This article was first published on the ABC website on 15 January 2013:
It is not at all clear what type of industrial relation system is ideal in a rich, economically dynamic country like Australia.
Certainly, we do not want to go anywhere near the US system which is replete with high flexibility, falling real wages, a general lack of decency for the lowest paid and now chronically high unemployment.
It is not a good model. Nor would Australia want a command system where workers do what they are told and are paid a subsistence wage regardless of competence, skills and opportunities for workplace development.
Rather, the labour market framework should at one level allow the best and brightest of the population to flourish and prosper in high-skill, high-wage areas. On another level, it should also provide a framework of fairness, safety and decency for all workers with an implicit if indirect range of macroeconomic objectives including low unemployment, moderate real wages rises consistent with ongoing low inflation and decent productivity gains to boost living standards for the population. The system should also ensure minimum wages are sufficient to encourage employment of low-skilled workers while providing them with a decent standard of living.
These are the obvious benchmarks.
In a recent interview with the Australian Financial Review, when asked about the current industrial relations system, RBA Governor Glenn Stevens said plainly, that:
I don’t think if the IR system’s in the wrong place that that necessarily impedes our capacity to meet our price stability goals.
He went on:
If the IR system is wrongly configured, if it is, ultimately that shows up in unemployment.
Those powerful assessments from Stevens say explicitly the industrial relations system does not have an inflationary bias nor is it imposing a damagingly high unemployment rate on society. On the contrary.
Recent history supports the Stevens view the industrial relations system is in good shape. It is delivering low unemployment in a range around 5 per cent and aside from cyclical variability, a solid rise in productivity. At the same time, real wages are rising at a moderate, yet sustainable pace, a point showing up in ongoing low inflation. From a corporate perspective, profit growth is strong, notwithstanding the headwinds from factors exogenous to the structure of the labour market such as the level of the Australian dollar and global economic conditions.
That does not mean the system is perfect, nor in need of what might be termed maintenance from time to time. In Australia, there is an ongoing structural change unfolding with a strong momentum towards service industries and mining with other sectors such as manufacturing and construction weakening. With these dynamics, labour market regulations and industrial relations settings will inevitably need to change from time to time. Those changes should be, and currently are, heavily skewed to the enterprise and workers negotiating the best wage and productivity outcomes, rather than the Government having to adjust laws to force a particular outcome.
The government should only be there to ensure fairness, safety and other minimum conditions and to act as an umpire when disputes occur. This is where the system is now.
There are a raft of other issues which don’t always make it into the labour market and industrial relations debate. Critically important are the skills and education attainment of current and future workers. This is one area where the government has an important part to play and the corporate sector, in the longer run, is a huge beneficiary of having educated and trained people serviced up, free of charge, to start working with good levels of skills and knowledge.
It is also important that the safety-net of the welfare system is not entangled in wage settings, especially for the lower paid. The unemployment and participation rates in recent years suggest this is not a major issue at the moment. Policies to encourage workforce participation such as the government paid parental scheme are also sub-set of the industrial relations system.
In the end, there seems to be more ideology than fact in the industrial relations debate. The system is a long way from being broken or a problem despite the straw men erected from those with a different agenda to push.