As I would expect, this is an extremely interesting response to the issues raised by the legislation. And the commentary concerning the Scandinavian approach is both very relevant and correct. In the US the term used to denigrate this approach is Scandivavian socialism. That just so aptly captures the ignorance and one-eyed approach (if that isn't a tautology) of so much of the American approach to society. Look after yourself and you will get ahead in the "land of opportunity"!

I agree - an interesting and articulate response. I have one small point, though.

"even the wildest optimist would have to agree that the net economic benefits from the workplace-welfare reforms will be at best small - hardly enough to justify the community anxiety it is causing and the long term effects on social cohesion."

If we are to properly account for the cost of the IR changes, surely the effects on social cohesion should push the balance sheet into a net economic loss as result of the changes.

Des Griffin writes "In the US the term used to denigrate this approach is Scandivavian socialism. That just so aptly captures the ignorance and one-eyed approach (if that isn't a tautology) of so much of the American approach to society."

I know socialism is considered by some as a dirty word but I have to wonder how we are meant to address political and social issues without some form of socialism. Economics, as useful as it is, has not and never will be the magic bullet that solves all our attempts to live cohesively. The concept that society should be left to organise itself around free market principals will not deliver social justice and the likes of Hayek freely admit this.

The question is how do we live cohesively without social justice? Even if we do well in the system and wall ourselves up for security, life has a way of climbing over the wall in the dead of night and confronting us with what is going on in the world outside.

Valerie

It is so refreshing that after $55+ millions spent trying to hoodwink the population, the truth of the matter just keeps popping its head up. Nice article and wonderfull supporting comments.

It's not about whether we want it or not it's about whether we will punish the Libs at the next election for doing it to us.

Kenny, so true, that we may not is a much more scarier nightmare.

*the use of propaganda to distort and distract,
* the maintainance of confusion and complicity,

The dumbing down of us all.

My understanding of production costs in many manufacturing companies, is that labour costs are often not much more than 20% of total costs. Most costs are normally tied up in the cost of supplies, the cost of equipment, the cost of packaging and transportation etc, but even if such companies reduced the wages of their employees by 50%, they would only be reducing their overall costs by 10%.

However, saving 10% of overall costs or more could also be readily done by using more advanced management systems (see "10 Ways to Improve your Manufacturing Productivity" http://www.productionprocess.com/improve-productivity.html).

I also think that reducing the wages of employees does not necessarily get the best out of those employees. If an employer pays people to be "arms and legs", then that is what the employer will mostly get, (ie. "arms and legs" and not brains or thinking ability also).

Labour costs may be proportionally higher within service industries, where the costs of supplies, cost of equipment etc are less, but I think that reducing the rights and wages of employees within service industries would not produce the best from those employees either.

I had experience of an overseas company that had very little regard for its workforce. The workforce had very few rights, they were paid the most minimum of wages, their working conditions were extremely poor, and the company's safety standards were almost non-existent.

There was very little automation or mechanisation, and much manual labour, and the company referred to its workers as "units". A task was described as requiring so many hours and units, so a 1 hr / 5 unit task, would take 1 hr and involve 5 workers. If one worker didn't come out alive, they would just take the body away and hire someone else. Needless to say that company was not very productive overall, and the quality of its product was such that it could only be sold nationally, but not internationally. Continuously reducing the rights and wages of workers in Australia, then Australia is heading down that track I would think

Excellent post Timkins - well reasoned and no scathing tirade towards other posters at the beginning - nice change.

I agree that holding employees wages to ransom over production costs is a false economy. No one can be inspired to work harder for less and in poorer conditions - a downhill spiral indeed. If an organisation cannot afford to pay its workers a fair living wage then it should not be in business.

Most if not all of the comments on this article and even the article itself would have us believe that these changes are motivated by a desire to reduce wages and in some way push down living standards of Auatralians. These beliefs defy the simplest of logic.

Having worked hard to strengthen the Australian economy and increase average wages by nearly 15% with the nation pushing along nicely why on earth would the Government want to create a situation that is designed to hurt people? It would seem that those who have posted comments somehow believe that The Government wants to punish the very people it has helped, the very people that have re-elected it on 4 occasions. And in doing so encourage them to vote Labor or for minor parties at the next election.

