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(An Address to the AFR Industrial Relations Event,
30th March, 2005)
Some years ago, I delivered a speech in which I compared the obstacles which prevent Australians from participating in the labour market to Checkpoint Charlie---that infamous entry point through the Berlin Wall which was made up of miles of barbed wire, concrete barriers, land mines, fortifications and armed guards. The Berlin Wall separated the world of the free market from that economic wasteland that was the Communist East. When it came down in November 1989 everyone knew that Communism was dead. During its 40 year existence only the privileged few could pass to and fro through Checkpoint Charlie, and even they knew that if they did not return, the lives of their loved ones were in jeopardy.
Now I accept that I was perhaps overstating my case somewhat, but the fact remains that the barriers to entry into the Australian labour market, particularly for the low skilled, poorly educated or socially disadvantaged or for those who lack connections, self-confidence or even good looks, are serious indeed. For those people---especially teenagers and now for older workers as well, the obstacles to getting a job were as formidable as getting through Checkpoint Charlie.
I said also that we had become too accustomed to a higher level of unemployment in this country than was either inevitable or desirable. And while it is a good thing that in 2005 we enjoy an official unemployment rate of around 5%, this still represents a failure on our part because it masks a serious level of underemployment, and a low participation rate. If Australia had the same proportion of its working age population working as, for example, in the United States we would have another half a million people in work.
We all remember the words of Ted Evans, the former Secretary of the Commonwealth Treasury who in 1993 said that unemployment in Australia was a matter of choice. Choice. A simple word and an even simpler concept. We are free to choose. Man's essential predicament. We can choose right or wrong. Good or bad. It is up to us.
The deep-seated desire of people to be free from tyranny is the very reason that the Berlin wall was pulled down. People chose freedom.
Let us now consider for just one moment the enormous social and personal cost that unemployment and underemployment has on individuals and the community. The costs in human suffering are enormous. When we limit, by the application of various constraints, the opportunity to work, we tell people in the most graphic of ways---'Sorry, your contribution is not needed---YOU are not needed.' When people are excluded from full participation in community and working life the predictable results are frustration, depression, addiction, domestic violence, civil disorder and even suicide. The highly regulated, highly protected workplace might be cosy for those on the inside but it comes at a great price for those who wait outside its gates hoping to someday get their entry ticket. This price is particularly paid by older workers who, if they didn't have a myriad of regulations to impede their path, would have a much greater chance of negotiating an arrangement that would enable them to remain in the workforce way beyond their traditional use by date.
This myriad of regulation is Australia's Checkpoint Charlie and it continues to function as a barrier to getting a start---or a 'start again', in the labour market.
Australia has been groaning under this yoke for a century. But now we have the opportunity for great change. Free markets and free societies are in the ascendant, and the defenders of regulation and privilege are on the defensive. And while it is still true that the price of liberty is eternal vigilance, it is also true that freedom today is growing around the world. As a big idea, individual liberty within liberal democracies, underpinned by free markets, is now dominant. The idea of a flexible and free labour market has now become mainstream. Even the Keating Labor Government tried to adjust to the reality that deregulating capital markets, and winding back protectionism, meant that the closed shop could not continue. Protectionism and wage regulation went hand in hand. They were opposite sides of the same coin. H B Higgins' face on one side, Alfred Deakin's on the other. Higgins was the champion of labour regulation, Deakin the champion of protection. But it is one thing to grasp this reality and another to enact the policies required to undo the labour regulation/protection compact that Higgins and Deakin put together a century ago.
Today I want to offer you a glimpse of the world that lies on the other side of Australia's Checkpoint Charlie. I want to describe to you the Workplace of 21st Century Australia.
You may have gathered that I am fond of metaphors. I'm a builder so I adhere to the old adage that a picture is worth a thousand words.
Instead of Checkpoint Charlie I see a wide highway---a Workforce SuperHighway, on which Australians will be able to travel. This Super Highway will have three lanes and each Australian will be free to select the lane he or she prefers, and to change lanes whenever he or she wishes.
The first lane I will call the Higgins Lane; the second the Employment Contracts lane; and the third the Independent Contractor lane.
