How can IR reform protect workers’ rights but drive productivity outcomes for the economy?

Thank you for the invitation to address CEDA today.

I appreciate this invitation, as I know that CEDA and most of you here today, recognise that any debate about Australia’s economic future must include the most important players in it: working people.  

CEDA has shown impeccable timing in the scheduling of today’s event, because even though industrial relations seems to never be far from the front pages of newspapers, it feels like it has been even more so in recent weeks.

For that, we can largely thank Alan Joyce’s reckless and disproportionate action to immediately ground the entire Qantas fleet on the afternoon of 29 October.

For those of us who are industrial relations practitioners, it seems as if the same issues and stories come around with monotonous regularity.

“Wage break out”. “Productivity crisis”. Return to WorkChoices style IR laws.

However, in recent weeks we have begun seeing something new: a growing employer militancy, and a lack of respect by business for the industrial relations system Australian voted for, four years ago yesterday.

Four years ago, Australians voted to restore a sense of fairness and decency in the workplace and subsequently, the Fair Work Act came into law following long and extensive consultation with unions and employers.

Now, it’s true that some employer groups have never accepted or got over the abolition of WorkChoices. Having finally achieved their Holy Grail under the Howard Government, they remain bitter that it was snatched away from them. But that’s democracy.

Employers continue to wage their campaign in the pages of the business-orientated press. But beyond that narrow realm, there is no public mood for return to WorkChoices.

The only IR battlefield is the one that exists in the minds of newspaper headline writers and partisan spectators like the man who shares the stage with me today, Peter Reith.

The rest of us – workers and business – want to get on with working within the system, to deliver higher productivity and to continue Australia’s economic growth.

Nevertheless, the dispute at Qantas has brought into sharp relief a couple of important issues.

In the time available to me, I would like to outline our position on these issues, which all relate back to the topic of today’s meeting: ‘How can IR reform protect workers’ rights but drive productivity outcomes for the economy?’

Bad faith in bargaining by employers
The first of these is the behaviour of employers in bargaining.

Bargaining disputes at high-profile companies like Qantas and BHP and by large frontline public sector workforces like nurses have always, and will always, get headlines, but the facts are that fewer days have been lost to industrial action since WorkChoices was abolished than before it.

In fact, there were fewer days lost to disputes in 2010 than in 11 of the Howard Government’s 12 years in office.

In the two years since the Fair Work Act took effect, there has been an average of 3.6 working days lost per 1000 employees per quarter. By way of comparison, there was an average 13.5 days lost per 1000 workers per quarter over the whole period the Howard Government was in office.

The frequent warnings from the business lobby of a wages break-out have been proved to be a furphy. Wages in Australia are growing at a solid and sustainable pace.

The Wage Price Index increased by a modest 3.6% over the past 12 months, the same as inflation. Far from a wages break-out, workers and their families are struggling to keep pace with the cost of living.

What we are seeing is the usual rounds of bargaining that occur as agreements come up for renewal.

The last time many of these workers bargained was in 2008 was at the height of the GFC.  Many workers took pay cuts through reduced hours, lower pay increases, or even accepted wage freezes – to keep their businesses going.  For 3 years prices have continued to rise, while workers’ take home pay has failed to keep up.  Cost of living pressures are really hurting many working families.

That workers now want to catch up as companies return not only to profit, but in many cases record profits – is only fair.  Workers did the right thing during the GFC it’s only fair they get respect and recognition now with decent pay rises. 

After all executive salaries have long since returned to their record highs.

At Qantas, workers have an extra concern about job security given management’s stated strategy of axing Australian jobs and sending more operations offshore.

Victorian nurses are fighting to preserve nurse-patient ratios and quality care in public hospitals and nursing homes.

And let’s not forget that in any industrial dispute, it is not all one-way traffic. Often these disputes have dragged on because of the employer’s unwillingness to engage in genuine negotiations with workers who are concerned not only to maintain living standards, but also job security.

This is not helped by provocative and uncompromising management rhetoric.

