Role that Governments Have Played in the Australian System of Employment Relations since 1980 - Case Study Example

Role that Governments have played in the Australian System of Employment Relations since 1980 Australia has undergone extensive changes and reforms in the labour market institutions over the last three decades. Out of the total population of Australia that is employed, almost half has been in the services sector. Twenty-two percent of the population is in the industry sector and 5 percent is employed in the agriculture sector (Golden, 1993). Australia has experienced major economic growth and an expansion in the labour market. The country reforms are credited to the interrelationship between changes in the micro-economic and macro-economic levels (Lansbury, 2000, p. 31). Around early 1980s, the country was faced with widespread unemployment up to an estimated 11 percent of the population. The government instigated several strategies to resolve this issue; for instance, it came up with a policy of tightening its budget and this saw inflation drop down to 1 percent in the period between 1991 and 1992. Unemployment persisted but later fell to 6.4 percent in the early 1990s (Blanpain, Bambe & Pochet, 2010). Here, the role of the government has been researched to establish its participation in the growth and development of the Australian workforce. Since the early 1980s, Australia has had three successive leaderships. First was the Australian Labour Party (ALP), whose leader was Bob Hawke. ALP was the ruling party in Australia from 1983 to 1996. Then came Paul Keating, who also ruled the country under the same party. The Labour party was particularly central to the growth of union movements in Australia. Bob Hawke took leadership at a period when Australia was faced with widespread inflation and unemployment. The Labour party interacted and worked alongside the labour movements in Australia to regulate and reduce wage rates. A reduction in wage rates would extensively reduce inflation. The government with support from union movement, sought to improve the labour market by undertaking various reforms both socially and economically. The Labour party government introduced decentralisation of the employment relations systems. This involved allowing agreements in workplaces which in turn allowed more flexibility in the labour market. The period between 1983 and 1996 saw radical changes take place in Australia under the Labour party government but in 1996, the party was replaced by the liberal National Party Coalition. The coalition government adopted more deregulatory approaches of policy making (Blanpain, Bambe & Pochet, 2010). The liberal party removed business rigidities by giving employees more attractive investment and growth opportunities. The coalition party shifted its concern from wages reduction and unlike the Labour party, it directed its efforts towards generally providing workers with greater discretion over employment matters. It is through these discretion policies that the Coalition party managed to create more opportunities for business expansion (Blanpain, Bambe & Pochet, 2010). The Australian government made the wage structures to be more centralized. This was after an agreement with the trade union movements and the government. A key element of the accord was the reliance on national wage adjustment of industry and occupation awards as the primary mechanism for wage determination. The government agreed with the labour unions to exercise wage restraint and ensure that labourers did not ask for more wages. In return, the workers would get social benefits i.e. an improvement in health and working conditions. They would also experience an increase in economic growth in the country. The Coalition party in Australia did not work well with the trade unions. Rather, it encouraged individualism among workers as the liberal National Party coalition sought to work with the workers themselves (Blanpain, Bambe & Pochet, 2010). In other words, the country championed a centralised system of government as a solution to Australia’s industrial, economic and social problems. Under the coalition movement, the country also experienced great achievements but the policies of the party failed in the long run. This can be attributed to the fact that the policies were not compatible with various government activities especially in the financial sector. Furthermore, there was advancement in technology and this resulted to globalisation, thus the real wage maintenance could not work. If the government did not change the fixed wage rate system, it would mean that Australia would be incompetent with the external world; hence, it would deteriorate economically. The fixed system of wages had to be changed and another policy adopted (Gregory, 1997). Australia was forced to forego its previous centralised system and adopted a more decentralised system. This was later to be termed as the managed decentralization which involved embracing wage flexibility. Workers’ wages were no longer fixed but could be adjusted. The Australian government resorted to encouraging workers to work harder and also advised firms to adopt more efficient ways of production i.e. ways that would result to less production costs while maintaining or increasing the productivity of the firms (Gregory, 1997). By this, the government would achieve a reduction in labour costs and an increase in productivity. Under the Hawke leadership tenure, Australia worked with the managed decentralization and this policy involved adoption of a two-tier wage system. The two-tier wage system increased productivity and still the maintained wage adjustment programme. Under this system, the government tried to increase wages up to 4 percent after negotiations with the trade unions and employees (Kitay, 1997). This was particularly evident during the second tier where the trade unions and employers at enterprise levels regulated the increase in wages. Any increase in wages would require approval by a commission. The two-tier system achieved less as it delivered minimal improvements in productivity. To increase productivity, the government introduced an awarding system where workers were awarded for their productivity (Dabscheck, 1995). This award strategy meant was to encourage employees to work harder and consequently, increase the production output of Australia. The award system saw the setting up of the Structural Efficiency Principle (SEP). This principle’s aim was to ensure that there was competition as competition would increase the efficiency of the industry. SEP