Productivity Commission Inquiry Report - Workplace Relations Framework

21st December 2015

The Minister for Employment, Senator Michaelia Cash today tabled the Australian Productivity Commission report into the framework of Australia’s workplace relations system of regulation and institutions. The report entitled, Workplace Relations Framework is a broad ranging assessment of Australia’s workplace relations (WR) framework, considering current laws, institutions and practices. It uses an economy wide approach, looking at possible reforms that, where merited, are likely to enhance the welfare of Australians as a whole.

The Report’s Recommendations

There are over 60 recommendations spread over two volumes covering topics such as the modern awards, minimum wage fixation, the role of the Fair Work Commssion, general protections, enterprise bargaining, unfair dismissals, weekend penalty rates, and the relationship between employment regulation and competition policy.

Some of the observations in the Report include:

  • A workplace relations (WR) framework must recognise two enduring features of labour markets. Labour is not just an ordinary input. There are ethical and community norms about the way in which a country treats its employees. Without regulation and an ability to act collectively, many employees are likely to have much less bargaining power than employers, with adverse outcomes for their wages and conditions. Equally, poorly designed regulation can risk bestowing too much power on organised labour in their dealings with individual employers.

  • The challenge for a WR framework is to develop a coherent system that provides balanced bargaining power between the parties, that encourages employment, and that enhances economic efficiency. It is easy to both over and under regulate.

  • The bulk of relationships between employees and employers are harmonious. The adversarial relationships between the parties that sometimes surface can often reflect poor relationship management, rather than flaws in the WR framework.

  • Contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated. Strike activity is low, wages are responsive to the economic cycle and there are multiple forms of employment arrangements that offer employees and employers flexible options for working.

  • Australia’s WR system is not dysfunctional — it needs repair not replacement. Nevertheless, several major deficiencies need addressing

Where to from here?

The Australian government has not responded to the recommendations. It has announced a series of roundtable discussions to be held in early 2016 with employees, employers, unions, social welfare groups and women’s groups to consult on the Productivity Commission’s final report. In other words, the government is unlikely to act on any of the recommendations prior to the next federal election.

Further information

On first reading, the Report provides some interesting commentary and useful recommendations to improve the system of workplace relations. However, it also includes some quite unusual suggestions in the area of enterprise bargaining and small business employment that would simply add even more layers of complexity to the system. I will analyse the Report in early January and provide you with a more critical evaluation of the key themes in the Report over the New Year.