As always, these bargaining rounds will be resolved through even-handed negotiation and a genuine willingness to reach an agreement.

What is new is that we are seeing a new wave of industrial militancy coming from employers.

Leaders from big business have been falling over themselves to slap Alan Joyce on the back for his reckless and disproportionate action last month to ground the entire Qantas fleet, needlessly disrupting tens of thousands of passengers and locking out his entire workforce.

Consider this, a quote from Alan Joyce at his media conference on 31 October:

“I’ve been overwhelmed by the support I’m getting from the business community. Nearly every major CEO in the country has given us a letter of support with the courageous decisions we’ve made to resolve this.”
I, for one, am extremely disturbed when I see a comment like that, endorsing such belligerent and militant action by a business leader.

Let’s not forget that this management action caused enormous damage to the national economy and to Qantas’ reputation.

Other employers appear to have been emboldened by Qantas’ action, and unions are concerned we will begin to see a new attitude of lock-out first/ask questions later from employers.

And even more worrying, it seems to be state Liberal Governments – like the Baillieu Government in Victoria – that are the most gung-ho of the industrial militants.

Not only is it too easy for employers to choose a lock-out as the first option, but it’s timely for the Government to strengthen the good faith bargaining provisions of the Fair Work Act.

Bargaining for secure jobs
The second issue that has been highlighted by Qantas is the unnecessarily tight restrictions on the range of matters that can be bargained about.

WorkChoices took away basic rights that had been a feature of Australian industrial relations for more than a century until 2006.

It specifically imposed heavy restrictions on what could be the subject of negotiations or contained in any final agreement. For example it was not possible to protect job security in agreements through reducing the incentive to outsource or contract out jobs. By pursuing claims that were not permitted, unions lost their rights to take protected industrial action.

These rights have been partly restored by the Fair Work Act and the scope of matters that can be subject of negotiation and agreement has been slightly expanded.

Good secure jobs for working Australians are a critical element of building a stronger and fairer society.

There is no more fundamental issue for workers than that of job security. It goes to the very heart of the employer-employee relationship, and workers should have the right to bargain The world is changing and job security is an area of legitimate and vital interest to workers. And we have seen employers use artificial legal devices to get around job security clauses that have been negotiated into agreements.

Take a close look at the job security clauses in agreements, such as those being sought by the TWU at Qantas or by the NUW at Baiada Poultry.  They are about  ensuring that contractors and labour hire workers are paid the same rates as the regular, permanent workforce doing the same job.

Under WorkChoices, forms of insecure work such as labour hire were used to undermine the pay and conditions of permanent workers.

An example is at Jetstar under Alan Joyce, where pilots and first officers were employed on individual contracts that meant they were paid $32,000 a year less than pilots employed under the union-negotiated collective agreement.

However, while the Fair Work Act has restored these collective bargaining rights, the range of “matters pertaining” remains too narrow, and prevents employees and employers from engaging in meaningful negotiations to improve workplace productivity.

Unions have always had a view that you should be able to bargain about the full range of matters affecting people’s working lives – and that the concerns of workers are not limited to simple wage rises and a limited set of conditions.

The reflex response from employers is that unions are attempting to usurp the managerial prerogative. This is nonsense. Too often, employers use the defence of “management prerogative” to avoid having to negotiate about anything they don’t want to.

One questions whether employers in this country actually accept there is an enforceable right to collective bargaining.

This week, the ACTU Executive endorsed actions by the ACTU to seek improvements in bargaining rights for workers in the Fair Work Act, including supporting job security by seeking explicit reforms in the ALP platform at next month’s national conference which would facilitate bargaining about these issues.

Arbitration and the role of the tribunal
The events of the last weekend in October, following Alan Joyce’s industrial action to ground Qantas’ planes and threaten a lockout, showed Fair Work Australia operating as envisaged by the Act.

In its statement, the full bench attributed its decision to terminate industrial action solely to the behaviour of Qantas management, and the enormous economic damage it caused.

Subsequent public opinion polling has shown overwhelming support for the role of the independent umpire to stop action and arbitrate claims.

