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WorkChoices - not so good: Fair Work Australia - frightening!

By Des Moore - posted Wednesday, 10 October 2007

I agree with the Opposition that WorkChoices should be torn up but not for the reasons it advances. And even though the Opposition claims it would have better legislation, their proposal is even further away from a fair, flexible and simple system.

Whichever party is returned, there is now no hope in the foreseeable future of moving to a deregulated labour market in which, subject mainly to observing normal legislated or common law contractual requirements, the terms of employment agreements are basically settled between employers and employees.

The opponents of a freer labour market have largely ignored the potential for both economic and social benefits and two major structural changes. The move to a market economy enables individuals generally to make their own employment decisions without fear of being exploited by employers. And the establishment of an extensive social security system helps those judged unable to obtain employment or otherwise disadvantaged, which should allow industrial legislation, and interpretations by tribunals and courts, to abandon any social justice role.


True, there has been some reduction in labour market regulation in recent years including under WorkChoices since March 2006. That has undoubtedly contributed to the fall in unemployment from 5.0 per cent to 4.3 per cent (in June) and increase in employment of over 360,000, (or about 3.7 per cent). The easing of the unfair dismissals regulation, the increased resort to individual agreements, the bar on the further exercise of compulsory arbitration, and the continued limitations on industrial disputation have helped, as has the establishment of the Australian Building Construction Commission in countering union restrictive practices in the construction industry.

Collective bargaining, bargaining in good faith and bargaining powers generally

In introducing the stronger safety net bill, Minister Hockey asserted that its rationale included “employers cannot coerce existing employees into modifying or removing protected award conditions”. Labor has extensive proposals designed to limit the bargaining role of individuals and employers and to promote collective bargaining, with employers required to do so in certain circumstances.

Yet employees are already protected under the common law and ordinary contract and criminal legislation. Also, as Australia now has more than 800,000 businesses competing with each other and operating with workforces totaling over 10 million, no valid argument can be mounted that, without prescriptive regulations, employers as a group would force wages down or impose “unfair” conditions on their employees. Moreover, any attempt to “exploit” workers exposes businesses to serious risk of loss of staff and difficulty in operating a business.

Individual employees also have bargaining power. They can readily quit jobs and well over a million do so voluntarily each year. During the period of reduced regulation in recent years, average hours of work and industrial disputation fell while real wages increased, which scarcely suggests employees bargaining powers would weaken in a deregulated labour market.

A less regulated labour market would cause some employees to experience reduced compensation and/or working conditions. But any substantive reductions would need to be assessed against the circumstances in which they were obtained. It is quite likely that many awards now being used in the fair compensation test were out of line with market conditions, particularly in industries employing relatively low skilled workers.

Past experience also suggests that some awards have reflected the provision of wages and/or conditions made by tribunals in circumstances where claims by unions were based on the actual or threatened use of industrial power that unions were allowed to exercise but should not have been. The outcome of the waterfront dispute illustrated vividly the existence then of extensive unwarranted protection of union power of an unfair nature and a similar situation obviously existed in the construction industry before the ABCC was established.


Labor’s support for collective bargaining, leading to its policy of abolishing AWAs, includes the policy statement that “all bargaining participants will be obliged to bargain in good faith”. There is no such requirement in the WorkChoices legislation and Labor’s policy effectively means employers seeking an employment agreement or a change in an existing one would have to involve unions if requested.

In practice, any enforcement of collective bargaining could involve a lengthy process imposing costs on employers and making it difficult for them to avoid agreeing to the “reasonable” going rate. Employers could effectively be forced to concede that rate as the costs of paying the condition would be cheaper in the short run than continuing to bargain in good faith. Over time there would be a loss of productivity.

There would also be a risk of returning to the situation in which rogue unions under the supposed protective regulatory system have been allowed to exercise quasi-monopoly powers to the detriment of employers and fellow workers. Labor’s establishment of extensive regulatory arrangements, supervised by new appointees to the new Fair Work Australia, would almost certainly increase union power in practice.

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This is an edited version of an address given at the Industrial Relations Society of Victoria, Annual Convention 2007: “A World at Work: Challenges and Opportunities for Workplaces” on September 28, 2007.

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About the Author

Des Moore is Director, Institute for Private Enterprise and a former Deputy Secretary, Treasury. He authored Schooling Victorians, 1992, Institute of Public Affairs as part of the Project Victoria series which contributed to the educational and other reforms instituted by the Kennett Government. The views are his own.

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