The Productivity Commission’s five issues papers, released yesterday, are the latest step in the government’s inquiry into the link between industrial relations (IR) legislation and productivity.
Despite longstanding debate, there is still a lack of objective evidence on the links between the IR framework and productivity, especially at the workplace level. Before making wholesale change to the framework, we really need to understand whether there is a role for IR institutions in legislating workplace productivity through enterprise agreements, or whether this should be a matter for industry and employers to develop as part of their business models and strategies. This would leave IR institutions to focus on inhibitors such as requirements for structural readjustment and flexibility as market demands and labour and capital shift.
This new inquiry has a much needed intent of making sure “the Fair Work laws are balanced and effective” through examining the current operation of the laws and exploring future options to improve the workplace relations system.
Differing from its usual practice of releasing a single issues paper, this time the Commission has instead issued five extensive documents in line with its initial views about the priority issues, informed by prior consultations.
While the majority of the issues up for discussion were expected, a surprise inclusion is found in Issues Paper 2 concerning minimum wages, the award system (including penalty rates), and the National Employment Standards.
Debating the minimum wage
Commission chair Peter Harris argues the minimum wage was a key part of the workplace relations system in Australia, but asks if it is doing its job, who is benefiting from it, if there are costs associated with the system, whether it is adaptable, or if there are any better alternatives.
The answer is yet to be found, but this discussion could be an important missing piece from earlier analysis.
If wages and penalty rates are indeed above the market rate, instead of “compensating workers” working unsocial hours, the practices actually attract workers to work those unsociable hours to boost incomes. As a consequence it puts undue pressure on families and will eventually break down family support mechanisms. The alternative is welfare or higher base wages with negotiated individual or workplace-level agreements with set performance expectations.
As mentioned in the issues papers, if these payments were in line with labour market expectations then in some industries at particular times penalty rates might increase depending on the demands and labour/capital changes. There should always be a big caution note though for any possibility of lower minimum wages and penalty rates - there could be a double jeopardising effect to the households and the economy if the general income level of workers (hence their purchasing power) is lowered.
It would help if the research was undertaken on households where workers are working unsociable hours, receiving a substantial part of their income through penalty rates, for low versus high income households. This would enable us to see if households are working unsociable hours because workers “want” to increase their income, or if there is a need to compensate their existing income to make ends meet. Further research is also needed on how unsocial hours affect family well-being.
The bigger issues likely to be left unanswered are what we want as future jobs and what type of workplaces we want to build for a better future. Real reform needs to dig deeper to address these issues, and we must recognise the limitations of IR legislation in addressing them.
The Commission is due to report by the end of November 2015, with initial public feedback on its issues papers to be concluded by March 13. The Commission will produce a draft report midyear, hold hearings after the draft and seek two rounds of submissions over the course of the inquiry.