Judith Sloan, a leading advocate of industrial relations reform, breaks her long silence over the Liberal party’s labour market policies and suggests the way forward

With the political hysteria surrounding WorkChoices now a receding memory — albeit one that the federal Labor government will be keen to rekindle at any opportunity — it is worth asking the question: was there anything good about WorkChoices?

The Coalition’s surprise majority in the Senate after the 2004 election (itself the result of poor attention to detail on preferencing by the Labor party) spawned the idea of further changes to the industrial relations system on the part of John Howard and a number of his ministers.

The industrial relations changes that had been made by Peter Reith, in negotiation with Cheryl Kernot, leader of the Democrats, had been significant, so the argument went. But the government’s changes to the unfair dismissal laws, exempting very small businesses, had been blocked by the Senate on a number of occasions in the previous term. And there was further unfinished business on a number of fronts.

The centralist thinker, John Howard, also dreamt about a national industrial relations system, effectively doing away with the state systems, some of which (New South Wales, most notably) were loathed by the Liberal party.

One of the credible critiques of the Reith reforms centred on the ongoing extent of regulation of workplace relations, in general, and the continued existence of the Australian Industrial Relations Commission and the award system, in particular.

While new forms of agreement-making had been introduced, including the statutory individual agreements named Australian Workplace Agreements, a ‘no disadvantage’ test applied. Workers could not be made worse on average compared with the relevant underlying award.

So WorkChoices set out to remedy a number of these perceived defects. The irony is that the new legislation was so complicated that it could hardly have been counted as a form of deregulation.

Certainly, the architecture was reconfigured (bizarrely, the Commission remained, albeit with little to do) and the process of agreement certification became more light-handed. The exemption from the unfair dismissal provisions was unexpectedly raised to firms with fewer than 100 employees. And, most notably, the ‘no disadvantage’ rule was rescinded.

For incorporated enterprises in the private sector, state industrial relations laws ceased to have any effect as a national system was ushered in using the corporations power in the Constitution.

Surprisingly, the compliance side of the system was significantly beefed up, with the well-resourced Workplace Ombudsman on the beat, to expose and fine offending employers. Given that non-compliance, particularly by small businesses, had always been a central feature of industrial relations laws in Australia, this aspect of WorkChoices was a truly astonishing development.

It was obvious even then that the politics of these changes were completely misjudged. And while there were economic benefits, they were never well-described or publicised by the government. For example, employment numbers surged after WorkChoices was enacted and many marginal workers — single parents, for instance — were able to secure jobs.

Ironically, in the wake of the global financial crisis, the Australian labour market proved to be remarkably resilient as working hours, rather than jobs, bore the brunt of adjustment — an outcome that can be attributed in part to WorkChoices (the Fair Work Act was not operational until after the worst of the crisis had passed).

Notwithstanding the trade unions’ fear and loathing campaign, AWAs never went anywhere under WorkChoices, peaking at just over 2 per cent of employees, although their impact on collective bargaining may have been important in some cases.

Getting rid of the ‘no disadvantage’ rule allowed shonky employers — the ones who had taken little notice of the regulations before — to have agreements certified that significantly undercut award conditions, particularly in hospitality and retailing.

By the time the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 was introduced by Joe Hockey, the game was up. By re-imposing the ‘no disadvantage’ rule, the real purpose of WorkChoices became completely obscure.

The alternative strategy was much more straightforward: rescind the Workplace Relations Act 1996 and introduce four short and simple statutes. These would deal with changes to the unfair dismissal arrangements for which the government clearly had a mandate at the 20 employee cut-off point; a set of minimum conditions; rules and procedures for agreement-making; and transition issues, the last to be rescinded in due course. In this way, awards and the Commission would be abolished.

To deal with the politics of the situation, a relatively generous set of conditions could have been specified. In the context of strong labour market conditions, actual pay and conditions of most workers would have exceeded the conditions in any case, given that only one-fifth of workers were actually employed on an award.

And leave the state industrial relations systems alone. The truth was that, by and large, the state systems did little harm and generally followed principles set down at the federal level. Moreover, many employers were happy to stick with the state systems — for example, in retailing. Attempting to create a national industrial relations system under WorkChoices, albeit a partial one, greatly complicated the legislation.

It was a lost opportunity. Instead of establishing new arrangements that could truly be described as deregulatory, we got a dog’s breakfast of regulations and enforcement that laid the groundwork for the spookily titled Forward with Fairness and the Fair Work Act. The principle of freedom of contract was completely forgotten in the confusion.

The one bright light has been the Australian Building and Construction Commission, which was created alongside WorkChoices. It has brought a semblance of order to the construction industry and a commitment to the rule of law. While the federal government is keen to neuter it, attempts to do so have been blocked in the Senate. But it is probably only a matter of time.

So where does this leave the Coalition in terms of formulating an industrial relations policy for the upcoming election campaign? Anything that resembles WorkChoices too closely is likely to be political poison.

Certainly, cracks have emerged in the implementation of the Fair Work Act: modern awards, minimum engagement periods for school students, wildcat strikes in Western Australia, the surge in unfair dismissal cases are all examples. So criticism is both legitimate and called-for.

Having said that, the real problem posed by WorkChoices for the Coalition is that the case for a less regulated industrial relations system has been damaged, potentially irreparably, by its own cack-handed approach to policy-making and implementation.

To announce a general policy intention in early 2005, but with no details, was to hand the trade union movement and the Labor party an incredibly generous gift. For month after month, a fear campaign was whipped up about a policy that had not been finalised. When WorkChoices was finally passed into law, its bark was much worse than its bite, but it was too late. The worm had turned, so to speak.

Judith Sloan is honorary professorial fellow at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne. She was a commissioner of the now-defunct Australian Fair Pay Commission, one of the agencies set up under WorkChoices.