Tenth Anniversary Conference

The Role of Registered Employer Organizations in Maintaining and
Upholding our Present Labour Market Regime

Tanya Cirkovic

I went out to Monash University the other day. For the first time in a decade I walked past the Student Union building. I saw a wall that once had graffiti condemning Peter Costello, in fairly colourful language, as an instrument of the New Right. Since then it has been repainted, and in black marker someone had scrawled the message---Down with the establishment---vote Liberal'. Of course, twenty years ago, Malcolm Fraser and the Vice-Chancellors were the establishment. It shows how much Labor dominated Federal Politics over the last decade or so when even formerly radical university students consider them the establishment.

Without a doubt, the establishment which this individual feels has failed her or him was the Labor Government and its fellow travellers, the unions. Increasingly the very groups which should have challenged this status quo---the employer groups---decided to fit comfortably into the system. They criticised the Court Government's industrial relations package as going too far'. They undermined the Coalition's industrial relations policy before the 1990 Federal Election. They did the same to Fightback in 1993. All in all they did little to help the industrial relations reforms in this State.

Over the last century, most employer organisations have been involved in a system of industrial relations which centralised the fixing of wages and conditions. It was dispute resolution which served neither employers nor employees. Most employer groups have acted within the paradigm created by the unions. In so doing they have failed in their duty to employers, employees and indeed themselves.

If you turn to a text book on industrial relations, or the history of the labour movement in Australia, you are lucky to find a paragraph on employer organisations. Indeed, I was undertaking a project recently where I needed to know more about employer organisations and their place in Australian industry. I sent out one of my researchers, and he came back with nothing. I sent someone else, who also found nothing. In retrospect, I don't find this surprising given that their sum contribution to Australian industrial relations is disappointing to say the least. Whilst the union movement has a long list of achievements for its members, ask yourselves what the most prominent employer organisations have achieved for their members. What are the great victories that employer organisations have won for employers this Century?

Most have contributed little, but there have been some exceptions, and I will refer to these later in the presentation.

I would like to begin by briefly canvassing the history of Australian industrial relations which, in relation to employer organisations is a history of lost opportunity, failures, and an inability to set the intellectual agenda. While I will look at the past with regret, the future does now hold some hope. At this moment employer organisations have the opportunity to start anew, or at least rekindle the flame that burned so brightly in the mid 1980s. Then, some employer organisations found the courage to defend their members' rights, by being pro-active in supporting business and in particular, small business. Employer organisations must help to build a new system of industrial relations that creates a workable partnership between employers and employees.

Unfortunately this speech is mostly critical of employer organisations and their role in Australian industrial relations to date, but that is not necessarily its purpose. Never have the opportunities for change in the industrial relations arena been so great. We are setting the agenda now for the next century, and it is in this context that the following comments must be taken.

  • In 1888 the Australian Shearer's Union was attempting to build a unionised work force in order to push for a pay increase and improved working conditions. Most of the New South Wales squatters opposed the formation of an employers' organisation, because it was anti-individualistic. They preferred to fight their own battles. Within a year, about 80% of New South Wales shearing sheds were unionised and paying over 20% more for labour.

In response to this development, Victorian squatters decided to work together to keep unionised labour out of their shearing sheds. However, they were no match for a Union which, even according to the authorised A.W.U. history by Spence, had then become so strong that it was unashamed about kidnapping non-union labour and threatening them with drowning if they refused to join the ASU.

It appeared that the Shipowners Organisation would suffer a similar defeat at the hand of the Seaman's Union in 1890, where the Union sought to dictate to ship owners the goods which they could carry. In that strike two thousand special constables were brought to the Sydney Docks alone, while the armed forces were brought down to the Melbourne Barracks. Only by government intervention was the viability of shipping saved.

Yet only three years later the tables were turned. In response to the 1890s depression, which brought ruin to many businesses throughout the Colonies and led to mass unemployment, the Shipowners Organisation had organised itself and taken the offensive. They unilaterally reduced wages by over 25%.

When the Union attempted to strike, the owners dry-docked every ship where they could not find workers to accept the pay cut. Within six weeks the Shipowners had crippled the Australian Seaman's Union. There was not another maritime strike in Australia for the next twenty-three years.

  • As the founding fathers prepared the Australian Constitution, they had a number of issues influencing their approach to industrial relations. Certainly, the decentralised British approach to industrial relations was not what our system was modelled upon.

