When is big business most successful at "rent-seeking" – winning special favours – from government? Often, when it’s got its unions on board. That way, both the Coalition and Labor are inclined to give it the privileges it seeks.
Despite the decline in the union movement’s power and influence in recent decades – and all the nasty things the bosses continue saying about unions – it’s very much a product of the capitalist system.
Over the decades, its greatest success has come in industries with some form of pricing power that’s allowing businesses to make outsized profits. The union simply applies pressure for the workers to be given their share of the lolly.
What kept Australia’s manufacturing industry heavily protected against competition from imports for most of the 20th century, before the Hawke-Keating government pulled the plug in the 1980s, was the manufacturing unions’ strong support for the manufacturers’ success in getting the Coalition committed to protection.
In the end, however, the manufacturing unions got screwed. While being protected in the name of preserving jobs, the manufacturers began automating and shedding many jobs. Turns out protection is better at protecting profits than jobs.
In last year’s election campaign, some part of Labor’s ambivalence on the question of new coal mines in North Queensland is explained by the support the Construction, Forestry, Maritime, Mining and Energy Union, one of the few remaining powerful unions, has thrown behind the foreign mine owners.
At present, however, there’s no more significant instance of the unions being in bed with the bosses than their joint campaign to have the government increase compulsory employee superannuation contributions.
When it comes to government-granted favours to business, there aren’t many bigger than the one that compels almost all the nation’s workers to hand over 9.5 per cent of their wage, every year of their working lives, to financial institutions which will charge them a small fortune each year to "manage" their money, until the government thinks they’re old enough to be allowed to get their money back.
I’ve supported compulsory super since it began because, when it comes to saving for retirement, most of us suffer from myopia. But it does leave the government with huge obligations to ensure the money’s safely invested, ensure super tax incentives aren’t biased in favour of the highly paid (such as yours truly) and ensure the money managers don’t abuse the monopoly they’ve been granted by overcharging the punters.
And, since most of us also save for retirement in ways other than super (such as by buying a house and paying it off), governments have an obligation to ensure that workers aren’t compelled to save more than needed to live in reasonable comfort in retirement.
Compulsory super is such an easy money-maker for the for-profit financial institutions (mainly bank-owned) that it’s not surprising they’ve gone for years trying to con governments into increasing the percentage of their wages that workers are compelled to hand over. They’ve done this by exploiting people’s instinctive fear that they aren’t saving enough, using greatly exaggerated estimates of how much they’ll need to be comfortable.
What’s harder to understand is why the non-profit "industry" super funds – with union officials making up half their trustees and the employer reps not taking much interest – go along with the for-profit industry lobby groups’ self-interested empire-building.
The main reason compulsory super isn’t a particularly good deal for most union members is that when forced to pay super contributions, employers reduce their workers’ pay rises to fit. This has been understood from the outset, but last week’s report from the Grattan Institute convincingly demonstrates its truth.
The second reason is that, by design and above certain limits, super savings reduce workers’ eligibility for the age pension. Treasury and independent analysts have repeatedly discredited the industry’s claims that the present contribution rate is insufficient to provide workers with a reasonably comfortable retirement.
The present legislated plan to raise the contribution rate to 12 per cent represents the industry funds’ gift to the army of ticket-clippers making their living off the super industry. It’s origins lie in the Rudd government yielding to industry fund pressure because it believed the huge cost to the budget would be more than covered by its wonderful new mining tax.
But, as an earlier Grattan report has shown, raising the contribution rate as planned would force many workers to accept a lower-than-otherwise standard of living during their working lives so their living standard in retirement could be higher than they ever were used to when working.
This is the union movement protecting its members’ interests? Sounds to me more like union officials expanding the union institution at the expense of their members – and delivering for the banks’ "retail" super funds while they’re at it.
