The Productivity Commission’s draft report on workplace relations is a weird document that seems at odds with itself. It suggests things are going well and then tries to find reasons to justify making changes.

The report is not really a savage attack on workers’ rights, but it certainly has the potential to be the starting point for such an attack. Perhaps its best short review was by Scott Steel, an economist for Queensland’s public sector union, who said it showed the “naivety of the technocrat”.

Workers' Sunday penalty rates should be cut, says Productivity Commission Read more

Rather humorously, the Productivity Commission acknowledges that it’s incongruous for a commission focused on productivity to examine workplace relations.

It notes that “there is little robust evidence that the different variants of WR systems over the last 20 years have had detectable effects on measured economy-wide productivity”.

This certainly is the case. You only need to look at the average productivity growth under WorkChoices, the Fair Work Act and the pre-WorkChoices systems:

Annual productivity growth under WorkChoices was a mere 0.76%, well below the 1.73% average growth achieved under the Fair Work Act (FWA), or in the similar period before the introduction of WorkChoices.

That doesn’t necessarily mean WorkChoices was a dud. You could easily argue productivity growth needs a longer-term period than WorkChoices had, or that perhaps growth was declining and WorkChoices turned it around and the FWA reaped the benefits.

Either way, you’re hard pressed to find any evidence that the great levels of “flexibility” under WorkChoices provided any great benefit to Australia’s productivity.

At this point the Productivity Commission could have ended its report, noting that workplace relations is really a political fight in which sides battle over who gets the lion’s share of income, and that arguing for changes to the current system on the basis of economic evidence is pretty difficult.

Instead the report argues that the lack of any link between workplace relations and productivity “does not mean there are no effects” but just that they can’t prove them because of “the myriad of other factors shaping productivity”.

That kind of reasoning underpins a fair bit of the report.

For example, it notes at the outset that “contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated”.

It then lists off the relevant “concerns”: “strike activity is low, wages are responsive to economic downturns and there are multiple forms of employment arrangements that offer employees and employers flexible options for working”.

It cites, for example, the drop in hours worked rather than actual employment during downturns as evidence that the labour market has become more flexible:

But then almost like a consultant brought into review a workplace, it begins making recommendations that smack of self-justification. Not all of them are logically coherent, either.

For example, when looking at removing Sunday penalty rates for those in the retail and hospitality industries it argues that “weekend work is now common ... More than one in three in the workforce work at least a Saturday or Sunday each week.”

This is true:

Nevertheless, the level of people working at least one day at the weekend hasn’t shifted at all in the past 15 years. It is actually not more common now.

And yet when the report refers to casual labour, it downplays the issue by suggesting that “security of work appears to have changed relatively little in recent years. While the proportion of casual jobs increased throughout the 1990s, this trend tapered off during the 2000s, particularly for women.”

Certainly this is true, to an extent. For prime-aged workers aged 25 to 54, the incidence of casual work hasn’t increased since the turn of the century, but for younger workers it certainly has:

Thus the report ignores the lack of change in Sunday work while highlighting the lack of change in casual work.

It is when it begins to make recommendations about penalty rates and industrial disputes that the confusing logic – and lack of understanding about real-world interactions between employers and employees – enters the fray.

For example, when it discusses individual contracts, the report notes that “statutory individual arrangements have also been used to reduce union influence over the setting of employment terms and conditions, or to de-unionise the workforce”. It further referred to surveys that found that “some employers saw individual contracts as an important device for reducing union influence”.

And yet it then argues that non-enterprise agreements “are unlikely to significantly reduce collective bargaining power”, and that as a result it should be illegal for agreements to include anything that “have the effect of limiting the hiring of subcontractors, labour hire workers or casuals”.

It also gives little real reasoning for why it recommends making Sunday penalty rates equal to Saturday rates for workers only in the hospitality, entertainment, retail, restaurants and cafe industries.

It does rather bizarrely suggest that employers in such industries are “not likely to have the same level of bargaining power over their employees as in many other industries”.

This must be great news to all the wait-staff in restaurants to know that they hold the whip hand in negotiations better than workers in other (more highly unionised) industries!

There is also little explanation of how lowering penalty rates (or wages) will improve productivity, which is the amount of work done per hour, not per dollar.

Cheaper labour is actually unlikely to be more productive. It may, however, be more profitable. But this report was not written by the “profit commission”.

The report also argues that “industrial disputes do not appear to be a major problem in Australia’s workplace relations framework”. This is also true – days lost to strikes are down at near-record lows:

And yet the report then suggests that the data misses certain types of industrial action. This is also the case – and has been acknowledged by the Bureau of Statistics – but the commission makes no argument that these missed actions are higher than they were in the past.

It then suggests that “there is insufficient evidence for sweeping changes” but also recommends changing the law, such that industrial disputes could be halted where “significant economic harm to the employer or the employees who will be covered by the agreement, rather than both parties (as is currently the case)”. Doing as such would make the threshold for stopping industrial disputes much lower.

Confusion also reigns with regards to unfair dismissal claims. It found that, contrary to claims by employer groups that unfair dismissal laws dissuade employers from hiring people for fear of not being able to fire them, the laws are actually “not playing a major role in hiring and firing decisions”.

And yet the report recommends the law be changed to “remove the emphasis on reinstatement as the primary goal of the unfair dismissal provisions”.

In effect, the commission asserts that when a person is unfairly dismissed a fine or penalty would be enough to compensate them for being sacked. Such a situation would certainly be beneficial for any employer wishing to get rid of someone agitating for higher pay or better safety conditions.

Perhaps the most confused part of the report regards flexibility and the commission’s proposed “enterprise contract”.

These individual contracts would operate outside the award framework, would not have to satisfy the “better off overall test” but rather just a “no disadvantage test”, and would “avoid the costs” of enterprise bargaining for small employers by “not requiring negotiation with each party to the contract, either individually or as a group”.

The contract would be a take-it-or-leave-it offer, with no requirement for it to be reviewed by unions or the Fair Work commission. And while employees would have “the right to revert to the award” they could only do so after 12 months. What’s more, as the AFR reports, “employees would not be back paid if they were found to have not been paid their proper entitlements”.

Gee, and you wonder why business groups like the idea! Flexibility, it seems, is only good when the employer has it.

Who knows, perhaps these measures will prompt a cafe-led economy boom for Australians.

But it’s clear what the commission in the end is recommending is that this occur through lower wages and less job security, and certainly not through greater productivity.