Image for Pay freeze will increase hospital costs

Despite the Tasmanian government’s fervent hopes that its pay freeze legislation will slash its budget into shape, employment costs in the biggest area ‒ public hospitals ‒ are likely to be pushed upwards instead.

Apparently simple one-size-fits-all measures like the pay freeze, when applied to complex situations, can have unexpected and perverse effects.

This is, perhaps unintentionally, the most radical piece of industrial relations policy to emerge from a government in Australia for many decades. The government does not appear to have thought through the ramifications.

Doctors and nurses, particularly senior staff with the most employment choices, will have a powerful incentive to circumvent this measure or to remove themselves from it altogether.

Doctors, particularly, have many such options. Many of these have already been exercised during the effective medical pay freeze that has been in place since the last government’s budget cuts in 2011.

Many have either resigned, gone part-time or negotiated expensive special deals. The exodus is now likely to accelerate. They will have to be replaced either by locums ‒ who get up to $2500 a day plus family accommodation and a car ‒ or by existing staff who demand special contracts as the price of remaining.

Nurses also have a number of options open to them, including seeking other employment. There has already been an exodus of nurses, particularly those in senior ranks who are hardest to replace. Overtime levels cannot increase much further, so hospitals will have to rely on expensive agency nurses to fill the gaps.

The result will be an increase in hospital costs far outweighing the savings generated by the pay freeze. Alternatively, the government could further run down the number of doctors and nurses, and rely even more on juniors, with the inevitable result that fewer patients will be treated and safety standards will suffer.

The 12-month pay freeze will be followed by government regulations setting pay rates and potentially other employment matters as well. These regulations will override the Industrial Commission, the Industrial Relations Act and any employment agreement.

There is no sunset clause in the legislation. So the government ‒ the employer ‒ will be able to set the wages of its own employees permanently. There will be no avenue for appeal.

The health unions are likely to warn their interstate members of the dangers of coming to Tasmania to work in such a situation.

Doctors and nurses who resign or reduce their hours will be difficult and often impossible to replace.

In the end, we will pay more for worse hospital services.

• Download Martyn Goddard’s analysis of the pay freeze effects:

pay_freeze_effects.pdf