Economics & IR In 1996-97: A Fair Go For The Australian Workforce

Economics & IR In 1996-97: A Fair Go For The Australian Workforce

In this speech Jennie George, ACTU President concentrates on two aspects of Government policy that directry affect people we represent - wages policy and industrial relations.

1. Introduction

I welcome the opportunity to be part of the "Fifth Economist Roundtable'. Whilst we, in the labour movement, do not always agree with what "The Economist" has to say, we do acknowledge its longevity and influence in the English speaking world. We also appreciate that 'The Economist' is interested in what the Australian labour movement has to say on current issues. I appreciate the opportunity to express some views, on behalf of the people I represent.

 

First of all, much has been said about the new political environment. The Roundtable has provided a forum for the relevant Ministers to outline what the Government has done and plans to do over the coming year.

 

I wish to concentrate on two aspects of Government policy that directly affect the people I represent - wages policy and industrial relations.

2. The New Environment - The End Of Wages Policy

The Howard Government has expressed the view that there is no need for any form of wages or incomes policy. This is in contrast to the dominant view in Australia over the past decade. In the lead up to the 2 March election, the Coalition was particularly critical of the prices and incomes policy of the previous Labor administration - known as 'the Accord' - which operated between 1983 and 1996. The Accord's premise was that economic and social policies could be combined to provide employment opportunities, low inflation, and social wage gains to enhance the living standards of workers and their families. The previous Labor Government worked with the ACTU to ensure that there was another policy instrument in addition to fiscal and monetary policy available in the form of wages policy. The ACTU in turn determined its wages strategy with due regard to meeting employment and inflation objectives and knowing that social wage reforms enhance the living standards of workers. Measures such as family payments, childcare assistance, Medicare and universal superannuation were of enormous assistance to those in greatest need.

 

Throughout that period the union movement consistently acted in the national interest. Regrettably, that contribution is neither properly understood nor appreciated by the Howard Government.

 

Let me provide a few examples to illustrate my point.

 

 

  • In 1985 following a collapse in our terms of trade and the consequent serious devaluation of our dollar, the union movement agreed to a wages/tax trade-off and the introduction of superannuation as a deferred wage rise.

 

 

 

  • In the last two Accords priority was given to employment growth with specific employment targets. The Accord Mark VII target of 500,000 new jobs in the period 1993 to 1996 was met in two years with approximately 720,000 new jobs created over the full period.

 

 

 

  • As well as the commitment to employment and sustainable economic growth, inflation fell from double digit figures to historically low levels. In the last Accord the unions accepted that wage outcomes should be compatible with the Reserve Bank's underlying inflation target of 2-3%.

 

 

 

  • The Accord partners were motivated to ensure reasonable industrial and social safety nets were in place during the period of economic restructuring in order to ameliorate market inequalities and maintain social cohesion.

 

 

However, despite the union movement's best efforts in the national interest, this was not replicated by large sections of the Australian business community. Many investors engaged in and were ultimately harmed by asset price speculation. There were few examples of productive capital investment despite the opportunities provided in terms of record company profits and high profit/national income ratios. The experience of a number of well known Australian entrepreneurs was perhaps symbolic of the lack of concern for the national interest shown by some sectors of capital.

 

Furthermore, there has been no recognition from the Government of the efforts made - in the national interest - by workers and their unions. Apart from the punishment to workers and the union movement explicit in the proposed workplace relations legislation the Howard Government has also rejected the Accord approach and philosophy and the use of wages policy in its economic policy framework.

 

Australian unions now operate in a new environment which the Government must come to appreciate.

 

In the new environment, trade unions will play somewhat different roles:

 

 

  • First, unions are now making claims based on economic conditions and community movements; that is the economic circumstances of industry, profits and productivity, changes in the cost of living, and community movements. The union movement is keeping an eye on executive salaries and company directors' incomes and the incomes of judges, politicians and senior public servants. Whilst the Reserve Bank of Australia has noted the growth in executive salaries and its role in inflation in its quarterly review, the Government has not followed suit.

 

 

Executive salaries were not mentioned by the Government in its Budget Statement No 2 when it gave a warning to the unions that :

 

"...if the recent increase in the size of enterprise bargaining claims translates into higher outcomes and - more importantly - spreads, this would boost wage growth with adverse consequences for employment and inflation". [Budget Statement No. 2 p.2-27]

 

The Minister for Industrial Relations, Mr Reith, has reinforced the Treasurer's message in the Budget. He has warned workers to be 'responsible' in enterprise bargaining as :

"to do otherwise would jeopardise Australia's current low inflation, and the recent fall in mortgage interest rates". [Media Release, Peter Reith, 19/9/96]

 

But the same warnings have not been given to executives about their salaries nor company directors about their fees.

