Great politics, lousy policy

THE PM's industrial relations laws highlight her strengths and weaknesses.

ON assuming power, Prime Minister Julia Gillard spoke about the government having lost its way and needing to get "back on track". But she refused to elaborate on precisely what she meant by these comments.

There is a fair chance that she was not referring to the Fair Work Act, the statute that replaced WorkChoices. In fact, my guess is that she would rank this new law at the very top of her list of achievements.

With the defeat of the Howard government and the obvious effectiveness of the Your Rights at Work campaign, the lifespan of the WorkChoices legislation was clearly limited.

Interestingly, the then deputy prime minister, the minister in charge of changing the legislation, opted to proceed slowly and methodically.

Certainly, the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 was passed relatively quickly, to abolish Australian workplace agreements, the statutory individual agreement stream. However, AWAs in place were allowed to continue until their expiration.

Notwithstanding the low incidence of AWAs (less than 3 per cent of employees), they represented the core evil of WorkChoices for trade unions. This early concession on the part of Gillard was strategic and well-timed.

To shape the form and content of the final legislation, Gillard opted for a lengthy period of consultation with various stakeholders, including employer groups. What might have been a degree of public resistance and questioning on the part of employer groups turned to silence, even mild endorsement, in some instances. There is no doubt this was clever politics.

Only as the interpretation and implementation of the Fair Work Act have become apparent, has it dawned on the employer groups that the impacts of the new law are both pervasive and detrimental to business.

Take the case of modern awards. The plan was to replace the nearly 4000 awards, many arcane and impenetrable, with a much smaller number of awards, just over 100, to be configured along broad industry lines. In addition to the National Employment Standards, other conditions specific to these industries would be set down in these new, modern awards.

The problem with this approach was apparent almost immediately. Gillard had promised the impossible: no worker would be worse off, no employer would face additional costs.

By defining industries in broad terms -- for example, hospitality -- businesses with very different requirements would be forced to operate under the same award. But hotels actually have very little in common with fast food outlets or restaurants.

But by forcing all businesses within a broad industry group to comply with the same pay and conditions as stipulated in the common modern award, the unintended and perverse consequences were all too obvious.

Gillard was forced to act, itself a strange development given the supposed statutory independence of the newly titled Fair Work Australia, the latest incarnation of the Industrial Relations Commission.

Additional awards have been created to deal with these industry differences. But these interventions have only been made in respect of the most anomalous outcomes of the award modernisation process.

One issue that Gillard has not been prepared to tackle relates to the minimum engagement period in the retail award, now set at three hours. With any adjustment strongly opposed by the Shop Distributive and Allied Employees Association, stories have emerged of school students being sacked from their jobs because of employers' inability to provide three hours of work.

Some of these employers have now been fined and back pay demanded. It is difficult to reconcile these outcomes with the notion workers are not worse off: these young people no longer have jobs and will not receive valuable work experience.

Enforcement more generally has been beefed up. In 2009-10, the departmental appropriation for the Fair Work Ombudsman was $134 million and staff levels have risen dramatically.

A major national audit of employers in retailing has been launched by the Fair Work Ombudsman, who stated that he was worried about "the large numbers of young people and low-paid workers who may be vulnerable if they are not fully aware of their workplace rights".

Removing the exemption of businesses with fewer than 100 employees from the unfair dismissal provisions has led to a surge in the number of claims for unfair dismissal. In the first quarter of 2009-10, the number of claims was 85 per cent higher than in the corresponding period of the previous financial year.

It is still early days but there are lots of ominous signs. Some of the more egregious initial decisions have been unwound but there is still a lot of uncertainty surrounding the act's various provisions, itself a bad thing for business. More generally, there are indications of a return to the rigid, centralised arrangements of the past, and the associated loss of labour market flexibility.

It has been a case of shrewd politics, lousy policy.

A final point worth pondering is what would have been the fate of the RSPT had Gillard been asked to apply her undoubted consummate skills of consultation, persuasion and preparedness to make concessions to the exercise at hand. In contrast with the "it's my way or the highway" approach favoured by Kevin Rudd and Wayne Swan, it is a fair bet that she would have had the miners almost eating out of her hand by this stage.

Of course, the harm cannot be totally undone. But with Julia in charge, some sort of peace settlement with the miners does seem likely.

Judith Sloan is a professor at the Melbourne Institute of Applied Economic and Social Research, the University of Melbourne.