Trade union perspective on industrial relations and the Australian economy by Tim Harcourt, Research Officer, ACTU.
First of all I welcome the delegation to Australia, and we are most appreciative that you have taken the time to come to the ACTU to get a trade union viewpoint on industrial relations and the economy in Australia.
At the outset I might say that there are certain stereotypes built up about trade unions in Australia, what they do, who they are, and what their relative contribution is to Australia’s economic and social prosperity.
All nations in the world have to live with national stereotypes. Some, I must say, are deserved, but some are not. Stereotypes are usually static. They are developed at a point in time when someone has had a personal experience dealing with a country or has visited the country. However, in contrast, the real world is dynamic, always changing. Often people, stereotypes, or myths can persist long after those changes have taken place. For example, in industrial relations Australia has at times been given a national stereotype in terms of work practices, attitudes to work, and our industrial relations systems that was forged in the 1960’s and 70’s.
This has come from overseas, but is largely spread Australian ex-patriots living overseas and travelling throughout the region and the rest of the world. The stereotype is of strike prone, leisure seeking, inflexible labour force of little ethnic diversity, run by large numbers of autocratic, anti-democratic trade union organisations, staffed by leaders of anglo saxon origin.
I think, instead of protesting this stereo type and just saying it is not true, it is far better to lay some facts on the table to show why the stereotype is outdated and inaccurate. That is what I plan to do today.
We think it is the ACTU’s job in particular, as Australia’s trade union peak council, to set the factual record straight.
The fact is that the ACTU is proud of our Prices and Incomes Accord Agreement with the Federal Labour Government, which at 12 years of age, is one of the longest running incomes policies in the industrialised world, and proud of our union movement’s own achievements in union rationalisation, social welfare, economic reform, and national social policy development. We have a lot to be proud of, and it is my mission today to outline that record to you.
I think it is particular important as Australia becomes more integrated with the Asia Pacific region that we set the record straight and show our regional counterparts what we have been doing in Australia, and how that is benefit to us and in fact to our place in the region.
2. Industrial Relations, Trade Unions and the ACTU
2.1 Industrial Relations
I want to say at the outset that the industrial relations system in Australia is unique in the world. Similarly, Australian trade unions have grown up in the Australia historical context. They are not, as is often thought, like British, American, or Western European unions. Like the marsupial, the Kangaroo, the Koala, or the platypus that has attracted so many overseas visitors to Australia to see, the union movement and the industrial relations system is unique to Australia, and often mysterious to the outsider.
The framework of the Australian Industrial Relations system has, since 1904, involved a federal based system of conciliation and arbitration, establishing minimum rates of pay and conditions for different occupations, and it has been coupled with the equivalent state based systems.
The system has also provided a means of setting and preventing industrial disputes by industrial tribunals, the Australian Industrial Relations Commission (AIRC) at the federal level with its appropriate state counterparts.
The use of conciliation and arbitration by tribunals, and the establishment of minimum rates of pay and conditions in what are known as awards is unique to Australia.
The awards provide a safety net for workers who are unable to engage or acquire much bargaining power on their own due to their economic status.
However, there is also bargaining above the safety net by strong unions on a overaward basis. That is on top of the safety net.
Whilst not wishing to go too indepth on the historical and legal development of our system, I might mention that there has recently been new legislation enacted by the Federal Labor Government which clarifies the role of the award system, promotes greater bargaining, and maintains a system of enforcement.
In the new Act the role of the Industrial Relations Commission in exercising all its functions is guided by the Objects of the Act. The role of the Commission with respect to Awards is made much more explicit by the new legislation. The Commission is given new powers in respect of sanctions. The need for the Commission to take family responsibilities into account in awards, and in agreements, is highlighted, and the Act promotes enterprise bargaining (in what other countries is known as collective bargaining). It provides rights to bargain and the requirement to bargain in good faith, subject to minimum entitlements.
The important thing that the legislation has done is that it has enacted the external powers and provision of the constitution to ensure that Australia meets its international obligations to ILO Conventions. That being so the legislation provides for minimum entitlements to all workers no matter what state they live in Australia. The minimum entitlements consist of minimum wages for groups of employees, equal pay for men and women for work of equal value, minimum entitlements on the termination of employment rights, which includes minimum period of notice and protection against unfair dismissal, and provisions for parental leave.
