Alternatives to the Industrial Relations Club

CHAPTER 12

In many ways, the main obstacle to reform of industrial relations in Australia is the Arbitration Commission itself.  By regulating labour markets in ill-considered ways, the Commission has done untold damage to the Australian economy.  By setting wages to placate the stronger unions, it has become a major cause of poverty and unemployment, and by establishing a pattern of strike first, arbitrate later, it has become a cause of strike action.  The Commission has acted always to preserve its own supremacy, and in doing so has effectively sabotaged the growth of collective bargaining procedures or workable, decentralised labour market arrangements.

Any approach to reform should have as its purpose the abolition of the arbitration system in its present form and the design of alternative arrangements that give some promise of lessening industrial conflict by way of strikes, boycotts, bans, limitations and the like, and of allowing the labour market to work smoothly and flexibly.  The aim of such a reform, of course, should be to let unions concentrate on the protection of their members, while allowing economic growth and the minimisation of unemployment.

In every matter that appears before the Australian Conciliation and Arbitration Commission, there are, as if in a real judicial matter, "parties" who argue their cases.  These will usually be the employers on one side, the unions on the other, with the Commonwealth and often State governments representing their interests or views.  But of course it is immediately obvious that these parties do not exhaust the possible lines of argument on the merits of a particular wages or conditions claim.  The unemployed are not present as a "party", nor is the social welfare lobby, still less is there present any genuine or self-styled representative of the public interest, although perhaps the Commission itself might lay claim to this latter role.  But the truth of the situation is that there is always one party before the Commission that is never explicitly named or referred to, and that is the Arbitration Commission itself.

The interests of the Commission are represented at every hearing, and the form and nature of the final decision takes account of those interests.  They are, of course, first the continuance of the role and influence of the Commission, and second the expansion of the Commission's empire throughout the labour market of Australia.  This helps explain the Commission's veering back and forth before prevailing winds of government policy, trade-union militancy, and economic events.  There has been a degree of inconsistency in the actions and attitudes of the Commission which cannot be adequately explained otherwise, whether by changing circumstances, changing personnel, or changing interpretations of what is happening in the Australian and world economies.

Perhaps the most obvious example of the Commission's trimming is its series of decisions related to the existence of earnings drift.  Earnings drift is a concept peculiar to the Australian arbitration system and refers to the divergence of actual earnings above (never of course below) the award rates set by the Commission.  From time to time, as a result of pressures in the labour market and successful bargaining at the firm and industry level, wages and salaries tend to increase faster than award rates.  This might seem an unobjectionable development in normal times, as it would tend to the establishment of a dual system whereby the Commission's awards operated as a structure of minimum wages;  but the Commission always tries to recapture the appearance, if not the reality, of total control of wages by granting increases that lift the award rates to something like the prevailing market rates.  That is, it has consistently chased the market so as to give the impression that it is in control of the market rate.

On the other hand, in times of weakness in the labour market it may accept that the rate of increase of award wages must be limited, but it is ready to accept devices such as wage indexation which ensure that it continues to be seen by many in the community as playing an active role in granting wage increases and maintaining living standards in the face of opposition from employers (and sometimes from governments).  In this way it actively curries favour with the union movement.

The experience of indexation from 1975 to 1981 is an excellent example of this, and of the way in which the Commission ignores the interests of the unemployed.  This whole indexation experiment amounted to the deliberate maintenance by the Commission of real wages set at the level of the 1974-1975 wages explosion in the face of high unemployment.  There is no doubt that in the years of recession, wage levels would have fallen back substantially in real terms if it had not been for the Commission.  The unions were not in a position to mount effective campaigns to raise money wages to keep up with price inflation.

The period 1981-1982 is often presented by supporters of the Commission as an example of how the disorder and chaos of collective bargaining demonstrated the need for an active role by the Commission.  In fact, it can as well be treated as a demonstration of how the Commission picks its timing -- maintaining an active presence when it can be seen as the determinant and the Father Christmas but strategically withdrawing when its own actions have built up irresistible pressures, only later to re-enter and recapture the high ground by endorsing actual wage movements and underwriting them in times of labour market weakness.

The Arbitration Commission, therefore, has a ratchet effect on both money and real wages which ensures that gains, once made, are protected regardless of the state of the economy, the exchange rate, or Australia's competitiveness in world markets.

It is sometimes argued that the Arbitration Commission does not affect wages in the long run, and that these are determined by the market, the Commission only recognising market outcomes.  To some extent this is true, in that over a longish period wages (and profits) cannot grow faster than the real rate of growth of the economy.  By granting short-term real wage increases at inappropriate times, or by maintaining real wages when they ought to be falling, the Commission ensures a poorer performance of the Australian economy, a lower rate of growth and therefore lower real wage growth over time.  That is, while the Commission can determine wages directly in the short run, it cannot determine them directly in the long run.  It can, however, affect them indirectly in the long run to the extent that its activities lower the rate of growth of real income.

Here again, the Commission's interest in its own aggrandisement enters the argument.  For many years it has vacillated between accepting that it has a role and responsibilities with respect to economic management, and denying that its fundamental responsibilities go beyond the settlement of industrial disputes.  Thus, whenever the Commission might be forced to make a decision in terms of economic realities which cannot be gainsaid and which the unions are clearly unwilling to accept, it tends to fall back on a reiteration of its constitutional role.

This role, however, is not at all clear.  It is often overlooked that the Constitution does not mention the Arbitration Commission in any of its manifestations.  Section 51(xxxv) of the Constitution simply provides that the Commonwealth shall have power to make laws with respect to "conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state".  The establishment of the Commonwealth Court of Conciliation and Arbitration -- as it originally was -- in 1904 was only one possible way of implementing this power.  It is by no means clear that it would preclude the making of laws that would require some arbitral authority to settle disputes purely with reference to economic conditions.

Of course, the Conciliation and Arbitration Act has contained for some years a provision that economic circumstances must be taken into account.  But this does not require the Commission to pay more than lip-service to the state of the economy, and it certainly does not require that it should be given predominant weight.  Nor does it provide that economic considerations such as the effects on particular industries, regions or segments of the labour force should be considered.

Whenever the Arbitration Commission is subjected to sustained criticism and it is suggested that it might be abolished or replaced by some other institution or set of institutions, its defenders inevitably declare that there is no real alternative to it.  The first line of defence is to point to the similarity of experiences between Australia and countries that have predominantly collective bargaining systems (or something that looks rather like that), such as Britain.  Even if it were true that dissimilar systems produced similar results over time, it would not be an argument for arbitration on the Australian model, but rather a reason to look for other, more deep-seated similarities.

The influence on Australia of British trade union structure and, perhaps as significantly, shop steward attitudes could not be ignored.  However, the fact that long-standing institutional structures produce similar unsatisfactory results after many years in place could as well be treated as evidence for the fact that any institutional structure needs root and branch reform from time to time;  regulatory institutions tend to become captives of those whose behaviour they are meant to modify in the public interest.

In the Australian context there is a tendency, too, to treat arbitration as having no alternative but free, unregulated and anarchistic collective bargaining.  Moreover, it is argued, abolition of the federal Arbitration Commission would not necessarily be followed by similar moves towards unfettered collective bargaining in the States -- the result of radical reform by the Commonwealth might simply be the creation of six (plus the territories) separate systems of industrial tribunals and labour regulation, even more confusing than the present system in which at least the Commonwealth system has national scope and moral authority and is generally followed.

Reform of the system should, it is said, take the form of a simplification and unification by subordination of State authorities, or preferably their total subsuming as branches of the central authority under the Arbitration Commission, or, at the very least, a system of joint sittings and sharing of jurisdiction by Commonwealth and State tribunals.  This viewpoint is favoured by the Labor Party (but not all the unions), by many practitioners in the industrial relations field, by many employers, especially those in the east coast metropolitan areas, and by determined centralists in the bureaucracy and the legal profession.  It is even favoured by most Australian economists, who have the same yearning as have the bureaucrats for nice, straightforward lines of authority from the centre that make Keynesian-type policies easy to implement according to textbook models.

So it may well be that the removal of the centralising influence of the Arbitration Commission would allow wage differentials to develop once again, promoting genuine relocation of industry.  (One very good reason for New Zealand to continue the process of economic union with Australia but to resist entry into the federation is to preserve its now considerable cost advantage relative to Australia.  New Zealand has enough trouble without adding the Arbitration Commission to its burdens.)  Hence the argument concerning the persistence of State tribunals has little validity and depends mainly on the presumption that uniformity of wages and conditions is desirable.  It is attractive to employers whose operations in Sydney or Melbourne compete with producers elsewhere, but many more would enthusiastically relocate in cheaper land areas if lower labour costs compensated for the transport cost disadvantages;  differences in industrial practice are easily offset by real cost differences.

However, is there no alternative as far as federal action is concerned to vacating the field to the State tribunals?  It is worth once again looking at the wording of Section 51(xxxv) of the Constitution.  This bestows upon the Commonwealth the power to legislate for "conciliation and arbitration for the prevention and settlement of industrial disputes ..."

As has often been the way since Federation, the High Court for a long time took a perverse position on the meaning of the terms in this section of the Constitution.  Apart from the reference to conciliation and arbitration, the operative terms here are "prevention", "settlement" and "industrial dispute".  One would think that the word "prevention" would be interpreted in its normal sense, but one would be wrong.  The prevention of illness refers to health measures taken prior to illness;  the prevention of pregnancy relates to the use of contraceptives (or abstention from sexual activity);  yet as long ago as 1910 (Whybrow's Case) the High Court interpreted "prevention" as applying only to the processes of conciliation and arbitration after a dispute had commenced.  This is like saying that the prevention of pregnancy only refers to abortion.

This strange twisting of ordinary meaning has become a central feature of our industrial relations system.  Fortunately there is some sign of change in the High Court's approach to the meaning of S.51(xxxv), most notably in the Australian Social Welfare Workers Union Case (1983).  This decision must go down as one of the landmark decisions affecting industrial relations.  First, it redefines the meaning of the term "industrial dispute".  For a long time the High Court insisted that this had to mean a dispute in an industry, and much heart-burning went on in the attempt to define "industry" (as was customary, the Court did not bother to consult the large body of work by economists on just this topic).  By taking a narrow and snobbish view of what an industry was (the legal business could never be considered an industry) the Court vitiated a large area of discussion concerning wages and working conditions.  In the ASWU case, the court finally brought itself to accept that an industrial dispute in ordinary usage means and always has meant, in the context of the labour market, an argument about wages and working conditions.

The word "dispute" has also been the source of much hair-splitting, and the invention of the "paper" dispute, and the ridiculous device of the ambit claim, was occasioned by this.  But the most important aspect of the ASWU case was that remarks by judges indicate that the Court might be willing to revise the interpretation of "prevention" so as to allow it to refer to measures taken before the existence of any particular industrial dispute, provided these were in the context of conciliation and arbitration.

This has the potential to become a major element in any recasting of the industrial relations system.  It means that some body responsible for regulating industrial relations could exist under a basic law that established a series of conditions which would have to be set before a strike was considered legal (such as cooling-off periods, observance of no-strike clauses, proper votes by members, and so on), laid down criteria as to the economic factors which must be taken into account (not just lip-service paid to them), and specified non-legalistic arbitration procedures.

Starting with the new commonsense approach to the meaning of s.51(xxxv), such a law could lay down a framework in which collective bargaining took place freely, without regulatory provisions designed to segment the labour market and prevent the movements of labour between industries and occupations.  Basic control of industrial relations should remain within individual enterprises, rather than being held externally.  There is a case to be made for the establishment of minimum wage provisions and for some prevention of discrimination on irrelevant (that is, not work-related) grounds in the workplace.  But these are matters of welfare and human rights, hardly part of the functions of an industrial relations system, except to the extent that excessively high minimum wages are used by unions as a device to disadvantage the weaker sections of the workforce.

There are many possible designs for an industrial relations system which would work better than our present one, and which would give much greater scope for and priority to collective bargaining.  Conciliation can be seen as a useful element in most stages of this procedure, but arbitration ought to be the very last stage of any such process, with no appeal.

Yet arbitration is often the first stage in contemporary Australian industrial disputes, being followed by strike activity, conciliation, and eventually collective bargaining.  Part of the problem is undoubtedly the fact that the Arbitration Commission has systematically encouraged the erosion of its own real authority (as distinct from mere prestige) over the unions, preferring instead to join with them in exercising authority over government and the labour market.  In the process, its pretensions to be a quasi-judicial body have totally eroded the respect of unions and their leaderships for the law, to the extent that many unions consider that in the pursuit of an industrial dispute they are above the law.

Moreover, there is a belief among participants in the industrial relations system that industrial disputants who remain within the law should not be allowed to prolong the processes of collective bargaining to their ultimate resolution;  that a union should not be permitted to prolong a strike to the point of collapse either of the firm or the union.  This is wrong.  Provided that a union is prepared to accept the consequences of the financial collapse of a company or the defection of its own members, there is no reason why a strike should not be taken to that ultimate conclusion if no more satisfactory settlement of a union's claims can be reached.

The present system involves a permissive attitude to illegal actions by the unions.  The one piece of legislation in place that places legal restrictions on sanctions additional to the withdrawal of labour in the context of collective bargaining is section 45D of the Trade Practices Act, which prohibits "secondary boycotts".  The unions are mounting a major campaign to have this legislation repealed, even to the extent of taking reprisals against companies that invoke it -- a classic case of contempt for the law.  This contempt has to a very great degree been fostered by the Arbitration Commission, which has encouraged unions in the belief that legal sanctions cannot, should not, and will not be taken against unions which do not follow the "rules of the game".

