Opinion & Commentary
Work act flaw threat to growth
Work act flaw threat to growth
During the Qantas strike in October last year the Australian Licensed Aircraft Engineers Association's Steve Purvinas highlighted job security for the existing workforce as the major sticking point with Qantas management.
Job security is a major bone of contention between unions and employers under the Fair Work Act. Unions pursuing industrial action against Port Kembla Coal Terminal, Rio Tinto, and BHP have also sought to firewall the jobs of their members by including provisions in new employment contracts (enterprise agreements) which restrict outsourcing and limit the use of casuals and contractors. This has prompted business leaders to complain about the stifling effect on their ability to manage their businesses and expand and cut costs as necessary. Matters central to business profitability which are usually considered management's prerogative are effectively subject to union veto if operational decisions are perceived to be not in the members' best interests.
Hence Transfield chairman Tony Shepherd recently said that Australia was at risk of ''becoming a high-cost, low-productivity nation''. The Australian Mines and Metals Association's Steve Knott has also warned of the ''ever-present threat of strike action able to be taken at the drop of a hat''.
If these concerns turn out to be well founded, Australia could end up with a competitiveness problem. Businesses will struggle to grow in times of prosperity and find it difficult to cut costs during downturns. In the long term this can only mean fewer jobs and less economic growth as successful companies will look to go offshore in search of more favourable business conditions.
The root cause of these disputes is the scope of enterprise agreements under the Fair Work Act, which has effectively widened the range of issues unions can bargain for, and strike over. The act states that enterprise agreements can only deal with ''permitted matters''. Any matter not permitted in an enterprise agreement cannot be enforced. According to section 172(1) (a), permitted matters are those ''pertaining to the relations between each employer that will be covered by the agreement and its employees''.
The intention is for employees (and their unions) to bargain for legitimate matters affecting the relationship between an employer and its employee, but anything outside this relationship is off limits.
This seems fine at first glance, but a closer look reveals there is no clear boundary between matters that affect the employees directly, such as wages and conditions, and management decisions that affect workers indirectly, such as external labour.
As a result, unions have attempted to insert clauses that control, restrict, or render ineffective, the use of external labour. Some clauses require that management consult with employees and unions before hiring contractors. Others, particularly in the manufacturing sector, require union approval before management can hire external labour.
More extreme clauses, such as those in dispute with Qantas, require that management offer contractors conditions that are no less favourable to those of permanent employees.
All these clauses are firmly outside the bounds of employer/employee direct relations and are intended to render any labour competition ineffective. Such encroachments on management prerogative were prohibited under WorkChoices, which gave employers an effective check against a union closed shop, and a device to temper excessive demands. The implications for business are profound.
Management will have difficulty preventing excessive wage claims, disproportionate leave and redundancy entitlements, undue work restrictions and other burdensome conditions. It will be harder to secure productivity improvements, and more difficult to organise flexible work arrangements for employees.
These impediments are particularly detrimental because Australian companies operate in an intensively competitive global market. Australian firms unable to adapt will be left behind by smarter, more flexible, more competitive companies.
But the effects are not confined to management. In the long run, these clauses will reduce job security, not increase it. This is because the security of a worker's job depends upon the health of the business. The more profitable the business, the more secure its employees.
If business is struggling to cover costs then jobs will and should be lost. Unless costs are cut, the business could go under and jeopardise the rest of the workforce.
Alexander Philipatos is a policy analyst at the Centre for Independent Studies.
