Editorial: Labour wage policy revives bad old days

Labour leader Phil Goff. Photo / Supplied

It will not be easy to take the Labour Party seriously at this election if it comes up with any more policy like the one announced on Tuesday. To lift the level of wages in this country it proposes industry-wide wage orders. When a union finds that some employers in an industry are paying less than others the union will be able to apply to a Workplace Commission for a minimum wage order.

The party clearly believes the minimum would be set at the higher rate. Maybe it would, if the commission Labour set up was of like mind to the trade unions that probably fed this policy to the party. But if the commissioners were economic realists they would hesitate to impose a one-size-fits-all regime on any competitive sector.

The Labour Party would surely hesitate to propose this if there was much prospect of the party winning the election and having to put the policy into effect. Like one or two other planks in the party's platform this year - notably the removal of GST on fresh fruit and vegetables - the policy is mainly interesting for what it says about Labour's condition at present and how much younger members of the caucus have to learn.

Any caucus member who imagines there is anything novel in industry agreements cannot have been around in the 1980s or earlier. National awards, as they were called, were one of the pillars of a protected, highly regulated, cost-plus economy. The modern world of competitive trade is quite different. To impose standard costs and working conditions on all competitors in an industry is not the way to help the economy generate higher incomes.

Older heads in the Labour caucus have tried to temper the policy, as is evident in the detail. When a union applies to the commission for an industry standard "agreement" any employer at risk of inclusion in the commission's definition of the industry would have the opportunity to make a case for exclusion.

All employers caught in the net would then have the chance to negotiate an industry standard agreement with designated unions. If no agreement could be reached, the commission would write a standard agreement for the industry that could cover pay rates, holiday entitlements, overtime and union rights.

There is nothing voluntary about an agreement made under that sort of duress. It's the 1970s' compulsory arbitration by another name. Labour argues for going back to the future because wage growth has lagged productivity increases, it says, since 1991, the year a National Government allowed employment to be an individual contract. It believes wages in Australia are higher because that country has preserved more collective bargaining.

Wages are higher in Australia for several reasons, such as mining and population growth, neither of which Labour appears to be endorsing. Inflexible working arrangements are probably not among the country's advantages.

If lifting a country's incomes was as simple as equalising pay in each sector, the problem would be solved. But not even Labour imagines it is that simple. Labour's mistake is to imagine industry minimums could do no harm. Terms of employment may vary from one firm to another for good reason, not least because they may be seeking different clientele.

A strong economy needs to let employers prosper wherever they can and compete for the employees they need. Wages grow when employers need more people with valuable skills. A policy for productivity encourages more investment in productive activities, and better education to equip workers with adaptive skills. It does not put industries back in a straitjacket for unions' sake. The country has been there.