The inability of the Arbitration Commission to exercise any final authority, and its pathetic and desperate attempts to maintain and extend its own role in the wage fixation and industrial relations system by cajoling the unions to co-operate in its pretense of authority, has led to a widespread belief that industrial relations, far from being "a new province for law and order", is a province for the exercise of arbitrary power and coercion.  Mr Justice Higgins's dream has come to a sorry end when law and order are excluded from industrial relations by a pusillanimous Arbitration Commission and a union movement contemptuous of legal authority:  not that the commission, whose self-interest has been demonstrated, is entirely to blame except in that it has deliberately encouraged the illusion that at some time in the future its good offices might produce a better state of affairs.  But the situation now is that the state of mind which the commission has fostered in the union movement has led to a general contempt for the law, which is apparent across the whole spectrum of the union movement.

The present situation is very largely the result of the collapse of the authority of government in 1969, when the unions forced the Arbitration Commission and the government to back down after union leader Clarrie O'Shea was imprisoned for contempt of court by Mr Justice Kerr.  Kerr's approach was ill-advised since it concentrated the matter on the issue of imprisonment for contempt, rather than on more general questions of the application of the law to trade unions.

The section 45D issue is rather different and is significant in that it takes an offence by a union (or other body) out of the context of industrial relations as such, and treats it as an offence in a more general context.  The real threat perceived by the union movement here is that it might have to face up to real courts, determined to uphold the authority of the legal system, and not, like the industrial tribunals, inclined to back down in front of their clients, the union movement.

The authority of the commission in the industrial relations field is discredited to such an extent, and the harm that it does to the economy is so great, that its retention in its existing form would make the reform of industrial relations and wage-fixation an impossibility.  It would be better simply to get rid of the present commission altogether, and to replace it with a network of conciliation commissioners and arbitrators without judicial titles or pretensions, whose function would be to facilitate collective bargaining and act as arbitrators on request, without the pretence of power to enforce their decisions.

The real reason why a simple abandonment of arbitration under the present system and the removal of an official framework for collective bargaining would not work is that the conditions for free, collective bargaining do not exist.  In Australia we have a union movement which considers itself, not without reason, beyond the law.  It is organised so as to exercise monopoly control over labour markets and to prevent the settlement of disputes on a freely-negotiated basis between employers and employees in a specific company or group of companies.  The union movement is determined to exercise a wide degree of control over the future of profitable investment, while making no commitment to the profitability of particular investments.

This is a far cry from the role of unionism as originally conceived, the protection of the weak.  It is a role which ensures that increasingly privileged sectors of union membership do well, while the costs of adjustment and low growth are concentrated on the casualties of society.  It is wasteful, counter-productive, and eventually self-defeating.  Reform of industrial relations, and the establishment of an efficient system of conciliation and arbitration, requires that the union movement be brought back within the law, and that unionism, like industry, become competitive and decentralised.  The Arbitration Commission, as the main defender of centralism and monopoly in labour markets, is the main obstacle to reform.

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CONCLUSION

The involuntary unemployment of willing and able people is a serious social and economic ill, whether because the jobs do not exist or because they are in abeyance on account of industrial action.  The employment of people and capital in ways that produce less than could be produced with the same effort and a better allocation of resources is an economic cost.  Social tension generated by the "them and us" attitudes of management and workers is unpleasant, wasteful, and potentially dangerous.  All these circumstances are often discussed in terms which ascribe blame to one or more of the parties engaged in the productive processes.  This sort of analysis is not necessarily irrelevant -- people often act stupidly, immorally or illegally and the fact should be pointed out -- but the policy it has generated has not obviously improved the functioning of the labour market.

Another approach is to examine the rules of the employment game:  to treat the ills as cases of market failure rather than moral failure.  One still faces strongly-held opinions and considerable distrust, but to the extent the players can be assumed to be rational, one has a framework in which to analyse, predict and prescribe.  This framework is the tested one of microeconomics.

This volume nevertheless began with macroeconomic analysis.  I identified the cost of providing employment as the prime reason that some people are involuntarily out of work.  I saw the events surrounding the 1982-84 recession as evidence that unions have an effective veto over macro-economic policy.  "Consistent expansionary policies designed to keep the unemployment rate at, say, 6 per cent, would have involved a continuous wage-price spiral, and eventually an inflation rate well above 16 per cent. ...  [U]nions can always set wages so as to ensure an unemployment rate that they consider tolerable."

I wrote that "increases in real wages which are reflected in real labour costs do cause employment demand to be less than would otherwise be the case.  In a situation where employment is less than full, therefore, rises in real wage costs actually destroy employment.  This conclusion is inescapable for an internationally trading economy."  I concluded that real wage restraint is essential if Australia is to return to macroeconomic health, and that the case for wage restraint is "largely independent of the ideological stances taken by individual economic analysts".

That real wages affect employment is now accepted almost everywhere except in trade union rhetoric.  Rhetoric aside, there is mounting evidence that some senior ACTU office-holders accept that there is necessarily a trade-off between the number of jobs and the rewards of employees.  The "Accord" struck between the ACTU and the Hawke government recognised the necessity of keeping the lid on wage demands in the interest of economic recovery and the unemployed.  The Hawke government accepted the need for wage restraint at the 1983 National Economic Summit Conference;  but as far back as 1975 the then Labor Treasurer Frank Crean had said that "one man's pay rise is another man's job".

I showed that pay increases have been one important factor among several that have brought about current high teenage unemployment, and that minimum award wage rates encourage employers to discriminate against youth, women and racial minorities.  Examining the extension of the award wage system to Aborigines in the 1960s, I also demonstrated that pay rises cost jobs and that minimum wage laws can disadvantage the very groups they were intended to protect.

Rules and practices that increase the cost of employment are increasingly defended in terms of "industrial reality" rather than the more traditional "fair shares" or "just rewards".  This is exemplified by the recent Hancock Report which accepted trade union power as something like the weather, unchangeable but not unchanging.  The Hancock Committee seems to have seen union power as a constraint on the industrial relations system, not as a part of it:

The analogy with civil litigants and sporting contestants ignores a major ingredient of the industrial relations scene -- the phenomenon of power.  If we ask why litigants and sportsmen usually accept the adjudicators' decisions, we find part of the answer in the ethics accepted by the disputants;  but part, too, lies in their relative weakness.  The two factors are inter-related:  the ethic of accepting decisions gains strength from the difficulty of doing otherwise.  By contrast, trade unions are, to varying degrees, centres of power:  they replace the powerlessness of individual workers with collective strength.  It is a mistaken view of the pluralistic society to assume that every "subject" is equally dominated by the might of the state and its arms of enforcement. ⁽¹⁾

This is equivalent to stating that might is right, that the powerful should be allowed to oppress the weak so as to enjoy the fruits of the power -- and to accept it is to deny the value of democracy, the whole history of which has been the history of equalising the domination, of striving to overcome the natural tendency for the powerful to get special treatment because of their power.  In his chapter, written before the Hancock Report was published, I too drew attention to the essentially undemocratic nature of trade unions which have acquired such great power that they claim, and can often enforce, the right to win.  The violence done by unions, with the encouragement of the "system" to freedom of association and the right to work would not be tolerated in any other area of Australian life.

That the question of trade union power is central to any discussion of useful industrial relations reform is apparent also from the chapter which considered the potential economic cost of a system which imposes the same wage structure on prosperous and impoverished firms and on enthusiastic and reluctant workers, and allocates similar rewards to the skilled and the unskilled.  The evidence led me to the conclusion that wages are not much more uniform in Australia, where we have centralised wage fixing, than in the UK and USA, where they do not.  In effect I warned against expecting much improvement in resource allocation, and by implication in employment, merely by abandoning the arbitration system in favour of collective bargaining among the same or similar organisations.

Generally unsympathetic to the union cause, I reminded readers that modern unions are a product of the industrial relations system, their legal personality conferred by the legislation that created the system.  I described them as "creatures of the state, yet not subservient to it -- unruly principalities rather than vassals".  Of the industrial tribunals, I said "they were established not to control the unions but to encourage them, not to protect the public from irresponsible unions but to protect workers from a greedy public".

What of the future?  Many readers of this book would agree that the labour market is badly flawed;  in the face of recent levels of unemployment this would be hard to deny.  They would agree further that the market is characterised by cartels, one group of which -- the unions -- possesses considerable independence/sovereignty/power.  In the short run it is not possible to alter this situation without great industrial disruption, perhaps even bloodshed.  In this sense the Hancock committee's craven submission to union power is understandable;  in this sense the unions are above the law and are able to enforce the right to win in the face of democratically-made decisions.  This is the background to "industrial reality".

The Hancock Committee was established in 1983 to examine industrial relations law and systems and to propose reforms in Commonwealth law and Federal-State interaction.  The three members were all life members of the IR Club.  Shortly before the Report was submitted to the government, I published a set of criteria to help people evaluate the Hancock recommendations, or indeed any proposals for industrial relations reform.  The criteria are:

Do the report's recommendations at least set us on course for a more flexible and efficient industrial relations system, or are they merely for minor and cosmetic changes to the present system?

Does the Report examine the likely effects of implementation of its recommendations on the labour market as a whole, and on the economy as a whole?

Does the report consider human rights in the labour market?  Do its proposals uphold them?

Does the report look below the surface of the industrial relations institutions and examine the underlying forces which determine employment and wages?

What does the report say about centralisation and decentralisation?

Would the recommendations make the tribunals take account of the interests of people other than the employees directly affected by a decision?  How?

Does the report recommend a way of achieving downward flexibility of wages?  Is employees' consent required?  How is consent gauged?

Does the report examine the problem of union monopoly power?  Does it recommend ways in which it can be reduced (for instance, implementation of the right to work and the right to freedom of association, application of the ordinary law of contract and torts to employment and industrial relations, extension of the provisions or principles of the Trade Practices Act to employment and industrial relations)?

Do the recommendations for dealing with "maverick" unions such as the Builders' Labourers Federation have a chance of working?  Do the recommendations cover situations like the Argyle, MCG and Omega disputes? ⁽²⁾

It is not worth examining the Hancock recommendations in detail.  Suffice it to say that 147 of the 148 recommendations were for "minor and cosmetic changes" principally directed at removing frustrations and inconveniences the current system presents to IR Club members:  that the problems of union power and "maverick" unions were not tackled;  and that the Committee was not free of the traditional IR Club belief that the labour market is exempt from the laws of economics.

The exception is Recommendation 21, for a means of opting out of the Commonwealth arbitration system.  Its exact intention is, perhaps deliberately, far from clear.  From the beginning, the Conciliation and Arbitration Act has provided a mechanism for "industrial agreements" between parties, which, as the Report points out, has not been used, perhaps because it does not actually allow "real freedom" from Federal or State tribunals.  Recommendation 21 proposes revision of the industrial agreement mechanism so that it could permit independence from the tribunals.

What is not clear is who the Committee sees as being allowed to opt out, and in what circumstances.  Combined reading of Part X of the Act and the relevant sections of the Report ⁽³⁾ leaves several interpretations open.  As the Act now stands, at least one of the parties to an industrial agreement must be an "organisation" (that is, a registered union or employer body);  the other recommendations on registration would make it very difficult for new organisations to be formed merely so their members could opt out of the system.  Judging again from the present Act, there are scant grounds to hope that Recommendation 21 would allow employer and employees in a small enterprise to agree to opt out and decide terms and conditions for themselves.  The Constitution only allows Commonwealth laws to deal with industrial disputes "extending beyond the limits of any one State" and it is hard to see how this could cover the typical small business.

The importance of Recommendation 21 is that it constitutes a recognition from within the IR Club that there is a place for non-Club IR, an acceptance -- in a way a corollary of the recommended abandonment of penal sanctions for breach of the tribunals' rules -- that the arbitration system need not be all-encompassing.  The importance of this recognition should not be underestimated.  It would have been more encouraging had this been based on considerations of human rights and freedom of choice rather than a desire to "combat perceptions of the ... arbitration system as an imposed arrangement" and "strengthen the arbitration system by countering the contention that it regulates parties who feel no commitment to it". ⁽⁴⁾

The limits to any implementation of Recommendation 21 will be set by the tastes of the government of the day and by the Commonwealth's constitutional powers.  The constitutional limitations can be overcome by joint action by Commonwealth and State governments.  As pointed out in the Report, the cooperation of even a single State would permit such a system to operate within that State. ⁽⁵⁾  Recommendation 21 could be used to justify a parallel, lightly-regulated industrial relations system which could bring about the labour marked reform this country so badly needs.  There would be many problems in implementing such a system -- mainly relating to friction where the two systems, unlike parallel lines, met -- but these could be overcome by a determined government.  The continuance of the conciliation and arbitration system and the voluntary nature of the new system would reduce opposition to the change, and in the long run, the more efficient system could be expected to dominate.

In the long run, the choice is between industrial relations reform and democracy.  When the union movement has so much power that the "right to win" ceases to be merely part of its mythology and becomes part of the community's daily experience, when decisions reached by the representative processes of democracy are liable to be reversed at the behest of groups whose power does not rest on the consent of the people, then a country is no longer a liberal democracy.  What is needed is not public and governmental acceptance of union power and accommodation of policy-making to it, but rather acceptance by union leaders and union members of liberal democracy and its policy outcomes.  The practical question is not what can be done to force the union movement to accept a diminution of its power, but what can be done to convince it that some of it should be ceded to rank-and-file unionists as individuals, and to all people as workers, as employers, as consumers, as voters.  The question is what can be done to reduce the concentration of power and to make its exercise for political coercion or in ways that cause personal or economic harm to the community, unthinkable.

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ENDNOTES

1.  Australian industrial relations law and systems:  report of the committee of review (Hancock Report), 3 vols, Canberra, AGPS, 1985, vol 2 p 663.

2.  "Some critical aspects of the Hancock Report", Economic Witness, 23 April 1985;  see also J. Nurick, "The Hancock Report:  how does it measure up?", Economic Witness, 22 May 1985.