We have a system where an award system provides a minimum safety net and which can regulate the industrial relationship between employees and employers, but parties are also able to bargain above the award safety net in terms of Certified Agreements and Enterprise Flexibility Agreements.
Certified Agreements are typically applied for by unions, and unions must be a party to them. Enterprise Flexibility Agreements or (EFA’s) are applied for companies and are made only in respect of a constitutional corporation. Unions have an entitlement to be a party if they have union members in that enterprise.
The overhead provides a brief sketch of the federal industrial relations system, which is Attachment 1 in your document.
2.2 Trade Unions
Trade unions grew up in Australia in the mid 19th Century. They are a home grown product, not an import from the United Kingdom or the USA, or anywhere else. They have reflected changes in the Australia workforce whether it be changes in the industrial structure or changes in the composition of immigration or the working family.
There are unions for textile workers, nurses, bank managers, carpenters, flight attendants, security guards and construction workers to name a few.
There are unionists who speak Italian, Greek, Vietnamese, Thai, Korean, Maori, and various indigenous Australian languages. Unionists can be mothers of three, 20 year olds or 60 year old grandfathers. The Ethnic and demographic diversity of the trade union movement is significant.
Tag 2 in your document shows the diversity of the trade union membership by state, by age, by birthplace, by occupation, whether in a private or public sector, and by gender.
It is important to note that Australia is a multi-cultural, multi-lingual country.
Apart from our indigenous people, the Australian nation is essentially a nation of immigrants. This is reflected in our union membership. More overseas born full-time workers who are born in non-English speaking countries are members of trade unions than those born in English speaking countries.
The Attachment 2 clearly shows this diversity.
It is important also to know that the view perpetrated that Australia is made up of a large number of British style craft based unions is essentially wrong when you look at the facts. It is also wrong to state that there is a multiplicity of unions at every company or workplace. This is an outdated picture of present day reality.
In the last decade there has been a major restructuring of the Australian union movement. In fact the Australian union movement is the only one in the world to have restructured itself during peace time.
In 1983 there were 300 unions registered. At the ACTU Congress in 1987 a strategy was adopted to change the structure of Australian unions by amalgamation and rationalisation to provide for 17 to 20 large unions, industry streams, and increased capacity to bargain at the enterprise level.
The view taken by the ACTU is that the union movement should be capable of ensuring adaption to changed political, economic and industrial environments.
In 1994, following amalgamations 98% of the workforce is covered by 21 major unions. The major industry based super unions have been formed to better utilise resources, to recruit and organise, and better service its membership than 300 smaller unions.
A guide to the amalgamation process is provided in attachment 3 of your document.
The view that there is a multiplicity of unions in Australian workplaces is factually incorrect as well. Even in 1991, before the major amalgamations took place, the average number of unions was 0.8% for small workplaces, and 1.9% for unionised workplaces. For small workplaces the average was 0.4% for all workplaces and 1.4 for unionised workplaces. Even for larger corporations the average was 6.1% for all, and 6.3% for unionised workplaces. This is shown in Attachment 4 which I have produced as an overhead. It is quite clear from this evidence that there are small numbers of unions in workplaces and that since the amalgamations have taken place in the last 2 years the figures will be even smaller.
Furthermore, the existence of Single Bargaining Units (SBU’s), unions joining together on site for negotiations, also shows that the ‘too many unions’ impediment is more myth than reality in the 1990’s.
2.3 The ACTU
The Australian Council of Trade Unions is the federal peak council of the Australian trade union movement. It was formed in 1927 and is based in Melbourne. It also has state and territory based branches known as Trade and Labour Councils. Its main activities include representing the workforce in public policy matters, domestic and international, representing the workforce in industrial tribunals including National Wage Cases, Equal Pay Cases etc., bargaining collectively on a national basis for wages and conditions, and co-ordinated enterprise based bargaining with affiliates, performing broad managerial functions for the trade union movement as a whole on a consultative basis, and administering union services including finance, superannuation, child care, information services, legal advice and communications.
A brief history of the ACTU is attached at Attachment 5 of your document.
