Productivity Commission: Mushy drivel, all for a sacred platypus

Our workplace relations framework is like the platypus — a very strange creature unique to ­Australia.

By dint of a historical accident, our strange system was based on the idea of alternative dispute resolution in which a government tribunal would decide on wages and conditions. The deliberations of wise persons would replace the barbarous law of the jungle, also known as market forces.

The only way to make this ­bizarre idea vaguely workable was to impose a high degree of protection on product markets and to ­restrict immigration.

We persisted with this settlement for decades until the point that it was recognised that living standards were being eroded. The real pity is that the settlement was not completely unpicked.

Product markets were exposed to competition, government businesses were sold and a substantial skilled migration program was instituted.

But the platypus was ­sacred and could never be replaced.

Workplace Relations Framework

Key recommendations

Now once upon a time, the Productivity Commission — under the leadership of Gary Banks — would have sensibly called for an overhaul of the workplace relations system. There is no way that the mushy drivel contained in the draft report into the workplace relations framework released yesterday would have seen the light of day.

You have only to take a look at the first key point — and sigh with disappointment. Evidently, the ­labour market is not a market and, without regulation, employees have much less bargaining power than employers, with adverse ­outcomes for their wages and ­conditions.

This is just plain wrong. For the labour market to clear, wages must equal the addition to a business’s revenue that the worker contributes. To push wages above this level is to invite unemployment and underemployment.

To be sure, there can be a ­degree of indeterminacy to this equation, but it cuts both ways: employers need employees and employees need employers. If ­employees have few alternative opportunities, there is nothing regulation can do to alter this, apart from make the situation worse.

If we are talking about equity, the groups that you most want to protect are the least skilled, the least educated and the young — regulation almost invariably hurts these groups. The commission knows this; indeed, it is acknowledged elsewhere in the report.

The real trouble with this report is that it has been written by people who do not understand how the system works. And what a profound inconsistency in the commission’s recommendation that the Fair Work Commission should make its decisions with less reference to what the parties submit but more on the basis of its own analysis, but when it comes to many of the Productivity Commission’s recommendations, the submissions of the parties are simply accepted as gospel.

The biggest howler is in respect of the awards. Oh, please. The modernisation of the awards has been a complete sham, based on squashing a large number of old awards into 122 new ones and allowing the wages and conditions to float to the highest common denomination. And just because a few unrepresentative employers tell the commission that they want the award system retained, so what?

It is a classic case of extreme over-engineering — there are already the National Employment Standards — and the commission should have called it as such. By the way, New Zealand gets along perfectly well without awards, which were abolished there in the early 1990s.

Perhaps the commission thought if it didn’t frighten the horses, the government might take more notice of it and give it something to do. In fact, its duty was the reverse: to work from first principles to lay down significant markers in terms of freeing up the labour market, even if this made the government uncomfortable. Unless the commission can turn it around in the final report, this is a wasted opportunity.