Given the problems European governments are having reining in public spending – and given how difficult the federal government is finding it to produce a minuscule budget surplus – one would think the federal government would be cautious in implementing reforms that put undue stress on its own balance sheet or those of the states.
Unfortunately, the federal government is adept at finding new ways of putting strain on the public purse.
Workplace Minister Bill Shorten has foreshadowed a plan to amend the Fair Work Act so that when a state government outsources work or sells off assets to the private sector, existing public sector workers will maintain the same entitlements with their new employer they had as public servants.
If successful, this plan will severely impede state governments’ ability to restructure their public sector and contain wage costs.
For public sector, Shorten’s plan sounds great. Who wouldn’t want to ensure that workers aren’t left worse off when a state government decides to sell its assets? Who wouldn’t like the assurance that any outsourcing of state government functions will not affect workers’ entitlements?
But the question that needs to be asked is why would a state government need to outsource in the first place? How come the government cannot perform its functions with its own public service?
The answer more often than not is the cost of the public sector itself. The failure of state governments to contain wage costs – because of overstaffing, low productivity, or overgenerous worker entitlements – creates inefficiency in government organisations. In other words, it is the cost of the public sector itself that creates the need for restructuring.
A plan to guarantee public sector entitlements hamstrings any attempt by state governments to rectify past cost blowouts. It is a recipe for higher costs and more debt at a time when government balance sheets are under significant pressure.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.