The grand compact we ought to have

The grand compact we ought to have

By Josh Bornstein

The decision by Toyota to close its Australian operations will undoubtedly catalyse the odd industrial relations Ayatollah to declare another jihad on the Fair Work Act.

The groundwork had already been laid by Paul Howes in his recent National Press Club speech when he argued the IR system was letting us down.

But Howes got it completely wrong. The IR system is actually working well, particularly if you are prepared to tune out of the endless hyperbole and shameless rent-seeking.

That said, Howes’ speech triggered a raw nerve by calling for a grand compact. On this, I think Howes could be onto something.

His speech harked back to an earlier era, when consensus among participants in the body politic was easier to find. Or was it?

With each year that passes, the 1983 Prices and Incomes Accord has become both increasingly venerated and misunderstood. Let’s start with what the accord was not – a broad political consensus.

There were only two parties to the accord: the federal ALP and the trade union movement.

It was strongly opposed by employers, employer associations and the LNP. In 1983, senior LNP politician Jim Carlton described the accord as: “The disgraceful deal cooked up between the ALP and the Australian Council of Trade Unions before the election. This so-called accord – this deal – was and is a recipe for the continuing exclusion of 10 per cent or more of the workforce from the opportunity to earn gainful reward for employment.”

Secondly, as ACTU economist Matt Cowgill has repeatedly pointed out, the accord was conceived in the midst of a raft of alarming economic danger signs. He writes that in 1983, inflation exceeded 10 per cent and the unemployment rate broke into double figures for the first time since the Great Depression. One year earlier, the unemployment rate had been 5.4 per cent. It almost doubled in the space of 12 months.

Wage increases were outstripping productivity growth at a rate of knots. In fact, the wages of full-time employees had increased by a lazy 14.6 per cent for the 1982 calendar year, fuelled by end-to-end industrial disputes and strikes.

The circumstances that gave birth to the accord provide a sharp contrast with our recent economic performance.

For example, the rate of wage increase for employees in the last year was 2.7 per cent – the lowest rate of wage increase for more than a decade. That hasn’t stopped Employment Minister Eric Abetz warning of an impending “wages explosion”.

According to my (admittedly rough) estimates, warnings of wages breakouts now outnumber actual wages breakouts by 35-1.

To further illustrate my point, consider this: After two decades of consecutive economic growth, the share of that growth enjoyed by employee wages is at a record low; meaning the share enjoyed by capital is at a record high. This sits oddly with what appears to be the most pressing issue for employer associations at the moment. Which apparently is reducing our “unsustainably high” labour costs, including minimum wages and penalty rates.

If anything, the accord era is a jarring reminder of the transformation of our political culture over the last three decades. In recent years, a false crisis epidemic has dominated the political landscape as we have apparently lurched between “emergency low interest rates”, a cost of living crisis, debilitating sovereign risk, a carbon tax catastrophe, class warfare, a budget emergency and a productivity crisis. Which begs the question: If any of those crises are, in fact, real, how did we survive 1982 without combusting?

Even if an outbreak of constructive cooperation about industrial relations gripped us tomorrow, what would the key tenets of a grand compact look like? Would the compact work towards increasing the rate of growth of wages beyond 2.7 per cent? Hardly. With labour productivity at the highest rate in more than a decade, the real productivity challenge is not labour productivity but a lag in the efficient use of capital. Would business seek union assistance on how best to allocate capital? Perhaps not.

Industrial disputes continue to trend at very low levels. Would increasing income inequality be on the table? Job security?

The reality is that the differences of unions and employer bodies are now more ideological than practical. Should unions have a workplace presence in a modern economy? Should we permit a system of collective bargaining or allow employers to impose standard form contracts to set wages and conditions? Should there be an industrial tribunal?

Notwithstanding my disagreement with Howes about the state of the industrial relations system, his speech hit a nerve for a good reason. Even the most partisan of political operatives must concede that adversarial politics has been on an extended frolic in recent years.

If one side shouts “black”, the other hits the “white” button. Repeatedly. And with generous dollops of rancorous abuse. Adversarial, personalised hate politics is not a strong foundation for addressing difficult political or economic issues.

A “death roll that has every chance of taking the crocodile and prey to the bottom” is how journalist Jonathan Green described the body politic. Apt.

Howes is right in advocating that political gamesmanship could take a step or two back and that we might all benefit from a more rational and civilized discourse.

A grand compact, involving both sides of politics, business and unions is a good idea. It should be directed first and foremost at mitigating the greatest risk to our wellbeing, both economic and otherwise: the reality of anthropomorphic climate change. That issue has the potential to make a structural budget deficit look like a stroll in the scorched earth (formerly known as a park). There is no more important issue to confront, consider and address.

Calm, wise heads can only improve on our current policy response to climate change, a response that has been politely described as “business as usual”.

Managing the difficult and multifaceted implications of an ageing population is another substantial issue that merits a considered, bipartisan approach.

And while we have you all around the table, would you mind sorting out an asylum seeker policy that does not compel breaches of human rights, domestic and international law? I’d be indebted. So would you.

References

The Drum Unleashed, 12 February 2014

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