I have named the first lane the Higgins Lane in memory of Henry Bournes Higgins---often described as the father of the Australian system of conciliation and arbitration. The Higgins Lane is the lane in which most Australian workers are currently forced to travel. The Higgins Lane is supervised, managed and regulated by the Australian Industrial Relations Commission, the various State tribunals, the Federal Court, trade unions, employers' organisations, and a battalion of lawyers who advise them all. It is the lane of Enterprise Bargaining Agreements (EBAs) and Australian Workplace Agreements (AWAs) and the many hundreds, perhaps thousands of legally binding Awards. Traditional employment, ie the traditional employer---employee relationship, has become so regulated that we have, in the words of Richard Epstein
...created a legal edifice of stunning complexity. Protective laws abound on every conceivable aspect of the subject: health, safety, wages, superannuation, unionization, hiring, promotion, dismissal, annual leave, long service leave, retirement, discrimination, access and disability. The volumes of regulation, rulings, and cases on each of these bodies of law would take a treatise to summarize fully.
Then there is the middle lane. This is a lane reserved today for the privileged few and it is rarely used. It is the Common Law Employment Contracts Lane, and the few who are not confined by the massive concrete barriers of the Higgins Lane, can avail themselves of the space and the freedom to travel in this lane. By and large it is reserved for high income earners---senior executives, salaried lawyers and accountants, sporting stars, TV celebrities and so on. Many of these people operate in the global marketplace for their skills. Not for them the constraints and constrictions of the Higgins legacy. Once upon a time however, everyone had access to it, but Higgins and his successors put an end to that by roping in this industry, then that industry, and so on, until today we find very few people travelling in that middle lane. On the Workforce SuperHighway of the future however, I see the middle lane providing employment relationships for employees and employers who want freedom and flexibility. The traffic in this lane will move much faster and more freely than in the Higgins lane. Employment conditions will be determined solely by the parties themselves---no-one else. Hours of work, rates of pay, holidays, sick leave, long service leave, hiring and firing, will all be agreed between the two parties. Employer and employee. It will be the lane of the Federal Contracts of Employment Act (2005). What is now the preserve of the few, becomes the opportunity for the many. There will be no Industrial Relations Commission for the people who agree to these contracts. In the event of a dispute they may seek advice from a voluntary mediation service, or they can seek redress in the State Magistrates Courts.
A Commonwealth Act of Parliament is needed which creates an employment contract---based on common law principles, which will provide an iron clad protection for the parties to that contract from the regulators, commissioners, judges, and trade union officials who rule over the Higgins Lane. The essence of such an employment contract is that it will be an agreement which the parties have reached themselves; and to which they are willing to commit because both parties believe they will be better off as a consequence of their commitment.
If the Commonwealth Parliament were to pass such legislation, and it could do so using the Corporations power (Section 51(xx) of the Australian Constitution), there would be no need to shut down the various State systems, nor to do anything more than tinker with the 1996 Workplace Relations Act. With such an Act on the statute books, employers and employees would be free to choose the lane on which they wished to travel. Those employers and employees who prefer the Higgins Lane could stay there. Those who want to do their own thing however, who believe that they know best what is best for them, could use this new Commonwealth Act, to write what is essentially a common law employment contract, and be secure in the knowledge that no industrial tribunal, no trade union official, no firm of ambulance chasers, no busy-body bureaucrats, could interfere in the employment relationship established by that contract. A Federal Contract of Employment Act would do for workers what Sections 45 D & E of the Trade Practices Act did for companies---ie protect their rights to go about their lawful business without interference, intimidation or boycott by a third party.
Finally, there is the outside lane. The fast lane. The lane of Independent Contractors. The lane of small and micro business. More and more Australians are choosing this lane---over one million at the last count. I am very familiar with many of them because they have been the back-bone of the housing industry for as long as I have been involved in it and for long before that. They are engaged by business, government and householders in countless ways. They mow our lawns, deliver our parcels, fix our computers, shear our sheep, paint our gutters---they even write much of what we read in our daily papers. When the car needs servicing, the drains need clearing or the kids want to learn to play the guitar, the likelihood is that we will call an independent contractor.
They are the most productive, creative workers in our economy. They negotiate a price and they wear the risk that they complete it on time and on budget. Just as you know what you want, so they know what they can provide and they get on with it. We must make it easier for these contractors to be engaged by government and we need to remind tax bureaucrats that those who wish to travel in the fast lane are doing so because they want flexibility and fulfilment in their lives, not because they are seeking back door tax relief. These people are not employees---they are small business operators. They accept the risks and rewards of business and they deeply resent being 'deemed' to be employees by those endeavouring to build a constituency.
