Research Paper 21 1999-2000

Australian Labour Market Deregulation: A Critical Assessment

Chris Briggs and John Buchanan
Economics, Commerce and Industrial Relations Group
6 June 2000

Contents
Major Issues
Introduction
What is Labour Market Deregulation?
Before Labour Market Deregulation: the Fraser Government (1975-83) and Accord Mark's I and II
The First Phase of Labour Market Deregulation: 'Managed Decentralism' (1987-1991)
The Second Phase of Labour Market Deregulation: 'Free Market Deregulationism' during the 1990s

List of Tables

Table 1: Dimensions of Regulation
Table 2: The Dimensions of Labour Flexibility
Table 3: The Spread of Enterprise Agreements: 1989, 1992, 1994, 1995
Table 4: Involvement of Employees Likely to be Affected by the Change in the Decision to Introduce it: 1995
Table 5: Reason Workers Gave For Why They Were Not Given a Fair Say About Workplace Change
Table 6: Some Issues Rarely Included in Enterprise Agreements
Table 7: High and Low Average Annual Wage Increases in Current Operative Agreements, by Industry, Australia: 1999
Table 8: Reasons provided by managers as to why significant efficiency changes could not be made, 1995
Table 9: Labour Productivity growth per year, 1979-1996
Table 10: Average Productivity Growth, 1968-69-1998-99
Table 11: Characteristics of low wage firms in Australia, 1995/96

Major Issues

This paper critically reviews the history of labour market deregulation in Australia-its rationale, the policy reforms and effects on the labour market-and the current debate. Against the prevailing orthodoxy, it argues that labour market deregulation has not delivered the benefits promised by advocates and further 'deregulation' will lead to further inequality and lower productivity growth without addressing the sources of unemployment.

The key findings of the paper can be summarised as follows. The term 'deregulation' as it has been used suggests that industrial relations can, in time, become unregulated. Such an outcome is impossible. Rules of some kind are necessary to maintain order in the workplace. Such rules can arise from sources internal or external to the workplace and be formal or informal in nature. In reality then the debate is not about whether there should be rules but about their source and the form they take. Advocates of deregulation seek to increase the significance of internal regulation at the expense of external modes. Under such a system managers, unilaterally or in consultation with their employees, would determine the rules.

Since the end of the post-war boom in the mid-1970s, active state intervention to restructure industrial relations has been a central aspect of efforts by policy-makers to revitalise the Australian economy. The policy regimes of the Fraser Government (1975-1983) and the early years of the Hawke Government (1983-1987) were designed to regulate wages and reduce strike levels by enhancing the power of centralised wage-fixing institutions.

The push for labour market deregulation did not develop momentum until the mid-1980s with the emergence of the 'new right' and the Labor Government's micro-economic reform agenda. However, the experiences of these earlier policy regimes, especially the experimentation with decentralised bargaining in the early 1980s were an important influence on the debates and policies of the 1980s and 1990s. Indeed, the antecedents of later generations of Coalition policy can be found in the practices of the Fraser Government. The anti-unionism, the commitment to 'freedom of choice' (e.g. the establishment of the Industrial Relations Bureau to prosecute individual complaints against trade unions) and the views on the appropriate role of industrial relations institutions echo throughout subsequent Coalition policies.

The first phase of labour deregulation occurred between 1987 and 1991. Despite the success of early Accords in promoting growth and reducing unemployment, the balance of payments crisis of 1985-86 triggered a major debate on the future of wage fixing. Falling commodity prices and the Accord led to the emergence of 'militant managerialism' amongst resource and agricultural employers. Real wage cuts centrally imposed in response to international economic pressures by the industrial relations commission eroded union commitment to centralised industrial relations. The agenda for reform was set by a nascent 'new right'. Through a series of high profile disputes, notably at Robe River in Western Australia, it thrust the issues of allegedly 'restrictive work practices' and the need for increased labour flexibility (defined in market and managerialist terms) onto the national agenda. In response to this challenge Labor Governments, unions and mainstream employers devised a 'managed decentralist' approach to labour market reform. In essence this attempted to combine the benefits of centralised wage fixation (control of aggregate, relative and minimum wage movements) with the benefits of decentralised bargaining (increased flexibility and productivity). This approach to reform was embraced by industrial tribunals who used it as a way of promoting orderly workplace change throughout the economy.

The 'managed decentralist' coalition began to lose its ascendancy when a more sophisticated variant of the 'free market deregulationist' approach emerged from the Business Council of Australia (BCA). In 1987, the BCA established a study commission to investigate ways of establishing an 'enterprise-based industrial relations system'. The BCA began from the position that Australia's industrial relations system was an impediment to the development of an 'enterprise orientation' and the source of periodic wage explosions. The Council advocated reforms to union, award and bargaining structures to prevent the devolution of bargaining leading to a wage breakout.

The occupational structure of unionism, the single biggest impediment to an enterprise approach according to the BCA, should be reformed to ensure no more than one union per workplace. An eight-step program for 'enterprise focus' was outlined which culminated in a non-union workplace. The BCA's proposals had an immediate impact on both mainstream political parties. The Industrial Relations Act 1988 allowed for a separate stream of certified agreements and streamlined union rationalisation arrangements. Coalition policies became more ambitious, advocating a more comprehensive sidelining of industrial tribunals. Although the Labor party remained in office until 1996, it was the ideas and policies of this conservative political alliance which primarily shaped legislative reforms during the 1990s.

The second phase of labour market deregulation commenced in 1991. In that year both the ACTU and Federal ALP Government set about to systematically reduce the wage fixing power of the federal industrial tribunal after it announced a decision rejecting calls for enterprise bargaining to become the predominant form of wage setting. These reforms occurred in the context of Coalition State Governments in Queensland, NSW, Victoria and WA also reducing the power of their industrial tribunals. At Federal level the initiative involved splitting the tacit links between wage settlements won by strong unions in the field with award rates. As such, the Keating Labor Government embraced the BCA/Coalition policy of 'two streams' within the industrial relations system. Most importantly, that Government also promoted the emergence of non-union arrangements-'enterprise flexibility agreements'. Initiatives of this nature were pushed further in 1996 with the incoming Coalition Government's Workplace Relations Act. The centrepiece of this legislation was the introduction of provisions for formally registering individual contracts-Australian Workplace Agreements (AWAs).

In some ways, the Workplace Relations Act 1996 merely built upon the foundations of reform introduced earlier by the Labor Party but the active use of legal regulations to individualise the employment relationship represents a new phase in Australian labour law. The effect of policies directed at deregulating the labour market has been generally unspectacular and often failed to live up to their promise. The major outcomes can be summarised as follows: the most elementary effect has been to formalise and partly extend decentralised bargaining. In 1989 about 23 per cent of workplaces had some type of enterprise agreement, by 1995 this has risen to 35 per cent. Most agreements now are rubberstamped and receive little scrutiny, few completely replace awards and many are 'pattern agreements'. The patterns are set as often by employers as they are by unions. Instead of the eruption of innovative agreements, workplace collaboration and flexibility promised by advocates of deregulation, the changes they have introduced have merely lead to a resurgence of unilateral managerial authority, a narrowing of bargaining pre-occupied with issues concerning hours of work and rising wage inequality.

