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Coalition’s productivity obsession makes for flawed IR policy

More than jobs, inflation, security or disputation, the Coalition’s just-released policy on industrial relations claims to be about productivity. The policy is replete with over 30 references to “productivity…

Ignore the hype: the Coalition’s IR policy won’t boost productivity in Australia. Paul Miller/ AAP

More than jobs, inflation, security or disputation, the Coalition’s just-released policy on industrial relations claims to be about productivity.

The policy is replete with over 30 references to “productivity”. It’s the frequent justification for action.

Yet despite repeated claims by some of a “productivity slump”, labour productivity is at an all-time record high, is growing strongly and indeed, as measured by GDP per hour worked, over the past year grew at the highest rate for a decade, and well over the rates achieved under WorkChoices.

It’s not that the Fair Work Act caused the improvement in productivity any more than the actual slump in productivity growth under WorkChoices should be solely attributed to that regime. In substance, industrial relations policy has little impact on productivity.

Let’s look more closely at how this policy intervenes, restricts, amends and defers on various matters.

Intervening in relations between employers and unions or employees

Two intriguing and little-noticed proposals are to preclude protected action if the Fair Work Commission believes a union’s claim could adversely affect productivity, and to require the parties to show the Commission they have considered productivity before an agreement can be approved.

These proposals suggest a degree of intervention (some would say interference) by the Commission that goes well beyond any role it has had in that aspect of bargaining since the initial days of enterprise bargaining over 20 years ago.

When the system of enterprise bargaining was introduced in 1991, the Commission initially vetted agreements for productivity. The parties soon became tired of that, and this role was removed in 1992 legislation, even before the Brereton-Keating reforms of 1993.

The Coalition proposes a different form of intervention to pre-1992. Still, it is remarkable that someone – especially a party representing the free market - should seek to reintroduce such third-party involvement. It goes against the norm of letting the parties sort things out for themselves.

This norm characterised the system since 1992, except during WorkChoices. Even under WorkChoices, government interference related to matters other than productivity.

Restricting the operations or rights of trade unions

It is hard to interpret the productivity interventions as anything other than an attempt to reduce trade union power in the workplace. But there are many other related elements to the Coalition policy that have little to do with productivity but much to do with shifting power at the workplace.

For example, protected industrial action is also to be precluded if the union cannot prove to the Commission that it has engaged in “genuine and meaningful talks” with the employer and its claims are “fair and reasonable” and not “excessive”. This would weaken the hand of employees and add immensely to the substantial bureaucracy surrounding the taking of industrial action. These are restrictions that go beyond those required by WorkChoices.

There would be further restrictions on union right-of-entry to workplaces. Unions would be subject to tighter regulation of their internal affairs under a specially chosen regulator. Employers and managers would be able to lodge claims against unions for “bullying” them, however that is to be defined. Agreements would be prevented from constraining “individual flexibility agreements” between employees and employers.

Employers would be able to make greenfield “agreements” with themselves, ratified by the Commission, if a union does not agree to a proposal within three months – a proposal reminiscent of WorkChoices’ unilateral “employer greenfield agreements” but with some greater limitations than under WorkChoices.

Most significantly, the policy promises to reintroduce the Australian Building and Construction Commission, replaced by Labor, and reinstate its punitive powers against individual employees and officials. Disappointingly, the policy is justified by bogus claims about industry productivity made in a discredited report.

Changing the entitlements or protections for individual employees

Some provisions will directly change the entitlements for individual employees. Most prominent has been the introduction of Tony Abbott’s paid parental leave scheme. The Coalition will largely accept Labor’s workplace bullying laws, though making the process of accessing them more bureaucratic for employees. Interest on unpaid entitlements will accrue to employees lucky enough to recover them. But most of the impact on employees will be indirect, through reducing the influence of their unions or their ability to unionise.

Amongst the most important issues for the general public is the proposed “urgent review” – presumably, leading to the abolition – of the recently established Road Safety Remuneration Tribunal. This exists to develop and apply safety standards and ensure that truckies, the occupation with the longest working hours, “do not have remuneration-related incentives to work in an unsafe manner“.

Deferring contentious decisions

The Coalition document criticises Labor’s review of the Fair Work Act as “deliberately weak”, takes a swipe at the participants, and says the system needs a “rigorous review” of its impact on ‘our economy, productivity and jobs’.