3.  Hancock Report vol 1 p 9, vol 2 p 243-44, vol 2 p 367-69.

4.  Ibid, vol 2 p 244.

5.  Ibid, vol 1 p 3.

Towards a market-sensitive wages policy

CHAPTER 11

When I first published "The Industrial Relations Club" (Chapter 4 of this volume) the atmosphere in the Commonwealth Department of Employment and Industrial Relations (DEIR) in Melbourne, to say the least, was somewhat icy as various disapproving messages were relayed from Canberra head office.  It was as if the Will of Allah had been queried in a mosque.  There was no substantive criticism of the piece -- heresy doesn't require refutation.  There were, however, some mutterings that whilst bits of what I was saying might have been true, it was all unrealistic.  After all, how could one change a system that had existed for over 80 years?  What would happen to consensus?  Who would there be left to drink with? etc.  In more recent times the ACTU's Simon Crean encapsulated this position of "high realism" when he addressed the January 1985 National Agricultural Outlook Conference.  Farmers facing an estimated reduction in income of 30 per cent in 1985 were treated to a dose of IR Club realism.  According to Mr Crean, decentralised wage-fixing may be supportable economic theory in that only those who make profits should pay higher wages -- but Australia was not a theoretical economy. ⁽¹⁾

In April 1983 the National Economic Summit Conference noted the intention of the Hawke government to hold a fundamental review of the Conciliation and Arbitration Act.  In July, the Minister for Employment and Industrial Relations, Mr Ralph Willis, announced that Professor Keith Hancock was to be chairman of the review committee.  The other members were Mr C.F. Fitzgibbon (a former vice-president of the ACTU) and Mr G. Polites (a former director-general of the Confederation of Australian Industry).  Staff support for the Hancock Committee was drawn from colleagues in the Melbourne office of DEIR.

The Hancock Committee was swinging into action around the time my IR Club piece was first published.  Among the people in DEIR who complained it was "unrealistic" to propose fundamental changes to our 80-year-old system were some members of the Hancock secretariat.  I responded to this criticism by drafting a quick paper on what could be done by a future Coalition government to achieve radical reforms to the industrial relations system by minimal changes to the existing legislation.  (It was assumed that a Labor government would not be able to make substantial changes to the existing system.)  The paper was completed in October and is set out below.  It was entitled "What is to be done".

WHAT IS TO BE DONE?

In theory at least, a market-sensitive wages policy could result either from a centralised or decentralised system.  The December 1981 wages freeze was an example of an economically realistic centralised decision.  But, unfortunately, such decisions are few and far between.  This is because wage determining bodies in Australia are committed to comparative wage justice -- and have tended to be so ever since Justice Higgins's appointment as President of the Conciliation and Arbitration Court in 1907.  As presently interpreted, comparative wage justice does not entail that all employees receive the same income.  But it does lead to a situation where they invariably receive the same percentage wage increases.  This is especially so during periods of full wage indexation where across-the-board increases are passed on irrespective of the capacity of individual industries and enterprises to pay.

In the 1970 Engineering Oil Industry Case, a Full Bench of the Conciliation and Arbitration Commission (consisting of, among others, Sir Richard Kirby, Mr Justice Moore and Mr Justice Williams) defined the doctrine of comparative wage justice in the following terms:

That employees doing the same work for different employers or in different industries should by and large receive the same amount of pay irrespective of the capacity of their employer or industry is well embedded in Australian industrial thought.

There have been occasions when the Commission, in exceptional circumstances, has departed from the principle of comparative wage justice.  In November 1982 Mr Justice Maddern ruled that four fruit growing companies could pay lower wages than their competitors covered by the same award because of their economic incapacity to pay.  (The secretary of the Food Preservers' Union described the decision as setting a dangerous precedent.) ⁽²⁾  And in June 1983 the Commission refused to grant a wage rise to workers in the pastoral industry.  The National Farmers' Federation had argued before the Commission that the recession and the drought had deprived the pastoral industry of the capacity to pay a $14 flow-on from the Metal Industry Award.  The ACTU Secretary, Mr Bill Kelty, described the decision as unfair. ⁽³⁾  Twelve months later an $11 increase was granted.

That these two cases represent the exception rather than the rule can be seen from an analysis of the September 1983 National Wage Case.  During the hearings, Deputy President Isaac questioned the ACTU about its rejection of capacity to pay as a consideration in national wage rises.  Dr Isaac said that the system of handing down a wage rise for all workers tended to put the whole of an industry in a straightjacket in that industries in difficulty were forced to pay the same rises as others better off. ⁽⁴⁾

The ACTU, supported by the Hawke government, maintained its opposition to the capacity-to-pay principle.  In its unanimous judgment the Commission supported the ACTU-Commonwealth Government position:

While we would not debar argument being advanced on economic incapacity we would emphasise not only the long established principle of wage fixation that those seeking to argue incapacity to pay must present a strong case, but also that the fundamental basis of a centralised system is uniformity and consistency of treatment.  In particular in cases involving the adjustment of rates in line with national wage decisions the Commission should not refuse an increase except in extreme circumstances.

The end result of comparative wage justice is that employers in severe economic difficulties have little option but to reduce and (sometimes) retrench staff -- or go out of business.  This, indeed, was the position adopted by Justice Higgins in the Broken Hill Mine Case (1909) when he stated that:

If a man cannot maintain his enterprise without cutting down the wages which are proper to be paid to his employees ... it would be better that he should abandon the enterprise.

Comparative wage justice is not the only economic distortion inherent in the centralised wage structure.  The system itself is flawed in that it presupposes that a centralised body should fix the wages and conditions that prevail throughout Australia -- irrespective of differing climatic, geographical, social, and economic conditions.  This frequently inhibits sensible agreements between employers and employees as to, for example, working times -- unless such arrangements outside awards have received the imprimatur of the Conciliation and Arbitration Commission.

In its May 1982 National Wage Case decision the Conciliation and Arbitration Commission examined the likely consequences of moving from a centralised to a decentralised system of wage fixation:

If there is to be a move in this direction the consequences would need to be fully understood.  National movements in prices and productivity would cease to have the same relevance.  Capacity to pay would have a new meaning -- it would be the ability of the individual establishment to pay that would be relevant.  The role of comparative wage justice would therefore be substantially downgraded.

Decentralisation could also result in greater emphasis being given to State and country differentials in wages and conditions.  It would follow that the ACTU's preference for simultaneous and equitable treatment of wage earners would be replaced by irregular and differential increases.  In those circumstances the wage level below which no worker could be employed would take on a new importance.  Indeed the Commission may be called upon to break with tradition and involve itself more actively in facilitating the decentralisation process.  The result could be to bring the tribunal's dispute settling role closer to the work place where that role originated.  Furthermore the current practice where ratification of an agreement by the Commission is sufficient authorisation for a price increase by the consenting employer, could well require review.

In May 1982 the Commission commented that it "may be that circumstances are pointing the future of wage fixation in this new (decentralised) direction".  But in September 1983, in the first national wage case after the election of the Hawke government, it decided "that in the current circumstances a return to a centralised system of the kind we have provided offers the best prospects for industrial stability and economic recovery".  It referred to "the strong and universal desire for a centralised system" expressed (1) in the ALP-ACTU Accord;  (2) at the National Economic Summit;  and (3) during the National Wage Case hearing -- by (among others) the Commonwealth Government, the ACTU and the CAI.  The Commission decided to implement centralised full indexation.  It did concede, however, that the 4.3 per cent increase could lead to higher unemployment, lower growth and higher inflation than would occur if the return to indexation were delayed and the wage pause extended until April 1984.  It is unclear as to whether Australia's unemployed appreciated the "realism" of this decision.

Sustained economic recovery will not take place in Australia unless substantial reforms are made to the existing wage-fixing structures.  Any proposals for change must take account of constitutional restraints and political realities.  They must be publicly presentable and technically competent.

Presented below are a number of options that a future Coalition government may choose to take up.  They are based on the assumption that a Liberal-National Party government would not wish to abolish the federal industrial tribunal or return responsibility for industrial relations to the States.  Any such move would be political dynamite.  Moreover, there is no evidence at the present time to suggest that the State governments and the various State industrial commissions would be any more market-sensitive than their Federal counterparts.  It is possible that they would be even less conscious of economic realities.  If a more market-sensitive wages structure is to be established in Australia, the Commonwealth should take the initiative in the legislative area.  It must be willing to take on those organisations and individuals that have a vested interest in the perpetuation of the existing system.

Substantial changes can be made to the existing industrial relations system -- either by legislation or executive action, or a combination of both.  Recent High Court decisions appear significantly to have increased the constitutional capacity of the Commonwealth government to act in the industrial relations arena. ⁽⁵⁾  Assuming a government with a Senate majority, a number of important amendments could be made to the Conciliation and Arbitration Act and to other Commonwealth legislation.

LEGISLATION

1. Section 39(2)

   Section 39(2) of the Conciliation and Arbitration Act should be amended by deleting references to Sections 31, 34, 34A, 35 and 36A, and adding the following words:  "and on the capacity to pay of specific industries and individual employers".  A further addition should be made to require the Commission to take into consideration Australia's international competitiveness.  Section 39(2) would then read:

   In proceedings before the Commission, the Commission shall take into consideration the public interest and for that purpose shall have regard to the state of the national economy and the likely effects on that economy of any award that might be made in the proceedings or to which the proceedings relate, with special reference to likely effects on the level of employment, on inflation, on the capacity to pay of specific industries and individual employers, and on international competitiveness.

   Note that the existing Section 39(2) refers to proceedings before a Full Bench of the Commission, references to the President, and appeals to a Full Bench.  Under the proposed amendments, the Commission would be required to take account of economic factors in all its deliberations -- not merely those listed above.  The inclusion of the capacity to pay principle in Section 39(2) would compel the Commission, by legislative enactment, to abandon its present commitment to comparative wage justice and to determine wages and conditions by tough-minded economic criteria.

2. Section 39A

   A new Section 39A (to be titled "Economic Impact of Certain Full Bench Decisions") should be inserted:

   In proceedings before the Commission under Sections 31 or 34, sub-section (4) of Section 34A or Section 35 or 36A, the Commission shall provide impact statements on the economic consequences of its decisions with particular emphasis on employment, inflation, and international competitiveness.

   This section would require the Full Bench, when dealing with those matters of national economic importance that come before it, to state publicly the likely consequences of its own decisions.  The National Economic Summit demonstrated that it is possible to prepare scenarios dealing with the likely impact of wage decisions on inflation, employment, and economic growth.  The Commission should be required to provide similar information when bringing down decisions which will have an impact on the Australian economy.  As presently structured, the Commission does not have the economic expertise to undertake this task.  It is proposed that Treasury staff should be seconded to the Commission to provide specialist advice and undertake economic research.

3. Section 25

   Section 25 should be amended to require the agreement of the parties before an industrial dispute is referred to compulsory arbitration.  This would be a radical change to the existing legislation in that it would ensure that, apart from exceptional circumstances, the Commission had power to arbitrate an industrial dispute only where the parties are of the opinion that it should do so.  At present the Conciliation and Arbitration Act virtually encourages industrial disputation since, by bringing on a dispute, an organisation can achieve award coverage or obtain an award variation.  Frequently unions use phone books to cite respondents -- who, unless they challenge the citation, are likely to become bound to federal awards (or bound to abide by award variations) irrespective of whether they are actually in dispute with their employees.  This amendment would ensure that the Commission only becomes involved in settling real disputes -- not artificially created ones.  The Commission's conciliation role should continue unabated but be separated (by legislation) from its arbitral function.

   In exceptional circumstances the Commission should be empowered to take hold of a dispute in the public interest -- at the direction of the Minister for Industrial Relations.  The Minister would issue such a direction where there was in existence a serious and protracted dispute which one or both of the parties had refused to take to arbitration.  It should be noted that this was the original conception of the Commonwealth conciliation and arbitration power.

4. Section 25A

   Section 25A deals with limitations on the powers of the Commission.  This section should be expanded to provide that the Commission's powers with respect to wages extend only to minimum rates.  By bringing down paid-rates awards the Commission gives legal force to over-award payments, which then become subject to indexation increases along with the minimum award rates.  Add the effect on the calculation of overtime, long service leave, annual leave and other entitlements, and the result is a significant increase in labour costs.  The Commission's role with respect to wages should not extend beyond setting minimum rates.  This principle should be enshrined in the Act.

5. Section 59

   Section 59 should be amended with a view to substantially restructuring the Commission's power to vary an award.  This would ensure that both parties -- employers and employees -- give more detailed consideration to the initial framing of an award or agreement.  In addition it would help to bring about a situation in which awards are regarded as being akin to legally enforceable fixed term contracts -- and not as mere pieces of paper that can be altered continually by means of artificially-created disputes.

   Section 59(1) and Section 59(3) should be repealed.

   Section 59(2) should be amended to read:

   The Commission shall, if it considers it desirable for the purpose of removing ambiguity or uncertainty, vary any of the terms of an award.

   A new Section 59(1) should be inserted:

   The Commission may, at the direction of the Minister for Industrial Relations, set aside an award or any of the terms of an award.

   The Minister would issue such a direction where there was a serious and protracted industrial dispute concerning an existing award in which the Commission should intervene in the national interest.

6. Section 119

   The amendments proposed above, if implemented, would lead to a more market-sensitive and contract-based industrial relations structure.  To be effective a contract must be enforceable.  This can be achieved under the present legislation.  At present awards and certified agreements are enforceable under Section 119.  The fact that prosecutions are virtually never launched against unions for award breaches is a reflection not on Section 119 but rather on the nature of awards themselves -- they invariably cast obligations on employers only.  Justice Higgins in 1926 noted this phenomenon:

   The awards of the [Conciliation and Arbitration] Court could not go outside the claims made, and, the claims being made by employees, every award was a restraint on the employer and not the employees.  This is an explanation of the curious fact that the prosecutions for breaches of the awards are practically all prosecutions for breaches committed by the employers ... ⁽⁶⁾

   Market-sensitive, contract-based awards should impose obligations on both parties.  These could be enforced under the existing Section 119 -- provided there was the will to do so.  The only obviously necessary amendment would be to increase the maximum penalties in Section 119(1D).  It should be remembered that parties to awards also have rights at common law and, at times, under other legislation.  These existing rights should be retained and where possible enhanced.