 

 

  • Further attention should be paid to executive salaries. The Prices Surveillance Authority (PSA) has calculated that between 1989 and 1995 executive salaries grew 1.5 times the rate of growth of average weekly earnings and 2.3 times the rate of growth of award rates of pay. Further, the pay increases were not commensurate with movements in profit and share prices and were not related to company performance.

 

 

The Government says nothing about executive salaries but blames workers for jeopardising economic outcomes. But the Government has said it doesn't want a wages policy; it will have to accept that the industrially strong will get what they can using their bargaining strength in the market place.

 

 

  • Second, the ACTU and unions will protect the low paid and those unable to make gains through enterprise bargaining. The Living Wage Case application is a strategy to achieve that protection. The ACTU has traditionally been concerned to protect the incomes of the low paid through minimum rates adjustments, safety net increases and supplementary payments. Bargaining has always been available to the strong sectors - be it enterprise bargaining or its earlier forms (like overaward bargaining) whilst arbitrated settlements have been aimed at assisting the weaker sectors. The ACTU has a responsibility to continue to protect the incomes of those in a weak position in the labour market.

 

 

 

  • Third, unions will continue to direct their resources to representing their membership, offering new services and concentrating on recruitment and organising in the workplace.

 

 

In this new environment, how effective we are will be determined by our capacities and our ability to be innovative and to anticipate changes in the needs of the workforce.

3. The Industrial Relations Legislation

The Government's Workplace Relations Bill has been widely criticised throughout the community for its attack on the fundamental values of fairness and equity which underlie our industrial relations system.

 

Around 1500 submissions, a record number, were made to the Senate Inquiry into the Bill; the overwhelming majority protesting against the weakening of the powers of the Industrial Relations Commission and the tipping of the power balance towards employers while stripping the most vulnerable workers of basic protection.

 

The most powerful evidence was from individual workers who, in some cases with great courage, told of their exploitation under state legislation, particularly in Victoria and Western Australia.

 

Last Thursday around 100 community organisations released a statement calling on the minority parties in the Senate and the independent Senators to ensure that the Bill is amended so as to maintain an effective safety net for those without a strong position in the labour market.

 

The key issues for the trade union movement, which have also been identified by the community groups as particularly affecting the most vulnerable workers are:

 

(1) The limiting of the Industrial Relations Commission's powers to make comprehensive awards and resolve industrial disputes through arbitration where necessary.

 

(2) The limiting of workers' access to the federal system of comprehensive and up-to-date awards to ensure fair terms and conditions of employment underpin enterprise bargaining.

 

(3) The provision of a means of slashing workers' wages and conditions by allowing state employment agreements to override federal awards.

 

(4) The encouragement of secret, individual contracts which are not scrutinised or assessed by the Commission.

 

(5) The removal of the Commission's powers to ensure equal remuneration in the over-award area.

 

(6) The limitations on the ability of unions' to collectively represent members, particularly by virtually eliminating the operation of right of entry.

 

(7) The denial of access to the federal unfair dismissal jurisdiction for workers who do not have access to an adequate remedy.

 

(8) The perpetuation of discrimination against young workers and abolition of some safeguards against exploitation of apprentices and trainees.

 

(9) The encouragement of legal sanctions against unions and workers who take industrial action as a substitute for effective conciliation and arbitration.

 

Negotiations are taking place now between the Government and the minority Senators, particularly the Democrats, whose votes will be required to pass the legislation.

 

I am confident that the Government will be forced to amend the Bill to address these issues which the Democrats have already identified as being of great importance.

 

The Government claims that the legislation is required in order to meet economic imperatives, particularly in relation to employment.

 

This link has been rejected by, amongst others, Reserve Bank Governor Ian MacFarlane, who was reported in the Sydney Morning Herald of 26 September as expressing doubt that the legislation would have the positive effect on employment proposed by the Government. Judith Sloan has conceded that MacFarlane "may have a point" (The Australian, 3 October 1996).

 

Similarly, ANU Professor of Economic Bob Gregory stated, in the context of his comparison of Australia and the deregulated US labour market, that removing institutional protection for the low paid would "impact adversely on income distribution rather than generate employment growth at low wages".

 

It can also be noted that despite Australia's's allegedly "rigid" labour market our employment growth rate of 22.1 per cent has outstripped the OECD average of 6.7 per cent since 1983, as well as other OECD countries which have gone down the deregulation path - United States 18.3 per cent, New Zealand 18.2 per cent, Britain 7.5 per cent.

 

The legislation will not bring any economic benefit to Australia. Rather, it will being social dislocation caused by deepening economic divisions together with increased industrial conflict.

 

This legislation does not address the real problems faced by our country, while it has the potential to weaken, if not destroy, all that is best - our relatively fair and equitable society. We have only to look at the horrendous social problems of the United States or Britain to understand the risks we are taking.