A little bit of common sense, common logic and the bitter experience of being in opposition indicates otherwise. Rather, in seeking to make these changes the Government sincerely believes that they will have a positive impact on the economy, levels of employment and wages. In other words they believe that the changes are in the best interests of the nation and will actually prove to be just that.

Having experienced an IR system that was similar to the one proposed in WA before the election of the current Labor Government, I have no doubt that the new IR changes will have very positive effects indeed. In WA we have gone from the best IR State system to the very worst in the Nation.

Bring on the changes, I say, with all speed and let's see the good that comes with them.

John Howard says the minimum wage won't fall but he guarantees that prices will rise when he won't take action over petrol prices.
Inflation is rising because of petrol prices. The petrol price rise is stops interest rates from rising so the petrolo price rise is politiaclly sound. What about the people on minimum wages? They will have a job and still be poor. They are the working poor and they have been written about long before this.
We are going back to slavery times, working but still not have enough to live or drive a car.
The result will be an increase in marriage breakdowns and social problems.
Sorry those two are not economically related are they in a materialistic world.
I will back what I say here with a staement about $3.60. The $3.60 is what Sydneysiders won't pay to go into the Cross-City tunnel because they are so cross that they should pay when they are the ones who have a job. Most can't afford the $3.60 or it would be paid.

Sniggid,

I am sorry but the rationale behind the introduction of these amendments has always been that Australia has among the highest minimum wages in the OECD. Therefore if this is the reason for the introduction of the IR changes, what could they possibly be aimed at acheiving, if not an overall reduction of the minimum wage?

Interestingly, very little attention has been drawn to the fact that Australia has among the highest hours per week, and productivity of OECD countries. It is probable that this additional work is performed by people predominantly because of the same financial incentives, that cause us to have the some of the highest wages in this community. Therefore any move to remove the incentives could operate to lower Australia's productivity, not raise it.

Also, with the record levels of personal debt, the corresponding difficulties in home equity (caused by defating house prices), and the possibility of interest rate rises in the foreseeable future, this is neither the time nor place for this sort of wholescale devaluation of teh minimum wage, nor for disassociating the same from the CPI.

At the present time inflation, imports etc. are all beginning to rise, the average minimum wage worker's confidence in the future is falling, and now is the wrong time to make changes to their ability to service their increasing debt. Particularly from a government that made no mention of these proposals prior to the last election, which may have prevented them ever gaining control of the senate, and thus have no mandate to introduce these reforms.

Sorry Aaron but you have failed to take into account the logic of what was reflected in my posting. Remember that most members of parliament (Government and Opposition) are actually quite sincere people, even John Howard and his ministers. Having precided over record growth in the economy, in employment and in real wages over nearly 10 years, why would the government seek to implement IR reforms designed to harm the economy and working Australians and risk being thrown out at the next election? That is an illogical position to take.

I'm not sure whether you have worked under a workplace aggreement. I did in WA until the Gallop Government did away with them over here. They were great. We negotiated them ourselves, and the employer and us benefited from the agreements.

I guess you will have to wait and see. But don't be surprised if it turns out that the benefits the Government is claiming will eventuate actually do eventuate. That is, a stronger economy, higher employment and higher real wages growth.

Sniggid, you under-estimate Howard. The adverse effects on battlers will be slow and gradual and will affect less than 10 per cent of the workforce. These are people who usually vote Labor anyway and in any case many of them are hysterical about the terrorist threat. So, alas, Howard is safe: he will hit the most vulnerable in the community and
get away with it politically, Freddy

Sniggid,

What are you being paid by the Liberal Party at present? I'm sure you won't be afffected by the proposed IR "reforms".

Reforms won't help productivity?

It is one thing to say that some lesser skilled people will miss out with the proposed IR reforms because the minimum wage will (quite rightly) eventually drop. However I am rather amazed by this argument put by many people that productivity will over time decrease because of the disincentive of lower wages. What about the situation now where management often would like to get rid of certain unpunctual /belligerent/ lazy/ sloppy workers but affordably can’t? How can this NOT effect productivity?