7. Industries Assistance Commission Act

   The policy guidelines of the Industries Assistance Commission should be amended to require it to take account of wage agreements (particularly "sweetheart deals") when recommending appropriate levels of industry assistance.  Those industries that have become less competitive as a result of wage increases should not be able to recoup their losses by obtaining higher tariffs and quotas.

8. Commonwealth Employees (Employment Provisions) Act

   Over a quarter of the Australian workforce are public sector employees.  The Commonwealth has the constitutional power directly to control its own employees and, through its financial powers, it has considerable potential influence over State and local government in their capacity as employers.  A future government should legislate for a Commonwealth Employees (Employment Provisions) Act along the lines initiated by the Fraser government.

9. Trade Practices Act

   Section 45D of the Trade Practices Act is an effective legislative provision against secondary boycotts.  If repealed by the Hawke government, it should be restored.

10. Unions

    Legislation should be enacted to provide that unions could negotiate awards only with reference to their own members -- and not, as is currently the case, also with reference to people who are merely entitled to be members.  The aim would be to bring about a situation in which unions act on behalf of their members within the IR system, and those employees who are not unionised are able to operate freely outside it.

NON-LEGISLATIVE INITIATIVES

If a future government is unable to get its IR reforms through the Senate, it will have to take non-legislative initiatives.  This should include forceful and tough-minded advocacy before the Conciliation and Arbitration Commission.  The evidence suggests that the Commission can at times be swayed by this kind of advocacy (note, for example, its December 1982 National Wage Case and its June 1983 Pastoral Industry Award decisions).

1. National wage case advocacy

   The total wage should be abandoned and a return made to the basic wage and margins (for skill) system that existed prior to 1967.  If some form of indexation is to continue it should be confined to the basic wage only.  This should be argued before the Commission.

2. Public sector employees

   The Commonwealth should use its direct power over its own employees to restrain wages.  It should indicate to the States and local governments that, unless they follow the Commonwealth's example, their grants will be cut.  Any cut in funding should reflect the actual budgetary cost of State and local governments not following the Commonwealth's public sector wages policy.

3. Notifying employers

   The Commonwealth should argue that the Commission has an obligation formally to advise respondent employers that they are bound to observe federal awards.  At present an employer can become bound to a federal award without knowing it.  If an award breach is detected, the employer may be liable for any arrears of pay incurred over the previous six years.  These legal obligations arise even though the employer will not have been advised by the Commission that he has been made respondent to a federal award.  This amounts to a severe denial of natural justice.  The Commonwealth should request that the Commission take action to ensure that all respondents to federal awards are made aware of their legal duties and obligations.  (If necessary, the Act could be amended to direct the Commission to notify employers of their award respondency.)

POSTSCRIPT

The "What is to be done" paper reproduced above was written to suggest ways in which there could be a significant move towards the creation of a market-sensitive, contract-based industrial relations system in Australia by means of minimal amendments to the existing legislation.

It was recognised that some unions could attempt to escape the new structure by moving from Commonwealth to State jurisdiction.  But this, of itself, should not prevent much-needed reform.  The fact is that the States, unlike the Commonwealth, do have direct power over wages.  An economically tough-minded State government could therefore require its industrial tribunals to follow its economic directives.  This could lead to a situation in which certain States (with lower labour costs) became more economically attractive than others.  This in itself would, over time, facilitate a more market-sensitive approach to wages policy.

In 1984 the then deputy leader of the federal Opposition, Mr John Howard, proposed that employers and employees should have the freedom to enter into voluntary work contracts covering such areas as starting and finishing times, hours and weeks worked, lunch breaks, annual holidays, penalty rates and (more generally) wage levels.  The introduction of voluntary work contracts would free employers and employees from the excessive bureaucratic requirements of the existing tradition-bound system.  This would encourage the creation of new jobs and enable employers and employees to arrange their work to suit their business and personal requirements -- for instance, travel, child care, recreation, education.  Such contracts could be subject to basic standard-of-employment legislation covering matters such as minimum pay and maximum hours, safety, health and welfare.  But some or all such legislation might be deemed unnecessary.

Legislation could be enacted -- as amendments to the Conciliation and Arbitration Act or otherwise -- compelling federal industrial tribunals to recognise the validity of voluntary work contracts.  To prevent "leap-frogging" from one tribunal to another, the Commonwealth and at least one State would have to enact complementary legislation.

There is nothing "unrealistic" about voluntary work contracts.  It would be quite possible to begin the process of labour market deregulation in the small business sector of the economy where union organisation is often weak or virtually non-existent.  Voluntary work contracts would have a special attraction when new industries are being established.

The Hancock Report (released in May 1985) is, predictably, a profoundly conservative document.  Professor Hancock and his colleagues put their names to such comments as:

The role of trade unionism in Australia is accepted and endorsed within our society.

The industrial relations system now existing in Australia is a product of history;  and, to a degree, Australia is a captive of that history.

Moreover, the committee members went so far as to endorse corporatism -- which was defined as "very much the notion of policy-making by agreement at a centralised level".  The Report embraced the findings of DEIR staffer Dr Kerry Schott that corporatism is the way of the future, in spite of the fact that her research was based on the period 1965-1981 -- prior to the world economic recovery that was led by the distinctly non-corporatist United States economy. ⁽⁷⁾

The thrust of the Hancock recommendations, if implemented, would be to make Australia's industrial relations system even more rigid, inflexible and centralised.  Industrial tribunals and unions would be given significantly more power.  There would be no legal redress (including a right of appeal) concerning industrial relations to any court except the proposed Australian Labour Court.  All sanctions for any form of industrial action would be abolished -- except, of course, for when employers breach awards.  Many independent contractors would be conscripted into unions simply by defining them as "employees".  The federal industrial tribunal would be empowered to order an employer to pay striking employees for the period during which they were on strike.  And the enormous privileges conferred on unions by the existing legislation would be preserved -- in spite of the fact that union privilege inevitably results in a diminution of the civil liberties of all employees, union members or not.

The Committee refrained from making any tough-minded recommendations on Australia's wage-fixing system.  It proposed that the federal industrial tribunal, in all proceedings, should take into account "the state of the national economy" and make "special reference to likely effects on the level of employment and on inflation".  But it did not show how such economic competence is to be injected into the deliberations of the Arbitration Commission.

There is virtually nothing in the Report to gladden the hearts of the proponents of labour market deregulation.  Recommendation 21 provides that in certain circumstances the "parties" should be able to determine their "terms and conditions of employment", but it is made emphatically clear that this so-called alternative system would only "be available for employers and unions who wish to use it".  Individual employees -- as distinct from union bosses -- would have no legal right to enter into voluntary work contracts.

By nailing its flag to the economic mast of regulation, centralisation, even corporatism, the Hancock Committee produced a set of recommendations that are precisely the wrong remedy for Australia's economic ills.

It is both possible and realistic to substantially reform the existing industrial relations system and to introduce an alternative opting-out procedure for employers and employees who wish to enter into voluntary work contracts free of unions, employer organisations, and industrial tribunals.  Whatever the Hancock Report says, this is the way of the economic future.

---

ENDNOTES

1.  Australian Financial Review, 31 January 1985.

2.  Australian Financial Review, 21 June 1983.

3.  The Age, 22 June 1983.

4.  Melbourne Sun, 14 July 1983.

5.  See especially the High Court's decisions in the Tasmanian Dams Case (Commonwealth v. Tasmania, (1983) 57 ALJR 450) and the Social Welfare Union Case (R. v. Coldham:  exparte the Australian Social Welfare Union (1983) 57 ALJR 575).

6.  H.B. Higgins, "Industrial Arbitration", address delivered in the Chapter House of St Paul's Cathedral, Melbourne, 22 March 1926.

7.  See generally, K. Schott, Policy, power and order:  the persistence of economic problems in capitalist states, London, Yale University Press, 1984.

Industrial relations in Australia -- the need for change

CHAPTER 10

INTRODUCTION

The case developed throughout this chapter is that there are strong industrial relations and economic arguments for changing the Australian industrial relations system to one that could be described as a decentralised collective bargaining structure.  While it will be asserted that these arguments stand in their own right, some related questions also need addressing.  These include:

1. If there are strong arguments for change, why has the system survived for over three quarters of a century, and why are there still powerful apologists for the system?
2. What sort of system of collective bargaining would be set in place of the existing institutional structure and how would this change be brought about?
3. What changes to union structures would be necessary?

A response to these questions follows, and leads into the separate industrial relations and economic argument for change.

WHY HAS THE SYSTEM SURVIVED?

The view of the author is that the system has survived because of a combination of mythology, political fear, and something that could be described as "institutional momentum".

Mythology

Every society needs its myths;  cultural developments rest upon them and depend upon them.  Whether Australia needed the "arbitration myths" is doubtful, but the myths abound.  Those about the origins of the Australian conciliation and arbitration system have ranged from the academically respectable:  "... Institutions do not materialise out of thin air.  They arise from the interplay of economic, technological, social and political forces and the historical context in which those forces operate ..." ⁽¹⁾ to the romantic assertion that the Australian system was "forged in the fires of Federation", ⁽²⁾ and therefore should not be lightly cast aside.

The greatest myth of them all was that the Australian conciliation and arbitration system created a "New Province of Law and Order" and that

... There should be no more necessity for strikes and stoppages in order to obtain just working conditions than there was need for the Chinaman of Charles Lamb to burn the house down whenever he wanted roast pork.  The arbitration system is devised to provide a substitute for strikes and stoppages, to secure the reign of justice as against violence, of right as against might. ⁽³⁾

That the redoubtable Henry Bournes Higgins, perhaps the most tenacious myth-maker in Australia's modern history, could blandly assert these things after presiding over the work of the Australian system during one of the most disastrous periods of the country's industrial relations experience, is testimony to his total commitment to building up a particular system and to the power of propaganda. ⁽⁴⁾  Higgins set out in the nineteenth century to establish his vision of a particular industrial relations system in Australia and he made this his life's work.  He was not one to allow the reality of experience to dissuade him from his self-appointed mission.  To understand the tenacity of purpose that he displayed, it is necessary to refer back to events in the last decade of the nineteenth century.

Henry Bournes Higgins was one of the Victorian delegates to the various Constitutional Conventions of the 1890s.  While others had promoted the idea of establishing an arbitration system, it was Higgins, on the last day of the final session of the convention in 1898, who carried the day. ⁽⁵⁾  The subject had received little support on the occasions on which it had previously been debated. ⁽⁶⁾  It is important to note that even as late as 1898 there was considerable opposition to providing the proposed Australian government with any powers in the field of industrial relations. ⁽⁷⁾  (The traditional view has been that the industrial relations experience of the great strikes in 1890 was the reason for the establishment of the Australian system of industrial relations based on conciliation and arbitration.)

Higgins parried the opposition with an appeal that must have sounded statesmanlike:

I do not ask the Committee to say that arbitration shall be compulsory or even that any steps shall be taken to secure the settlements of industrial disputes -- I simply wish to give the Federal Parliament power to legislate on the subject ...  I merely want to leave the thing open and I think I may appeal even to those who are opposed to conciliation and arbitration in industrial disputes in this respect ... ⁽⁸⁾

Finally, a vote was taken and Higgins's proposal was adopted 22 votes to 19. ⁽⁹⁾  By a mere three votes after seven years of debate, the Australian Constitution included the well-known nineteen words in Section 51(xxxv) which led -- six years later -- to the setting up of the Australian ⁽¹⁰⁾ conciliation and arbitration system.

The uneven course to the 1898 decision, and the narrow voting margin cannot be viewed as support for arguments that the stream of history flowed inevitably in the direction of the establishment of an Australian conciliation and arbitration system.  Nor did events justify the mythical assertions about the emergence of "a New Province of Law and Order".

Political fear

While three ministries fell in the first four years of Federation over the introduction of arbitration legislation, it is the dramatic events of 1929 that most loudly ring alarm bells in the minds of politicians when the question of changing the industrial relations system is raised.

In that year, Prime Minister Bruce proposed repealing the Conciliation and Arbitration Act.  Much of that year's election campaign centred on this issue.  Bruce not only lost the election;  he also lost his seat. ⁽¹¹⁾  Bruce later became Lord Bruce of Melbourne.  As one commentator put it:  "... disapprobation, elevation and castration, all on the altar of arbitration ..."  Is it any wonder that tremors of fear run through the corridors of power whenever anyone mentions legislative action to change the system?

Institutional momentum

It is no easy task to master the intricacies of and become expert in the elaborate procedures which characterise the Australian conciliation and arbitration system.  Large numbers of extremely competent people dedicate their lives to making the system work.  Large and complex organisations have been established to represent the interests of the various actors in the system.  The system only works as well as it does because of the expertise and dedication so many people bring to their appointed tasks.  Because of the demands upon the participants, it is unlikely that detailed proposals for changing the system would emanate from them.  Rather, it is more likely that a conservative reaction critical of any such proposals would be forthcoming from those most closely involved in the system.

Dabscheck has postulated that the Commission itself "... behaves as if it is motivated by the instinct to survive ...", ⁽¹²⁾ and others have asserted that "... management, unions and tribunals have become a common interest group concentrating on short term compromise solutions rather than tackling more basic issues.  The arbitration industry is self-perpetuating. ⁽¹³⁾

The authors believe that there is some force to these assertions and that they have to be recognised as relevant in any analysis of the reasons for the survival of the system.  It has been argued elsewhere that it is the attitude of people that is important and not the institutional structure;  that better industrial relations will come from changing attitudes and not from changing the system.  The author here contends that the rules of the game will influence the way people play the game, and that the system needs to be changed to make the central actors, the employers and the employees, more directly involved in and responsible for industrial relations decision making.

WHAT CHANGES SHOULD BE MADE, AND HOW?

It is the view of the author that "revolutionary" or "imposed" change to the system is neither possible nor desirable.  The Australian community as a whole would need to perceive the advantages that would flow from change.

