The proposition that the Federal Government’s workplace relations reforms will create more jobs and will not lead to anyone getting lower wages has been questioned by three leading economic figures in the past week: the present Governor of the Reserve Bank, Ian McFarlane; the previous governor, Bernie Fraser; and the ANU’s professor Bob Gregory. There messages are similar, but not identical.
Mr McFarlane said of the reform, “”It is quite possible that it will have very little effect on employment and that most of the effect will be on productivity and long-run growth.” Mr Fraser went further, arguing that the Government’s constant repetition of the proposition that labour-market reform would bring more jobs was brainwashing. Professor Gregory asserted that it was likely that the reforms would result in Australian wage structures following the US pattern, with lower-paid people getting even lower pay and higher-paid people getting even more money.
Clearly there are more forces afoot than the industrial-relations regime. Deregulation in general and technological change are also affecting employment and pay. None the less, the three critics put under scrutiny at least one of the arguments in favour of industrial-relations reform, namely that it will create more jobs. But that is not the end of the argument; there are other reasons for going ahead with the reforms, but they might not have the immediate political appeal as the jobs one.
The essential problem for the government is that its messages on industrial-relations reform are contradictory. On one had it argues that reform is necessary so that businesses can be more flexible and internationally competitive. On the other hand, it argues the reforms will generate more jobs. The trouble is that, as any business striving to be competitive will attest, one of the best ways to be more competitive is to do the same task with fewer people. Equally, the Government argues on that its reforms will not leave anyone worse off. But, once again, the key to international competitiveness is to reduce labour costs, which means paying people less for doing the same or paying them the same for doing more.
The sad truth is that it is more efficient and therefore more profitable for individual enterprises to have fewer people working longer in skilled areas and in the unskilled areas to have batteries of part-time people on hourly all-in rates. Whether that is beneficial for society as a whole is another matter. Do the efficiencies of four people working 50 hours each rather than five people working 40 hours each outweigh the economic and social cost of supporting the fifth jobless person?
It is likely that reform of unfair dismissal laws will remove one impediment to employment, but it has probably been overstated. It is likely that changes to Australia’s inefficient industrial-relations system will result in great productivity, but it is in the nature of capitalism (now referred to as a market economy) that that greater productivity will sound in higher profits long before they will sound in more jobs.
That does not mean the reforms should not go ahead. There are many benefits to a more efficient and more productive economy, notably a higher standard of living for many. But the government is being far to optimistic or ignorant in the ways of the market economy if it imagines that this increased productivity will automatically result in higher levels of employment and shorter dole queues. Indeed, the contrary is more likely as companies get leaner and meaner.
That government ministers have been peddling the jobs arguments is typical of the political process: one a government charts a course it will throw up any argument, however ill-founded, to support its case.