Flat White

Here’s hoping ScoMo’s new consensus with the unions is not what it appears

27 May 2020

3:31 PM

27 May 2020

3:31 PM

Is Scott Morrison’s industrial reform agenda a serious attempt at industrial change, or is it #ScottyfromMarketing looking for a mechanism which shifts blame away from him if the economy fails to recover quickly? 

I hope it is the latter, because it’s hard to see how a consensus arising from his five working parties is going to be good for the economy. Good reform is more likely to come from parliament, and indeed, even with a consensus, can’t come from anywhere else. 

I remember the last time when consensus was the reigning theology of industrial relations and you had what was referred to as the industrial relations club. Industrial relations wasn’t run for the benefit of the country, but mostly for the benefit of the established players – industry associations and unions.   

They used their power with government to ensure regulatory and taxation barriers were put in place to prevent the emergence of domestic and international competitors, protecting their fiefdoms, but making the country uncompetitive and reducing relative standards of living, even for the industrial princelings and their courtiers in favoured industries. 

It took Bob Hawke, a Labor leader, to end this, because when it comes to industrial relations, it’s Labor who has enough purchase with the unions to get them to accept change.  

This is because the unions are the bankers and shareholders of the Labor movement via donations and the factional blocs they pay for and control within the party. Labor is the unions, and vice versa. (Which makes a joke of Scott Morrison’s claim to have excluded the Labor opposition from this process). 

And even so, the price that Hawke had the country pay was huge – the creation of superunions, and an industry superannuation industry with virtual monopoly control over the retirement savings of the employees in whole industries. 

Morrison starts at a severe disadvantage. He is the class enemy, and the only way Liberals have been able to properly reform the sector is by decentralising industrial power and building a constituency that saw no reason for union involvement in their workplace. Most of the 44% of employed Australians who work in the 2.1 million small businesses in the country don’t need a union, either because the can talk to their boss easily themselves, or they are the boss and set their own wages and conditions.  

Fortunately, while you have the same institutions involved, the insistence they come to a consensus is likely to see the whole process fail as long as the government is interested in effective change, rather than a peace treaty. 

There are really only three groups that count in the process – the unions, the employer organisations and the politicians.  

Past experience says we can disregard the “individuals chosen based on their demonstrated experience and expertise and that will include especially small businesses, rural and regional backgrounds, multicultural communities, women and families.  

These tend to be window dressing, most of whom will have a poor understanding of industrial relations, and an even poorer idea of what an ideal system might look like. Lacking the resources of the larger organisations they will be either easily suborned, or dogmatically stick to a point of view which will see them marginalised in a “consensus” process. 

But then again, if there are enough of them – and small to medium-sized business should have the majority of seats at the table given that they employ 68% of the workforce, and the unions only represent 14% – then they could change the dynamic. And there are people outside the mainstream who understand what the employment system needs, like, for example, Graeme Haycroft, a labour hire grandee who has now set up two alternative unions – one to service nurses and the other teachers. So there is potential here for some real firecrackers and genuine reform. 

I’d also expect most of those from government to be at the margins. They will have some resources, but their understanding of the sector will be mostly theoretical, which is no match for the experiential knowledge of people whose livelihood depends on exploiting the complexities of the system. 

On top of that the key politician running this process is Christian Porter, who will have to chair five working groups, and come up with a consensus by September, in time for the October budget. Porter has shown poor judgment in a number of his portfolio areas, and now he is being asked to do the job of five men. Ominously, he will have a civil servant, or ex-civil servant” as deputy chair (effectively the chair). Not only does this signal that he knows he doesn’t have the time to do this job, but he sees it as bureaucratic. 

The union movement as it exists today, is institutionally corrupt, with superunions being granted monopolies over entire industries and protected from competitors through exemptions from competition policy.  

Outside the public service, they barely exist at all proving that most workers see no need for them. The movement has spent most of the last two decades ensuring that those who run it are insulated from the overall decline of the movement and can have good careers in politics or related fields. 

One of the tools that it has to slow its decline is to make awards as complicated as possible, so employees need an expert, and employers are at a disadvantage, even with a lawyer. It also has a vested interest in FairWork Australia maintaining its dominance of the sector, because its bench is part of the career path for union officials, the real reason the unions exist. 

Sally McManus is the most left-wing leader that the movement has had for decades, and has spent most of her term in office complaining that the wage share of the economy has fallen and that there is too much “insecure work” – what others might call “flexible work”. 

So how likely do you think it is that this movement will agree to be part of a consensus to simplify employment conditions, decentralise industrial relations power (which would include alternative avenues of employee representation), encourage informal settlement of employee complaints, have more flexibility in employment contracts, and ultimately encourage more workers to become contractors? 

Then we have the employer organisations. These are amongst the most cowardly of public organisations and tend to be staffed by people with political rather than business skills.  

The businesses they represent are very large ones in industries where scale counts. Many of these companies have a high degree of internal inefficiency because they are protected from competition by their scale 

When these companies want to make a process more efficient they often don’t reform internally, they outsource the process to a smaller business that has been forced to be efficient because it has lots of competitors. 

These organisations have been doing cosy deals with unions forever, and they prefer centralised and difficult awards because they are another barrier to entry to competitors. Many of them have also had lazy growth leveraged off the economies of scale delivered by two decades of above-average migration and population growth. 

Again, they have no interest in the flexible, human-centred industrial relations system we need. 

At least Morrison pays lip service to the right principles. The most encouraging part of his speech was when he said growth depended on the “[v]alue created by establishing successful products and services, the ability to be able to sell them at a competitive and profitable price and into growing and sustainable markets. It’s economics 101”. 

That’s better than the vacuous nonsense we get from market economists that increased spending equals economic growth. 

So hopefully PM ScoMo has a plan in mind that doesn’t really involve the union movement agreeing with the employers that after a few superficial changes business will pretty much continue as pre-COVID. 

The key to whether he is serious is exactly how the terms of reference are framed, who Christian Porter’s off-siders are, and what percentage of each committee is drawn from serious members of the small to medium business community. 

If these lack substance, then it will be conclusive – the roundtables are just an attempt to wedge Labor moving the game back to the parliament providing cover for a failing economy. 

I’ve got my fingers crossed. This is one crisis that should not go to waste. 

Graham Young is Executive Director of the Australian Institute for Progress and founder and editor of On Line Opinion.

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