Rigidity of the labour market

January 12, 2015
Rigidity of the labour market

FCB’s Managing Partner and Solicitor Director, Campbell Fisher, contextualises the articles that follow by setting the legislative & economic scene.

The need for enterprise flexibility within workplaces continues to be burdened by Australia’s current legislative framework. Instability in the Australian and global economy is still challenging the competitiveness of Australian businesses to adjust quickly to market forces. In order for businesses to weather this “new normal” economic uncertainty, they must be both more adaptable and more resilient to the changes occurring around them.

Businesses face many challenges when attempting to implement flexible workplace practices to ensure they remain competitive, including:

  • The rigidity of the current industrial relations statutory framework;
  • Increasingly diverse Australian workforce demographics;
  • Unpredictable and ineffective Government interventions; and
  • Restrictive union campaigns.

Labour market regulation and the need for change

The Productivity Commission Review due to take place later this year will provide an invaluable insight into the ability of the current workplace relations framework to adapt to changes in the global economy. Given the timing of the review, we are not expecting major reforms to occur within 2015, however anticipate that this review will influence policy debate coming into the election year.

The current statutory framework faced by employers does not support the growth of the dynamic and flexible labour market that Australian businesses require to remain competitive in a global environment. Whilst changes to the current statutory framework are crucial, the see-sawing of industrial regulation over the past decade has created unnecessary uncertainty and compliance costs to businesses needing greater enterprise flexibility.

The Abbott Government, burdened by the historical weight of WorkChoices and a lack of control in the Senate, has been ineffective in achieving necessary statutory reform. Regardless of the reason, thus far the Abbott Government has proved unwilling to make any fundamental changes to the industrial relations framework necessary for supporting a competitive labour market.

Given that statutory change is not imminent, now is a perfect time to assess business strategy and prepare for future change. FCB has assisted numerous businesses in undertaking a review of workplace business strategies to ensure they are prepared for the challenge of an increasingly volatile economy.

It is crucial that the Government is able to create a stable and flexible industrial landscape in order to overcome the reform fatigue created by the industrial relations pendulum that swung from 1996 to 2012. The creation of a simplified set of labour laws that provide flexibility underpinned by acceptable social safety nets is fundamental to ongoing economic growth.

Facilitating flexibility

A strong business case exists for encouraging flexible work practices. Benefits include long term productivity gains, labour cost savings, increased market competitiveness, a reduction in absenteeism, attracting a wider range of candidates, greater retention and improved staff morale.

Demographic pressure

The Australian labour market will see significant changes in demographics as the population ages. The workforce of 2035 will see 70 year old workers awaiting access to the age pension working alongside 20 year old colleagues born in the coming weeks of 2015. The vast differences in the 4 to 5 generations that will work concurrently in our workplaces will present unique challenges for employers. The needs of a 60+ year old employee will be considerably different to those of an 18 year old, and companies need to be planning how to manage this diversity now.

Technology & mobility of labour

Rapid technological advances have provided an enormous transformation to the way in which employees can work and the way Australian businesses deliver service and engage with their customers. Mobile and cloud technologies have untethered employees from the desk and effectively allow us to work anywhere at any time: in addition, the changing nature of intermediaries provides significant opportunities for businesses to leverage people contribution to their business differently in the future. The problem faced by HR practitioners is how these technologies are harnessed and utilised. How does a business effectively monitor employees working remotely? What additional challenges are faced to ensure productive contribution? What are the workplace health and safety obligations of the employer? Is technology and remote work an avenue for significant reduction in employment on cost if managed properly?

The final word

Business leaders will continue to face immense pressure to ensure they are strategically prepared to have their business nimble enough to adjust to volatile market conditions. In light of the upcoming Productivity Commission Review, a window of opportunity has presented itself for Australian businesses to influence policy debate around labour market flexibility. Labour market flexibility is fundamental to Australian businesses remaining competitive in a dynamic, global market.