The ACTU views on wages and Industrial Relations issues on the post-Accord environment, Industrial relations legislation adn the Living wage application. Tim Harcourt, ACTU Research Officer.

1. Introduction

Thank you for the opportunity to address the Economic Society. As an economist employed full-time in the union movement, I regard this as a good opportunity to exchange views on economic and IR issues. I also trust that this forum benefits from hearing the views of trade unionists as well as its other more regular contributors from the corporate and university sectors.


As Professor Griffin will have provided a thorough analysis of enterprise bargaining. I thought it would be beneficial if I sketched a brief overview of ACTU views on current wages and IR issues. In particular, I will concentrate on the post-Accord environment, the IR legislation, and the Living Wage Application.

2. The Post Accord Environment

As we are all well aware, the election of the Howard government ended the long-standing Prices and Incomes Accord. We are now all operating in a post-Accord world.


The Accord arrangements contributed to significant benefits to Australia in terms of employment growth, falls in industrial disputes and real unit labour costs, low inflation, workplace reform, and improvements in the social wage in terms of medicare, superannuation, childcare and the like.

The economic policy benefits of the Accord were noted by RBA Governor Bernie Fraser (among others) in a speech on 28 March, 1996:


“I speak, as you know, as a consistent supporter of the Accord process. I believe it has helped to moderate wage increases over the past decade. This, in turn, has contributed to job creation, lower inflation and a higher profit share. It has helped monetary policy to maintain growth in activity and employment while delivering lower inflation, and has also helped to reduce the incidence of industrial strife”.

[‘Sustaining Growth & Living Standards’

B. Fraser, RBA speech, 28 March, 1996]


However, the new Government eschews tripartism, consensus and co-operation. Its legislation (which I will discuss later) attacks workers, their institutions and ‘the independent umpire’ the Industrial Relations Commission (IRC).


The Government has said it rejects wages policy as an instrument to achieve macroeconomic objectives. While it does this it still makes public condemnations of wage claims and calls for wage restraint (see Costello, Reith). It does so despite wage and price increases being within prescribed RBA targets. This approach of ‘talking up’ wages for the financial markets by the Treasurer is dangerous. Furthermore, Minister Reith has repeatedly misrepresented the impact of the ‘Living Wage’ claim as an across-the-board increase.


As there is no Accord-type, or any other arrangement with the Government why should workers and the unions accept wage restraint from a Government that wants to attack them through legislation and impose regressive budgetary cutbacks?


In the new environment, the role the trade unions will have to play is clear:


  • Unions should make 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 (with an eye on salary movements for executives, senior executive service (SES), public servants and the like).
  • The ACTU and unions will protect the low paid and those unable to make gains through enterprise bargaining through the Living Wage Case applications. In a sense this has always been a role for the ACTU with respect to improvements for the low paid through minimum rates adjustments, safety net increases, supplementary payments etc. 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.
  • Unions will continue to direct their resources to serving the membership, offering new products, and concentrating on recruitment and organising in the workplace.
  • How effective we are will be determined by our own capacities. However, the Government will make it as difficult as possible through the new IR Legislation.

2. IR Legislation

The Workplace Relations Bill as proposed by the Howard Government seeks to introduce principles that have played no part in Australia’s Industrial Relations framework. The ACTU says that the principles have played no part for good reason as they will bring exposure to and exploitation of those with the weakest bargaining power in the community.


The principles that the Workplace Relations Bill are based on are:


1. Employment of individual contracts in preference to collective bargaining.


2. Erosion of the award safety net to ensure that it is a less than adequate, secure and comprehensive safety net for all working people.


3. Interference with trade union organisation and structure, the intentions of which will increase inter and intra-union conflict, bring on litigation and undermine the union movements ability to recruit and organise.


4. Places an emphasis on sanctions for industrial action rather than practical solutions. [For example fines to unions have increased by 500% under the Workplace Relations Bill].


5. Erosion of the functions and responsibilities of the IRC with respect to ensuring the integrity of bargained agreements in complying with a real no disadvantage test.


