Workplace reforms would hit workers outside unions hardest

The great majority of Sunday workers who would lose penalty rates under proposed IR reforms, are non-unionists. Flickr/Rae Allen, CC BY

Would non-union employees be the biggest losers from the proposals by the Productivity Commission for changes to the workplace relations framework?

So far, the main focus of publicity from last week’s report has been on the commission’s recommendation to cut Sunday penalty rates in retail and hospitality.

There, the great majority of workers who would lose wages – with wage cuts of 17- 37.5%, as estimated by the commission, for Sunday work – are non-unionists.

They have weak bargaining power – notwithstanding the commission’s statement that “employers in such industries are not likely to have the same level of bargaining power over their employees as in many other industries”, a comment that contrasts with the Fair Work Ombudsman’s view that parts of this sector have “high non-compliance risk and are employers of vulnerable workers”.

Penalty rates

The Productivity Commission espouses the view that “businesses would not be the beneficiaries of deregulated penalty rates” - at odds with the long “campaign” waged by business bodies to cut penalty rates there (not just on Sundays). Amongst consumers, considered by the commission as the beneficiaries, 81% oppose the removal of penalty rates.

Explicitly omitted from the commission’s agenda to cut penalty rates are essential services such as nursing, policy and fire services, and even continuous production manufacturing. Workers in most of these areas are more highly unionised, and would put up much more visible resistance if their penalty rates were challenged.

Some observers plausibly wonder if that is the reason they have been excluded – but have no doubt that a precedent set in retail and hospitality would eventually set the tone for the rest of the workforce.

The commission argues that community attitudes on penalty rates for Sundays have changed, but presents no attitudinal evidence on this. It argues that Sundays are no worse for workers than Saturdays, though the authors of the survey evidence it cites concluded: “Those who work on Saturday and particularly Sunday (my emphasis) have worse work life interference - an issue that is relevant to the current debate about penalty rates in Australia.”

The PC noted that “the worst social disabilities arise from evening work” and that evening rates are much lower than weekend rates, but it made no recommendation to increase evening rates.

The Productivity Commission concedes that many workers would stop working Sundays. Many of my own students (mostly non-unionists) have told me that without penalty rates they wouldn’t work at such times.

Non-union workers

Would other aspects of the report also disproportionately affect non-union workers?
The proposal to introduce non-negotiated “enterprise contracts”, a combination of pre-WorkChoices Australian Workplace Agreements and WorkChoices-style “employer greenfield agreements”, would most clearly affect non-union workers. The proposal that employees be unable to recover underpayments through such contracts would especially disadvantage them.

Likewise non-unionists would be most affected if the period of notice for cancelling an unsatisfactory “individual flexibility agreement” is multiplied by up to eight times, given the difficulties of enforcement here.

Changing unfair dismissal laws to ignore breaches of proper procedure would have their biggest impact in non-union firms, which are less likely to have formal systems and procedures anyway.

That said, it is not as if the commission’s recommendations would favour unions. Many of its recommendations, in areas such as industrial action, would reduce the bargaining power of unions, which the commission has long distrusted.

Some surprises

And yet, many of the recommendations are not what the government would have ordered.

This is because of the type of institution that the Productivity Commission is: a market liberal body that mostly searches for the closest approximation to market solutions to any problem it is asked to address.

In some ways the workplace policies of the John Howard-led Coalition government, which provided the key ministers for this one, were not so much market liberalism as “Stalinist neo-liberalism”.

While in certain aspects it sought to expose employees to unconstrained market forces, that government also sought to intervene in the employment relationship in great detail, prompting criticism from the conservative HR Nicholls Society that its policies were “the old Soviet system of command and control, where every economic decision has to go back to some central authority”.

Secret ballots

Detailed prescriptions on the procedures to be followed in applications for secret ballots and “legal” industrial action, dating from then, are an example.

A market (and democratic) solution would require unions hold secret ballots before undertaking industrial action, but would leave the rest to the parties (unions) to work out. Yet 2005 legislation imposed 26 pages of procedural requirements designed to provide detailed notice to employers of any action and numerous opportunities for employer interventions to pre-empt it.

Labor, under pressure from employer organisations, left these mostly unchanged in the Fair Work Act.

The Productivity Commission report questions the complexity of secret ballot procedures. It also recommends the bar be lowered for identifying “sham contracting” arrangements by employers and improved protections for migrant workers.

The report also questions prohibitions on “pattern bargaining” when it may lead to “low transaction cost agreements that parties genuinely consent to”.

It recommends that Parliament abandon the Bill that seeks to involve the Fair Work Commission (FWC) in assessing the “excessiveness” of union claims, as “undermining the decentralised and enterprise-oriented focus underpinning the WR framework”. That Bill also mandates “productivity clauses” in enterprise agreements that are “likely to have perverse effects”.

Little evidence of gains

Indeed, the PC can find no evidence that there would be productivity gains from major changes to the industrial relations system, or even from reducing the level of industrial conflict.

It finds “little evidence that unfair dismissal laws are a major obstacle to hiring”, that “Australia has one of the more light-handed suites of arrangements” for protecting employees from unfair dismissal, that strikes are low, the system is largely working, and even (unusually for the PC) that “without regulation, employees are likely to have much less bargaining power than employers, with adverse outcomes for their wages and conditions.”

It also favours implementing some of the remaining recommendations of the 2012 McCallum review into the Fair Work Act.

Political antennae

So, the commission’s report is not as purist as many were expecting. Its political antennae are more attuned than many believed, and it seems well aware that the government no longer wishes to see radical proposals for change. (However, the report reads inconsistently, as if some passages were written by more market-liberal authors than others.)

Still, the government will likely repudiate much, or even most, of the report: some, because recommendations are too politically dangerous (such as “enterprise contracts”); some, because it is not interventionist enough (for example on secret ballots).

If the government announced the commission’s recommendations were to be fully implemented, it would be the government that had the most to lose.

But on weekend rates, the government will be pleased. Here, recommendations are consistent with its aims but targeted at the FWC, not the government. It will say “this is a matter for the FWC”, and watch with satisfaction as the FWC and the parties deal with what the Productivity Commission has said in this government-instigated report.

It will hope that this much is implemented, and that this sets the scene for bigger changes after the 2016 election.

That way the greatest immediate cost would be borne, not by the government, but by mostly non-union employees.