The rally that did workers more harm than WorkChoices

The irony is that, even with the lower than expectations turnout for the union IR rally, it has probably done workers’ interests more damage in one day than WorkChoices has in the eight months since it came into force. Many will have lost pay, given up annual leave, or been inconvienced by the the traffic chaos the protests caused.

Out of all the thousands of employers in Australia, the normal statistical spread of personality types suggests that some of them must be bastards happy to exploit workers. But despite being desperate to run a scare campaign, the unions have been struggling to find them. Even the few cases that they have managed to flog to the media have often been borderline – businesses in financial trouble where the realistic choice is a new agreement with employees or bankruptcy, or getting rid of dubious penalty rates for weekend work in exchange for higher normal rates.

Leftist bloggers have been drawing attention to an apparent decline in real wages since WorkChoices came into effect. The ABS’s Australian Economic Indicators, the latest version of which came out today, shows that while full-time adult average ordinary earnings increased by 2.9% in the 12 months to September, the CPI in the same period was 3.9%. Compared to recent times, inflation was unusually high and the average earnings increase unusually low. But what could be driving the wages figure is a very large increase in the number of people in full-time work – up 177,000 since WorkChoices came into effect, compared to 28,000 more in the equivalent period before WorkChoices. Such a large increase is probably bringing in workers with low skills and/or little experience who are paid less than the typical already-employed worker, driving down average earnings growth (but not the earnings on average of those who already have jobs). While I doubt that WorkChoices really has much to do with any of these figures, this is the outcome that WorkChoices advocates had hoped for – more people in work being preferable to higher wages for those already in work.

And last month’s labour market statistics showed a slight decline compared to the same time in 2004 in those expecting not to be with their current employer in 12 months time for ‘involuntary/economic’ reasons – supporting my argument that laws on job security, such as unfair dismissal laws, have little effect on perceived job security.

There are aspects of WorkChoices that I think should be changed. From what people like Mark Wooden have said, the collective bargaining provisions are deficient. Like everything the Howard government does, it is too bureaucratic. If I read its hundreds of pages, I’d probably find more to disagree with. But the campaign against it looks like another exercise in leftist hyperbole.

23 thoughts on “The rally that did workers more harm than WorkChoices

  1. I am sure Andrew is correct in the explanation for reduced average earnings.

    In similar vein someone wrote that lowering the miniumum wage and recruiting people with law skills and experience into the workforce would lower productivity (a Bad Thing). Presumably that meant average productivity. So what is the problem with that kind of reduction? Everyone is better off and the idea that reducing the average is a bad thing simply demonstrates the limitation of looking at aggregates and averages when you should be looking at the benefits for individuals.

    In case anyone is interested in a comprehensive demolition of the major myths and misconceptions about the benefits of collective bargaining, check out this paper.

    Click to access champion2006.pdf

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  2. This is a bit like saying that economic sanctions against Iran do the US more harm than to Iran. A principled position requires sacrifice.

    Whether this will achieve anything is another matter.

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  3. I also did notice that employment growth was stronger AFTER the unfair dismissal laws came into being.

    Rafe,
    The BCA have given up trying to find evidence that individual awards gain better productivity benefits than under collective bargaining

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  4. I have heard the “lowering of average labour productivity” story before and it makes some sense if labour market deregulation results in reduced unemployment. Presumably the people who were unemployed prior to deregulation tend to have lower productivity levels on average than those who were employed prior to deregulation. You are right to suggest that such a result is a good thing rather than a bad thing. However, the claim might have been made to counter some of the rhetoric that you occassionally hear about labour market deregulation being necessary if we are to improve our productivity levels.

    There was a paper written by Steve Dowrick for EPAC back in the early to mid 1990s (or somewhere around then) that looked at the relationship between labour market regulation and productivity. I seem to recall that it found that both countries with highly centralised industrial relations systems and countries with highly decentralised industrial relations systems tended to have higher productivity growth rates (or productivity levels?) than countries with an industrial relations system in between these two extremes.

