Rob Burgess continues his good coverage of the ongoing labour market debate today with praise for Paul Howes:
Yesterday’s speech – as delivered at least – knocks together the heads of the two sides in the IR war that has heated up so much in past weeks in debates of pay, conditions and productivity at Holden, Toyota, Qantas and SPC Ardmona.
…Howes’ call for a new culture of co-operation in the formulation of enterprise bargaining agreements is the right one. If either management is being screwed by unions, or workers being screwed by management (or corrupt union officials screwing both), the media has a pivotal role in exposing both.
Howes’ call for a ‘grand compact’, though vague at present, is the right call. Business leaders and unionists alike must shake off the habitual tendency to draw battle-lines and recognise the crisis bearing down upon Australia (The Great Australian Reckoning is upon us, January 30).
In shallow political terms, I see no obvious downside for the Government should it embrace Howes’ call. It can go it the hard way, and drive a cold bargain with everyone, look hypocritical every time it doesn’t, upset the polity and make a hero out of the people’s champion Bill Shorten every time he defends jobs. Or it can go the Howes way and wedge the Labour Party with an out of the box agreement. The unions themselves will be divided by it and even if it doesn’t work they will be the culprits, not Tony Abbott, who will have shown magnanimity in inviting them to the table.
However, a deeper look at the politics throws up a problem and it is this:
When the original Accords were first struck in the early 1980s, union’s represented almost half the workforce. Now they represent only around 17%. This throws up two issues.
The first is just how effective would any Accord be? On this front it’s probably true that unions still represent the conditions of a larger number of Australians than the low membership number implies. For instance, 1.9 million Australians work in the public service but nothing like that number are union members. Even so, it is the public service unions that make the running whenever awards and agreements are negotiated. Public service wage inflation has been a significant contributor to the wage cost index:
Keeping public sector costs contained would help competitiveness via greater labour supply.
Unions are also strongly represented in the most inflationary sectors of the economy, mining and utilities:
A new Accord here could be useful but with the mining boom about to bust (in a capex sense) and utilities also winding down their investment plunge, both might rightly conclude that by fixing wages now they’d actually be preventing cost-out deflation.
In the wider tradable sectors where the need to boost competitiveness is most acute – manufacturing, education, agriculture – some are union represented and some are not, but slower wage growth across the economy would dampen it in every sector.
This analysis is hardly exhaustive but it suggests that any “grand bargain” would have mixed successes.
The second issue is the political and public legitimacy of any renewed Accord given the low contemporary penetration of unions. The ideologues of the Liberal Party will rightly feel that they are re-centralising the labour market. They will argue that they are dealing the unions back into power which will have longer term detrimental effects to flexibility and growth (an example is Jennifer Hewett today).
I don’t agree especially – given any agreement can be framed as extraordinary – but it will be a hard pill to swallow for the loon pond even if it is in the name of increasing competitiveness.
This segues with a similar issue for the polity. How would Australians feel about a renewed Accord negotiated by unions that represent only 17% of workers, especially if it means negative real income growth, which is the whole point of the exercise? I think it’s possible Australians could be rallied to the cause but only through a sweeping rhetorical act of political leadership that is nowhere in sight.