The Constitution was prepared against a background of fluctuating commodity prices, a deepening depression among trade and industry, increasing unemployment, insolvencies among employers, and retrenchment in the Public Sector. Employers were largely unable to utilise the glut of unemployed labour and were being held captive by the unions.

Of course, the unions had much to gain from collective bargaining through a compulsory arbitration system, and it was mainly the unions which lobbied for its introduction.

The perceived benefit of State-recognised unions and employer groups being able to collectively bargain at a national level stemmed mainly from the protectionist views of the era.

As Roger Kerr put it in his speech to this organisation entitled, Common Law and Common Sense:

As is well known, protectionism and labour market relations have had a symbiotic relationship. Industry was protected from "unfair competition" from imports in return for accepting that union members had to be protected from "unfair competition" in the labour market through the award and arbitration system. This twin delusion has taken a fearful toll on the living standards of [Australia and New Zealand]....

As such, Australian employer organisations were perhaps not as concerned about inefficiency and high labour costs as they should have been. They knew that export product would be subsidised, and that product for Australian consumption would be protected by tariffs.

The real concern of Australian employer organisations was that all member employers from a particular industry faced the same inefficiencies. Our system provided that all employers would make the same settlement with the unions. Strikes were more likely to be industry-wide, not putting a particular employer at a disadvantage.

Of course, such an attitude played right into the hands of the unions. The employer organisations had accepted the collective paradigm of the unions by deciding to sink together.

The "union paradigm" to which I refer is one of collectivism. It is a belief that society is not made up of equals. The "union paradigm" says that an individual can have a normal life, can have children, can negotiate a mortgage and can in fact negotiate in all walks of life, but is incapable of negotiating their employment relationship. The reality of the union paradigm is that it equates our daily existence with a class struggle.

The unions were heavily influenced by certain hard left Labor figures who saw the employment relationship as a class struggle. Many leading Labor and union leaders were heavily influenced by the Communist Party, who had the view that society is not made up of equals. It was this influence which gave the union movement its hard edge and passionate leaders. It was also these people who gave the union movement its ideological base and it was also these people who attempted to make the union movement the engine room of social revolution in this country.

Rather than providing a political or ideological alternative, mainstream employer organisations chose to participate wholeheartedly in this collective paradigm. They could have promoted an alternative of voluntary unionism, enabling protection for those who wanted it and needed it, hardly a radical concept and certainly not one which could have created political controversy.

As has been pointed out in past proceedings of this Society, even that great bastion of international right wing ideology, the United Nations, supports the concept of voluntary association.

The saddest part was that for many employer associations accepting the union's paradigm was not the worst of their sins. The paradigm was embraced to the extent that Australia's industrial relations system was based on the belief that not only should all employees join the appropriate "union" but all employers should join the appropriate employer organisation. Indeed as many of you will know from personal experience, the Industrial Relations Commission and the Industrial Relations Act deliberately place legal impediments in the way of employers and employees being able to negotiate directly.

Within this paradigm the employer organisations could never hope to win the ideological battle for the hearts and minds of Australia's growing urban population. They were almost purely reactionary. The divided anti-Labor parties failed to create a vision for Australia with which the bulk of Australians could identify.

The Labor Party, while fragmented and unstable in the pre-World War II years, was able to provide a united front on both State and Federal levels.

The transforming Liberal/Nationalist/United Australia anti-Labor forces failed to develop an effective party structure. They faced problems with cohesion and money. Unity at a State level was rare, and unheard of at a Federal level.

Unable to form a mass party organisation, they fell into the Union/Labor paradigm of workers supporting Labor. The support for anti-Labor parties came mainly from employers and financiers.

The disintegration of the UAP in the late 1930s and its loss to Labor in 1941 underlined the problems inherent in accepting the Labor paradigm.

Menzies understood these problems and set about building a mass organisation pitched at the burgeoning middle classes. This mass membership served two functions: a steady source of membership fees; and an army' of supporters to work in the electorate.

At the formation of the Liberal Party, Sir Robert Menzies said -

..... all persons joining the new movement should do so on an equal footing, and that through branch executives, State Councils, State Executives and a Federal Executive, all democratically chosen, every joining member should feel that he or she has an effective chance of influencing both policy and organisation.

