In good times and in bad?

When I first arrived in Australia four years ago from a dozen years in New Zealand one of the things that soon struck me was how different the labour market was here in Australia than it had been back across the Tasman. Even after years of a left wing Helen Clark Labour government in New Zealand, the labour market over there was noticeably more liberal and less regulated than it was here, under a John Howard government. In fact, and here you can express your amazement in whatever way you wish, even with Work Choices in place and operating, Australia still had a noticeably more regulated and less liberal labour market than the Kiwis. The Rudd/Gillard back-to-the-future changes have only accentuated the difference.

Let’s be clear. Australia also looks highly regulated or centralised compared to my native Canada. The US is on a different planet with comprehensively more flexible (read ‘neo-liberal’ if you’re the Prime Minister) rules.  And I’d bet that even the Brits, with all the obligations imposed on them by a sclerotic Europe, have a more flexible set of arrangements.

So how do you make a set of labour market rules look good when they impose one of the world’s highest minimum wages and generous union entitlements in terms of bargaining powers and rights of entry? Of course in part you do it by dealing in moral abstractions such as ‘fairness’, with advertising campaigns focused on some unlucky person who’s being asked to work longer hours or on the odd weekend. You avoid talking about the many untalented, uneducated people out there who can only get jobs when the costs of employing them aren’t made extra high.

But that kind of a campaign can only work in the context of a booming economy with jobs galore. In really good times even most people without many skills or without much of a work ethic can find jobs.  The spotlight isn’t on keeping a job. It’s on getting the most desirable terms you can.  Throw in a lack of confidence about your own personal bargaining power and you can make any move to more flexible, less control-and-command arrangements look unfair or undesirable.

But in bad times, when the focus is on having a job, rules that give more powers to unions and that impose higher costs on employers have one undeniable effect. They make it harder for people at the bottom of the heap in terms of education, experience and talent to get jobs.  And to hold jobs. And to get new jobs when they lose the old one.

Unions exist to look out for their members. They do not exist to be altruistic agents for the greater good. That’s not their job. Their job is to do the best they can for their members.

In the US, in normal times, the average gap between being made redundant and getting a new job is four weeks. In the UK it’s six months. That’s over six times longer. The UK’s complex employment laws make employers far warier of taking on new staff.  So do rules that make it more costly to get rid of people who aren’t working out.

Australia is not immune to this trade-off whereby more rigid and union-friendly terms for those with a job come at the expense of those without a job and those soon to lose their jobs.

Our Prime Minister might write sneeringly of ‘neo-liberalism’. But once that term is unpacked and defined it seems to amount to little more than a term of abuse for those Mr. Rudd fears may not have voted for him at the last election. France has highly regulated labour laws. And it also has astoundingly high unemployment rates. Nor is it, or the other economies of the European Union — those darling social democracies that warm the heart of Mr. Rudd – doing any better at weathering this economic crisis than the US.

Indeed there’s every chance they’ll weather it worse.  Anyone want to put money on the UK coming out of this economic crisis better than the US? I didn’t think so. And yet Gordon Brown, the British Prime Minister and architect of the current economic woes up there, talks just the same sort of ‘third way’, pro-social democracy, scornful of something some few initiates know as ‘neo-liberalism’ nonsense as our Prime Minister.

The truth seems to me to be that no honest person has any solid idea how bad this economic crisis will be or when it will end. It could be much less severe than we fear, or much worse than we hope. In part that’s because the severity of the recession will be influenced by people’s outlooks and psychology. It will end when people and households and businesses and banks that hold cash regain their confidence and feel that we’ve now reached the nadir so it’s a good time to start spending and lending again. And no one can know when that will be. No complex econometric model can predict when the psychology of the situation will turn for the better.

But it’s precisely while we’re in the doldrums economically that we want flexibility and (dare one say it?) neo-liberal laws and rules to govern our labour relations. If we don’t get it then there will at least be the cold comfort of watching Mr. Rudd and Ms. Gillard hoist with their own petard.

James Allan is Garrick Professor of Law at the University of Queensland