Paper based on a speech to the Industrial Relations Research Centre of the University of NSW’s seminar ‘The New Industrial Relations System in NSW’ (1990: Sydney) later published in Michael Easson and Jeff Shaw, editors, Transforming Industrial Relations in NSW, Pluto Press for the Lloyd Ross Forum, Leichhardt, 1990, pp. 53-74.
It is an irony that for most of the 1970s and earlier, the most vocal and strident critics of the Australian centralised and regulated wages system were located well to the ‘Left’ of the industrial relations mainstream. Such critics alleged that the centralised conciliation and arbitration system acted against the interests of unions when seeking to extract the best possible deal from employers. The argument ran that unions should always be able to collectively bargain with employers and engage in industrial action to achieve a particular industrial aim. By placing obstacles to this behaviour, including legal sanctions, the State, through the conciliation and arbitration system, was illegitimately curbing the scope of union strategies. Usually married to such arguments was the view or suspicion that this was deliberately aimed at stunting working class consciousness – and that this outcome was not a good thing.
In the late 1980s, such views are hardly listened to at ACTU Congresses and other union forums; and when such arguments are put forward, they are regarded as the eccentric views of minority leftist sects. But on the other side of the industrial relations and political spectrum, much has happened over the last decade. Within some employer bodies, arbitration is in contempt. A small number of organisations and critics associated with the New Right have lampooned the ‘industrial relations club’ as a conspiracy against the public to cause high labour costs, inflexible labour markets and unacceptable levels of industrial disputation. Hence the catchcry and argument in favour of deregulating the labour market.
To contrast the changes in attitude within the union movement and on the employer side with respect to the conciliation and arbitration system in this way, perhaps, is a little misleading. Historically, the industrial relations and regulation processes within Australia and in New South Wales have always generated controversy. Indeed, the Niland Green Paper process is only one of the many reviews and Royal Commissions which have examined the strengths and weaknesses of the New South Wales industrial system. A reading of history also shows that almost all unions have not been consistent about the preferred industrial relations framework. In addition, over time, there has been a good deal of criticism, particularly amongst academic economists, concerning the utility and workings of the Australian processes of conciliation and arbitration of which the New South Wales system is a part. It would be a mistake to think that the issues are merely a contest between a ‘purist’ system of conciliation and arbitration (for example, as outlined in H.B. Higgins’ A New Province of Law and Order) and the kinds of views favouring a free market which are much beloved by some of the devotees of Adam Smith.
Nonetheless, different approaches to the regulation of the labour market have emerged in recent years, particularly between the major political parties. This means that any examination of the New South Whiles industrial relations system needs to contemplate the arguments about what’s ‘good’ for the economy and the issues concerning rigidity, flexibility and opting-out in the context of the existing system of compulsory conciliation and arbitration.
This chapter will argue about various reform options worthy of pursuit in NSW and cast a critical eye over the historical and contemporary debates concerning conciliation and arbitration. Much of that debate occurs at a dreary and predictable level. Hence, when many people step on to the public platform or scribble about industrial relations changes they are on automatic pilot. Nothing original emerges. Instead of a critical and thoughtful analysis, there is a free flow of unconsciousness and, as well, an unhealthy dash of sloganeering.
All this reminds me of Hans Christian Andersen’s story The Snow Queen. I know that it is usually the Secretary of the ACTU who has a mortgage on telling fairy tales in the context of industrial relations, but I cannot resist the analogy. A wicked demon made a mirror whose grinning face had the property of reducing the good and beautiful almost to nothing while it accentuated everything worthless and ugly. Everyone who looked into the mirror ran about saying that for the first time they could see what man and the world really looked like. The converted ran about everywhere with the looking-glass; soon there was no man and no country that had not been distorted in it. So impressed were the evil guardians of the mirror that they flew up towards heaven to make fun of Our Lord and his angels; but the looking glass shook so violently with laughter that it slipped out of their hands. The shattered pieces and particles filled the air. And “wherever they got into people’s eyes, there they stayed, and then the people saw everything distortedly, or else they had eyes only for what was bad in things, for every little splinter of glass had kept the same power that the whole mirror had. Some people even got a small piece of the glass in their hearts”, and that was dreadful, “for their hearts became just like lumps of ice”. Some of the pieces of this ideological speculum were made into spectacles — by which may be understood particular philosophical systems – “and then indeed all went wrong, particularly when people put them on in order to see right and to be just”. So it is with much of the ‘debate’ about industrial relations reforms. I am not impressed by the shining bright light of enthusiasm which carries along some of the NSW government’s key advisers in this field. Their grinning faces see contemporary industrial relations through lenses altogether foreign to me and alien to reality.
This chapter will expand on this point by examining some of the history of Australia’s industrial relations system and touching on the relevance of some of the contemporary debates. So much that is written about the need for change is poorly argued. This is a reflection not only of imperfect reason but also faulty vision. Second, it will sketch some arguments about what reforms are worthwhile and why. Third, an overriding theme at the conclusion of this chapter will be that the current level of inflation – much too high by any international standards – is the biggest factor to be considered in a comprehensive approach to industrial relations change in this country. So much so that I believe that the entire debate about changes in industrial relations would be recast if inflation was much lower than it now is.
