Trade Union Reform

The Future of Trade Unions: Reform or Replacement?

Vern Routley

The bull in the bull ring is his own worst enemy, for he wastes his energies attacking the cape instead of the matador. But the same can be said about the critics and opponents of trade unions. Invariably they waste their energies attacking the cape---the activities and behaviour of trade unions, and ignore the matador---the ultimate basis of trade union power: their control over the hearts and minds of the ordinary wage and salary earners arising from their perceived role as worker protection organizations.

And it is precisely on this worker protection role that attention must be concentrated if the continually increasing of trade unions is ever to be reduced.


Trade unions as worker protection organizations

The role of trade unions as worker protection organizations can be regarded as simply the logical outcome of the way the labour market has operated in capitalist economies in the last 200 years.

For the most part the labour market is much like any other market---a conflict situation wherein buyers and sellers alike are each trying to get as much as possible and to give as little as possible. Unlike other markets however the labour market has usually operated in a state of over-supply; in other words in conditions of unemployment. And in any condition of over-supply of course the bargaining advantage is always with the buyer rather than the seller.

Now naturally enough, no-one is very happy operating in a situation where they are permanently at a bargaining disadvantage, so that it is only to be expected that wage earners would try and look around for some way of remedying the situation. And having once decided on the need for positive action to improve their bargaining power in the labour market there are in fact two different approaches which might be adopted. The first of these is to raise the demand for labour by eliminating unemployment thereby creating a sellers' market for wage earners. The second is for workers to combine and bargain collectively with employers by establishing trade unions.

Considered as alternatives, the first method of improving the bargaining power of the ordinary worker, viz. full employment, or a sellers' market for labour is by far the more effective. For by creating a surplus of jobs over job-seekers it makes the individual worker the master of his own destiny; he can now pick and choose in a way he could never hope to do in a buyers' market for labour.

Unfortunately for the ordinary wage earner, effective though the establishment of full employment would be in improving his bargaining power in the labour market, there is no immediately obvious way through which he can bring this most desirable state of affairs about. This is where the second alternative---collective action by the sellers of labour---comes into its own. For though it may present initial difficulties in creating and maintaining an effective bargaining organization, once these have been overcome, the benefits of a united front in negotiating with employers are obvious and immediate.

So here then we have the ultimate explanation for the existence of trade unions. They are essentially a cooperative response by individual sellers of labour to the inferior bargaining position in which they usually find themselves in a capitalist economy operating at various levels of unemployment. And this desire on the part of individual workers for more equal bargaining power is not only understandable, it is also totally justifiable. After all, everyone believes in equality before the law: why should there not also be equality within the market place? And, to take the argument a step further, it is the fact that trade unions are presently seen as instruments whereby greater equality of bargaining power in the labour market is to be achieved which gives them their present dominating role in the economy. For they are pursuing not only an economic objective but a moral objective as well. And, although we cannot be said to be an overly moral society, the ability to appeal to morality is one of the most powerful weapons any pressure group can possess.


The Moral Issues of Industrial Relations

Although the morality of the basic trade union objective is unarguable, the same may not be said for the method through which they seek to achieve it. For this essentially involves the pursuit of equality in one area of the labour market by the creation of inequality in another area.

To be an effective force in the labour market, trade unions must be in a position to interrupt production---in other words they must be allowed the right to strike. Without this right, often itself expressed in fervent moral language as 'the sacred right of the worker to withhold his labour', trade unions would be unable to exert significant pressure on employers and would in fact be reduced to the status of a workers' friendly society. Yet the right to strike immediately introduces double standards into the labour market. One group, representing the sellers of labour, has the right to unilaterally breach contracts while at the same time the buyers of labour are required to meticulously honour them.

But if the supporters of trade unions face a moral dilemma---although in practice it seldom seems to worry them unduly---so also do their critics. The critics of trade unions are rightly indignant about the way trade unions exploit the special privileges which have been conferred on them. But in seeking to remove or reduce those privileges the critics seldom face up to the consequences of such actions. For the reduction of present double standards will undermine the 'equalizing role' of trade unions, and, in consequence, lead to increased inequality in the labour market between buyers and sellers. In short, in seeking the removal or reduction of the special privileges granted to trade unions, their critics usually overlook the necessity to protect the totally desirable objective which led to the adoption of those double standards in the first place.

The position may perhaps be summarized in terms of the classic baby and bath water proposition; the supporters of trade unions arguing that the bath water---double standards---is essential for the welfare of the baby---greater equality of bargaining power in the labour market. The critics of trade unions are arguing that the bathwater must be thrown out wholly or partly but in so doing they make no specific provisions to protect the baby from harm.

