Class wars pave the road to poverty

THERE is no doubt that the public's negative reaction to John Howard's WorkChoices legislation contributed significantly to the election of the Rudd government in 2007. In its place, the newly elected government promised to pursue a balanced approach to industrial relations: ensuring fairness while promoting productivity.

The Fair Work Act was duly passed and is now fully operational. New statutory individual contracts have been abolished, the award system has been rationalised and modernised and there are numerous provisions in the act that are favourable to the trade unions. The overall impact of the new act is to re-regulate the labour market, but because agreements made under WorkChoices have been allowed to run on until expiry, any adverse economic effects have been relatively muted.

Certainly, the number of claims for unfair dismissal has begun to rise, although this was to be expected given that the previous exemption for firms with fewer than 100 employees was removed by the new act. And while there has been some increase in the number of industrial disputes over the past several months - witness the rolling strikes at a number of ports - industry harmony remains the norm.

Then along came Paul Howes, national secretary of the powerful Australian Workers' Union. While asserting that he had no intention of reigniting the class wars of the past, he warned Rio Tinto - a company with which the AWU has a long and fractious relationship - that "you don't own this government; you don't own this country anymore. You cannot hide behind your slimy, grubby mates in the Coalition because we are coming after you."

So what explains this extraordinary outburst, replete with its intemperate language? What would possess someone in Howes's position to describe Rio Tinto's chief executive as "sucking blood out of the blood, sweat and tears of blue-collar workers"? And then to promise that his union will take on Rio Tinto "to make sure they pay a liveable wage to the workers who make the wealth that these shiny arses sitting in the boardroom in London enjoy". (Howes's idea of liveable wage is an interesting one given that the lowest wage in the Pilbara is about $100,000 a year.)

The first point to make is that the bad blood between the AWU and the company goes back to the days when Rio was called CRA. Faced with bloody minded and economically damaging industrial action in the Pilbara and elsewhere, the management of the company pursued a policy of getting closer to the workers, thereby undermining the representational role of the trade unions, and not just the AWU.

Armed with generous individual contracts, over time, the company's strategy was very successful and unionisaton fell markedly, particularly in the Pilbara. Other mining companies followed CRA/Rio's lead, moving in the direction of individual contracts for their workers.

The blow to the unions has been symbolic and financial, although inter-union fighting had not helped their case with the workers in terms of retaining union membership. The ongoing campaign to re-unionise the Pilbara has been focal and unsuccessful for the AWU.

In other words, there is an important historical context for Howes's remarkable verbal explosion and the singling out of Rio Tinto. There is also an element of personal grandstanding: "look at me, I am head of a strong and proud union; our membership is growing; don't think we are a spent force".

This self-aggrandisement has two threads. One is to secure "top-dog" status in the trade union movement, as one of the young turks who would lead the movement out of the wilderness, to a position of renewed strength and greater membership. The second is to allow Howes to position himself for a future political career by reinforcing the influence of his expressed opinions on the federal Labor government.

While a number of Labor politicians must be privately furious over Howes's remarks, this did not stop the Prime Minister or the Deputy Prime Minister effusively supporting Howes and the AWU in speeches delivered at the AWU annual conference.

Of course, Wayne Swan's unqualified backing of Howes should not surprise. The AWU and the ALP are essentially contiguous in Queensland and no one succeeds in Labor politics in Queensland without the backing of the AWU. Swan has been a long-standing member of the union.

The reality is that these "back-to-the-future" comments of Howes are of no help whatsoever to the federal Labor government. They jar completely with the government's soothing rhetoric of balancing fairness with promoting productivity, something that some businesses had begun to doubt in any case.

The fear is that, by belling the cat, Howes is actually foreshadowing a return to the bad old days of industrial relations warfare. And the fact that the Fair Work Act presents the unions with a number of new weapons to wage the war is creating some consternation in the business community.

The government would be wise to distance itself from the comments and the implications that follow. Partnerships and win-win solutions at the workplace are the way to secure economic prosperity. Them and us, fighting over the spoils, protracted disputes: these are the fast route to economic impoverishment.

Judith Sloan is an economist and company director.