Chapter 2 - Opposition Senators' Report
2.1
In a little over five years this committee has
dealt with nineteen amending bills to the Workplace Relations Act 1996 (WR
Act). These bills have represented, in toto, attempts by the Government
to weaken the entitlements of employees across the whole spectrum of their
relationship with employers, all of this in the name of ‘balance’. These
matters include the conditions of the termination of employment, the rights of
association and representation, the rights to collective bargaining, and now
the rights to have award wages matters fairly dealt with by the Australian
Industrial Relations Commission (the Commission).
2.2
With this bill the Government proposes to
legislate to direct the Commission to give prime consideration to matters
which, if followed by the Commission, will weaken the wages safety net which is
relied on by a high proportion of low paid workers to maintain their standard
of living. Opposition senators note from the Explanatory Memorandum that in
drafting the bill, the Government consulted the Australian Chamber of Commerce
and Industry (ACCI), but makes no mention of consulting other parties,
including the ACTU which represents a high proportion of people who are claimed
to be the beneficiaries of the amendment.
2.3
Opposition reports have previously noted the
provocative mistitling of government workplace relations amendment bills. The
purpose of this bill is at odds with the idea of protecting the low paid. It
will, as the Government intends, have the effect of forcing down the wages of
the already lowly paid, creating a sub-class of barely subsistence employees to
undertake work which is traditionally undervalued. There is an assumption made
that if wages could be reduced, a fair proportion of the currently unemployed
would be absorbed into this employed sub-class, presumably on the basis that
with a reduced payroll, employers could then find something productive for them
to do. Labor senators know of no empirical research which supports this
proposition, and none has been provided by the government.
The economy
and the safety net award
2.4
At each year’s safety net review the Commission
is presented with two conflicting views on the likely effect of an increase in
minimum award rates. The Commonwealth, usually supported by employer
organisations, argues that there will be a substantial effect on the capacity
of business to increase the rate of employment, particularly in that sector of
industry which employs unskilled or low-skilled labour. This sector of the workforce
is intended to be the main beneficiary of award adjustments.
2.5
The ACTU and state governments (currently all
Labor governments) have over recent times argued that effects on employment
will be negligible. Labor senators point out, as does the ACTU submission to
the Commission each year that there is no empirical evidence to show a
connection between safety net increases and the employment of low-skilled
employees. They note the comment from the Queensland government submission in regard to the Commonwealth’s arguments
before the Commission:
In responding, the federal government have tended to steer clear
of the empirical data, instead relying more on simplistic interpretations of
economic theory – an increase in price (wages), by definition, leads to a fall
in demand (employment). This might be partly because it is difficult to isolate
the effects of past safety net increases from all the other factors that impact
on employment, but it is more likely because their position is not strongly
supported by the empirical evidence.[1]
2.6
The committee notes that the Commission has
consistently found little evidence that past safety net increases have had any
substantial effect on employment generally or on specific groups such as the
low-skilled. As the Commission reported in its 2003 safety net decision:
a general assessment of employment data, including a focus on
more heavily award reliant sectors, does not disclose any basis to suggest that
past safety net adjustments have had significant adverse employment effects;
there remains a continuing controversy amongst academics and
researchers as to the employment effects of minimum wage improvements. As noted
by the UK Low Pay Commission the research undertaken often produces conflicting
results;
the various studies do not establish that moderate increases in
the minimum wage, of themselves, will diminish aggregate employment effects;
whilst there is no automatic relationship between the two, real
wage growth can adversely affect aggregate employment growth. The extent of such
effect will depend upon the prevailing economic circumstances and the extent of
the real wage movement;
in respect of the modelling undertaken by the Commonwealth,
consideration of the net impact on aggregate wages costs of the ACTU’s claim,
absent a monetary policy response through increased interest rates, suggests a
very limited impact of the ACTU’s claim on economic growth and employment;
the ACCI, AiG and Retail Motor Industry surveys provide no data
as to the magnitude of employment effects and the results in relation to the
proportion of firms reporting particular effects should be treated with some
caution. The surveys do, however, support a conclusion that there are
employment effects of safety net increases with respect to some employers, such
effects operate differentially and adverse employment effects are more evident
in relation to those employers directly affected by safety net increases.[2]
2.7
As the Queensland Government submission noted in
relation to this decision, the Commission had quite correctly come to the
conclusion that after six previous safety net decisions, any adverse employment
effects of those decisions should be revealing themselves in the employment
data. No such effects could be demonstrated.[3]
Low wage jobs
in the economy
2.8
The Government rhetoric which accompanies the
thinking behind this legislation tells us that any job is better than no job.