Henry Bournes Higgins’ lofty sentiments, expressed in the Harvard Law Review, 1915, have often been quoted and compared with current situations:
… the processes of conciliation, with arbitration in the background, is substituted for the rude and barbarous processes of the strike and the lockout. Reason is to displace force; the might of the State is to enforce peace between industrial combatants as well as between other combatants; and all in the interests of the public.” (A New Province For Law and Order).
Such were the contours of the new province of law and order described by Mr Justice Higgins. Nowadays, his words are usually quoted in order to score a ridiculous comparison; modern day affairs compared to the expectations of this founding father of the Australian Constitution. Usually overlooked in the passage quoted above are the words “with arbitration in the background”. It is here that a clue to the development of conciliation and arbitration in Australia, at the expense of collective bargaining, may be found.
As a result of the protracted shearers’, maritime and other strikes of the 1890s which, amongst other things, put up to public debate the right of workers to organise – and collectively bargain with their employers – and the defeats suffered by the labour movement at that time, many unionists and colonial politicians began to think seriously of alternatives to the harsh methods of resolving industrial conflict – where victory could be secured according to force and not necessarily by justice. At first, conciliation and arbitration were proposed, not as alternatives to collective bargaining, but as ancillaries. Indeed, in the original objects of the Conciliation and Arbitration Act was the requirement to encourage and assist collective bargaining processes. K.F. Walker commented in Australian Industrial Relations Systems that “the founders of arbitration systems …based their hopes on legitimising collective bargaining which was, however, to be regulated so as to protect the public interest.”1 (It might be noted that the ‘public interest’ is a concept notoriously difficult to define and a concept usually invoked at a time of competing interests.) Continuing strong opposition from employers meant that:
…attempts at voluntary arbitration proved abortive because the employers, being in a strong position, refused to submit to it while the experiment in New Zealand with compulsory conciliation and arbitration beginning in 1894appeared to be succeeding.2
Compulsory conciliation and arbitration was legislatively introduced in Western Australia in 1900, New South Wales in 1901 and federally in 1904. Emphasis was placed on collective negotiation and, if that broke down, on conciliation – the attempt by a neutral to arrange for disputants to conciliate their differences – rather than immediately relying on arbitration.
An exhaustive survey of the developments in the New South Wales and Australian conciliation and arbitration systems is clearly beyond the scope of this chapter. It is important, however, to note that these systems each involve elements of collective negotiation and voluntary/compulsory conciliation and arbitration. Further, the method of dealing with industrial conflict varies from industry to industry. Differences also apply between the states: some states, such as New South Wales, have developed a system of compulsory conciliation and arbitration similar to the Federal system, whereas other state governments have experimented with Wages Boards. (Although it might be noted that, in the last decade, Tasmania and Victoria discarded Wages Boards systems in favour of State Industrial Commissions similar, in many respects, to the New South Wales system.) The industrial character of work performed or required of an employee, for many years, was interpreted by the High Court to mean that classes of workers such as professional engineers, airline pilots, journalists and actors could be parties to the creation of an industrial dispute within the meaning of the Federal Act, but that workers such as fire-fighters, nurses, lawyers and doctors were not within such a class.
This interpretation was overthrown in the 1982 CASS case (R. v Cohen and Ors; ex parte Australian Social Welfare Union 47 ALR 225), a decision which will continue to have widespread industrial implications – not the least of which is ‘opening the door’ to many New South Wales unions, previously confined to the State system, to seek Federal award coverage. This is relevant to any consideration of radical changes to allow ‘opting-out’ from the compulsory conciliation and arbitration processes. Experimentation along those lines in New South Wales may well encourage many unions to abandon the State system by securing Federal award coverage for employees presently within the New South Wales jurisdiction. In so doing, the jurisdiction of Federal awards would override State legislation or arrangements allowing individual work contracts.
In brief, the New South Wales and Australian systems of conciliation and arbitration are compulsory in these respects: either party – the union or employer – may notify the existence of an industrial dispute and the parties can be compelled to meet in conference (that is, compulsory conciliation). If conciliation is not achieved, the matter may be referred to arbitration, where a settlement may be imposed on the parties, enforceable by law. Unlike voluntary arbitration, where the parties choose an arbitrator, in the centralised system an arbitrator is assigned to handle disputes arising in a particular industry or industries. Kenneth Walker commented on this process, with respect to award creation, as follows:
…what looks like a slow, cumbersome legal procedure from the outside is actually a mixture of negotiation and arbitration hearings and the speed at which the whole process moves is largely in the hands of the parties. Since awards and agreements continue in force indefinitely, and tribunals are usually anxious for the parties to agree on as many points as possible, so long as both parties are willing to negotiate, there is no pressure for the case to be [immediately] settled.3
As already pointed out, it is important to note that industrial relations patterns between different industries and enterprises are vital considerations for an analysis of conciliation and arbitration in Australia. Walker sets down the following rubrics which enable distinctions to be made between industries:
a. effectiveness of direct action;
b. extent to which unions attempt to penetrate managerial functions;
c. stability of organisation among employers and employees;
d. nature of work and circumstances of employment;
e. economic horizon of employees;
f. methods of management;
g. common social and industrial background and interests of employers and employees;
h. personalities of union leaders, management and employers’ association staff;
i. ideological and political objectives.4
This is not a complete list. Other factors include:
j. government framework (such as the Accord);
k. employment and unemployment levels;
l. economic conditions;
m. whether an industry or enterprise is in competition or protected;
n. multi or single employer bargaining;
o. the influence of the ACTU and peak councils (including the Labor Council of New South Wales); and
p. overseas influences.
