TONY Abbott has baulked at the prospect of comprehensive labour market reform; many Australians believe such reform is the antithesis of the fair go. But it is possible to increase labour market flexibility, create more jobs and keep the fair go alive by abolishing the outdated industrial award system.
Awards set minimum wages and employment conditions across industries. Reforms across the past few decades have simplified awards, and enterprise bargaining was introduced to encourage employers and employees to negotiate wages and conditions. This has been an integral part of micro-economic reform increasing productivity.
The Rudd government's Fair Work reforms of 2009 saw roughly 3700 state and federal awards amalgamated to 122 modern awards. But then employment minister Julia Gillard's commitment to leave no worker "worse off" has made the new system more burdensome. Employment conditions were factored in, increasing minimum wage rates and penalty rates. Small businesses have been hit hard by these costs. Increasingly they are closing on weekends and public holidays because they cannot afford the exorbitant penalty rates prescribed in awards. For example, the retail award dictates workers be paid an additional 25 per cent on evenings and Saturdays, and up to 2.5 times their normal wage on Sundays and public holidays. The retail sector is highly casualised, so much of the workforce attracts a further 25 per cent loading.
In an industry increasingly open seven days a week, penalty rates are outdated. Large parts of the services sector conduct their greatest volume of trade late at night, on weekends and on public holidays, times convenient for consumers. If businesses are to be competitive against online competition, they must cater to these demands.
Abolishing awards would not open the door to exploitation because employers have to comply with minimum wage and employment conditions.
The Fair Work Act introduced a comprehensive set of statutory entitlements available to all employees. This safety net is one of the most generous in the world. In 2011, Australia's federal minimum wage represented 54 per cent of the median wage and ranked fifth highest among OECD nations. Full-time employees also receive at least 20 annual leave days a year, plus 10 public holidays, on par with the average for OECD nations. These statutory conditions are more than sufficient to cater to the needs of the low paid.
The award system sets even higher minimum wages and conditions on an already generous standard.
An efficient and fair regime should provide acceptable minimum standards for all. But it should also allow employers and employees to negotiate all wage rises and conditions beyond the safety net.
Alexander Philipatos's Relics of a Byzantine IR System: Why Awards Should Be Abolished is released today by The Centre for Independent Studies.