Bargain for a Fair Work flop

Yesterday's Fair Work review was nobbled from the beginning by the government's compulsion towards a culture of wealth redistribution.

The main problem with the Fair Work Act is the mining tax. Discuss.

Through that tax, and an air of general hostility towards wealthy miners and employers, this government has encouraged a culture of wealth redistribution to replace the culture of productivity that was set up by the previous Labor government.

It has become respectable to believe that 'the community must share in Australia’s minerals wealth', as if it doesn’t already. This has had a pervasive secondary effect on all workplace bargaining, where productivity offsets are now routinely resisted by union negotiators, seeking, instead, to simply redistribute supposed ill-gotten wealth to their members.

The idea that industrial relations was all about wealth redistribution rather than wealth creation had become entrenched under successive weak governments during the mining boom of the 60s and 70s and reached an apogee under Malcolm Fraser in the early 80s with an uncontrolled wages blowout that contributed to the recession of 1982.

In 1983 the election of the Hawke government began Australia’s greatest period of workplace reform through a partnership between government and unions, expressed in a series of Accords.

In March 1987 the third Prices and Incomes Accord required efficiency offsets for wage increases for the first time – huge breakthrough.

Accord Mark VII in 1991 introduced enterprise bargaining, ending more than a century of centralised wage fixing and and cementing the linkage of efficiency and wages at an enterprise level. This was further enhanced by the Howard government through the Workplace Relations Act 1996, which restricted awards to 20 "allowable matters”, expanded enterprise bargaining and restricted unions – and then by the great waterfront dispute of 1998.

Unfortunately John Howard then went a step too far with the 2005 Amendment Act, known as WorkChoices, by removing the 'no disadvantage test' for individual agreements. That contributed to the Coalition’s defeat in 2007 and allowed the pendulum to swing back the other way with a vengeance.

So a new partnership was set up between a Labor government and the unions aimed at "restoring fairness” rather than efficiency, and this has been further tilted into wealth redistribution by the government’s rhetoric, led by Treasurer Wayne Swan.

The difference between Swan and Paul Keating, and the modern leadership of the ACTU with Bill Kelty, could not be starker.

The new 'Fair Work' legislation entrenched the position of unions and replaced the no disadvantage test with the aptly anagrammed 'Better Off Overall Test' (BOOT), which requires employers to sign a statutory declaration that workers are better off – not that they’re no worse off. The test creates a due diligence nightmare for companies because of the way it combines monetary and non-monetary conditions, but without being clear about the latter.

The review of the Fair Work Act released yesterday was nobbled from the beginning by terms of reference that directed the panellists to look only at whether it was working "as intended”, and whether it could be improved "consistent with the objects of the legislation”.

Naturally enough the review concluded that the Act is working as intended. No surprise there. The Business Council described the review as a lost opportunity, but it was always going to be.

In general the Fair Work Act is a legalistic quagmire designed principally to guarantee unions a place in the system. In new projects it even gives them a monopoly, which has dramatically increased the cost of new projects. This something the Review Panel specifically commented on, recommending that "good faith” bargaining rules should apply, as well as recourse to arbitration.

The review is not a total dead loss: it recommends that Individual Flexibility Agreements be made easier to access and "more attractive” to both employees and employers, whatever that means. This is what Tony Abbott has already flagged as the focus of his attention for reforming the system.

The Panel has also recommended that the BOOT be amended to clearly include non-monetary benefits, although that doesn’t seem to solve the problem of how to measure them before signing a stat dec.

In any case, Australia’s productivity problem is only partly about legislation – albeit an important part. It’s mainly about leadership and, yes, rhetoric.

Hawke, Keating and Kelty led the nation towards recognition of the need for productivity and creating wealth; Rudd, Gillard, Swan and a succession of non-entities at the ACTU have led it back towards redistribution.

Follow @AlanKohler on Twitter

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