Currently, debate on labour market reform is characterised by a number of major intellectual rigidities. A romanticised vision of the US labour market experience informs much of the debate. Little of the data on what workplace managers regard as the major barriers to efficiency informs contemporary policy discourse. If the key labour market problems of our time are to be effectively addressed, it is vital that we break with the obsession of the impossible (and economically undesirable) dream of labour market deregulation.

Introduction

It is now a conventional wisdom within many business and Government circles that the labour market needs to be 'deregulated'. The popularity of labour market deregulation is a recent phenomenon. From the introduction of systems of conciliation and arbitration at the turn of the twentieth century until the mid-1980s, proposals to fundamentally change Australia's distinctive industrial relations system⁽¹⁾ were of marginal relevance to mainstream research and policy debates. However, a push for labour market deregulation began in the mid-1980s and accelerated during the 1990s. With the introduction of the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999, Australia stands on the cusp of another major leap towards the 'deregulated' systems of other English-speaking nations such as the United States (US), United Kingdom (UK) and New Zealand (NZ). The changes currently under active consideration could be just as far-reaching as those implemented a century earlier. The debates of today, therefore, will have important consequences for generations to come.

This paper critically reviews the history of labour market deregulation in Australia-its rationale, the policy reforms and effects on the labour market-and the current debate.⁽²⁾ Against the prevailing orthodoxy, this paper argues labour market deregulation has not delivered the benefits promised by advocates and further 'deregulation' will lead to further inequality and lower productivity without addressing the sources of unemployment.

What is Labour Market Deregulation?⁽³⁾

The term 'deregulation' as it has been used suggests that industrial relations can, in time, become unregulated. Such an outcome is impossible. Following Mark Bray (Professor of Industrial Relations), we define labour market regulation as 'The creation and enforcement of rules which are designed to control the actions of individuals and groups who are a party to the production of goods and services.⁽⁴⁾ Rules will always be a basic element of any industrial relations system. The production of goods and services requires the coordination of activities that transform resources into an activity or product. To achieve these it is necessary to have procedures or rules that will ensure an efficient outcome. In reality then the debate is not about whether there should be rules but about the source of rules and what form they take.

How rules concerning work are created and enforced has been the central concern of industrial relations research. Allan Flanders, a leading British academic, distinguished between internal and external sources of job regulation. Internal regulation arises because every business or organisation 'has a structured pattern of relationships which have a permanence and a distinct identity, irrespective of the individual personalities involved.'⁽⁵⁾ External regulation is derived from 'the external environment in which the enterprise is placed. These limit the freedom of the enterprise and its members in their rule-making activities.'⁽⁶⁾ Flanders argued the different sources of rules addressed quite different problems. External forms of job regulation arose to protect workers from 'the devastating and degrading effects of unregulated labour markets'⁽⁷⁾ and to keep the 'conflict between unions and employers within reasonable bounds.'⁽⁸⁾ Internal forms of regulation, on the other hand, responded to another need. 'Here the principal drive has come from management seeking to bring the work behaviour of employees under greater control.'⁽⁹⁾

Another leading British industrial relations researcher, Hugh Clegg, has argued that it is important to note the different forms work rules can take. Writing for the Donovan Commission in the late 1960s he argued:

Even though Clegg referred to two 'systems' of industrial relations, the concept of 'formality' and 'informality' can be applied usefully also to the nature of rules. Formal rules can arise from the authority of official institutions such as Government agencies or managers in the workplace. Informal rules may come about as the result of custom and practice at the workplace and may be based on no more than a shared understanding between the parties or the culture of a workplace. Equally the behaviour and actions of groups such as unions and employer associations beyond the workplace may result in the application of informal rules that regulate activities within organisations. A shared understanding between employers about wage rates and wage movements is an example of this type of informal rule making. Differences in the formality of rules is associated also with how rules are enforced. Formal rules are most often sanctioned by law or authorities with legal standing (e.g. industrial tribunals). Informal rules on the other hand are not usually enforced by official institutions but rather by actions of the parties such as threats of non-cooperation where there has been a breach of workplace customs or 'norms' and ostracism in the case of workers or employers who breach the 'rules' or understanding of their peers. The informality of the sanctions does not necessarily make them any less real or effective.

In Australia external regulation takes a variety of forms. The industrial tribunal system is probably the most visible and best known. In addition, there are numerous federal and state statutes that regulate aspects of employment and business organisation such as Equal Employment Opportunity and discrimination in employment. While the popular perception of external regulation is of prescriptive legislation, external regulation can also be voluntary. Multi-employer arrangements such as industry or occupationally based wage arrangements are examples of this form of extensive and effective regulation. Training arrangements such as group apprenticeships can also sometimes involve both formal and informal externally generated rules regulating aspects of workplace activity.

The internal dimension of regulation can also be formal or informal in nature. The most prevalent and obvious formal regulations found in organisations are rules and procedures devised by managers and codified in personnel manuals. These specify employees' obligations and rights and often deal with matters such as the handling of grievances and procedures for disciplining employees. Where these matters are not codified the rules that prevail are usually determined by employers unilaterally as a matter of management practice. Rules within organisations can also be devised on a joint basis. Such rules can be very informal and simply prevail on the basis of custom and practice. They can, however, be more formal, such as enterprise agreements negotiated and registered under the Workplace Relations Act. Individually negotiated contracts are another example of the increasing importance of internal formal regulation.

The key dimensions of labour market regulation and examples from the Australian industrial relations system are summarised in Table 1.

Table 1: Dimensions of Regulation

Advocates of deregulation seek to increase the significance of internal regulation at the expense of external modes. Under such a system managers, unilaterally or in consultation with their employees, would determine the rules. Rules arising from outside an organisation are regarded as insensitive to its particular needs and are therefore seen as a source of inefficiency. There is no suggestion in the deregulation literature that rules made by management for individuals or groups within organisations should be removed. If some form of regulation is an inevitable and necessary requirement for organisational efficiency, what deregulationists are demanding is a change in the source or rules and/or the form they take. Essentially, the call for deregulation is a call for less external regulation and the consequential increase in the importance of internal regulation by organisations.

