Businesses have only themselves to blame for high wages: Abetz warns on wage breakout

Employment minister Eric Abetz says Australia’s bosses are too easily out-negotiated by their unions and frequently have only themselves to blame for rising labour costs.

In a speech to the Sydney Institute delivered last night, Abetz said he often wonders why employers “don’t just say ‘no’ from the outset?”

“As shadow minister it was always disappointing to see weak-kneed employers caving into unreasonable union demands then coming to me advocating for workplace relations reform, effectively blaming the system for their own shortcomings,” he said.

“In some cases, their history of cave-ins was longstanding, even during times when the system was arguably more in their favour. As minister, this phenomenon is now even more frustrating. “

Abetz used the example of enterprise bargaining agreements at Toyota and Holden to demonstrate his case.

At Holden, he said, workers were paid more than double the award rate for apprentices, human resource management was handed over to the union, and employees received a $3750 ‘hardship payment’ in lump sum.

At Toyota, he said, management has been trying to claw back some of the “costly and unproductive” clauses in its agreement while leaving high wages intact. Some of the changes Toyota seeks, Abetz said, are to reduce the ‘Christmas shutdown’ period from 21 days to 10 days, half the number of days union delegates get paid to attend delegate training, and removing the practice of giving workers half a day off on the last day before shutdown.

“It is of great concern to the Coalition that unions and employers have inserted unproductive and expensive clauses into enterprise agreements, particularly where the taxpayer is ­subsidising the sector,” Abetz said.

“If this is not done, we risk seeing something akin to the ‘wages explosions’ of the pre-Accord era [the Hawke Labor government], when unsustain­able wage growth pushed thousands of Australians out of work,” he said.

However, Melbourne Institute Professorial Research Fellow and industrial relations expert Mark Wooden is dubious of such claims.

While he says some individual employers will always negotiate bad agreements, the threat of a wage breakout “do not reflect economic reality”.

“At an aggregate level, the latest figures from Wage Price Index showed wages rose 2.7%, or 2.6% after seasonal adjustment. That’s the lowest rate of growth since the index began in the 1990s.”

“Wages are still growing, but only by a little bit. As long as productivity is rising as well, there’s nothing untoward going on.”

Furthermore, Wooden says, Australia’s industrial relations framework has significantly changed from the 1970s, when practices such as pattern bargaining meant wages in one sector would leapfrog to other sectors and businesses.

“We have an enterprise bargaining system,” Wooden says. “That was [former prime ministers] Keating and Howard’s whole philosophy. As a student of Howard, Abetz should understand that with such a system, you just don’t get unions using agreements in other industries to push for wage rises.”

Australia’s economic situation also makes high wage growth unlikely, Wooden says.

“The labour market isn’t that strong. Unemployment is around 6% and 8% of workers say they want more hours. That’s all putting downward pressure on wages. It means if most workers quit, they can be easily replaced.”

If wages do rapidly rise, Wooden says, it will be because of a massive shock to the system that develops under Abetz’s watch.