The Minister’s disparaging remarks about ‘job snobs’ indicates a common
populist attitude. But even if there was a discernable response to a lower wage
structure, there could be no way of ensuring that an expanded demand for labour
would be met from the pool of chronically unemployed. Emerging job vacancies
over the past decade have been taken up to a disproportionate extent by women.
It is likely that any further job creation would be taken advantage of by
people outside the current labour force. Opposition senators believe that the
problem which the Government is attempting to solve in a quite inappropriate
manner through this amending legislation is well described in the submission
from the Queensland Government:
The problem ... is not a lack of demand in the labour market by
employers because wages are too high, but rather a mismatch between the jobs
that are on offer and the ‘employability’ of those currently unemployed.
Instead of instituting policies that have the effect of lowering minimum wages
(relative to the current policy settings), the federal government should be
considering implementing labour market programs that enhance the skills of the
long-term unemployed to better match them to the existing pool of available
jobs. It should also be encouraging the development of a wage structure and
associated jobs that encourages skills formation, rather than jobs that are low
skilled and low paid with little prospect of career development.[4]
2.9
The ACTU submission poses the question of
whether the low paid have low incomes. In doing so it takes issue with the
assumption that low paid workers are likely to improve their employment or
career prospects over time.[5]
This applies only to a small minority of award workers. For the great majority,
the nature of the work provides no such opportunity. Even if it were so, such
employees still require sufficient income to provide for the essentials of life.
In a recently published paper, Professor Sue Richardson suggests many low wage jobs are
not only insecure, they do not lead to better paid jobs into the future and
that many individuals get caught in a cycle of low wage job, spells of
unemployment and spells out of the labour force.[6]
Professor Richardson finds that wage mobility
amongst low wage workers is particularly low in the UK and the US, which
is reflected in the broader conclusion that countries with greater earnings
inequality have lower levels of upward wage mobility.
2.10
The Queensland Government reports the adverse
psychological effect of having a ‘bad’ job. Studies have concluded that those
in jobs which are low paid and offer few prospects for career improvement are
no better off psychologically than those who are unemployed. This applies even
to school leavers attempting to enter the workforce for the first time. The
Queensland Government submission adds further evidence of the Governments
futile attempts to legislate to galvanise the chronic unemployed into a burst
of initiative:
Even if the Government’s amendments to the Act were to lead to
an expansion of low paid jobs and those jobs were taken up by people currently
unemployed rather than outside the labour force (recalling that both points are
highly contentious), there is still a substantial number of negative
consequences that could flow from such an outcome (aside from the low wage –
unemployment cycle discussed above). One obvious detrimental effect could be a
lowering of productivity growth as firms substitute low wage, low skill jobs
for higher wage, better skilled, more capital-intensive jobs. Such a situation
did occur in Australia during the early period of the Accord between the then
Labor federal government and the ACTU (1985-1990). As award rates of pay were
allowed to decline in real terms in favour of improvements in the social wage,
the level of labour productivity growth in Australia declined to very low
average levels.[7]
2.11
Opposition senators conclude that the attitude
that any job is better than no job is likely to be prevalent among middle class
policy makers who have never experienced unemployment, and who, with their high
level of educational attainment, have not found themselves in depressed
economic and social conditions.
Award
dependency
2.12
The Government has consistently argued that its
amendments to the WR Act have been directed at increasing the extent of
enterprise bargaining and individual workplace agreements between employees and
workers. While it is not stated explicitly in either the Minister’s speeches or
in the Explanatory Memorandum to the bill, there is an obvious implication that
the dependence on awards is far too prevalent. One reason for the Government’s
increasing enthusiasm for unitary industrial relations regime is the eventual
prospect of eliminating state awards, along with the federal award for all but
a tiny minority of employees.
2.13
There appears to be little support for the
Government’s campaign against awards. The current award system is too
convenient for either employees or employers to dispense with. The Association
of Professional Engineers, Scientists and Managers, Australia (APESMA) has
argued that the repositioning of the award safety net toward the low paid is
unlikely to give, as intended, incentives for other award dependent employees
to engage in bargaining. APESMA argues that driving down pay and other
entitlements will neither instill satisfaction nor inspire commitment from
employees.
