Arbitration In Contempt
The Fridge Dwellers---Dreamtime in Industrial Relations
The day John Howard was elected Leader of the Opposition
there was pandemonium in the Melbourne head office
of the Conciliation and Arbitration Commission. All
the shelves in the library collapsed. Among the heap
of books on the floor was Mr Justice Higgins' A
New Province for Law and Order and Mediator
- Ms Blanche d'Alpuget's biography of Sir Richard Kirby.
The non-fiction area was upturned as well.
The Commission's library is quite small. Its rather
limited collection was built up after Sir John Moore
became President of the Commission. His predecessor,
Sir Richard Kirby, had little interest in books. The
truth is that most IR types don't read much. Their
preference is for wine and song. Their passionate interests
turn on cricket, football and racing, doing deals and
arranging fixes (all in the name of 'industrial relations
reality', of course).
When I left the Melbourne office of the Department
of Employment and Industrial Relations (DEIR) in December
1983 it, too, had a small library. What was missing
in books was made up in refrigerators. On my floor
alone there were twelve fridges---one for each three
squares of floor space. In these agnostic times, the
search for the Holy Grail had been replaced by the
pursuit of the 'real cold one'. The more refrigerators,
the more likely that nirvana would be attained.
There was an element of status involved as well. The
more senior the public servant, the more likely he
was to have a fridge in his office. I well remember
impassioned minutes going to Management Branch alleging
that this or that office simply could not operate without
a fridge---for entertainment, of course.
As well there was a Social Club, the key possession
of which was a huge fridge purchased by the taxpayer.
On arrival I was told that this was the venue for DEIR's
'happy hour'. In fact what had started out as a happy
hour had ended up as a happy day and, sometimes, a
happy week. The prevailing orthodoxy was that happy
hour discussions were essential for resolving key industrial
relations problems. So were long (liquid) lunches.
In this rather left-leaning department, it seemed that
alcoholism had become an (almost permanent) dialectical
transitional stage between socialism and communism.
From each according to his drinking ability, to each
according to his liver capacity. At my retirement (long)
lunch I ruefully reflected that during my four years
in the Commonwealth Public Service I had lost more
brain cells than any of my senior officers were born
with. This comment was not appreciated by some senior
officers. Some others, fortunately, could not comprehend
The Department of Employment and Industrial Relations
had clearly delineated functions. The Employment people
usually tried to place people in work by means of a
quite inefficient Commonwealth Employment Service.
In Industrial Relations, however, the unintended consequence
of our actions invariably was to drive workers on to
the dole queues. This was done by enforcing the awards
handed down by the Conciliation and Arbitration Commission
- irrespective of the capacity of individual industries
and employers to pay.
Between 1980 and June 1983 I worked in the Industrial
Relations Bureau (IRB) in the award inspection area.
On 30 June 1983 the IRB was abolished and its award
enforcement functions were transferred to the Department
of Employment and Industrial Relations. Prior to the
establishment of the IRB, award enforcement had come
within the responsibilities of the Department. So,
in a sense, we were going home---although it was a
quite different home since most Industrial Relations
officers had been compulsorily transferred to Canberra.
This was probably good for the country but bad news
indeed for the local catering and entertainment industry.
There remained in the Melbourne office a hard core
of officers who had refused to move to Canberra but
still wanted to enjoy the privileges associated with
the Public Service lifestyle. This group was allocated
special assignments. Some found their way into the
task force that was to bring about the deregistration
of the Builders Labourers Federation. The problem here
was that the longer they took to achieve this task,
the longer they could live happily in Melbourne. Not
surprisingly, the task was not completed when the Hawke
Government came to power and decided to give the BLF
a second (or was it a third) chance. Others were attached
to the Hancock Committee. As such they had a vested
interest in the Committee recommending the retention
of the existing system and an increased role for the
Commission since they would be involved in the follow-up
work Others still were unattached officers. As such
they turned up on pay day and attended the many happy
hours. Little else was seen of them.
In September 1983 (soon after I took up duties in
the Melbourne office of DEIR) my essay 'The Industrial
Relations Club' was published in Quadrant. This caused
some disquiet among the DEIR heavies in Canberra. It
is as if the Will of Allah had been queried in a mosque.
It was put to me that, somehow or other, what I had
done was inconsistent with the Public Service regulations.
No-one suggested that anything I had written was actually
false. My response was to enquire as to precisely what
regulation had been breached. The matter was then allowed
to drop, but there was a clear understanding that any
future promotion was out. Clearly, in DEIR, heresy
had no rights---even if it is tolerated occasionally.