ensured that wage increases were a form of awarding workers in order to improve the productivity of employees. However, the programme was implemented slowly and thus it did not perform to its best. The slow implementation of SEP saw its failure as it resulted to slow achievements and ultimately low gains. Survey results as reported by Locke, Kochan and Piore (1995, p. 63-67) for example indicate a general failure of firms to implement the industry agreed change. Due to the failures of SEP and two-tier system, the Australian government had to come up with more efficient ways of coping with the economic pressure. Despite the many strategies that the government was undertaking to counter inflation and unemployment, there were groups that were not satisfied with the working of the government. For example the Business Council of Australia (BCA), which was a major lobby group that represented the major employers, argued that the labour market was overregulated (BCA, 1989, p. 31). The Australian Chamber of Commerce and Industry and the Australian Industry Group, were among other groups that pressured the government to start new strategies to counter the rising unemployment. The BCA was a key party in changing the system of compulsory conciliation and arbitration and shifting it towards an enterprise-based model. The Council aimed at shaping the elements of the Workchoices legislation, which was a national system of private sector employment relations. This was implemented through providing national minimum standards rather than industrial awards and the promotion of enterprise based bargaining and individual employment contracts. The BCA protested that increased competition in Australia was only attainable through comprehensive based bargaining whether or not the trade unions were involved. The BCA argued that enterprise bargaining allowed coordination and management of employees as well as the managers’ interests. BCA was in favour of the flexibility of the labour market. As a result, the government agreed with the thinking of the BCA and changed the direction of industrial and relation strategies (Dabscheck, 1995, p.67). BCA encouraged parties and government systems to develop new approaches such as decentralisation. This allowed an open forum where employees would communicate their views openly. A decentralised system would provide workers with the opportunity that they could negotiate their wages. Enterprise bargaining was well received except for some groups who worked to see that it failed. The government thus initiated the Industrial Relations Act in July 1992, which suppressed these groups’ involvement in the enterprise bargaining activity. The government further started the Industrial Relation Reform Act in 1993. The Industrial Relations Reform Act introduced flexibility agreements that allowed the negotiations would take place in the respective work places (Golden, 1993). Golden (1993) points out that Australia first experienced the decentralised bargaining system in the year 1990. This was when the employers and unions complained that enterprise bargaining should become the main way through which future gains would be achieved. The government agreed to change its policies and embraced the enterprise bargaining system. Many groups rejected the enterprise bargaining system on grounds that they did not know the repercussions of the system. The rejecting groups continued to criticize the enterprise bargaining system and this forced the government to regulate them by amending the Industrial Relations Reform Act. The amendments reduced the powers of these groups in order to allow the system to perform well under minimal resistance (Golden, 1993). In 1993, that the Labour party was re-elected. Its leadership also agreed with the enterprise bargaining strategy and made some minor reforms (Blanpain, Bambe & Pochet, 2010). The re-elected Labour party was under Paul Keating, who based the workings of the enterprise bargaining system with the terms of the International Labour Organization (ILO). This linkage to the ILO strengthened protection of employees and also facilitated the understanding between employees and their employers. This understanding was important as it removed the necessity of trade unions. Keating proposed that it was important to bring this understanding to a whole new level by introducing an award system (Dabscheck, 1995). This was not well received by the trade unions as they protested against the award system. Paul Keating’s government saw the introduction of a period of co-ordinated flexibility whereby employees spoke directly to their employers and agreed on matters without the involvement of trade unions; for instance the AIRC which was the national regulator of employment relations in Australia. However, the AIRC maintained administration of the whole process but with reduced power. An AIRC tribunal oversaw settlement of disputes through a process of compulsory arbitration with the tribunal being the arbitrator. If the parties i.e. the employer and employees had a conflicting issue and they could not settle it, the AIRC intervened and would issue an ‘award’-a legally enforceable document that would entail the terms for settling the dispute. This way, the AIRC maintained control of the employers’ association and also regulated the employees’ activities by reflecting and representing their views. In the early 1980s, employers’ associations representing the interest of the employers criticised the method of forced arbitration as the employers stated that forced arbitration resulted to low performance by the workers, hence causing low productivity. These critics argued that AIRC’s involvement resulted to low returns as it dictated all the aspects of resolving the disputes i.e. the pay rates, job structures, duty statements, hours of work, overtime and pay rates. All these benefits seemed to favour the employees and in cases where the employees were favoured, they resulted to low productivity thus low returns (Locke, Kochan & Pior, 1995). Enterprise flexibility was introduced in the 1993 by the government (Blanpain et al 1997, p. 45). The Enterprise Flexibility Agreements (EFAs) did not require the participation of the trade unions and thus unions were against them. The trade unions argued that the employer wanted the EFAs in order to establish contracts between them and the employees and these contracts would be used to suppress the workers later. This was later to be true as outlined in the case of the Rio Tinto Company and unions at Weipa in South Australian (Blanpain, Bambe & Pochet, 