End game

Friday, 13 June 2008 

Having sent the wife off to therapy for anger management, it looks like the Rudd-Gillard team is about to deal with the husband.

The Australian reports that the Federal Labor leadership is set to get its way and the Iemma government will overturn Della Bosca’s opposition to centralising IR to Canberra and abolish his department. NSW was the only state to oppose Gillard’s IR plan because it was the last Labor government to make its break with the unions, a process that is now finally well underway. It shows that in the final stages of the ALP’s break with the unions, it is the right faction that is the really big loser.

By centralising industrial relations to Canberra it will be bringing the nation’s unions under a regime helped set up by the left that happens to be the most anti-union of any in Labor’s history. This politically dextrous act was done through the neat trick of opposing Howard’s sham anti-union initiative, Workchoices. Watching Gillard on Lateline a few weeks ago was to be reminded how useful a political tool the anti-Workchoices campaign was, but how it is now starting to run its course.

The importance of Gillard’s role in the government is constantly under-rated as shown by the persistent rumours that she is egging to be allowed a go at Treasurer. Without second-guessing her personal ambitions, it would be surprising if she did, since her current portfolio is much more important. Gillard is the stake driven through the undead body of the Labor party to keep it pinned down. She does this by holding the highly conflicting portfolios of industrial relations along with productivity and education. Holding this combination of portfolios is something never been done before, for a very good reason. Linking productivity and education with IR would have been unthinkable for a Labor Minister in the past because they go to the heart of the argument against the union movement.

Linking wages to productivity seems fair enough except for one basic problem, it assumes that how hard an employee works is the only factor determining profitability. It is not, of course, we daily see profitability impacted by a plethora of other factors not least a natural part of the maturing of the economic cycle itself. When that happens, the inevitable question comes, who pays? When wages are linked to productivity, it inevitably means the employee. It was why unions had traditionally been opposed to it and why when they agreed to that link under Hawke-Keating, it spelt their doom as their members took the strain in the wage-packet.

Gillard’s portfolio not only makes that link explicit but takes it further through her portfolio of education. Once it is accepted that the problem is employee productivity then it becomes fairly easy to make it a personal responsibility of the employee to improve. This is the thrust behind Labor’s skills argument against the previous government. It may have provided the semblance of an economic critique against the coalition, but it also implicitly laid the blame on the individual employee as well. It makes it a question on the education level of the employee and willingness to be re-trained to adopt new skills rather than the more fundamental question of Australian business’s inclination and resources to take advantage of them (which is why we see the brain drain to countries like the US where they do).

Given changing business’s investment levels is beyond the remit of most individuals, the education argument undoubtedly has some appeal, especially in the ALP, but ultimately it is more a political tool than a fundamental economic one. Brian Toohey in the AFR has been running a noble campaign highlighting the underfunding of the government’s education ‘revolution’ especially in the area where surely productivity skills would be most likely developed, the tertiary level.

Emphasising education may deal with political problems but it does not really create a new argument for going forward. The Lateline interview showed this and was interesting because it was one of Gillard’s few uncertain performances. It was helped by Tony Jones being on good form (not always the case) and persisting with three good questions. One was on Brian Toohey’s claim of education under-funding and another on the government’s claim to fight inflation.

However, the central one, which she could not answer, was whether wages should be expected to keep pace with inflation. She noted that the unions have agreed to have them linked to productivity but, of course, that didn’t answer the question. She tried rolling out the at-least-we-don’t-have-Workchoices line but that barely works now much beyond the most loyal Labor hacks.

Gillard’s problem with this question goes to the central difficulty Labor has now it has (almost) cut off the last remnant of its social base. Unlike the last Labor government, there are no relations with a union movement to make the argument with its members why wages should lag inflation. Even a Howard Minister would have had less of a problem with that question because they could have rattled on about irresponsible unions causing inflation, as though they still existed and there was a business community wanting them dealt with.

This government has an anti-union agenda more as a way of accommodating to the erosion of the unions themselves than because anybody really won the argument against employees improving living standards. Instead Gillard has to show sensitivity, which makes it hard to then argue employees should bear the pain of inflation. Gillard’s role is critical to this government but she has immersed herself deeply into a government without a social base on which to build a program, summed up at the Sydney Institute last night by Craig Emerson’s ‘market democrat’ thingy (aspirational nationalism anyone?). Maybe the time will come when she might feel like a holiday in Treasury after all.

Posted by The Piping Shrike on Friday, 13 June 2008.

Filed under State and federal politics

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