The ongoing public service pay dispute provides a prime example of ideology – on both sides – blocking rational policy debate: the wage bargaining policy itself is irrational and inappropriate; there is little appreciation on either side of politics of the importance of the Australian Public Service in our democracy and in our economy; and the recent Senate Inquiry into the policy demonstrated how far we still need to go for our Parliament to become the place for genuine policy deliberation.
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Less than half the APS has yet to settle pay negotiations since their previous enterprise agreements ended, mostly back in 2014. The process has occupied an enormous amount of management time and effort in every agency, and there remains much bitterness amongst rank and file public servants – at best, there is resigned acceptance in agencies where agreements have finally been reached.
False premise
The Government's Wage Bargaining Policy is based on the false premise that wages should be financed fully by productivity within each agency (or "enterprise"). While it is currently being applied with a very firm hand, the policy is not new but has been applied since the Keating Government in the early 1990s. Arguably it had some merit back then as a short-term measure to encourage workplace reform, but after 25 years the downside impact is very clear in a public sector where agency income is not set by the market but by the political process. Increasingly, so-called productivity offsets are nothing of the sort, but just trade-offs between pay and conditions.
The best demonstration of the downside is the wide disparity for similar work across agencies, evident now for a decade. According to the Australian Public Service Commission's 2016 Remuneration Survey, the salary range (between the 5th and 95th percentiles) was at least 10 per cent for similar work at every level in the APS, and 30 per cent or more for the Senior Executive Service. Even for graduates, the range was 26 per cent and for the lowest classification (APS 1) 22 per cent.
Damage to capability
This causes serious damage to mobility and to some agencies' capability. Agencies suffering budgetary cuts find it hard to attract and retain the skills and experience they need. Agencies subject to administrative rearrangements have to spend months and years to merge workforces with different pay and conditions. As the Department of Prime Minister and Cabinet has found, such problems give rise to unfounded but understandable accusations of unfairness and even racism.
Wages are not set purely by internal enterprise productivity, even in the private sector. Real wage increases are certainly funded in the economy by productivity improvements, but productivity gains in one set of enterprises, or one industry, that are passed on in wages eventually flow on elsewhere to employees with similar skills (subject of course to the enterprises being profitable). What enterprises do is to set remuneration on the basis of labour market factors – the pay necessary to attract and retain the skills they need.
That fundamental focus on enterprise capability, not just productivity, is what is missing from the pay policy. Focusing on the labour market, and on attraction and retention, would undoubtedly still lead to very significant pay restraint in the current climate, and be consistent with budgetary restraint. But the debate with the union movement would be on more solid ground and could be conducted with much lower cost to management by a more centralised process focused on market considerations. Careful analysis may well reveal areas where remuneration (pay plus conditions) are excessive as well as areas where they need improvement.
Senior public servants may not publicly criticise Government policy, but the 2010 "Ahead of the Game" report almost certainly represented a consensus view amongst the then departmental secretaries in its call for a whole-of-APS approach to employment conditions and for problems of attracting and retaining skills – such as ICT, project management and high level policy and research – to be addressed.
Genuine respect needed
Sadly, there has been far too little evidence in three years of disputation, and there is little to suggest genuine respect for the institution of the public service. The government, egged on by the Institute of Public Affairs, seems convinced the public service only serves its own interests with excessive pay and conditions and an unproductive feather-bedded culture. It sounds more like an opposition than a government in power understanding the capacity the public service requires to deliver its public policy platform. The Labor opposition (and Greens) are hardly better, seeming to see the public service as a natural constituency and too readily mouthing the views of the Community and Public Sector Union (an important part of the family).
The Senate Inquiry into the Government's Enterprise Bargaining Policy reported in late November. It, too, was a disappointment.
While the majority – Labor and the Greens – at least referred to the full range of evidence presented, it gave far too much weight to the CPSU and squibbed the key issue of how public service pay should be determined in the future by a vacuous final recommendation, "that the APSC and the CPSU consider a range of approaches for future enterprise bargaining and settle on the best and most productive approach … in advance of the nominal expiry of this round of enterprise agreements".
The minority (government) report was worse, referring exclusively to the official government line – which the Australian Public Service Commissioner had presented – and the views of the Institute of Public Affairs, with no mention of any other evidence presented.
It was hardly an example of the Parliament acting as a forum for genuine deliberation of policy and related evidence.
Andrew Podger is Honorary Professor of Public Policy at Australian National University and a former Public Service Commissioner 2002-04. He gave evidence to the Senate Committee Inquiry.
