Business Spectator’s Rob Burgess has produced another solid post today arguing that Australia needs another wages accord to bring labour costs down and improve Australia’s international competitiveness:
…the end of the terms of trade boom, the end of the construction phase of the mining boom, and the realisation that Australia is a price-taker on just about everything – including the sometimes manipulated prices of our core commodities – means we have to rapidly expand value-added export industries to take up the slack in employment and incomes…
I have suggested a number of times that if Shorten is to play the historic role expected of him, he will have to be the author of some kind of new ‘accord’ with Australian workers. We simply won’t navigate the ‘great reckoning’ without some kind of shift in workers’ expectations.
Abbott and Hockey have revealed their version of this new pact: a fairly ruthless cutting out of dead wood to allow workers and managers to grow up incredibly quickly. It’s a kind of ‘take it or leave it’ approach.
…When Bob Hawke, Paul Keating, Bill Kelty, Simon Crean and others set about restraining wages growth in the 1980s and then creating enterprise bargaining to replace to the old systems of arbitration, they needed something to buy the voters’ acceptance with…Medicare, tax reform and cuts, fiscal restraint (under Hawke), and the super guarantee…
…There is one giant outstanding issue for Australian families that has not been adequately dealt with – something Shorten could use to buy the respect of workers who he has to tell that the good days are over.
That issue is good, affordable childcare…
Data released by the RBA last week supports the notion that Australia’s labour costs are uncompetitive, with Australian unit labour costs (ULCs) rising faster than most other developed nations:
And the decline in Australia’s ULC-based measure of cost competitiveness even more pronounced for the manufacturing sector:
With Australia’s competitiveness eroded in part through elevated labour costs, there needs to be some kind of mechanism that prevents the competitive benefits arising from the expected devaluation of the Australian dollar from being lost through higher wage claims.
Interestingly, Paul Howes of the AMWU also chimed on the theme this afternoon:
One of the nation’s most influential unionists, Paul Howes, says industrial relations has become a “bloodsport” that is crippling national productivity and prosperity.
…He called for a grand compact involving business, government and unions reminiscent of the accord struck between the Australian Council of Trade Unions and the then Hawke and Keating Labor governments 30 years ago.
The deal would require concessions from all parties, but could deliver policy stability over the longer term, therefore increasing productivity.
“We’ve failed spectacularly together,” Mr Howes said.
This would be preferable to the kind of conflict the Abbott Government’s “take it or leave it approach” will provoke but it must be said that the labour market is far less regulated than it was in the 1980s and union penetration lower still so another wages accord (or series of them) could be difficult to implement.
I also have reservations about Burgess’s proposed payoff (and what’s wrong with just explaining the national interest?) One of the reasons that there are so many dual income families in Australia is because they require the extra income in order to make ends meet and pay-off their jumbo-sized mortgages (which is not saying anything about whether women want careers). Certainly, I know of a few families in my age group where the mother has been required to go back to work early, and send their children to childcare, because they cannot afford to live on only one wage.
Surely, then, a better way to achieve lower wages growth is to reduce workers’ biggest cost – the price of housing – via more flexible and efficient markets for land, as well as enhancing housing-related infrastructure?
That may not be seen by the population as a reward, but it’s a much better long-term policy that addresses cause not symptom. In a sparsely populated nation like Australia’s, abundant low-priced land should be a competitive advantage, rather than a millstone around the nation’s neck. Australia’s constipated land-use system needs to be front-and-centre of any productivity-based reform agenda.
