The everlasting battle: the background to the industrial relations wars


The everlasting battle: the background to the industrial relations wars
  1. The everlasting battle: the background to the industrial relations wars
    theage.com.au
    It's the economic debate that just won't die, even when it's dead, buried and…
    Health

It's the economic debate that just won't die, even when it's dead, buried and cremated.

The fresh political war over penalty rates, and new ACTU Secretary Sally McManus' controversial comments about the rule of law, are just the latest flashpoints in a century-long and bitterly fought battle between Aussie bosses and their workers, which began when a bunch of sheep shearers gathered under a ghost gum tree in central Queensland in 1891 to strike for better conditions and ended up creating the Australian Labor Party.

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Police escorting non-union labour to Patrick Stevedores through the MUA picket lines in 1998. Today, strike action is low. Police escorting non-union labour to Patrick Stevedores through the MUA picket lines in 1998. Today, strike action is low. Photo: Jonathon Marsden

Australia's one-of-a-kind industrial – or workplace – relations system has evolved over time into a set of rules, regulations and institutions designed to strike the best balance between the interests of employees and employers.

One worker's wage is, after all, another business person's cost of doing business.

Few disagree there is a need for workers to band together to overcome an inherent imbalance of information and negotiating power between capital (bosses) and labour (workers). 

But it is possible for union power to go too far, just as it is possible for employers to screw workers down too far in the name of community standards. 

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As the Productivity Commission explained in its 2015 review of workplace laws: "Labour is not just an ordinary input. There are ethical and community norms about the way in which a country treats its employees."

Any economics textbook will tell you that if prices are set above market equilibrium, demand for that product will fall.

If wages rise too fast, there will be less demand for labour, leading to higher joblessness.

The commission again: "The challenge for a workplace relations framework is to develop a coherent system that provides balanced bargaining power between the parties, that encourages employment, and that enhances economic efficiency. It is easy to both over and under regulate."

Here's the rub. Because we're dealing with ethical and social norms, that balance is ever evolving. We used to think it was OK to have just one week's mandated annual leave. Maybe one day we'll think it inhumane to have a two-day weekend – not a three-day one.

At various points in our history, the balance of power between capital and labour has shifted.

For much of the early and mid-20th century, Australia was celebrated as a "workers' paradise". High trade tariff walls protected domestic industries – profits and wages alike – from foreign competition.

Joblessness was low, and workers were able to push for super-sized pay rises, usually by drawing on their collective power to strike.

Industrial action reached a peak in the first three months of 1974, when a record 2.5 million working days were lost to industrial disputes, be it strikes or lock-outs.

Higher wage demands from scarce labour fuelled double-digit inflation, which would peak at an eye-watering 17.7 per cent in 1975.

Realising there was a problem, the Whitlam government gave support to a new system of wage indexation.

But joblessness began to climb, from 2 per cent in the mid 1970s to 8 per cent by the early 1980s.

The Hawke-Keating era

In 1983, the newly elected Hawke government endorsed a Statement of Accord with the ACTU under which unions agreed to link pay increases to cost of living and productivity gains, in return for increased spending on social programs.

Meanwhile, the Hawke Government set about dismantling the wall of tariffs protecting Australian industry, exposing industries to fierce international competition.

The power once commanded by Australian industry to generate large economic rents was undercut, as was the ability of workers to lay claim to their share of the super-sized profits with super-sized wage demands.

In this new cut-throat competitive environment, industrial action became more damaging to the economy.

In 1993, the Keating government introduced a new "enterprise bargaining" system, which shifted to a more decentralised wage bargaining system, and also came with a new legal right for unions to strike, under certain conditions.

Strikes had, until this point, always been unlawful in virtually all cases. But rarely had employers ever sought to extract penalties from unions or workers for taking action.

This new right to legally strike came with harsher penalties for illegal strike action. Days lost to industrial disputes fell sharply as a result.

Post-accord era

Three years later, the newly elected Howard government formally abandoned the accord and introduced the first form of individual contracts to the workplace relations system.

A decade later, Howard swallowed his own political poison pill by passing the highly unpopular WorkChoices legislation, which removed a long standing "no disadvantage test", which ensured employers were unable to sign employees up to individual contracts which left them worse off.

The laws only stood for a year or so before the government re-instated, under employment minister Joe Hockey, a "fairness test" to protect workers.

The main principle behind the WorkChoices push was to make the industrial relations system more efficient by drastically reducing – from 4000 plus – the number of state and federal awards governing pay and conditions.

When the newly elected Rudd government abolished WorkChoices, it sought to continue this spirit of reform by securing agreement from state governments to reduce the number of awards down to about 122, which remains the case.

The Labor government's 2009 Fair Work Act also retained some of the WorkChoices-era reforms to strike laws – much to the frustration of unions. Rules requiring unions to hold a secret ballot before being able to legally strike remain in place.

Having promised that WorkChoices is "dead, buried and cremated", the Abbott and Turnbull governments have done little to meaningfully alter the balance of power between employers and employees, besides reinstating the Australian Building and Construction Comm…

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