What these proposed reforms will do is spread the gap of wages between the competent and the incompetent. With the employer’s same wage bill, he /she can now pay more to the highly efficient, pay the same to the mediocre, pay less to the barely competent but sincere, and pay nothing to the erstwhile incompetent or sullen and disruptive workers on the factory floor that were previously too expensive or administratively difficult to fire. Because the carrot and stick incentive to get on with your workmates and do a good job would always be there, productivity would increase in leaps and bounds.

Edward Carson,
Your assertion that employers will spread wages on ascending scales commensurate with competency to paraphrase your last paragraph is an exercise in fantasy.
I am reminded of a 1967 survey by the North Australian Workers Union, of cattle stations across the Northern Territory to check the wages paid to Aboriginal stockmen one year after the Arbitration Commissions decision that Aboriginal Stockmen be paid equal wages from a delayed commencement date.
The Pastoralists advocate claimed that some were not competent but gave the Union to understand they would increase the wages of those workers who were.
The survey visited a wide cross section of properties and not one single Aboriginal Stockman was being paid the full Award wage.
The refusal to pay full award precipitated the Wave Hill Walk -Off of the Gurindji people.
The Howard Government's IR legislation will ensure that low paid unskilled jobs will experience difficulty in finding workers .
Without regulation of decent wages and conditions,Howards scheme will create more problems that it solves.

One thing many people fail to take into account in their analysis of reward for effort in the workplace, is the total amount of energy in the system. In the past/present there certainly were/are many people who did/do not get properly compensated for their work . But, in my opinion, this has more to do with the deadening effect of the majority who didn't really want to be industrious that dragged down those around them. Whatever you think about Howard's politics, he has plenty of energy and he wants to transform the entire economic system, so that those who can offer more in the workplace are rewarded more. On this conceptual level I think he's on solid ground.

The other thing is that as (above-average) standards fall, the amount of opportunities for people who have traditionally missed out in the past increase. For example, while Qantas is reducing its costs in order to stay competitive, the "equity" locked up in its current arrangements (including what it pays its workers) is being redistributed in a wider and flatter form, with the result that opportunities are being created for more people. While the vested interests in the unions complain, more ordinary people are slowly and silently benefiting. At least this is one significant positive in Howard's agenda.

RobP,
Surely you are aware that Award wages are Minimum wages......
There has NEVER been a restriction on Employers rewarding performance by paying OVER the award

Maracas. Absolutely true. Unions have exploited this fact in the past to raise wages. However, there is still a LIMIT to which above-award wages can rise before they become counterproductive, and a distortion in, the economy. What Howard is doing is swinging the pendulum back to the opposite extreme (from where they once were) so that a greater number of people are included in the system at the floor level. No doubt, long after Howard is gone, there'll be other pulses of activity that boost wages again when they're needed. All I'm really saying is that every cloud has a silver lining: when standards go down, they'll be replaced by greater opportunity. I expect that the system will toggle between the two opposite approaches over time.

Dear maracas,
None of the Aboriginal stockman may have received the award wages, but you didn’t actually mention whether or not there was a spread in their pay or if they all received the same amount.

Be that as it may, management doesn’t pay higher wages to be nice. They will always pay the lowest market price they can get away with but, strictly for selfish reasons, sometimes to elicit higher productivity or attract better workers, they will pay more. This opportunity is limited if part of their total salary budget has to be spent on forced, above market, minimum wages.

Also, you seem to turn a blind eye to the fact that up until now it is always expensive, if not impossible, for management to sometimes get rid of employees who possess at least one of the following attributes: lazy, unpunctual, sullen, disruptive, unpopular with other staff, otherwise possess attitude problems.
Surely a boss with the arbitrary power to hire and fire will ultimately end up with a more finely tuned workshop than one lumbered down with unwanted staff, or expensive redundancy payments.

I find it astounding that some people dare to say businesses will suffer due to Howard’s reforms. What Howard is doing is removing some government regulations from the operations of business.
Is it not a self evident truth that a business will always run more efficiently without the monkey of government interference on its back?