An Australian model

There is no reason to assume that any particular model of collective bargaining should be imported into Australia.  The existing institutional structure could be modified to establish a purely Australian model.  A Conciliation Commission could be established, under the umbrella of which decentralised collective bargaining could proceed.  The registration of agreements could proceed along similar lines to those in the United States of America.  Section 51(xxxv) of the Constitution could still provide the authority for this national framework;  alternatively, the Trade and Commerce power in Section 51(i) of the Constitution could possibly be the source of authority.  The wording of the trade and commerce powers is identical to that in the United States Constitution, and it is that power which underpins legislative control of the American labour relations system. ⁽¹⁴⁾

The States

An obvious question:  what of the State systems of arbitration which could conflict with the proposed enterprise by enterprise system?  There are three major responses.  First, it would be preferable, if there were a strong national consensus for change, for the States to withdraw from the regulation of industrial relations matters;  alternatively, they could pass complementary legislation.

Second, if the first response is not possible, federally registered agreements would, as today, override conflicting State agreements.

Third, State systems of arbitration can coexist with a nationally based system of collective bargaining.  No less than eighteen states of the United States of America have legislated for compulsory arbitration for some categories of public employees, and compulsory arbitration "is becoming especially common in statutes applicable solely to police and fire fighters". ⁽¹⁵⁾

There seem to be, in the opinion of the author, no legislative impediments to the establishment of a different institutional model of industrial relations in Australia.  The impediments lie elsewhere;  their relevance and validity need to be tested.

UNION STRUCTURE -- NECESSARY CHANGES?

This is not a central issue in the argument for reform of the system.  The arbitration system has certainly fostered the growth of unions, 15 but the usual arguments that there are too many unions in Australia are overstated as problems for industrial relations.  Nearly one third of the unions registered under the Conciliation and Arbitration Act are associations of employers.  Overseas experience allows no conclusions to be drawn about the relevance to Australia of the number and type of unions which may be appropriate for an effective industrial relations system oriented to collective bargaining.

Whatever reforms an appropriate body might consider desirable for union structures, these reforms would be peripheral to the fundamental issue of reform of our institutional structures in industrial relations.

IMPERATIVES FOR CHANGE -- INDUSTRIAL RELATIONS ARGUMENTS

The adversary system

Anyone who has attended arbitration proceedings can see that the court room procedures of the Commission heighten the atmosphere of conflict in industrial relations issues and can be seen as a force acting against the development of constructive co-operative relations at the enterprise level.  A major problem with this sort of system, with the rituals of the Court (the bowing to the Bench, the calling on of cases, the swearing in of witnesses, the whole paraphernalia of examination, cross-examination and re-examination of witnesses in open court with media representatives present) is that the "advocates" for the parties to a formal dispute are very much on trial themselves for their performance.

The "advocates" or professional mouthpieces are there to win for their clients, and individual conflicts can occur between them which may do little for the parties and certainly nothing for human relations between employers and employees.  Verbal "blood-letting" in the court-room has led to appropriately worded admonitions by the Commission from time to time.  The contests between the advocates, and between the parties, are very much public affairs.  "Industrial roundsmen" from the media are generally present, and the more dramatic the conflict, the more likely the whole story will appear on the front page of newspapers and on the radio and television news.  The battleground atmosphere of the court proceedings is in no way lessened by the attitudes of the arbitrators, their expectations of the advocates and the potential that any hearing has for appeal proceedings, either on matters of merit or law.

While arbitrators do not assume an attitude of intellectual tabula rasa at each hearing, it is precisely because an arbitrator will be influenced by his past experience and knowledge, ⁽¹⁷⁾ that industrial tribunals have stated:

[I]t becomes so important, particularly in matters of major significance, that parties appearing before a tribunal should exhaust all possible avenues to ensure that all matters which may have relevance to a proper conclusion are fully ventilated. ⁽¹⁸⁾

As appeal proceedings are normally not argued de novo ⁽¹⁹⁾ but on the decision of the arbitrator arising from the matters before him, there is clearly point to the observation quoted above;  but the detailed, ritualistic, and not infrequently antagonistic unfolding of events in this way can be an alienating process for the people at the level of the enterprise.  Further, even if something is "gained" by a union at a "hearing", it very often is seen as only a partial victory and the flames of discontent can be kept burning for the next approach to the Commission.  The "award" may simply be seen as an instalment.  A system less suitably designed to improve employer-employee relations is hard to imagine.

Employment policies -- complicated and confused by Federal-State Systems

The constitutional division of industrial relations power between the Commonwealth and the States has resulted in the development of competing and more than occasionally conflicting federal and State industrial tribunals.  A State commission may reject a claim for an allowance, based on certain criteria, for certain employees, yet the federal commission may grant an allowance based on the same criteria to people working alongside the first employees but under a federal award. ⁽²⁰⁾  The consequences for employer-employee relations, especially when the one employer may employ people under both federal and state awards, are easily imagined.  Dissatisfaction, disruption, and strained employer-employee relations follow, until some financial accommodation can be reached.  Regrettably, even after an issue such as this is resolved, nothing has been done to improve inter-personal relations on the job.  For example, at intervals during the period of wage indexation 1975-81, the Australian and Western Australian Commissions were pursuing different policies. ⁽²¹⁾  It may not be taking too jaundiced a view to suggest that such inconsistency of decision making by the tribunals can actually cause disputes, particularly when the complexities of both federal and State awards can impinge on the one employer.

That there has not been a massive groundswell of resentment against the irrationality of a system -- or systems -- of industrial relations which necessitate multiple employment policies in the one establishment, is testament to the long-suffering nature of personnel and industrial relations practitioners in this country.  One employer in Perth is bound to no less than 32 federal and State awards.  Not only have these been amended at different times for rates of pay, but provisions for sick leave, overtime, ratios of juniors to adults, and many other provisions, also vary from award to award.  During the period of wage indexation, 1975-81, general wage increases also varied as to amount and timing. ⁽²²⁾

The potential for disruptive employer-employee relations is obvious;  the difficulties in the way of developing a rational employment policy are also obvious.  Such problems were further compounded in December 1982 when the Western Australian government proclaimed legislation that prohibits "preference of employment" for unionists under State awards. ⁽²³⁾  So what is obligatory in employment policies concerning people employed under federal awards is absolutely prohibited in relation to employees employed under State awards in Western Australia.

Is it any wonder that industrial relations in Australia more than occasionally resembles the Mad Hatter's tea party, and has led to the suggestion that Lewis Carroll may well provide a reference point for those trying to unravel the mysteries of what we loosely call the Australian system of industrial arbitration.

UNREALITY OF REMOTE ARBITRAL PROCESSES

The artificial atmosphere in which arbitral decision making occurs inevitably leads to inappropriate, irrelevant and often quite damaging economic and industrial consequences for many employers who have no direct involvement in proceedings.  That this so often occurs is not necessarily the fault of the arbitrator, who has to work within the framework of the system, a system so structured that inflexible centralised decision making is inevitable.  A striking example of this was the decision of the Australian Conciliation and Arbitration Commission in the 38-hour week issue in respect to the building industry, in January 1982. ⁽²⁴⁾  This was a Full Bench decision of the Commission from which there were no rights of appeal.  One group of employers, the National Industrial Executive, which represented the various Master Builders' Associations and the Australian Federation of Construction Contractors, had reached agreement with the respective unions on the introduction, among other things, of the 38-hour week.  As far as these employers were concerned, a 19-day month with a set, unalterable rostered day off every four weeks was acceptable, and they sought with the unions to have the award amended accordingly.

A great many other employers, however, working both directly and indirectly in the building industry in all States, and bound by the pecularities of "respondency" to observe that award, took strong exception to the suggestion that they have imposed upon them a "deal" to which they were not a party, and which was quite inappropriate for their particular operations.  While these employers saw little point in resisting the introduction of the 38-hour week at that time, what they did quite reasonably seek was flexibility in its introduction.  They argued that, particularly in mixed industry sections, a total close-down every fourth Monday was impractical and disruptive, as only a portion of the workforce (those bound by these awards) would be rostered off while other operations continued.

The three learned persons on the Commission, sitting in Melbourne, noted that "... there was opposition on the part of a number of employer associations to the method of implementation ...," ⁽²⁵⁾ but later said "... We acknowledge the desirability of maintaining a flexibility on the institution of any major change to the operations of working methods of employers in this industry.  At the same time we are reluctant to depart from the terms of a package which has been negotiated between the major parties to the awards." ⁽²⁶⁾

The sensible, rational thing to do, one would have thought, would be to allow these "willing parties" to a rigid system of a rostered day off to have what they wanted and at the same time allow those who wished to have flexibility to avoid disruption of employment patterns and trade to follow that course.  Not a chance.  Every employer in Australia bound by the awards, regardless of the composition of his workforce, or the multi-industry nature of his enterprise, was ordered to follow the purely construction deal of a 19-day four weekly cycle.  There was no apparent consideration of the consequences for enterprises whose workforces were also covered by State awards, or other awards of the federal system.

Cargo cult mentality

It can be argued that remote decision making by Australian arbitrators -- strangers to the enterprise -- has actually inhibited the development of constructive employer-employee relations and bolstered views that the market and its economic pressures are irrelevant in setting working conditions.

From the earliest times, the industrial tribunals have taken the view that the settlement of disputes and the setting of appropriate rates of pay could be done without regard to the economic consequences of their decisions.  In 1909, Mr Justice Higgins ruled that the federal Court could not prescribe a lower rate in order to keep an unprofitable mine going. ⁽²⁷⁾  Professor Shann pointed out in the 1920s that "... the propriety of a wage the legal award of which would abolish other jobs was not plain to the copper-miners at Wallaroo and Moonta in South Australia in 1921." ⁽²⁸⁾  The workers very sensibly arranged with management for a fluctuating wage having regard for the price of copper and thus they preserved their jobs.

Nevertheless, over the decades, the industrial tribunals have implicitly and explicitly behaved as though their institution has been able magically to overcome the reality of the market.  According to Mr Justice Higgins in 1907, fair and reasonable wages "... must mean more than the level set by the barbarous higgling of the market", ⁽²⁹⁾ and as late as 1981 an industrial tribunal could say:

The primary function and responsibility of the Commission is the prevention and settlement of industrial disputes ... the Commission is not responsible for the management of the economy. ⁽³⁰⁾

Coupled with statements of apparent pride over the years in furbishing the cherished doctrine of comparative wage justice that purports to allow the setting of uniform rates of pay for each classification across a variety of industries without regard for the state of these industries, ⁽³¹⁾ is it any wonder that there has been a lack of awareness of economic reality by workers at the enterprise level?  There has always seemed to be another money basket out there in the Commission, which can be unlocked in response to incantations recited before an industrial altar.  It has not helped matters that the arbitrators in the rarified court room atmosphere "hand down" decisions or judgements concerning money, or "award" money payments, and then issue "orders" for the new law to be observed -- by employers.  Even the word "award" means a prize or a payment and adds to the "lucky dip" mentality in the wage setting area.

The grim reality of market forces finally caught up with Australia in 1982-83, when the lucky country exhausted its capacity to cope with the unrelenting pressure for higher wages and reduced hours of work, regardless of economic capacity.  Unions, however, appeared to be so conditioned to the cargo cult that even in the face of massive unemployment and support for a wage pause by seven Australian governments (including three state Labor governments) and a National Wage Bench decision establishing a wage pause, ⁽³²⁾ the ACTU resolved on 18 January 1983 to refuse to cooperate with the Arbitration Commission's six-month wage freeze.

The cargo cult syndrome also owes much to the manner in which "national productivity" has been distributed through national wage cases over the years.  The total absurdity of a group of people sitting in a Melbourne courtroom purporting to determine, by little better than witchcraft, the economic capacity to pay wage increases of over 400,000 enterprises in Australia, from a bicycle shop in Northam to the SEC in Victoria, has only to be stated to be seen for what it is.  Yet year in, year out, the solemn rituals are observed by people described by Professor M. Fisher as having "... no special skill -- and as the government of the day has to accept their decisions they in effect have the power to determine unemployment, as they do not know whether or not the Government will validate any inflationary settlement by monetary expansion." ⁽³³⁾  I do not question the integrity or general capacities of the arbitrators.  The system simply requires that the people involved act out a charade.  As one astute observer put it:  "... It is almost as if a medieval ecclesiastical court took over the economic planning of Australia." ⁽³⁴⁾

The Australian community accepts the system because it is there, and also because of the myths that have developed about its virtues.  These myths are discussed elsewhere in this chapter.  There is a growing realisation that the real objective of Australian industrial relations must be to get decision making back to the level of the enterprise.  The cargo cult could be dissolved in this way.  But effective developments to this end are not occurring in spite of the existence of quite compatible policies on employee participation that have been officially adopted by employers, unions and all political parties. ⁽³⁵⁾  Employee participation has become a "motherhood" subject in industrial relations:  everyone subscribes to its virtues but there are few signs of increased participation.

It can, moreover, be argued that the existence and pervading influence of the Conciliation and Arbitration system are enormous barriers to development in this area.  The Australian Treasury perceived this and responded explicitly in August 1982:  "... A more decentralised approach to wage determination which worked to reduce the rigidities in the wage system by bringing the focus of responsibility for bargaining outcomes closer to the workface and to the fortunes of the individual firm involved -- and its employees -- should assist ... both sides of the bargaining table, management and employees alike, to take into account the inescapable economic inter-relationships between wage levels, price competitiveness, profitability and employment ..." ⁽³⁶⁾

The law -- a barrier to dispute settlement and a cause of disputes

In many academic publications, industrial relations is described as a multi-disciplinary area at the crossroads of economics, politics, psychology, management, law, and history.  In the Australian system, emphasis is placed on law as the pre-eminent basis for industrial relations.  The most senior members of the Australian Commission are former legal practitioners and their appointment as Deputy Presidents of the Commission provides them with the designation, rank and status of a judge. ⁽³⁷⁾  The President of the Commission must have been a barrister or solicitor of the High Court or of the Supreme Court of a State or Territory of not less than five years' standing. ⁽³⁸⁾

Inevitably there is an emphasis on legalistic rituals which can cause legal disputes to have precedence over actual industrial disputes.  This can cause delays which can inflame industrial issues and, at the very least, do nothing to improve employer-employee relations on the job.  Additionally, the rights or wrongs of matters being decided on fine legal points not only adds an air of unreality to industrial relations but can produce absurd consequences.  The formal side of proceedings, the institutional side, takes on a life of its own, and the matters or dispute in issue become incidental to the orderly life of the court system and the participants in these hearings.  Not infrequently, a matter at issue in some remote part of Australia, for example the Pilbara of Western Australia, will be listed for hearing in Melbourne or Sydney.  This meets the convenience of the Commissioner and the barristers involved.  It also ensures that the workers and employers actually in dispute do not participate in nor are in a position to wonder about the mystical proceedings of the professionals.  Decisions by members of the Commission are frequently "handed down", not merely in another State from the area of dispute, but in another State from that in which hearing took place.

