10/06/2010 - 00:00

Fear factor a boost for union membership

10/06/2010 - 00:00

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The labour movement doesn’t like growth, people get too comfortable.

THE union movement has been in slow decline for many years.

So the 4.7 per cent uptick in membership for 2009 was significant, especially as it came on the back of a smaller rise of 3.3 per cent the previous year.

While, as the accompanying graph shows, the recent increases do little to overcome two decades of constant falls at a time of rising workforce numbers, they do point to the position of the union movement in the economy.

To put that in context, the proportion of employees who were trade union members in their main job increased to 20 per cent from 19 per cent over the year to August 2009, according to the Australian Bureau of Statistics. This represents 1.8 million trade union members in their main job, a rise of 82,200 from the previous year.

Just as there are defensive shares on the stock market – big grocery retailers are generally seen as safe places to park your money in bad times because everyone has to buy food – so too are there organisations that fare better in a downturn.

Unions are definitely among them and last year’s rise, especially, offers some proof.

It makes some sense. When people fear for their jobs and livelihoods, an obvious choice is to pay a fee to a union who might make it all the harder for them to be sacked. In my experience, unions are all about the lowest common denominator, so they attract those most at risk from losing their jobs.

By lowest common denominator I mean people who realise or suspect that they offer the least value for money to their employer. For obvious reasons, employers find these people the most disposable.

It should also come as no surprise that the biggest area of union domination is the public sector. Despite the growth in that field under governments of all persuasions, there is constant fear of cuts due to the perennial issue of making budgets balance. Given the talent poaching by the private sector there might also be an argument that the public sector has more of the vulnerable lowest common denominators than anywhere else.

In 2008, even though the economy was generally good until September’s jitters and October’s market meltdown, union membership had risen on the back of the previous year’s union scare campaign against the Howard government’s WorkChoices legislation.

Again, fear was involved and the lowest common denominator was most scared by the prospect of being disposable under WorkChoices.

While I’m the first to admit that WorkChoices went too far too fast in many respects, the irony of this is that, despite many individual contracts extending well into 2008 and 2009, very few Australians were sacked in the downturn. That is because employers had recent experience of labour shortages and were unwilling to shrink their workforces in troubled times, which they did not expect to last too long.

Further muddying the waters of these statistics is the change of federal government in late 2007, which brought new powers to unions who had heavily backed the campaign of Kevin Rudd.

Nevertheless, employees were worried about their jobs in 2009 and, with unions growing new muscle in the workplace, they found plenty of people willing to stoke their fears.

So in my view the business case for a union growth is employee fear.

In that sense, a strong economy must be the enemy of unions. When people see labour shortages and that anyone with a pulse could get a job, as happened in Western Australia’s last boom, their fears recede.

With that in mind, it has been interesting to see recent union-related posturing on the resource super profits tax. The union movement has backed the tax, even though the industry has warned that it will reduce growth and cost jobs. As we heard last week, job losses have already occurred.

While it may surprise readers that the loss of future construction jobs doesn’t worry unions, it is worth going back to the idea that a rising job market doesn’t suit them. Union bosses don’t see jobs growth as an opportunity, it is threat.

Just look at the history of big construction sites, such as city towers, regional infrastructure or north-west projects as examples. Unions appear to prefer a limited number of construction sites, which they can control, in part by prompting delays, rather than free-for-all growth. By limiting the work available – in the main through cost – they play to the fears of their workers who wonder where the next job will come from.

It is a pity that unions don’t have the same profit incentive as companies whereby doing more jobs more quickly through efficiency and productivity gains actually ensures the positive employment cycle lasts longer.

Imagine if the strike-ridden Mandurah rail line could have been built for 30 per cent less cost in half the time. Wouldn’t the government have the incentive to build more?

But this sort of thing won’t happen.

An interesting development has been the outspoken backing of the resources rent tax by a key representative of the union-dominated industry super funds, which were actually asked by the federal government to fund a pro-tax advertising campaign.

This is a no-brainer for the industry funds, which get to win in more ways than one.

Naturally, the industry funds – and don’t underestimate how strong the union movement links are in this sector – want to get their hands on the extra superannuation revenue promised by Wayne Swan as part of the budget. This is especially attractive now that they have manoeuvred themselves as a near monopoly over default funds in the new awards system, further payback for the union movement’s funding of Mr Rudd’s rise to power. While the government claims it needs the resources tax to pay for the rise in the superannuation guarantee to 12 per cent from 9 per cent, the fact is the cost of this will be born by employers.

No matter how important it is to encourage people to save, asking employers to pay for it will result in them employing less people than otherwise would have been the case. Even Ken Henry and his boffin buddies would have to come to that conclusion from their economic modelling.

Therefore, the increase in the superannuation guarantee and the RSPT are both moves that will reduce employment growth – the perfect outcome for the union movement. No wonder they keep vocally backing Mr Rudd, he’s actually generating the fear they need to boost membership.

Who knows, with the current policy settings we might get a chance to see those two lines on the graph move closer together again

 

 

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