Before Labour Market Deregulation: the Fraser Government (1975-83) and Accord Mark's I and II

Since the end of the post-war boom in the mid-1970s, active state intervention to restructure industrial relations has been a central aspect of efforts by policy-makers to revitalise the Australian economy. The policy regimes of the Fraser Government (1975-1983) and the early years of the Hawke Government (1983-1987) were designed to regulate wages and reduce strike levels by enhancing the power of centralised wage-fixing institutions. The push for labour market deregulation did not develop momentum until the mid-1980s with the emergence of the 'new right' and the Labor Government's micro-economic reform agenda. However, the experiences of these earlier policy regimes, especially the experimentation with decentralised bargaining in the early 1980s, were an important influence on the debates and policies of the 1980s so it is here that this history of labour market 'deregulation' begins.

Although some academics began to advocate greater reliance on rule-making within firms in the 1970s (e.g. John Niland),⁽¹¹⁾ the Fraser administration pursued centralised solutions for controlling strikes, wages growth and inflation. A centralised wage indexation system operated between 1975 and 1981. The wage principles promised real wage maintenance in periodic national wage cases so long as additional wage increases did not exceed a 'negligible cost'. For much of the indexation system, Malcolm Fraser believed the system was not centralised enough. According to his biographer, Fraser tried unsuccessfully to impose a wage-prices freeze at a State premiers conference in 1977, investigated the possibility of transferring wage-fixing powers from the Commission to the Commonwealth Government and used tight macro-economic policy settings to limit the capacity of trade unions to pursue wage increases outside national wage hearings. ⁽¹²⁾

Yet, in some ways, the antecedents of later generations of Coalition policy can be found in the practices of the Fraser Government. The anti-unionism, the commitment to 'freedom of choice' (e.g. the establishment of the Industrial Relations Bureau to prosecute individual complaints against trade unions) and the views on the appropriate role of industrial relations institutions echo throughout subsequent Coalition policies. The Commission's awards under the wage indexation system were routinely attacked as excessive, and the Fraser Government was clearly uneasy with its wage fixing powers. Legislative reforms to strengthen the punitive powers of the arbitration tribunals against trade unions were introduced. It was a short step from this position to advocate diminished powers for the Commission and an increased role for common law and civil courts as an enforcement agency. Less advanced or coherent than later policies, some of the key elements of the labour market deregulation agenda were starting to emerge in Coalition policies.

When the centralised wage indexation system broke down in July 1981, the shift to decentralised bargaining was applauded by the Coalition. As the Commission was viewed as the source of excessive wage increases, they believed wage increases would now moderate as they would be directly responsive to market forces and the Coalition's tight macro-economic policy settings. Ian Viner, the minister responsible for industrial relations, claimed:

Minister Viner's confident predictions proved to be completely ill-founded: after a wave of strikes, the metal industry agreement (December 1981) for a $39 wage increase and 38-hour week flowed right through the Australian labour market.

The wage explosion of 1981-82 had a lasting impact on the direction of reform during the 1980s. Following the wage explosion of 1973-74, also during a period of decentralisation, it reaffirmed the folly of decentralisation for many observers and participants-whatever the texts of neo-classical economists had to say about the virtues of unfettered markets. In the mid-1980s, when calls for decentralisation began to resurface, the Commission summed up the dominant assessments of Australian industrial relations practitioners and theorists following 1981-82:

The 'lessons of history' illustrated centralised wage fixation was necessary for the development of an orderly, rational wages policy and the minimisation of industrial conflict.

So centralised wage systems were reinstalled after the 1981-82 wages explosion. The Fraser Government switched policy (again) and a centralised wage freeze was introduced by the Commission in December 1982. Following the election of the Australian Labor Party (ALP) in March 1983, centralised wage indexation was reintroduced. Under the Prices and Incomes Accord between the ALP and the Australian Council of Trade Unions (ACTU), trades unions agreed to make 'no extra claims' in exchange for real wage maintenance 'over time', social wage increases and union involvement in policy-making.⁽¹⁵⁾ The labour movement claimed to possess a solution to the great historical weakness of Australian economic policy: the absence of a mechanism for the incorporation of wage formation into macro-economic policy.⁽¹⁶⁾ The Labor Government attempted to use expansionary fiscal and monetary policies to promote investment, growth and employment without triggering off a union-led inflationary wages spiral. Using the institutions of arbitration to regulate wages, the Accord was remarkably successful in its early years: wages 'drift' (the gap between award wage movements and actual change in wage rates) ranged between 1.5%-2.5%,⁽¹⁷⁾ working days lost to industrial disputes fell from 797 days to 228 days per 1000 employees⁽¹⁸⁾ and the job creation target of 500 000 new jobs was met 6 months early in November 1985.

The First Phase of Labour Market Deregulation: 'Managed Decentralism' (1987-1991)

However, by the mid-1980s the Australian economy, and with it the centralised wage system, was again in crisis. The structural weaknesses of the Australian economy, especially a dependence on primary products and an uncompetitive manufacturing sector, led to surges in the current account deficit as commodity prices fell.⁽¹⁹⁾ The Australian dollar, floated in 1983, was devalued by 40 per cent during 1985-86. In 1985, real wages were discounted to pre-empt an inflationary spiral developing from the depreciation of the Australian dollar and further real wage cuts were envisaged to accommodate the balance of payments crisis during 1986. However, after three years of strong economic growth, wage pressures were building up within the unionised sector of the labour market and centrally administered real wage cuts were not viable for any longer period of time. Employer criticisms of excessive labour costs, the political power of unions and the overly facilitative role of the Commission in mandating the Accords-muted by the outstanding economic results of the early Accords-now ripened into trenchant opposition. Falling commodity prices and the Accord led to the emergence of 'militant managerialism' amongst resource and agricultural employers. In a series of high-profile disputes, (Mudginberri, South East Queensland Electricity Board and Dollar Sweets), employers used common law remedies to successfully punish striking unionists. The economic and political foundations of centralised wage fixation were disintegrating: as international economic pressures undermined the acquiescence of employers, real wage cuts also eroded union commitment to centralised industrial relations.⁽²⁰⁾

The 'new right' emerged as a public force for labour market deregulation during 1986. The H. R. Nicholls Society, a torchbearer of the 'new right', was a group of prominent lawyers, academics, politicians and chief executives who advocated confrontation to dismantle the arbitration system and reduce the power of trade unions. According to the 'new right', the arbitration system distorted market signals, upheld the power of trade unions and fettered entrepreneurial initiative and managerial decision-making authority. The arbitration system had created an 'industrial relations club' consisting of commissioners, unions and employers who used the system to defend their own privileges and interests. The 'new right' advocated the abolition of the arbitration system to be replaced with individual contracts and the use of common law and the civil courts-who could not be 'captured' by special interest groups-to enforce contracts.⁽²¹⁾

The New Right's vision was a modern variant of economic liberalism-sometimes referred to as 'economic rationalism' or 'neoliberalism'. In this framework, the market for labour is no different from any other. Suppliers of labour (workers) sell their product to the highest bidder (employers). Competition will ensure full employment and the efficient allocation of workers to different jobs. Workers must be allowed to reach individual agreement free of 'interference' by external 'third parties' such as unions and Government bodies. A limited role for external regulation is acknowledged, primarily through the rule of law, but the law only provides a framework for facilitating and enforcing rules determined within organisations. This view of the labour market has a long tradition and informed nineteenth century labour law.⁽²²⁾

The Robe River dispute, involving one of the founding members of the H. R. Nicholls society (Charles Copeman), in mid-1986 thrust the issue of work practices onto the national political agenda. In the Robe River dispute, a mining company (Peko-Wallsend) locked out 1000 workers in a unilateral effort to change 284 work practices. Although it was unsuccessful-a negotiated settlement occurred-its impact was national. Other employer associations such as the Confederation of Australian Industry (CAI) joined unions and the Government in criticising the approach of the 'new right' but set about incorporating the question of work practices and labour flexibility into the existing wage system.