Dear Edward Carson,
No I am not turning a blind eye.
Under unfair dismissal rules an employer is required to warn the offender.Verbally and in writing.
After three strikes, he's out. I know, from experience as a rank and file delegate. The character you describe does not get support from fellow workers or Union unless the dismissal is unjust. As for your final comment about self-evident truths, dont you know about the corporate crooks in business who use the absence of regulation to fleece unsuspecting investors that get exposed regularly ?
HIH and Enron come to mind,Hardie's asbestos ettempt at envasion by going offshore; and still not paying out.
Howard is on his way out and the mess he is creating wont bother him on his generous retirement package.
I guess you also overlook the waste of taxpayers money he has authorised with his subservience to the American invasion of Iraq. If there was any justice in this world he and his "Coalition of the willing" co-conspirators Bush and Blair would be arraigned before a Nuremberg style Tribunal and tried for crimes against Humanity.
The hardship he is imposing on those of us who do not have power is also a crime against Humanity. Tomorrow you will see National and international solidarity of workers against his so called IR reforms.

Maracas

You are clearly very pro union. Fair enough. The Unions and the Labor Party are totally opposed to the changes. They believe that they will lead to lower wages and be generally bad for the country. The Liberals believe they will lead to higher wages and be good for the economy and good for the country.

This week we will see the Senate inquiry where most of the reported submissions will be against the changes. Your rally will receive a great deal of publicity from most media outlets and you will get plently of support from the ABC and the Faifax Group in particular. In the end time will be the determiner of the overall result. It will be pretty clear over the next 2 years in the lead-up to the next Federal election which side of the argument proves to be right. In that sense it is in the interests of both the Liberal / National
Parties and the Unions / Labor Party to have the legislation passed as soon as possible so that the test can begin.

I worked on a Workplace Agreement here in WA before I retired. It was great. We got better salary increases than the Union was able to obtain, and quicker too.

I expect that you will be disappointed by what comes out of the changes but only time will tell.

Sniggid, you are sitting on the picket fence 50/50 because nothing is that equal. It is impossible to be balanced 50/50 except when you want to say nothing at all. That is what you have done. You have just filled up sapce.
It means you are a conservative newspaper editor.
Everyone, but everyone has a leaning, even editors.
To sit on the fence is to add nill comment just like most editors do in the name of being objective.
Objectivity means to argue both sides with argument and reason and make it believable.
It does not mean to say someone else says something or believes something. That is the way to say you have no mind or opinion of your own. Now which side of the fence is your 50.00001 weight of bias?

GlenWriter

The only sense I can make out of your contribution is the first 4 letters of the name GlenWriter as my Christian name is also Glen. The rest is something akin to basic school staffroom gobbledegook. What in fact you want me to attempt to do is to convince you to agree with a point of view that you cannot accept. No argument, no form of words will satisfy you that the proposed changes will be good for the country and for workers. And even if time does show that the country has benefited from the changes you will still not be convinced, I am sure.

The difference between us is not only that I believe in the changes and you do not, but there is the added comfort for me that the changes will most likely become Law and the added frustration for you that you almost certainly cannot stop them from becoming Law. I can only hope that your frustration will abate over time.

maracas,
Sorry, my mistake. When I was talking about industrial relations and what is good for Australian business the allied invasion of Iraq two and a half years ago somehow slipped my mind.
The cost of maintaining one frigate and two hundred (?) land troops in Iraq when they would otherwise be maintained in Australia must be absolutely enormous.

That verbal and written warnings you talk about is only for those who are blatantly incompetent or belligerent. (and even then, if an employee has made two cock-ups or twice talked back to the boss, why should management have to wait for it to be done a third time rather than just getting rid of the problem asap and moving on with a new worker) The main problem is those in the grey area who are not overall worth their cost to the company (in efficiency or inability to get on with others) but don’t engage in any specific action that would justify warnings. As a rank and file delegate are you going to tell me that you’ve never heard or a case where management has tried but failed to dismiss someone, unless they also paid out a redundancy package.
The mere fact that management wants to get rid of someone is evidence in itself that they are not of value. It is only incompetent management that gets rid of good workers and in time that company will go kaput anyway under the weight of its own negligence and stupidity.
With regards to regulation there is difference between making a company answer for intentionally selling harmful asbestos and telling them who they can or can’t hire and fire.
With some minor exceptions all the government has to do is just maintain the basic criminal and civil law where anyone (whether individual, business, non- profit association or whatever) must answer for all crimes or tortious actions such as fraud, perjury or negligence. Recently the law in Victoria was changed so that executive directors of companies can now be held criminally liable for the actions of the companies.