The 21st century revolution in communications and information technology provides individuals with enormous resources and access to information on everything from franchise options to business checklists---Google has replaced Government. And just as freedom has undermined dictators abroad, so it has empowered thousands of ordinary Australians. Our economy is a diverse, diffuse and dynamic entity. Merit is now the absolute determinant of success.
Nevertheless, it is beyond argument that many people, probably a majority, prefer to be employees than to be independent contractors. But for many employers and employees the Higgins Lane has become so costly and burdensome that potential investors in Australia go elsewhere to establish new plants and businesses and existing travellers in the Higgins Lane have to put up with the burdens imposed upon them because they are confined by statute and regulation. They have nowhere else to go.
The Howard Government, in considering the opportunities which the new Senate will give them, has spent a great deal of time discussing what changes should be made to the 1996 Workplace Relations Act---the great-grandson of Higgins' 1904 Conciliation and Arbitration Act, in order to make the Higgins Lane less costly and less burdensome. They are supported in this activity by employer and big business organisations. At the same time they are being warned by the trade unions and Labor leaders---and many media commentators, to leave the Higgins Lane well alone. Then there is the desire of the Federal government to have one system of labour market regulation, run by the Commonwealth. In this ambition they have been strongly supported by the business groups---big business organizations in particular.
Whilst I hold the Howard Government in very high regard, I have to say that in this enterprise I believe the ambitions of the Government are misplaced. Why pick a fight with the States if you don't need to? While there is nothing wrong in principle in seeking to make the Higgins Lane less burdensome, it is far more important to do for employees what the Government has promised to do for independent contractors and that is to make accessible to all who would like to travel on it, the Employment Contracts lane. Such an arrangement would substantially increase productivity and the benefits to individual employees who choose to move lanes would be incalculable. The much publicised labour shortage for both skilled and unskilled workers is real and competition for workers is rapidly increasing.
It is time for our political leaders to recognize these changes in society and create, enshrine and protect the extra lanes on the Workforce SuperHighway. We need the Federal Contracts of Employment Act and the Independent Contractors Act, so that people can do their own thing and escape the clutches of the Workplace Relations Act.
How we work, and with whom we associate, are fundamental rights. It is unthinkable that in Australia today government would attempt to tell us whether to have children or not. Nor would they dare attempt to limit our choices of holiday destinations, or in which suburb you may choose to buy a house. Why then should government be allowed to circumscribe our most basic choice, namely how much time we devote to work, and the price we seek in exchange for this time?
Sometimes new statutes lead the way in defining a new state of things and establishing new ground rules. More often though, as is the case of these proposed statutes, they simply reflect changes which are already a fact of economic and community life.
For the health and vigour of our economy, for our future prosperity, it is essential that we unshackle our workforce. The world of work as we knew it is gone. Contracting and streamlined employment contracts are with us. But let us not forget that they are here not because of the law, but because the choices and actions of millions of Australians have said this is what they want and this is how they want it. New laws are important however because they enshrine in legislation rights and protections for those who choose to work differently.
Just as the benefits from phasing out tariffs proved to be far, far greater than anyone had predicted during the 1960s and 1970s, it is impossible to predict just how great the benefits will be from giving people freedom to choose their own working arrangements. Mature age workers, the 'x' and 'y' generations who are in demand globally, might not want or need any or all of the so-called '20 Allowable Matters' contained in Awards. So why make them pay for them. And make no mistake it is the employee not the employer who pays for all the provisions contained in the Award system.
All people want is freedom of choice.
Some will opt for the slower lanes for a variety of legitimate reasons. It comes down to respecting their choice. People do things for their reasons and it is not for outsiders to override those choices.
We cannot continue to place obstacles in the path of those who choose to work differently. The nature of economic life and the labour market have changed---and so have the opportunities which the global economy affords. Our labour force must be able to move quickly from declining industries to emerging industries.
Australia has the opportunity to become one of the world's most prosperous nations---spectacularly prosperous in fact. The benefits of that prosperity would be too numerous to list.
Welcome, to the Workforce SuperHighway.
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