IR Isn’t Working So Let’s All Fix It

The Australian
20 July 2012
By Jennifer Westacott
Chief Executive, Business Council of Australia
Business wants to work with government to raise wages by boosting productivity
AUSTRALIA’s workplace relations system needs to come to terms with the changing nature of the economy, and the shape and preferences of our workforce. Fundamentally, this is what business has been saying in the context of the review of the Fair Work Act.
It’s important to get the facts on the table about this, about what we say isn’t working in the present system and what we are seeking to change.
The first point is that we are not trying to undermine workers’ pay and conditions.
Getting workplace relations right matters to all of us. It matters for workforce participation, job creation and satisfaction, and supporting worker mobility for the future. And yes, it matters for productivity.
Most of all, workplace relations matters to Australia’s economic competitiveness because all the benefits are irrelevant if businesses and jobs are being lost.
And lifting productivity is the key to strengthening our competitiveness.
That’s why it is so hard to understand why the government would say the present system is working well for Australia before releasing the results of its own independent review.
It’s why it is a shame the government is saying we don’t have the evidence to link productivity to workplace relations arrangements, having excluded the question from the review’s terms of reference.
History shows that Australians are amply capable of having a sensible, informed discussion on these things.
Business has valued the opportunity to talk with the Fair Work Act review panel about what’s happening on the ground and where we believe the system could be improved.
Let’s be clear on what we’ve said.
At a time when we need a system to support collaborative approaches to change and innovation, it is allowing an adversarial culture to flourish.
The system is out of sync with major shifts in the international and domestic economy, where our high dollar, global volatility and intensifying competition from Asia is making it tough for many companies to survive.
And it’s also out of sync with how people want to work and how we consume.
Companies need to be in a position to respond quickly and creatively to these trends. They need the flexibility to adopt innovative ways of working.
The Fair Work Act allows for a broader set of matters on which industrial action can be taken, and that can be put into a claim. Some fall outside terms and conditions of employment, and are making agreements drawn out, complicated and costly.
The fact that a greater range and number of matters can be on the table for negotiation has increased the likelihood and scope for disagreement, and hampered critical business transformation.
The system is not allowing for timely negotiation of arrangements for major new (greenfield) projects that are central to Australia’s economic resilience in the next decade and beyond.
We are concerned transfer of business provisions means that some employees are being made redundant where, under the previous system, they would have been offered ongoing employment.
On productivity, we are finding the operation of the act works against workplace collaboration that allows companies to improve processes, training and systems, and build their output. But let me come back to that.
In terms of the changes we are asking for, we have accepted the broad architecture of the act while suggesting a number of specific improvements, including:
  • Amendments to reduce the range of matters that can be bargained.
  • Amendments to strengthen flexibility arrangements for both employees and employers.
  • More effort put into dispute prevention, as opposed to dispute management and settlement.
  • More employment options available on greenfield projects, and
  • Amendments that reduce the scope for adverse action claims to align with other anti-discrimination legislation.
Cumulatively, the issues business has brought to the review are having an impact on our capacity to lift productivity.
The fundamental question Australia needs to ask is whether the system is supporting productivity improvements that are essential to maintaining, let alone improving, competitiveness and living standards. Our experience is that it is not.
Productivity is a complex issue. We recognise that improvements happen largely through decisions made at the firm level.
We also recognise that workplace relations is only one piece of the puzzle for creating the environment to support that kind of innovation.
But in order to do what they need to do to get more output from the same input, managers have to have an environment that encourages direct engagement.
Industrial relations laws are hampering the collaborative culture that’s central to innovation.
If Australia is to come up with some answers on productivity, we need to be prepared to ask the questions and to have frank discussions.
We need to end the blame game on productivity, and realise what’s at stake if we don’t work together to improve it. Wages and living standards cannot grow over time without us lifting our productivity performance.
Once and for all, can we put an end to the myth that what business means by increasing productivity is having people working harder for less wages. This is not what we mean at all.
We mean creating the conditions and management capability to drive home innovation and change at the firm level.
Scare campaigns that misrepresent the position of business obscure the fact that we are all essentially aiming for the same thing. We all stand to gain from action that shores up Australia’s competitiveness and, as each month goes by, we will all bear the costs of failing to do so.
At the Prime Minister’s recent economic forum, I stressed the commitment of business to work collaboratively to address these problems.
I felt we achieved common ground on the shared imperative of lifting productivity, and on the shared benefits of economic competitiveness and growth.
The release of the report of the Fair Work Act review presents a singularly important opportunity for consultation that faces the facts, asks the right questions and facilitates national interest decision making.