Labour flexibility, like 'deregulation', is a loaded term with different meanings for different people. Part of the complexity and ambiguity lies in the fact there are different types of labour flexibility relating to the deployment, cost and quality of labour. An indication of some of the different dimensions of labour flexibility is shown in Table 2.

Table 2: The Dimensions of Labour Flexibility

Source: This Table is-with some modifications-drawn from: M. Rimimer and J. Zappalà, 'Labour Market Flexibility and the Second Tier', Australian Bulletin of Labour, vol. 14 (4), 1988; National Labour Consultative Council, Labour Market Flexibility in the Australian Setting, AGPS, 1987.

Clearly, there are quite a few different types of labour flexibility. Policy-makers face important choices as to which type of labour flexibility legislative and institutional frameworks should be encourage to use. The impact of reforms designed to increase wage flexibility, by changing minimum wage requirements for example, will be very different from reforms designed to increase functional flexibility and the adaptability of firms. In the mid-to-late 1980s, there was a struggle between the new right and mainstream industrial parties over where the important rigidities in the industrial relations system lay and which type of labour flexibility policy-makers should be pursuing.

Following the OECD's influential Dahrendorf report (1986),⁽²⁴⁾ which concluded that increased labour market flexibility could increase growth and employment, the National Labour Consultative Committee (NLCC)⁽²⁵⁾ produced a report titled Labour Market Flexibility in the Australian Setting in 1987. 'Labour market flexibility' was defined by the NLCC as:

Six different factors influencing the flexibility of the labour market were identified:

• labour costs (general, wage differentials and non-labour costs)
• conditions of employment (e.g. employment protection)
• work practices and work patterns (e.g. working hours)
• labour market regulations
• external and internal mobility, and
• education and training.

The key conclusions of the NLCC's report were:

• general wage levels were reasonably flexible, labour on-costs were equivalent and external labour mobility (or allocative flexibility) was high by international standards
• increasing relative wage flexibility was undesirable because it could impede the growth of high-productivity employment (by accelerating wage growth in these industries) and spark off 'catch-up' claims by disturbing established wage relativities between different categories of labour, and
• the reform agenda should focus on improving the efficiency of work practices, increasing the skills of workers through education and training reforms and the adaptability and productivity of workplaces through internal mobility (or 'functional flexibility').

In combination with macro-economic and industry development policies, increased functional flexibility had an important role to play in reforms to increase productivity and facilitate industry restructuring to correct the balance of payments crisis.

The NLCC rejected the case mounted by the 'new right' for dismantling the arbitration system:

A 'managed decentralist' approach, as it was termed by academic commentators McDonald and Rimmer (1989), was recommended as a superior alternative to wholesale deregulation: it could combine the benefits of centralised wage fixation (control of aggregate, relative and minimum wage movements) with the benefits of decentralised bargaining (increased flexibility and productivity).⁽²⁸⁾

The 'managed decentralist' approach dominated Australian wage fixation during the late 1980s. The two-tier system, introduced in March 1987, included a flat $10 national wage increase (tier one) and a 4 per cent wage increase (tier two) in exchange for an industry or enterprise agreement improving work and/or management practices.⁽²⁹⁾ In August 1988, the Commission introduced a new Structural Efficiency Principle which aimed to 'improve the efficiency of industry and provide workers with more fulfilling and better paid jobs'.⁽³⁰⁾ A bargaining agenda was inserted:

• establishing skill related career paths which provide an incentive for workers to continue to participate in skill formation
• eliminating impediments to multi-skilling and broadening the range of tasks which a worker may be required to perform
• creating appropriate relativities between different categories of workers within the award and at enterprise level
• ensuring that working patterns and arrangements enhance flexibility and the efficiency of industry
• including properly fixed minimum rates for classifications in awards, related appropriately to one another, with any amounts in excess of those properly fixed minimum rates being expressed as supplementary payments
• updating and/or rationalising the list of respondents to awards
• addressing the cases where award provisions discriminate against sections of the workforce.⁽³¹⁾

Following the development of a 'blueprint' for restructuring awards by the ACTU,⁽³²⁾ the August 1989 National Wage Case decision included:

• increases to minimum wage rates
• general wage increases in exchange for reforms to broadband classifications, removal of demarcation barriers to allow the development of more flexible work organisation and the creation of career paths to create a clear schedule of rewards and incentives for skill acquisition and,
• the bargaining agenda was expanded to increase the scope for re-negotiating a range of work practices and employment conditions such as working hours, penalty rates and annual leave.⁽³³⁾

The national wage principles-reflecting a broad consensus amongst peak union, employer and Government bodies-were primarily designed to enhance functional flexibility. The principles also contained scope for increasing numerical flexibility and to some extent procedural flexibility but not relative or minimum wage flexibility.

However, the 'managed decentralism' coalition began to lose its ascendancy when a more sophisticated variant of the 'free market deregulationist' approach emerged from the Business Council of Australia (BCA). In 1987, the BCA established a study commission to investigate ways of establishing an 'enterprise-based industrial relations system'. The BCA began from the position that Australia's industrial relations system was an impediment to the development of an 'enterprise orientation' and the source of the periodic wage explosions.

The arbitration system, as a product of the 'industrial relations mindset' with its assumption of inevitable conflict and the use of uniform regulation, was claimed to be a barrier to the development of cooperative 'employee relations' and enterprise flexibility:

Once the assumption of conflict is jettisoned, the role of the legislative framework is to create 'incentives' for enterprise bargaining. An 'enterprise approach', inevitably entailing greater diversity in employment regulation, would enable work methods to 'constantly' adapt to customer needs, technological change and skill requirements and allow for more enterprise-specific remuneration to encourage a competitive and productive work culture. The BCA claimed its enterprise approach would lead to a 25 per cent increase in productivity.⁽³⁵⁾ Economic prosperity would ultimately rest upon the success of enterprises in global markets and only through enterprise bargaining could the customer focus required for global competitiveness be achieved: developing an enterprise approach must therefore be the focus of the regulatory framework.