Edward, I dont believe that management is infallable. If they cant dismiss someone who deserves to be dismissed without paying a redundancy package, they are mostly incompetent.
I dont consider talking back to the boss a sackable offence either.
Besides an incompetent Manager who goes Kaput affects the livelihood of the workers in the industry he is supposed to be managing.
With regard to hiring and firing; If management is competent in hiring the right person they shouldn't need to fire too often.
Indeed I think that since rules for wrongful dismissal have been in existence, Managements have had to lift their game in the hiring of staff,take more time, check past employment references by speaking to previous employers instead of just reading 'written references' and bothering to establish if the prospective employee has the qualities required to do the work or accept training.
Regarding my comments on regulation and the dishonesty of corporate management I was seeking to illustrate the fallability of management..... Governments are painfully slow at protecting Workers from Corporate fraud

Sniggid,
In one of your posts you said

“Having presided over record growth in the economy, in employment and in real wages over nearly 10 years, why would the government seek to implement IR reforms designed to harm the economy and working Australians and risk being thrown out at the next election? That is an illogical position to take.”

Howard has opposed every wage case since 1996. This increase in real wages is not because of Howard. That’s a FACT.

Howard despises unions. His main motivation in these reforms is to weaken the unions. This in turn will weaken the ALP. This in turn will weaken the opposition to the government leaving the Libs/Nats the only real choice for the people. Labor wont have the funds to get there message out to the people because the unions will be smashed which is there main source of funding. So basically we will have a dictatorship.

Another side effect of these reforms will be an increase in crime because more people will be living on the poverty line. This is what happened in the US.

Look what happened in New Zealand when reforms similar to the ones being implemented here were brought in. We had mass migration of Kiwi’s coming to Australia to earn a decent wage! So your arguments about higher wages are shear fantasy. Mr Sheen (Howard) is only looking after the Liberals party’s interests and that of his business mates

Weaken the unions? yes indeed for a while they are going to be in danger.
Weaken the ALP? from this day forwards the reverse is true Howard has refocused Australians and the time will come ,as a direct result of this criminal act, that sees conservatives bought low and a true revitalised ALP federal goverment in place.
That goverment must reform a great deal but do it with class not an axe.

These laws are more about entrenching managerial prerogative than economic reform.

The government has failed to make an economic case justifying its claims that these changes will grow jobs and boost productivity - all of the research, pre and post, the tabling of the bill has pointed very clesarly to the damaging effects these laws will have on the work force from both. There is no economic justification.

In the pages of this journal Saul Easlake has conceded any data supporting the governments clams is equivocal at best.

The idea that market forces will see cohorts of workers voting with their feet is fanciful - while contemporary society is partly characterised by higher levesl of mobility - people make very serious choices about where they live; schools, families life long relationship, regional familiarity keep many people rooted in one place;- what these changes might induce is a larger number of bread winners "on the wallaby" chasing subsistence employment and fracturing families - in fact the Mad Monk has endorsed this life style if people reeeeally want to find a job.

Already employers exploit outworkers, intinerant labourers, migrant workers - does any one really think that lowering the level of protection of workers rights that this form of bastardry will not grow exponentially.

The most insidious element of these arrangemetns is the fact that when an AWA collapses there is no obligation to renegotiate the deal or maintain the status quo; the 5 basic principles kick in after 90 days.

This is not about economics or prosperity ( well for some it is but not the worker ) - it is an exercise in social engineering and revenge.

I do hope that sneekeepete and MechEngineer enjoyed their day of action protesting about these changes. I am reminded of the hype and demonstration that occurred in 1975, in the IR changes in 1996 and with the GST introduction. These were all warning of dire consequences for the nation. But what happened. Gough Whitlam suffered a huge defeat. The 1996 IR changes are now seen as positive, and the GST has been a great initiative securing financial gains for the States. Now, we move on to labour market reform which will also prove to be a positive step forward.

When the dust has settled and time passes, judgements can then be made about the effectiveness or otherwise of these changes. If they prove to be unwise, the Government will lose the next election. I suspect that in all likelihood, however, you can look forward to more Coalition Governments.