Notes of a speech delivered sometime that year on the issue of industrial relations reforms in NSW.
The symposium is about the future.
It is difficult at the best of times to speak with certainty about the future. It is particularly difficult to do this with industrial relations at this time. The best approach to understanding our future operating environment is not to attempt to forecast events but rather to examine key trends or issues which are already evident and comment about potential impacts of these events on the main players. In my case I will focus on the impact on the trade union players.
Given the time constraint I have, I propose to highlight two key issues.
- The industrial relations framework debate;, and
- The decline in trade union numbers and the most appropriate structures to reverse the decline
The Industrial Relations Framework
The debate on the most appropriate industrial relations framework is probably the most public of all the current issues.
The public debate is an extremely complex, with prominence being achieved by the extremists. This is because this debate, in its simplest form, is a classic regulation versus deregulation debate. As such, it has all the characteristic irrationalism associated with these types of debates. A hardcore on each side of the debate have attempted to hijack the discussion to suit their own political agenda.
“The hard right deregulationists” assert that a regulated labour market is inconsistent with free enterprise, and, if it continues, will undermine our economic competitiveness by imposing less than optimal productivity outcomes on Australian producers faced with heightened global competition.
A milder and more sophisticated version of this position was recently advanced by the Business Council of Australia in its report on enterprise-based bargaining units, subtitled “A Better Way of Working”.
On the positive side, the Business Council report contains some important and original survey material. On the negative side, the report has many inconsistencies. The report, for example, claims that industry productivity levels across Australian industry is conservatively 25% below comparable countries, largely because of the current rigid industrial structures and the award focus. Yet to maintain its credibility, the report has to acknowledge that, in reality, there are mechanisms under the current system to accommodate those that seek flexibility. In fact, the report provides a comprehensive list of these mechanisms. Thus having destroyed their own argument the authors are forced in the final analysis to assert that the problem is not the industrial relations system so much, as the culture the system breeds, and the powerful yet subtle ways this culture influences behaviour. The difficulty for the report’s authors is that if one accepts that low productivity levels are really a function of culture and behaviour rather than the direct structure of the industrial relations system, then alternative explanations are possible for this situation. In fact, the report itself touches upon some credible alternative explanations for our comparatively lower levels of productivity. The reliance on Taylorist methods of work organisation, and the failure to manage human resources properly are two examples of alternatives identified by the report.
Another major problem with the report is its failure to define terms with sufficient precision to exclude confusion. For example, the report on many occasions contrasts the industrial relations approach to the employee relations approach. But it never clearly specifies what is meant by employee relations. The best possible interpretation I can put on this term is that it refers to an amalgam of the sort of “Quality of Work Life Programmes” that were fashionable in the United States in the early seventies with a form of higher order “Quality Circles”. Most of these types of programmes have already been tried, by many firms, and discarded after some initial success, as being of little use in the long term in reducing conflict and lifting productivity. These programmes failed because they dealt with the symptoms of the problem, not the real causes of workers dissatisfaction with work.
To deal with the real problems it is necessary to start looking at the way work is organised – i.e. with Taylorism.
The report on several occasions briefly mentions the role of Taylorism in the evolution of current work arrangements and management organisation, but fails to properly assess its impact on current industrial relations practice. This is perhaps understandable given that the theme of the report is primarily the role of the current industrial system in inhibiting flexibility and productivity growth, the last thing the authors need is another cause that may provide a better explanation, but in the process ruin a good theme.
Moreover, if they attributed to Taylor what is his due, they are left with the inescapable conclusion that the problem is not the system but their own members failure to invest in the new technologies and workforce training that are now available and thereby create meaningful and productive work which benefits both the employer and the employees. Clearly, it is more convenient for the Business Council not to explore this issue to its logical conclusion. After all, we do not want to ruin a good story.
On the other extreme edge of the framework debate are those sometimes found in the labor movement that believe that any talk of an enterprise focus should be dismissed as an attempt to undermine trade unions and their hard fought for award conditions. This view often posits that regulation in all spheres of economic activity is necessary to deal with the excesses that will inevitably arise when the free market is left to its own devices. The problem is that if one starts from this position then, by definition, you are almost forced to look for things to regulate. The irony is that many of the strong supporters of the centralised wage fixing system today, only a decade or so ago, dismissed the same system as a scheme for the bosses to restrict the workers getting what was rightfully theirs. We all remember the “Bosses Court” rhetoric.
A milder version of this view is the position that sees the centralised wage fixing system as a mechanism for income redistribution in the interest of social justice. Supporters of this view argue that it is not possible to have enterprise bargaining and social justice.
