Changing labour laws backward step: academic

By Selwyn Parker

The coalition Government's rewriting of labour legislation is a misguided attempt to turn the clock back, according to an adviser to the Australian Government on industrial relations policy.

"Any retreat from the general provisions of [the Employment Contracts Act] would be very damaging," argues Judith Sloan, professor of Labour Studies at Flinders University of South Australia and a member of the Productivity Commission.

Citing evidence of more harmonious and productive workplaces in Australia under broadly similar labour laws, Professor Sloan says the New Zealand Government's industrial relations policy runs counter to global developments.

"The trends worldwide are towards more decentralised wage bargaining, declining unionisation, greater individual contracting, and pay linked to enterprise performance," she said.

"Any attempt to turn the clock back would be like trying to hold back the tide."

Professor Sloan warns against "dangerous ideas" such as making trade unions the sole parties to collective contracts, giving them the right to negotiate multi-employer contracts, and insisting that individual contracts be consistent with collective contracts. All are elements of the new Government's policy.

The Australian academic and policy adviser made her comments in the Sir Ron Trotter Lecture in Wellington. The lecture was given before the election but received little attention at the time. Since then, Professor Sloan's views have become much more relevant.

An influential authority on industrial relations in Australia, she not only has the ear of the Liberal coalition but is also a director of Santos, Australia's biggest onshore oil and gas company, Mayne Nickless, and the Australian Broadcasting Corporation, and is chairwoman of general insurer SGIC Holdings.

A firm supporter of liberal labour markets, Professor Sloan argues that warm-hearted attempts by governments to boost the rights of employees, for example by strengthening unions, are generally misguided and based on misapprehensions about the best way to achieve desirable results in employment issues.

According to Professor Sloan, much labour legislation over the past century was based on well-intentioned misapprehensions: "Workers and employers alike suffered under philosophies that fundamentally misunderstood labour markets, and especially in Australia and New Zealand which 'had two of the worst industrial relations regimes among Western countries'."

Professor Sloan skewers numerous commonly held assumptions about labour markets. For instance, she does not accept that employees are generally disadvantaged in negotiations. If they were, Professor Sloan says, wages would not have risen dramatically since the beginning of the industrial revolution, as indeed they have.

"The claim by Karl Marx that the living standards of the proletariat were falling under capitalism was wrong even at the time he made it," she explains.

The decline of union power was a general phenomenon that reflected the changing nature of the workplace and it was a mistake to artificially boost unions.

In New Zealand unions, she points out, while membership fell between 1985 and 1995 from 54.1 per cent to 24.3 per cent, the same was happening elsewhere. Over the same period, the number of workers belonging to unions in Australia dropped from 45.6 per cent to 32.7 per cent, in France from 14.5 per cent to 9.1 per cent, and in Germany from 35.3 per cent to 29.1 per cent.

Monopolies in representation were counterproductive: "In Australia and New Zealand there was [before the 90s] an unhealthy dominance both of unions and employer associations. With monopolies on both sides of the labour market, the conflict model came to be institutionalised."

One of the results was the national awards system which helped give New Zealand the worst record for productivity growth of any OECD country.

Like certain other interventions in the labour market, compulsory parental leave was discriminatory. That is because it is essentially unfair to single or childless employees, and to the self-employed who represent an increasingly big percentage of the workforce. Companies should be allowed to provide parental leave or other perks if they want to - or can afford to.

For similar reasons, Professor Sloan regrets the law in both Australia and New Zealand which makes it illegal to specify a mandatory retirement age in an employment contract: "This law has had a perverse impact in Australian universities, as it has elsewhere. Nobody can be forced to retire, including low-performing academics. The reaction from universities has been predictable. They bribe their 'dead wood' to retire by paying them large sums of money."

Australia's more liberal labour laws had helped achieved spectacular economic gains. Since labour reforms started in 1993, annual productivity growth had gone from a long-run average of 1.2 per cent a year to 2.4 per cent.

Perhaps Professor Sloan's key point is that the labour market is changing dramatically to one where shorter-term, contract-type labour is generally preferred.

Both employer and employee need to be left alone to design arrangements that suit both parties.