A Nanny State On IR Policy Is The Liberal Choice

In politics, sometimes it’s best not to go into detail. This is the lesson Eric Abetz learned after he explained part of the Coalition’s industrial relations policy last Thursday.

Abetz told the Australian that, under an Abbott government, the Fair Work Commission would not approve workplace agreements that raised real wages unless there had been “appropriate discussion and consideration of productivity” (paywall).

Why? So “lazy companies don’t just give wage increases because it’s the easiest thing to do.”

It is one of the founding assumptions of Australia’s system of industrial relations that workers are unable to negotiate with bosses in their own best interest.

Around this paternalistic assumption we have built a superstructure of industrial relations law, tribunals, and controlled wages unique in the developed world.

Now the Coalition seems to think some bosses are just as incapable of looking after their interests. And that a government regulator knows how to run a business better than the business itself.

If true, one wonders how the labour market functions at all.

The Coalition’s policy is patronising, illiberal, and fundamentally anti-market.

Now we know the true legacy of WorkChoices.

The fight over WorkChoices represents the moment the Coalition turned its mind from liberalising industrial relations to regulating it.

More on that in a moment. On Friday poor old Senator Abetz was accused by his colleagues of “freelancing” – that is, speaking only for himself – and advised to avoid interviews for the next few weeks.

But the Coalition’ official workplace policy document does, in fact, say “before an enterprise agreement is approved, the Fair Work Commission will have to be satisfied that the parties have at least discussed productivity as part of their negotiation process.”

If anything, Abetz softened the policy, suggesting Fair Work will only second-guess agreements if they give pay increases above inflation.

That’s how sensitive the Coalition is to the WorkChoices tag – even talking about its own policy is off-message.

Industrial relations has a special place in the Australian political compact. It is Labor’s raison d’etre; the world’s oldest party was born as the political wing of the union movement. Obviously they have a deep interest in wages policy.

In the Liberal Party there have always been free traders and protectionists, conservatives and liberals, fans of both big government and small. But one thing has bound the party together since conception – an antipathy to union power and prominence.

So Labor supporters recount our political history as a contest between employees (labour) and employers (capital). For Liberal supporters our history is a contest between sectional interests (union thugs) and the mainstream (Forgotten People).

Yet eight decades of the Australian Settlement concealed a few subtleties in the Liberal view.

For all that time, being opposed to union power and supporting greater market control over wage price setting was, effectively, synonymous.

When, during the Hawke, Keating, and Howard eras, labour law was slowly liberalised, this equivalence was superficially reinforced. As labour markets became freer, unions declined.

But then Kevin Rudd repealed WorkChoices. Rudd’s move was the first time since the reform era began that a liberalisation – in any sector of the economy – had been reversed. In 2007 Australia hit the market reform wall. This was very disorientating.

(I’ve described WorkChoices here as “liberalisation” because that’s what all sides of politics imagine John Howard’s policy was. In fact it was a complex regulatory takeover of workplace relations by the federal government. Still, perception is what matters.)

Now the Liberal Party has to figure out what its industrial relations priority is: to pursue a free market in labour, or to battle the unions.

Put another way, is Australia’s industrial relations dilemma that it is too highly regulated? Or is the dilemma that unions are too prominent?

After the 2007 defeat, there are many on the Liberal side who say the latter; many who imagine they are fighting a guerrilla war against the union movement. There are hints of this attitude in the Australian article. Abetz says the Coalition’s policy was developed “in response to unions ‘bragging’ that they had secured productivity-free pay increases.”

The Coalition’s solution to such hubris? Increase workplace regulation. If the government has to nanny lazy companies to reduce union power, then so be it.

Never mind that both sides of a mutually beneficial exchange should be “bragging” about the great deal they got.

It’s worth pointing out that unions would exist in a free society. They would have no privileged position in the law, and no coercive power, but, as Friedrich Hayek once wrote, everybody “ought to have the right to join a trade union.”

The dust from WorkChoices has settled. Now that Coalition is preparing to form government again, what does it really want for industrial relations? Labour market freedom, or just defeat of the union movement?