Unlike the new right, mindful of the warnings by the Commission of a wage explosion and its 'underlying institutional basis',⁽³⁶⁾ the BCA advocated greater flexibility within the centralised system as a 'gradual', 'step-by-step' transition to a more deregulated, flexible industrial relations system.⁽³⁷⁾ Unlike the 'managed decentralism' option, which the BCA claimed was simply a means to 'suppress or compensate for the fundamental problem,'⁽³⁸⁾ the BCA advocated institutional reforms to union, award and bargaining structures to prevent the devolution of bargaining leading to a wage explosion. The occupational structure of trade unionism, the single biggest impediment to an enterprise approach according to the BCA, should be reformed to ensure no more than one union per workplace. The 'antiquated' union structure created unions with no interest in enterprise performance, rigid work demarcations and multi-employer awards which inhibit enterprise flexibility. An eight-step program for 'enterprise focus' was outlined which culminated in a non-union workplace.⁽³⁹⁾ As an interim measure, 'two streams' of regulation should be introduced into the industrial relations system: an award stream for 'those who wish to remain in it' and an agreements stream for 'individual employers and employees' to negotiate agreements without meeting a 'public interest' administered by the Commission.

The Industrial Relations Act 1988 introduced by the Commonwealth Government already showed the influence of the BCA. The reforms were relatively minor but there were two key changes. Firstly, provision was included for certified agreements which contained enterprise-specific variations on award conditions (s. 115). Secondly, s.118 was redrafted to increase the powers of the Commission to settle demarcation disputes and, in doing so, rationalise union structures. The two key priorities of the BCA, enterprise bargaining and the reform of union structures, were catered for by the 1988 legislation.

The BCA's report was subjected to heavy academic criticism on methodological, theoretical and empirical grounds. Dabscheck,⁽⁴⁰⁾ and Frenkel and Peetz,⁽⁴¹⁾ found irregularities in the collection and use of data. Both concluded no link had been proven between labour market deregulation and increased productivity. The report was based on an attitudinal survey of executives and managers and a comparison of a small number of firms in the US and Australia. No measures of productivity were developed, no substantive research into links between proposed reforms and productivity levels was conducted and there was no attempt to disentangle industrial relations and non-industrial relations influences (e.g. product markets) on productivity. In fact, some of the data in the BCA's report appeared to point to a very different set of findings. For instance, whereas chief executives considered industrial relations and the award system a major problem, the report concedes that sites managers-the people actually responsible for dealing with employees and unions on a day-to-day basis-identified non-industrial relations issues as the 'major' impediment to higher productivity and were 'reasonably content with the industrial relations system':⁽⁴²⁾

The conclusions of both Dabscheck, and Frenkel and Peetz, were damning: the report had been conceived to validate enterprise bargaining and results subsequently tailored to that objective.

However, these academic critiques had little impact and a conservative political alliance for labour market deregulation, given intellectual leadership by the BCA, developed formidable momentum. The Coalition had been transformed into a 'party of the radical free market right'⁽⁴⁴⁾. From the mid-1980s, a clique of 'drys' began eliminating the moderate 'wets' from the party such that by '... 1990 there was no new right; the 1985 extremists had become the 1990 Liberal Party mainstreamers'.⁽⁴⁵⁾ Under the influence of the new right, including some of the leading figures of the H. R. Nicholls society, Coalition policy had been evolving towards increasingly stronger forms of labour market deregulation throughout the 1980s. In 1984, the industrial relations policy platform of the Federal Coalition advocated decentralised bargaining, introducing provisions for 'opting out' of the award system and 'under-award' bargaining and the creation of a new tribunal to enforce awards and agreements. The 1986 policy envisaged 'voluntary agreements' for small businesses employing 50 or fewer employees. Introducing the capacity to 'opt out' of the award system and enter into voluntary agreements was presented as an issue of 'freedom of choice': the award system and voluntary agreements would be placed on an equal footing enabling the parties to choose the most appropriate regulatory arrangement for themselves. The Coalition's 1988 policy removed size limitations upon voluntary agreements and for the first time advocated enterprise-based unions and voluntary agreements confined to an enterprise. In the 1990 election, the industrial relations platform of the Coalition contained three regulatory streams:

1. award stream under the jurisdiction of the Commission
2. certified agreements subject in the short-term to ratification by the Commission, and
3. voluntary agreements outside the jurisdiction of the Commission.⁽⁴⁶⁾

As well as the Coalition, the report had a major influence on federal bureaucrats and leading media commentators who relentlessly championed its findings. Although the Labor party remained in office until 1996, it was the ideas and policies of this conservative political alliance which set the agenda legislative reforms during the 1990s.

The Second Phase of Labour Market Deregulation: 'Free Market Deregulationism' during the 1990s

During the 1990s, Australian industrial relations has travelled further and further down the path mapped out by the 'free market deregulationist' approach, especially that charted by the BCA. At federal level, the Labor Government and now the Coalition have introduced legislative reforms to reduce the role of the Commission, fragment the wages system into different 'streams' and facilitate the expansion of non-union bargaining. Developments at state level have outstripped and in some ways foreshadowed reforms enacted at Commonwealth level. This section traces the reforms of the 1990s and examines their impact.

The transition to an industrial relations system based upon enterprise bargaining began in 1990-91. After the Accord Mark VI contained provision for enterprise agreements on the basis of profitability and productivity, the ACTU led an industrial campaign to negotiate enterprise agreements. In the April 1991 NWC decision, the Australian Industrial Relations Commission (AIRC) famously rejected the almost unanimous submissions of the parties in favour of enterprise bargaining. The AIRC claimed there was 'no firm evidence' enterprise bargaining would lead to a productivity boom, the parties lacked the 'maturity' for successful enterprise bargaining and a more likely outcome was a wages explosion.⁽⁴⁷⁾ After the ACTU refused to accept the decision and launched a wage campaign, the AIRC reluctantly developed an enterprise bargaining principle in October 1991.⁽⁴⁸⁾

The first pieces of legislation establishing a framework for enterprise bargaining were introduced at State level. Legislation was introduced in Queensland to allow enterprise negotiations and 'voluntary employment agreements' during the late 1980s.⁽⁴⁹⁾ In January 1991, New South Wales enacted the Industrial Relations Act 1991 which removed the power of the Commission to subject agreements to a 'public interest' test. An enterprise agreement would be automatically registered so long as it complied with the Act and met some basic specified criteria.⁽⁵⁰⁾ The 1991 Act also introduced minimum standards for agreements covering sick leave, hours and wage rates and established a commissioner for enterprise agreements. Also in 1991, NZ introduced the Employment Contracts Act 1991 which abolished the framework of the arbitration system (no awards, no tribunals, the removal of the legal status of unions under the old law). The NZ legislation was an inspiration for Australian deregulators. The labour market deregulation agenda then took a quantum leap forward in Australia when the Kennett Government in Victoria abolished compulsory arbitration in the Employee Relations Act 1992.⁽⁵¹⁾

