A lottery with no winners
Australia’s industrial relations system is a lottery with no winners. Consider a small business owner who sits down this morning to do the pay run. They have 122 modern awards to choose from, containing between them 1,900 employee classifications and 205,816 separate legal rates of pay.
The awards run to 8,739 pages and have been amended 7,568 times since 2009. Get anything wrong and the owner has broken the law and faces severe fines.
It is impossible to believe anyone would design a system this complex by choice, but somehow we did. In 2009 the then minister responsible, Julia Gillard, asked for modern awards that were “simple to understand and easy to apply”.
Seventeen years later, HR Nicholls has done the work detailing what that reform produced. Awards have grown by 3,602 pages, more than 200 per year, and across the system they are updated more than once a day. There is now a different legal rate of pay for every 16 workers they cover.
There are 14 different definitions of “wages” and 66 different formulations of how often they must be paid, against a single rule in the Act for each.
The awards have failed the "simple to understand and easy to apply" test and we have ended up with the most complex and irrational system of minimum wages in the developed world.
New Zealand runs on three, Britain about five, France on 12 and Australia on 205,816.
What chance does a small business have? A tradesperson can fall under any of 87 awards and a labourer under 82, and which one applies depends not on the work but on the industry the employer is deemed to be in.
Under the Restaurant Industry Award there is a 64-cents-per-hour difference between the person who carries a plate to the table and the person who takes the same plate away.
It is wicked to run a pay scale under which an honest employer is more likely to get it wrong than right, and even the federal department that administers the Fair Work Act has been caught underpaying its own public servants. How is it logical to prosecute the corner shop for failing where the department itself failed?
Even the legislated review into awards turned into a farce. The Act required the awards to be reviewed every four years, but it no longer does because the first review was only halfway through when the second was due. By the time that first review finally concluded eight years later, it held more than 1,300 days of hearings, published more than 25,000 documents and issued more than 700 decisions and statements.
With no apparent irony, the Commission’s own Full Bench observed during the review that “an award should be able to be read by an employer or employee without needing a history lesson or paid advocate to interpret how it is to apply in the workforce”.
The Productivity Commission found that the decade after the Fair Work Act delivered the slowest labour productivity growth in 60 years, and that award complexity is driving employers away from the enterprise bargaining that lifts wages and output. And nothing since suggests it has changed on the productivity front.
And here is the point – how does anyone expect productivity from a system where every worker is a number on a scale? Under an award you are not a person who works hard, learns fast or turns up on the days nobody else will. You are a Level 3 or Grade 2. The award pays the box, not the person in it, stripping away any incentive to achieve.
This level of prescription rests on an assumption that is, frankly, an insult to the very workers the unions and the Labor Party claim to protect: that every employee is too helpless to strike a fair bargain, that every employer is waiting to exploit them, and that if the government had not stepped in with 8,739 pages of instruction and 205,816 rates of pay, the whole country would be on survival wages.
Common sense dictates the reforms. Rebuild the awards on one axis, by occupation, so that no worker can fall under two of them. Confine them to wages and put every other condition into a single national standard.
Lift the small business threshold from 15 employees to 50 and give those businesses a plain-English employment code they can follow without a lawyer.
Put the Commission under a legal duty to simplify and let an employer get a binding ruling before the pay run rather than a penalty after it.
None of this reduces a wage, but all of it makes the right wage easier to pay.
