Let’s build workplaces that are “nimble, productive and equitable” says Ron McCallum

Speaking on August 2nd at the AIER’s 2nd Annual Debate named for him, Emeritus Professor Ron McCallum, whose long-awaited Review of the Fair Work Act was released the same day, called for the creation of Australian workplaces that were nimble, productive but fair. “This is what I want to see for my children and grandchildren”, he declared.

The Institute’s second Debate in the Justice at Work series examined closely the key issue of productivity in Australian workplaces, asking: is productivity the imperative and if so at what cost does it come?

“More productivity” has become the catch-cry of politicians, economists, commentators and employer associations, particularly during the Review of the Fair Work Act conducted by a panel of three experts headed by Ron McCallum.

In addition to Prof McCallum, who called for “the cut and thrust of rational discussion” on the Review panel’s report, the debate attracted a panel of four speakers willing to try to rationally discuss productivity.

They were:

• Peter Wilson – National President, Australian Human Resources Institute
• Tim Lyons – Assistant Secretary, ACTU
• Steve Vamos – President, Society for Knowledge Economics
• Lisa Heap – Executive Director, AIER

[Two other panel members who had intended to speak became unavailable on the day. They were: Jennifer Westacott – Chief Executive Business Council of Australia and Adam Bandt MP – Deputy Leader of the Australian Greens Party.]

The event was Chaired by Michael Harmer, AIER President and Chairman of Harmer’s Workplace Lawyers. The debate attempted to go beyond the obvious and the partisan approach to productivity to explore all of its dimensions.

Fair Work Act review and productivity

Productivity was an issue that could not be avoided in the Review of the Fair Work Act, McCallum told the 250-strong audience in Sydney. The Review report devoted a chapter to the subject noting that while productivity growth in the 1990s was strong it had been ‘disappointing’ since 2001, but this could not be attributed to industrial legislation.

This was because it had occurred under three different industrial legislation regimes: the 1996 Workplace Relations Act, WorkChoices and the new Fair Work Act. WorkChoices in particular had been “low on equity” and others may have been low on productivity – the key thing, he said, was to work to build a system that delivered both productivity increases as well as more equitable workplaces.

The Review panel wanted better, more nimble and productive workplace laws, but ones that did not sacrifice equity in the process and called for rational discussion of the Review’s recommendations which were directed at achieving these goals.

What impacts on productivity?

Tim Lyons echoed Ron McCallum’s views on the role of IR legislation and its relationship to productivity growth. He said that the highest productivity growth had been delivered under a centralized wage fixing system behind tariff barriers, but had also been boosted by enterprise bargaining.

“WorkChoices certainly did not help productivity”, he said, “nor has the Fair Work Act hurt it”. No clear link had been established between IR regimes and productivity: growth had been 1.7% under Fair Work compared to 1.1 % under WorkChoices.

Tim Lyons also noted that there had also been a ‘de-coupling” of the link between labour and productivity: the gains of productivity growth were increasingly going to capital at the expense of labor, he said. The Fair Work Act Review panel’s report finally rejected the argument that IR laws determined productivity outcomes, he concluded.

Fairness and productivity

AHRI President Peter Wilson also called for workplaces that were “productive flexible and fair”. “Total factor productivity” is the key, he declared, also taking a broader view of what drives productivity. Skills, technology and innovation are key drivers of productivity boosting change. IR laws could be the jewel in the productivity crown or could tarnish it, he said. Both WorkChoices and the Fair Work Act were backward steps in his view, since they imposed bureaucratic rules on the parties in the workplace.

Vocational skills were also a key he told the debate: “ our education outputs need upgrading for higher workplace relevance; we place inhibitions and barriers on rapid transfers of skills between sectors e.g. the highly developed technical skills we have trapped in the motor vehicle industry when our faster growing services and resources sectors need them, can’t get them and have to turn offshore instead. Nor do we get the best sustainable value from our older workers, female workers, indigenous and disabled workers …” he said.

“Economics is as much about picking future turning points,” he said,” and not complacency over the continuation of past projections. Today the world turns us around, as much as we turn ourselves. We need to be more vigilant as to what this means, and both respond to, and anticipate all this – in order to keep our productivity heads above water. We haven’t succeeded at that in the last five years, and need to be wary that soon we may be ‘running on empty’ unless we take more proactive remedies’.

Investment in people and technology is important

Steve Vamos, President of the Society for Knowledge Economics, told the audience that he was wary about straying into the arena of industrial relations, in which his organisation was not a player. He noted that it was always possible for a company to cut costs but there was a limit to this and “no company grew to greatness this way”.

What was critically important, he said, was to invest in technology, innovation and people. Real productivity growth grew out of finding ways for managers and employees to work better together, through creating a workplace culture where people “wanted to be the best” they could be.

Industrial relations might be important, he said, but it was not the end of the productivity equation: what was necessary was to cultivate workplace leadership “at all levels”.

The loss of workplace rights too high a price to pay

Finally, Lisa Heap, AIER Executive Director asked the audience and the other panellists to consider whether the cost of obtaining productivity was too high. Lisa said that in her view, the cost was too high if it involved the loss of workplace rights by employees. “If by flexibility we mean reductions in rights, then it is wrong”, she said. The culture in some workplaces, aided and abetted by WorkChoices type legislation, had become “command and control”.

This not only did not assist productivity, it damaged the health of individuals and the nation, leading to and allowing poor management, workplace bullying and harassment. Workers could not leave their rights at the workplace door, she declared: workers and managers must be able to work together. A positive workplace culture was the key to productivity enhancing change, not an adversarial one.

In some workplaces, especially in the public and community sector s, workers were missing out from economy wide productivity gains.

It was also regrettable that oppositional IR debate often drove out rational discussion of key issues in favour of partisan and political point scoring.

Is industrial relations too narrow a focus?

Debate Chair Miriam Lyons from the Centre for Professional Development asked the panellists if industrial relations got a bigger share of the debate than it should. Both Steve Vamos and Peter Wilson agreed. Steve said that an IR focus was too narrow and Peter Wilson agreed it got too much attention, “pushing the skills debate out of public discussion”.

Tim Lyons said that a consideration of industrial legislation in the productivity debate was “fair enough”, because it was an important area of public policy, but agreed it was a narrow focus.

For video of debate click here

To view AIER’s Background Briefing Note developed in preparation for the Debate click here