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  5. Damien – I don’t think there are contradictions here, just confusion because terms like ‘labour market deregulation’ cover rule changes with different effects.

    For example, lower minimum wages and the absence of unfair dismissal laws will, all other things being equal, encourage employers to take on more low-productivity workers. This will have a downward pressure on average productivity – though not on the productivity of other workers, provided they are not being distracted by the new employees.

    But giving employers more power to organise the workplace in an efficient manner will, all other things being equal, increase output per hour worked. If we had only this ‘labour market deregulation’ productivity would go up. If we have both, the effect will be more mixed.

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  6. I agree and disagree. Newer workers will have lower productivity initially but it’ll increase with experience.

    As for the “bastard employers” – how do you know they’re not holding off on implementing some of the harsher provisions until WorkChoices becomes a memory or until the next federal election is over?

    WorkChoices does seem to have increased employment as there was a significant fall in unemployment from March 2006 to present.

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  7. Fortunately (or unfortunately, depending on your point of view), there are a number of different statistics on wages growth for people to pick and choose from when trying to support one argument or another. Andrew is quite right that if there is significant growth in a relatively low paid sector of the workforce (eg lower-skilled, part-time and/or junior workers), that will tend to have a distorting effect on whatever average figure you might choose.

    The ABS developed the Wage Price Index to try to correct for this effect in stats based on the workforce as a whole. This measures the changes in hourly rates of pay, holding the composition of employment constant. Unlike AWOTE, which increased by 2.9% (seasonally adjusted) or 3.1% (trend) over the most recent 12 month period, the WPI increased by 3.8%, a figure much closer to headline inflation.

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  8. vee’s argument is a faith-based one. There is little evidence that getting a job much increases a low-skilled person’s productivity over time, and some evidence to the contrary. Even if it did, to prevent the compositional effect on aggregate productivity the new employees’ productivity would have (on average) to rise to average levels, which seems most unlikely.

    But rafe’s right – the lower average productivity aint necessarily a bad thing (unless you believe in the separating equlibria – low wage/high wage economy thing).

    And I reckon both critics and supporters are putting too much faith in short-term wage and employment movements as indicators of the effects of Workchoices.

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  9. “And I reckon both critics and supporters are putting too much faith in short-term wage and employment movements as indicators of the effects of Workchoices. ”

    I agree – my point is just that the labour market data to date is not consistent with the claims made by WorkChoices critics, and I doubt it will be even over a longer time period, because they are over-rating legal factors in the labour market.

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  10. Both Australian workers and the bosses are inconveniently missing the point that current work practices are harming human health through pollution, war etc and seriously damaging the environment all over the world. Unless changes are made stop the release of toxins and greenhouse gases, and respect is shown for animal, plant and other forms of life, then in a few years it wont really matter how much plastic surfcash you are getting paid or paying out.
    More people working in the current system with its inefficient energy use, and more poeple consuming and supporting that system through their wages or profits is not a boony. Hawking says we need a new planet, the only option maybe to renew the planet.

    Garrett for PM! Let’s have a green prime minister like more advanced countries with efficient internet, and 10%+ economic growth such as Latvia. His baldy heed would standing out above the rest could put Australia back on the map of Tassie.

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  11. I read recently that the CBA is intending to put more of its workers on individual contracts, offering some reduced entitlements. If it’s taken a big bank 8 months to get this far, it will probably take most employers a lot longer. Still, Andrew, it’s true that there don’t seem to have been a slew of firings to exploit the removal of unfair dismissal laws for larger workplaces. Unfortunately, for workplaces where real change is needed – the public service and firms like Qantas – it is either politically impossible or the firm sorts out a sweetheart deal for itself (like Qantas’s protection from transpacific competition).

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  12. Andrew Norton wrote:
    “I agree – my point is just that the labour market data to date is not consistent with the claims made by WorkChoices critics, and I doubt it will be even over a longer time period, because they are over-rating legal factors in the labour market.”