2.4 Employer Associations
Like workers forming unions, employers have also found that forming employer associations at federal and state level beneficial to their business. They appear in industrial tribunals such as the Industrial Relations Commission, just as unions and state and federal governments do. They are mainly industry based but there are also major employer bodies that cover a number of businesses in different industries.
The main employer bodies include the Australian Chamber of Commerce and Industry (ACCI), the Metal Trades Industry Association of Australia (MTIA), the Australian Chamber of Manufactures (ACM), the Australian Road Transport, Industrial Organisation (ARTIO), the Business Council of Australia (BCA), and the Australian Hotels Association (AHA).
No doubt you will be visiting some of these employer organisations on your visit, or have already done so.
3. The Accord
One of the important features of the Australian scene is the Prices and Incomes Accord, negotiated between the ACTU and the Government. The original Prices and Incomes Accord or Accord Mark I as it is popularly known, was signed by the ACTU and the Australian Labor Party (ALP) when the Labor Party was in opposition in 1983.
It was forged as an alternative economy strategy to the Conservative Governments policy which had left Australia with double digit inflation, double digit unemployment, low profit levels, poor health and social security policies, and an extremely high level of industrial disputation by historical and international standards.
However, the Accord also had its origins in the failure of the Whitlam Labor Government to survive beyond their three years 1972-1975, and the legacy of unfulfilled expectations that period delivered. In 1983 it was the only Labor Government in almost 30 years since World War II. When Labor returned to be the Government in 1983 there was a clear understanding by both the trade union movement and the Government that they would not repeat those mistakes of the Whitlam period in the 70’s where there was a noticeable lack of co-ordination between the ACTU and the Labor Government at the time.
Ironically the ACTU President in the 1970’s was Bob Hawke who later became Prime Minister of Australia during the much more successful Labor Government of the 1980’s.
The Accord was originally a document on economic policy signed by the ACTU and the Government. It was essentially a Prices and Incomes Policy which, at the time was perceived to have had Anglo-American economies, but with more success in Scandinavia and Western Europe.
However, the Accord must be seen as an unique Australian document and process. It was essentially born of the political and industrial arms of the Australian labor movement, not an import from overseas.
The Accord has undergone a number of changes in its 11 year history, but it essentially remains a process of consultation between the ACTU and the Federal Government.
The original Accord promised recovery from recession. Australia had been in a sharp recession in 1982/83 in which many workers, especially in manufacturing, had lost their jobs. Improved living standards over time, and a fairer and more equitable society. The objectives of the Accord were to reduce unemployment and inflation simultaneously, provide a consensus based policy approach, integrate economic and social policy, and reduce the industrial disputation that beset Australia under the Fraser Government in the late 70’s and early 80’s.
[There have been to date essentially 7 Accords or Accords marked 1-7, and they are outlined on page 10 of your document].
They allow for changes in wage policy, changes in taxation, and importantly how the Accord responded and was re-negotiated when changes occurred to Australia’s international economic position. For example, the Accord was re-negotiated from mid 1985 when it was clear that a severe terms of trade decline had slashed Australia’s national income. The Accord was re-negotiated to discount wage increases for the price impact of the currency depreciation. This was compensated by income tax cuts.
The Accord has also overseen the spread of enterprise bargaining. Whilst in the early days of the Accord the wage system was primarily centralised and wage increases were based on changes in the cost of living, the later Accords saw the adjustment of safety net award increases for low paid people which underpinned bargaining by stronger organised groups.
The important thing about the early inception of the Accord was that stronger groups made a no extra claims commitment to ensure that economic growth and economic recovery went into increased employment, and that there was a consistent environment of price and wage stability. The wage restraint evident in the Accord provided stability and certainty to the Australian economy, allowing investors and businesses to make those decisions based on certainty.
The up-shot of this is that while the low paid were protected there was declining wages for stronger organised skill groups whose solidarity was never questioned, and it was the same groups who, from the late 1980’s, shouldered the weight of award and workplace restructuring. Whether centralised or decentralised wage arrangements have occurred, the union movement has worked together. It has been committee to Australia having a low inflation rate below that of its trading partners, and has ensured that the nation gets the benefits of improving international competitiveness.
From close observation of the facts it is clear that the commitments the Accord partners made have been well exceeded.