Unreality of remote proceedings -- the High Court

It is not to the credit of the system that so many industrial relations cases come before the High Court.  And it is even less satisfactory that the issues can get lost in fine legal points and even finer points of language, once the matters become enmeshed in the rarified, esoteric world of that august body.  The spectacle of learned men bending their undoubted intelligence to determine the best "legal" response to issues can be awe-inspiring.  The results of their deliberations can, however, appear quite unrealistic and occasionally can be quite harmful in the area of industrial relations.

In a famous case dealing with the Australian Conciliation and Arbitration Commission's jurisdiction to grant "preference of employment" to union members, one of the five High Court judges had this to say about the particular "preference" clause which was the "vehicle' for the case:

[T]he wording of the proviso to Clause 2(a) appears involute and to have aberrations of tenses and in the use of the subjunctive mood.  But if the meanings of both the protasis and apodosis sufficiently emerge we need not be concerned by inelegancies appearing on a syntactical analysis ... ⁽³⁹⁾

The learned judge did point out that:  "... The question is not one of lexicography but of semantics in the proper sense of that word.  It is the concept of preference in employment as understood in the context of Australian industrial law." ⁽⁴⁰⁾  It is, of course, the complexity and convoluted nature of Australian industrial relations law which produces the sorts of verbal wonders and other worldliness quoted above.

Another example is provided by the remarkable High Court decision which was delivered in June 1981 in connection with a demarcation dispute over the rigging work on the construction of the Omega navigation transmitter tower in Victoria. ⁽⁴¹⁾  The disputing unions were the Federated Iron Workers' Association (the FIA) and the Australian Building Construction Employees and Builders' Labourers' Federation.  The history of events that led to the High Court proceedings would justify a study in its own right.  Suffice to say that the Arbitration Commission had determined that the FIA members were the workers appropriate for the task which in essence was the construction of a communications tower.  The constructor's description says:  "A typical Omega transmitting installation consists essentially of a 427 metre high steel lattice mast supporting from the top an umbrella of antennae consisting of 16 cables radiating out and down to concrete anchor blocks on the ground." ⁽⁴²⁾

The unions' rights to coverage of the work turned on whether the construction was a "structure" or a "building".  The Commission had held both at an initial arbitration and in a Full Bench appeal decision that the work was not a building but a structure.  Finally, the High Court, in a split 3-2 decision, found that the words in the BLF constitution referring to "building operations" were wide enough to embrace the work which thus became considered a building.  Two of the judges, however, found that the mast was not in fact a building.

This sort of exercise demonstrates the artificiality of such decision-making in industrial relations.  Although a total of only 13 workers were covered by the decision (there were more people actually participating in the appeal proceedings), the decision resulted in a campaign being unleashed around the country by the BLF to make further inroads into areas of work covered by the FIA and the AWU. ⁽⁴³⁾  It can be argued that the remarkable decision, which demonstrated that five learned judges could not determine unanimously whether a steel tower was a building or a structure, actually caused industrial disputes right across Australia.

Less than eighteen months later, in yet another case on not dissimilar "constitutional" arguments involving the BLF, FIA and the AWU, the High Court took a much narrower interpretation of "building operations" (thus a decision more consistent with the minority decision in the Omega case) and in a 6 to 1 decision rejected BLF claims for work on electricity transmission towers, steel tanks, a furnace stack and a structural steel framework at a power station. ⁽⁴⁴⁾

There really has to be a better system than this.

Bureaucratic inflexibility

An appearance, at least, of institutional infallibility emerges when the inflexibility of policing machinery set up to enforce the pronouncements of the Arbitration Commission is considered.  Despite the fact that the economic downturn through 1981 and 1982 hit firms at different rates and at different times, workers and employees were sternly forbidden by the Australian Commission and its watchdog, the Industrial Relations Bureau, to alter the purity of awards in order to save jobs.  In other words, those best placed to assess the impact of economic forces on the operations of enterprises are forbidden under the rules of the Australian system from making appropriate arrangements amongst themselves.  With emptying order books and workshops to match, many employers, in order to preserve jobs and retain their workforces, opted to work a four-day week.  Faced with the option of 80 per cent of a week's work and appropriate pay, or no work at all, workers had little difficulty in making a decision. ⁽⁴⁵⁾

Similarly, union officials generally had little difficulty in accepting these developments.  Not so the guardians of Australia's sacred institution, the Conciliation and Arbitration Commission.  One member of the Commission recognised the merits of the arrangements but had to point out that they were illegal and could have adverse consequences if a worker or workers decided to press for a complete week's wages as set out in the awards. ⁽⁴⁶⁾  The then watchdog for the system, the Industrial Relations Bureau, was rather more blunt about it:

Parties who fail to bring themselves into conformity with legal requirements when requested, or are unduly tardy about it, can expect that the Bureau will take appropriate action to secure the award provisions. ⁽⁴⁷⁾

The sanctity of the law clearly has precedence over economic reality in the area of industrial relations.

Given what some perceive to be the Australian predilection for bureaucratic social models, ⁽⁴⁸⁾ it is not surprising that people at the centre of the system apparently did not see the incongruity of the sanctity of official rules prevailing over the livelihood of real men and women.  These matters alone provide a strong argument for decentralising decision making in industrial relations in Australia.

Lopsided compulsion -- or periodic impotency

The capacity of the system to discipline employers who breach the awards or the Conciliation and Arbitration Act, and its almost total incapacity to discipline recalcitrant unions, have taken employers to a point of despair and rendered the enforcement procedures a farce.  The system has become a compulsory arbitration system in the sense that only employers are compelled to obey it.

In 1981, a Full Bench of the Commission dealt with an application by the Metal Trades Industry Association for a determination on standard hours of work.  The application sought, among other things, an endorsement of the 40 hours standard for the forthcoming three years.  The respondent unions did not bother to attend the hearing which resulted in the employers' application on the 40 hours being granted, although the retention period was set at two years. ⁽⁴⁹⁾  The consequent events are now history.  Unions embarked on a massive campaign of industrial action which disrupted, at enormous cost, the metal industry in New South Wales, Victoria and Queensland.  Within months the 38-hour week and wage increases were wrung from a shattered industry.  The Australian Conciliation and Arbitration system and the Industrial Relations Bureau viewed the battleground from afar, although the Commission did chair the armistice talks and record the capitulation of employers.  The contribution of these events to the rapid increase in unemployment in 1982 has been noted elsewhere, ⁽⁵⁰⁾ so it was a pyrrhic victory for union members.  It would be difficult to avoid the conclusion that the unions involved treated the system with total contempt as they proceeded by means of the application of force to gain their objectives, illusory though these were.

These events have done more than anything else in recent times to destroy the credibility of the Australian system of industrial relations.  The assumption by the unions that the system was not capable of providing any control mechanisms except against employers was borne out.  Significantly, there are now signs that employers are looking more to the civil jurisdictions to redress the balance of power in industrial relations. ⁽⁵¹⁾  This could be a firm evolutionary step towards a collective bargaining structure.

The Arbitration Commission, which has always had a strong instinct for survival, has always had to gauge how firm it could be with unions without losing their custom.  This has been long recognised. ⁽⁵²⁾  The Commission has been less concerned about reactions of employers.  On a recent notable and remarkable occasion, one member of the Commission was even prepared to order employers to pay additional monies to employees to enforce changes in work practices and management.  With a naivety that borders on the incomprehensible, the commissioner said that he would cease to require the employers to pay the special amounts when conditions improved so as to "... eliminate day-to-day work frustrations." ⁽⁵³⁾  In effect, the commissioner was fining employers and directing the employers to pay the fine to employees.  The whole matter, not surprisingly, became the subject of appeal proceedings, but the event and the metal trades matter referred to above demonstrate that it is far easier for the Commission to be firm with employers than it is for it to discipline unions.

This has caused the system to lose a great deal of credibility, and has led to people suggesting that, in order to survive, the Commission has to seek the custom of the very unions that the system created.  Employers, on the other hand, are forced to come before and abide by the decisions of the system once the unions decide to take their business to the Commission.  It is only in times of market downturn that the Commission can afford (as a "survivor") to be tough with unions.  "Apparently tough decisions can be handed down as unions have lost the ability to gain concessions elsewhere." ⁽⁵⁴⁾  Even in these situations it can be argued that it is the unions and not employers who benefit from the system as the market in recession applies its own discipline.

The pulpit syndrome

Perhaps because of the emphasis placed on legal trappings in the Australian industrial relations system, arbitrators in many cases have developed a penchant for delivering pseudo-judicial pronouncements along with whatever the dispute-settling formula may be.  Insofar as such literary excursions expatiate on legal precedents and extracts from various pieces of legislation, they do little harm other than to consume an excessive amount of the time of people who are obliged to read them.  Unfortunately, some arbitrators use the decisions to launch attacks on employers and unions and frequently expound at length their value judgements about the behaviour and capacities of the parties to the dispute. ⁽⁵⁵⁾  These tirades are very damaging to employer-employee relations, can be damaging commercially where an employer is involved, and certainly harm the public image of the parties concerned.  Such performances do not contribute to improving relationships at the workface.

The development of a conciliation and decentralised collective bargaining model of industrial relations would eliminate this particular hazard from the field of industrial relations.

The public interest -- or who is running the country?

Dabscheck has examined the role of governments as opportunists in the world of industrial relations and postulated that "appropriate" industrial relations policies will often form part of electoral strategies for survival. ⁽⁵⁶⁾  These policies will range from confrontationism to neutrality.  Each approach has had varying degrees of positive or negative influence.

How is it possible for governments to maintain such a high profile, such important roles, often interventionist and occasionally mischievous, in industrial relations in Australia?  The answer probably lies in the emphasis given to the "public interest" in industrial legislation across the country.  The government, as one of the recognised actors in the scheme of things, has a permanent watching brief over all matters before the tribunals and can intervene virtually at will.

It seems clear that the present institutional model of industrial relations in Australia encourages and facilitates the involvement of governments in matters that would not attract such interventionist roles in other countries.  The authors are of the view that a diminution in the role of governments in industrial relations would be in the interests of improving employer-employee relations.  Such diminution is not likely to occur unless the institutional structure is changed to one of decentralised collective bargaining.

Big is beautiful -- or zoological wonders of the south

I referred earlier to the prominence given by the media to industrial relations issues, and to some of the reasons for this and some of the resulting problems.  Central to the whole problem of the public nature of industrial disputation, however, is that a dispute, by definition, has to be big before the Arbitration Commission can legally act.  A dispute has to extend beyond the "limits of any one state" ⁽⁵⁷⁾ before it can come within the jurisdiction of the Commission.

Apart from the criticism that may be levelled at a system which allows a total stranger (that is, the arbitrator) to set working conditions for an enterprise he may not have seen and may never see, the very nature of these exercises in dispute finding ensures that "disputes" are never small and ensures a continuing and major arbitral role for the Commission which, in itself, may not be in the interests of closer employer-employee relations at the enterprise level.  Reinforcing the "larger than life" dispute structures arising out of such charades is the question of "ambit".  An arbitrator in the Commission can only issue an award on matters in which the parties are in dispute.  "If a clause in an award is not within the limits or ambit of a dispute, then it has been made without jurisdiction." ⁽⁵⁸⁾

Consequences of this are the grossly inflated claims lodged by unions in "letters of demand".  Unfortunately these exaggerated claims may serve to create unrealistic expectations in the community and do nothing to diminish the cargo cult syndrome.

Garran has also pointed out the philosophical or metaphysical problem posed by the Constitution allowing the Commonwealth to legislate (as it has done) to provide the means for the prevention and settlement of disputes extending beyond the limits of any one State.  A dispute can only be prevented before it comes into existence.  "But before it exists, how can it extend?" ⁽⁵⁹⁾  Truly a jurisprudential and semantic wonder from the antipodes to match the biological wonder of the kangaroo and the duck-billed platypus.

IMPERATIVES FOR CHANGE -- ECONOMIC ARGUMENTS

Economics, industrial relations, wages and employment

There is a strong (and to my mind a deplorable) tendency among the bright young labour specialists, not merely to let economics go by default out of ignorance, as was customary among the older generation of writers on this subject, but to cast it out of the window bodily, with shrill cries of jubilation.  One can hardly pick up a new book on labour nowadays without finding the author jumping gleefully on what he thinks is the corpse of demand and supply, or proclaiming with trumpets, "The labour-market is dead, long live human relations!" ⁽⁶⁰⁾

The view that, because labour relations is concerned with "living, breathing, emotional human beings" and/or "powerful union 'monopolies' ", the labour market is not like other "normal" markets for goods and services and hence the lessons of economic theory are not applicable, has a long history in Australia.  The redoubtable H.B. Higgins, referred to earlier in this paper, was quick to express his contempt for the "so-called" economic laws of supply and demand, in effect declaring them dead. ⁽⁶¹⁾  That those responsible for presiding over Austalia's industrial relations systems should have had scant regard for "cold" economic reality (compared to the "warmth" of human relations) is hardly surprising.  As Hancock has commented:

[A]n important part of the history of Australian arbitration consists of the efforts of men with no formal training in economics to understand the economic implications of alternative courses of action. ⁽⁶²⁾

But it is more surprising when a member of the Commission, with a very strong background in economics (a rare exception), is not more careful with his choice of words and perhaps inadvertently adds to the myth that supply and demand do not operate in the labour market.  For example:

It will be obvious from what I have said that the determination of wages is not the result of a freely operating labour market ...  The "sale" of labour services is different from the sale of inanimate objects.  Human feelings about what is fair and unfair are involved and those feelings can be harnessed and given effective expression by organised action on the terms of employment at the negotiating table and in the field.

