This article was originally posted at http://www.menzieshouse.com.au
“Your rights at work” words that in 2007 brought down the Howard government. The idea that an individual statutory contract could remove pay and condition guaranteed under industrial awards and enterprise bargaining agreements was enough to get voters to take a chance on Labor. The idea that access to service or minimum conditions are “rights” has become so ingrained in our society that almost no one has challenged the notion that such conditions are rights or seriously raised the question do such rights violate peoples’ more fundamental rights.
This issue can be understood by comparing positive rights with negative rights. From the 20th century on, the definition of what could be considered a right has changed from negative rights which protect individual freedom, such as free speech, the right to a fair trial or the right to enter a contract to positive rights, such as the right to an education or healthcare. The problem with positive rights is that unlike negative rights they aren’t a person’s by birth. Positive rights usually require some restriction on another person’s freedom. For example, for me to have the right to education, that by definition forces someone else to pay for it. By comparison the right free speech is mine and all that right does is protect me from someone taking that right away from me.
If one accepts individual freedom as basis for all rights, then workers’ rights cannot be consider rights in the traditional sense. In fact, minimum wages and awards significantly restrict individual freedom. If I wanted to start a career working for a consulting firm but my current skill set doesn’t justify the minimum pay required by industrial regulation then my freedom and the freedom of the employer would have been significantly restricted. Most likely the outcome would be that I would remain unemployed.
A more relevant example to many disadvantaged jobseekers is the Food, Beverage and Tobacco Manufacturing Award 2010 which covers most jobs in the hospitality sector. Under this award it is illegal to pay someone less than $17.88 an hour for an adult employed in a casual capacity. While this may seem to be a small amount to many of us, for some people entering the labour market with insufficient education or life skills this can be a major barrier to employment. For example, someone who has never worked before may need constant supervision, in reality the time spent supervising this person initially may exceed the value of their labour. Preventing such a jobseeker from working at a price an employer is willing to employ them for is violation of their basic right to sell their labour and to enter into contracts.
Much of the industrial relations debate has been framed in the context of international competitiveness and profitability. These arguments have fundamentally missed the point. Employers have no more right to cheap labour then employees have rights to high wages. Ultimately, both parties should be free to pursue their self-interest. The argument against restrictive industrial relations regulations should be argued on the basis of individual freedom.
Last Wednesday I attended a joint Friedman/HR Nicol Society dinner arranged by the infamous John Humphreys. The guest speakers were Professor Judith Sloan and the former Howard minister Peter Reith. Both made the case for deregulation of the labour market and condemned the current Fair Work system as imposing excessive costs on employers and stifling flexibility. This is clearly a controversial issues and Labor is quick to remind people of workchoices.
Flexibility is one of those hot words when it comes to industrial relations. For many it’s code for employers being flexible with pay and conditions, while workers work harder in less certain jobs. For those who are employed in industries where they have little bargaining power and are working in jobs where little skills is required this is a likely consequence of a more flexible industrial relations system. Trade unions use the fears of such people to defend the arbitration system that gives them significant power.
What is often not mentioned in arguments about industrial relations is the cost of a highly regulated system to those people who are excluded from employment. Setting minimum standards for wage rates sets wages above the market rate, meaning that there are people willing to supply their labour for less than the award rate. Industrial laws actually make it illegal for people to work for less than the award rate. The result of this restriction on individual liberty means for those people who due to a lack of experience, training or ability are not productive enough to justify the award rate are excluded from the labour market.
The Government itself has all about acknowledged this by providing wage subsidies for its employment services to use. The ultimate effect of a wage subsidy is to reduce the cost the employer incurs employing people who lack experience or education. This method of creating flexibility has significant transaction costs to the employer and financial costs to the government. Wage subsidies have to be agreed to and both employer and jobseeker are at the mercy of government policy to determine if they are eligible for the subsidy. Ultimately the employer is getting taxpayer money for employing someone and the worker is getting a wage above market rates.
Another deficiency of the current system is that imposes a set of penalty rates on both employers and employees. Of course these benefits are popular with workers who earn extra money for working weekends, what often doesn’t get reported is the employment opportunities that never occur because employers choice not to open their doors. Rules that impose penalty rates and minimum hours eliminate opportunities for unskilled jobseekers to enter the labour market. While doing dishes for two hours on Sunday afternoon may seems like a “shitty” job to many of us, for others it is an opportunity to enter a new industry, gain some experience and a credible reference for their resume. This can be an important first step for some to enter the labour market. Unfortunately, “fairness” for workers at the bottom of the labour market comes at the expense of those excluded from the labour market. These are the true forgotten people in the industrial relations debate.
With industrial relations rapidly becoming the major political issue of the moment, readers of this blog might be interested in the upcoming HR Nicholls Society Annual Conference. I wish to stress that the HR Nicholls Society is not in any way affiliated with the Australian Libertarian Society, and I post this purely for the information of readers who have an interested in labour market freedom (although full disclosure, I am a member of the HRN Board of Management so have a somewhat vested interest in promoting it!)
As I’m sure you would be aware, the HR Nicholls Society was the driving force behind the freeing of the labour market in the 1980’s and 1990’s, and the most prominent critic of WorkChoices for being unconstitutional reregulation, not true deregulation. This conference – the Society’s 24th and entitled “Fair is Foul and Foul is Fair” – is a detailed examination of Julia Gillard’s proposed Fair Work legislation. It shall be held in Melbourne on the 27-28 March. Of particular interest to readers here might be Brian Johnson, Executive Director of the Alliance for Worker Freedom in Washington DC. Other speakers include Former Secretary of the Treasury John Stone; Dr. Alex Robson, one of Australia’s leading free market economists; Ken Phillips, President of the Independent Contractors Association and many more. Full programme details are available here.
I would strongly urge everyone interested in industrial relations to attend. The registration application form is available here. There are special accommodation options available if needed. Please do not hesitate to email me on timintheus followed by the usual gmail ending if you have any further questions.
Hope some of you would be able to make it!