4. The Living Wage Claim

A major challenge for the Government (given its lack of wages policy and anti-worker legislation) is how it will meet its election commitments to the low paid in the workforce. It is on record saying that it supports a wages safety net for low paid workers and has claimed that no worker will be worse off under its legislation.

 

A simple way to meet the challenge of assisting the low paid would be for the Government to support the ACTU's Living Wage claims in the Industrial Relations Commission. The Government has been ambiguous in its attitude to our claim.

 

Through the claim for a New Living Wage, the trade union movement is asking employers, the Government and the Commission to face up to the challenge of ensuring that Australia maintains a fair and relevant system of safety net awards.

 

The rates of pay contained in the claim, to be achieved over three years, are the minimum required to provide Australian workers and their families with decent living standards.

 

The object of the claim is to increase minimum award rates so that no worker earns less than $12 per hour for each ordinary hour worked and not less than $456 per hour in a 38 hour standard working week. The claim will be processed in 3 stages with the first stage providing for a minimum of $10 per hour (or not less than $380 for a 38 hour standard working week).

 

The rates claimed are based on the skill relativities established through the award restructuring and minimum rates processes put in place by the 1989 National Wage Case decision.

 

The claim is based on a wide range of factors, including fair market rates and changed work patterns as well as the economic requirements of workers and families, recognising the diversity of Australian family structures.

 

The Living Wage claim is directed particularly at ensuring fair wages for those unable to negotiate enterprise agreements and who are not in receipt of over award payments. The claim will be of great benefit to women and to part time workers, ensuring them more equal treatment.

 

The claim for a Living Wage is an opportunity to establish wage rates for all workers in line with the community standards which are appropriate for this country.

 

The Living Wage is about the kind of society we are as much as it is about what employers should pay their employees.

 

The Living Wage not only has its origins in the famous Harvester Judgement of Justice Higgins - an important part of Australia's industrial and social history - but also in principles expressed by the great founder of economics Adam Smith who wrote in the 'Wealth of Nations':

 

"It is but equity that they who feed, clothe and lodge the whole body of the people should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged" [Smith (1776) 1901, 193].

 

I would imagine Adam Smith to be a hero to many of the contributors to and readers of 'The Economist' and I draw your attention to Smith's belief in social stability and fairness as a necessary prerequisite for the economic system to function effectively.

 

I also call on the Australian Government to show consideration for the needs of the low paid by supporting our claim and so honouring the commitments they gave to the Australian people - including the low paid - at the last election.

5. Summary - The Future

In conclusion, despite the animosity that the Government feels towards the union movement we have many reasons to be excited by the challenges of the new environment. For instance:

 

1. The new market-based wages environment will allow us to show workers the economic value of joining unions. This will assist in recruiting and organising workers to turn around the decline in union membership. Unions will be delivering tangible industrial benefits too - beyond the scope of wage outcomes alone.

 

2. The new environment highlights the protection that unions can provide workers. That is not to say that we will only continue what we have done in the past but we also have to think of new services that workers require - particularly in a diverse workforce. We will continue to be innovative in the services we provide to our members.

 

3. The Living Wage claim has enabled the union movement to work and consult closely with community groups, churches and other religious groups, Aboriginal organisations, women's groups, organisations representing young people and migrants about the needs and values of the society in which we live. This has enabled us to build a coalition of people who wish to alleviate poverty and assist the plight of working families.

 

4. The campaign against the IR legislation has also allowed us to build coalitions and alliances with others in the Australian community in similar fashion to the Living Wage campaign.

 

5. The new environment has enabled us to re-focus on workplace issues and consolidate the gains of the past decade.

 

The union movement has undergone many changes in its history. We accept the recent changes as a challenge to uphold our basic principles of a fair go for the workforce and a commitment to a fair society. We are optimistic that we will meet that challenge.

 

Thank you.

Sources/References:

R.G. Gregory (1996) "Wage Deregulation, Low Paid Workers and Full Employment" in Sheehan, P.J. Grewal, B. and Kummick (ed) Dialogues on Australia's Future, Centre for Strategic Economic Studies, Victorian University of Technology, Melbourne.

 

I. J. MacFarlane (1996) "Making Monetary Policy: Perceptions and Reality."

Talk to 25th Conference of Economists, Canberra, 25 September, 1996.

 

Adam Smith (1776) 1901. The Wealth of Nations. Library of Universal Literature, New York Collins.

 

OECD in Figures, 1995 edition

 

ABS, Cat 1350.0. Australian Economic Indicators (various Issues).

 

Speech by Jennie George, ACTU President to the Fifth Economist Roundtable with the Government of Australia. Session 11: The Union View, 3.15-4.00 pm, October 8th, 1996, Hyatt Hotel, Canberra.