In my view, they confuse the role of the industrial relations system with the role of the political system. The political system is where the decisions on social justice should be made. Once made, there are a number of mechanisms including the wage fixing system in a regulated labour market that can be used to promote “social justice”. Overall, it is essential to have a wages system and ensure social justice objectives are met. Alternate mechanisms can be used. For example, appropriate taxation and social expenditure policies can provide a substitute mechanism.
The third group in this debate are those like myself who believe that the system has very real problems, however, who are not convinced that either side has the answer or, for that matter, that an answer exists at present. As a consequence the best available short term approach is one that seeks to test the limits of the current system before we dismiss it as inappropriate to our needs. The one thing that is clear, is that the extremists on both sides of this debate fail to appreciate that internationally there are a number of examples of vastly different industrial relations systems that adequately meet their country’s economic requirement. The two most frequently quoted examples, at different ends of the spectrum, are Sweden and Japan.
The important point is that whilst a Federal Labor government exists, the framework debate will remain an academic debate, attempts to go it alone at the state level will result in confusion, and more importantly will not provide a fair testing ground for the alternatives. It is therefore not surprising that one of the most widespread criticisms of the Niland proposal heard amongst practitioners on both sides of the fence is that they won’t work in isolation to changes at the federal level.
It is my understanding that the New South Wales Minister for Industrial Relations will be making a statement on these matters today. I am sure the minister’s statement will contain some important issues that will require a detailed response from the trade union movement. However, it is my preliminary view that no matter how radical the changes are that are announced, their impact in practice, will, in the short term, be constrained by their isolation to New South Wales. The difficulties of running a specific New South Wales approach to industrial relations is already evident in the structural efficiency process.
The New South Wales government is currently attempting, in the face of Federal and State Commission decisions to the contrary, to turn the structural efficiency process into a re-run of the second tier. The crude trade-off approach adopted by the government shows an extreme lack of creativity. It also shows that despite all the rhetoric about managing better, the NSW government still has not come to terms with modern approaches to human resources management. On these issues it is still operating with text books written in the early fifties.
Moreover, the way the government, has sought to approach the structural efficiency negotiation at the statutory authority level shows clearly that the corporatisation process is fast becoming the farce its critics expected it to be. One of the key tenets of corporatisation is the depoliticisation of the activities of the government trading entities. Yet, despite formal accountability and new salary packages which far exceed what is available to average employees, we find that the managements of these organisations which are supposed to be well on the path to corporatisation are forced in practice to submit their structural efficiency documentation to central government agencies for approval prior to agreement with the unions. Other than the increased cost of management, what is the difference between this new approach and the old approach?
It is because of its lack of vision on these matters that the New South Wales government is placed in the position of developing scapegoats for its failings. It has always been convenient to blame the unions and the ‘system’ for bad management practices. Unfortunately for the government, this type of lowest common denominator approach to problem solving has not worked in the past and will not work in the future.
In short, the framework debate, notwithstanding the Greiner government’s attempt at a distinctive state government approach, is a debate that will ultimately be resolved in practice one way or the other by the next Federal election.
If Labor is returned to government at a Federal level, it is likely that the current system will remain largely intact. Centralised national wage decisions and a strategic application of these decisions will dominate industrial relations practice. The general feeling I pick up from most practitioners is that this is an outcome that they can live with. After all, supporters of the current approach would argue that it has been successful in creating a more competitive economic environment, thereby, facilitating greater investment opportunities. The recent survey by the Access Economics research group which pinpointed over 90 billion dollars of investment projects, either underway or in the pipeline would seem to confirm the wisdom of pursuing the current approach to industrial relations.
Industrial relations under the fourth Hawke Government would follow much the same pattern as the past, i.e. a gradual evolution towards enterprise industrial relations within a framework that restricts aggregate wage outcome to those the government believes are economically appropriate. The challenge for the Greiner government is to recognise its limitations to influence these matters and work creatively within the system like everybody else to ensure the best possible outcome. It is the same challenge we in the union movement face if there is a change of the federal government at the next election.
It is my strong belief that the Greiner government would be industrially irresponsible to make radical changes to the New South Wales industrial relations system prior to the outcome of the next Federal election. Any changes the government proposes to make in the meantime should be changes to bring the two systems into closer alignment. The fact is that given the recent decision by the State Commission to apply the Federal wage decision at a State level, there is no need or point to change the current system for at least six months, i.e. the minimum time required to implement the structural efficiency process. Any radical changes prior to the completion of the structural efficiency process would cause havoc and could sabotage the process at both the State and National level.
If it is accepted that the federal election result is the key to understanding the year ahead, it is appropriate at a forum such as this, to make some comments on the alternative scenario and its impact on both State and Federal industrial relations practice.
The difficulty in assessing the impact of the election of a Federal Liberal government on industrial relations practice is the conflicting messages emanating from the various Liberal Party policy statements and spokespersons.
