Let a dying system rest in peace

As baby boomers start to work less and put their feet up more, it seems apparent our economy will follow and relax into, if you like, the leather recliner phase. When people slow down, simplify their lives, downsize their dwellings and focus on retention of capital, they are less inclined to splash money around and more inclined to look for value when outlay is needed.

Economic figures show that individual spending drops dramatically, by as much as 40 per cent, in the retirement years.

Because the consumer dollar is scarce and business investment is in retreat, the government has to pull other levers to keep economic contraction at bay. For now, public spending and immigration shield us from recession. To assist, the Reserve Bank of Australia is expected to cut interest rates again, which allegedly discourages hoarding of cash and forces investment to flow.

In this low interest rate, low inflation environment, one impact felt by post boomer generations is modest wage growth. Some make the argument that larger wage rises would act as a spark and get the economy firing. This seems a hopeful misconception but, nevertheless, the federal government, which is conducting a review into our industrial relations system, is expected to do something to lift wages growth.

Recently, the representatives of two large employer groups, writing in these pages, urged Canberra to save the enterprise bargaining system and lift wages, by making key changes, most notably to the “better off overall” test. Policymakers should ignore this plea; enterprise bargaining has aged and finds itself in an advanced state. Instead of applying the defibrillators, let’s mark it as a “do not resuscitate”. Let’s allow the system, when the time comes, to sink quietly into the grave.

After all, most large companies are already in the post bargaining era, whether they realise it or not. The productivity gains of the past are long exhausted and now all that remains is the need to adjust wages regularly, after consideration of inflation, business performance, market standards and employee expectations.

Perhaps the most unproductive and frustrating period in any businesses operation is the bargaining negotiation schedule. Sometimes this drags on for so long that by the time one tortuous set of meetings is finished, the next round is due to begin.

The Australian management class has been conned by government, unions, employer groups, law firms and other enterprise bargaining diehards into thinking that renewing collective agreements is the only, or best way, to achieve workplace change and lift wages.

But if you think about it logically, how ridiculous is it to think that an employer can’t hand out a pay increase until the employees have voted to accept it? In the vast majority of cases, bargaining is the most conflict ridden, nonsensical and expensive method of wage adjustment.

An employer can give out wage increases at any time they like. There is no need for managers to scratch their heads to try to dream up a log of claims to ask the workforce to accept. There is no need to sit around the table and argue, there is no need to secure union agreement and there is no need for the workers to vote to accept the money.

Any employer can simply decide to put a pay rise in their employees’ accounts and save everyone the tedium of a bargaining process. What’s more, when a pay rise is handed out without bargaining, before it is due to begin, employees lose interest in bargaining, and the unions lose relevance and power.

Legally, employers don’t need to renew their enterprise agreements every few years. They can simply sit on their existing agreements, which remain in place with the force of law, even after they have expired, for forever and a day.

The government must not try to save the system and it must not make the changes to the BOOT that employer groups want. To accede to this request will restore lucrative side income streams to the unions and strengthen the ties of the industrial relations club. It will allow big business and unions in the retail sector, for example, to collude in organised wage theft, by resurrecting the now defunct dodgy deals of the past.

To put it simply, the law allows a worker to trade away their own penalties and loadings in return for a higher base rate of pay. The law does not allow a day shift worker to trade away a night shift worker’s penalties and loadings in exchange for a higher base rate for day work, leaving the night workers worse off than on the award.

Politically, to allow this change would prove a disaster. It would lead the government into a classic Work Choices scenario.

Finally, in the construction, mining, energy and other infrastructure delivery sectors, an enterprise bargaining agreement is the single document that facilitates corruption. An EBA causes inefficiency and higher prices.

The malfeasance starts at the head of the supply chain, with agreement between the “tier one” company and a union, and cascades down through the supply chain to the smallest contractor. In these industries, there is a strong case to be made for outlawing bargaining altogether. A government that wanted to reform our economy, boost productivity and deliver infrastructure in a timely and cost-effective manner would make this aim a top priority.

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