In terms of industrial disputes, the view that Australia is strike prone is clearly outdated and inconsistent with available evidence. The commitment to reduce the level of industrial disputation was a key element of the Accord when it was signed in 1983, and the figures show that it was well exceeded. There has been a substantial fall in working days lost to industrial disputes by almost two-thirds since the implementation of the Accord. The average in working days lost per 1000 employees in 1981 was 692, whilst in 1993 it was 170 averaging 230 over the decade.
The reduction is shown in the following graph, which is Figure 1 in Attachment 6 in your document. The overhead shows You can see quite clearly the high level of industrial disputation in the late 1970’s and early 1980’s, followed by a sustainable reduction in industrial disputes for the rest of the decade up until the early 90’s.
The reduction is sustainable in the historical context and is also significant in the international context. The reduction of disputation in Australia in 1983 – 1992 and 1973 – 1982 was greater than that of the UK, Canada, and various Western European economies. The reduction in the decade makes Australia a low strike country by industrialised country standards. On this basis, under the Accord, the average annual working days lost due to industrial disputes fell by 65% in Australia, relative to the pre-Accord period under Fraser. This compares to a 19% fall in the OECD average.
Whilst saying this there are dangers fought with these type of comparisons because of different definitions. For example in Australia a dispute is included in the statistics if it causes the loss of 10 or more working days, while in the US it is counted if it includes at least 1,000 employees, and in Japan it is counted only if it is official, while in Denmark it is counted if it is a loss of 100 working days. So even allowing for the fact that Australia’s official dispute statistics are regarded among the best in the world, it is clear that other countries under-report disputes in their official statistics. Even allowing for this differentiation in collection, Australia’s fall in strikes was one of the most significant in the OECD.
5. The Accord and the Economy
The Accord has also delivered its commitments in terms of national economic policy. In particular, it is delivered in terms of employment, inflation, labour costs and international competitiveness. The collapse of employment, especially in manufacturing in the late 1970’s and early 1980’s prompted the union movement to collectively take responsibility for putting employment first when framing its wage and economic strategy. The union movement has also taken responsibility for ensuring Australia’s international competitiveness in terms of low inflation and falling real unit labour costs.
The data is provided in terms of tables and charts in Attachment 7. In terms of employment and inflation I think that Figure 5 in the document illustrates the success and I will show you this on the slide as well.
Over the decade under the Accord there has been a large expansion of employment, an increase of 20% between 1982 and 1992/93 within a company increase in the labor force participation rate. This reflects a strong growth in employment in the 1980’s when Australia experienced the highest employment growth rate in the OECD. This allowed the unemployment rate to fall towards the end of the decade, averaging 6.2% for 1989/1990. The 1991/1992 world recession again saw unemployment return to a higher level, but the recent economic recovery is seen to fall again to single digits.
The wage restraint shown under the Accord allowed the economy and employment to grow to those high rates in the 1980’s despite a conservative fiscal policy strategy.
In response to the 1990’s recession, the Accord Mark VII, Putting Jobs First, links safety net wage increases to employment growth as the economy recovered. The Accord partners promised 500,000 additional jobs between 1993 and 1996. As at October 1994, 404,000 jobs have been created since March 1993, well ahead of the promised target. The increase in employment, and the increase in the labor force participation rate is clear from the graph. It is also significant that employment growth was pretty slow in the 1970’s at a time when international economic conditions favoured Australia during the minerals and resources boom. In contrast, 1983 to the present day were periods in which Australia faced adverse international economic conditions, but still the employment growth rates throughout the 80’s is quite startling in that context. This shows the contribution the trade union movement has made through the Accord process.
Inflation has also fallen significantly over the decade. Before the Accord Australia experienced double digit inflation at 11.4% in 1982/83. The wage moderation of the Accord has ensured that Australia is a low inflation country in the 1990’s.
This is shown in the graph over the period, and is also shown in Figure 2 in Section 7 of your material, in the terms that Australia has consistently had a lower inflation rate that its major trading partners since December 1990.
This is the contribution of wage restraint and related economic measures brought in by the Accord.
