The decision by General Motors HQ in Detroit to quit car production in Australia in 2017 has led to criticism of its Australian subsidiary, Holden, for entering agreements with unions which established uncompetitive cost structures. And the same might be said about Toyota, whose attempt to change its agreement with unions on the ground that it had created “outdated and uncompetitive terms and conditions” has been rejected by the Federal Court. So why did it agree to them in the first place?
My view is that the basic reason is that these and other companies have been subjected by the Labor government to greatly increased regulation in workplace relations under the Fair Work legislation and its heavily pro-union administration. If these arrangements are not changed quickly, there will be continuing increases in closures and unemployment. The Abbott government spoke during the election about a “budget emergency”. But while undesirable a delayed response there can occur without causing closures and unemployment. Failure to deal with the emergency in workplace regulatory arrangements, however, risks a marked slow-down in economic growth and increasing unemployment (including those who drop out of the workforce altogether).
Under existing regulatory arrangements businesses, particularly large businesses, are subjected to claims by unions which if not met are either likely to be approved by FW (perhaps in a modified form) or, if not met, are likely to lead to disruption of business activity by unions which the FW is disinclined to stop (or to impose severe penalties on unions). Such disruptions are also sometimes threatened unless “donations” are made to unions, which then establish “slush funds” that are used to benefit union officials – and others. The Abbott government intends to try to effect some changes but these are much less than what is needed, both economically and politically.
This is not the place to elaborate on my reasoning: I have done that in a submission to the farcical review of the Fair Work arrangements and (with Theresa Moltoni) in a Policy Paper just published by the HR Nicholls Society. This article by Terry McCrann adds weight to my reasoning that quick reform is needed in FW. In this regard note this article from the Australian that refers to the relative steadiness in manufacturing employment prior to 2009 but a decline of 100,000 since then ie as the Fair Work arrangements came into full play. The implication is that, prior to FW, inefficient manufacturers were able to maintain activity but since then they have become increasingly exposed.
Des Moore is a member of the HR Nicholls Society Board of Management.