The advantage of an award system has been that it has provided
an even playing field on which employers could compete on the basis of quality
of service or product rather than on the basis of cutting the pay and
entitlements of their employees.[8]
2.14
The difficulty here lies with the limited
ability of many employees and employers to engage in a bargaining process. As
the Australian Catholic Commission for Employment Relations has pointed out in
its submission, workers with little or no bargaining power within the labour
market are more likely to be paid a low level of wages. They are unlikely to
have the industrial position, ability or skills to bargain directly with their
employer and will therefore rely on the award system to determine their rate of
pay.
2.15
Labor senators note that enterprise bargaining
is much more likely to be a feature of wage fixing agreements by large
industries than among small and medium sizes businesses. Research conducted by
ACIRRT for the Victorian Industrial Relations Taskforce 2000 shows that only 6
per cent of small businesses have certified agreements compared to 19 per cent
of larger businesses. Labor senators support the comments made in the Victorian
Government submission on this point.
2.16
This disparity has nothing to do with the impact
of national wage rises. Small business owners lack the resources and expertise
that often need to be devoted to the enterprise bargaining process. Small
business owners are also less likely to belong to an employer group that can
provide that expertise. In particular, a business owner who has one or two
employees is unlikely to devote time and money to negotiating and certifying an
agreement that will in all probability result in marginal increases in
efficiency. The relative cost and returns for a business with 50 employees are
of course different.[9]
2.17
In summary, there is every reason to believe
that the Government’s assumptions about enterprise and workplace bargaining are
based more upon wishful thinking and rigorously ‘pure’ free labour market
theories than any sober reflection on what employees and employers, in
particular circumstances, find most convenient. The functions of the Commission
are several, but most important to award dependent employers and employees is
considered and impartial judgements. Not only award employers, but enterprise
bargaining parties too, are also heavily reliant on the safety net award
judgements. The apparatus of the Commission is established for the public good,
and while it maintains the confidence of all parties to awards and industrial
agreements there is likely to be a high degree of workplace harmony.
Maintaining
the independence of the Commission
2.18
Labor senators accept assurances given by the Department
of Employment and Workplace Relations that the bill will not impose
impermissible limitations on the discretion of the Commission, nor prevent it
from making awards that are appropriate for the resolution of an industrial
dispute. Nonetheless, there are some observations that may be made in relation
to this question.
2.19
The committee majority considers it necessary to
report its concern about representations it has received that the bill
threatens the independence of the Commission. This view was put to the
committee in a number of submissions, and at the public hearing, principally by
the representative of the Shop, Distributive and Allied Employees’ Association.
It has been alleged that the principal amendment will have the effect of
fettering the discretion of the Commission to weigh the arguments made before
it in relation to the primary role of awards and the relative importance of the
needs of the low paid.
The
welfare-tax intersection
2.20
Labor senators note the arguments of the
majority report in regard to this term of reference and agree with comments
made to the effect that this issue, while relevant in some ways to the bill before
the committee, poses policy questions that extend far beyond the scope of this
inquiry.
2.21
The ACTU has acknowledged in its submission that
its campaigns in favour of wage increases are criticized on the grounds that
the net gain to employers for such rises are small because of tax scales.[10] Labor senators agree that
there is a problem in this regard and that effective marginal tax rates may
have to be addressed. This a matter for the Government to address, along with
the question of ensuring that the social welfare system delivers effective
services to those entitled to them.
2.22
It should be stressed, however, that the issue
of the ‘social wage’ should not be confused with the entitlement for all
employees to receive a respectable ‘living wage’ irrespective of tax credits
and welfare safety nets. The existence of the latter does not absolve employers
from the responsibility of paying fair wages. Labor senators would be opposed,
in any future debate on this topic, to the notion that wages for the low paid
be subsidized by the taxpayer.
Conclusion
2.23
Labor senators on the committee can see nothing
in this bill which recommends its passage. In summary:
- the bill is unnecessary as the Commission is
obliged under the current Act to consider the effect of award decisions on the
low paid and the unemployed, and to attempt to strengthen this provision is
either to fetter the discretion of the Commission, which the Government denies
it intends to do, or to provide unnecessary direction;
- the bill indicates scant regard for the
importance of the safety net award system in maintaining a basic living
standard for the low paid; and
- the bill makes the erroneous assumption that the
undermining of the award system will force all workers and their employees into
enterprise or workplace agreements.
2.24
The Labor senators on the committee recommend
that this bill not be passed by the Senate.
Senator George
Campbell
Deputy Chair
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