Walker concludes that: “a complete knowledge of the market conditions and technology of an industry would permit a fairly clear delineation of its industrial relations pattern.”5 This, in turn, explains the varying patterns of preventing and resolving disputes in various industries. The economic consequences of Australia’s industrial relations system is critical to any assessment of its utility. But it should also be remembered that the regulation of the labour market through the compulsory conciliation and arbitration processes evolved to serve three purposes: to resolve disputes in an orderly way, to ensure a fair distribution of earnings, and as a sword of justice.
This paper can hardly pretend to be an exhaustive summary of the historic progression of the conciliation and arbitration processes in Australia. But enough is revealed by the above analysis to show that it would be a mistake to contrast collective bargaining with conciliation and arbitration as if both are ideal types exclusive of the other. Moreover, the actual industrial relations experiences in industries and enterprises considerably vary accordingly to many factors.
Collective Bargaining and Compulsory Conciliation and Arbitration in Australia – What is the Difference?
In some academic circles, Professor John Niland’s critique of Australian conciliation and arbitration processes and his advocacy of collective bargaining has attained wide influence. One admirer, Clifford Donn, even said in 1976 in the Journal of Industrial Relations that “those advocating substantial change in the system have won the day, at least in terms of the intellectual debate, and that it is now time to consider a major overhaul of Australian industrial relations institutions.”6As Niland has discussed the strengths and weaknesses of collective bargaining and compulsory conciliation and arbitration in works such as Collective Bargaining and Compulsory Arbitration in Australia, this section shall refer to his analysis for the purpose of discussing some important features of the Australian and New South Wales industrial relations systems. It may be useful to note that the debate has had two rounds: Isaac, Laffer, Hancock and Foenander in the late 1950s and 1960s and second, the debate in recent times. In his review of the earlier debate, David Plowman comments that the “debate had exhausted itself, with the participants concluding that no one system had any greater superiority than the other.”7
Niland argued that for the purposes of analysis, Australia can be said to face four broad possible policy options:
1. to permit, through benign neglect, the drift towards dispute resolution outside the tribunal system;
2. to enforce a return to compulsory conciliation and arbitration simpliciter;
3. to enforce a shift to conventional collective bargaining;
4. to structure a system of dual procedures, involving compulsory arbitration on the one hand, and collective bargaining on the other.
Niland discounts the merits of options (2) and (3) because there are many who prefer and presently enjoy a more flexible disputes settling and prevention procedure – and it would be unrealistic for those parties to forego what is familiar and useful for a new system. The drift towards collective bargaining outside of the conciliation and arbitration system, which Niland considers both desirable and inevitable, leads to consideration of options (1) and (4). Niland proposes that option (1) should be discarded in favour of option (4), because of the unstable conditions arising from industrial tribunals resisting the collective bargaining tide (which is what Niland presumes would occur if option (1) were followed). In Niland’s view, option (4) would require new and substantial modifications to existing industrial legislation.
This is not the place for an exhaustive discussion of Niland’s views. It might be mentioned, in passing, that a fifth option could have been put forward, namely:
5. within a centralised framework, the fostering of industry and workplace bargaining together with the recourse to compulsory conciliation and arbitration.
Such a system is the one which appears to be emerging, particularly in the aftermath of the March 1987 National Wage Case and subsequent decisions.
What follows are some arguments about the merits of conciliation and arbitration systems:
a) It is important not to oversimplify matters and, for example, define collective bargaining as ‘heaven and earth’ and, on the other hand, infer that conciliation and arbitration is ‘purgatory and hell’. The debate should be about what kinds of regulatory processes are appropriate and, in an economic context, what wage and labour flexibility outcomes are desirable. In addition, it should be noted that questions about regulation are partly about degrees of regulation. The term ‘centralised’ is a relative rather than a normative term. Some systems are more centralised than others, and the content of such systems varies. Collective bargaining is a term which might be applied to the highly-centralised and regulated system that operates in West Germany, or to the decentralised voluntary work contract arrangements that apply to much of the United States. In other words, there are many different systems of collective bargaining.
Moreover, it would be a mistake to infer that collective bargaining processes are ‘rule free’: each country has developed its own forms of regulating collective negotiation between employers and employees.
b) In view of the variety of industrial relations procedures existing between industries, it is not very meaningful to discuss Australian industrial relations procedures at the broadest level, as is found in some analyses. Moreover, the argument, based on survey research, that most unions prefer more direct negotiations to compulsory conciliation and arbitration is hardly surprising: it is consistent with current behaviour and the workings of compulsory conciliation and arbitration, and is hardly ‘evidence’ supporting new collective bargaining procedures.
c) It is necessary to adequately consider some important defences of the conciliation and arbitration system as against some arguments about collective bargaining. It is not enough to trot out the familiar arguments concerning the ‘chilling effect’ of arbitration for the negotiating process – and favourably contrast this with the need for responsible action and a constructive relationship between the parties to collective bargaining. This is a most uncritical account of the differences between the two arrangements. It is significant that the United States literature which spawned the ‘chilling’ and ‘narcotic’ effects has been silent in this area during the recent period of rapid and increased use of arbitration in the United States. Recourse to arbitration on ‘rights’ and ‘issues’ matters in the United States suggests convergence between collective bargaining and arbitration arrangements. In the United States, this is partly related to the need (in view of the recession in the early 1980s and America’s economic problems) to minimise long periods of industrial disputation and increase economic competitiveness.
