1

The Challenge of Change

LAFFER lecture – June 2013

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Technology

Energy & Environment

Structural Change

Society

The Asian Century

Demography

Change

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Chart 1: Proportion of the population aged 65 and over

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Chart 2: Effect of the ageing population on the participation rate

Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-1364.0

64.5

65.0

65.5

66.0

66.5

67.0

Counterfactual Actual LFPR

Per cent

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Chart 3: Contributions to growth in average incomes

-1

0

1

2

3

4

-1

0

1

2

3

4

1960s 1970s 1980s 1990s 2000s

Foreign income flows Terms of trade Labour utilisation

Labour productivity GNI per person

Percentage points contribution, annual average Percentage points contribution, annual average

Source: Treasury calculations based on ABS Catalogue Numbers 5206.0, 6202.0 and unpublished ABS data.

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Manufacturing

Agriculture, forestry and fishing

Information media and telecommunications

Other services

Electricity, gas, water and waste services

Rental, hiring and real estate services

Administrative and support services

Financial and insurance services

Arts and recreation services

Wholesale trade

Retail trade

Public administration and safety

Transport, postal and warehousing

Accommodation and food services

Mining

Education and training

Construction

Professional, scientific and technical services

Health care and social assistance

-30 -20 -10 0 10 20 30 40 50 60 70

Year to February 2013 Average annual change February 2003 to February 2013

'000s

Chart 4: Change in employment by industry – February 2003 – February 2013 (“000s)

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Chart 5: Employment growth for selected industries—Cumulative growth since February 2007

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13-100

-50

0

50

100

150

200

250

300

350

Mining Manufacturing

Retail trade Professional, scientific and technical services

Education and training Health care and social assistance

'000s

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Chart 6: Proportions of total employment by sector

Feb-93 Feb-95 Feb-97 Feb-99 Feb-01 Feb-03 Feb-05 Feb-07 Feb-09 Feb-11 Feb-130

2

4

6

8

10

12

14

16

56

58

60

62

64

66

68

70

72

74

Manufacturing (LHS) Services (RHS)

Per cent Per cent

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“The union and state opposition also fear a shortage of mental health beds at Monash Medical Centre is linked to at least three sexual assaults against nurses that occurred just days before the hospital was stretched to breaking point, causing management to create a virtual, pop-up ward for eight mentally ill patients.”

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Chart 7: Union membership by top five industries, as a proportion of total union membership, 1994 and 2012

18.5

9.5

8.3

13.410.5

39.8

9.2

8.3

12.7

17.521.6

30.8

Manufacturing

Retail trade

Public adminis-tration and safety

Education and training

Health care and social assistance

Other

1994 2012

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Chart 8: Union membership by top 5 industries, as a proportion of total union membership, 1994 and 2012

0

5

10

15

20

25

1994 2012

Per cent

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Chart 9: Disputation, union density and size of industry by employment, 1993–2012

0 5 10 15 20 25 30 35 40 45 500

20

40

60

80

100

120

140

160

180

Mar-1993 to Dec-1996 Sep-2009 to Dec-2012Union density (%)

Average working days lost per year

Manufacturing

ConstructionEducation; Health and community ser-vices

Manufacturing

Construction

Education & training; Health care & social assist-ance

Mining

Mining

Source: ABS, Industrial Disputes, Australia, Dec 2012, Catalogue No. 6321.0.55.001; ABS, Employee Earnings, Benefits and Trade Union Membership, Australia, August 2012, Catalogue No. 6310.0.

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Chart 10: Working days lost per 1000 employees, 1988–2012

19881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120120

50

100

150

200

250

300

Wo

rkin

g d

ays

lost

per

year

per

10

00

em

plo

yees

IR ActAverage =

175.8

IR Act post 1993Average =

96.0

WR ActAverage = 53.7

Work Choices Average =

13.4

FW Act Average = 20.3

CAA ActAverage =

232.2

Source: Fair Work Commission calculations based on ABS, Industrial Disputes, Australia, Dec 2012, Catalogue No. 6321.0.55.001. Weighted averages are for the quarters covered by different employment relations arrangements.

Based on, and extending, Chart 4.16 at p. 75 of Towards more productive and equitable workplaces: An evaluation of the Fair Work legislation, report prepared by the Fair Work Act Review Panel, DEEWR, 2012.

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Chart 11: Industrial disputes and employees in expired/terminated agreements

Source: Chart 4.17 at p. 77 of Towards more productive and equitable workplaces: An evaluation of the Fair Work legislation, report prepared by the Fair Work Act Review Panel, DEEWR, 2012. Using ABS, Industrial disputes, Australia (Cat. No. 6321.0.55.001), Spreadsheet Table 3B; Workplace Agreements Database, and ABS, Labour force, Australia (Cat No. 6202.0), Spreadsheet 1..

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Nature of our work

• wage fixation• individualisation vs. collective disputes• engagement

The consequences of change

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Chart 12: Growth in C14 and C10 relative to AWOTE, AWE and WPI, cumulative percentage change

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12100

110

120

130

140

150

160

170

WPI AWOTE AWE C14 C10

Index (Dec-02 = 100)

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Chart 13: Real weekly total earnings (full-time adult non-managerial employees) by percentile—2002–2012

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190519101914191919231928193219371941194619501955195919641968197319771982198619911995200020042009100

105

110

115

120

125

130

135

140

10th percentile 25th percentile 50th percentile 75th percentile 90th percentile Mean earnings

Index (2002 = 100)

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1998–99 1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12

0

5,000

10,000

15,000

20,000

25,000

Collective matters Individual matters

Workplace Relations Act Work Choices Act Fair Work Act

↑Individual matters

Chart 14: Matters dealt with by the national industrial relations institution, 1998–99 to 2011–12

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Dimensions of Change

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SHIFT IN THE NATURE OF THE COMMISSION’S WORK

Legislative Factors

unfair dismissals

general protections

non union collective agreements

right to request

individual flexibility arrangements

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26

Promoting fairness and improving access

Efficiency and innovation

Accountability

Productivity and Engagement

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30

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RECENT INITIATIVES

PRO BONO LEGAL SCHEME

UNFAIR DISMISSAL BENCHBOOK

APPEALS PRACTICE NOTE

FAIR HEARING PRACTICE NOTE

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ENGAGEMENT STRATEGY

PUBLIC ENGAGEMENT

•FACT SHEETS•VIRTUAL TOUR•INFORMATION SESSIONS•FEEDBACK

STAKEHOLDER ENGAGEMENT

RESEARCH COMMUNITY ENGAGEMENT

WORKPLACE ENGAGEMENT

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✔ Capacity to search the content of collective agreements launched December 2012. The new tool responds to the Fair Work Act Review Panel’s suggestion that best practice productivity enhancing provisions in agreements be more readily identifiable and made more widely known to employers and unions.

✔ In terms of workplace engagements, a Commission-sponsored conference was held in October 2012 with key industry stakeholders including ACCI, the ACTU and the AiG.

✔ The Fair Work Commission signed an MOU with the Fair Work Ombudsman and Fair Work Building and Construction in October 2012, formalising their commitment to work together on the issue of productivity in Australian workplaces.

PRODUCTIVITY AND ENGAGING WITH INDUSTRY

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