Big business schmoozes while small business loses

The Australian, January 24, 2018

When Davos rolls around, deja vu sets in. There’s the familiar smell of jet fuel as private planes land near the small Alpine town this week. There’s a nice theme: this year it’s “creating a shared future in a fractured world.” And the familiar sound of hobnobbing among global elites, from top CEOs to prime ministers, other political leaders, various intellectuals and even a few monarchs, usually of the Eurotrash variety.

Wine glasses will clink inside Davos’s Michelin-star restaurants — Glow, with food by Armin Amrein, is a must — and merriment will drift into late nights at the Postli Club. As usual, celebrities — this year Elton John, Cate Blanchett and Bollywood star Shah Rukh Khan — will sprinkle stardust and a certain stream of consciousness on everything from climate change to globalisation.

If Davos were still a serious economic forum instead of a schmooze-fest, former bank teller and Greens senator Sarah Hanson-Young might learn something about how to boost economic growth. She is, after all, the Greens spokeswoman for finance and trade. Instead, Hanson-Young’s self-funded trip to Davos is proof enough that, after 47 years, this Swiss circus is a worn-out gig that needs to shut up shop.

Economic progress is not about hobnobbing with big names, it comes from understanding a set of numbers and settling on good policy back home, in our case in Australia. Behind the silly carry-on at Davos, its host — the World Economic Forum — does some sound work. Its latest Global Competitiveness Index 2017-2018 of 137 countries ranks Australia at 22, one rung above France, sadly famous for its rigid work practice, and way behind other countries including the US (No 2), Germany (No 5), the UK (No 8), New Zealand (No 13) and Canada (No 14).

The report’s country profile of Australia found that labour market efficiency is ranked one of our worst economic indicators along with infrastructure, specifically communications infrastructure. In fact, on most indicators we don’t rank among the top 25 countries. And when business leaders were asked to select the five most problematic factors for doing business in Australia, restrictive labour ­regulations topped the list, well ahead of tax rates, inefficient ­bureaucracy and policy instability.

This matters right now because the unions have pitched 2018 as the year for demanding more restrictive labour practices. Led by union chief Sally McManus, the ACTU has declared war on casual labour. The recent ruling by the Fair Work Commission to strike out a clause in an enterprise agreement that required Visy to convert casuals into full-time employees after three months has only ­emboldened McManus.

The union loses one decision and McManus claims the whole system is “hopelessly broken.” In other words, bring on more restrictive labour laws.

It’s entirely predictable that ­unions detest casual work. Casual employees are non-union workers — they don’t pay union fees. ­Casual employees also threaten the centralised monopoly bargaining power craved by unions because these workers opt out of a regimented, command-and-­control industrial system. Casual workers routinely trade off the panoply of union-negotiated hours, security of tenure and ­conditions for flexibility and more money, in the form of casual loadings. They often have several jobs and do casual work because it suits their lifestyle or family choice. Casual workers are often (but ­admittedly not always) free-spirited members of the gig economy.

If McManus can abolish or heavily restrict casual labour so that new workers join unions, ­funnel money into the ALP and ultimately entrench an old style of centralised industrial relations, she will become a secular saint of the union movement. Watch Saint Sally pick up a safe seat in parliament.

But when union leaders launch emotional tirades against the terrible rising tide of insecure work, remember that the rate of causal work hasn’t moved much in two decades. And that one person’s insecure work is another person’s freedom of choice. This is not a battle of good unions v evil employers. This is a union war to boost their size and power at the expense of economic growth.

For owners of small businesses the union war on casual work is nothing short of an existential threat. Casual labour is key to flexibility, allowing small businesses to hire and fire according to prevailing business conditions. It’s critical to growing a small business into a larger one that turns a bigger profit and employs more people. That’s why small businesses are willing to pay a casual work loading as a premium for flexibility. Small business has no choice but to fight the union war on casual work. They’re fighting for their future, and doing it with their own money.

A corporate boss running a big business plays with other people’s money — shareholders’. And any change to laws governing casual labour won’t affect the bottom line of big business for some years — which means today’s CEOs can keep collecting their annual ­bonuses before sailing off into a well-padded retirement. Why risk media criticism, union abuse and political angst to fight a battle that has little short-term benefit for CEOs, even if it does have long-term costs for the economy and loyal shareholders?

Big business has the added luxury of being big, giving it the pricing power to pass increased labour costs on to consumers. Look at the construction industry for how an unholy alliance between unions and employers can buy great conditions for unions at no immediate cost to employers but at huge cost to consumers and taxpayers.

Just as the ACTU’s stance is predictable, it’s equally predictable that corporate leaders, many of them cavorting in Davos this week, will abandon the casual work battleground in 2018. Surrendering to unions and deserting shareholders, most CEOs are focused on next year’s bonus, securing a little love from the media and picking up an Order of Australia to tack on to their name in retirement. While business leaders spend shareholders’ money on social issues like same-sex marriage, the pay-off from good industrial policy is simply too long-term for many of today’s CEOs. Honourable exceptions deserve a mention: Visy fought the Australian Manufacturing Workers Union and won. And don’t forget the standout courage and determination of CEOs like Boral’s Mike Kane, Alan Joyce at Qantas and Daniel Grollo at Grocon, who took on union bullies and won.

Alas, most business leaders talk a good game but it’s nothing more than window dressing. The Business Council of Australia makes a few comments here and there but it’s nobbled by starvation rations from big business compared to the membership money that props up unions and their campaigns.

Worse, while unions fund the ALP exorbitantly and virtually exclusively to purchase union-friendly policies, big business, when it does donate, will fund pro-business and anti-business politicians almost equally. Occasional one-off campaigns such as the miners’ campaign against the mining tax in 2010 and the more recent banks’ campaign against the South Australian bank levy prove rather than disprove the thesis: unless big business is threatened specifically, and in the very short term, it usually opts to do nothing.

That’s a shame. There’s nothing improper about big business taking an active role in political matters that determine economic growth. If CEOs advocated for same-sex marriage, often spending shareholders’ money when roughly 40 per cent of shareholders opposed same-sex marriage, surely it’s appropriate to spend shareholders’ money fighting for more flexible labour laws that benefit all shareholders.

So the next time some corporate leader, fresh back from their lavish trip to Davos, complains about selfish, short-term politicians, tell them to look in the mirror. Big business, you get what you pay for.