In any event, mutual tolerance and understanding is not always as readily apparent as collective bargaining advocates sometimes suggest; moreover, it does not always follow that more realistic initial claims are made in collective bargaining compared to conciliation and arbitration. Dr Isaac, a former Deputy President of the Australian Conciliation and Arbitration Commission, commented in the Journal of Industrial Relations about the argument that collective bargaining provides a basis for the union to be desirably more conscious of the cost of its claims and to be prepared to trade off one claim against another, whereas the log of claims in compulsory arbitration “is approached in a cargo cult fashion”. Those who have been intimately involved with Australian arbitration will deny the general validity of this contention. Whatever unions say in public, when they sit down in conference, their sensitivity to cost considerations and trade off possibilities is rarely in doubt to the employer who can smell ‘ambit’ positions from afar. Nor are arbitrators deluded by ambit claims.8
In addition, it is important to acknowledge that because, under some forms of collective bargaining, a union leader must defend the agreement drawn up, this is not always an uncomplicated virtue. This responsibility may sometimes limit a union’s ability to make an agreement: “Arbitrators may perform a useful social function in drawing some of the rank-and-file union member’s fire”.9 This is a particularly interesting remark if the processes of conciliation and arbitration are considered as ancillaries to, rather than the opposite of, collective bargaining at the workplace and industry levels. Thus, the costs and merits of various collective bargaining systems and the contemporary compulsory conciliation and arbitration experience in New South Wales and in Australia need to be assessed, taking into account all those factors.
d) There are problems in assessing how a dual system of compulsory conciliation and arbitration, as it now operates in the New South Wales and Australian spheres, and collective negotiations outside of that system, would operate. In assessing arguments for change, it is necessary to consider significant points against favoured proposals. Unfortunately, the advocates of ‘opting out’, as will be discussed below, have little to say about:
- Who should decide whether to opt out – is it only the employer? What say do the relevant union(s) have?
- Will opting-out arrangements favour industrial relations delinquents (either employers or unions) moving out of the compulsory conciliation and arbitration system?
- How can governments and the community influence overall wage outcomes and favour sensible labour market changes if the parties decide to opt out? Opting out may mean, for example, that it would be harder to encourage and develop industry training schemes which cover a whole industry and allow for transferable and credible skills.
- What will be the situation in multi-union workplaces and industries where there may be divisions among employers and among workers as to the merits of opting out?
- What will be the situation in the public sector?
- What would be the place of arbitration in the so-called voluntary contracts area?
- Would there be any economic benefits if organisations were able to kangaroo jump out of arbitration in ‘good times’ and retreat in leaner times?
- What should be the rules allowing for moving back into the compulsory conciliation and arbitration system?
- To what extent would registered agreements be used as precedents influencing the award area? This is likely to be a complicated question, given the likelihood that, for example, multi-industry unions would have members in both camps and would seek to duplicate gains in one area across an industry.
In a review of opting-out proposals, David Plowman comments that:
An equally difficult problem is establishing effective machinery to separate out the two sectors. Normally, unions have access to both direct bargaining and industrial tribunals, and have been able to switch from one approach to the other. Because of the discretion generally available to unions in the existing institutional arrangements, it is difficult to conceive of them voluntarily opting to surrender the use of either approach. Unions in productive industries which at a particular point of time may be able to dispense with the Commission’s service, will not want to move out of the arbitration sphere for two reasons. The first is that arbitration provides an insurance policy for lean periods. The second is that the union’s legal identity is bound up with the registration provisions of the arbitration system. Few unions will find advantages in opting out of the arbitration system when the existing arrangements enable them to bargain directly with employers without having to opt out.10
As argued earlier, the onus of proving the merits of a new dual system compared to existing arrangements very much rests on the proponents. Rhetorical flourish, ideas of wishing away problems in contemporary industrial relations and vague sketches of what alternatives might be are no arguments for a dual system.
e) “Like it or not, we are saddled with the inertia of our institutional history”11 is one jibe which Dr Isaac has utilised against proposals advocating a radical departure from centralised conciliation and arbitration systems. Even though Dr Isaac’s point sounds too complacent and even reactionary, it is not clear how the movement towards the dual system can be achieved, particularly with regard to the customs and practices which permeate Australian industrial relations. (This point is further discussed in the next section.) Allowing for differences between industries, the following observation of the 1913 Royal Commission on Industrial Arbitration in New South Wales is still valid:
It has been brought home to me very strongly that the effect of compulsory arbitration and published awards is to give the industrial classes a much wider view of the industrial field and its conditions. Formerly each union and industry thought of itself. It might know a little of some allied trades, but a bird’s-eye view of the labouring world and its conditions was rare. Now all that is altered. By the newspapers, the reports of the Department, and the training in arbitration work of the secretaries of unions, the industrial world has become like a huge jelly – touch it anywhere and it trembles to its farthest corner.12
If anything, the influence of arbitration in shaping the Australian and New South Wales industrial relations systems has increased in the last seventy seven years. It is not obvious that attempts to break away from the centralised conciliation and arbitration systems are workable or can withstand the criticism that they are utopian, given the historical development of arbitration in Australia. But as this chapter will discuss, this does not mean that things are destined to remain static. Indeed, in the sea-changes in the industrial relations system in Australia and New South Wales in the late 1980s, there has been a demonstration of the enormous flexibility and adaptability of the centralised conciliation and arbitration processes. This is acknowledged in academic/industrial circles, for example by Professor Niland in some recent publications. Therefore, the contemporary repetition of many of the arguments developed in the 1950s, 1960s and 1970s about the rigidity of the Australian and New South Wales conciliation and arbitration systems now sound off-beat and directed against an industrial relations culture which has changed utterly.