In a word, a new movement must come into existence unhandicapped by vested political or personal interests of any kind. '

This new vision wrenched the Labor Party out of office for over two decades.

The Menzies vision for Australia required the employer organisations to fight many more of their battles outside of Parliament. Unfortunately this encouraged employer organisations to cling to the system which they knew well, as their only chance of survival and continuing power.

By the beginning of the post-war era, large portions of the industrialised world were moving to State-sanctioned collective bargaining systems. The system which Australia and New Zealand had introduced half a century earlier.

The move to mass secondary industry with a more highly skilled work force presented labour organisations the chance to negotiate wages on an economy-wide level. The natural result of economy-wide bargaining was a far more strong and effective peak labour organisation.

This centralisation of labor organisations on a national level led to a huge increase in the strength of union bargaining power. There were some industrialised countries where employers avoided economy-wide collective bargaining. Through this, countries like the United States and Japan have managed to avoid the creation of de facto union-run Governments, like that of Gough Whitlam's in Australia.

Employers in America and Japan resisted economy-wide bargaining in favour of shop-floor or at worst, industry-wide bargaining. This was because they knew that if negotiations reached a national level they would never win the argument. At a local level, individual employees are more prepared to take the side of their company. They understand the people and issues involved. At a national level, the concepts are too remote. As such, the unions can easily conceptualise the issues as class-based. At this point, arguments from a peak employer organisation about competition and profitability only reinforce the union's arguments and tend to lead to middle-class support of the unions' claims.

So whilst American and Japanese employer organisations were encouraging an approach to employees which made them feel like part of the Company---Australian employer organisations had accepted the union paradigm of a nation-wide collective of workers fighting a nation-wide organisation of employers.

From 1972 to 1975 the Union paradigm and the Menzies vision did battle. Of course, history records the Menzies vision as the outright winner. However, the victory was a moot point. The world was about to enter a period of rapid change---change to which many employer organisations had failed to adapt.

The mid-1970s heralded a rapidly internationalising economy. Trade barriers were falling, transport costs were plummeting, and financial systems were becoming truly global. As early as 1968 Lord Donovan's Royal Commission in the United Kingdom had identified the removal of collective bargaining as essential for international competitiveness.

In 1979 Margaret Thatcher was elected Prime Minister of Britain. The system of collective bargaining in that country was changed, and Britain began the slow road to once again achieving international competitiveness.

An essential prerequisite for the Thatcher reforms was the previous collapse of much of the secondary or manufacturing industry. A phenomenon experienced by many industrialised countries.

The new industries which would drive modern economies were as yet not unionised. A window of opportunity existed to radically change the nature of the employment relationship. A visionary legal framework was introduced, removing much of the unions' ability to interfere in the employment relationship. By imposing minimum conditions of employment, the institutional regulation of the labour market was reduced. Industrial relations was exposed to market forces.

By not recognising unions, employers deserted collective bargaining and the new emphasis was on market individualism. Employers and employees would work together as a team to ensure mutual benefit.

  • These international developments brought pressure for reform in Australia. Indeed, by the early 1980s something of a national consensus had emerged. Australians as a whole recognised the need to reform and achieve greater efficiency in work.

When the New Zealand Labor Government entered into discussions with the New Zealand Council of Trade Unions to create a social contract', employer organisations did not make submissions or constructively criticise the process. They boycotted the whole procedure, causing New Zealanders to question its very legitimacy. In 1990 New Zealanders ousted the Labor Party. The industrial relations reforms which followed the election of the National Party Government are the benchmark by which we can measure industrial relations reforms in Australia.

The stark contrast to the Australian Labor Party's introduction of the Accord is plainly obvious. Employer organisations participated in this process. They attempted to represent the interests of their members. They moved a few commas, they doted some "i"s and crossed some "t"s. The bottom line was that the Accord was introduced and employers and employees in this country suffered a massive loss.

  • In 1987 I commenced articles in a small but even then well known law firm Kroger & Kroger.

Most of our clients were then, as they are now, employers who were dissatisfied with the representation provided to them by employer organisations. They are not always corporate giants, indeed many are small businesses. All of them are sick of unnecessary government, union and regulatory interference in their businesses.

The Dollar Sweets case, the Castle Bacon agreement were the high water marks of the industrial relations arena of the late 1980s and early 1990s. They were not precipitated by the needs of large companies, but rather the result of small companies going to a small law firm and saying, if you can't help me fix this, I go out of business and dozens people lose their jobs'.