It follows also that ... the price of labour is not determined in an impersonal way by the forces of supply and demand. ⁽⁶³⁾

The author suspects that what Deputy President Isaac meant was not that supply and demand do not operate in the labour market, but rather that the labour market does not operate according to the results predicted by "ideal" neo-classical economic theory. ⁽⁶⁴⁾  That is, he was not implying that the "invisible hand" did not exist, but rather that it had more than one thumb.  A quick reading of statements such as this one unfortunately reinforces the views of those who would like to deal with industrial relations regardless of economic constraints.

The real issue, however, is to consider whether the final economic result (in terms of wages and employment) would be different under collective bargaining compared with Australia's present centralised compulsory arbitration system -- and whether the different result would be preferable.

Collective bargaining

Some commentators and people within the system ⁽⁶⁵⁾ argue that Australia had a situation of decentralised collective bargaining during the second half of 1981 and 1982 (led by the Metal Trades round) and that the experience should convince everyone that it is not desirable to move away from the present system.  The authors do not accept that this was decentralised collective bargaining nor, in particular, that the results of that wage round reinforced the so-called advantages of centralised arbitration.  The particular situation of late 1981 and 1982 is better described as the worst of both worlds.

First, it was centralised wage fixing.  For instance, only two parties represented the employers and the unions.  What role did small metal fabrication shops play in that particular process?

Second, negotiations took place with the arbitration system in the background.  Both parties knew that once an agreement was reached, it would be possible to have it recognised by the Commission so it would flow through to all workers in the metal trades area throughout Australia and, perhaps just as importantly, so that no competitive advantage would be lost.

As has been mentioned previously, the authors have no particular view of a formula for an Australian system of collective bargaining.  A central theme running though this chapter is, however, that decisions about wages and industrial relations should be made by the parties directly involved;  that is, those decisions should be as decentralised as possible.  While there is a compulsory arbitration system in the background as a last resort, the sense of responsibility for one's own action will not be achieved.

The metal trades round of 1981-82 was not collective bargaining.  But what it did illustrate was the flexibility of the Commission as discussed above.  This flexibility might, in part, explain the system's survival.

Survival of the Commission

If the market forces (even though modified by social forces or monopoly power) are largely responsible for the level of real wages and employment in Australia, particularly over longer time periods, then how does one explain the long survival of an institution that attempts to regulate wages?  Does the arbitration system follow the market and in its decisions establish wages that are generally consistent with market forces?

That the system has survived because it has followed the market is a view frequently expressed by commentators on the Australian industrial relations scene.  For example, Blandy has said:

It is my view that although the Commission sometimes does not follow the market, mostly it does follow the market, for otherwise it would not have survived. ⁽⁶⁶⁾

and Hancock:

In the end, the tribunals bend to economic and industrial pressures, external to themselves ... their success in doing so may be the secret of their survival. ⁽⁶⁷⁾

This is not to say that the Arbitration Commission produces a similar result to a freely competitive labour market.  Rather, given the various sources of monopoly power and the social considerations that may exist in their own right regardless of the system,

it is likely that in most cases the compromise reached under one system [of industrial relations] would not be very different from the compromise under the other. ⁽⁶⁸⁾

Whether the arbitration system has established its own social forces, and so could give a different result, is discussed later.

Some commentators have argued that trade unions are dependent on the system for recognition and effectiveness. ⁽⁶⁹⁾  I have argued elsewhere in this volume that,

Trade unions are organisations established under the Conciliation and Arbitration Act to carry out the purpose of that Act and their existence as democratically governed organisations is a by-product of the Act's assertion that such organisations are necessary for the Act's purposes ...

Australian unions are a part of the State ...  They are creatures of the State, yet not subservient to it -- unruly principalities rather than vassals ...

It is no great revelation, to observe that union principles have "captured" the arbitration tribunals.  The tribunals were established not to control unions but to encourage them;  not to protect the public from irresponsible unions but to protect them from a greedy public. ⁽⁷⁰⁾

To the extent that the existing system has encouraged and increased any monopoly power of the trade union movement, this would result in a higher level of real wages and a lower level of employment -- higher unemployment -- than would exist in the absence of the arbitration system.

Absolute level of wages

One of the factors that will determine the final wage outcome is the "willingness" of employers to resist wage rises.  It can be expected that the greater the degree of competition in the product market (and hence the lower the ability of employers to raise prices) the greater will be the resistance to wage rises.  (The level of overall demand will also affect this "willingness" through its effect on prices.)

Evidence of this has been given in a paper by Brown et al. ⁽⁷¹⁾  In a study of the underlying factors influencing over-award payments in the Adelaide labour market in 1974, they concluded:

Establishment-specific effects dominate the results.  The second major conclusion is that the size of these effects is strongly influenced by the degree of competition (as measured by concentration ratios) in the product market.  Putting these two positive findings together, we conclude that it is not possible to divorce labour market processes from those in the product market. ⁽⁷²⁾

If the Arbitration Commission has somehow played a role in lessening the degree of competition in the product market, then the overall level of real wages could be higher (with higher unemployment) than would be the case under collective bargaining, particularly if the collective bargaining was very decentralised.  There are two ways this could have happened.

First, as I have argued,

Any wage increases which can be recouped by price increases will be less costly than the deadweight losses caused by an industry-wide strike, let alone a general one.  "Taking wages out of competition" by securing "comparative wage justice" between all comparable workers means that competitive pressures cease to help in restraining wage rises. ⁽⁷³⁾

Unless, that is, the competitive pressures are international ones.  While the notion of comparative wage justice is not unique to Australia (as will be argued later), it is true that the arbitration system does provide a means of ensuring that all are affected by a wage increase and that the granting of a "sanctioned" wage rise does not mean a competitive disadvantage.  Again, as will be discussed later, it may also be that the "flow-ons" occur more rapidly under the Australian system.

Second, and related to this, is the relationship between tariffs and the Arbitration Commission.  Leaving aside the overall argument for or against tariffs, it does appear that the dual existence of the tariff and the Arbitration Commission has, by removing competition in the product market, led to higher wages than would exist in its absence.  As Deakin explained it in 1907:

[New Protection] aims at according to the manufacturer that degree of exemption from unfair outside competition which will enable him to pay fair and reasonable wages.  [I]t does not stop there.  Having put the manufacturer in a position to pay good wages, it goes on to assure the public that he does pay them. ⁽⁷⁴⁾

That the duality of tariffs and compulsory arbitration has meant a higher wage level is put another way by Dabscheck and Niland:

[T]he emergence of industrial tribunals in Australia was linked to the erection of tariff walls, and ... the arbitration-tariff link is a significant feature of the political economy of Australian industrial relations.  The wage policies pursued by the Commission are one of the reasons Australia has such a high level of tariff protection. ⁽⁷⁵⁾

So far, this section has examined demand-side reasons for there being a higher overall level of wages under the arbitration system.  There is also a possibility that the existence of the system has led to more pressure from the union movement for higher wages than would otherwise be the case.  To the extent that the unions have monopoly power, this would tend to raise wages and lower employment.

The development of a "cargo-cult" mentality under a system of centralised arbitration has been discussed earlier.  The removal of wage decisions from those most directly affected by those decisions gives an unreal picture to employees of the effect that wages could have on their employment.  It is possible that this would lead to unrealistic expectations on behalf of union members which they expect their elected representatives to fulfil.  Even if the union leaders understand "economic reality", the present system does nothing to make their "employers" -- the unionised workforce -- understand the same economic reality.

If employees were more directly involved in and responsible for wage determination and more aware of the impact those decisions might have, it is possible that wage claims would be more relevant to the current economic climate than is currently the case.

RELATIVE WAGES AND COMPARATIVE WAGE JUSTICE

One of the most widespread myths surrounding the Australian industrial relations system is that it produces a more equal wage distribution than would exist in its absence.  Supporters of the existing system contrast this fair, egalitarian approach, protecting the weak and restraining the strong, with collective bargaining where power struggles are said to be the order of the day and the weak fall by the wayside.  Comparative wage justice is said to be unique to the Australian system.

It is surprising that this myth continues to exist despite considerable evidence that it is incorrect, and no evidence (at least that the author is aware of) that the relative wage structure is much different from that applying in other countries.  Comparative wage justice is not unique to Australia.  It is a concept well established in other countries, although under different labels -- "fair wage comparison" in Britain and "pattern bargaining" in the United States, for instance.

I do not propose to deal in depth with this question but rather to take it as read that the Arbitration Commission does not perform an egalitarian role by compressing wage relativities:  first, because the myth is perpetuated not by detailed studies but rather by "throw-away lines" in the public pronouncements of those groups party to or supportive of the existing system;  and second, because Rowe has published a paper dealing at length with this specific topic.  The conclusion of that paper is:

Previous studies, the new evidence presented, and the explanation of the forces at work in wage determination all combine to suggest that the Australian relative wage structure would not be very different under collective bargaining in times of either full employment or high unemployment.  The widely held view of the compulsory arbitration system being more egalitarian than collective bargaining is contradicted. ⁽⁷⁶⁾

What is less clear is whether the similar wage structures occur because of similar social forces (such as a desire for comparative wage justice) or because of the underlying pervading influence of market forces regardless of the system, or both.  The evidence suggests similar relative (not absolute) wage structures in countries with widely divergent systems of wage determination and levels of unionism.

If the need is for wage restraint, as was argued earlier in this part of the paper, then Corden has raised the possibility that if the Australian system was more egalitarian, the effect would be adverse:

If the Arbitration Commission and the various state tribunals played no role at all, so that we had a new-model collective bargaining system, comparative wage justice principles would still affect the final wage structure outcome to some extent.  This is clear from the examples of other countries like the United States and Britain where collective bargaining prevails. ...  But it seems highly likely that the centralised system is relatively more committed to comparative wage justice.  As long as the Arbitration Commission and the state tribunals play their part and yet are unable to discipline the strong unions, the competition between the two principles (bargaining power principle and comparative wage justice) will be worse than if they stayed right out.  The "flow-on" will be more rapid, the general wage push therefore greater, and thus unemployment and inflation more severe. ⁽⁷⁷⁾

Note here that the view of comparative wage justice being more central to Australia's system is a feeling, not a supported fact.  However, it does raise the question of the speed at which "flow-on" takes place.

The speed of "flow-on"

While the relative wage structure in Australia might be related to the existence of the Arbitration Commission, several commentators in addition to Corden have raised the possibility that wage rises granted in one area may flow more quickly to other areas under the arbitration system. ⁽⁷⁸⁾  There are reasons why both employers and unions would wish to use the system to ensure a speedy "flow-on" both across a particular industry and into other industries.  The advantages to the union movement of being able to file a claim, have a case heard and for the result to flow automatically to all employees under that award is obvious.  In general wage cases, the advantages are even more apparent.  There is no doubt that if each claim had to be served and dealt with individually with each employer (or even each group of employers), the speed with which the wage round would take place within an industry would be much slower.  Similarly, by using notions such as "nexus" and "comparative wage justice", it is likely that unions under the centralised compulsory arbitration system are able to flow-on increases granted in one industry area to other industries or areas more quickly than would be the case under collective bargaining.  Particular employers, having either negotiated or arbitrated a new arrangement, will also like to see the system ensure that the wage increases "flow-on" as quickly as possible so as not to be at a competitive disadvantage.

(Deviating slightly from the topic, it is also interesting to note that for contractual reasons [rise and fall] particular employers are keen to have negotiated settlements recognised by the existing system.  The ultimate effect of this, however, can be to speed up the "flow-on".)

Given that a relative wage gain by one section of the workforce may be more rapidly eradicated under the Australian system, there may be some force to Corden's comment that the wage push will be greater as pressure for a new wage round builds up.  The authors would note, however, that this is modified by the underlying market forces.  In this regard, it is interesting to tie the comment in this section to the comments made earlier about the effect that the degree of market power in the product market can have on the level of wages.  It is interesting to note that the pace-setters in the private sector -- building trades, metal trades, transport, storemen and packers and the waterfront -- either do not compete on the international market or have significant tariff protection.  This fact, combined with the speedier "flow-on", and the ability to "pool" your competitors, could well mean that the absolute level of wages is higher in Australia than would be the case in the absence of the Arbitration Commission.

Prices and incomes policy?

Reference was made earlier to the belief that because of union monopoly power, there would always be pressure for wage rises above the level consistent with full employment.  Further, some people believe that while the market (through high unemployment) might eventually cause unions to moderate their claims, the social and economic cost of this unemployment is too high, and an alternative must be found.  On the other hand, there is support for the existing system by some commentators who believe that the solution to this problem is an "effective" prices and incomes policy, and that the Arbitration Commission provides the vehicle to achieve that policy.

Leaving aside both the question of the effectiveness of market forces (discussed earlier) and the question of whether or not a prices and incomes policy would work, despite the chequered career of such policies both here and overseas (a topic for another paper), there are two points that can be made.  First, several reasons have already been given why the absolute (but not relative) level of wages may be higher under the centralised compulsory arbitration system than under collective bargaining.  Second, if the ACTU, because it recognises economic reality, can give a specific undertaking to moderate wages under a prices and incomes policy -- as it did at the National Economic Summit Conference, although as time passes the meaning of that undertaking is becoming broader -- then why can't it use that same supposed influence to moderate wages under a system of collective bargaining?  If it can deliver the goods under one system, why not under the other?

While there are, admittedly, trade-offs involved under a prices and incomes proposal, there is also a reason why the "ability to deliver" may be greater under a collective bargaining system.  A central theme running through this chapter has been the need to make people responsible for their own actions, to decentralise decision-making about wages and conditions to the people most directly affected by the result.  As explained earlier, this will achieve a better appreciation of the effect of a particular wage claim.  This could act to modify the expectations union members have of their elected representatives, and make it easier for those elected representatives to explain the need for wage restraint to ensure that employees are not priced out of jobs.