However, the Qantas dispute has also raised real questions about the role of arbitration in our industrial relations system: when it should be available, and when it should not.

We believe that all participants in workplace relations should bargain and seek to resolve disputes and grievances in good faith, and that Fair Work Australia should continue to have a role in preventing and settling disputes which threaten the national economy or pose a serious risk to the health, safety or welfare of the Australian community.

But intervention by the tribunal, including arbitration, should not be available as a reward for bad behaviour by employers, including companies that threaten the national economy in order to remove workers’ rights to take industrial action.

Qantas had options to respond to the unions’ low-level industrial action in a proportionate way. However, it chose to take the ‘nuclear’ option of seeking arbitration and in doing so, it caused significant damage to its own brand, its customers, Australia’s international reputation, and its workforce.

We think the Qantas case has highlighted the need to strengthen the rights of workers to also seek the assistance, via arbitration if necessary, of the independent umpire to resolve disputes and grievances in an even-handed manner.

We believe that Fair Work Australia should be given additional powers to make workplace determinations, where an employer engages in “surface bargaining” without the intention of reaching agreement and in “first contract” situations. It should be an activist tribunal.

This is important at workplaces like the hearing implant maker Cochlear, where the employer has been surface bargaining without ever genuinely intending to reach agreement. For five years, workers have asked one thing from their employer: to bargain with them and their union in good faith. 

Workers at Cochlear have held a number of ballots electing a union as the bargaining agent – yet they are no closer to agreement. These are signs that employer power is out of control.

It’s also logical that workers who are covered by a collective agreement should have the right to have disputes about the application of the agreement determined by arbitration.

This is only fair, as workers have given up their right to take industrial action by making the agreement.

Without access to arbitration, disputes under agreements might never get resolved, and the stronger party will simply be able to impose its wishes on the weaker party.

At the moment, the Fair Work Act encourages the parties to include a clause providing for arbitration of disputes in the agreement, but does not require it. This is not sufficient. The Act should go further, and mandate arbitration of disputes relating to the terms of the agreement.

The real story of the Qantas dispute is that a company was prepared to deliberately injure the national economy – including its customers and its workforce – in order to stop low-level union action, and trigger arbitration of its dispute.

This should cause us all to have another long and hard think about the role of arbitration in our IR system.

The slowdown of Australia’s productivity growth since the 1990s is a matter for concern, and unions support a real productivity growth agenda. But this won’t be achieved by changes to the Fair Work Act.

The productivity slowdown is a long-term problem, and one that has been underway for at least a decade. WorkChoices didn’t fix it – nor did Peter Reith’s Workplace Relations Act – and Fair Work hasn’t made it worse.

Labour laws are not the cause of our productivity problems, and they’re not the solution.

Australia’s pacesetting economic performance of the past couple of years shows that strong economic growth and workplace rights are not incompatible. In fact, they can go hand in hand.

It has been those nations with the most deregulated labour markets, and consequently the poorer worker rights – such as the United States – that have struggled most to emerge from the economic downturn initially caused by the GFC.

Sensible people know that improving productivity won’t be achieved by declaring war on your workforce, by locking them out as happened at Qantas.

It won’t be achieved by threatening them with big fines and punitive legal action, as the Victorian Government seems to be suggesting against its nurses.

And it won’t be achieved by snubbing legitimate workplace issues and refusing to negotiate, which is what happened at Baiada poultry.

It will be achieved by investing in education, skills, training, innovation, machinery and infrastructure.

It will be achieved through better management.  Managers who are not rewarded 70% pay increase for shutting down an airline, or cutting staff or wages.  But rewarding managers who work with their workforce, listen to them, plan for the future.  Then I believe we will see productivity gains.

I would question whether employers that adopt a militant approach of “lockout first, ask questions later” are genuine about improving productivity.

Because the results speak for themselves. The most proven method of achieving higher productivity in the workplace is through through genuine negotiation and engagement with your workers – not by making them your enemy.

Thank you.