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Alan Wood | June 11, 2009
Article from: The Australian

IT would be a mistake to see the clash between Rudd government ministers and the dinosaurs of the union movement as heralding a new era in industrial relations where unions will take a back seat.

It is useful political theatre for a government happy to distance itself from the antics of the bumbling apparatchiks of the ACTU and the hard men of the building unions in Victoria and Western Australia, such as the Construction Forestry Mining Energy Union’s Kevin Reynolds and Joe McDonald.

But the industrial relations system that starts from July 1 marks an untimely retreat from the labour market reforms of the past two decades that were so important in Australia’s improved economic performance. This is evident even in the issue that is generating the most heated clashes: abolition of the Office of the Australian Building and Construction Commissioner set up by the Howard government following the report of the Cole royal commission into the commercial building industry. Cole found widespread lawlessness characterised the industry.

Abolition is Julia Gillard’s word, intended to appeal to unions that hate the ABCC. When she is addressing employers and the wider public, the Workplace Relations Minister prefers to talk about “keeping a strong cop on the beat”.

So what is it, abolition or retention? Neither, really; more an unsatisfactory compromise.

The ABCC, an autonomous body with wide powers that has been impressively successful in restoring law and order, increasing productivity, and reducing strikes and disputes in the building industry, will be retained until January 31 next year. That’s an election commitment.

It then will be replaced by what Gillard describes as a specialist division in the inspectorate of Fair Work Australia. Fair Work Australia, which begins operations on July 1, is the new more powerful, influential and union-friendly replacement for the Australian Industrial Relations Commission, whose role was diminished by the Keating and Howard governments as they freed up its centralised control of the labour market.

If you think this sounds like being buried in a bureaucracy, you’re right. Following a report for Gillard by former Federal Court judge Murray Wilcox, the new building division’s operations will be subject to a range of bureaucratic restraints that will significantly reduce its effectiveness.

Its powers will be constrained, freedom of action limited, penalties on unions for unlawful conduct reduced, taxpayer funding of legal costs introduced (inviting a lawyers’ picnic), funding may well be cut and there are already signals Labor-friendly appointments will be made.

Fortunately, the building division will retain the ABCC’s power of compulsory interrogation, which allows it to require building workers to appear before it and to answer any questions relevant to an investigation by it, with stiff penalties for failure to do so. This is the particular focus of union resentment, but Wilcox found retention of the power was essential because of continued industrial lawlessness in the industry. In any case, Gillard and Kevin Rudd are well aware of the political damage unrestrained building unions could do.

Even so, bureaucratic limits will be placed on its exercise of this power (Wilcox calls them safeguards) that will weaken its effectiveness, potentially dangerously so. Also potentially dangerous will be the activities of the Fair Work Ombudsman, the body the building division will operate within.

It is recognised in many countries, including Australia, that the characteristics of the building industry make it particularly exposed to industrial extortion, strikes and violent behaviour by unions and justify the creation of a special tribunal and rules to police its behaviour.

The same is not true of small business, which operates in a highly competitive environment and needs maximum flexibility in its operations.

On Tuesday the Prime Minister was singing the praises of small business in a speech to the National Small Business Summit. Small businesses, he said, made up 96 per cent of all businesses, contributed about 35per cent of Australia’s gross domestic product and employed 3.8 million people, accounting for nearly half of total private sector employment.

There was another crucially important fact he didn’t mention and is probably unaware of. In the past Australia’s labour market has had a vitally important safety valve. Small businesses were able to operate with an important degree of flexibility and freedom because in practice they were largely able to ignore prescriptive, union-dictated industrial awards.

This was possible because the unions have always concentrated on big business, not having the resources or the inclination to engage with twomillion small businesses or police their award compliance, apart from the occasional show trial.

Inevitably some bosses, a minority, abused this freedom, but in most cases the arrangements reached in these businesses suited and benefited their owners as well as their employees. The objective was not to exploit workers but to avoid the stranglehold of award (union) prescription of pay and work arrangements.

But, curiously, under John Howard a taxpayer-funded industrial police force was established called the Workplace Ombudsman, soon to become Gillard’s Fair Work Ombudsman with the role, among others, of policing award compliance in small business. Not surprisingly, Labor is already expanding its funding and resources, and the ombudsman is enthusiastically launching raids on places as diverse as suburban shopping centres and Snowy Mountains ski resorts.

But along with the bad employers being caught and penalised, many small businesses also are dragged into the sillier reaches of the award net.

The danger here is that the safety valve that allowed essential flexibility in the small business sector is being closed, just as Labor revives the stultifying award system so poorly suited to 21st-century labour markets. Through time this will have seriously adverse economic and employment consequences. Gillard’s plans to modernise Australia’s 4000 awards with their 44,000 wage classifications and numerous restrictions on work arrangements, including allowable hours, penalties and all sorts of unproductive union-imposed “rights” that are anathema in a modern labour market, are already coming spectacularly unstuck.

There is only one viable long-term path for reform that guarantees flexibility, productivity, competitiveness and rising living standards, and it is not award modernisation. It is to allow a bargaining stream where agreements are negotiated between employers and employees, individually or collectively, and with no compulsory involvement of unions or arbitral tribunals.

Making awards redundant was Howard’s ultimate aim, but he made an unholy mess of it and Australia will pay the price under Rudd.

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