The Liberals economic action plan, for example, states that “it is a blueprint for higher real wages growth underpinned by productivity growth”.
Yet, as late as yesterday, the Opposition spokesman on industrial relations was quoted in The Australian newspaper to be aiming for much lower wages outcomes than in recent years, with the possibility of some workers getting nothing, leading the The Australian’s commentator to conclude that under the Liberals, wage earners will be facing big cuts in their real income.
The Liberals rhetoric is all about the need to deregulate the labour market. Their recently released economic action plan for example, claims that a major ingredient of their approach is that it will allow employers and employees to negotiate voluntary agreements on wages and conditions of employment at the enterprise level. This is clearly a form of deregulation and is consistent with rhetoric.
The same document, however, also makes the claim that the Industrial Relations Commission will continue to settle disputes and determine the wages and conditions of employment for a significant proportion of the workforce. Moreover, the document also claims that the centralized wages system should encourage enterprise wage negotiations which take into account the impact of its decisions on the national economy.
Clearly, if this is what the Liberals mean by deregulation, it is difficult to see how industrial relations practice under a Federal Liberal government will change one iota. We already have the potential for this form of deregulation under the current system. The difference of course is, the Accord which has ensured that the unions have operated responsibility in this environment.
In short, this policy in its current form is a “Claytons” policy. It is a marketing exercise designed to appeal to everybody.
Confronted by this non-Accord environment, and if I was irresponsible, my advice to affiliates of the Labor Council would be that if you are a big strong union with plenty of muscle like the building unions opt out of the system and go for your life. If, however, you are a weak union with little bargaining power, stay within the system and pick up whatever wage increases the system will give to maintain its credibility, or alternatively, amalgamate with a big union.
If you are in a cyclical industry a strategic approach of jumping in and jumping out to suit your immediate circumstances would be the best approach. In short, under this system, if you play your cards right, wage increases for all.
Clearly this policy has the potential to be a disaster. It is not full blown deregulation so it achieves none of the alleged benefits of deregulation. Nor is it able to facilitate negotiations between peak bodies to achieve agreed national wage targets.
In short, like any policy designed to please everybody, it will end up pleasing nobody. It is difficult to believe that the Liberals would be so naive as to advance such a policy after all the hard line deregulationists in or about to enter the parliamentary party have on repeated occasions claimed that deregulation of the labour market is the single most important issue that distinguishes the Liberals approach to economic management from the current government’s. There must be a hidden agenda. One clue to understanding the “hidden agenda” that underpins the Liberals approach is provided by former Liberal MP and prominent dry, John Hyde.
Hyde advises those wanting to change the current industrial relations framework to study Margaret Thatcher’s approach to industrial relations reform. According to Hyde:
She did not go bull-headed at the unions. Heath did that. She changed the legislation a little at a time to reduce union privilege. On each occasion making very sure that she fought from the moral high ground. No occasion justified a union showdown… the softly, softly opinion is available to an Australian government and is, in fact, implicit in the opting-out proposal floated by the opposition.
Clearly, the framers of the Liberal Party’s policy document have taken Hyde’s advice. The Thatcher path to labour market deregulation is the Liberal path to deregulation. This explains the apparent inconsistencies in current Liberal policy statements.
Unfortunately for the Liberals they could not have picked a worse path to follow. Just look at Britain today, after more than a decade of this approach, 10.5% wage inflation, a balance of payments crisis, record high interest rates, high unemployment rates, regional economic imbalances, and finally political crises.
And what of British unions, they are lean and mean and fully prepared to exploit the current environment. Surely, this is not preferable to our current industrial relations climate. Could the current investment boom survive a ‘summer of discontent’?
I would now like to turn to the other major issue confronting unions in the next period, i.e. the question of declining trade union participation rates.
Without a doubt the development of strategies to reverse the decline in trade union organisation is the key challenge facing the union movement. It is a challenge that has to be addressed immediately, if it is not, it is my belief that by the turn of the century, unions will be nothing more than the subject matter for academic history theses.
Some argue that the decline in trade union participation rates is something we should not be concerned too much about. To the contrary, we should be proud, for it indicates we have successfully fulfilled the task set by the founders of the movement. This “voluntary liquidation approach” is, in my opinion, premature. The trade union movement still has many tasks to complete, not the least of which is the task of developing ongoing mechanisms to ensure workers are able to fully participate in a meaningful way in the design making processes that affect their day to day working life. We as a movement have not even touched the surface on this issue.
Assuming that unions still have relevance and important tasks to complete, the key question is what strategy will best reverse the current decline, and more importantly lay the basis for future growth.
The “received wisdom” on this issue currently, is that union amalgamations are the key strategy.
Supporters of this view hold that it is “obvious that Australia has too many unions” and that the solution to current difficulties is also “obvious”. Unions, we are told “need to amalgamate” in order to form “larger, more efficient units”.