Thus the central issue to be faced and resolved in any serious attempt at trade union reform is really a moral one: how to reduce the present double standards enjoyed by organized labour without, at the same time, increasing the inequality of bargaining power in the labour market between individual buyers and sellers. And in so far as the critics of trade unions ignore this issue they are left in a morally ambivalent position. They are concentrating on one form of injustice while overlooking or inadequately accounting for another. In such circumstances the debate tends to deteriorate fairly rapidly into a slanging match about which injustice is the worse---double standards or inferior bargaining in the labour market. Reduced to these simplistic terms this is not a debate which the critics of trade unions can expect to win. They simply haven't got the numbers. The great majority of the community are wage and salary earners and their dependents and sympathisers and, when faced with a choice of injustice, they will obviously prefer special privileges for trade unions rather than greater inequality of bargaining power in the labour market.


Trade Union Responses to Trade Union Reform

Up to this point discussion has in effect assumed that the trade union response to proposals for trade union reform will be a neutral or passive one. In point of fact the precise opposite will be the case. Trade unions will, quite correctly, regard any proposals for reform as a direct and immediate threat to their existing powers and privileges. Once the talking gives way to action and proposals are converted into specific legislation trade unions must be expected to respond with the utmost vigour. Furthermore the resources they are in a position to mobilize in their defence are forbidding. To begin with there are presently two and a half million trade union members in Australia.

At this point it is pertinent to make a few comments about the relationship between trade unions and their members. In recent years public opinion polls have shown not only the increasing unpopularity of trade unions among the community generally but also a rising level of dissatisfaction on the part of the rank and file members. A clear distinction must be made however between the behaviour and activities of particular trade unions and trade union officials and the basic underlying principle for which the trade union movement stands. Furthermore, allowance must be made for the love-hate relationship which frequently exists between the executives and the rank and file---the latter regarding the former as autocratic and demanding, the former regarding the latter as ungrateful and apathetic. Both sides however accept that the fundamental purpose of trade unionism is worker protection. Once this is seen to be under threat---and trade unions can be expected to present any proposals for reform in this light--- ranks will close and individual complaints will be submerged in a common struggle to preserve existing rights and privileges.

To start with then, trade unions in their opposition to reform can recruit from an army of two and a half million. And they can back this resource up not only by massive financial reserves but also by easy, and, for the most part, sympathetic access to the media.

Then again the trade union movement is closely affiliated with what may be the largest political party in Australia, some of the members of which would favour an actual increase in trade union power while few, if any, would support a significant reduction.

Given then the quite awesome array of force the trade unions can mobilize in what they would regard as their defence and given too that they have in their hands the stronger, or at least more popular moral argument, it is difficult to see any significant reform of trade unions in the foreseeable future.


The Alternative to Reform: Replacement

  • The basic conceptual problem with the idea of trade union reform is that it directs attention to the external symptoms rather than the ultimate source of trade union power. The argument revolves around the rights and privileges trade unions enjoy rather than the basic objectives they seek to achieve. However, were the focus of the debate to be shifted away from the behaviour and activities of trade unions and concentrate instead on ways and means of equalizing bargaining power in the labour market, then the critics of trade unions would find they had in their hands a new and potentially devastating weapon. For if the basic objective of social and economic policy is seen as greater equality of bargaining power in the labour market between buyers and sellers then there is, as pointed out earlier, an actual alternative to trade unions in the form of full employment. And once the argument is brought to this point trade unions suddenly lose their monopoly in the area of worker protection; they no longer have a mortgage on morality. A competitor has arrived on the scene and trade union performance can now be assessed in terms of what that competitor has to offer the trade unions' clients---the ordinary wage and salary earners.

Furthermore, once attention is focused on full employment as an alternative to trade unions the critics of organized labour have a morally unassailable position. They are no longer, as in the case of trade union reform, arguing for a choice between injustices. Nor are they even attacking trade unions directly. They are simply espousing the cause of greater equality of bargaining power in the labour market and asserting that full employment rather than trade unions is obviously the best approach.

In contrast trade unions will find themselves in the uncomfortable position of arguing that wage and salary earners should forgo the manifest benefits of a permanent sellers' market for labour in order that they, the trade unions, should be able to continue to bargain on their behalf.

Furthermore, winning the moral victory against trade unions opens the way to the next step---winning the political battle, for the consequences of this change in the moral balance of power will inevitably be a drastic realignment of political forces in the community.

In any push for trade union reform the 'pro's' are heavily outnumbered by the anti's. Those in favour of a reduction in the privileges of organized labour are mainly limited to employers, the self employed and economic rationalists. Opposed to them is the vast majority of wage and salary earners who make up about 85% of the workforce, plus independent third parties who almost invariably regard inequality of bargaining power as a greater injustice than double standards.

When however it comes to the possible replacement of trade unions---to the proposition that full employment be used as an alternative way of achieving trade union objectives---the numbers come out very differently. Those in favour of full employment without trade unions as opposed to the maintenance of trade unions plus a continued high level of unemployment will include not only employers, self employed and economic rationalists but also the unemployed, those who live in fear of unemployment, those concerned about the economic and social consequences of unemployment, plus a proportion of securely employed wage and salary earners whose social conscience overrides their hip pocket nerve. In such a situation those who, when faced with a choice between trade unions and full employment, will choose the latter are likely to be in a significant majority.

