Ideas@TheCentre
Breaking the IR code
In the IR debate, productivity is that magical word. Politicians, academics, journalists and leaders of business groups speak of Australia’s ‘productivity imperative’. But terms such as productivity, flexibility and competitiveness mean different things to different groups.
Flexibility could mean altering regular working hours, or ease of hiring and firing. Productivity could mean removing restrictive working practices, cutting out the union, or implementing measures for performance pay. Increasing the firm’s competitiveness could mean reducing wage costs or substituting labour with capital.
Rio Tinto's Australian managing director, David Peever, has pinpointed the rising influence of unions as ‘the elephant in the room’ in the debate on productivity.
‘Direct engagement between companies and employees, flexibility and the need for improved productivity has to be at the heart of the system. Only then can productivity and innovation be liberated from the shop floor up, and without the competing agenda of a third party constantly seeking to extend its reach into areas best left to management.’
Peever is talking about the ability to have a non-union shop or quarantine from union negotiations certain managerial decisions such as redundancy or the use of external labour. These concerns go to the heart of managerial control over both wage and non-wage matters. Many employers are also worried that increased union presence will create an ‘us versus them’ working culture.
Unions have been able to increase their influence in several ways as a result of the Fair Work Act. First, statutory individual contracts (Howard’s AWAs), which allowed one-on-one negotiations between employer and employee and offered protection from industrial action, were abolished.
Unions also have a guaranteed spot at the bargaining table for new projects. Since the Fair Work Act abolished Employer Greenfields agreements, any company looking to set up an enterprise agreement for a new project needs to bargain with the default union, even if no workers have yet been hired for that job.
When employers complain about the effects of unions on flexibility, competitiveness and productivity, it is often these elements of the Fair Work Act they speak of.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
