David Alexander is chief of policy and advocacy at the Australian Chamber of Commerce and Industry

The federal government is currently proposing another wave of industrial relations changes.

Called Same Job, Same Pay, these changes will have significant impacts on Australian businesses.

As the title suggests, the principle behind the legislation is to change the system so people who do the same work receive equal wages.

The rationale for these major alterations has been described by the Minister for Workplace Relations, Tony Burke, as addressing a “loophole”.

That term suggests that there has been some well-recognised oversight by legislators that now requires a sensible and helpful remedy.

But this is definitely not the case. Let us be clear on this point: there is no loophole at all. There has been no oversight. The central assumption of the government’s changes is a flawed premise.

Before we look at the specific government “loophole” claim, let’s understand the context. We need to recognise that different wage outcomes are a core part of a healthy, dynamic, market-based system.

We depend on a system that allows wages to vary according to skills, experience, business types and business conditions. That variation of wages is not a bug but a feature.

That variation of wages allows reward for effort, reward for skills, and flexibility for businesses of vastly different shapes and sizes.

Most people are comfortable with the existence of difference in wages, but others are not. Some people look at wage variations and think that the very existence of difference is proof of injustice or conspiracy.

The fact that wages differ, according to this mindset, allows “undercutting” of the person on higher wages.

Some countries have tried to eliminate differences in wage outcomes, but the results have been terrible – think of those failed old utopian projects of the 20th century. The lesson is that prosperity requires a level of comfort with differences in wages.

When it comes to the government’s same job, same pay proposals, the central concern of the government is that “undercutting” can occur because some workers in the same occupation have lower wages than other workers. This is the so-called “loophole”.

The proper response to the notion that wage differences exist is “Of course!” rather than “That’s terrible.” We want a system where difference is permitted, and where, for example, higher skilled workers get paid more than lower skilled people, and small business is not forced to pay the same wages as big business.

The government now says that it will limit the scope of the measure to labour hire companies, but this is really just a matter of damage limitation.

As it stands, one mining company, BHP, says that the changes will cost the company $1.3bn per year and threaten “serious damage to every level of the Australian economy”.

The government will soon release details of the proposed legislation, but the point that all legislators should keep in mind is that the introduction of a one-wage-fits-all policy is bad for the Australian economy. It is not neutral or benign. The Minister’s loophole has a loophole.

Published in The Daily Telegraph on August 22, 2023