Fair Work Act Review Pleases No one

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The review of the Fair Work Australia Act was released on 1 August (PDF), delivering a result which angered businesses, but didn’t leave unions without grievances.

The panel investigating the effectiveness of the legislation concluded that wages growth, industrial disputation, the responsiveness of wages to supply and demand, the rate of employment growth and the flexibility of work patterns had been positive.

On the level of industrial disputes, the review found that the days lost to industrial action under the Act have remained close to historically low levels. There were 127,000 lost in 2012 and just over 240,000 lost in 2011, with the average of the last ten years being 230,000. The panel noted that the number of agreements being renegotiated this year amounted to 8,335, up from 5,133 last year, which it said brought the 2011 level of disputes into line with expectations.

The panel concluded that the Act had not led to higher wages growth than that under WorkChoices. It said that nominal wages growth had been covered by rising commodity export prices, however, conceded that commodity prices were no longer increasing.

The panel noted that for wages growth to continue at its long-term average of 4%, productivity growth needed to average at least 1.5% to be consistent with an inflation rate of 2.5%. Unfortunately, Australia’s productivity figures have continued to disappoint, as they have under the past two legislative frameworks.

The panel was “not persuaded” that the Act had anything to do with Australia’s believed productivity growth. It did, however, recommend a number of areas where it believed legislation could be improved to encourage productivity growth and equity in the workplace, looking for ways to axe unintended flexibility restrictions in the Act that were unintended.

The panel’s stance on wages and industrial disputes was a blow to businesses that had hoped for changes to the Act to help ease cost pressures.

The review comes at a time when the noise level about the cost of employment to businesses is high. Mining companies say that given falling commodity prices and wage levels are making their business unsustainable. The Minerals Council of Australia recently commissioned a report (PDF) into the risk that Australia will be passed on as a source of resources for cheaper competitors, due to rising costs, including “wage cost super-inflation”.

Myer has said that it intends to close some of its stores on Sundays because it can’t afford to pay penalty rates. We do note, however, that Myer has recently invested in more staff.

Unions have certainly won many concessions to improve the lot of their members, leading to pay premiums for overtime or remote work.

This means that experienced locomotive drivers working from the mine to the port can earn a base wage of $40 to $55 an hour, with average annual earnings amounting to $200,000 for a 40-hour week due to shift penalties, overtime penalties and other allowances, such as disability allowances due to working in enclosed spaces. At these rates of pay for a 70-hour week, locomotive drivers can earn considerably more than many experienced professional employees, whose hourly rate would be less than $50, despite the fact that the work value of the locomotive driver would be significantly less in many instances.

Business believes that the proposed changes to the Act merely tinker at the edges and do nothing to ease what it considered to be a sea of red tape, although the Australian National Retailers Association pointed to a recommendation for a national approach to public holidays, with a limit of 11 days on which penalty rates could apply.

Unions on the other hand, held up the report as showing that Fair Work Act was right for Australia, with ACTU assistant secretary Tim Lyons telling the Australian Financial Review that it gave the Coalition “no wiggle room at all for bringing back any of the elements of Work Choices”.

However, other recommendations, for example, that employment agreements include a flexibility term enabling individual flexibility agreements, that workers do not accrue annual leave while receiving workers compensation and that an application for a protected action ballot order can only be made when bargaining for an agreement has commenced, did not please the ACTU (Australian Council of Trade Unions).

The report is available online (PDF), as is the ACTU’s response. Submissions to the review can be found here.

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