The Harvester Judgment and its Consequences

[First published in The Age, 15 November 2007]

Ray Evans

Julia Gillard's comments at the centenary celebrations of the Harvester Judgment of 1907, handed down by the then President of the Arbitration Commission, Henry Bournes Higgins, and Paul Keating's spray in The Age (13-11-07) show that it is difficult for Labor politicians to understand just how much long-term damage was wrought by H B Higgins, Alfred Deakin, and Billy Hughes, as they combined wage regulation with tariff protection in the Arbitration Act of 1904 and the Tariff Act of 1906.

A number of points have to be made about the Harvester judgement. The first is that it decreed a minimum wage of 42 shillings per week for unskilled labourers. The second is that it was soon overturned by the High Court, which found that the Excise Tariff Act of 1906, which Higgins had presumed gave him the legal authority to make his award, was constitutionally invalid. The High Court's intervention was indeed fortunate for the unskilled worker upon whom Higgins had bestowed a huge mandatory increase. He subsequently wrote in 1922 in his apologia "A New Province for Law and Order"

    "I think I am close to the mark when I say, even for men in regular work, the average wage was not more than 5s.6d. per day, 33s. per week. This would mean that the standard was raised by over 27 per cent in 1907 "

If that increase had remained a legal requirement in 1907, then a sharp increase in unemployment, particularly amongst the unskilled, would have followed soon after; just as we saw a sudden and disastrous increase in unemployment which followed the 1981-82 increases of similar magnitudes in the metal trades awards. But Higgins' doctrines took hold in the minds of the arbiters of the State Wages Boards, particularly of NSW and Victoria, in the years which followed, and slowly these Boards, with unlimited constitutional power, and constrained only by fear of inter-State competition, began to regulate using the language and sentiment expressed in Harvester.

Higgins was vehemently opposed to "the higgling" of the market place and referred to the "despotism of contract". Even the most casual reading of his judgments and his apologia reveals a man who had not the slightest understanding of how markets work, how economies grow, or how contracts, whether they be contracts of employment or contracts for services provided, benefit both of the parties involved, as well as the society to which they contribute. In his view the contractual relationship between employer and employee had to be supervised and controlled by a righteous judge, and in his mind no one could rival Higgins in righteousness or judicial acumen.

Freedom of contract is the necessary foundation for a prosperous, growing economy, and Higgins' attempt in Harvester to supplant with judicial oversight and supervision the rights of people to enter into employment contracts as they desired, implanted into our body politic a malignant tumor which still threatens our future growth, prosperity and ultimately survival as a free and independent nation.

The election campaign makes it clear that both sides of politics are still deeply infected with the Higgins malignancy. Paul Keating's defense of his 1993 legislation shows the same entrenched mind-set. Both sides make it clear they want to regulate and interfere in the labour market. Where they differ is in the measures of regulation and the instruments they wish to employ. The Coalition wants the Commonwealth government, through the use of ministerial regulation, to be the primary instrument of interference and control. Labor wants to bring the trade unions back into the regulatory apparatus. The trade unions, after all, have been the life blood of the ALP from its founding, and current Labor policy will restore legal privileges to trade unions which no other institutions in Australia possess.

A characteristic example of this privilege is seen in NSW where awards and agreements for hundreds of thousands of employees in the energy distribution business stipulate that superannuation payments must be made to a fund (EISS) administered by companies owned by Unions NSW. Thus the power to impose superannuation contributions is used to directly finance unions and, through them, the ALP.

But whether regulation is to be imposed by Ms Gillard as Minister, or by trade union officials, is a second order effect. The primary problem is the innate incapacity of the regulators to stop regulating. And every time a new regulation is promulgated the capacity of free individuals to make decisions in their own best interests is diminished, and the huge social benefits which come from such unregulated activity are lost.

The collapse of the Soviet Union should have made it clear to everyone that centralised planning and control does not work. But this is the essential feature of all of the commonwealth legisaltion since 1904 which empowers the various industrial tribunals and labour market regulators. Work Choices and the No Disadvantage amendments which are now driving the small business sector into apoplexy are squarely in the Higgins tradition.

By assuming the role which Higgins sought to create for himself in 1907, and using the corporations power as his authority, John Howard has assumed an omniscience and omnicompetence which Labor will inherit and to which no mortal should aspire. It will end in tears.