2010, p. 45). The Rio Tinto company was a mining firm whose owner i.e. the employer had breached contract and consequently suppressed his workers. The mining firm scenario brought about the Australian Workplaces Agreements (AWAs) (Gregory, 1997, p. 49). AWAs were a conservative Coalition government strategy that allowed direct relations between the employers and the employees without the intervention of unions. They were considered legal, meaning that any agreements between the employers and employees was to be enforced by the courts if need be. In the late 1990s, and most significantly in 1996, the AWAs worked with vigour as the policy was backed by the Workplace Relations Act of 1996 (Dabscheck, 1995). The AWAs was one of the strategies of decentralisation bargaining structures that were put in place by the labour party of 1996. These structures saw the rise in numbers of workers willing to work. According to a survey that was conducted in 1991, there were over 15,000 federal government bargaining structures that were formally accepted in Australia (Golden, 1993). At this time, the estimated number of employees covered by these agreements had reached 1.74 million. This was almost 64 percent of the employees that were covered by these structures. Australia’s reforms were most significant during the 1996, when John Howard was elected. Under him, Australia sought to move its employment relations away from its collectivist’s traditions, with a strong role for the arbitration system to a mere fragmented system of individual bargaining between employers and employees (Lansbury & Wailes, 2004, p. 36). The Australian government raised the performance of the labour market by improving employee relations situation in the country. This was achieved by ignoring trade unions’ pleas to adopt a more complex strategy whereby workers were not allowed to pass their views to the employers openly. Australian Workplaces Agreements played a key role in achievement of the advancements in the economic and labour market. Until the latter period of 1990s, the Australian government insisted on use of the enterprise bargaining strategy and individualised forms of workplace agreements. Currently, the AIRC handles the activities of unions and their members. Around 35 percent of the total employed population is on a mixture of the awards and agreements system and another 30 percent are governed by contracts. Although the AWAs have greatly worked in Australia, there are major critics of the system; for instance, the BCA are keen on seeing that the AWAs were abolished. These critics are focused on improving the bargaining system. They also are advocating for AIRC to be repositioned as the sole regulator of the labour market. According to BCA (1989), the AIRC repositioning as the overall authority in regulation of the labour market would strengthen the functionality of the employers and employees. Though enterprise bargaining is deemed to improve the working of the Australian workforce, there is rising doubt that the policy will continue delivering the same results as it has been doing. The doubt is based on experience by policy makers who tend to think that enterprise bargaining will not continue to increase the productivity of the labour market in the long run (Blanpain, Bambe & Pochet, 2010, p. 231). This continues to be true as there is growing mistrust between the employers and employees. Employers are initiating many workforce changes without consultation or negotiations with the various unions or employees. Another major upcoming trend is the development of non-standard employment opportunities that are arising in Australia (Gardner & Palmer, 1997). Non-standard employment includes the likes of part time contracts. Employers are continuously adopting the temporary job allocation and avoiding the full time waged employment. This is as a result of the decentralisation policy whereby the government insists on collective bargaining and this move by the government is discouraging employers from engaging in full time employment contracts with its employees. Moreover, the policy of awards and bargaining is set to increase the non-standard form of employment as it lowers the potential of management to operate their firms effectively. Non-standard employees in Australia are approximated to have reached 45 percent of total employed personnel (Lansbury, 2000). In conclusion, the government has contributed to the major advances in the sectors of economy by reducing unemployment rates and inflation in Australia. In general, there seems to be a direct relationship between the employment relations, labour flexibility and the productivity of the employees. The Coalition government is keen to see more advances take place in the Australian labour market. This shows that the government is concerned with improving the welfare of employees as well as building the market at large. The Labour party has also expressed its concern by stating that it will eradicate the AWAS once re-elected. In summary, the Australian government is generally contributing greatly to the development of the labour market. REFERENCES Blanpain, R, Bambe, G & Pochet, P 2010, Regulating Employment Relations, Work and Labour laws, Kluwer law international, London. Business Council of Australia, 1989, ‘Enterprise Based Bargaining Units: A Better Way of Working’, Report to the Business Council of Australia BCA, Melbourne. Dabscheck, B 1995, The Struggle for Australian Industrial Relations, Oxford University Press, Melbourne. Gardner, M & Palmer, G 1997, Employment Relations, Macmillan Education, Australia. Golden, M 1993, ‘The Dynamics of Trade Unionism and National Economic Performance,’ The American Political Science Review, viewed 10 April 2012 Gregory, M 1997, ‘Labour Market Deregulation,’ Australian National University Centre for Economic Policy and Research Discussion, Discussion paper. Kitay, J & Lansbury, D 1997, Changing Employment Relations in Australia, Oxford University Press, Melbourne. Lansbury, D 2000, ‘Workplace change and Employment Relations Reforms in Australia, Australian Review of Public Affairs’, The Drawing Board: An Australian Review of Public Affairs, vol. 1, number 1, pp. 29-45, viewed 10 April 2012 Lansbury, R D & Wailes, N 2004, ‘Employment Relations in Australia’ in G Bamber, R D Lansbury & N Wailes (eds), International and Comparative Employment Relations: Globalisation and the Developed Market, Sage Publications, London.. Locke, R M, Kochan, T A & Piore, M J (eds) 1995, Employment Relations in a Changing World Economy, MIT Press, Sydney. Read More