Wages based on productivity – there’s a new world dawning

A quite seismic story in The Australian today and one that makes me think that in government the Coalition plans to be there for a long time. The obsession with trying to rid us of our unique industrial relations system may be waning and not before time. Instead, we have evidence that the intention is to use the existing structure in a more creative way. The story is titled, Coalition to police wage claims, and the first two paras say most of what needs to be known:

THE Coalition has vowed to crack down on ‘excessive’ wage claims by forcing ‘lazy’ employers and unions to prove they have engaged in an ‘appropriate discussion and consideration of productivity’ before above-inflation pay rises are approved.

Opposition workplace relations spokesman Eric Abetz said yesterday unions pursuing agreements allowing for annual pay rises of, for instance, 5 per cent should be required to show to the Fair Work Commission that they had ‘genuinely discussed’ productivity with their employer before the deal is approved.

Hard to do, glory be, it will be hard to do. But putting productivity back into the equation where unions are involved in wage negotiations is a major step in the right direction.

Further comment: I am apparently one of those free market economists who actually has an interest in institutional structures. I am also a Burkean conservative in that I think that the “bank and capital of nations” is a standard from which we should only deviate slowly and with caution. And finally, I don’t want Tony Abbott to be the third Prime Minister in our history to lose his seat while his government is voted out because of their policies on industrial relations.

I wrote an article for Quadrant some time back on this, “A Free Market Defence of Industrial Tribunals“, where I point out why the institutional structures we have are a benefit for conservative governments if properly understood and appropriately managed. It’s not the system that’s the problem, it’s the unions and they are a massive problem. For comparison, the industrial relations system of Singapore was based on the system in Western Australia.

It’s union power ruthlessly used, that needs to be dealt with. The idea that we could have what no one has – an industrial relations system free from legislative rules – is a non-option. We have unions and they have power and they will use that power to bludgeon employers for wage increases that threaten our productivity. The madness of the decision yesterday on apprenticeships will, typically, be sheeted home to the Fair Work Commission and not to the current government that sought the change. A government in which half its front bench are union leaders is a government that will cause economic harm.

So what should you do? Get rid of the Fair Work Act, ensure that workplace decisions are determined at the workplace but also make sure that the system put in place is not only fair to all parties but is seen to be fair. If that makes no sense to some people, we will just have to agree to disagree. But if you are interested, read my Quadrant article. We can then continue the conversation after that.

And in this I am mindful of the commotion that this proposal has caused within the Coaltion. Andrew Bolt discusses this under the heading, A good Liberal idea shut down in a day. An election to win. If trying to raise productivity at the workplace by leaning into union power is no longer a vote winner – that is, if the community no longer has any idea how living standards are raised – then this country no longer has any idea on which side their bread is buttered. I don’t believe that but I’m not running the campaign.

1 thought on “Wages based on productivity – there’s a new world dawning

  1. Pingback: TA on IR – seeking fair and just arrangements | Law of Markets

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