The purpose of this paper is to present the origins and progress of Accord Mark VI. Tim Harcourt, Research Officer ACTU.
The Prices and Incomes Accord has been the cornerstone of the Hawke Labour government’s macroeconomic policy since 1983. It was initiated by the Australian Labor Party (ALP) and the Australian Council of Trade Unions (ACTU) in February 1983, and has provided a sound foundation for industrial relations and wages policy under the Hawke government. 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 in living standards, without incurring the circumscribing penalty of higher inflation that would otherwise be the case”.
It is important to understand that the Accord has come to represent the working relationship between the ALP Government and the ACTU. It is a process of consultation, rather than just a written document etched on stone which remains immutable. The economic assumptions and conditions of the 1983 Accord have changes considerably since then. The Accord Marks I-VI is a form of reference that the media use to distinguish between the differing wage negotiations.
Since its inception, the Accord has been renegotiated on five occasions (Accords Mark I-VI). With each successive new version of the Accord, the wage fixation guidelines have changed markedly. The first Accord, Mark I, was highly centralised and premised on full indexation and no bargaining outside the National Wage case. However Accord Mark III (1987) heralded the introduction of the two tier wage fixing system – with national wage case adjustments and productivity bargaining at the workplace level, for second tier wage increases. The Accord process has been extremely adaptable and has provided the scope for over award bargaining between parties. The most recent version of the Accord, Mark VI sought to promote greater enterprise bargaining whilst maintaining a system of legally binding minimum wages. However, unlike earlier Accords, this agreement has been the subject of much discussion and debate. The Australian Industrial Relations Commission’s (AIRC) rejection of the central elements of Mark VI earlier this year appeared to signal the end of the resilient Accord process. However, the events of the last two months have vindicated the original Accord Mark VI package.
The purpose of this paper is to present the origins and progress of Accord Mark VI.
The Accord Mark VI agreement was reached in February, 1990, shortly before the March, 1990 Federal Election. It consisted of the following elements;
- the September, 1990 quarter CPI to form the basis of a general wage rise;
- a further $12 per week general wage increase to be introduced from 16 May 1991;
- an extra 3% award-based superannuation to be phased in;
- plus the opportunity for enterprise bargaining on an over-award basis as a result of agreed productivity/efficiency/profitability achievements.
Following the low September, 1990 quarter (the CPI rose only 0.7%), the government offered the ACTU a wage-tax trade off deal, which was subsequently accepted.
The National Wage Case proceedings of November 1990, staggered over into February of the following year. A decision was not released until April 1991.
The April NWC decision rejected the central tenets of the ACTU and Commonwealth, Accord Mark VI submissions. The most controversial element of the decision was the failure to permit workplace bargaining. The NWC Full Bench concluded that the wage case participants were not yet mature enough to engage in a more decentralised wage-fixing system. It did not oppose enterprise bargaining per se. In the preceding NWCs the Commission had endorsed greater flexibility within the centralised wage fixing system by implementing the Structural Efficiency Principle and advocating productivity based bargaining. However, it decided that prior to ratifying enterprise bargaining, the employers and the trade union movement would have to address their fundamental differences of opinion about the specific parameters and objectives of enterprise bargaining.
The Commission’s decision was strongly criticised by the union movement, the government and a number of employer organisations. Despite marked differences in their ideological interpretation of enterprise bargaining, all were in favour of a more workplace focussed wage fixing system.
The key elements of the April 1991 NWC decision were:
- an increase of up to 2.5% based on continuation of the structural efficiency principle (SEP). This was considered to be a form of productivity bargaining. (Hence parties were required to make a formal application, and to have previously received the second SEP increase available under the August, 1989 decision).
- No change to the superannuation principle, although it recommended the Commonwealth convene a conference on retirement incomes.
- No enterprise bargaining permitted.
In response to the to the April NWC decision the ACTU convened a Special Union’s Conference which unanimously rejected the Commission’s decision. However, the ACTU denounced only the decision, not the institution of the Commission with awards, unlike employer associations such as the CAI and the Coalition who sought to question the future of the arbitration system.
Before the August NWC hearings commenced, a number of developments became evident, which reduced the ACTU dissatisfaction with the April decision. These included the Federal Government’s announcement in the August 1991 Budget that they intended to introduce superannuation legislation, the aim of which was to ensure, by the end of the decade, 12% superannuation for all working people; the vast majority of 2.5%/$12 applications through the AIRC were processed without trade-offs, and the no extra claims commitment modified to finish on 1 November 1991.
Many commentators argued that the April 1991 NWC outcome signalled the end of the Accord process. However, the Commission’s decision proved to be a temporary delay in the implementation of Accord Mark VI rather than its demise.
The historic process of reform is a child of the Accord, which since 1983 has also delivered the greatest fall in disputation in the industrialised world and a period in which the growth of labour costs has been moderate and predictable – even in the face of strong economic growth, and skill shortages (1988-90), and outrageous executive salary movements.
