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Henry Thornton - Politics: A discussion of economic, social and political issues Unions and industrial relations in the new era Date 07/05/2007
Member rating 4.2/5
Quadrant editorial for May 2007 (No 94)
By PP McGuinness Email / Print

What is happening to trade unions and the workforce? Certainly we know that union membership is continuing to decline – that is hard evidence derived from the Australian Bureau of Statistics labour force survey. But it also seems on the less reliable evidence (since they need further interpretation) of opinion surveys that there is considerable unhappiness in the workforce about the government’s workplace legislation. What is the connection between the two? It is clear that Sharan Burrow, the president of the ACTU, hasn’t a clue as to what is really going on. Twelve months previously she confidently asserted that an increase in union membership much less significant than the more recent decrease showed that “working Australians are voting with their feet and turning to unions to help them protect their job security, wages, and basic entitlements in the face of the Howard Government’s industrial relations changes.”  (SMH, 29 March 2006) If she were consistent – which of course is unlikely – she would now be admitting that there is no connection at all between union membership and attitudes to the legislation, or even that the more worried about their jobs they are the less people care about union membership.

This last is perhaps the most suggestive piece of information we have had about unionism for quite some time. That is, people clearly believe that unions have no useful role at all in protecting their working conditions and so on, but rather see the government as the guarantor of their security – and many now seem to feel that the federal government has done the wrong thing by encouraging a greater variety of possibilities in the workplace. The unions are irrelevant, except to the extent that they are generating a great deal of misinformation about the meaning of the new legislation and trying to spread fear and loathing in the community. In a word, they are conducting a dishonest campaign in the hope that people can be persuaded to confuse the utility of unionism with their own welfare.

The fact that union membership is in longterm decline, especially in the private sector, is very worrying to the unions. It would seem that they have no real future as far as the workforce and social policy are concerned. The only segment of the workforce where they have any substantial membership is now the public sector, still the most secure avenue of employment, and where the unions can exercise a considerable degree of coercion through their political arm, the Labor Party. Unfortunately this means that for the private sector there is increasing divergence between the interests of unions and many potential Labor voters – a fact which has been fully understood by John Howard, who has won an increasing vote in once Labor electorates. Since the unions are now most dependent on the public sector, and a substantial proportion of these employees are antagonistic to the traditional Labor voters, who are (again as Howard has realised) interested in upwards mobility and economic independence, unions can now for the most part be regarded as antagonistic to the traditions of Labor. (Ms Burrow is of course a school teacher, an occupation traditionally devoted to extracting privileges from government and peddling ideology.) It is clear that the government has been pretty unsuccessful in conveying its message about the benefits of the new legislation to the workforce which is definitely fearful about the new system. Part of this can be attributed to the barrage of propaganda from the unions and their sympathisers in the media, the education system and in public sector employment. A large part is the government’s own fault in making the legislation so complex that few people have had the opportunity to familiarise themselves with it in detail, even to the extent of building in an excessive degree of regulation of business which the unions have not cared to understand and business has not yet fully grasped. Indeed, one of the many faults of the legislation is that it has introduced more rather than less regulation.

But what the unions have grasped is that by diminishing the power of the institutions like the Industrial Relations Commission which they long ago gained effective control of and which bolstered their own role the legislation has cut short their future as coercive associations. It is incidentally interesting that the NSW Industrial Relations Commission has, unlike its federal equivalent which was deprived of the power by High Court decision, continued to believe that it can punish its critics for contempt – that is, for criticising it. Such a threat was made to the Workplace Relations minister, Joe Hockey, quite recently. The issue which elicited his criticism was its conduct of an inquiry into an industrial matter which was none of its business, and which it was subsequently told to abandon by the Federal Court. Perhaps it is a pity that the commission did not proceed against Hockey, since there is considerable doubt as to whether the original absence of a separation between judicial and arbitral power in NSW remains; the High Court would be likely to overrule the NSW commission’s pretensions to exercise the power of punishment for contempt without resort to a real court.

If the Labor Party should win the next federal election its leader, Kevin Rudd, has promised that it will get rid of the Australian Workplace Agreements which are a central feature of the new system. It is hard to make much sense of such a pledge when the unions are continuing to decline in power and membership – although of course the unions do retain considerable power in the Labor party if not in the community. It is of the nature of a last throw, since another term of office for the Coalition would entrench the new system to the extent of being irreversible. But no matter what Mr Rudd promises, unless he manages to reintroduce some form of compulsory unionism there is no reason why the decline in union membership should not continue. The workforce may not trust the new legislation, but neither does it trust the unions. Inevitably, Labor will ultimately have to subordinate the unions to its structure rather than vice versa. This means that it would need to depend on some aspects of the new legislation to re-regulate the labour market to its own preferences. The High Court has now made it clear that the corporations power is virtually limitless (and the constitution meaningless, as discussed in our editorial of January-February 2007); the old conciliation and arbitration structure is as dead as the dodo.

In their desperation to hang on to the remains of their power, the unions will be virtually exhausting their resources in the campaign against the new system at the next election. It will be a last throw of the dice. If the Howard government retains power the unions will be at the end of their tether – with membership in continual decline, and their treasuries empty. But it will make no difference whatever to the workforce which will be guaranteed security to a much great degree than the critics of the legislation will admit, and with no interest in union membership. What the unions dislike most about the new legislation is that by destroying most of its beloved structure of complex award conditions, with their favourite tactic of pattern bargaining, and encouraging direct discussion between employees and employers about wages and working conditions it undermines the key role they established under the old arbitration system. It is obvious that it makes sense for the two parties to agree amongst themselves as to the mix of working hours, and whether hourly wage rates can be arranged to incorporate holiday and other allowances or these defined separately. The argument traditionally has been that the two parties are of such unequal power that first the unions and then the state had to intervene.

