national system of corporate and taxation regulation is desirable and achievable, then there is no reason why a unitary or national system is not just as appropriate to govern how those corporations employ their staff. If we are serious about pursuing a system whose focus is on increasing productivity and reducing complexity, then the issue of a national system must be addressed.

The current competing and complex federal/state systems just don’t make sense and now is the time to put in place a truly national system.

The current duplication of state and federal systems exists because of the priorities of the founding fathers in the 1890s, and the inherent limitations of the conciliation and arbitration power of the constitution. This should not be an acceptable argument for retaining such duplication in the year 2010 and beyond.

It is acknowledged that the federal system has "contributed materially to sustained and significant productivity increases, real wage increases, GDP growth, low industrial disputation, greater export competitiveness and a flexible economy" .(11)

Workplace relations issues are politically charged but this cannot and should not be the reason why reform which "is almost a given, so obvious are the advantages in terms of cost savings and policy coherence" (12) should not be pursued.

I hope that state IR ministers, who I understand are holding a ‘special’ meeting today, can resist the "vested interests against change" (13) and the temptation of "short-term political advantage[s]" (14). Instead I call on them to take heed of the words of a former Chief Justice of the High Court of Australia, Sir Anthony Mason, who said:

"…we have a dual (federal and state) system of arbitration…that …has unnecessary complexity and technicality. A dual system of courts is awkward enough…But there is no justification for them in the world of industrial relations where speed and simplicity …should be, of the essence." (15)

Our current system was developed at a time of social and political upheaval over a century ago. However, "history cannot give us a program for the future"(16).

In the twenty first century there is simply no logic in the current competing and complex state and federal systems or in "futile gesture[s]"(170 by State premiers to preserve such an absurd situation.

I am absolutely convinced that the Government must take this once-in-a-generation opportunity to put in place a contemporary and national workplace relations system able to meet Australia’s longer term economic and social goals.

The reform agenda

As I am sure all of you are aware, the Government is currently settling its vision for further workplace relations reforms and it is no secret I met with my senior Cabinet colleagues earlier this week to discuss the broad strategic direction the Government should take over the coming months.

The Government will be embarking on another major round of workplace relations reform in its current term. These reforms have been, and will continue to be, aimed at ensuring Australia’s future economic prosperity whilst maintaining a genuine safety net.

In this context let me remind you that the Government’s workplace relations reforms since 1996 have been driven by a consistent set of principles, which are that a modern workplace relations system must:

- encourage job creation;

- recognise a more direct relationship between employers and employees;

- ensure ever increasing productivity;

- be relevant to modern businesses and modern labour market realities;

- ensure genuine freedom of association and choice of representation; and

- become a simplified, more accessible system that puts workers and businesses first.

These same principles will continue to underpin the Government’s workplace relations reform over its fourth term as we look to put in place a workplace relations system that can take us to 2010 and beyond.

The options that the Government will be considering in detail over the coming months include:

a package of reforms, based on the corporations power that will cover the field and bring roughly (depending on the estimates used) 85-90% of employees into an Australian workplace relations system;

options for the setting of the minimum wage including whether the current ambit and adversarial process is sustainable into the twenty first century;

significant reforms designed to remove the complexity and third party interference with agreement making and simplify the process;

a series of initiatives such as increased use of mediation along with changes to the role of the Commission to ensure it is more aligned with the needs of a system that is suitable for Australian workplaces in 2010; and

changes focused on ensuring an ongoing role for awards as a genuine safety net of minimum terms and conditions of employment now and into the future.

In conclusion

At the beginning of the twenty-first century, it is appropriate to re-assess the nature and ongoing viability of a system that was designed at the end of the nineteenth century.

Further workplace relations reform remains essential if we as a nation are to keep pace in a competitive international environment. Standing still or going backwards is about as realistic as rebuilding tariff walls or fixed exchange rates.

In the area of workplace relations reform, with ever increasing international competition, an ageing workforce and increasing economic capacity constraints, if we do not go forwards we go backwards.

As Mr Deveson has said:

"Australia’s leaders have helped make the country a better place…than it was two decades ago." (19)

The Howard Government wants to continue to do so.

ENDS

References

1   Cicero
2   Higgins,, H.B.  ‘A New Province for Law and Order’ Harvard Law Review Vol 29 November 1915
3   Bethwaite, M, Speech to Australian British Chamber of Commerce, 2004
4   SMH 9 February 2005
5   BCA Workplace Relations Action Plan for Future Prosperity, 10 February 2005
6   AFR 16 February 2005
7   AFR 16 February 2005
8   Chaney, M. The Australian, 16 February 2005
9   ACCI Review January 2005
10 CEDA’s 2005 Economic and Political Outlook
11 Senator Andrew Murray, 22 February 2005
12 Stewart, A, referred to in  Abbott T, ‘A National Workplace’ Speech to Australian Food and Grocery Council, May 2002
13 Constitutional Commission Final Reports, Vol 2 (AGPS, Canberra) p798-801
14  McCallum, R, ‘A Robust National Industrial Relations System for Australia’, 17 November 2000
15  Mason, CJ. ‘The Australian Constitution 1901-1988’ 62 ALJ p759
16  Robert Penn Warren
17  Senator Murray, op cit
18  s51(xx) of the Constitution
19  CEDA’s 2005 Economic and Political Outlook

 



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