Rhetoric fails to tell whole story

WHEN in opposition, more astute members of the Australian Labor Party cheered when the Howard government introduced Work Choices. They realised two things.

First, the Coalition had seriously overreached; Work Choices was political poison and it would ultimately help bring down the government. Second, it would generate a widespread mobilisation of the union movement, funding a huge election war chest for Labor.

Ironically, the Rudd government's Fair Work laws may have the same effect, though in a much quieter, slower way. While Work Choices was a short fuse - once lit, it didn't take long to explode - Fair Work looks like being a long, slow burn. But in time, as its effects slowly grow more obvious and more drastic, perhaps it will deliver just as big a bang.

Increasingly, Fair Work appears to represent a dramatic overreach. And though the business community has been slow to react and even slower to pick fights with a government known to be vindictive, it seems the full horror of the new regime is starting to dawn on it. Even worse, workers will end up bearing the brunt of Labor's IR hubris.

While improved productivity was sold as the heart of Labor's IR revolution, Julia Gillard, the minister overseeing Fair Work, is obviously nervous that the propaganda is beginning to unravel.

With no sign of a Fair Work productivity boost - in fact the opposite - Gillard told the 15th World Congress of the International Industrial Relations Association in Sydney yesterday that the "final piece of the productivity puzzle" apparently rests on "workplace leadership and the requisite culture" to build co-operation in the workplace.

But hang on. Gillard's Fair Work regime has reinstated an adversarial system of workplace relations where unions can game the new collective bargaining system to their advantage.

Even before the laws came into operation, improved productivity under Fair Work was a sham. For months the restaurant and cafe industry - a sector that drives employment - warned that many of them would close if forced to adhere to the new award of increased minimum wages, penalty rates, casual rates, shift loadings and allowances. And Gillard agreed.

In May, when she directed the Australian Industrial Relations Commission to create a new special award for this industry, she effectively conceded that the Rudd government's "award modernisation" reforms could not deliver promised productivity gains. Gillard also asked the AIRC to take the full five years to implement the new restaurant awards so as to ease cost pressures on employers during the tough economic climate.

Not surprisingly, the media failed to report or understand the real meaning of Gillard's intervention. During the election campaign, Labor specifically promised voters that its new IR system was made for all seasons, economically sensible and safe in good times and in bad. Bad times arrived and Gillard personally intervened to ensure that the restaurant industry could weather the economic storm. While she was lauded for her pragmatic intervention, any system of workplace relations that relies on the grace and favour of a government minister is the antithesis of a predictable, workable industrial relations system. Unions are furious about Gillard's intervention and other industries, not surprisingly, are lobbying the Employment and Workplace Relations Minister for similar favours to ride out the economic downturn.

The productivity promise of Fair Work has gone the way of Grocery Choice and Fuel Watch: political puffery crushed by reality. Only Fair Work is worse. Worse than failing to deliver on promises made, Fair Work diminishes productivity.

More specifically, the notion that enterprise bargaining will drive productivity is equally spurious. Enter Cochlear, maker of the bionic ear, a company that ought to be lauded as an Australian success story. In the past five years, Cochlear has trebled in size, generating $600 million in revenue during the past fiscal year.

It did that by moving away from an artisan or craft-based system to a 21st-century manufacturing process, allowing the company to operate in a globally competitive marketplace. Ninety per cent of Cochlear's revenues are generated outside Australia and 90 per cent of the company's global tax bill is paid to federal or state governments in Australia. That is, as chief executive Chris Roberts told the Senate IR hearings in February, "good news for Australia".

Explaining the revolution at Cochlear, Roberts told The Australian: "We required different thinking and different approaches to manufacturing as we scaled up", focusing on leaner, more flexible operations, better employee training and aligning reward with productivity increases.

Change came about by dealing directly with Cochlear employees, who earn 45 per cent above award wages, with average rates rising between 16per cent and 23 per cent during the past two years.

Yet, Roberts says incredulously, "the Australian Manufacturing Workers Union fought very hard against those changes that significantly increased productivity".

Fair Work has brought the unions back into the game. Last week, the AMWU used Labor's new laws to secure what it hailed as a landmark victory over Cochlear when 57 per cent of workers expressed their desire to bargain collectively. But this is a case of not so fast. Unlike many business leaders who timidly preferred to stay under Labor's radar, Roberts remains vocal in raising his concerns about Fair Work, given his focus on productivity in the real world of commerce and innovation.

Under Fair Work laws, the AMWU will get a seat at the Cochlear bargaining table, even if only one Cochlear worker wants it there. On past evidence that does not augur well for productivity.

As Roberts says: "The behaviour of the unions to fight against initiatives that drove up our productivity and delivered financial rewards to our people made no sense." The problem, he says, is that unions "need a conflict to be relevant". The other problem is that 43 per cent of workers have expressed a view that they do not want the unions representing them, "so what you end up with is a divided workforce".

Roberts is most scathing about the government's empty productivity rhetoric. There is, he says, "no immutable law that links collective bargaining with productivity" and he was amazed at the paucity of data to support the government's proposition. "The fundamental basis of this IR legislation is false. We moved into the age of enlightenment 259 years ago - if you consider 1750 as the dawn of the age of reasoning and logic - and we shouldn't walk away from evidence."

On the evidence to date, Fair Work is not the softly, safely set of IR reforms promised by then economic conservative Kevin Rudd when he was seeking office. In fact, Gillard's reforms have restored an adversarial culture she has the temerity to claim is holding back productivity. With the country's most militant unions already on the warpath, it is only early days for this potentially long-fuse time bomb.