Enterprise Bargaining in the context fo the Accord and the industrial relations alternatives proposed by the Federal Coalition in Fightback! Tim Harcourt, Research Officer, ACTU.

Thankyou for giving me the opportunity to speak to you today. Gary sent me a list of suggested subjects and I guessed that an ACTU view of Enterprise Bargaining would be the most topical and of interest to you.

 

I want to speak about Enterprise Bargaining in the context of the Accord. I believe it can be understood after examining the development of the Accord process – in all its shapes and forms – since 1983.

 

I will also briefly look at the industrial relations alternatives proposed by the Federal Coalition in Fightback! There have in part been based on policies undertaken in the UK under Mrs. Thatcher and more recently under Mr. Bolger in New Zealand.

 

The Australian industrial relations system is undergoing a transformation to become more responsive to international economic forces. The 1980s made Australia a more open economy. In the 1990s this will continue. The Australian trade union movement is a player in this reform and has embarked upon changes to reform workplaces, restructure awards, make enterprises more flexible and resilient to the forces of international competition whilst improving the skills of the labour force and quality working life.

 

The main process by which the ACTU has undertaken reform to respond to these changes is through the Accord that we have with the Federal Labor Government. The Accord has been the framework for economic and social policy under the ALP Government in co-operation with the ACTU.

 

The Accord’s focus was not only upon economic growth and wages but encompassed a broader agenda, including:

 

 

• taxation reform
• active labour market policies
• industry policy to underpin restructuring
• a more equitable approach to retirement incomes
• Medicare
• reform and better targetting of Family Income support
• development of Child Care.

 

 

These issues come under the social wage’ component of the Accord.

 

The original Accord was signed before Labor took Government in the 1983 Federal election. It was in part, a response to the economic crisis of 1982-3 and in part, a response to the confrontation of the Fraser Government years which had come to a head in 1982. It could also be said that the ACTU and the ALP were learning from their own mistakes in the Whitlam period. As it has worked out, the Accord has allowed the industrial and political wings of the labour movement to co-ordinate in a way that deserted them during the 1972-75 Whitlam Labor Government that subsequently led to its own downfall.

 

I want to firstly examine the Accord’s record in terms of the facts – in industrial disputes and macro-economic performance.

 

Secondly, I want to see how the Accord has developed in terms of wages policy leading to enterprise bargaining.

 

In terms of getting away from the industrial confrontation of the Fraser years, the Accord has done the job.

 

In the 1976-82 period under Fraser, there was an average of 591 working days lost per thousand employees.

 

In contrast, in the 1983-91 period under the Accord, there has been an average of 237 working days lost per thousand. If the NSW ‘Day of Action’ against the Greiner Government industrial relations bill is included then the average is 182 between 1983 and 1991. In fact, in December 1991, there were 10, 400 working days lost – the lowest figure recorded for any month in three decades.

 

So even on conservative estimates there has been a 60% fall in industrial disputes during the Accord – illustrating the sort of changes that have been occurring in the Australian industrial relations system.

 

In terms of macroeconomic performance, until last year, the Accord era has been associated with consistently better macroeconomic outcomes. The original Accord was designed to tackle the problem of stagflation ie. simultaneously high unemployment and inflation with low economic growth. Coming out of the 1982-3 recession, the Accord served Australia well.

 

 

• Growth in GDP and employment was considerably higher relative to both the pre-Accord period and outcomes experienced in the OECD.

 

 

For example, Chapman and Gruen, 1990, estimate that up to 1990, the Accord brought a 4.2% annual average increase in real GDP compared to 1.9% under the pre-Accord years and a 2.9% average increase in employment compared to 1% previously.

 

In some ways labour market problems of today are a consequence of the employment success of the 1980s. The employment growth (1.6 million jobs created by 1988) experienced under the Accord lifted participation rates – especially of women – meaning that the economy had to growth more strongly to provide work for the growing labour force.

 

 

• Under the Accord, wages have been restrained with nominal wage growth of 6.0% under the Accord compare to 11% in the pre-Accord days. Real wages fell by 0.9% compared to + 1.2%, pre Accord.

 

 

 

• At the same time real unit labour costs have fallen 8% since March quarter 1983 consistent with supporting both employment investment and living standards.

 

 

These results might have been cause for concern had the social wage not been boosted. Real household disposable income per head, which captures some but not all benefits, has risen 11.5% since March 1983.

 

 

• There has been a shift in factor shares which has boosted the profit share of GDP from the weak and low levels of the late 1970s and early 1980s.

 

 

 

• The corresponding real growth in investment was exceptional over the late 1980s.