CONCLUSION

The author believes that there is a strong case to be made for the gradual evolution of Australia's centralised compulsory arbitration system into one of decentralised collective bargaining.  This argument is based in part on economic grounds, but mainly on strong industrial relations grounds.  Although collective bargaining might not, in the short term, lead to significant changes in wage structures or employment, changes would take place over time.  There are few if any economic arguments against the change to collective bargaining.  In any event, in the author's view, change could be justified solely by industrial relations considerations.

That the system has survived for so long is not due to the inherent advantages it offers but rather to the myths that have been built up around the system by those with a vested interest in its survival.  There are no legal or technical barriers to a move from compulsory arbitration to collective bargaining.  The barriers are more related to the myths.  If the myths can be exposed for what they are, the barriers to change may disappear.  Although the centralised system seems certain to endure for some time to come, the author does not believe that it provides the most appropriate wage fixing system for the future.  I hope that this chapter has not only exposed some of the myths about the present system but also will help to increase the debate in the community about the most appropriate industrial relations system for Australia.

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ENDNOTES

1.  J.E. Isaac, "Compulsory arbitration and collective bargaining reconsidered", Journal of Industrial Relations, Vol 16 (1974), p 1.

2.  J.J. Macken, Australian industrial laws -- the constitutional basis, Sydney, Law Book Co., 1981, p 280.

3.  H.B. Higgins, "A new province for law and order" Harvard Law Review, January 1919, pp 205 and 190-191.

4.  13.5 million man days were lost through strikes between 1913 and 1919, and in each of two years, 1917 and 1919, over 4 million man days were lost.  At that time the Australian workforce was less than one quarter its 1982 numbers.

See Labour Report No 55 (Commonwealth Bureau of Census and Statistics) and Industrial Disputes, March quarter 1973.

Elements of mythology and institutional faith pervade the works of latter day spokesmen also:

"There does remain the problem of 'flow on' of the decisions of one tribunal to the awards of another. ...  Even here the problem is not of major proportions because those in charge of the administration of both systems are highly responsible men and women.  Where a claim is conceded by a tribunal there is a very good reason for the claim being granted. ..."  (Macken, op. cit. p 209).

"... I think that we have fewer strikes and stoppages than we would have had without the system.  I must admit, however, that the opinion is intuitive rather than calculated.  I think it is common ground among all critics that the Australian public supports the system and, although it is claimed that this has become merely a matter of habit, I myself feel that there is more to it than this.  Although it does not prove anything statistically, I feel pretty confident that one of the reasons for the public support of the system is a belief that there are fewer strikes and lock-outs because of it. ..."  (R. Kirby, "Some comparisons between compulsory arbitration and collective bargaining", Journal of Industrial Relations, Vol 7, No 1 (March 1965) p 10).

5.  Quick and Garran, Commentaries on the Constitution (quoted in Macken, op. cit. p 12).

6.  Proposals were defeated 25 to 12 in 1891 and 22 to 12 in 1897.  See J.R. Niland, "Industrial relations reform", Address to Australian Institute of Political Science Summer School, January 1983 p 3.

7.  Macken, op. cit. p 12.

8.  Ibid.

9.  Ibid, p 13.

10.  Higgins's full purpose was revealed in the first session of the first federal Parliament when he moved "... to the effect that the power to regulate industrial relations throughout the Commonwealth should belong exclusively to the Federal Parliament". (E.I. Sykes and H.J. Glasbeek, Labour law in Australia, Sydney, Butterworths, 1972, p 381).

11.  Niland, op. cit. p 23.

12.  B. Dabscheck, The Australian system of industrial relations -- an analytical model, Sydney, University of NSW, 1979, p 21.

13.  Niland, op. cit. p 9.

14.  Sykes and Glasbeek, op. cit. p 458.

15.  C.J. Morris, The role of interest arbitration in a collective bargaining system, New York, American Arbitration Association, 1976, pp 231-232.

16.  See comments of J.E. Isaac quoted in Morris, op. cit. p 213.

17.  Western Australian Industrial Gazette, Vol 46 p 823 at 825 -- Commission in Court Session -- Appeal Decision 4 July 1966.

18.  Ibid.

19.  Western Australian Industrial Gazette, Vol 45 p 254.

20.  Western Australian Industrial Gazette, Vol 60 pp 1141-1152, and C. No 5809 of 1980, M D Print E3213 in the Australian Conciliation and Arbitration Commission.

21.  See for example Australian Bulletin of Labour, June 1975, p 25 and Western Australian Industrial Gazette, Vol 55 p 803 at 804:  "... However, though we respect the reasons of the Australian Commission for deferring a decision on the introduction of indexation ... we do not think we should follow a similar course. ..."  (The WA Commission provided for automatic quarterly indexation for four quarters.)

22.  Australian Bulletin of Labour, loc. cit., and Western Australian Industrial Gazette, Vol 55 p 804.

23.  Industrial Arbitration Amendment Act (No 2) 1982 (W.A.)

24.  Australian Conciliation and Arbitration Commission M D Print E8647.  The National Building Trades Construction Award 1975, and the Building Construction Employees' and Builders' Labourers' Federation Award 1978.

25.  Ibid, p 8.

26.  Ibid, pp 9-10.

27.  E.O. Shann, An economic history of Australia, Melbourne, Georgian House, 1963, p 385.

28.  Ibid.

29.  Ibid, p 377.

30.  Volume 61 Western Australian Industrial Gazette, Vol 61 (July 1981) p 1043.

31.  "That employees doing the same work for different employers or in different industries should by and large receive the same amount of pay irrespective of the capacity of their employer or industry is well embedded in Australian industrial thought. ..." (Engineering oil industry Case 1970), 134 CAR 165.

32.  National Wage Decision M D Print F1600 -- 23 December 1982.

33.  M.R. Fisher, "The industrial malaise -- what is the cure", Employer Federation of NSW, 26th Annual Industrial Relations Conference, September 1982, p 7.

34.  D. Horne, The lucky country, Ringwood, Penguin Books, 1966, p 160.

35.  See for example:  Involving employees in the enterprise -- a guide for employers, Canberra, Confederation of Australian Industry, 1978.

36.  Budget Paper No 1 (1982-83 Budget Statements) p 53.

37.  Conciliation and Arbitration Act 1904 section 7(5) (a).

38.  Ibid, section 7(1).

39.  Rev. Holmes (1971) 126 CLR 566.

40.  Ibid.

41.  High Court of Australia 23 June 1981 -- In the matter of an application for a writ of prohibition against Mr Justice Marks and the FIA by the BLF.  See also Australian Industrial Law Review, Vol 23 No 13, p 217.

42.  EPT Group Holdings Limited (Sydney).

43.  See for example C No 3848 of 1981 in the Australian Conciliation and Arbitration Commission involving the AWU and the BLF.

44.  Australian Industrial Law Review, Vol 24 No 26 (December 1982), p 469.

45.  Weekend Australian 9 October 1982.

46.  Australian Financial Review 11 October 1982.

47.  Industrial Relations Bureau, Fifth Annual Report, Canberra, AGPS, 1982, p 11.

48.  M. Somare, "The Australian model -- a big public service, restrictive bureaucracy and heavy regulation -- is not appropriate for Papua New Guinea", West Australian, 4 January 1983, p 53.

49.  Australian Industrial Law Review, Vol 23 No 9 (May 1981), Item F190, p 141.

50.  G. Polites, "The economy, industrial relations and the 38-hour week", Industrial Review -- Confederation of Australian Industry, No 3, August 1982, pp 6-14.

51.  West Australian, 20 January 1983:  "... Builders have recently found that they are getting more satisfactory responses from the less conciliatory civil courts than the Arbitration Commission which has limited powers in some disputes. ..."

52.  Some comments over the years:

"[The Commission's] prime unstated imperative at all times has been its own survival and hegemony in the Australian industrial relations scene."  (Australian Financial Review, 16 December 1982.)

"The functioning of the Commission is highly dependent on the preparedness of unions to make use of it."  (B. Dabscheck -- University of New South Wales, 1979.)

"Understandably the Commission has not been willing to go into voluntary liquidation."  (J.E. Isaac in Australian Compulsory Arbitration and Income Policies, 1975.)

"[T]here are no experts in industrial relations -- only survivors."  (Mr Justice Ludecke in Industrial Aggression, 1978.)

"[T]he skill with which the Full Bench has come back off the ropes and reasserted its pre-eminence in the wages field ... is in keeping with its finest traditions."  (Australian Bulletin of Labour.)

53.  Australian Conciliation and Arbitration Commission Mis 339/82 M D Print F0484 -- ABCE and BLF v Raymond Engineers.

54.  B. Dabscheck, loc. cit. (note 12 above).

55.  For example:  "[T]he principal participant [employer] ... does not understand the industrial law or industrial practices of this country."  (Decision 5911 and 59180F of 1980, and 5733 of 1981, February 1981.)

"[T]his to me makes [this company] not to be the good industrial citizen it so often seeks to be. ..."  (Decision C No 5809 of 1980, 20 June 1980.)

"[I]t is a deliberate mistruth for [the employer] to say that industrial relations had been very good prior to my decision. ..."  (Statement accompanying decision, Perth, January 1981, in the Australian Conciliation and Arbitration Commission.)

"Apart from the overall poor site conditions I have never observed such poor housekeeping on any site. ..." (Decision No 5849 of 1982, Melbourne, 30 August 1982.)

56.  Dabscheck, op. cit. p 23.

57.  Constitution section 51(xxxv) and Conciliation and Arbitration Act 1904, section 4.

58.  C.P. Mills and G.H. Sorrell, Federal industrial laws, fourth edition of "Nolan and Cohen", Sydney, Butterworths, 1968, p 80.

59.  R.R. Garran, Prosper the Commonwealth, Sydney, Angus and Robertson, 1958, p 175.

60.  Professor Kenneth Boulding, 1949, cited in A.M. Cartter, Theory of Wages and Employment, Homewood (Illinois), Irwin, 1959, pp 1-2.

61.  The following quotation from Higgins is cited in J.E. Isaac, "Economics and industrial relations", Journal of Industrial Relations, Vol 24 No 4 (December 1982), p 497:

"In these days, the problems of industry must be approached, not through the dicta of the political economists of the nineteenth century, but by thoughtful and well-directed experiment. ...  They told us that a law for minimum wages was absurd, that the wage fund was fixed by irreversible economic laws, that the laws so-called of demand and supply were inexorable, that industrial tribunals were impracticable, and they were wrong.  We all make mistakes, and we have to learn by our mistakes. ...  Industrial tribunals are doing their best for human life, the only wealth.  It is the noblest objective.  We work and learn."

62.  K.J. Hancock, "The first half-century of Australian wage policy -- Part II", Journal of Industrial Relations, Vol 21 No 2 (June 1979), pp 129 and 152-3.

63.  J.E. Isaac, "Industrial relations and economic growth", an address to the 13th Annual National Agricultural Outlook Conference, 1983, published in the Quarterly Review of the Rural Economy, Vol 5 No 1 (March 1983), p 16.

64.  That Isaac does acknowledge the importance of economics is confirmed in the Shann Memorial Lecture published in the Journal of Industrial Relations, referred to above.  See pp 500-1.

65.  Ibid, pp 510-511.

66.  R.J. Blandy "Does the Arbitration Commission matter", Economic Papers, No 68, October 1981, p 37.

67.  K.J. Hancock, "The Australian tribunals and the labour market", National Institute of Labour Studies Conference, Flinders University, 1982, cited in M. Keating, "Australian wage determination", Economic Papers, Vol 1 No 3 (November 1982).  Keating also gives a similar view, p 71.

68.  J.E. Isaac, cited in B. Hughes, "Wages of the strong and the weak", Journal of Industrial Relations, March 1973, p 1.

69.  W.A. Howard, "Australian trade unions in the context of union theory", Journal of Industrial Relations, Vol 19 No 3, pp 255-273.

70.  p 92, p 94.

71.  W. Brown, J. Hayles, B. Hughes and L. Rowe, "Product and labour markets in wage determination:  some Australian evidence", British Journal of Industrial Relations, March 1984, p 169.

72.  Ibid, p 13.

73.  p 84.

74.  Cited in Hancock, op. cit. 1979, p 130.

75.  B. Dabscheck and J. Niland, Industrial relations in Australia, Sydney, Allen & Unwin, 1981, p 332.  For further discussion on this see:  Report on the British Economic Mission, Commonwealth Parliamentary Papers 1929, Vol II (extracts were published in The Industrial News, WA Employers' Federation, January 1929);  J.B. Bridge, "The Australian tariff and the standard of living", Economic Record, Vol 1, 1925;  and P. McCarthy, "Employers, the Tariff, and Legal Wage Determination in Australia -- 1890-1910", Journal of Industrial Relations, Vol 12, 1970.

76.  L.G. Rowe, "Reason, force or compromise:  egalitarian wage structures under bargaining and arbitration", Journal of Industrial Relations, Vol 24 No 2 (June 1982), pp 245-265.  See also:  Hughes, op. cit. (note 68 above);  W. Brown, J. Hayles, B. Hughes and L. Rowe, "Occupational pay structures under different wage fixing arrangements:  a comparison of intra-occupational pay dispersion in Australia, Great Britain and the United States", British Journal of Industrial Relations, XVIII, July 1980;  K. Norris, "Compulsory arbitration and the wage structure in Australia", Journal of Industrial Relations, Vol 22, September 1980;  Keating, op. cit. (note 67 above);  and Isaac, op. cit. 1982 (note 68 above) pp 502-504.

77.  W.M. Corden, "The wage push and macroeconomic policy:  the dilemmas ahead", Economic Record, Vol 58, June 1982, p 116.

78.  See for example:  Hughes, op. cit. (note 68 above) and Isaac, op. cit. 1982 (note 62 above).