Changing the Agenda: The New Right Approach
In contrast with the views of Professor Niland, which essentially argue about the efficacy of different systems of industrial regulation, are the arguments of the radical deregulationists. Their agenda is based on an ideological view of unions and the labour market and includes:
(a) the abolition of so-called compulsory unionism and ‘closed shops’;
(b) the development of enterprise-based ‘unions’ and employee-share ownership schemes which would encourage greater commitment to the success of an enterprise and greater alienation from the objectives of the broader union movement;
(c) the elimination of compulsory arbitration at both federal and State levels;
(d) the elimination of national wage and conditions cases;
(e) the use of private conciliation and arbitration services operating on a fee-for-service basis;
(f) lower tariffs and reductions of other forms of industry assistance to reduce the scope for unions to extract concessions from ‘protected’ employers;
(g) restrictions of award coverage to unionised workplaces, the abolition of comparative wage justice and allowing the ‘freedom’ of employees and employers to negotiate directly on all matters relating to employment; and,
(h) so-called equality of standing before the law of employers and unions through the use of, for example, the Trade Practices Act and the common law in the industrial arena.
Some of these issues are discussed elsewhere in this book, especially in the McKenna and Shaw chapters. The reader is referred to the ACTU publications Future Strategies for the Trade Union Movement and Australia Reconstructed and the Labor Council of NSW’s A Fair Deal at Work for some useful arguments in answer to the New Right’s industrial relations agenda.
It might be noted that the presentation of the New Right’s base agenda, as outlined above, exaggerates its coherence as most of its policy promulgations might more accurately be regarded as fulminations. Nonetheless, the expected results desired by the New Right from such changes would include:
- reductions in union power, leading to more ‘freedom’ for individual employees;
- more radical experimentation in employment packages in the absence of the current restrictive uniformities imposed by the so-called lowest common denominator approach;
- employees would resolve problems with employers at the enterprise level in a more conciliatory and less time consuming and legalistic process;
- common law contracts and new types of unregulated agreements would lead to more flexibility and increased productivity.
The debate between what might be loosely called the deregulationists and the interventionists rests on both philosophical and empirical grounds. In relation to the former ground, the deregulationists share a commitment to the workings of the ‘free market’ and see unions and regulatory intervention as necessarily leading to less than optimal outcomes. Even those who concede that market failure is a problem will stubbornly assert that regulation always has negative externalities and regulatory failure will be greater than market failure. Most of these views are reflected in the Federal Liberal/National Parties’ policy on industrial relations. One of the objectives of this policy is to “introduce greater certainty and predictability into industrial relations”. There are many reasons to be cautious about such an alleged outcome, however, as will be outlined below.
It is interesting to reflect that the ideological prescriptions that the New Right proposes in 1990 is the same medicine that would have been prescribed in the 1970s. A patient, or in this case the Australian community, is entitled to be sceptical about remedies which are the same whatever the condition.
Some Myths About Reform
Let us examine some of the reasons often cited to change the existing system. Even though Professor Niland is horrified by attempts to paint him as part of the New Right canvass, there are considerable overlaps between the Green Paper’s critique of the Australian industrial relations system and those of the radical conservatives. Briefly, three matters frequently put forward in favour of radical change are worth exploring. First, the claim that the existing system does not sufficiently encourage an enterprise focus; second, the “there is a lack of flexibility in the system” claim; third, the argument that support for a productivity orientation is crucial to any worthwhile industrial relations system and that this orientation is missing from the centralised system of conciliation and arbitration. These three claims are beliefs shared by Niland and the New Right even if, between them, different philosophical and practical arguments underpin their advocacy of particular changes.
As earlier sketched, we live in an era of significant change in the processes, procedures and orientation of the industrial relations tribunals. In 1986 the Federal Australian Commission’s Second Tier decision significantly broke with the past and initiated a new era of industrial relations change. The previous December 1987, the Commission rejected the ACTU’s arguments in favour of full wage indexation. After awarding a flat increase the Commission required the parties to justify further increases of the order of 4 per cent through bargaining on work and management practices leading to improvements in productivity arrangements. It is true that the results of the second tier experience were mixed. Within the union movement there is the catchcry – especially now with the award restructuring process – that “there be no return to negative cost offsets or a return to the second tier”. On the other hand, the BCA study released last year under the direction of Professor Fred Hilmer observed that in most enterprises real productivity improvements to the level of the 4 per cent paid through the second tier arrangements were rare. Professor Hilmer’s report went on to comment that this illustrated systemic failure of the conciliation and arbitration process: the failure to achieve such productivity gains illustrated the inability of the Commission to deliver or effectively oversee significant productivity improvements. Of course there is an alternate explanation to that offered by the BCA report and that is a conclusion which I favour. Namely, if the rules of the game were so loaded in favour of a productivity orientation and yet the results were unfavourable in many industries or enterprises, then this points to the incompetence of management.
