| Introduction
Lachie, ladies and gentlemen, thank you for inviting me to speak today.
I welcome the opportunity to talk about the necessity for a continuation
of industrial relations reform in this country. It is an important subject
because of the benefits that reform will bring to the Australian economy
and to Australian agriculture. NFF policy is quite clear: industrial
relations reform must continue if Australian agriculture is to maintain
its competitive position in world markets. It sounds a fairly simple
proposition but it reflects a firm position in one of the fiercest debates
that will be held in the lead up to the next election.
The political battle lines have been drawn, with industrial relations
shaping up as an area where the starkest policy differences between
the parties will be on show. Because NFF has a clear policy view, I
want to speak to you today about the Labor Party's proposals not only
to stop the reform process but to "roll back" some of the
initiatives introduced by the present Government. I want to stress that
the NFF vision for industrial relations is for reform that abandons
the current system, including the reliance by employers and employees
on Awards, and this vision and the ALP vision is a world apart. In making
that statement, it should be absolutely clear that NFF is not taking
political sides - we are advancing policy and it is the rationale for
that policy that I want to explore with you.
The NFF
Vision for Industrial Relations
The NFF vision for industrial relations is one based on a unitary system
that has as its underlying employee safety net a series of minimum statutory
conditions. We believe in a unitary system because it is just a plain
nonsense for a country with fewer than 20 million people to have six
different, overlapping and complex systems of industrial relations.
Businesses need to operate across State borders and increasingly into
international markets and the structure of legal arrangements about
something as fundamental as labour management should be of assistance
rather than act as a hindrance. As an example, the recent report on
the Harvest Trail found that the duplication, inconsistency and complexity
of the various Federal and State Awards that apply in horticulture cause
a number of difficulties for the industry, and are clearly an impediment
to growth.
The statutory minimum conditions could take the form of a Schedule along
the lines of current Schedule 1A of the Workplace Relations Act 1996
(Cth) (the Act) which sets out minimum terms and conditions of employment
for Victorian employees not subject to Federal Awards. Above those minimum
standards, agreement should be reached between employers and employees
about conditions that suit the enterprise. Implicit in the advocacy
for a simplified and unified system (whether it takes the preferred
NFF form or another form) is the notion that there is nothing sacrosanct
about Awards. We should not hold them up as the holy grail of employment,
especially not farm employment. The essential principle that will fuel
growth and make for better workplaces is the need to empower employers
and employees so that appropriate agreements designed for particular
circumstances (especially the meeting of export orders) can be put in
place. I will elaborate on this idea later.
Awards
not the Answer
For the moment, I want to concentrate on a line of argument that is
important in the reform debate. NFF understands that some farmers support
the Award system. The reasons for this support appear to rest on some
arguments that, frankly, don't hold water. The view seems to be that
because farming is characterised by numerous small operations, the practicalities
of farming prevent individual arrangements being negotiated with employees,
particularly as those arrangements might need to be signed off by a
Government agency such as the Office of the Employment Advocate, a State
Commission or the Federal Commission. The shearing industry is often
cited as a good example of an area where farmers would be faced with
difficulties if they could not turn to an award.
The argument to the contrary is that farmers and workers have been reaching
agreements for years, agreements that do not necessarily fit with the
rigid Award prescriptions that might apply to their enterprise.
When I was acting as solicitor for Victorian farmers, a great deal of
my work came in defending cases where, on termination of the employment
contract, the strict Award conditions fell foul of an agreement that
had been working successfully for years - until something went wrong
and the employee got advice that despite the agreement that had operated,
the law would force the employer into retrospective compliance with
a strict Award standard. The most common scenario was for an amount
to have been paid by the farmer in addition to the legal hourly rate
in order to compensate the employee for overtime that may or may not
have been worked, depending on seasonal factors. These informal agreements
could not be enforced in the face of prescriptive Award conditions.
Often farmers were flabbergasted when penalty rates were imposed on
the higher hourly rate that had been set to compensate for overtime
- the Award requirement that overtime be paid at time and a half or
double of the normal hourly rate meant it was added to the higher base
rate.
Time and again, farmers would tell me that they wanted to be guided
by a minimum industry rate, and then to be permitted to reach appropriate
arrangements with their employees about other issues, such as the example
about overtime. This fits in with the NFF vision.
It should be clear that no one is advocating that you should be a lawyer
in order to design an agreement that is suitable for your workplace.
All that should be needed is for there to be a legal guideline on the
base rate of pay, the community standards for such things as annual
leave and sick leave and the rest can easily be the subject of a fairly
simple and straightforward agreement.
At the VFF, common law agreements have been drafted for farmers since
the Kennett Government changed the Victorian system away from Awards
in 1993 to the establishment of a set of minimum standards. Those common
law agreements have not been costly to implement and are part of the
VFF handbook service that costs an additional $55.00 per year on top
of the normal subscription. So, not only do you get a handbook, and
thereby an industrial update service, but you also have a common law
agreement drafted free of charge. I did hundreds of those agreements
from 1994 to 1998 and I commend the work of David Griss and his team
who continue that work, with approximately 400 agreements having been
drafted in the first six months of 2000.