    I’d almost be inclined to agree with you, other than questioning what the point was of the wholesale changes. Howard and Andrews thought they must have been achieving something.

    Ultimately, the legislation is enormous (this is de-regulation?). It is aimed at ideological targets (why start to water down the support for freedom of association?) . Howards grand plan for the ultimate union bashing legislation is 30 years too late, too complicated and doesn’t achieve a single one of his stated aims. They’ve de-regulated nothing of importance and spent a fortune doing it. Worse than that, the co-operation of unions during the accord period has been thrown away. While Howard was busy planning the sword of damocles, he hadn’t noticed the target had died of old age.

    Perception of legal factors counts for just as much as actual legal factors, given that the vast majority of people like to avoid lawyers and courts at practically any cost.

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  13. “Perception of legal factors counts for just as much as actual legal factors, ”

    That would seem to be the case if we look at the macro polls on IR laws, are you for or against? But at the micro level things seem different – if for example we consider job security (link above) it is hard to find legal factors such as casual employment having an influence. Many fewer people say they will be negatively affected by WorkChoices than say they are against it, consistent perhaps with their legal position having changed slightly, but their actual position not at all, because the law was providing protections they did not need anyway.

    I think there will be some benefits in WorkChoices in job creation – though these are hard to quantify – but a high political price is being paid. Though I would not worry about ‘union cooperation’ – that hasn’t been necessary for a long time.

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  14. Andrew Norton wrote:
    “…are you for or against?”

    Against – but not opposed to changes per se. If the changes had been reasonably thought out and beneficial I would have thought it was long overdue. A homogenised system was certainly needed – state awards seem like an anachronism to me. This set of laws reminds me a lot of the gay marriage debacle – lots of noise about nothing, give a kicking to those “who deserve it” in the unions and prop up those well meaning employers across the country etc. I am deeply opposed to the changes to collective bargaining though. I’ve seen the studies that purport to show individuals get a better deal, but this is removal of a freedom, and the freedom to collective bargain was very important in the past (look at the raw deal some of the 457 visa workers were getting – there are still exploitative employers out there).

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  15. Andrew, you have spent considerable time arguing that the Work choices legislation have little negative effect on people. This may be so, but then how about David’s point that it may also indicate that it would have little effect… period? If so, why bother about this at all? Do you see tangible benefits further down the line perhaps? Or was it indeed just an ideological obsession? Or do you see it as a small step in the right direction?

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  16. Boris – For the most part, progress is made incrementally, so the fact that the gains may not be huge is not an argument against reform in itself, only if the costs exceed the gains. I think the unfair dismissal laws were being rorted and were a disincentive to employment, and on balance worth getting rid of. As I have noted, the collective bargaining provisions probably need improving – and there is something rather ridiculous in having thousands of identical ‘individual’ contracts (needless paperwork for a start, which was one reason universities resisted having the government foist AWAs on them).

    I don’t think you can understand WorkChoices apart from the long-running battles between the Liberal Party and the unions. Many key politicians formed their views in the context of a union movement that was far more irresponsible and destructive than unions today. ‘Ideology’ probably exaggerates the intellectual coherence in all this.

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  17. Something I’ve learnt is that people in politics don’t necessarily apply scepticism when thinking about things – people often use “accepted wisdom”.

    It’d be good if more careful evidence-based thinking was used – an example of this is the ALP’s policy on nuclear power, which seems to be informed by fear. (I’m not in favour of any particular policy there as I don’t know enough about it, but I’m in favour of actually looking at reality and dealing with that.)

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  18. ALP’s nuclear policy is one of their oddest policies, which has hardly any parallels anywhere among the left, say, in Europe. However, across the board parties have little insentive to go to serious research on policies, since seriously researched policies are unlikely to make a difference with voters. That’s the harsh reality of politics.

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  19. My position on IR is that people should be able to negotiate a collective agreement with their employer if that’s what they want to do. If people don’t want to do it, that’s fine too.

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