The Bill will harm workers and their institutions, hinder employers, and provide no benefit to national productivity, employment or the competitiveness of the economy.


It is based on retribution to the union movement after a frustrating 13 years in opposition for many of the current Government players and their allies.

3. The Living Wage

The Living Wage application has been lodged in the AIRC and was first heard on Wednesday this week (7 August, 1996).


The Living Wage Claim is specifically focussed on low paid workers who do not have access to enterprise bargaining increases or overaward payments. The aim of the Living Wage Case is to avoid the spread of ‘working poor’ that has occurred in other industrialised countries. It recognises Australia’s tradition of fairness and equity.


This Claim is referred to as the Living Wage because our claim draws on the Living Wage principles enunciated by Justice Higgins in the Harvester Judgement. Justice Higgins was required to determine what was fair and reasonable remuneration. Higgins used this statutory duty to embark on a process of establishing a Living Minimum Award Rate for low-skilled workers.


His Honour stated:


“The provision for fair and reasonable remuneration is obviously designed for the benefit of the employees in the industry; and it must be meant to secure to them something which they cannot get by the ordinary system of individual bargaining with employers. If Parliament meant that the conditions shall be such as they can get by individual bargaining – if it meant that those conditions are to be fair and reasonable, which employees will accept and employers will give, in contracts of service – there would have been no need for this provision. The remuneration could safely have been left to the usual, but unequal, contest, the “higgling of the market” for labour, with the pressure for bread on one side, and the pressure for profits on another. The standard of “fair and reasonable” must, therefore, be something else”.

[2 CAR 1,3].


Two fundamental criteria informed Justice Higgins decision that 7 shillings per day (which represented a 16% increase to workers at the Harvester factory) was a fair and reasonable rate.


First, the needs of workers. The standard adopted was:


“The normal needs of the average employee, regarded as a human being living in a civilised community”.



Second, whether the rate was relevant to the market.


Justice Higgins tested the living wage against actual rates being paid by experienced employers in the market.


His Honour stated:


“….Then, on looking at the rates ruling elsewhere, I find that the public bodies which do not aim at profit, but which are responsible to electors or others for economy, very generally pay 7 shillings”.

[at 6]


“In most cases my standard of wages is higher than the applicant’s – as necessarily followed when once I had settled a higher standard for unskilled labourers. As will be seen from my preceding remarks, I have generally solid precedents for my standard in the actual practice of experienced employers in great undertakings”.

[at 15]


In other words the Living Wage must be relevant both in terms of the needs of workers and fair market rates.



  • The concept of the Living Wage will draw on those standards enunciated by Higgins J. in the Harvester Judgement 1907, in terms of the needs of workers and the relevance of the market.




  • But the Living Wage concept in 1996 will reflect the contemporary relativities facing Australian workers in the 1990’s. The Living Wage in 1996 must provide a standard that is:



– sufficient for a worker to participate in a belong to the community as an active citizen.


However, the standard will not be constrained by the 1907 stereotype of a male breadwinner, nor will the wage be depressed by reference to a limited range of items comprising the cost of living. The standard will be inclusive and comprehensive.


In order to reflect contemporary society, the ACTU’s Living Wage Claim is also based on other fundamental principles on which the Commission will be asked to arbitrate:



  • equity and equality in labour market opportunities and remuneration, including facilitating equal remuneration for work of equal value. The notion of a family wage is no longer part of Australian wage fixing and was dispensed with in the Equal Pay Cases. The ACTU Living Wage Claim is not concerned with a family wage;




  • objectives of shared family opportunities and responsibilities and the desirability of viable, flexible work arrangements;




  • that employees covered by awards should be entitled to part of the improvement of wealth in our society;




  • that in assessing what is a fair and reasonable wage rate regard must be had to standards of fairness in society, such as poverty line estimates and cut-off points for government benefit;




  • that the integrity of the skill based classification structure must be sustained.



The objective of the claim itself is to raise entry level rates of pay in federal award to a level which can be regarded in 1996, and the immediate future, as a living wage in our civilised community.