The point is that farmers have not really embraced the Award system.
They want some guidance as to the appropriate going rate for wages and
around that notion they generally construct appropriate agreements.
In the shearing example they just use the Pastoral Industry Award flock
shearing rate as a guideline even where the local State rate might be
lower, as in South Australia.
The Australian award system has meant that most of the relations between
agricultural employers and their workers have been and continue to be
detailed with a large measure of prescription. Managers of labour have
operated in a framework where they have been told exactly what wages,
work place standards and other employment related conditions they must
provide to their workers. They have been told the minimum rates of pay
which must be paid, because there has always been an Award minimum rate
applicable to labour, and they have been given a vast bundle of complex,
sometimes onerous, provisions to apply in the workplace. If they fail
to meet an Award standard, they are faced with a civil liability no
matter that an agreement has been reached about a different standard.
Farmers don't want such a system. What they want is an indication of
what the safety net levels are so that when they, say, engage a shearer
they have a starting point to the contract rather than numerous prescriptive
conditions. The wide combs dispute made that abundantly clear - where
there is an Award prescription that is counterproductive, it will be
ignored.
James Ferguson made the same point as I have been making as follows:
"Despite having one of Australia's oldest industrial Awards…the
Pastoral Industry Award (1907), employers and employees in agriculture
have an older tradition, still maintained today, of reaching mutually
satisfactory arrangements without the involvement of third parties.
Driven principally by necessity borne of isolation and mutual dependence
in scarcely populated regions, common sense has generally prevailed
over arbitrary rules formed in tribunals far from the workplace, and
the agreements reached have been to their mutual benefit in terms of
wages, conditions and job security."
Part of the NFF vision is translating the tradition that is mentioned
in the quotation to a legal reality. If you like, we want to make what
occurs now at the informal level, the formal reality. This is different
from a "romanticised notion of the US labour market experience"
or some other ethereal idea of where reform should take us. These ideas
are firmly fixed in the reality of what now happens in agricultural
employment.
International
Competitiveness
There is another, potent reason for further decentralising industrial
relations, for the system to legally permit what farmers have been doing
for decades, and that relates to the idea of international competitiveness
that I mentioned in the beginning of this talk.
Australia has a long history of closely regulating the labour market.
There has been a traditional disconnection between labour productivity
and remuneration in that the hallmark of the system has been to provide
workers with a wage that meets their needs despite any lack of profitability
in the employing entity or industry. The linkage between a "fair
and reasonable" wage for the ordinary Australian worker with an
exemption for an employer from the payment of excise duties was established
at the turn of the century. The famous Harvester judgment made a clear
link between the payment of wages which were sufficient to provide "reasonable
conditions of human existence" with exemption from the excise established
under the Excise Tariff Act 1906 (Cth). In other words, from Australia's
early days, the system sought to ignore pressures on both employers
and employees from the world market by protecting wages within a wall
of import barriers thereby redistributing wealth from the mining and
agricultural sectors. That approach to economic management leads to
disaster and has long been abandoned by both political parties, and
is an issue that NFF has addressed full-on since its inception.
The OECD has summed up the structure of economic institutions that have
impeded the agricultural sector in particular:
"For much of this century, economic institutions in Australia developed
around the idea of redistributing rents from the rich primary commodity
sectors to the rest of the economy. Key features of these arrangements
were high import protection, notable for the manufacturing sector, and
a centralised wage setting system that fixed a multitude of legally-binding
minimum terms and conditions for employment relationships."
The issue of historically poor productivity in the labour market has
been partly addressed by the Coalition Government's utilisation of a
more flexible statutory instrument in the Workplace Relations Act 1996
(Cth). This Act assists Australian businesses to face up to the challenge
of world markets by permitting enterprise level agreements to take priority
over industry wide agreements. Fuelled by this change and other structural
reform, at present, Australia's productivity growth, the major contributor
to rising per capita incomes, is at historically high levels. The Productivity
Commission has noted that in the 4 years from 1993-94, productivity
growth in the market sector of the economy reached 2.4% per year, significantly
above the previous long-term average of 1.2%.
The power of the organised labour movement to demand the establishment
of industry-wide standards of regulation that have consistently provided
a false market for labour has been challenged by the current Federal
legislative regime. The OECD has appropriately encapsulated this movement:
"The Workplace Relations Act 1996 (WRA) has clearly given the industrial
relations reform process a fresh impetus and thus constitutes an important
reform step towards labour market deregulation. But there is still a
long way to go to arrive at an entirely decentralised and highly flexible
industrial relations system. The WRA has expanded the opportunities
for enterprise bargaining, as reflected in the rapidly rising uptake
of non-union (collective and individual) agreements."
As expressed in this quotation, the WRA has gone some way to introducing
labour market reform and flexibility but the process is far from complete.
The Government's reform agenda has been compromised by the position
of the Australian Labor Party and Democrats. The very important issue
of, for example, the statutory abolition of meat industry tallies is
still clouded in uncertainty because of the opposition parties' current
lack of commitment to that reform. This lack of commitment is a real
concern to NFF, given that industrial relations reform is currently
only a half-baked cake. Reform must continue so Australia may successfully
compete in world markets.