Management’s inability to focus on overall restructuring of its workforce to achieve career paths, training, increased mobility of its workforce, wages based on experience and skills, reductions in classifications and so on, continues to bedevil worthwhile industrial relations changes at hundreds and thousands of workplaces throughout Australia. So it was in 1987 and so it continues to be the case today.
Even though I regard the experiment with the second tier as justified and worthwhile, I also understand the absolute hostility which is felt about the second tier experience by many trade unions. There were different results in different industries and enterprises. What proved to be marvellous in the metal industry, Kelloggs at Botany or the Sydney Water Board was not replicated elsewhere. Unionists in the retail, clerical and local government industries, for example, were disadvantaged by dealing, in many cases, with myopic employers who had little interest in quickly and efficiently achieving reasonable second tier outcomes. In place of that was the “let’s get rid of the cafe bar” approach, the elimination of rights and entitlements as the exclusive focus of the industrial relations change on the employer side. Nonetheless, as the Shaw and Dabscheck chapters in this book note, there is no mistaking the significance of the 1987 National Wage Case and subsequent experience. Out of this has emerged the current system which emphasises a more flexible approach to industrial relations reform at the industry and enterprise level. Underpinning much of what is now occurring at the Federal level is the Industrial Relations Act, 1988.
Any advocates of systematic change need to justify why these new arrangements are unsuitable and why significant radical reform need be undertaken in contrast with less sweeping changes as will be argued, below. But before doing so, let me briefly state some arguments concerning the three points of criticism mentioned at the opening of this section.
Does the existing system insufficiently encourage an enterprise focus? It is not always certain what the critics are getting at here, but, it seems obvious that both an enterprise and an industry focus is required in industrial relations. For example, if training at the workplace were only oriented to what was necessary at a particular workplace, then the development of portable, transferable skills and basic skill standards that would be achievable across industries would be impossible. That is why unions are now emphasising the need for career paths based on competence at an industry level as well as the skills needs of an individual enterprise. With the possible exception of the Nestlé’s case, which will be referred to later, there is little difficulty with any company negotiating with unions an enterprise agreement which complements or in some cases, replaces basic award rights anywhere in the workplace.
The second issue to deal with is the “there is a lack of flexibility in the system” claim. I think that earlier comments in this paper provide a partial answer to this point. The conciliation and arbitration processes in 1990 are radically more flexible than they were five or more years ago. But “are they flexible enough?” is a more subtle point which is answered below. The third usual line of attack is the argument that “there is an absence of productivity orientation“ in the system. Nonetheless, it should be conceded that the 1989 National Wage Case guidelines give large scope for improvements in productivity. But as the second tier experience illustrates, there are many factors at work in determining productivity growth including the realisation of National Wage Case guidelines in a particular industry or enterprise. They include the economic climate; the social infrastructure, including education resources; the abilities of management, the skills and training of employees, investment and labour practices. First in importance in my judgement is the inflation level in determining productivity performance.
So, in summary, much of what is usually said in favour of the reasons for radical reform disintegrate under examination. But that is not an argument for no change.
What Reforms are Worthwhile
If I were running New South Wales, I would take my cue from one of the statements contained in Volume 1 of the Niland Report, namely that there ought to be much more complementarity between the federal and NSW systems of industrial relations.
I would do the following things:
One, restructure the NSW Industrial Commission, to integrate the roles of commissioners and presidential members. The Federal arrangements, including panels and shared responsibilities between both Divisions, is a good guide to what might happen in NSW.
Two, encourage industry and enterprise negotiations and agreements above the floor of awards. In addition, particular agreements between unions and employers might oust awards subject to overview by the Commission. It beats me why on earth it is necessary to establish one overall minimum standard across all industries (as advocated in the Green Paper), rather than relying on the existing minimums which vary according to different awards in different industries.
Three, the features of the Federal Act in Section 112 and 115-118 which encourage single union agreements at the enterprise level at greenfield sites should be adapted with certain improvements to NSW law. The Federal law is now couched in terms requiring conflict to be established before the Commission has a role in assisting the parties to reach an agreement. This should be modified in the NSW law. It should be possible for the parties to be in agreement rather than seeking to prove some artificial conflict to enable the matter to reach the Commission. I also favour the Commission consulting with interested parties, including competing unions as an agreement is finalised.
Four, changes on brownfield sites should be facilitated by vesting with the Commission the right to modify award and union coverage depending on a number of criteria, including career paths, productivity related training, the interests of employees, streamlining work practices and classifications and overall efficiency of the enterprise. Such a right vested in the Commission might act as a sword of Damocles encouraging participants to be much more sensible and cooperative in the bargaining processes. The Olex Cables Case in the Federal Commission, where Mr Justice Munro awarded coverage of a whole industry to a union where there was industrial demarcation disputation and conflict, is an example of what might happen at the State level.
