Howls of horror understandable, but Howes half right about IR reform

Calls by AWU chief Paul Howes for a “grand compact” are fanciful, but he’s right we need to shift our thinking away from a focus on yet another round of IR reform. AAP

It is easy to see why media coverage of Paul Howes’ National Press Club address has focused on his claims that wage growth has been too high in some areas and that the adversarial industrial relations system is killing productivity. These claims by Howes, who is the Australian Workers Union national secretary, seem difficult to sustain, but they make for dramatic headlines and certainly look like more evidence of disunity in Labor Party and labour movement ranks.

But is there any merit in Howes’ bigger argument about the need to change the national approach to industrial relations?

Let’s start with the idea a “grand compact”. I wouldn’t want to speculate about Howes’ motivation for presenting this idea, but it seems to me a fanciful one. In terms of the politics of the situation, it seems difficult to believe that the key players would have an interest in pursuing this kind of arrangement. In a practical sense, even were there the will to do so it’s hard to see how the Coalition, the ALP, unions and employer groups would actually negotiate and implement such an arrangement. While it may be appealing to look back to the apparent golden age of reform in the 1980s and 90s, it is important not to mythologise the past.

The Accord was an agreement between the ALP opposition and the ACTU, signed in 1982, in the lead-up to the 1983 Federal election. The Accord was a bipartite agreement between the ALP and the peak union body. Put simply, it promised the union movement some input to policy in return for moderation of wage claims and keeping the lid on industrial action.

It should be understood as an agreement which was expedient for both the union movement and the ALP, in political and economic conditions that were vastly different from those which exist today. Undoubtedly, the Accord played a role in the steady reduction of days lost to industrial disputes during the 1980s and 1990s and in keeping real wage growth relatively low, while allowing Labor to pursue its reform agenda.

Clearly the Accord was a significant development in Australian political and industrial history, but it is difficult to see why anyone would entertain the idea of an Accord-like compact which included the major political parties, unions and employer groups or how it might be implemented.

Having said this, one part of Howes’ argument seems to me to have merit. In arguing for a compact, he is making the point that we need to shift our thinking away from a focus on yet another round of IR reform. While I don’t think a compact is a plausible solution, I think he’s correct that yet another wave of reform of the industrial relations legislation is unlikely to generate productivity gains and greater prosperity for Australia. There is little evidence, for instance, that either WorkChoices or the Fair Work Act had any significant impact on any economic outcomes. In my view, a shift away from IR reform as the proposed driver of economic performance is long overdue.

A greater focus on encouraging workplace innovation through training, research and development, investment and so on is much more likely to deliver performance gains. Precisely how this would be achieved is open to debate, but there are plenty of useful examples, from around the world, of government policies which have encouraged workplace innovation and delivered performance gains. Moreover, it is clear that such policies are most likely to be effective when there is some degree of cooperation between management and workers, including their collective representative bodies. The challenge is for government, business, unions and researchers to develop policies of this kind which are appropriate for contemporary Australia.

I think we should be very sceptical about claims that adversarial industrial relations and excessive wage growth are damaging the economy. There simply is no credible evidence to support such claims. Similarly, the advocacy of a “grand compact” is fanciful. But the argument that more reform of IR legislation is unlikely to deliver benefits is spot on.