In fact the only real problem with the idea of replacing rather than reforming trade unions is the quantum jump in community thinking which it involves: the requirement to suddenly cease taking for granted organizations which, over the past three generations, have become an increasingly dominant element in the social infrastructure and instead to subject the basic assumption which supports these organizations to critical scrutiny. In short, to ask the ultimate question, can the objectives sought through trade unions be attained by some other form of economic or social organization?


40 Years On

My own association with industrial relations in Australia now extends over four decades. It began in 1945 when in the second year of my commerce course at Melbourne University I chose, as an optional subject, industrial relations in preference to philosophy---in retrospect I sometimes wonder if I really made the right decision. Whether or no, looking back over those forty years, what stands out most clearly in my mind is the enormous increase in the power and authority of trade unions during the period. Over those four decades in fact the power of trade unions has simply grown and grown until today they have become a virtual State within a State with the central trade union body, the ACTU, not only initiating and therefore largely determining wage policy but more generally acting as a sort of national monitoring authority to which our present Federal Government automatically defers before presenting its legislative proposals to our elected representatives.

Throughout those four decades employers and their representatives have been persistently complaining and protesting against excessive trade union power in language incidentally which has hardly changed during the period. Indeed if you care to go back to speeches made in the 50's and 60's they could be recycled today with a minimum of revision.

From time to time during the period attempts have been made to reverse the trend but all such attempts have failed. Trade union power has remorselessly expanded. In 1986 trade unions expect, as a right, to negotiate on a range of issues such as retrenchment payments, superannuation, work practices, etc, which 30 and 40 years ago were regarded as purely employer prerogatives.

Forty years ago unions were subject to penalties when they engaged in direct action in defiance of awards and fines were levied on them. Today awards are little more than a bargaining platform from which direct action is mounted.

Forty years ago the idea of claiming payment for time spent on strike would have been laughed out of court. Today however it is regarded as the normal stock in trade of industrial negotiations.

Viewed in the broad perspective of the last 40 years trade union power might be compared to one of those mediaeval castles standing upon some rocky outcrop and dominating the landscape of the surrounding countryside. Periodically employers launch frontal assaults on the castle only to be beaten back and to retreat and lick their wounds while the defenders set about still further improving their defences from which at some future date, which they judge to be propitious, they will sally forth to seize yet another traditional employer prerogative.

It is true that over the past two years employers have had some successes---the Queensland Power dispute, Mudginberri and Dollar Sweets. But these, though heartening in themselves, are essentially peripheral. They are no more than a few stones dislodged from the outer wall of the fortress. Moreover it is important to appreciate the real reason for these successes. It has been dissension among the occupants of the castle---the normal division of interest between the political and industrial wings of the labour movement which surfaces whenever the Labor Party forms a government. In each of the foregoing instances the dispute had reached a point where the unions could only achieve a favourable result by escalating it to a national level. Such a nation wide action would however have demonstrated the essential emptiness of the Labor Government's consensus policy and consequently that government exerted (behind the scenes) all its authority to prevent such escalation occurring.

When however the coalition parties achieve power this division of interest between the industrial and political wings of the labor movement automatically closes over. Trade unions take over the running and the political party reverts to an auxiliary role. Trade unions in this situation are free to use their ultimate weapon---the national strike---and when they do the political party backs them up, not by directly encouraging them to defy the law of the land but indirectly, by urging that the dispute be settled through conciliation, meaningful negotiations, top level conferences, etc, etc. In this course of action they will be actively supported by the 'responsible', 'mature' and 'fair minded' sections of the media and of the general public and passively supported by a community which soon becomes alarmed at any interruption to the familiar security of its normal way of life. In very short order the government of the day finds itself increasingly isolated and is forced to seek the best face-saving compromise it can.

The clear lesson of the last 40 years is that the fortress of trade union power will not be stormed by direct frontal assault. The defenders are now not only too firmly entrenched but they still possess the ultimate weapon which makes them essentially invulnerable to such a form of attack---their control of hearts and minds of wage and salary earners arising from their perceived role as worker protection organizations.

And, to take the analogy a step further, the only way the fortress of trade union power can be stormed is through an entrance at the rear---a back door which can never be effectively barred because the hinge opens outward---a back door labelled 'equality of bargaining power in the labour market'.


Asking the right question

It is a commonplace of scientific discussion that 80% of all progress results not from finding the right answer but from asking the right question.

For the critics and opponents of trade unions and the community generally the answer to the problem of excessive trade union power is to be found not by asking how trade unions can be reformed, how they can be made more socially aware, or more economically responsible, or how their activities may be restricted by legislation. It is to be found by asking the question how best can we equalise bargaining power in the labour market between individual buyers and sellers.

Once the community can be brought to ask itself this question the parameters of the present debate will change dramatically and the potential impact on trade unions will be shattering. For they will be immediately deprived of the moral and social justification for their existence---their claim to be the only means in a capitalist economy of protecting the workers from exploitation.

Why HR Nicholls?

More...