Five, together with a public interest test, it should be harder for agreements collectively bargained between unions and employers and agreed to at the enterprise or industry level to be overturned. Recently, the NSW Minister for Industrial Relations, Mr Fahey, made some remarks which referred to this issue in the light of the public interest test argument. The Minister stated that he disagreed with a recent agreement in the funeral industry providing for one day off every month as “against the public interest”. The Minister also stated his annoyance with a full bench determination of the Australian Industrial Relations Commission which overruled an agreement between the Cold Storage Union and the Nestlé Company at the company’s plant at Tongala in northern Victoria. He implied that he thought that that agreement was in the public interest and should not have been overturned. I agree with him on the last point. It will be interesting to see what emerges in the Industrial Relations Bill to be presented to the NSW Parliament as to what the public interest test will be. I am in favour of a wide discretion being given to the Commission and that the breach of existing guidelines shall not be ipso facto a reason for overturning an agreement.
Six, choice in tribunal members might be something worth experimenting with. At the Federal level, Mr Justice Ludeke argued for this reform in his submission to the Hancock inquiry. I think something similar can be adapted to NSW and would be in the interest of encouraging the abler of the tribunal members. Lastly, in every respect the NSW Act should complement and reflect the Federal legislation.
In the last Federal election, a virtual referendum was held on more radical industrial relations change and this was rejected. This is an additional reason for the NSW government to adopt the approach of complementarity. It follows that I do not support more radical reform. There is no need to demolish the bathroom as well as throwing the baby out with the bathwater.
Therefore, I do not favour the creation of bargaining units in the terms stated in the NSW government’s Industrial Relations Bill (1990) or the anti-union implications of that legislation.
In my view, the whole debate on industrial relations would be recast if inflation was much lower that it currently is. For this reason are apposite the reported remarks by the Governor of the Reserve Bank, Mr Bernie Fraser, who claimed that the Australian government needs to adopt a strategy in 1990 to halve our inflation levels. Think how differently much of the debate about industrial relations would be if Australia’s inflation level was 4 per cent or lower. The Australian Manufacturing Council draft (October 1989) report on Australia’s competitive industries commented that the biggest single factor acting against more investment and expansion of employment in manufacturing and other industries is Australia’s traditionally high interest rates and inflation levels.
Australia’s productivity levels would be much more substantial if the rate of inflation and the cost of borrowing money was much lower. According to a Report to the May 1990 EPAC meeting:
With nominal labour costs rising more rapidly in Australia than in many of our trading partners, and with the exchange rate relatively firm, all the gains in international competitiveness achieved through devaluation and real wage restraint in the period after 1985 had disappeared by the end of April 1990.
The report went on to conclude that:
In coming years, underlying productivity movements (that is, excluding cyclical effects) can be expected to reflect the investment surge of the late 1980s, as well as the lagged effects of recent microeconomic reforms. But many of our international competitors have embarked on their own wide-ranging programs of reform. And Australia’s underlying rate of cost inflation still exceeds that of our trading partners. For Australian industry to improve its ability to compete, it has to improve its productivity and inflation performance not only relative to its own standards, but also relative to overseas rivals.
Thus, the task of improving Australia’s competitiveness is a never ending race to match and improve on past performances and to keep pace with the competition and performance of the leading OECD countries.
Unfortunately, at the heart of Australia’s industrial relations dilemma is the fact that both these statements are true: Australia’s real unit labour costs have, in the late 1980s, outstripped that of the OECD average; it is also true that, in the same period, Australian wage and salary earners have experienced real reductions in purchasing power. Both statements are factual but in the Australian industrial relations debates only one side or the other is usually emphasised depending on the contributor. Thus, the set routine is for supporters of the Accord to brag about the Accord processes’ contribution to achieving enormous employment growth – the “dividend of wage restraint” as it is often said. In contrast are the assertions that Australia’s economy can no longer “afford” unsustainably high real unit labour costs. It is little wonder that descriptions of Australia’s recent industrial relations experience is a bit like looking at Kurasawa’s Rashomon movie. Different worlds are described in ways that contradict each other.
In my judgement, it would be naive to rigidly argue for retaining the existing system. Such an argument would be incoherent. This is because the system is alive and changing, subject to new precedents and affected by the arguments of the parties and societal changes. In the three years since the 1987 National Wage Case decision, there has been a progressive move to a flexible three-tier system of national award determinations, industry agreements and enterprise bargaining under a centralised framework. But the achievement of a more flexible system and the wage restraint which has occurred has been challenged by the shrill cry that “it is not enough”. Such calls gain some credibility because of Australia’s poor inflation record. But that is not to say that a deregulated or a re-regulated system ousting the centralised system of compulsory conciliation and arbitration as it is currently developing would be economically justified or fair. Indeed, it would be a cruel hoax if, under the banner of liberalism and labour market deregulation, the New South Wales government were to implement the quit-the-system aspects of its industrial relations policy. For although the advocates of opting-out of the conciliation and arbitration system usually dress up their claims as opening up employment opportunities, the reality would be that vulnerable sections of the workforce could be far worse-off under such a system.
To those who argue for more sweeping reform compared to what is argued for here, I am tempted to answer like Sam Goldwyn who once responded to a difficult situation by saying: “In that case I’ll give you a definite maybe”. Maybe some further substantial reforms are worthwhile but I have not heard a substantial case made out. One thing I am sure of is that the mirror that is often held up to show how bad things are not only distorts reality but displays the opposite of what really happens.
