I hadn’t read Andrew Norton’s CIS/Policy article “The End of Industrial Relations Reform?” until today.

A very interesting and valuable review and analysis.

I wonder whether the introduction of the WorkChoices “Fairness Test” might have be seen by the public as a sort of “admission” by the previous government that WorkChoices was (at least potentially) unfair, thereby reinforcing the message presented by the Union movement.

It’s a great shame for Australia that Brendan Nelson has RETREATED from labour market reform, instead of determining to better explain it and push for it.

If the Liberal Party can’t (or is too scared or too economically incompetent to) even sell labour market flexibility, how can it hope to sell its liberal ideals? How can it ever hope to beat Labour?

Andrew Norton’s “The End of Industrial Relations Reform?” provides many good starting points which the Libs would benefit from studying.

For instance:

The myth of unequal bargaining power between employer and employee.

The myth that unions or collective bargaining can (or ever have) raised real wages across the board (versus raising wages for some at the expense of others)

The fact that the public does try to take a “big picture” perspective on policies and proposed reforms - by doing its best to take into account the effects upon fellow Australians as much as upon themselves. Although they got it wrong with regards to WorkChoices, this is a very powerful factor to keep in mind.

And there is plenty more good meat that I was able to identify in Andrew Norton’s article.

Best Wishes,

PRODOS

Did the LN/Ps IR policies - ie WC & UD - help it or hurt it at the election? Obviously right wing IR will help the LN/P amongst its base. But these tend to be rusted on voters in safe seats.

What is the exit polling evidence on IR policies vote-changing and seat changing effects ie for swinging voters in marginal seats?

My gut feeling is that IR hurt the LN/P and may have cost it up to 1% in the 2PP vote. The Newspoll put concern about IR up very high (72%). I suspect that high-feeling ran in voters who might ordinarily be considered reasonable LN/P prospects.

The fact that the LN/P spent so much (tax-payers!) money and political capital trying to defuse concerns about IR suggests to me that its electoral advisors perceived this to be a big problem.

Any hard evidence?

We did some work on the Workplace Relations Act as a natural experiment to look at the connection between unionization and productivity - which you can see here:

http://www.latrobe.edu.au/business/abstracts_2007.html#A07.04

We are currently revising this paper - if interested contact the authors or a revised version will go up at

http://www.business.latrobe.edu.au/public/staffhp/dphp/index.htm

It has some contemporary interest as some of the changes in the air will take us back pre-WRA (as Julie Bishop, amongst others, has pointed out)

Thanks MikeM for the reference too.

cheers

“Australia has a relatively high minimum wage as a proportion of median earnings (58 per cent, see OECD, 2006) compared with the OECD average. On the other hand, the US minimum wage is quite low. To argue that a relatively high minimum wage in Australia is leading to high unemployment rates for the less skilled, one needs also to explain why the unemployment rates of the less skilled in the US are around the same as in Australia. This is not to suggest that minimum wages and their interaction with the welfare system have no consequences for unemployment, especially for the less skilled, merely that the effects may be relatively small.”

Thus to the extent that WorkChoices was intended to increase employment among the least skilled by allowing minimum wages to drop, it was unlikely to be very effective. At the same time, it was clearly politically expensive.

What the Liberals have to do is make the argument that a more highly regulated labor market locks people out, and that the worst affected are the unemployed and unskilled. An example is the way the French Conservatives argued against legislated 35 hour weeks using the case of cleaners who needed the extra hours to make ends meet. The Liberals ‘Union bosses will take over the country’ line was crude, unrealistic and appealed only to the rusted-on constituency anyway. I would love for somebody in politics to actually try to talk about economics beyond slogans.

One interesting thing about the demise of WorkChoices is that in a few years we may be able to look back on the data and see what the actual effect of the legislation was on unemployment, wages, participation etc. It would probably take a pretty good labour economist to isolate the effects of WorkChoices, but with a definite start and end date, it may be possible to get a hard number. Such a natural experiment is rare, but could provide an empirical test of the true benefits of labour market deregulation.