But this is not always the case. It is clear that there are some skills which are in such demand as a result of the expansion of particular industries that workers are in a privileged position to demand higher wages and better conditions, and there are large segments of the labour market in which there is considerable mobility and in which wage levels (however they are defined) act to adjust available labour supply to demand. But as is often pointed out as if it were a fundamental discovery, workers are human beings and are not always in a position to bargain from a secure position. This is why unions traditionally resist downsizing of workforces and indeed reduction of real wages when labour market conditions deteriorate. But it is wellknown to economists that frequently the main role of unions has been to increase unemployment by resisting adjustment of real wages, and to maintain employment for their own members at the expense of the rest of the labour force. The more they decline as a proportion of the workforce, the more union power is devoted to depriving other sections of the labour force of employment to the benefit of their own members. When unionism was more general and the determination to maintain money wages as in the great Depression was more naïve, the workers lucky enough to keep their jobs experienced substantial rises in real wages as prices fell – lower real wages would have more equitably spread income and allowed a more rapid recovery in profits and hence employment.

What unions cannot do is underwrite both wages for their members and total employment (as well as the wages of non-unionists). Nor can government achieve this through old-fashioned Keynesian policies – the best they an hope for is inflation which will lower the level of real wages and temporarily facilitate increasing employment. What government can do, however, more effectively than unions is to underwrite and legislate for wages and conditions, and share out the burden which its policies impose on the community as a whole. There is a strong case for some government underwriting of living standards (within the limits of available product) by taxation and social benefits. Government can do this far more efficiently than unions, as well as more equitably. Milton Friedman’s old proposal for a guaranteed minimum income, to be achieved through negative taxation (benefits) to those below a certain income has much to be said for it. However there are many complexities in any such system, not least the problem of the minority who will always bludge on any welfare system.

However, there has been little serious debate in Australia about the working of the new workplace relations system. The unions do not care for debate, and prefer scare mongering. This presents a very great difficulty for the Howard government, since a large proportion of the workforce has become accustomed to the structure of wage plus award-style conditions, including standard overtime and penalty rates, and either cannot conceive of trade-offs between elements in this structure but combine their fears with a belief that somehow the old structures in some way guarantee security of employment. Of course the truth is that there have been huge changes in the structure of the labour force as a result of economic change over even the last 20 years. These basic fears are part of the system of folk-beliefs about the economic system of which adherence to manufacturing protectionism on the old model is part. It is all too common to hear fears being expressed that our manufacturing sector is dwindling away with the loss of jobs to evil competitors like China and other developing countries. (It is surprising how common this nonsense is amongst those who claim to be interested in the welfare and development of poor countries; these countries can only escape poverty by following the path of industrialisation and low cost manufacturing.) Unions are closely involved in this line, which is essentially about freezing the obsolescent industrial structures whence they drew their strength originally – the great contribution of the Hawke government in the 80s and early 90s was to move away from low growth protectionism towards genuine economic development appropriate for a high income country like Australia. Despite the doom mongers of the era, our present prosperity (and our ability to deal with environmental issues) is based on precisely the decline of traditional manufacturing industry and the growth of both mining and high-tech industries, as well as services. Sophisticated manufacturing still thrives.

The great challenge to the Howard government, which it may not have fully understood, is that it has presented the community with changes to the industrial relations system which relate to their most basic fears and insecurity. It is not true that unions and the award system have been the mainstay of employment security as well as wages and related benefits, rather they have actively harmed employment and real income growth, but probably most people in employment in Australia believe hazily that there is a connection. And while the great success of the Howard government’s economic policies has been precisely falling unemployment and rising real wages, this has really given the beneficiaries more reason to fear the loss of what they have. Unionism has little if anything to do with it. Few people have any real understanding of risk, let alone risk/benefit trade-offs. In the great period of Hawke’s prime ministership (when Paul Keating throve by merely doing what his Treasury advisers told him to do – it is frequently forgotten that Keating never wanted to be Treasurer and had to be forced into the shadow portfolio by Bill Hayden) the electorate did not really understand what Hawke, with the support of a strong front bench and a supportive public service, was really doing. But they did remember the high unemployment of the seventies and early eighties, as well as the inflation and high interest rates which were the legacy of the Whitlam government, and they did not want to go there again. The middle class ideologues in the universities were constantly denouncing the Hawke government for acting rationally and effectively. Rational economic policy, under the name “economic rationalism”, became a term of abuse amongst the Left and the unions, and their ignorant cheer squads. which had done so much harm to the Australian economy in previous years.

Fortunately for the Australian people and economy Hawke was able to sell his agenda to them; and even after the destruction of Labor’s most successful Prime Minister in history not too much harm could be done by Keating.

The great problem for John Howard is to find a way to not to sell his industrial relations policy to the electorate – this is probably impossible, as with the GST – but to persuade it that he should be reelected despite the Workplace Relations Act. That will be his greatest test. It will also be a necessary learning experience for Kevin Rudd, who if he can last the distance and not “do a Latham” might well make an acceptable Prime Minister after the election of 2010.

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