Productivity Now, Innovation Now, Serenity Now

10th November 2015

“O God, give us the serenity to accept what cannot be changed,
Courage to change what can be changed, and the wisdom to know the difference”

American theologian Reinhold Niebuhr’s serenity prayer should be writ large on the wall of anyone foolish enough to attempt reform of Australia’s byzantine workplace laws. There has been a lot of talk of productivity and innovation but little political courage to see through changes to bring it about. It is enough to drive a man to scream ‘Serenity now!’.

The clarion call of productivity and innovation sounds wonderful on the 6 o’clock news but is meaningless without sensible reform of workplace laws inhibiting productivity and innovation.

Notwithstanding a review of the Fair Work Act in 2012, a commission of audit report in February 2014, two Fair Work Commission reviews of modern awards, and an ongoing Productivity Commission enquiry, nothing has really changed. Meanwhile, (and excuse the biblical references) pre-diluvium era centralised award wage fixation has been re-established, modern awards are crafted to ensure conformity, third party regulatory intervention into workplaces is endemic, the cost of employing and terminating staff has never been higher, collusion and pattern bargaining rife, average living standards are falling and unemployment steadily rising.

Add to the mix the overwhelming evidence of corruption uncovered by the Royal Commission into trade unions, and it shouldn’t need the wisdom of Solomon to understand the need for change and the courage to see it happen.

None of this would matter much if we weren’t going to hell in a hand basket. I am no genius (most people will testify to that fact) but even I understand the relationship between productivity and improved living standards. Surely we can also agree that innovation is stifled by regulation and thrives when barriers to competition are removed.

So, what do we have the courage to change on the one hand, and the serenity to accept on the other?

Institutional reform would be a good start. By institutions I mean trade unions, the Fair Work Commission, and the regulatory structure supporting them. It is a truism that left unchecked, the dominant players in an industry will inevitably exclude dissenters, restrict competition, and manipulate regulations to the detriment of all others. Lack of transparency, barriers to new entrants and accountability to customers are major impediments to innovation and productivity.

Attempts to reintroduce the investigative powers of the Building and Construction Commission and establish a new bureaucracy to oversee registered organisations have met unyielding resistance in the Australian Senate. Maybe its time to regroup - serenity. The Royal Commission is likely to recommend vastly more comprehensive and effective reform of union organisational structure, obligations and governance.

On the other hand, coercive powers in the Building and Construction Industry (Improving Productivity) Bill 2013 a lightening rod for opposition to the re-establishment of the Building and Construction Commission, seem to be necessary to clean up the endemic corruption, thuggery and standover tactics in commercial and civic construction. Prosecuting the case for change does require courage but is worthwhile if the rule of law is to be re-established.

Penalty rates paid to staff working weekends invariably rises to the top of the list of reforms advocated by employer associations and conservative governments.

Although an additional expense that most employers would rather not pay, penalty payments do not inhibit businesses capacity to innovate. They also have very little effect on productivity. They just raise the cost of operating a business. So do taxes, rental lease fees, power, utilities, supplies, and transport. Of course this can be diabolical to businesses that operate on low profit margins or exposed to international competition for goods and services, so maybe there is a case for reform. Is it worth changing them or should we just chant ‘serenity now, serenity now’ over and over?

On the other hand, the Productivity Commission makes a good case for reducing Sunday penalties and generally harmonizing weekend penalties in retail entertainment, café and hospitality businesses based on trading patterns and other modern lifestyle factors. Strangely weekend penalties paid to highly paid health professionals don’t rate a mention. Probably a good idea not to upset the person you are relying on to keep you alive.

Whilst you are contemplating this conundrum, consider this sobering fact. The shop assistants union, Woolworths, Myer and Coles agreed to reduce weekend penalty rates twenty years ago without the need for the intellectual gymnastics of the Productivity Commission. They just paid higher base wages. The only reason the union is opposing reductions in the minimum modern award penalties today is so that it can trade weekend penalties for higher base wages again.

Maybe the wise thing to do is to replicate the structure of penalties in retail and hospitality enterprise bargaining agreements in the modern awards. How’s that for homespun wisdom?