Fair Work Commission awards won’t save hospitality and retail from Kodak moment

 

The rise of automation will see a sizeable chunk of today’s workforce replaced by robots, global employment giant Seek warned last week.

The fears are justified. A recent McKinsey report found 75 per cent of hospitality jobs and 60 per cent in the resources sector are vulnerable to being edged out by machines.

For Australia, the threat of much of the workforce being innovated into redundancy is made graver by the impending fiscal burden of an aging population. Already, spending on health, pension and aged care is set to swell from 25 per cent to half the federal budget.

These mounting claims on our public finance will have to be shouldered by a shrinking working age population, competing for scarce work in a labour market riven by structural change.

This presents a clear imperative that our industrial relations framework is equipped to maximise employment, and has the flexibility to adapt to rapidly changing economic circumstances. Yet on both these measures, it’s clear our current workplace framework falls desperately short.

The headline unemployment rate of 5.8 per cent paints a deceptively upbeat impression of the real labour market. Australia’s share of working age adults working at least one hour a week is a tad under 65 per cent – miles behind the participation rates of Iceland at nearly 85 per cent, and the United Kingdom at 78 per cent.

A sizeable share of the 35 per cent of adults without work are effectively unemployed. Before the question was scrapped in 2013, the ABS consistently found 22 per cent of non-workers would like a job, but weren’t strictly unemployed, either because they hadn’t recently applied for a job, or couldn’t start work immediately. When you add this to record levels of underemployment, approximately 23 per cent of Australians are left wanting by the current job market.

A root cause of Australia’s underwhelming labour market is the award system – a hangover from compulsory arbitration that continues to see the wages and conditions of almost a third of the workforce largely determined by a quasi-legal industrial tribunal.

With the performance of the national economy so frequently at odds with conditions outside the east coast capitals, the ‘one size fits all’ approach of the award system punishes workers and businesses in Australia’s weakest regions.

The idea that a café in Townsville’s anaemic local economy and record unemployment should by law pay the same wages as a bustling coffee house in Surry Hills, where the cost of living is at least a third higher, is a throwback to Soviet style central planning. It has no place in a modern and competitive economy.

Enterprise bargaining – often credited with heralding the shift away from compulsory arbitration to bargaining at the individual business level – has also proven too rigid, and hamstrung by bureaucratic oversight to be truly responsive to the ebbs and flows of the market.

Despite representing a miserly 10 per cent of the private sector – less than half the number of self-employed and individual contract workers – trade unions enjoy entrenched power in enterprise bargaining . If just one employee in the business is a union member, the existing trade union is automatically appointed the bargaining representative for the entire workforce, at which point negotiating without the union’s blessing becomes nigh on impossible.

What’s more, the Fair Work Act gifts the well-established trade unions a virtual monopoly over worker representation by preventing the registration any employee organisation if there’s already a union workers could conveniently belong to. As a result, the well-known, Labor Party affiliated unions enjoy an effective veto over the collective bargaining agreements in some of Australia’s largest industries.

The problem is that while unions enjoy decisive influence over the bargaining process, they bear none of the commercial risk of  negotiating pay and conditions in total defiance of what a competitive market would tolerate. If you want to understand why Australia is one of the most expensive and least productive places in the world to manufacture cars, steel and construct nation-building infrastructure, the profligacy of Australia’s enterprise bargaining culture provides some major clues.

Ensuring Australians continue to reap the benefits of a specialised, high wage and internationally competitive workforce will require more than an injection of capital and entrepreneurial zeal. It needs a workplace relations framework that stimulates job creation, rather than hindering it.

In the scope of the biggest challenges facing Australia’s labour force over the coming years, the brouhaha over Sunday penalty rates is really squabbling over loose change.

After all, whether someone is paid $29 or $25 an hour to work at a fast food outlet on Sunday is really an academic question if automation sees burger-flipping go the way of Blockbuster, Kodak and the dodo.

John Slater is the author of the Centre for Independent Studies paper: Industrial Relations in Australia: A Handbrake on Prosperity