It is worth reflecting on all this because it demonstrates
the dramatic changes that have taken place in the industrial
relations debate in recent years.
In September 1983 I doubt that even those most strongly
opposed to the economic irrationality of our industrial
relations system would have predicted Jay Pendarvis'
historic resistance at Mudginberri, the triumph of
management and most employees who wanted to work at
Dollar Sweets in Melbourne, or the enormous success
of the Queensland Government in the 1985 Queensland
power dispute. Nor, I suggest, would anyone have foreseen
the vitally important role that would be played in
the industrial relations debate by the National Farmers'
Federation, the Australian Chamber of Commerce and
the various small business organisations.
I am not suggesting for a moment that one successful
court case makes an industrial relations summer. Quite
the contrary. There is still an enormous amount of
work to be done. But Australia's eighty year old industrial
relations edifice is beginning to crumble.
The paradox is that while these developments are taking
place, trade union power in Australia has never been
stronger. The Hawke Government has consciously enshrined
the trade union movement at the very centre of decision
making. This was manifested in the National Economic
Summit of 1983, in Accords Mark I and II, and in the
Tax Summit of 1985. The Government's acceptance of
most of the recommendations of the Hancock Committee
will further enhance the power of union bosses (provided,
of course, it can get its legislation through the Senate).
And yet. And yet. And yet. Despite all the evidence
of overwhelming union power and influence, there is
no doubt that unions are vulnerable.
It is a mistake to over-estimate the power of trade
unions, in Australia. Certainly their muscle is considerable.
But, contrary to what the union bosses want us to believe,
it is by no means in invincible.
Slightly over 55 per cent of the Australian work force
is unionised. This is very high by world standards.
But it is a long way short of 100 per cent
The Australian Bureau of Statistics figures indicate
that, in 1983, 14 per cent of Australian employees
were 'award free' i.e. their wages and conditions were
not governed by either Federal or State awards. For
private sector employees the figure was even higher
and stood at 20 per cent. In other words, one fifth
of workers in the private sector are presently employed
under some kind of voluntary agreement.
This explains why the Hawke Government is proposing
safety net legislation to soak up 'award free' employees
into the proposed union-dominated national superannuation
scheme. Were there no 'award free' employees, there
would be no need for this type of legislation since
all the proposed superannuation arrangements could
be laid down within awards determined by the Arbitration
Commission or the various State industrial tribunals.
The existing legal voluntary agreements are supplemented
by a substantial black market in work arrangements.
Many employers and employees willingly enter into agreements
to work in a way that is quite inconsistent with award
determinations. This is clear evidence that the existing
rigid, inflexible centralised industrial relations
system is breaking down---a trend that has been evident
since the 1982 recession.
Mr Justice Ludeke blew the whistle on this in October
1982 when he referred to 'one of the best kept secrets
of the recession'--- namely:
'. . . the extent to which individual employers
and their workers have entered into agreements under
which the workers accept reduced wages and work reduced
hours ... In the face of a severe contraction in business
the employer in many cases has been compelled to consider
the alternatives---sack large numbers of its workforce
or endeavour to hold it together by asking the workers
to accept reduced wages and a shorter working week.
The arrangements are in breach of the relevant award
but everyone involved understands that an attempt is
being made to save jobs.'
Well, not quite everyone. In fact some zealots in
the Arbitration Inspectorate and in DEIR agreed that
awards should be enforced---in spite of the fact that
this would (and indeed did) lead to job losses. But,
in spite of this, the black market continued and, in
certain instances, has probably increased in recent
Before passing on, it is worth reflecting on the civil
liberties issues involved. What right has a government
(or, indeed, a public servant) to decide whether a
citizen is able to work on his own her own terms? In
Australia the right to work is not protected by legislation.
Perhaps it is time that this changed. It is quite indefensible
that strict interpretation of awards has actually forced
Australian workers on to the dole queues.
The existence of legal and illegal voluntary agreements
represents the soft end of union power. It is here
that many unions are, and will remain, vulnerable to
a whittling away of their power. It is quite significant
that unions are most vulnerable in the very area where
there is greatest demand among employers and employees
alike for a freeing up of our rigid centralised industrial
relations system---namely in small business. The importance
of this sector of the Australian economy should not
As at July 1985 there were over 750,000 small businesses
(including farms) in Australia. Small businesses account
for 55 per cent of total private sector employment.
Two out of five workers are employed in private firms
with less than 20 employees.
