Enter your email to read this article
Read news on any topic, in one place, from publishers like The Economist, FT, Bloomberg and more.

The world is changing, but don’t tell big business or its media cheerleaders

It’s comforting to see first the Reserve Bank (RBA), and now economic journalists, grappling with a world made dramatically more volatile by a reaction against globalisation, by climate change and shifting demographics. After we raised exactly this issue a few months back, earlier this week Philip Lowe decided it was worth a speech, and in response The Australian Financial Review, Nine newspapers, and The Australian are all now opining about a more complex policy environment.

Unsurprisingly, at News Corp and the Fin — where no worker has yet been born who should not be impoverished — Lowe’s belated discovery that the world is changing has been taken as code for him criticising the government’s industrial relations changes.

That’s possibly true, since Lowe and the RBA have now retreated into the clichés of neoliberal orthodoxy after a daring period of habitation in the real world. Lowe’s call for “flexibility” in labour markets echoes the long-term demands of business for more “flexibility” in industrial relations — where, of course, the flexibility is only ever one way, toward lower wages, poorer conditions and more wage theft.

But it illustrates the paucity of thinking — perhaps on Lowe’s part, and definitely in the minds of economic journalists and editors — that a discussion of changing demographics which will drive an accelerating decline in the availability of workers should be linked to attacks on the government’s plans to strengthen collective bargaining power.

Labor’s goal with the reforms is to re-tilt the industrial relations playing field back in favour of workers — a little — by allowing sectoral bargaining in some circumstances. It aims to reduce the artificial constraints in an industrial relations system that has been designed to prevent workers from exercising their market power to obtain higher wages by coordinating bargaining activity across multiple workplaces rather than one.

That is, the reforms will add some much-needed flexibility to labour markets, by removing an artificial constraint on workers using their market power.

It’s just not the kind of “flexibility” business likes — businesses like free markets when they work in their favour, but demand government intervention when they don’t.

And notice businesses aren’t too much in favour of flexible markets when it comes to goods and services, either — which was the other kind of market Lowe called for “flexibility” in. Businesses do everything possible to get rid of flexibility in the markets in which they operate by absorbing and eliminating competition wherever they can, because nothing appeals to an investor like nice wide “moats” as Warren Buffett calls them, that protect a company from competitive pressure. Australia has an overly-concentrated economy and it’s been getting worse in recent decades, increasing the power of companies when it comes to pricing.

You won’t see too much enthusiasm for that kind of flexibility.

In an age of growing worker scarcity — and in the wake of a major pandemic — the current industrial relations system, and the kind of “reforms” business want, are the equivalent of the Statute of Labourers from 1351. That was the law introduced by Edward III in England after the Black Death wiped out up to half the English population and made labour much scarcer for aristocratic landowners. The law pushed wages back to pre-plague levels and made it illegal for both workers and employers to contract for higher pay, preventing workers from using the sudden demographic shift in their favour to bargain for higher wages.

This didn’t go down well with English workers. The massive peasant revolt of 1381 was one consequence of such laws. Instead of the flexibility to bargain with employers, suddenly it was about flexibility to murder them.

The problem for business is that they are facing a demographic change of a similar scale but which will occur over a much longer period, and we’re just at the start. By the 2040s and 2050s workers globally are going to be far scarcer than now. Countries will have to aggressively bid for skilled migrants and, increasingly, unskilled migrants as well. Workers will have to be remunerated very well to be retained. For the rest of this century, workers are going to have increased market power. And that thought terrifies business. The days of 10% and even 5% unemployment are going to seem like the good old days when a pool of spare labour would keep prices in check.

For now, though, business and commentators are taking the Edward III approach of trying to regulate away increasing worker power. And maybe the RBA is too.

Top stories on inkl right now
Related Stories
Philip Lowe’s world of growing volatility — and why you, not those responsible, will pay the price
The Reserve Bank has recognised that the world is becoming more volatile and inflationary — but not how it will respond.
From analysis to the latest developments in health, read the most diverse news in one place.
Want wages to rise? Then support workers’ right to strike
Proposed industrial legislation is an attempt to reverse three decades of onerous restraints on industrial action, and flip the decline in real wages.
Michael Pascoe: Interest rates won’t work like they used to
The RBA board should be thinking very, very seriously about before lifting interest rates again, Michael Pascoe writes.
Labour sounds like the Tories on immigration – but its policy goes back to its trade union roots
Keir Starmer has given a glimpse of what immigration policy could look like under a Labour government. Speaking to the Confederation for British Industry, the party leader’s key message was about reducing the UK’s dependency on migrant labour.
RBA governor Philip Lowe warns Australians to brace for higher inflation, lower growth
The Reserve Bank governor warns the global economic conditions that helped central banks keep inflation low and stable are reversing, making for more economically volatile times, and potentially higher interest rates ahead.
One place to find news on any topic, from hundreds of sites.
Christmas may be safe, but three-year port dispute shows the IR system is full of holes
Australia’s industrial relations umpire has delayed industrial action that would have crippled Australia’s ports in the lead-up to Christmas.