 

 

 

• A key success of the Accord has been the reduction of inflation to a level below that of our OECD major trading partners. Australia is now a low inflation country. The trade union movement is committed to keeping our inflation rate low for the sake of international competitiveness and we now have formed our wages policies accordingly.

 

 

So in terms of the ‘big picture’ – industrial disputes, macroeconomics, social wage the Accord has fared well. However to see where we are heading in terms of enterprise bargaining, we need to look at the detail of wages policy under the Accord.

 

Since the original Accord there has been a series of agreements (Accord Mark II to VI) which have evolved to address changing economic and industrial circumstances. The original Accord statement was premised on half-year wage indexation linked to movements in the CPI. However, whilst wages were centrally determined, the Accord was sufficiently flexible to:

 

(1) accept the low CPI outcome associated with the introduction of Medicare

 

(2) in September, 1985, quarantine the inflationary impact of the substantial exchange rate depreciation from wages.

 

1986 saw the introduction of 3% award-based superannuation and tax cuts in return for a 2% discount of a CPI-based wage rise.

 

Following terms of trade declines and other external shocks to the Australian economy, a turning point occurred in 1987 with Accord Mark III. This signified the end of formal indexation and the formation of two-tiered wage system based on requiring efficiency offsets for wages.

 

The two-tiered system was followed by Accord Mark IV in 1988, introducing the Structural Efficiency Principle as a central element of wage fixation and the commencement of Award Restructuring. Award Restructuring was aimed at improving efficiency, providing workers with access to career paths, encouraging multi-skilling and minimising demarcation.

 

The problem associated with the two-tiered system was that focus of many parties on short term cost-offsets tended to limit bargaining to cost neutral outcomes. However, Award Restructuring, which was a central component of Accords Mark IV, V and VI, came to the fore of the award system generally after years of negotiation in the metals industries. Under the two-tiered system, ‘efficiency’ and ‘flexibility’ was in effect defined in terms of narrow-cost cutting exercises imposed by many employers and by the Industrial Relations Commission. Award Restructuring was able to help broaden the focus to all aspects of enterprises, to restructure workplaces, concentrate on skills, job design and career paths, improve management structures with a consultative, co-operative approach.

 

Enterprise Bargaining is a logical development from award restructuring. The gains from Award Restructuring will not last unless new facilitative provisions in restructured awards are in fact utilized in Workplaces. Enterprise Bargaining is the logical next step because it provides an incentive for implementing change. Enterprise Bargaining continues to broaden the focus of bargaining to ensure a high standard workplace highly competitive enterprises. Enterprise bargaining means getting away from the clinical cost-cutting or ‘bean-counting’ approach to productivity. The focus of negotiations is broadened to a whole range of issues in enterprises.

 

Unions are broadening the focus of negotiation to include such issues as:

 

 

• the need for a single bargaining unit – to facilitate direct negotiation at the workplace
• product and service quality
• training of all employees
• union coverage
• competence and methods of management
• health and safety
• under-staffing causing loss of service and productivity
• wasteful uses of energy
• elimination of demarcation barriers
• consultation and co-operation between workers and management
• better job design – to negotiate objectives, fix responsibility for outcomes, arrange monitoring and allow for adjustment
• promoting broader-based skills and provide proper valuation consistent with new award structures
• implementation of new technology, including training and job design
• productivity measurement and evaluation
• company restructuring and effect on staff
• better working environment, including –

 

 

less bureaucracy and middle management

shared objectives

emphasis on problem solving

occupational health and safety

measures to reduce labour turnover and absenteeism and improve the quality of working life.

 

• career structures (including child care provision)
• flexibility in working times – especially to suit part time workers.

 

 

The ACTU approach to enterprise bargaining has been to create a national framework so that all workers face the same set of rules. Unions can then, on behalf of their members negotiate an industry or award framework. Enterprise bargaining is then properly focused upon implementing restructuring and flexibility at the workplace.

 

In this way, the ACTU will protect national award standards – these are not negotiable.

 

National award standards include:

 

 

• minimum rates and classifications
• annual leave
• penalty rates/allowances
• long service leave
• national training standards
• termination change and redundancy (TCR) provisions
• parental leave
• 38 hour week and shift work provisions
• shop steward involvement.

 

 

The ACTU supports the award system to establish and protect minimum standards in workplaces and supports the role of the IRC enforcing standards. The union movement has had its differences with the IRC and its predecessors in the past but has always supported a strong, independent and viable arbitration system in this country to protect the weak. This contrasts our vision of workplace bargaining with the New Right view of excluding union and industrial tribunal involvement.

 

There is a long way to go to reform our system and bring about attitudinal change in Australia. However, I think the changes made under the Accord show that much flexibility is attainable when a consultative approach is used in workplaces around Australia.