Lastly, the Accord has delivered a major fall in unit labour costs since 1982/83. This has been due to the wage restrain exercise by the trade union movement as laid out in Tables 5 and 7 in Figure 1. The fall in real unit labour costs, that is the cost in constant price dollars of the labor needed to produce each unit of output, has been 5.9% between 1982/83 and 1992/93. This has been associated with an improvement in the incomes share gain to profits, and improvement in international competitiveness.
The improvement in international competitiveness is shown in Figure 3 in the Attachment where a fall in the index denotes an improvement in international competitiveness. The large sustainable fall in real unit labor costs is shown in Figure 1 in Section 7.
6. The Accord and the Social Wage
The social wage refers to benefits to workers that come through means other than the wage component of pay packets. The social wage has been an integral part of the Accord. In return for wage restraint through the no extra claims commitments, the ACTU ensured that there were other benefits to workers families such as in areas as employment, health care, superannuation or pensions, child care, job protection, security, taxation reform, occupational health and safety and family payments.
In addition, the unions have been concerned with social security and have been at the forefront of negotiations regarding pensions. The unions have regarded these issues as part of the labour market reform process, and part of the agenda or battleground on which unions should be representing workers in order to benefit their families.
The social wage has provided basic safety nets to ensure that part of the growth process is distributed to those in need in society. The process of accelerating change are backed up by economic and social protections. There has been an important need for redundancy pay, superannuation, pensions, unemployment benefits, and lately labour market programs in the White Paper on employment creation in Australia.
The Accord partners were motivated to negotiate a safety net of basic societal protections and opportunities in order to avoid the emergence of an underclass as has existed in both industrialised and developing countries, and maintain social cohesion. The social wage is a means of promoting a fair and equitable, as well as a productive society.
Details of the social wage are attached in Section 8.
Medicare, our universal and fair health insurance system, was introduced in 1984, a year after the Accord. It provides all Australians with access to excellent hospital care through the public hospital system, where they are treated by their local physician.
Private health insurance is available to supplement Medicare, and it may cover things such as private hospital expenses and other options. Medicare is financed from consolidated revenue and explicit levy, currently 1.4% of total income applies to non-exempt individuals and raises about half the total cost of the Medicare system.
The Medicare system is the envy of the world, and replaced the shambles that the health care system was in when the Fraser Government was in charge in the 1970’s and early 1980’s.
Another important area was superannuation. Before the Accord superannuation was the preserve of elites, with only 39% of employed persons having superannuation cover. Overwhelmingly, they were high paid, white collar managerial executive males. The rest of the workforce had to rely on fully publically funded pensions from the Commonwealth Government.
The unions, under the Accord, undertook an industrial campaign to gain employer funded superannuation. In 1991 the Labor Government legislated to require employers to make superannuation contributions on behalf of their employees. The level of contribution to be phased in over the course of the decade will reach 9% by July 2002.
The arrangement ensures superannuation coverage for the workforce and also takes some pressure of the Government’s fiscal policy in terms of providing fewer pensions to Australia’s increasingly aging population.
The Government subsidised child care places in 1983 totalled 46,000. Currently, in 1994, there are 220,300 places, an increase of 74,300 places. The places are made up of family day care, community based long day care, occasional care, private long day care, non-profit and employer sponsored long day care, multi-functional centres, and outside school hours care.
Income tested child care assistance is available to parents who use both Government established centres and commercial child care centres. Subsidies range up to $100 per week per child.
The ACTU sees child care as an important industrial issue, particularly given the importance of workers needing to reconcile work and family responsibilities. It has also become increasingly important to assist women workers who have played an important part in labour market participation over the decade.
7. Work Practices
There is a view perpetrated that Australian workers are lazy. This has been perpetrated both by Australians and by other international visitors. This is clearly a myth when looking at the facts regarding leave and bonuses in comparable industrialised countries.
The amount of holidays available, both public and in terms of annual leave, and the 17.5% annual leave loading in particular singled out when discussing the myth of the ‘great Aussie Bludger’ as it is know colloquially, (which is a term for loafer, or lazy worker). A survey of comparable conditions in the major industrialised centres shows that Australian standards are not exceptional. For example the 17.5% annual leave loading is only paid when leave is taken, and it represents only 1.3% of total labor costs. The four weeks is a national standard in awards and agreements. Only in the US is that standard lower, and that is dependent on length of service. Similar studies show that Australians actually work long hours, and the number of public holidays we take compared to our counterparts internationally is by no means exceptional, it is in fact in the medium range.