Unions are weak or non-existent in many small business
enterprises. However, they do determine employment
conditions and work practices in these enterprises
due to the favours bestowed on them by our centralised
industrial relations system. The key to industrial
relations reform is to make it legal for employers
and employees to reach their own agreements about work
conditions and practices---free from the interference
of trade unions or industrial tribunals. This should
be combined with the incentives that encourage profit
sharing and employee share acquisitions. Employees
should be encouraged to share in, and benefit from,
the economic advancement of the firms which employ
them. This is the best way to increase productivity
at the enterprise level and to ensure that the prime
loyalty of a worker is to his or her employer---rather
than to a union or a union boss.
In his February 1986 EPAC paper, Mr Charlie Fitzgibbon,
(a former ACTU Vice-President and the one-time National
Secretary of the Waterside Workers Federation) pointed
the way of the future.
In his devastating criticism of Australia's industrial
relations system (in which he was once a key role-player),
- queried the worth of Mr Keating's much heralded
j Curve theory by pointing out that the devaluation
'is not necessarily producing expansion in Australian
industry, particularly manufacturing industry';
- advocated enterprise agreements between managers
and employees (not unions) at the small business end
of the economy;
- suggested that such enterprise agreements 'would
be outside any award' and that they would most likely
succeed where there was a degree of profit sharing;
- maintained that the 'rigid concept of comparative
wage justice' (which is so dear to members of the Industrial
Relations Club) 'can do harm';
- advocated overcoming the rigidities of Australia's
industrial relations system;
- indicated that the key lesson of the Mudginberri
dispute is that in future there will be a 'lesser role
Regrettably, the Hawke Government appears to have
rejected Mr Fitzgibbon's advice. Rather it has gone
down the track recommended by the Hancock Report.
Ironically Mr Fitzgibbon was one of the three members
of the Hancock Committee (along with Professor Hancock
and Mr George Polites). The Hancock recommendations
are quite inconsistent with the thrust of Mr Fitzgibbon's
EPAC paper. It is unclear as to whether Mr Fitzgibbon
still agrees with the Hancock Report which he co-signed.
No doubt there is an element of 'Yes Minister' (or
'Yes Professor') involved here. I first met the public
servants working on the Hancock Committee in July 1983.
Shortly after, at a meeting of the fridge dwellers,
I predicted the Committee's likely recommendations.
This was regarded as somewhat irreverent. But my prophecy
turned out to be true. I stated then that the Hancock
Report would find that, by and large, our eighty year
old industrial relations system had served Australia
well and its critics were ill-informed and/or unrealistic.
Certain minor reforms, however, were needed which would
require legislation. This, in turn, would necessitate
an on-going task force of public servants to draft
the legislative amendments and see them into fruition.
And so it was done that the prophecy might be fulfilled.
If implemented, the Hancock recommendations would
dramatically increase trade union power in Australia.
This is precisely the wrong remedy for our economic
The Hancock Report, inter alia, recommends:
- increased powers for the Commonwealth industrial
tribunal (proposed Industrial Relations Commission,
which is envisaged to take over the role of the Conciliation
and Arbitration Commission).
- the abolition of legal redress concerning industrial
relations to any court except a proposed Australian
Labour Court which is to come within the area of responsibility
of the Minister for Employment and Industrial Relations.
- the scrapping of all sanctions for any form of direct
industrial action---no matter how improper. (The Hancock
Report recommends that only employers should be subject
to sanctions---for award breaches).
- the virtual conscription of many independent contractors
into the industrial relations system---in spite of
the fact that they are not, and do not want to be regarded
- giving the proposed Commonwealth Industrial Tribunal
the power to compel employers to pay workers for periods
during which they were on strike.
The Hancock Committee report is an appalling attack
on the civil liberties of independent contractors and
on the rights of Australians to pursue actions against
unions in the ordinary courts of the land. Had the
Hancock recommendations been law in 1985, then Jay
Pendarvis would not have been able to bring his action
against the Meat Workers' Union in the Federal
Court. Rather, any such action would have had to be
conducted in a so-called court (modelled on the Arbitration
Commission) where all of the judges would possess 'industrial
relations experience'. The unions like appearing before
such 'courts'. They revel in the familiar, clubby atmosphere.
And they invariably ignore any judgment or finding
with which they do not agree.
The Hancock Report is very much a product of the IR
Club. Professor Keith Hancock has maintained that the
IR Club does not exist and that if it does then he
is not a member of it. But he has some explaining to
do. Why was the committee of three unable to come up
with a majority finding concerning some of the most
sensitive areas of industrial relations?