The Australian agricultural sector is no different from any other part
of our economy that must be devoted to a global outlook. In fact, Australian
farmers export close to 80% of their production so an export orientation
is even more vital. As part of this focus, management education about
industrial relations is a very high priority for the sector, a matter
generally borne out by the Karpin Report:
"Australia's problems with its current account and terms of trade
has placed long-term structural pressures on macroeconomic settings.
In this environment, developing an outward or global orientation amongst
greater numbers of Australian managers is necessary to improve trade
performance and sustain the nation's standard of living. Moreover, this
orientation should be broader than a simple exhortation to export. It
encompasses all forms of international business and it also includes
a willingness to set world best practice as the target for all Australian
enterprises and managers to meet or exceed. Even enterprises whose strategies
and managers are domestically focussed should be fully cognisant of,
and striving for, competitiveness in world terms:"
The nub of the Australian farm manager's challenge is to be internationally
competitive. In the farm sector, Australia's unsubsidised farmers compete
on a corrupt world market exposed to the blowtorch of unfair competition.
They compete in a world market where, for example, the EU subsidises
its farmers to the tune of $A60 billion per annum, and the US $A28 billion
per annum - and yet Australian farmers succeed. It makes it harder for
them when they have to find $2,300 per farm to prop up other Australian
industries that are subsidised.
However, both here - for the motor vehicle and textile industries -
and for EU and US agriculture, retaining subsidies only prolongs the
inevitable. The answer does not and cannot lie with subsidies. Uncompetitive
farmers disappear and the attrition rate for EU and US farmers is much
the same as for Australia - around five per cent per annum. In every
aspect of management, and especially people management, the internationally
competitive focus must drive action or will force extinction. It is
therefore imperative that labour is managed productively, to continue
to achieve this internationally competitive outlook.
Why is the productive management of labour tied up with further decentralisation?
The economic imperative to be world competitive means that farmers and
their employees must be flexible in their workplace arrangements with
uniform, prescribed sets of centralised conditions inappropriate to
changing needs. In agriculture this need for flexibility is more evident
than in other sectors, with seasonality, the catering to peaks and troughs
of overseas markets and the need to tend to livestock, all factors that
prevent "one size fits all" industrial solutions.
One other important issue is that the current evidence is that workers
have been benefiting from the move to enterprise agreements. A recent
paper by Dawkins postulates that enterprise bargaining in Australia
has supported strong growth in real wages because a large proportion
of the country's productivity growth has gone in higher wages. NFF has
consistently argued that higher wages can only be paid out of productivity
growth and that the annual wage case mechanism is just not sustainable.
Ironically, it is only because of higher overall labour productivity
that the economy has been able to afford the real wages growth engendered
by the national wage case outcomes.
Labor's
Platform - More than a Halt to Reform
In the face of the indication that much of the prosperity has flowed
to workers, it is a battle to understand the Labor party platform. It
contains policies that will take one giant leap backwards rather than
a gentle roll-back. The recently issued Labor policy promises a prohibition
on individual employer and employee bargaining in that an individual
contract of employment will be unenforceable if it is different from
an Award or union collective agreement applying in the industry. That
is a complete change from the prior Labor Government's own policy. It
was a Labor Government that in 1990 advocated "greater labour market
flexibility, award re-structuring and a form of enterprise bargaining"
.
In addition, Awards would be given new life by a Labor Government and
would become 'comprehensive'. This re-regulation of the labour market
through the strengthening of the Award system goes against the increased
flexibility derived from a focus upon workplace outcomes rather than
upon the rulings of third parties and the deleterious decisions sometimes
imposed on agriculture by those third parties. It goes against tailoring
flexible agreements to meet the peaks and troughs of export industry.
And it goes against the grain of permitting flexible and relevant agreements
to be tailored to individual workplaces.
In addition, Labor wants to extend the reach of the industrial relations
system to some contractors who will be deemed to be employees, along
the lines of the Queensland legislation that AgForce and NFF are actively
fighting now with AFFF funding. There are other aspects of the Labor
platform that concern us, like again changing the trade practices law
to remove the prohibitions on secondary boycotts and sympathy strikes.
This law was essential to us in our waterfront strategy.
Conclusion
In a rare move, three of Australia's leading employer organisations
NFF, Business Council of Australia and Australian Chamber of Commerce
and Industry recently issued a joint statement criticising this move
towards greater IR regulation by the ALP. We called for a forward looking
approach to labour relations, which enables Australian business and
industry to compete in international markets and improve productivity
and efficiency. We singled out for criticism the decision by both unions
and ALP to embrace industry-level bargaining in some circumstances and
to reject individual contracts. We pointed out that both the unions
and ALP supported enterprise bargaining when the IRC introduced it in
October 1991. Any backward step on this issue could have very serious
adverse consequences for the Australian economy and the Australian standard
of living based on the increased productivity I referred to earlier.
One size does not fit all. Industry level prescription is not the best
approach. Industrial relations reform must continue to deliver a prosperous
Australia.
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