The Commonwealth Labor Government reacted to these pressures for deregulation by introducing the Industrial Relations Legislation Amendment Act 1992 and the Industrial Relations Reform Act 1993. The 1992 legislation removed the requirement for certified agreements to meet a 'public interest' test administered by the Commission to dilute the power of the Commission which was criticised for being 'very cautious' in its administration of s. 115 agreements under the 1988 Act.⁽⁵²⁾ Two streams had now been introduced into the national industrial relations system-the award stream subject to the scrutiny of the Commission and the 'public interest', and the agreements stream. Senator Peter Cook (Minister for Industrial Relations) left no doubt these amendments were stepping stones to further deregulation:

After a monumental struggle with unions,⁽⁵⁴⁾ the Industrial Relations Reform Act 1993 took the deregulatory project a step further. For the first time, provision was made for registering collective, non-union agreements ('enterprise flexibility awards') subject to a range of tests including agreement of a majority of employees and notification of eligible unions. The role of the Commission was further downgraded and reoriented from its historical function of preventing and settling disputes in the 'public interest' to 'encouraging and facilitating' workplace or enterprise agreements.⁽⁵⁵⁾ Certified agreements were now subject merely to a 'no disadvantage' test and the AIRC's function in relation to awards was to ensure the maintenance of a 'secure, relevant and consistent' award framework as a 'safety net' to underpin enterprise bargaining.⁽⁵⁶⁾ The legislative framework, incorporating rights and responsibilities for the parties including industrial action relating to part or all of a single enterprise, was clearly designed to impose single-employer agreements. Employer associations, including the ACCI and the BCA, criticised the reforms as inadequate⁽⁵⁷⁾ but some of the threshold changes foreshadowed by the 'free market deregulationist's' had now been implemented: the tribunals and awards were now firmly placed in the 'shadow'⁽⁵⁸⁾ of enterprise bargaining, incentives and penalties were in place for single-employer bargaining and non-union agreements could be formally registered.

Some major corporations began to pursue the free market deregulationist agenda. In the mid-1990s, disputes began to flare as the drive to de-unionise workplaces and shift employees to individual contracts accelerated-especially in the mining industry. Mining giant CRA, moving from site to site, offered large pay increases in a bid to lure its employees to leave the union for individual, 'staff style' contracts. After legal manoeuvres failed to check the advance of individual contracts, the ACTU 'escalated' a dispute at Comalco, Weipa (Queensland). A group of employees refused to switch to staff employment and claimed they were being discriminated against for remaining unionised and employed under the award. As Bill Kelty (ACTU Secretary) then said, the union movement had drawn a 'line in the sand' and 'for us to be beaten is for the union movement to lose its heart, its soul and its purpose.'⁽⁵⁹⁾ After some determined industrial action by the 70 employees, the Commission ruled they could be represented by the union but could only receive equal terms and conditions with other employees if they worked under the same requirements as staff contracts. It was a landmark case: although the right to collectively bargain was upheld, the award system was clearly no impediment to the development of employment systems based around individual staff contracts of employment.⁽⁶⁰⁾

The Weipa dispute was resolved just as the Accord ended and the Coalition was elected with a deregulatory platform of reduced union, award and AIRC influence. The Workplace Relations Act 1996 came into effect in November 1996. The scope of awards was stripped back to 20 'allowable matters'. The powers of the AIRC, especially to arbitrate, were curtailed. The centrepiece of the legislation was the introduction of provision for formally registering individual contracts-Australian Workplace Agreements (AWAs). AWAs override awards and are registered privately with a newly created body, the Office of the Employment Advocate (OEA). Trade unions lost the automatic right to bargain for employees in unionised workplaces. A 'valid majority' of employees must agree to be represented by unions and employees can choose to be represented by another bargaining agent. Trade unions are also subject to a range of other new regulations such as restrictions on the rights of entry to workplaces and penalties for the use of industrial action. In some ways, the Workplace Relations Act 1996 merely built upon the foundations of reforms introduced earlier by the Labor party but the active use of legal regulations to individualise the employment relationship represents a new phase in Australian labour law.

The Effects of Labour Market Deregulation

The first most elementary effect has been to formalise and extend decentralised bargaining. In some industries and workplaces decentralised bargaining was already occurring informally and agreements for these segments of the workforce could now be formally registered with the tribunals. However, large segments of the economy with little or no experience now had to engage in enterprise bargaining. The spread of enterprise bargaining is illustrated by Table 3.

Table 3: The Spread of Enterprise Agreements: 1989, 1992, 1994, 1995

Source: J. Buchanan and I. Watson, 'The Living Wage and the Working Poor' in M. Bittman ed., Poverty in Australia: Dimensions and Policies, Social Policy Research Centre, no. 135, 1997, p. 23.

Note: the 1989 estimate is derived from unpublished information available in the Australian Workplace Industrial Relations Survey (AWIRS). The statistic refers to the proportion of employees covered by what were then known as 'Certified or Registered Agreements'. Data on unregistered agreements have been excluded because at that time they generally did not contain wage increases.

The labour market is now split into three segments with different types of wage regulation: approximately 30 to 40 per cent of employees now have some or all of their working conditions regulated by an enterprise agreement, another third remains dependent on awards unable to negotiate enterprise agreements and another third is on individual contracts.⁽⁶¹⁾

Associated with the shift to enterprise bargaining has been a shift from external, centralised regulation to internal, decentralised regulation of employment conditions within workplaces and enterprises:

1. the powers of the AIRC have been rationalised. The AIRC can do little more than 'rubber stamp' enterprise agreements, it has virtually no role in the registration of AWAs (only if the OEA refers an agreement in the event of uncertainty as to whether it passes the 'no-disadvantage' test) and the capacity to intervene to settle disputes has been greatly reduced by the new Act. Many disputes which previously would have ended up in the Commission are now left to run their course (until one party triumphs over the other) or find their way into the civil courts instead of the Commission (e.g. 1998 Waterfront dispute)
2. although few agreements completely replace awards, the influence of awards (usually multi-employer or industry-wide) has declined
3. pattern bargaining does occur in some industries, notably construction and electrical contracting, but the new legislative framework has successfully erected impediments to multi-employer bargaining and 'flow-ons' between enterprises⁽⁶²⁾
4. the level of bargaining has shifted downwards within firms. Whereas head office managers and full-time union officials controlled bargaining in its earlier phases, by 1995 sixty per cent of agreements were negotiated in the workplace and 83 per cent of workplace managers were involved in bargaining reflecting a trend towards single-site agreements⁽⁶³⁾, and
5. union density has continued to decline, falling from 40.5 per cent (1990) to 28.1 per cent (1998).⁽⁶⁴⁾ The growth in non-union agreements, especially collective non-union agreements, is beginning to accelerate.