 

These are positive changes that are frequently ignored by the likes of H.R. Nicholls society and other “armchair industrial relations commentators” who find these successes inconvenient to their ideological stances.

 

Some brief examples of practical changes being negotiated through enterprise bargaining:

 

 

• Toyota and Ford have signed 2 year agreements to introduce team involvement, share objectives/shared gains and career development. In Toyota, 9-10% productivity based wage increases are agreed over a 2 year period. The number of unions has been reduced by agreement to streamline organisation. The introduction of single bargaining units is an important aspect of this. In fact, the new Toyota plant will be a ‘greenfield site’ with the VBEF having coverage.

 

 

 

• Rheem has signed an agreement with unions in the Metals sector incorporating for work re-organisation, competitive benchmarking, and International Best Practice implementation schemes.

 

 

 

• Daimaru, whilst having some difficulties recently, last year signed an agreement for a greenfield site and provided flexibility with shopping hours and shifts without having workers lose income.

 

 

In each of these agreements there has been close consultation with unions from the beginning. The importance of the ACTU’s Amalgamation and Union Rationalisation proposals should be mentioned too. The development of 17-20 large amalgamated unions from the current 275 will facilitate enterprise bargaining and reduce demarcation. Union Rationalisation is an important part of this process.

 

From some personal experience, I think we’ve come a long way. I worked in the United States for GNB Incorporated – a subsidiary of Pacific Dunlop – that made batteries in St. Paul, Minnesota. I was a part-time consultant assisting in the “Company Wide Improvement Programs” to promote consultation and better performance in workplaces. The virtues of the Japanese Management Practice ‘Kaizen’, the works of Management Guru, Professor Deming were being promoted throughout the company. There were schemes for Benchmarking, International Best Practice, Total Quality Management, etc. This was in a company that had both union and non-union workplaces in a country traditionally hostile to unions. When I came back to Australia, I was working with Doug Cameron, Assistant Secretary of the MEWU on the Metals Case last year. Doug was actually implementing Benchmarking, International Best Practice, Total Quality Management etc. – the very same programs that the company was trying to get its head around in the USA. I think this illustrates –

 

1. How we’re well in the running in Australia for making changes and getting our places competitive. In my judgement the Metal Workers in Australia were more advanced in the same process than the management in the USA.

The important roles of unions as agents or facilitators of change. In some ways Australian unions play the role of de facto management consultants. Keith Freason of Monash University always says: “The amazing thing about Australia is that the trade union leaders are better at business than the businessmen”.

 

 

2. This is one reason why I am puzzled by the stance of the Coalition on industrial relations. They like the rhetoric of ‘taking on the unions’ ‘ the industrial club’ “favours for the trade union mates!” etc. etc. But they are not keen on spelling out the detail. Dr Hewson said in Perth, “no more national wage cases, no more penaly rates, no more awards etc… workers only get a wage rise if they lift their game”. John Howard has said that there would be an hourly minimum rate legislated but he does not say what it would be, how it would be adjusted and by whom. He says everything else (except occupational health and safety) would be up for grabs. We know the Coalition wants individual bargaining – employer with employee, but I don’t think this gives much negotiating power to large numbers of workers. Industrial Relations is not a level playing field and unions and tribunals are needed for basic worker protection.

 

One comment that John Hewson made really strikes me as ill-informed for a trained economist. He said to the National Press club:

 

“Finally there is the more general question of why we need an agreed aggregate wages outcome. Why sould we control the price of labour when the Government controls no other price in the Economy – not oil, not food, not rent, not even the price of money”. (20/3/91)

 

There is a mass of literature – applied and theoretical – in labour economics suggesting why in effect, the price of labour is not like other prices. Look at the literature on implicit contracts, insider-outsider models, human capital theory, dual labour markets, efficiency wage models, quantity-constrained models etc. Empirical evidence shows that labour markets operate differently than other markets and in my view, either Dr.Hewson wants the world to look like his theories (instead of using theories to understand the world) or he just does not like unions. Perhaps it is a combination of both – a marriage of discredited abstract economic theory and political ideology.

 

In summary, I think if you look at the facts of the matter, the Accord has fared well in Australia on economic and industrial relations grounds. It has not been rigid tablet coming down from the Mountains but has been a flexible process and gives Enterprise Bargaining some strong foundations to build upon. I think the real players in the game have been given confidence to take on the changes that Australia needs, from the successful transformation taken place under the Accord.

 

It is never easy, but I would suggest that the consultative approach of the Accord put a lot down to commonsense which is preferable to the confrontationist, destructive approach of the alternatives put forward.

 

Thank you for inviting me this morning and I’ll leave it open for questions.

 

Tim Harcourt, Research Officer, ACTU. Address To Industrial Relations Students University Of Melbourne. 3 April 1992.