This would be undertaken by the Productivity Commission, and the Coalition will look to implement “sensible and fair changes” that arise from it.

When the previous Coalition government introduced WorkChoices, that policy was “common sense”, “fair, practical and sensible”. Those who remember former Prime Minister Howard’s WorkChoices promise that “Australian workers can be assured that this is not a wage cutting policy” might not be reassured by the new assertion that “the pay and conditions of workers will be protected”.

What the Coalition would do in future cannot be known, but we do know something about what drives them. At various times it has been stated by Liberal leadership that budget surpluses, lower taxes, support for free speech, funding independent schools and even private health rebates are “in our DNA”. Yet the issue that is most obviously in “the DNA” – that is, the dominant meme in Coalition ideas – is that of industrial relations reform.

In surveys of candidates for the two major parties, consistently the issue that exhibits “the starkest difference between the parties” is “regulation of trade unions”.

The Coalition has been careful not to repeat the claimed statement, attributed to a Coalition frontbencher, that “it’s in our DNA to do something about industrial relations” — but it is clear that there will be more to come on industrial relations reform.

Business says that an Abbott government should go further than what it says in its policy. Unions say that an Abbott government will go further than what it says in its policy. We just can’t know for sure what those further changes will be. But whatever they are, it is unlikely that they would boost productivity, either.

Join the conversation

11 Comments sorted by

  1. David Rennie

    IT Contractor

    Current Managers are far more concerned with cost-cutting and control, or increasing unpaid hours worked than productivity. In the first instance increased productivity is claimed by reducing expenditure per worker. In the second, the expectation of workers providing more hours than they are paid for produces more for the same outlay without actually producing more per hour worked.

    The classic example of this is the abolition in many organisations of free on site tea and coffee facilities…

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  2. John Armour

    logged in via email

    The front bench of the Coalition do not understand that productivity, or more precisely, labour productivity, has a very precise rather than a political meaning:

    "real output per unit of labour"

    I've heard Abbott talk about how getting long-term unemployed single parents would "add" to productivity.

    The "dog-whistle" was clearly audible, but I think that a HSC Econ student would've quickly spotted the howler.

  3. Mark O'Connor


    The obsession with productivity is based on a common economists' myth that natural resources are effectively unlimited and there are no physical limits to growth.

    In this economic fantasy the only limitations would seem to be Labour and Capital. Yet the fractional reserve banking system enables capital to be created in vast amounts (as a sort of human-generated promissory note against the planet's supposedly limitless natural resources and infinitely tolerant environments). So in practice the…

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  4. robert roeder
    robert roeder is a Friend of The Conversation.


    This might be a bit simplistic. Workers have a defined income from which the government receives tax, mean tax Oz 24%. The citizens are the government. Whats good for the government should be good for us.
    Corporation receive the bulk of company profits. If we assume that most off the corporate profits will be returned to overseas investors and that many of these corporations end up paying zero or less than 5% tax we see the inequity. To establish who owns what would be difficult, going to a company…

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    1. John Armour

      logged in via email

      In reply to robert roeder

      Interesting thoughts Robert.

      My understanding about corporate profits is they do eventually finish up in the hands of households and individuals, or what's the point of having corporations.

      There's no doubt that some multi-nationals engage in price shifting (artificially increasing costs for their operations in high taxing jurisdictions) and I think Swan is trying to get this onto the agenda at the next meeting of the G20.

      It's also my understanding that the ATO takes it's cut before any…

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  5. Lee Emmett

    Guest House Manager

    Individual Flexibility Arrangements (IFAs) is the newly branded form of 'individual workplace agreements' which were the cornerstone of Work Choices.

    Just because Tony Abbott says he will retain the Fair Work framework is no guarantee that industrial relations will be untouched.

    Peter Reith and other LNP IR spokespeople will continue to push for greater 'flexibility' in working wages and conditions.

    Since Hawke's 'Accords' (where non-wage benefits went to permanents in lieu of wage increases), the workforce has progressively been 'split' between full-time/permanents and part-time/casuals (who have no incentives to belong to unions). Union numbers have been decimated over the past decades as conservative governments have continued their assault on union 'rights'.