If enterprise bargaining is still not as 'pure' as some advocates of 'deregulation' would prefer, there is little question that the role of 'third party interveners' has been drastically reduced and the locus of regulation has been shifted to the enterprise and workplace.

What, then, have been the results of labour market deregulation to date? Instead of the eruption of innovative agreements, workplace collaboration and flexibility, it has merely led to a resurgence of unilateral managerial authority, a narrowing bargaining agenda focussed on working hours and rising wage inequality.⁽⁶⁵⁾

The 'enterprise approach' has rarely led to the increased workplace collaboration promised by the BCA and other advocates of labour market deregulation. It was often claimed that new technology and product markets would compel managers to increase the involvement of employees in order to win the employee commitment and flexibility necessary to compete globally. Research by the Commonwealth Department of Industrial Relations⁽⁶⁶⁾ reveals a very different picture. Using a representative sample of 2001 workplaces, the Australian Workplace Industrial Relations Survey (AWIRS)-conducted several years after the 'deregulation' of the labour market had been underway-confirmed earlier research⁽⁶⁷⁾ which found low levels of employee involvement in decision-making about organisational change:

Table 4: Involvement of Employees Likely to be Affected by the Change in the Decision to Introduce it: 1995

Source: A. Morehead, M. Steele, M. Alexander, K. Stephen and L. Duffin, Changes at Work: the 1995 Australian Workplace Industrial Relations Survey, (Longman, 1997), p. 244.

The major reason for the low levels of employee participation appears to be the practices of managers. When employees were asked why they were not given a fair say in workplace change, most pointed to the practices of their managers.

Table 5: Reason Workers Gave For Why They Were Not Given a Fair Say About Workplace Change

Source: Department of Industrial Relations, Enterprise Bargaining in Australia-Annual Report, 1996, p. 87. Note: multiple responses were possible.

The majority of changes have been initiated by managers and implemented with little involvement by the workers concerned. It is little wonder then that surveys find managers are satisfied with enterprise bargaining and workplace change whereas a majority of employees say they are worse off.⁽⁶⁸⁾

Nor, by and large, have the innovative agreements envisaged by the BCA and others materialised to date. Ironically, the further the process of labour market deregulation has progressed, the more the bargaining agenda has been narrowing and regressing back to traditional industrial relations matters. Of the 4700 agreements examined by Australian Centre for Industrial Relations Research and Teaching (ACIRRT) up until July 1998, 79 per cent contained changes to working time arrangements such as increasing the span of ordinary hours and averaging of hours over a week, month or year. Non-union agreements are even more 'traditional': they generally contain smaller wage increases (around one per cent lower on average), 85 per cent of agreements include changes to working hours and some types of hours clauses (e.g. overtime paid at a single rate) are more common.⁽⁶⁹⁾ Innovations such as gain-sharing, team work and family-friendly provisions have rarely been the subject of bargaining.

Table 6: Some Issues Rarely Included in Enterprise Agreements

Source: ACIRRT, Australia at Work: Just Managing?, 1999, p. 48.

Wages and hours are the dominant issues in agreements: enterprise bargaining has not, generally speaking, been used as a vehicle for 'best practice' but instead has facilitated and entrenched the fragmentation of working hours amongst part-timers and the length of working hours amongst full-timers.^'(70)

The other major effect is a very rapid growth in wage dispersion and inequality. Workers on award rates, unable to negotiate enterprise agreements, have received one to two per cent annually, workers covered by enterprise agreements have seen their wages rise four to six per cent and those covered by individual contracts have received anywhere between nought to eight per cent annually.⁽⁷¹⁾ Within the collective agreements sector, there are also large variations in wage outcomes. Wages growth in some industries such as mining and construction has dramatically outpaced other industries such as hospitality and retail. Wages dispersion is also occurring within industries.

Table 7: High and Low Average Annual Wage Increases in Current Operative Agreements, by Industry, Australia: 1999

Source: ACIRRT, Agreements Database and Monitor Report, no. 20, 1999.

The disintegration of comparative wage justice across workplaces and industries, ⁽⁷²⁾or to put it another way the growth in relative wage flexibility, is then reflected in occupational wage dispersion. In the pivotal metal manufacturing sector, for instance, there have been increasing pay differentials between skilled and unskilled workers but also within occupational groups between higher and lower-paid workers.⁽⁷³⁾ The aggregate decline in wage growth has been reversed during the 1990s but workers at the bottom end of the labour market have not benefited.

The shift from a 'managed decentralist' to a 'free market deregulationist' approach has led to a change in the type of labour market flexibility being pursued. Whereas functional flexibility was the objective in the late 1980s, managers are taking advantage of their greatly enhanced procedural flexibility to pursue numerical flexibility and wage flexibility (relative and minimum) (see Table 2).

The Current Debate: How Much Further Deregulation?

It is a measure of the ascendancy of the 'free market deregulationists' that in the current labour market debates the only question being seriously contemplated in media and policy circles is how much further we should 'deregulate'. The Liberal-National Parties Coalition, prevented from implementing a 'second wave' of legislative reform into the Commonwealth Parliament by the Australian Democrats, is still exploring ways of further 'deregulating' the labour market. The final section of the paper examines some of the reforms of the WRLA and the intellectual underpinnings of proposals for further 'deregulation' of the labour market.

Little of the intellectual substance behind the case for radical change presented by the free market deregulationists has changed over the past decade. Key employer associations such as the Australian Chamber of Commerce and Industry, Australian Industry Group and the BCA lobbied for change on the grounds awards are an impediment to productivity which 'crowd out' enterprise and workplace relationships.⁽⁷⁴⁾ As one prominent commentator, Des Moore (Head of the Institute for Private Enterprise) puts it:

There is no hard evidence behind this assertion. In the Australian Workplace Industrial Relations Survey, managers were asked about impediments to greater efficiency. Table 8 summarises their responses:

Table 8: Reasons Provided by Managers as to Why Significant Efficiency Changes Could Not be Made, 1995

Source: A. Morehead et. al., Australian Workplace Industrial Relations Survey 1995, op. cit., p. 256.

Again, in line with earlier research conducted by the BCA,⁽⁷⁶⁾ managers saw financial/economic and management, head office and Government policy as a bigger problem than unions or awards.⁽⁷⁷⁾ It is important to remember this survey was conducted five years ago-before the latest round of award simplification, before the further reduction in the powers of the AIRC enacted by the Workplace Relations Act and before a further decline in union membership and influence.

