John Menadue–A lot of nonsense about productivity.

Jul 24, 2014

A lot of nonsense about productivity

For years the Business Council of Australia and News Corp have been warning us about our poor productivity record and the need to change our industrial relations laws to bring trade unions to heel.  A part of this campaign against unions is now being played out in the Royal Commission into Trade Union Governance and Corruption. The partisan nature of this action is obvious when we see that the government has refused a Royal Commission on governance and corruption by the Commonwealth Bank of Australia and other banks in the treatment of thousands of investors in superannuation. But the unions are easy game for a vindictive government.

It is not that productivity is not important, as the BCA reminds us. It is important, but we have been doing much better than the BCA is prepared to admit. We are also doing much better in labour flexibility than the BCA is prepared to admit. But invariably business interests take the political path of urging changes to industrial relations legislation rather than focussing on improved relations in the work place. That is where real labour productivity is and must be achieved…in the workplace and by members of the BCA.

In his speech in Hobart to the Econometrics Society on 3 July this year, the Governor of the Reserve Bank of Australia, Glen Stevens, pointed out that the value of output produced per hour of labour time, increased at an annual rate of 2% in the three years to June 2013. They were the three years of the Rudd/Gillard governments. Stevens commented ‘[This] better trend for [labour] productivity, if we can sustain it, and especially if it can be further improved, would be a reliable base for optimism about the longer-run prospects for the economy and our living standards’.

There has been no productivity crisis despite what the BCA and News Corp have been telling us month after month.

The BCA and other large employers were also telling us that the labour market under Fair Work Commission was too rigid and that employees should be much freer to change jobs and move into areas of high demand like mining. But again the facts pull the rug out from under this specious argument.

In the same week that Glen Stevens was speaking in Hobart, Dr David Gruen of Treasury spoke of a survey of nominal wages over the decade to March 2014. Wages in mining rose 9.7% more than the aggregate increase. Wages in construction rose by 5.4% more than the aggregate. And wages in the professional, scientific and technical sectors rose by 2.5% more than the aggregate. By contrast, wages in the manufacturing sector rose by 0.9% less than aggregate wages. In retail the increase was 4.3% less than the aggregate and in the food sector 7.6% less.

As Ross Gittins in the SMH has pointed out ‘We now have a genuinely decentralised and more flexible wage fixing system, delivering wage growth in particular industries more appropriate to their circumstances’.

The clear facts are that productivity and wage flexibility have been improving. Unfortunately much of the rhetoric about industrial relations legislative reform distracts from the need for both employers and employees to concentrate on the work area, in the work place where productivity and wage flexibility is best achieved. The outcomes we seek will not be obtained in ideological campaigns about industrial relations law like the Fair Work Act. Competent and engaged employers know that. But the shrill spokespeople for the BCA and News Corp don’t want to listen. They want to blame others.

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