What will make us more productive?

The government has at last thrown business a bone with the promise of a little relief in the area of industrial relations. Workplace Relations Minister Bill Shorten on Monday announced 17 small changes to the Fair Work regime. The biggest win for business, small business in particular, is that the changes will make it harder for employees to bring vexatious claims against employers by ensuring that costs can be awarded against employees. Currently employees can bring cases against employers for no more costs than paying a lawyer and anecdotally employers have been complaining of being blackmailed into paying “go away” money to avoid the cost and distraction of a case over a claim they believe to have little foundation.

For a business community deeply disillusioned with the current government, it’s a step in the right direction. However, for businesses at the top end of town, it is probably too little to late, particularly as Shorten has opted to leave more controversial topics such as how industrial relations agreements for big projects are decided. It’s easy for big business to accuse Shorten of tinkering with the regime when you realise that one of the changes announced this week was that the name of the tribunal, Fair Work Australia, will become the Fair Work Commission to more accurately reflect what it does. One can only hope that neither too much money nor time will go into this rebranding.

Labor’s record on IR has been disappointing and this tinkering will not change that. Shorten also announced $12 million funding over four years to set up a Centre for Workplace Leadership that will look at how to improve productivity by establishing better management practices.

Business has long been lobbying for policies to improve productivity. A recent report by the Economist Intelligence Unit ranked Australia as second last out of 51 countries on productivity growth. Multi-factor productivity – the output derived from a given amount of labour and capital inputs – has been falling since the turn of the century. The impact of falling productivity has been hidden so far by the boost to incomes by historically high terms of trade. However, now the mining boom appears to have peaked and the terms of trade are falling, productivity must be cranked up.

Boosting productivity comes down to what government can do on policy and what businesses can do on the front line. With these most recent measures, the government is trying to give succour to both. What government should do is create the right environment to encourage productivity, which is one with less rather than more regulation. Having a better industrial relations regime must be part of this, although it is worthwhile noting that labour productivity (the output per a given input of labour) suffered more under the previous government’s Work Choices regime than it has under Fair Work.

For individual businesses, their role is to invest in technology, business process and management and really this is what individual businesses should focus on to turn the dial on productivity. Better management across the country’s businesses is a laudable goal and if the government can help achieve this with this new centre, the politicians may prove to have been more productive than expected.

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