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Oh For Another Accord!

My last two blog essays have been about unions and the Labor party.

This week I want to enlarge on the theme that the anti-business stance of the both the unions and the Labor party are in the end self-defeating.

In the debate about the reduction in company taxes Bill Shorten has railed about reduced company taxes improving business bottom lines. He seems to believe that business profitability is achieved at the expense of workers. In this regard he seems too obsessed by the distribution of wealth rather than be concerned about the creation of wealth. And it will surely follow that obsession with wealth distribution will undoubtedly reduce wealth creation. (But of course the Opposition’s current antagonistic attitude to reducing company tax it is just another case of opportunism at work. It wasn’t too long ago that both Shorten and his Shadow Treasurer were advocating reducing company tax. The previous Labor Treasurer, Wayne Swan has also been an advocate in the past.)

Labor and the Union movement have long bemoaned the lack of job security for workers. They have taken a stance that would suggest that job security is an entitlement for workers. But that is an unrealistic expectation, certainly in the private sector.

Employment security is inexorably linked to the profitability of business enterprises. Accordingly the most constructive way of bolstering secure employment is ensuring the businesses that employ workers are profitable, and those workers form a productive part of the workplace creating business profits. (The most important thing a worker can do these days to promote their own job security is to ensure their employability. Unfortunately this will often be linked not only to skills acquisition but also to mobility.)

Time and again we see labour intensive businesses fold because of high wage rates and restrictive work practices. This is particularly the case in manufacturing industry with high rates of unionisation. As I have written previously, it is only when such businesses are in imminent danger of folding that unions make any concessions to ease the burden of employment costs.

If unions were smart they would be continually monitoring the profitability of the businesses that employ their members. They should be proactive in safeguarding business profitability to ensure the security of employment of their members. Instead they adopt a win/loss mentality believing somehow that imposts on employers is helpful to their members and any concessions made to business must automatically be detrimental to their members.

The Hawke/Keating Governments entered into an Accord with unions and businesses to progress Australian Industry, particularly manufacturing. Early on they sent a mission to Western Europe to study manufacturing business to determine why Australian firms were so poorly performed compared with their European competitors. On its return the study group published a document which they titled Australia Reconstructed containing their findings. In essence they found that the major contributors to low productivity were:

  • Australia’s outdated award system.
  • Australia’s restrictive work practices,
  • Poorer education and training than was available in Western Europe, and
  • Poor management.

These findings seeded the microeconomic reform agenda then commenced by the Government with the cooperation with the Union movement and business. This kicked off a process that provided a couple of decades of improving productivity and economic growth. It is just such an approach that we urgently need today.

One of the union officials that had been part of the delegation to Europe related a very telling story to me. He told of going to a factory in one of the Scandinavian countries. He was shown around the factory by a local union official. The factory had enlightened management which had established various mechanisms for worker involvement. The official related how the workers often brought to management’s attention various ways of improving productivity. The Australian unionist was flabbergasted by such cooperation with management. He remarked that that wouldn’t happen in Australia because his union believed that fostering improved productivity would most likely lead to reduced employee numbers. And even if the union were to agree to measures to improve productivity, they would expect to trade that off against higher wages or improved conditions.

The Scandinavian official protested that they were in a very competitive market and that his members’ futures were dependent on the firm’s success. “But,” he added, “we know, even beyond this, a collaborative approach with management is in our members’ long term interests.” To prove his point he told the Australian his members’ wage rates, which were surprisingly much higher than their Australian counterparts. “You see my friend, we learnt a long time ago that if you are to maximise the milk you get from a cow, first you must feed her well!” This would be a good lesson for both Bill Shorten and the ACTU to learn. High levels of productivity translates to higher wages.

It doesn’t take a genius to find out that a stagnating economy is hurtful to employees. Since the Global Financial Crisis, except for those fortunate enough to benefit for a time from the minerals boom, Australian workers (apart from those cloistered in the public sector) have had few wage increases. In these circumstances, instead of putting more imposts on business, the Government and unions need to be finding ways to encourage business growth and maintain our international competitiveness.

Another point worth making is that when Shorten decries company profitability, he should think more carefully about the beneficiaries. Profitable businesses tend to pay better and employ more people. But Shorten seems to be obsessed with the distribution of profits. Even here he should take care. Once upon a time it was the wealthy who were the major shareholders in business. But today many ordinary workers directly hold shares and many more do so through their superannuation funds. Consequently they benefit from business profitability not only as employees but as shareholders as well. So business profit is hardly the dirty word that the Leader of the Opposition and his union cohorts make it out to be.

So my thesis is that Australians would be better off, with a more robust economy, with better prospects for economic growth, with higher levels of employment and more buoyant growth in wages if we could again cultivate a more collaborative relationship between unions and business.

Unfortunately I suspect that such a relationship can only be encouraged under the auspices of a Labor government. But it won’t happen while Bill Shorten leads the Labor Party, nor while Sally McManus is Secretary of the ACTU, both of whom seem obsessed with taking industrial relations back to the 1960’s.

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  1. 3 Comment(s)

  2.   By Mark Shaw on Apr 9, 2017 | Reply

    Australia Reconstructed was published 1987 and I still have a copy in my personal library.
    Yet 30 years later we still have:-
    • An outdated award system (dare I say supported by an outdated Industrial Relations system generally)
    • Restrictive work practices
    • Poor management.
    (I’ll hold on the ‘Poorer education and training compared to Western Europe’ as I am not up to date on that one.)

    Clearly Australian’s have not yet learned the lessons of history. Perhaps Paul Keating was right with his ‘banana republic’ comments. Unfortunately perhaps we need a serious and sustained ‘bad time’ to jolt us out of our current mind set.

  3.   By Brian Turnbull on Apr 9, 2017 | Reply

    Hi Ted, once again you have addressed the issue in clear and forthright terms.
    I have been concerned about the future of Australia for some time, but being out of the workforce for 10 years now, and with some health challenges, the opportunity for me to do something about has probably passed. However I have distilled some of what you have raised into some homespun notions:
    • Australia has had a wonderful party for the last 20 years, now is the time to do the washing up, and put things back where they belong.
    • The Liberal party bakes the cakes, the Labor party is only concerned with cuting them up.
    • Virtually all “bosses” have been an employee at some time, very few employees have ever been bosses. Who has the better idea to “make Australia great again”?
    • Politicians are ruled and fed by the bureaucrats – how many bureaucrats have ever had to do it tough?
    You may care to use some of the above.
    Regards,
    Brian

  4.   By Brad Carter on Apr 10, 2017 | Reply

    Hi Ted
    I have read many examples over the years where progressive companies have significantly improved productivity by clever involvement of workers including cleaners advising on machine layout. A good example that I can recall came from the Omark company who made the majority of chain saw blades in the world. For every Chain Saw sold, there would be the supply of six chain saw blades during its life. As Omark improved productivity, the company launched into an acquisition mode buying strategic unproductive companies for growth, but also ensuring the continued employment of the workers who were loyal and leading in productivity improvements.

    I note Mark Shaw’s comments that we may need a period of sustained bad times to jolt us into reality. However, I thought that with the demise of manufacturing industry in Australia, we were already experiencing those bad times but the jolt into reality is still yet to occur.

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