The Productivity Commission has produced an extensive two volume draft report into major public infrastructure.  Not surprisingly, industrial relations features in the draft report. Relevant here is the impending Productivity Commission review of workplace regulation which we have written about previously.  The two volumes comprise almost 600 pages. Industrial relations is dealt with specifically in some 50 pages, but to varying degrees influences much of the analytical backdrop to the report.  This is not surprising given the report’s focus on the scope for reducing costs and improving productivity when it comes to the construction of major public infrastructure.

The Productivity Commission observes industrial relations in the Australian construction sector as having “a history of profound concern” summarising the various reviews undertaken since 1982.

Two key recommendations are made by the Productivity Commission for improving the IR environment.  Of concern to many will be the observation that “On face value the fragility of the link between the industrial environment in the construction industry and productivity and costs might suggest little policy action is required”.  Nonetheless, the Productivity Commission forms the view that a “more disaggregated assessment suggests that significant problems still occur”.

What can we learn from the Productivity Commission’s most recent foray into industrial relations as it relates to its impending review into workplace laws?

First and perhaps not surprisingly, the Commission adopts a rigorous framework grounded in numbers.  For employers wishing to make useful and credible submissions to the Commission, they would be well advised to go beyond the usual resort to anecdotal “evidence” and other storytelling to convey a picture of whatever might be the problem and its depth.

Take, for instance, enterprise bargaining.  It won’t be enough for employers to simply say “we had no choice but to agree” (to a particular enterprise agreement) without providing meaningful detail about the economic circumstances where, ultimately, the employer has taken the view that the short term cost of making the deal was in its interests.

Indeed, the enterprise bargaining regulatory framework will undoubtedly be a key focus of the Productivity Commission’s attention as it seeks to explore where negotiating leverage sits and whether it has been appropriately calibrated by the Fair Work Act 2009.

Secondly, and akin to the first point, the Productivity Commission’s conclusions about the impact of industrial relations on construction bear out the challenges which some data poses to making a case.  Here, whilst “poor IR environments on major project sites will have adverse effects on their productivity and costs, this was not necessarily reflected in aggregate economic data”. One is reminded here of the conclusion reached by the 2012 evaluation of the Fair Work legislation which found “no convincing evidence that the FW Act impedes productivity growth”.

The point is that building the case for reform remains a challenge despite the best anecdotal evidence. In outsourcing the analytical basis for Fair Work Act reform to the Productivity Commission, the Government is effectively looking to those interested to put pen to the paper in the right way.  Whilst those persons and organisations having accountability in workplace relations will have a role, there will also be a role for those who crunch the numbers and those who make the decisions which in the short term seems to work, but in the long term seem to be unsustainable.

Finally the capacity of employers to mobilise in a united way on the key areas of possible reform will be crucial. Leadership amongst the employer community is vital.

Both reports are available below:

Public Infrastructure: Productivity Commission Draft Report March 2014

Towards More Productive and Equitable Workplaces – an evaluation of the Fair Work legislation