The Hancock Committee found itself unable to make
any recommendations concerning:
- whether the holding of a certificate of conscientious
objection by an employer should exempt that employer
from the union preference provisions within an award
- whether unions should receive immunity against employers
who are seeking civil remedies for breaches of contract.
- whether the secondary boycotts provisions (Sections
45D and E) should remain in the Trade Practices Act.
The Minister for Employment and Industrial Relations,
Mr Willis, has said that 'it is an extremely important
and valuable part of this report that such a wide array
of recommendations could be agreed upon by a tripartite
committee'. This is an extraordinary comment. What
should be explained is why a committee of three was
unable to make a majority finding. One can only assume
that club rules applied and that there was a tacit
agreement not to disturb the (industrial relations)
What neither the Hancock Committee nor the Hawke Government
understand is that trade unions and union bosses are
immensely unpopular in Australia. That is not all.
Opinion polls consistently show that wage pauses, reduction
in wages that price the young out of jobs, and the
abolition of penalty rates and holiday loadings are
all popular. It is here that the hope for Australia
lies. What is needed is a government with the political
will to give the electorate what it wants---the right
to have a say in determining working conditions and
The increasing antipathy to unions partly explains
the significant drop in industrial disputes that has
occurred in Australia, and elsewhere in the western
world, in recent years. It is this, along with rising
consumer debt, that has thwarted the power of union
bosses to fulfil their traditional role---i e. preventing
workers from doing what they want to do.
It is a myth for Mr Hawke, Mr Keating and Mr Willis
to maintain that---due to the ALP-ACTU Accord and it
alone---Australia has experienced some phenomenal and
unique reduction in industrial strikes. The fact is
that over the past four years there has been a world-wide
decline in industrial disputation in the western democracies.
Between 1981 and 1985 time lost due to industrial disputes
has fallen by:
United States 60 per cent
France 50 per cent
Italy 80 per cent
Canada 60 per cent
West Germany 80 per cent
This trend has been reflected in Australia. Industrial
disputes were declining in Australia before the Hawke
Government came to power.
Industrial Disputes Per 100,000 Per 100,000
Year days lost employees
1981 4,192 798
1982 2,158 392
1983 1,641 249
1984 1,307 246
1985 1,255 230
This trend has coincided with a dramatic increase
in consumer debt---as the following table illustrates:
Australia's consumer credit figures underline our
deep seated economic problems. As a nation we are up
to our eyes in hock. Our balance of payments deficit
is the worst in the western world. It is estimated
that our national debt will triple in the first four
years of the Hawke Government. Our dollar is at record
lows, interest rates are at record highs and our level
of inflation is dramatically higher than that of our
major trading partners. Clearly the Accord (Marks I
and II), which was supposed to be our economic saviour,
has not worked.
In spite of all this our industrial relations 'experts'
still tell us that major reform is unrealistic and
impossible. Professor Keith Hancock has declared:
'The question of whether we would be better off
with a genuinely competitive labour market is far from
the agenda. There is no way we are going to get a competitive
This blatant defeatism is a prescription for ever
falling living standards for all Australians---in the
name of alleged 'industrial relations reality'. This
is a price that Australia can no longer afford to pay.
Shortly before I left the Department of Employment
and Industrial Relations two significant social functions
In Sydney there was a dinner to celebrate the twenty
fifth anniversary of the New South Wales Industrial
Relations Society. Among the speakers were Sir John
Moore and Sir Richard Kirby. But the star of the night
was Professor Kingsley Laffer---an industrial relations
academic. According to reports, Professor Laffer was
'cheered to the echo' as he attacked economists.
In Canberra soon after Mr Brian Tregillis, a long
time DEIR man, resigned as head of the Commonwealth
Employment Service. Mr Tregillis reflected on his years
in the Public Service:
'A Labour Department has to present a different
viewpoint to Treasury. Treasury is concerned with the
economic aspects of the country and what are the best
ways to operate to get the most desirable economic
result for the country... A Department of Labour has
to look at the industrial relations and social consequences
of major policy decisions by government---in a sense
it is the Devil's Advocate.'
The end result of this type of devil's advocacy has
been to drive Australia into a form of economic hell.
We can no longer afford this luxury. The dreamtime
in industrial relations must become a thing of the
past. We have all paid dearly for the economic illiteracy
of the fridge dwellers. Their time is over. We need
to realise that Australia is part of a world economy
that pays no respect to the folklore of the IR Club.
The economic indicators demonstrate vividly that Australia's
rigid inflexible centralised industrial relations system
simply has not worked. It must be reformed.