Arbitration In Contempt

The Fridge Dwellers---Dreamtime in Industrial Relations

Gerard Henderson

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 In these agnostic times, the search for the Holy Grail had been replaced by the pursuit of the 'real cold one'.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 it.

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 years .

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 be underestimated.

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), Mr Fitzgibbon:

  • 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 for unions'.

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 woes.

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 as, employees.
  • 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) horses.

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 work practices.

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 labour market.'

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 were held.

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.

Why HR Nicholls?

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