IR system killing worker productivity to economic detriment of all

Australia’s Industrial Relations system is a millstone around the neck of prosperity, which is struggling to produce economic and wages growth, a new CIS paper outlines.

John Slater’s ‘Industrial Relations in Australia: A Handbrake on Prosperity’  says the body count is high — and rising —  due to the major parties’ bi-partisan reluctance to undertake workplace deregulation necessary to promote employment and stimulate economic and real wages growth.

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Mr Slater argues that to address the major demographic and technological challenges facing the nation, we need more than piecemeal changes to penalty rates; substantial reform of our industrial relations framework is essential.

“You’d struggle to slide a cigarette paper between the industrial relations policies of the Coalition and Labor,” Mr Slater says.

“This belies the critical role the IR system is certain to play in how Australia meets the fiscal challenge of our ageing population by ensuring as many working age Australians as possible are employed – a goal that will be made increasingly difficult by the looming prospect of entire occupations being rendered obsolete by automation.

“The twin challenges of ageing and automation make it imperative that our IR system is equipped to maximize employment and adapt to rapidly changing economic circumstances.

“On both these measures,” says Slater, “there’s already ample evidence the current system is falling short to the detriment of the overall economy.

“Our labour force participation rate- – the proportion of working age adults working at least one hour a week — is just under 65%; in Iceland its 85% and is 78.4% in the UK.

“Unemployment and under-employment are particularly serious issues in regional areas, especially among young people, with grave implications for social cohesion and community wellbeing.

“The root problem”, says Slater, “is that the Fair Work Act is still wedded to an antiquated conception of employment.

“Placing the Fair Work Commission at the centre of a one-size fits all regulatory process denies employers and employees the flexibility to negotiate the kind of productive employment terms and conditions that creates jobs and advances the economic prosperity of all Australians.

“The mealy-mouthed platitudes typically spouted by politicians about Australia’s robust economic performance conceal an uncomfortable truth,” says Slater.

“In reality, the productive, intellectual and creative energies of Australia’s workforce will remain chronically underutilized, unless we realise that industrial relations should be and must be conducted by workers and businesses.”

The paper, Industrial Relations in Australia: A Handbrake on Prosperity, has been developed from a speech delivered at CIS as the 2017 Helen Hughes Lecture for Emerging Thinkers.