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Productivity growth over the past decade has been “disappointing”, but cannot be blamed on the Fair Work Act, according to a review of the industrial relations regime released today.
“This is a good report,” Workplace Relations Minister Bill Shorten said in a press conference today. “I’m heartened that the conclusion is that our Fair Work laws are working, and working well.”
In a rebuttal to business leaders who have in recent months clamoured for changes to the laws, Shorten said the review found the industrial relations framework had no negative impact on productivity.
The minister stressed that workplace productivity could be found primarily at an enterprise level.
Wading further into the productivity debate, Shorten said labour productivity – which is just one element of productivity – has been rising for the past year, citing data from the Australian Bureau of Statistics.
“In the March quarter 2012… output per hour per worker in the market sector increased 1.2%. That’s 3.9% over the year,” he told the press.
The report is a striking win for the government, which was facing political pressure from businesses to change the rules. Businesses are likely to be waiting some time for changes to the industrial relations framework. Even if the Coalition wins government at the next election, industrial relations remains a political hot button that makes it difficult for either party to make dramatic changes, experts told LeadingCompany today.
The Fair Work Act Review
The Fair Work Act was introduced by the Labor government under Kevin Rudd’s leadership in 2009. A reaction to the previous Coalition government’s controversial ‘WorkChoices’ legislation, it rolled back many of the provisions regarding the rights of employers to fire and hire.
The review, conducted by Reserve Bank board member John Edwards, workplace relations academic Ron McCallum and former Federal Court judge Michael Moore, was announced last December, earlier than originally planned (2014) due to ongoing pressure from businesses. (The Fair Work Act mandated a review within two years of the Act becoming fully operational in January 2012.)
The broad brief for the three panellists was to examine and report on whether there was any evidence for improving the Fair Work Act, as well as to examine whether the legislation was operating as intended.
The review received 250 submissions from businesses, unions and advocacy groups.
The review, which the government has had in its possession since June 15, makes 53 recommendations, most of them minor and technical in nature.
The review stated that productivity growth was a key concern in drafting its recommendations.
The panel made several suggestions to this end, including having the institutions created by the Fair Work Act take a greater role in encouraging productive workplaces. Their suggestions included:
The panel also recommended that the legislation be amended to promote “good faith” bargaining between unions and employers, especially in “greenfield agreements”, which apply to new projects. Employers had raised concern with the way some unions were deliberately slowing the commencement of new resource projects, thus increasing the cost for the developers and forcing them to make concessions.
Unfair dismissals were also an area of interest, with the panel recommending the regulator be given powers to throw out claims of unfair dismissal in certain circumstances, and to award costs against a party that is “unreasonably pursuing a proceeding”.
The panel also recommended the name of Fair Work Australia be changed “to a title which more aptly denotes its functions”.
“It is recommended the new title contain the word ‘Commission’ and that it no longer contains the words ‘Fair Work’,” the panel said.
The recommendations, which can be seen as minor improvements to the current system rather than its overhaul, has disappointed for Australia’s business community. In a survey released this week by Business Spectator, 82% of 96 chief executives surveyed said the Fair Work Act has had a negative impact on productivity in Australia, and 60% said their company was worse off because of the act.
The panel rejected outright various recommendations made by the business community, including making access to arbitration easier in the case of long-running disputes, lumping this in a category of changes that would “unreasonably favour one party over another”.
It also rebuffed calls for allowing individual agreements to have provisions that “undercut” award provisions. “In the panel’s view this is contrary to the objectives of the FW Act and inimical to both the making of collective agreements and the safety net role of modern awards.”
Overall, the report took a strikingly positive view of Australia’s workplace system, adding that its strength should not be “put at risk lightly” through sweeping changes:
“For well over a century Australians have debated what is the right legal framework for wages, working conditions and employment… Over the last 20 years, however, both the legal framework and the nature of Australian industrial relations have profoundly changed....While there are important distinctions between each of the four legislative frameworks for industrial relations since the shift towards a greater focus on enterprise bargaining in 1993, they also have a good deal in common, including an emphasis on bargaining at the enterprise level, constraints on resort to arbitration, a safety net of minimum conditions, and recognition of a right to strike in pursuit of a collective agreement.
“Over those two decades the pertinent economic outcomes have been congenial to continued prosperity. Industrial disputes are uncommon, overall wages growth has remained consistent with low consumer price inflation while wages growth between industries and regions is responding to supply and demand, unemployment has steadily declined while participation in the workforce has increased, wages after inflation have markedly improved, and at the same time the profit share of incomes has increased. These are considerable achievements, not to be put at risk lightly.”
What happens next?
It’ll be another month before the government releases its response to the recommendations. Shorten says he’ll be meeting stakeholders in that time, and hopes to legislate some of the “uncontroversial” recommendations in the spring parliamentary session.
Businesses hoping for an overhaul of the entire regime shouldn’t hold their breath. The report was a tick of approval of the current regime.
The issue remains difficult politically. Peter Gahan, a professor of management and industrial relations expert at the University of Melbourne, told LeadingCompany this morning that the issue is too politically charged for either party to push any dramatic changes to the industrial relations regime.
“It will be very difficult, even for the current opposition, should it win government – as it’s likely to do so – to bring about sweeping changes to industrial relations,” he says. “It’s still such a hot issue.”
“What some businesses were calling for, things like the return of AWAs [Australian Workplace Agreements], was never going to happen, because it’s too much like a return to WorkChoices”
Nonetheless, he says the review is significant because it followed “an extended period in which the business community put enormous pressure on the government to look at the legislation”.
“They had the review well before the originally planned,” he said. “This suggests it was an issue for the government.”