If you were to choose one buzzword that, despite its vagueness, has dominated industrial relations debate over three decades, it would be “flexibility”. It has emerged again in rhetoric surrounding Toyota’s closure.
Flexibility might be “good” or “bad”: it depends on your interest.
For example, flexibility for workers occurs when companies change work practices or working time to better suit worker needs. Allowing workers to take time off to attend school concerts, enabling job sharing, permanent part-time work, ‘48/52’ arrangements – these are all examples of employers being flexible for workers.
But when employers or politicians complain about a lack of flexibility, they usually mean flexibility by workers, of which there are two types:
- Functional flexibility – the employer’s ability to move workers between activities and tasks, in line with changing workloads or production methods. It often requires multi-skilling of workers. It may lead to employees doing more work because they do more varied work.
- Numerical flexibility – the employer’s ability to adjust labour inputs to changes in output. That means cutting or increasing the number of workers or their hours worked, classifying them as casuals or contractors, or varying the wages they are paid.
Numerical flexibility is sometimes linked to loss of quality in output, and often to loss of job quality– because workers typically don’t like uncertainty in wages, hours or job security.
This is the sort of flexibility that critics of the Toyota unions claimed was needed, and frustrated by the “no extra claims” provision in the enterprise agreement. The whole point of two decades of enterprise bargaining has been to give employers and workers the flexibility to negotiate agreements suiting their particular circumstances.
A key element of that, and indeed of wage negotiations since the early 1980s, has been “no extra claims”. This was an important source of stability for employers, who advocated it and did not want unions reopening wage claims after agreements were made. Even the Productivity Commission’s enterprise agreement had a “no further claims” clause.
Now suddenly “no extra claims” is a rigidity, because it inhibits an employer demanding more while an agreement is in place. And, according to some politicians, it is the fault of the Fair Work Act and of unions, even though this was denied by Toyota and indeed the same provisions existed under Coalition legislation.
A virtuous stability has become an evil inflexibility because interests have changed.
Why agreements are so hard to change
Unions actively oppose cuts in pay and conditions, because that’s what workers want them to do.
There is nothing unusual about resistance to having things taken away from you: losses are felt far more strongly than gains. It’s an innate part of human and indeed animal nature.
So is “flexibility” in labour markets (which, for those who write about it, means flexibility by workers) necessarily a good thing? In the lead up to WorkChoices, and since its repeal, there were claims our industrial relations system lacked flexibility.
Yet by objective measures, the level of flexibility by employees in Australia is amongst the highest.
The Organisation for Economic Co-operation and Development (OECD) analysed a number of aspects of “inflexibility”, referring to them as “employment protection legislation”.
It found (even before WorkChoices) that Australia had one of the lowest levels of job protection in the OECD (see chart). Several countries had high job protection and low unemployment, including Norway and the Netherlands.
Overall, compared to other OECD countries, Australia also has high rates of part-time employment, temporary employment and people working very long hours.
Most countries do not allow long-serving employees to be denied sick or recreation leave. We call it casual employment, and it affects a quarter of employees.
Why flexibility could be unhelpful
The OECD was one of the strongest advocates of labour market “flexibility”. Yet during the global financial crisis, something happened to force a rethink of its position.
Across the North Atlantic, gross domestic product (GDP) fell as the crisis deepened. Theory said the US labour market, with its far greater flexibility than that in Europe (for example, workers could be fired “at will” in the US), should adapt better than its European counterpart.
Reality was the reverse. The US experienced a smaller fall in GDP between 2008 and 2009 than did Europe yet it suffered a greater drop in employment.
The OECD saw through the flexibility fairytale. So in 2009 it found no evidence that “reforms” to promote flexibility had made labour markets “less sensitive to severe economic downturns than was the case in the past”. It recommended improvements in income security it had previously dismissed as inhibiting flexibility.
We can no longer say that flexibility by employees is necessarily a good thing.
But we can say that the rhetoric of flexibility is often a device for transferring risk onto workers – who can least afford it.
David Peetz is Professor of Employment Relations at Griffith University. He receives funding from the Australian Research Council and has undertaken research over many years with occasional financial support from governments from both sides of politics, employers and unions.