Still waiting for a plumber

11 May 2005

David Peetz suggests the government industrial relations cure could be worse than the disease

IF YOU’RE still waiting for that plumber, builder or electrician to turn up - or if you’re saving up to pay for one - you’re one of many people feeling the effects of the worst skills shortage in years.

Now the federal government has come up with an answer - industrial relations reform. But will the solution help or only make the problem worse?

As the federal minister sees it, his unannounced package of industrial relations reforms will address the skills shortage and encourage women back into the workforce. As he said recently, ‘The best thing that we can do (to get skilled mothers back to work) is to provide an industrial relations system that gives people the maximum opportunities.’

As far as we can tell, the government’s agenda, once it takes over the states’ industrial relations systems, is to promote individual contracts at the expense of collective bargaining, restrict workers’ access to unions, change the way minimum wages are set, and relax unfair dismissal laws.

What will these policies do for the chronic skills shortages we face? Obviously, the purpose of changing how minimum wages are set is to bring them more in line with government policy. The government will do this by having people more sympathetic to its position (probably including government officials) making the decisions, instead of the independent Australian Industrial Relations Commission.

The AIRC has consistently awarded wage increases higher than the government’s recommendation, so clearly the result of reform will be lower minimum wages.

The promotion of individual contracts (such as Australian Workplace Agreements) also will lead to lower wages. Statistics released by the Bureau of Statistics in March showed that hourly wages of workers on AWAs were 2 per cent lower than the hourly wages of workers on registered collective agreements, mostly negotiated by unions. For women, AWAs paid 11 per cent less per hour than collective agreements.

What impact will lower wages have on the skills shortage? Lower wages mean fewer people want to enter the labour market. In short, it will make labour shortages worse.

But won’t more individual contracts create more flexibility in working hours? Won’t that bring more women into the labour market? Sure, individual contracts increase flexibility in how working hours are paid for. Research shows that they focus on reducing or abolishing overtime pay, increasing the standard hours in a week and reducing or abolishing penalty rates for working at nights or on weekends. This increases flexibility for the employer.

As one worker on an AWA said on national television last year: ‘We have to be available seven days a week, at any time that they choose to roster us. So in that way, being a single mum, I would much prefer to have certain set days so that I could plan things that I needed to do with my children.’

So, more AWAs are not going to help skills shortages. If anything, they will worsen them.

What about relaxing the unfair dismissal laws, making it easier for employers to sack people when they wish? The government claims that this will make employers more willing to hire more workers. This is a hotly contested claim, with many people arguing that the effect is small or negligible.

But even if it is true, it does not help the skills shortage. The problem isn’t that employers aren’t willing to hire people. It’s that skilled or potentially skilled people aren’t willing to work in those jobs for the wages and conditions on offer. Why would the knowledge that they can be sacked more easily make workers suddenly keen to take on those jobs?

The real problem behind the skills shortage is that employers simply have not been training enough skilled workers in the right areas over the past nine years. And that problem has been made only worse by government training policy over that period.

All sorts of wild claims have been made about industrial relations reform over the past few months. It will boost wages, it will boost productivity, and now it will solve the skills shortage. Next we will be told that it will repair the health system, improve academic standards, fix my mother’s hip and cure cancer. But you’ll still be waiting for that plumber to turn up.

David Peetz is professor of industrial relations at Griffith University and visiting professor at the University of Bergen, Norway. This article first appeared in the Courier Mail.

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