Ideas@TheCentre
Flexibility rhetoric ignores common law contracts
It is important that politicians, business leaders and commentators have a grasp of the facts before making brash statements about broken systems and agitating for policy change. This is particularly important in an area as politically polarised as industrial relations. The public need to be properly informed about all the relevant facts if they are to be convinced of the need for reform.
For example, John Howard said recently that industrial relations reform, particularly individual contracts, needs to be put back on the policy agenda. Howard’s statements are legitimate and that debate needs to be revisited. What is not helpful, however, is MPs making ignorant statements that omit important facts.
Liberal MP Steven Ciobo said the current situation was ‘lunacy,’ that it was ‘absurd’ for Labor to say, ‘Employers and employees should not be allowed to have individual contracts.’ What Ciobo is implying here is that under the current industrial framework, there is no provision whatsoever for individual contracts. This is simply not true.
Individual contracts do exist. ABS statistics on forms of employment showed that in 2010, 37% of the workforce is covered by them. In fact, they are the most common form of employment contract in the private sector.
These agreements are the old common law contracts. They are individual in nature, are unregistered, and have existed since long before the labour market reforms of the 1990s and 2000s. It is true that the Fair Work Act got rid of the Howard-era statutory individual contracts, but it did not make common law contracts ‘illegal,’ as Ciobo implies.
Such irresponsible statements exaggerating the degree of inflexibility in the labour market hamper an honest debate about labour market flexibility, an important debate to have in the current industrial climate.
Common law contracts play an important part in the flexibility of our current system. They are quite popular in non-unionised industries and areas where labour is highly skilled – such as finance and law.
Moreover, common law contracts were far more important for labour market flexibility than the statutory agreements of the Howard era. Common law contracts have accounted for at least 30% of the workforce over the last decade, while Howard’s agreements never accounted for more than 3% of the Australian workforce, even under WorkChoices when the reforms were supposed to make them more appealing for employers.
Labour market reform needs to be debated, and reintroducing statutory individual contracts needs to be considered, but misleading statements about labour market (in)flexibility only serve to damage the public discourse.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