Under the Accords, unions have kept every commitment they have given. Real unit labour costs have fallen to historical lows, profits remain high compared with previous recessions, and Australian labour costs are low by comparison with the rest of the industrialised world. [See Chapman, B.J. and Gruen, F. (1990) “An Analysis of the Australian Consensual Incomes Policy – the Prices and Incomes Accord”, Discussion Paper No 221, Centre for Economic Policy Research, Australian National University, Canberra.]
We have achieved the lowest rate of inflation for decades. The real issue now is to make enterprise bargaining work in such a way that real wages increase – ensuring a return for workers from the productivity increases that flow from restructuring.
The fact that this restructuring is occurring now, in a context of high unemployment, means that the objective of economic growth can be pursued without running into early capacity constraints, and in consistent with the need to maintain a healthy balance of trade.
Australia’s award system is no impediment to this end. The award system traditionally has been a protection for the lower paid and weaker groups of workers, and the union movement will fight forever against those who would sabotage it.
The National Wage decision handed down last month reflects the momentum for change which has built up in our wages system since the mid 1980s, and facilitates what the parties – employers and unions – believe should happen over the period ahead. This is that restructuring should proceed.
Especially since mid 1986 the union movement has led the charge to overhaul Australia’s wages system, in a process which has come to be known as award restructuring.
This has included:
- creating skill-based paths for all workers, with rates of pay increasing with skill levels to provide incentive for continuing acquisition of skills;
- making Awards simple and understandable
- building stability into relationships between Awards, so that a 1974 uncontrolled wage round is less likely to occur;
- devolving responsibility for implementing these changes to workplaces.
Hence, the ACTU views enterprise bargaining as part of the continuum of change which commenced under the Award Restructuring Process, but with greater emphasis on change at the workplace.
Given the breadth of views on wage determination it is crucial to understand the trade union movement’s vision of a more flexible wages system, as distinct from the Coalition, the CAI, and indeed the approach adopted in recent times in New Zealand.
(1) Enterprise bargaining conducted by trade unions based on increases in productivity/profitability and/or service efficiency and effectiveness which may be pursued on an Award or over-Award basis. In the public sector some form of market based adjustment will be necessary.
(2) That permanent work-based and attitudinal change is not necessarily brought about by reducing people’s job or income security. Rather that reform be supported by appropriate wage rises, which it must be remembered are the rewards for boosting productivity and efficiency. The NWC decision rejected the cost-offsets or negative cost cutting approach by stating that there should be no weakening of minimum award rates of pay, nor departures from National Standards such as hours of work, annual or long service leave with pay.
(3) Parties are encouraged to reach longer term agreements on wages providing stability, certainty and process for preventing industrial disputes during its terms.
(4) The role of the AIRC should be to facilitate the process of reaching agreement amongst the parties, and not arbitrate prematurely in advance of the process of conciliation.
It is important to remember that the wages system is in transition, and unlike the BCA the ACTU does not believe in the blind pursuit of some “pure” model of wage determination above all others. Bill Kelty has often argued that there is no perfect wages system.
However, in the debate thus, far management attitudes remain unquestioned. Employers wish for workers to focus upon the improved operation and productive performance of the enterprise, but they must realise that the challenge also exists for them that is in order to promote an enterprise culture, in that they too must learn to avoid the discredited authoritarian model of management. Although many forward looking Corporations have come to accept that the challenge of workplace bargaining lies with both management and unions.
In supporting a more flexible wages system we have recognised the challenge for our country to reform itself economically and socially in order to improve our productive performance, not just in historical terms, but relative to our trade competitors.
Under the process of Award Restructuring the ACTU has been at the forefront of attitudinal and institutional change. Unlike others who merely criticise we have addressed the Trade Union Movement’s need to change itself, via the Amalgamation and Union Rationalisation Process and supported the development of Single Bargaining Units.
The new wage fixing principles ensure that the award system serves as a safety net for those who are without access to overaward payments, and hence amongst the lowest groups in the community.
In the push for workplace reform, the ACTU will never abdicate its responsibility to protect the interests of weaker and lower paid groups in the community. We will do everything possible to protect their living standards and create real jobs and careers.
Indeed for those seeking trans-Tasman inspiration the New Zealand Employment Contracts Act introduces a completely decentralised and unstructured method of negotiating wages and employment conditions. It will have unpredictable, uneven, inequitable and unstable and unsustainable outcomes. Nor is there any guarantee that it will lead to productivity improvements.
In contrast, the ACTUs approach is:
- provides a broad framework within which enterprise bargaining may operate, focussed on:
- a highly skilled competency based wages system
- a collective commitment to an aggregate wage target
- a consensus about the need to increase
Tim Harcourt, Research Officer, ACTU.