The history of this period also records the legendary successes of Mudginberri and Robe River. Finally, at least some employers had organisations worth belonging to. The National Farmers Federation, the Australian Small Business Association and the then Melbourne Chamber of Commerce, each had a vision, and backed that vision with the people, the time and the money to make it work.

Time and again, employers who have negotiated enterprise agreements with the "help" of their employer organisation come to me to try to obtain variations to these agreements. Not because they were badly advised about the technicalities of making an enterprise agreement, but because the representation centred on working with the union rather than working for the company, its needs and the needs of its employees.

I recently had a client come to me because the Award he operated under required him to pay his employees an allowance to wash their work uniform. There is nothing unusual about that except that the allowance was so high, he could have purchased new uniforms for every worker every fortnight. l could spend the rest of the afternoon giving examples of absurd clauses. The point I do wish to stress is that even within the confines that they have set themselves, some employer organisations fail to foster the interests of those members they supposedly represent. The award to which I refer is in a large industry, yet the employer organisation respondent to the award had failed to seek the removal or amendment of this clause.

During the final round of wage negotiations before the 1990 Federal Election, employer organisations condemned Coalition industrial relations policies. Ian Spicer of the Confederation of Australian Industry said on the ABC News one evening:

We have got to have an industrial relations system that allows flexibility, and essentially then we would like to see a continuation of the existing system, and we will evolve from there.'

I would like to note that Mr Spicer's public comments leading up to the 1996 Federal Election were on the whole positive commitments to coalition policy, and we must take his 1990 comments in that context.

Similarly, some time after the 1993 Federal Election, where employer groups were at least one factor in the re-election of Labor, the Australian Chamber of Commerce and Industry sent a circular to members voicing concern about developments in industrial relations. That it did not voice these concerns publicly before the election is condemning alone.

As you are aware, a leaked union document in New South Wales pointed to the H R Nicholls Society as winning the battle of ideas. Without this organisation, and a handful of other think-tanks, there would not only be many more unemployed workers, many more businesses would have been destroyed by the labour movement.

There have been some shining lights among the employer groups. While the 1993 Federal Election showed many employer organisations at their worst, several stood up. The Housing Industry Association was particularly brave in its support of decentralised wage-fixing and enterprise bargaining. In the short term, they were punished by Keating. In the long term, they have surely done the best for their members. The Western Australian and Queensland branches of the Chamber of Commerce and Industry should also be commended for their public stances in 1993.

Employer groups must come to realise that legislative schemes for arbitration, as are currently in place in this country, create an inherent conflict of interest between employers, employees and their representatives. Employer groups must lobby for the national acceptance of the principle of direct negotiation between employer and employee.

Thankfully for this country, we now have in Peter Reith as Minister for Industrial Relations and indeed a Government, committed to this goal. The system proposed by the Government simplifies awards to a basic set of minimums and then provides for two kinds of workplace agreement. Whilst unions may be a party to one of these agreements, the Certified Agreement, and can be the employee's bargaining agent in the other agreement, the Australian Workplace Agreement, it is finally possible to have a non-union work place agreement at the Federal level. It is to be hoped that employer organisations will embrace this opportunity. I sincerely hope that they do not allow this opportunity to pass as they allowed the opportunity presented by the Employee Relations Act in this State to pass. This will only be achieved if employer groups start working within a paradigm where unions do not set the agenda and where unions are not seen as the only representatives of the best interests of employees.

Employer organisations must publicly support the Reith reforms, continue the move to enterprise bargaining, oppose compulsory unionism and stand up for their members

We have opened our currency, our trades and our goods to market forces. The last step is labour. Company managers worry about the cost of product. Now is the time to make the unions accountable, and start worrying about the cost of labour.

We are building a new market individualism. There is a chance to condemn the union movement as we currently understand it to history. This will only be done if the employment groups reinvent themselves by refusing to give legitimacy to the collective paradigm.

  • I began this presentation with a reference to a lone university graffiti artist. Employers in the mid-1980s stood up at Dollar Sweets, Mudginberri and other places to question the established union paradigm. Let us hope that today's employer organisations can take a lesson from that era and give that graffiti artist a reason to believe in our Nation.


Why HR Nicholls?

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