Wednesday, June 14, 2006

Beazley flops again

The leftwing online newsletter Crikey got it at least partially right for once:

Kim Beazley is acting like a 'leader', according to the spruikers of his weekend announcement that a Labor government would abolish Australian Workplace Agreements (AWAs). The Opposition Leader argues that AWAs have reduced working conditions and flexibility, and increased productivity is best achieved through collective agreements.

Really? But what about people (including Labor voters) who want their own personalised industrial agreements? And what about the flexibility all companies need in a volatile and globalised economy? And in pandering to the trade union arm of the ALP is Beazley likely to attract the voters of the growing army of once-traditional Labor voters who are now contractors or members of the entrepreneurial working class? Kim Beazley is right to attack the harsh excesses of the Work Choices laws. He's right to argue for changes to protect workers' basic rights and wages. But if he thinks that abolishing all AWAs is the right policy solution, which also happens to be good Labor politics, he's likely to find himself wrong on both counts. Which will raise even more questions about his own employment arrangements and workplace


Fred Argy said...

Harry, surely the test is whether an agreement is fair to both employers and employees. The old AWA's largely met this test. The new AWA's are different. They are basically take-it-or-leave-it contracts with no disadvantage test and no requirement to bargain in good faith and a diminished set of minimum conditions. If any employees want individual arrangements they should be able to get it - either through common law contracts or through individual agreements that cover workers' enittlements fully. Fred Argy

Bring Back EP at LP said...

totally agree with Fred.

hc said...

Fred and Homer, AWA's have been around for about nine years and the employment situation throughout the economy has improved dramatically over that time. Yes there has been a broad-based investment-driven boom throughout the economy during this period but AWA's have not hurt.

I am not sure that collective bargaining between trade unions and employees should be the only basis for conducting industrial relations. AWA's give employees in some industries - such as the mining interest - the chance to negotiate better salaries and no-one is forced to sign an AWA. If you do sign an AWA you can appoint a trade union as your bargaining agent.

The best protection for workers from monopsony power is competition in labour markets. A wage is not an act of charity and self-interested employers will be loath to dispense with the services of productive employees.

In some sectors of the economy wages should fall and conditions of employment should deteriorate. Why do you suppose the status quo is optimal from the viewpoint of reducing unemployment?

Fred Argy said...

Harry, you ask “why do you suppose the status quo is optimal from the viewpoint of unemployment”? It’s a good question.

I accept that more downward wage flexibility, coupled with tougher welfare tests, will help reduce unemployment a little. But that’s not the entire economic story. I also ask myself: what impact will it have on productivity? And I come out with a rather negative answer there. So the wider economic impact of relying on downward wage flexibility is ambiguous. In any case, what we are getting from the Howard Government is not more deregulation but one-sided regulation (to curb unions).

In the end it’s not just about the economy Harry. I am very concerned about the risk of a more divided, less cohesive and more unequal society. So I ask myself another question: are there alternative ways of achieving the same employment gains with more positive productivity outcomes and at less social cost (i.e. with a less regressive distribution effect)? My answer to that is yes – as the Nordic countries and many smaller European ones have amply demonstrated.

hc said...

Fred, I am not sure that productivity will suffer with AWBs, frontpage of today's Australian here provides a reason why productivity might improve. Basically wages shift to rewarding effort and specific abilities rather than, as under collective bargaing, flattening out rewards to some average level of effort. Under AWAs workers get about 13% more. I agree labour productivity has not grown strongly over the past couple of years but the level of AWAs is low.

I agree the productivity story is complex and I would not want to bet my life on the past story. But I still disagree with your last statement that it is the wage system that should be used to address issues of social injustice. This thinking entrenches unemployment by making forcing to pay uniform rates to workers of non-uniform abilities.

I strongly favour using the tax-transfer system not the wage system to address inequalities. For example, I am not a big fan of tax cuts for middle income earners such as myself when people are struggling on much lower incomes. But forcing firms to pay uniform rates will only effectively reduce inequality by sharply raising unemployment.

Bring Back EP at LP said...

Harry, ask any academic in business schools or anyone in senior management and they wil tell you improvements in productivity comes from improving the work processes.

This involves people not a person hence I am not surprised that there is NO evidence showing improved productivity from individual agreements.
I also note this backs up evidence from NZ.

improvement in employment will come from lower wages for the unskilled which doesn't really help the case of increasing wages or productivity

Fred Argy said...

On the question of productivity, we must continue to disagree (for the obvious reason that the evidence is inconclusive and we are both relying on judgment to a large extent). But please do not misquote me, Harry.

I am NOT saying that “the wage system should be used to address issues of social justice” and I am NOT denying that in general the tax/transfer system is a more efficient and effective way to address inequalities (I have been arguing this since the 1970’s!).

I have long been an advocate of wage flexibility so long as the tax/transfer system is used to compensate low-paid workers. But the point has been reached when (a) it is no longer practical politics to keep compensating the working poor and (b) increasingly relying on fiscal policy as the main instrument of social support is itself creating serious efficiency costs (in particular work disincentives) which at least equal the efficiency costs of regulation. So the situation has been reached where the economic gains from further deregulation are small and the social costs are high. So I say enough is enough.

That of course assumes one cares about inequality and one is concerned about the social costs of economic policy.

And please, Harry, don’t raise red herrings: the so-called fact that people on AWA’s earn 13% more than those on certified (collective) agreements is grossly misleading because the figures used include senior managers and bureaucrats who comprise a disproportionate proportion of AWA”s. Comparing like with like and adjusting for hours paid, workers on collective agreements can generally earn more than those on AWA’s.

hc said...

Fred, I am concerned with inequality and the social costs of economic policy.

Why not a negative income tax where the minimum is set low so people have incentives to work but where benefits at low incomes decrease at a rate which always makes it desirable to seek more work? This need not be implemented rigidly - you might need to be seeking work or unable to work to be eligible and could be approximately implemented by wage subsidies that reflect total weekly earnings.

I am not convinced that overall levels of taxes in Australia are excessive and most Australians share my views according to recent opinion polls.

Your theorem is that the work disincentive effects of excessive taxes currently exceed the inefficiency costs of having a wage system dominated by collective bargaining. In other words the gains from liberalising are small and the incentive losses from higher taxes are large.

Maybe true but I don't have the evidence. I agree the measured efficiency gains from liberalising most markets are that little triangle which always seems small -but I have no uunderstanding why you believe so strongly that taxes in Australia are killing work effort so badly.

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