- Walker, K.F., Australian Industrial Relations System, Harvard University Press, Harvard, p. 435.
- Merrifield, L.S., ‘Wage Determination Under Compulsory Arbitration’, George Washington Law Review, Vol. 24, no. 2, 1955, p. 158.
- Ibid., pp. 89-90.
- Ibid., p. 391.
- Ibid., p. 397.
- Donn, Clifford, ‘Australian Compulsory Arbitration – Some Proposed Modifications’, Journal of Industrial Relations, Vol. 18, No. 4 1976, p. 326.
- See Plowman, D., ‘The Hancock Inquiry: Models and Strategies for Change’, p. 8; also, Hancock, K.J., ‘Compulsory Arbitration Versus Collective Bargaining: Three Recent Assessments’, Journal of Industrial Relations, Vol 4, No. 1, 1962, pp. 20-31.
- Isaac, J.E., ‘Professor Niland on Compulsory Bargaining and Compulsory Arbitration in Australia’, Journal of Industrial Relations, Vol. 21, No. 4, 1987, p. 471.
- Walker, ibid, p. 451.
- Ibid., p.17.
- Isaac, ibid, p. 469.
- Quoted in Walker, ibid, p. 444.
ACTU, Future Strategies For The Trade Union Movement, Melbourne, 1987.
ACTU/TDC, Australia Reconstructed, Australian Government Publishing Service, Canberra, 1987.
Andersen, Hans, ‘The Snow Queen’, in Kingsland, L.W. (editor and translator) Hans Andersen’s Fairy Tales A Selection, Oxford University Press, Oxford, 1984, pp. 228-272.
Australian Industrial Relations Commission, Nestlé Australia Limited and Federated Cold Storage and Meat Preserving Employees’ Union of Australasia (Section 115 Application for Certification of an agreement determined by a full bench presided by the President, Mr Justice Maddern), 22 January 1990, Print J1163.
Australian Industrial Relations Commission, Olex Cables and National Union of Storeworkers, Packers, Rubber and Allied Workers and Others (Demarcation decision by Mr Justice Munro), 16 February 1990, Print J1534
Australian Manufacturing Council, The Global Challenge: Australian Industry in the 1990s, Pappas Carter Evans and Koop/Telesis, Australian Government Printer, Canberra, July 1990.
BCA, Enterprise-Based Bargaining Units. A Better Way of Working, Report to the Business Council of Australia by the Industrial Relations Study Commission, Volume 1, BCA, Melbourne, 1989.
Dabscheck, Braham, Australian Industrial Relations in the 1980s, Oxford University Press, Melbourne, 1990.
Donn, Clifford, ‘Australian Compulsory Arbitration — Some Proposed Modifications’, Journal of Industrial Relations, Vol.18, No. 4, 1976.
EPAC, Micro Economic Reform, Paper for the May 1990 Meeting of EPAC, mimeo, 44 pp.
Fahey, John, ‘Enterprise Focus’, Address to Australian Investment Conference’s Enterprise Focus Seminar, Regent Hotel, Sydney, 28 February 1990, mimeo, 12 pp.
Fraser, Bernie, Speech to the Canberra Branch of the Economic Society, reported in Australian Financial Review, 20 April 1990, pp. 1-2.
Hancock, K.J., ‘Compulsory Arbitration Versus Collective Bargaining: Three Recent Assessments’, Journal of Industrial Relations, Vol. 4, No. 1, 1962, pp. 20-31.
Higgins, Henry Bournes, A New Province For Law and Order, Constable and Company, London, 1922 [earlier published in journal format].
Hilmer, Fred, New Games, New Rules, Angus and Robertson, Sydney, 1989.
Isaac, J.E., ‘Professor Niland on Compulsory Bargaining and Compulsory Arbitration in Australia’, Journal of Industrial Relations, Vol. 21, No. 4, December, 1987.
Labor Council of NSW, A Fair Deal At Work: The Union Movement’s Agenda For Industrial Relations Change in New South Wales (submission to Professor John Niland), Sydney, 1988.
McAuley, James, ‘The Grinning Mirror’, in Kramer, Leonie, James McAuley Poetry, Essays and Personal Commentary, University of Queensland Press, St. Lucia 1988 pp. 67- 77.
Merrifield, L.S., ‘Wage Determination Under Compulsory Arbitration: The Basic Wage in Australia’, George Washington Law Review, Vol. 24, No. 2, December 1955.
Niland, John, Collective Bargaining in the Context of Compulsory Arbitration: An Australian Dilemma, Department of Industrial Relations, University of New South Wales, Kensington, 1976.
Plowman, David, ‘The Hancock Inquiry: Models and Strategies For Change’, Department of Industrial Relations, University of Western Australia, Discussion Paper 3, mimeo, 41 pp.
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Walker, K.F., Australian Industrial Relations System, Harvard University Press, Harvard, 1956.
I mentioned in this article that the ACTU’s Secretary Bill Kelty deployed childrens’ stories and analogies in the speeches he sometimes gave. He had a young son, Michael, at the time. It could be a very effective, engaging, and whimsical way of dealing with a serious issue. My use of ‘the grinning mirror’ and The Snow Queen was a homage to Kelty’s technique.
This article argued that in a dynamic, changing system, ‘wholescale change’ was unnecessary.