The claim will have regard to the changing patterns of work and will seek to provide benefits to low paid workers and those workers who have not received increases from enterprise bargaining.


The claims will seek to ensure that the award system remains relevant as an effective and fair system, providing protection to workers (and fair employment from unscrupulous employers).


The claim is in three stages. The first stage of the claim is to provide an immediate increase in the minimum rates of pay and also seek to establish an increase in wage rates for workers who have not had an EBA increase.


This means a minimum award rate of $10.00 per hour for a C14 entry level process worker (or $380.00 per week).


It also asks for a schedule of minimum rates consistent with previous AIRC decision and a $20 SNA for those workers who have not received EBAs.


[The ACTU will also seek a statement-in-principle for the AIRC that part-time workers should not be discriminated against in terms of overaward payments, superannuation and other benefits of employment].


The second stage of the claim will have special regard to the changing patterns of work. The legislative arrangement will be particularly relevant to the final consideration. The ACTU will ensure protection for workers called upon to work occasional and a few hours per week. The provisions will provide an incentive to employers and to workers to achieve more certain income and higher weekly incomes.


The second stage will be:


– $11.00 per hour for C14 ($418.00 per week);

– $20.00 SNA


The third stage of the claim will consider the final adjustment in the context of producing a variety of work sharing and voluntary additional leave options including a reduction in the standard hours of work.


It consists of:


– $12.00 per week for C14 ($456.00 per week);

– $20.00 SNA.


The claim will be heard and (if successful) phased in over 3-4 years. The claim is based on a standard which is sufficient for a worker to belong to and participate in the Australian community.


The claim is based on a broad range of criteria:



  • fair market rates [the Living Wage Rates at the end of the adjustment will be equivalent to a tradespersons’ average rate in May 1995];




  • integrity of skill relativities set in 1989 NWC;




  • adequacy of MRA with respect to Australian living standards;




  • the ‘needs’ of household types according to the Household Expenditure Survey (HES);




  • other benchmarks of income inadequacy;




  • labour market changes – hours worked, mode of employment, industry composition;




  • sharing of family responsibilities;




  • equal pay;




  • equitable distribution of income;




  • dispersion in earnings;




  • movement in ARPI, AWE and AWOTE;




  • community movements;




  • desirability of simple and enforceable rates for employees and employers alike;




  • economic criteria – cost of living, profitability, productivity.



The claim, (by being phased in and allowing for absorption etc….) is both equitable and economically sustainable. The Government and employers in their wisdom unsuccessfully tried to delay the application [despite their publicly announced ‘concern’ for the low paid]. The applications (now to be heard in October) will allow the AIRC an important role in protecting low paid groups who do not have sufficient bargaining power to better their incomes directly with employers.

4. Summary

In conclusion, the IR Legislation and the Living Wage Case will be key determinants of wage and IR developments over the next 2-3 years. The ACTU will continue to play a key role in both developments.


Otherwise, the post-Accord environment provides the following roles for the IR players:



  • Decent employers will continue to work well with workers and the union whatever the legislative framework. [Refer to companies already signed up to the commitment on legislative change].




  • There is considerable goodwill towards unions for their role in workplace reform in the 1980’s – especially the large fall in industrial disputes since 1983.




  • Some employers will be unscrupulous and impose individual contracts and other means to reduce workers’ living standards.




  • The ACTU will restrict legislative changes to the extent of its resources but will primarily concentrate on recruitment and organising in the workplace.




  • Unions will make claims in their industry sector and enterprise according to bargaining strength, economic adjustments, productivity and profits.




  • The ACTU will pursue protection of the low paid through the Living Wage Case to avoid an expansion of the working poor, inequality and related social problems of other countries which are contrary to the Australian tradition of the ‘Fair Go’!



[Whatever happens, there will be plenty of activity for Economic Society Fora in the future!]


Thank you.


Tim Harcourt, Research Officer, Australian Council of Trade Unions. 8.30-10.00AM. Friday 9 August, 1996. Grand Hyatt Hotel.