Achieving International Competitiveness - The Macro IR Environment

Achieving International Competitiveness - The Macro IR Environment

Stephen de Rozairo, Research Officer, ACTU speaks on the Accord, Industrial development since 1991, workplace change in Australia and the challenges facing unions.

Thank you for the opportunity of addressing you on the ACTU’s perspective of achieving International Competitiveness with respect to the industrial relations environment. Although our overall approach is multi-dimensional one encompassing other areas such as industry policy, microeconomic reform and a supportive macroeconomic policy mix.

 

From the outset I must clarify that the ACTU supports the development in Australia of a First World Standard of Living consistent with a viable union movement, that is to say a highly skilled, highly productive workforce, rewarded by first class wages and conditions.

 

Our vision of international competitiveness does not involve trading off our living standards relative to those who have a large unskilled low paid labour force. The union movement is not pursuing a Third World Strategy, unlike proponents of the recent developments in New Zealand.

 

The Federal Government and the ACTU have since 1983 developed an Accord arrangement to supplement the Award system. In essence the Accord which was an attempt to initiate a major cultural shift in industrial relations, “was believed by the parties in 1983 to offer by far the best prospect of enabling Australia to experience prolonged higher rates of economic and employment growth, and accompanying growth in living standards, without incurring the circumscribing penalty of higher inflation then otherwise would be the case.”

 

In that vein the recent developments arising out of the One Nation Statement are still consistent with the premise, but I shall expand upon that later.

The Accord Approach

Since 1983 wages growth has been moderate and predictable. In terms of investor certainty the same degree of support has not been afforded in terms of interest payments, foreign exchange exposure and energy costs.

 

These moderate outcomes have been achieved in spite of skill shortages and outrageous movements in executive remuneration.

 

For nine years now, Australia’s union movement has discussed with the Federal government prior to each budget, what the aggregate wage outcome is likely to be in the period ahead. As you can see from Table 1, wages growth has consistently come in on target, and often bulls eye.

 

The reforms achieved in the labour market are sustainable in that they do not threaten workers’ income security in terms of minimum rates and conditions. Rather that reform be supported by appropriate wage rises, which are the rewards for boosting productivity and efficiency.

 

The union movement has accepted its own need for change within the current environment and since 1987 has commenced a process of amalgamation and rationalisation. From Table 2 it is clear that by June 1993 there will be approximately 21 industry/occupation based unions with membership greater than 10, 000.

 

The reforms will be felt in reducing potential for demarcation disputes and improving bargaining processes in brownfield sites. In greeenfield sites the ACTU supports Single Bargaining Units. [This is in stark contrast to the New Zealand approach, which encourages a number of competing, bargaining agents at medium to large size workplaces.]

 

In terms of real unit labour costs we have achieved considerable improvements and sustained them over the last nine years as is evidenced in Chart 1.

 

Underpinning all of this has been a reduction in disputation of over 60% since 1983.

 

Industrial Developments Since 1991

 

There have been a number of major industrial developments since 1991.

 

The October 1991 National Wage Case decision has provided for enterprise bargaining. The important elements of the decisions were:

 

 

  • the enterprise bargaining agreement must be for a fixed term;

 

 

 

  • minimum award rates can not be bargaining away;

 

 

 

  • national standards of hours of work and annual or long service leave with pay can not be altered;

 

 

 

  • the AIRC will conciliate but not arbitrate in the event of a dispute over enterprise bargaining

 

 

The ACTU believes that these principles are appropriate in the flexibility is a positive process for both parties, whereby workers receive wage rewards for bringing about workplace change. It is a win-win approach rather than the “stick” approach adopted in New Zealand. There the issue is not positive workplace change and inculcating a spirit of co-operation at the workplace level, rather merely threatening worker security to reduce costs. Industrial reform is not a zero-sum game where one party can only gain at the expense of another.

 

The union movement sees workplace bargaining as the next logical and evolutionary phase of the Award Restructuring process. That is the process, which since the late 1980s, has sought to reform Australia’s wage fixing and industrial relations system.

 

Award Restructuring has already delivered the rewards for those companies that put in the effort. Table 3 is taken from a recent study by McIntosh Brokers and found that the top 18 publicly listed firms achieved an average 6.8% increase in productivity over the period 1989-90 and 1990-91.

 

The Award Restructuring has proved to be the foundation for greater productivity upon which the new wage principles are built.

 

The Prime Minister released the “One Nation” Statement in late February.

 

Whilst I do not intend to focus on macroeconomic developments, it is clear that the Prime Minister has chose an ambitious target for Australia. That is to be a nation of high economic growth, maintaining a low inflation rate and seeking productivity growth through structural reforms, infrastructure and increasingly through our labour market arrangements. That is clearly a lofty goal but it is an appropriate one for a First World nation.

 

In acknowledging the emphasis of government policy in revitalising jobs growth the ACTU Executive decided to defer the National Wage Case claim till the second half of 1992 which was originally proposed for early this year. This is another example of the Accord supporting greater employment growth and lower inflation environment.

 

Furthermore, the ACTU re-affirmed its commitment to wage outcomes consistent with Australia maintaining an inflation rate comparable with those of our major trading partners.

 

This is a historic development which demonstrates the maturity of the Accord in bedding down a lower rate of inflation.

 

A lot of commentators focus on the exchange rate as an indicator of competitiveness, but international competitiveness is not achieved merely by having a week and unstable currency. The two most successful industrial nations, Germany and Japan, give weight to that. A stable currency with low inflation is a major boost to Australia’s competitiveness.

The Challenges

The key to the extent of workplace change in Australia will be determined by a number of factors. The framework provided by the National Wage Case principles has the capacity to satisfy a broad range of agreements.

 

One such example is the Metal Industry Framework which has dominated the agreements before the AIRC - and proved to be achievable.

 

For those who wish to form longer term contracts, or incorporate any National Wage Case rises within their industry or enterprise award/agreement, the capacity is there – because the ACTU support this within our policies.

 

Those who wish to bring about greater reforms, more quickly and therefore negotiate appropriately greater wage rises are also accommodated, eg. the Metal Industry Agreement has a special case clause.

 

The principles and framework are flexible enough, but the challenge is in working through the changes with your employees and unions.

 

The union movement has committed itself to work with governments and employers to bring about a change in workplace culture. This is a role of Positive Agents of Change, which contrasts with traditional expectations of unions in society.

 

Four our organisations the challenge is to devote greater authority to our affiliates, whilst strengthening the quality of shop floor representation via training.

 

In dealing with management our aims is to build trust and co-operation with employers at he workplace, our credentials being that we have met all our no extra claims commitments during the Accord era. We look to further consultative practices and information sharing.

 

The task is to maximise the potential of the reforms currently in train. It is only when the economy recovers past its previous peak that we will fully realise these gains.

 

The union movement believes that the award system with its minimum rates and conditions should be a safety net for those employees who are not industrially organised. In that regard flexibility and workplace bargaining can not trade these minima way. However, apart from the above, there is nothing inherent about the award system that limits negotiations. In the quest for international competitiveness the lower skilled and lower paid will not be the sacrificial lambs. Positive reforms, as opposed to negative cost cutting, are difficult and yet necessary to achieve. That is the challenge for Australia to maintain and improve its standard of living.

Conclusion

The union movement is in for the long haul in terms of reform. We take a long-term view and negotiate in a sustainable way. This is not a “winner takes all” attitude where employers “win” in weak labour market periods and workers “gain” in booms, for such an approach means that in the long-run everyone loses.

 

Stephen de Rozairo, Research Officer, ACTU. Address to the Committee for Economic Development of Australia, Sydney 22nd May 1992.