• Although promoting productivity is an object of the Fair Work Act, most enterprise negotiations have not focused on productivity gain
  • Australia’s future prosperity depends on refocusing collective bargaining on productivity

Productivity bargaining: enterprise bargaining with productivity gain. Yesterday's story. Indeed, it was only in the 1990's that Australia saw the shift towards enterprise-based bargaining away from centrally arbitrated awards.

But yesterday's story needs to be today's story. By its own admission, the Rudd Government was elected with a plan to increase Australia's productivity. Such desire finds its way into the Government's regulatory analysis to the Fair Work Bill which stated:

"Enterprise agreements can ensure that increases in pay and entitlements are linked to productivity increases of the enterprises. This is due to negotiations at the level of the enterprise better reflecting the financial situation of enterprise. Furthermore, collective bargaining will shift the focus of negotiations towards boosting productivity."

The Deputy Prime Minister noted that:

"The Bill aims to achieve productivity and fairness through enterprise-level collective bargaining underpinned by the guaranteed safety net, simple good faith bargaining obligations, and clear rules governing industrial action. The Fair Work Act itself includes in its objects the desire to "promote productivity and economic growth".

Then we have union leadership pronouncements about productivity. In September last year at a Workforce conference, the National Secretary of the Australian Manufacturing Workers Union, Dave Oliver, observed that 'the bargaining agenda should be about real productivity' and that 'unions are leading the debate on this issue'. He offers this advice for employers:

"The companies that are genuinely engaged in the productivity agenda, and in good faith bargaining as prescribed by Julia Gillard's laws, will clearly reap the rewards".

Mr Oliver's union is a key player in Australian manufacturing. His quest for bargaining for productivity are clearly laudable. So there must be a disconnect between such thinking and what happens on the ground. For there would be few employers in the manufacturing industry (if elsewhere) that can boast having been able to embark upon a negotiation where the productivity and efficiency interests of the enterprise are seriously considered in any enterprise bargaining negotiation. Most employers complain that such concerns are given short thrift by union negotiators.

The good faith bargaining laws go someway to ensuring that an employer's position here is considered - just as much as it requires an employer to properly consider union demands. But beyond the obligation to consider and respond to respective claims there is nothing to compel a focus on improving the well-being of the enterprise. To be fair, when it comes to the regulation of collective bargaining in Australia, there has never been a legislative solution to the need to focus on productivity.

So apart from a brief foray in the early 1990s most enterprise negotiations have focussed little on productivity gain. Most set out with unions making claims on employers such as a CPI wage increase and additional allowances. Some go to direct costs such as shift penalties being paid on all leave. Some go to indirect costs, such as limitations on the capacity to embark upon change. Some demands are directed towards increasing the economic benefits of the employees. Others are concerned with the employer having less control over its right to manage.

The employer typically responds with reasons why it cannot agree to some or all these demands but often falls short of responding with its own claims (at least with any real fervour). Indeed whether out of a lack of skill, or because of a focus on short term needs (and the desire to avoid a bargaining dispute and industrial action), the employer is often complicit in outcomes which are ultimately not sustainable in the medium to long term. The per unit cost production is increased. Unless something changes, the value of the business will be eroded. The labour cost is, of course, often the biggest line item in a company's operating expenses.

In part, anecdotally, this has seen employers respond over time with action to reverse what becomes an unsustainable medium-long term trend. Redundancy programs, increased casualisation, outsourcing to a third party labour supply, and other means of restructuring become an invariable consequence of the need to stem the unsustainable trend.

The need for a focus on genuine productivity bargaining underscored by a genuine desire by all parties has never been greater.

The 30% pay increase over 3 years (to offshore oil and gas employees of Total Marine Services) without productivity gain represents a recent stark example of current failings. So too does the Victorian desalination plant deal where, it seems, the desire for "industrial peace" saw an outcome of approximately 25% above industry standards. When commenting on recent negotiations with offshore employers, the Maritime Union National Secretary, Paddy Crumlin offers this view:

"For the record ... none of the offshore employers proposed any specific productivity improvements at the bargaining of or during the current bargaining round, so the union has therefore not rejected new proposals for productivity improvement ...".

According to AMMA who negotiated on behalf of these employers, productivity improvements were sought.  The MUA refused to address them.

True it is that many employers pursue a productivity agenda independent of any bargaining outcome.  Indeed there are sound reasons for this - and bargaining ought not interfere with this as many an employer might fear.The best thinking here, and perhaps internationally, needs to be harnessed in order to stimulate a necessary fundamental shift in the approach to collective bargaining in this country. Our nations future prosperity demands it.

This article first appeared in Human Capital Magazine.