In more recent policy documents, supporters of this view, also claim that it is “self evident” that larger unions will create economies of scale that free up resources which can be targeted at providing services and recruitment campaigns. There has been little real debate on this matters within the trade union movement. After all if something is “obvious” or “self evident”, what is there to debate? Only a fool would debate the obvious.
So at the risk of being regarded a fool, I would like to question the “obvious” and self-evident”.
First, I question the notion that because an organisation is big it somehow lends itself to greater efficiency. The real issue is not size, but whether a task or a group of tasks is performed efficiently, i.e. it is performed with the optimal amount of resources required. Strictly speaking the opportunity costs associated with the activity should also be assessed. The size of the organisation is of itself not a determinate of efficiency. There are countless examples of large inefficient organisations and small efficient organisations and vice-versa.
In short, it is not obvious that “big is better”. The current trend in many private and public sector organisations to smaller planning or business units is a clear reversal of the previous trend to large centralized structures. In my view, it is an experience we in the union movement should examine carefully before we rush headlong like lemmings into large structures which may have the opposite consequence to that which are intended, i.e., they may act as an inhibitor to trade union growth. The appropriate size for an organisation is not “self evident”.
It requires a proper assessment of a number of considerations such as task, product, resources, operating environment, competition, to name a few.
In the same vein, I question whether it is indeed “obvious” or “self-evident” that the notion of economies of scale has applicability to trade union activity in anything other than a strictly limited sense. The phenomena of economies of scale is usually found in activities that are characterised by uniform standard outputs. As output of these uniform standard products increase, usually because of mass production techniques, average costs decline. In my experience, the environment that lends itself to economies of scale is a very different environment to the one I have had to operate in within the trade union movement. The amount of uniform standard activities that lend themselves to mass production techniques that are to be found in the day to day life of a trade union official are very small. In fact, most trade union activity is about dealing with very specific and often unique problems of members. Moreover, much of the activity is unplanned and reactive and therefore far from the constant and repetitive activities associated with notions of economies of scale. The opposite approach to the economies of scale approach, which seek to reduce costs during production, is the approach that seeks to reduce costs by controlling cost creators through measures to identify costs and make those responsible more accountable, i.e. the development of cost centres. In my mind, this approach lends itself better to trade union activity. The key point is that for this approach to be affective it requires smaller units not larger ones.
The other problem with the view that larger unions are needed to generate economies of scale is that it fails to deal with the other side of the coin, i.e. diseconomies of scale. At what level of membership are the alleged benefits associated with increased size lost? At what size will the functions currently handled by the union secretary require a personnel department within the union staffed by an army of specialist ‘human resource officers’? Clearly, the problems with what appears “self-evident” may require a fool’s examination to make them “obvious”.
A related issue that requires brief comment is the notion of industry unions. It is my view that in many cases industry unions are desirable and, in the interests of all, and therefore should be encouraged. However, in encouraging industry unions it would be a mistake to lose sight of the ultimate objective of the exercise, which is not industry unions so much as the reduction of the multiplicity of unions at the enterprise level. There are other methods of achieving this aim other than industry unions. On “greenfield sites” there are already examples of this occurring under current arrangements.
In conclusion, it is my view that the proposition that unions, to survive, must be big and organised along industry lines, is far from self evident. I believe the issue should be examined in more detail and alternatives considered. One viable alternative that requires examination is the view that sees union survival as being linked to smaller unions, structured in a similar manner to the early associations of workers that evolved into the industrial unions that we are so familiar with today.
There is a great deal of circumstantial evidence to support this view. Given the time constraints, I need to detail the argument another time. Briefly, however, supporters of this viewpoint to four sets of factors to support their position. These are: Firstly, the current technological revolution associated with the second industrial divide, i.e., the notion of flexible specialisation. Secondly, the growth of managerialism and its use of sophisticated human resource practices. Thirdly, the growth of statutory employee rights provisions. Fourthly, the end of intense political ideological warfare, and finally, on the economic level, the phenomenon of globalisation.
Those factors mean that rather than there being one homogenous market for trade union services there may well be a multiplicity of markets that require specialist products and targeted marketing programmes that are best undertaken in smaller structures.
This of course does not preclude a federation of these smaller unions or organisations into larger lobby groups to pursue broader interests.
This is an issue that will have to seriously be confronted in the year ahead.
Postscript (2014)
This was one of many speeches (in this case, I forget who the audience was) on industrial relations.
It was a snapshot of what I then thought, critiquing both NSW and national Liberal party views, as well as casting a critical eye over the ACTU campaign for “bigger is better” amalgamated unions.
I am sure that Michael Costa and Tom Forrest assisted me with this speech.