8. The ACTU and Asia
Finally, I wanted to mention briefly some comments about Australia’s role in the Asia Pacific region, and the trade union’s part in that.
There was a time when Australian trade union officials would fly over Asia to Geneva, occasionally London, and sometimes Washington. Those days are clearly gone as they have for the rest of the Australian community.
The ACTU is working closely to increase its involvement in the Asia Pacific region. We are affiliated with the International Confederation of Free Trade Unions Asian Pacific Regional Organisation (ICFTU/APRO) in Singapore, the South Pacific and Oceanic Council of Trade Unions, (SPOCTU), and in addition individual ACTU Affiliates have undertaken numerous project work throughout the region, in Cambodia, in Vietnam, in Indonesia, in Fiji, the Cook Islands, and throughout the South Pacific. The ACTU wants to further develop these close links with its Asian Pacific trade union counterparts.
A chart explaining the ACTU’s Asia strategy, and our trade union relationships is found in Attachments 10 and 11 of your document.
Trade and Worker Rights
The ACTU recognised the importance of economic integration into the Asia Pacific region. It is an exciting prospect given the growth of the region, and Australia is clearly benefiting from that and will do so in the future.
However, the ACTU believes that as the world economy and the region becomes more integrated, that the benefits of economic growth should be shared with the workforce in both the industrialised and developing world. Trade liberalisation by itself will not trickle benefits to workers and their families without the appropriate mechanisms. There are those who attempt to paint, those who advocate a link between trade and labor rights or the social clause as protectionists. There is also a view that human rights and trade union rights are a western concept that are not applicable to certain countries in the Asia Pacific region.
While I don’t have time to fully debate this issue, I want to just make the following points:
1. The social clause is an insurance policy against a return to protectionism. Countries then have to compete on grounds other than cutting labor standards and harming human rights.
2. It protects workers in poor countries being played off against each other by rich country employers. i.e. it is not a rich country versus poor country worker issue.
3. There are some labour standards that should be universal. e.g. occupational health and safety. The recent factory fire in Bangkok, the Kader Factory is an example in point. Chemical X or a fire or any harmful substance will hurt and Australian worker, an Indian worker, a Thai worker, or a Fijian worker equally.
As a result the ACTU supports core minimum labour standards that form a social clause throughout the region. These are basic labour standards that should be maintained. These standards are occupational health and safety, the prevention of child labour, freedom of association, the right to organise, the right to bargain collectively, the prevention of forced labour, and anti-discrimination measures. This is consistent with ILO standards adopted by many countries throughout the world.
We also say that we have a responsibility to provide training to those countries to improve their capacity to meet those standards. We have been putting this into practice in terms of our project work, for example in Indonesia, on occupational health and safety, and training. There is a lot of work we can do in the region, and I think we have a responsibility to do so to ensure that as these economies develop that there is benefits to workers in those countries in terms of an improvement in working conditions. We do this as part of our obligations to the international trade union movement, and also to ensure that the benefits of international trade liberalisation, such as in the WTO, are supported by our constituency and other government constituencies in their countries.
I hope the information outlined is of assistance to you as an introduction to Australian industrial relations. The ACTU is proud of its achievements in terms of the Accord, and trade union and industrial relations reform. The stereo-types that have existed in Australian industrial relations and trade unions, and workers in general, do not fit the reality as clearly presented in the data and information I have put before you. In fact, the reality shows quite the opposite.
However, there is no point complaining about it. It is up to us in the ACTU and among our affiliates to change people’s perceptions of Australia and Australian trade unions, and I hope that this talk is a small step along that path.
I think the important thing to observe from your visit here, and I hope you do, is that despite our easy going and relaxed manner, that Australia is in actual fact a hard working and innovative country, and obviously very excited at the recent changes that have brought us closer to the Asia Pacific region, and away from our colonial past.
It is also important to note that we are a multi-cultural country, and a diverse country, and there are many people from the Asia Pacific region who have immigrated to Australia, and many people from the rest of the world. This is in fact our great strength and that is also being reflected in changes in the trade union movement itself.
By Tim Harcourt, Research Officer, ACTU. 1994.