Advocates of further labour market deregulation also claim it would lead to lower levels of unemployment. The BCA says awards should be no longer perform a role as a 'safety net'. Using awards as a safety net, and increases to minimum wage rates to protect the living standards of the low-paid, distorts market wage structures and creates unemployment by pricing the unskilled out of jobs. Instead, the taxation system and social welfare policy should be used to address the needs of the low-paid and inequality arising from the labour market.⁽⁷⁸⁾ Similarly, the 'five economists' have also proposed a wages/tax trade-off.⁽⁷⁹⁾ Des Moore would like to see complete deregulation to allow minimum wages to fall:

In the US, a deregulated labour market has led to very high levels of wage dispersion and low-wage employment.⁽⁸¹⁾ Commentators such as Des Moore, and some politicians, present the public with what Katz calls 'a simple diabolical trade-off between inequality and unemployment.'⁽⁸²⁾ The public is told: 'you can have better employment outcomes only if you accept greater earnings inequality.' Typically, Australian proponents of labour market deregulation invoke the 'US model' as an example of a dynamic economy which has beaten unemployment by deregulating its labour market.

On the surface, the US performance is impressive but the linkage between deregulation, wage dispersion and lower unemployment is based on a selective and misleading analysis of US labour markets. In terms of jobs-growth rates, Washington's Economic Policy Institute shows the US only averaged one per cent per annum between 1989 and 1996-a rate which was much lower than other more regulated labour markets such as the Netherlands (1.5 per cent) and Ireland (2.3 per cent).⁽⁸³⁾ Examples like this suggest that there is little in the way of a neat correlation between jobs growth and the degree of labour market regulation. Additionally, it is almost identical to Australia's performance during this period (0.9 per cent). Indeed, if the comparison extends back to the 1980s-before labour market deregulation-when Australia's job-growth rate outstripped the US (2.4 per cent against the 1.7 per cent), Australia's employment performance is actually superior to the US. The United States' impressive unemployment rate of 4.7 per cent is related primarily to the slowdown in labour force participation growth to about half the rate of the 1960s and 1970s.⁽⁸⁴⁾

Nor can claims about minimum wages, wage flexibility and unemployment be validated by reference to the US. The unemployment rate for persons with less than high school education was 12.6 per cent in the US-higher than Australia (10.2 per cent) and other OECD nations:

Less educated workers, the supposed beneficiaries of labour market deregulation in the US, are not employed in greater numbers.

Labour market deregulation, the reduction of external regulation of workplaces, promotes a low-wage/low-productivity economy. The very low level of minimum wages in the US has led to the establishment and growth of low-wage sectors. The success of some firms in gaining a short-term competitive advantage on the basis of lower wage costs creates pressure for other companies follow suit. The failure of wage-fixing institutions to construct an effective wages 'floor' reduces the incentive to shift into higher value-added production and pursue increased productivity through new technology, skill formation and more efficient work organisation. Low-wages may subsidise inefficiency and are associated with low value-added, low-skill economic activities. As Table 9 illustrates, in terms of labour productivity growth, the US has been one of the 'poorest performers' in the OECD:

Table 9: Labour Productivity growth per year, 1979-1996

Source: Mishel et. al., The State of Working America 1998-1999, op. cit., p. 360

The US performance is superior only to Switzerland and clearly inferior to the OECD average and more centralised, regulated European industrial relations systems. As Robert Brenner notes:

Labour market deregulation appears to be associated with lower rates of improvement in productivity.

There is evidence to suggest a low-wage, low-productivity cycle is being produced in Australia. The claims by the Coalition Governments⁽⁸⁷⁾ that labour market deregulation in Australia has boosted productivity during the 1990s are flawed. Table 10 compares productivity growth in the 1990s with earlier decades and examines the differential growth rates of the public and private sector:

Table 10: Average Productivity Growth, 1968-69-1998-99

Source: Joint Coalition Governments', Submission to the 2000 Safety Net Adjustment Case, February 2000, Table 3.3, p. 3-9.

Productivity growth rates are stronger during the 1990s than the 1980s but have still not returned to the standards of the 1970s. Additionally, the primary source of productivity growth during the 1990s has been the public sector. Ultimately, the case for labour market deregulation sinks or swims on the performance of the private sector: proponents of labour market deregulation have championed the private sector as the engine of productivity growth and argued at length that it has been inhibited by regulation. A decade after the commencement of labour market deregulation, private sector productivity growth remains sluggish and is falling as a ratio of public sector productivity growth. Meanwhile, the incidence of low-wage jobs has grown strongly and low-wage firms now account for 45% of employment.⁽⁸⁸⁾ As Table 11 shows, the economic performance of low-wage firms is poor:

Table 11: Characteristics of Low Wage Firms in Australia, 1995-96

Source: ACTU, Living Wage 1997/98: ACTU Written Submission, 1998, TAG 28. Based on ABS data from Business Growth and Performance Survey 1995/96. (Catalogue No. 8141.0).

Note: abbreviations used in this Table are as follows: Total Quality Management (TQM), Quality Assurance (QA) and Just-in-Time (JIT).

'Low wage firms' were defined by the ACTU as those firms 'whose wage bill per full-time equivalent employee was 80 per cent or less of the all-industry average'.

Low-wage firms, especially amongst larger firms, have a lower commitment to productivity (evidenced in the lower take-up of new production systems) and are less likely to export.

Thomas Hobbes once noted that the greatest power of all is the power to define the terms of debate.⁽⁸⁹⁾ By this measure, the advocates of radical labour market deregulation have accumulated enormous power. Des Moore's proposals play an important role in creating space for further deregulation by obscuring the radical nature of these reforms. Employer associations have responded by saying they don't want 'radical', Des Moore style change but support 'evolutionary' change such as the 'second wave' legislation introduced into the Commonwealth Parliament. The second wave legislation which took the form of the Workplace Relations Legislation Amendment (More Jobs Better Pay) Bill 1999 has (so far) failed to pass the Senate. A Senate Committee report on the Bill was debated on 29 November 1999.

There are no other alternatives to deregulation currently being seriously debated. This is a disappointing situation. As the analysis of the effects and rhetoric of deregulation has shown, the deregulationists do not engage with the realities of the Australian labour market. Exciting new ideas are emerging about how the difficult labour market problems of today can be addressed which are informing the mainstream policy debate in Europe.⁽⁹⁰⁾ Unfortunately, these ideas are not getting the attention they deserve in the English-speaking world. If policy innovation is to occur in Australia we need to move beyond current intellectual rigidities. In particular, we need to break with the obsession with the impossible dream-labour market 'deregulation'.

Endnotes

1. D. Plowman, 'Australian Industrial Relations: An Introduction', Industrial Relations Research Centre Monograph, UNSW Studies in Australian Industrial Relations Number 34, The University of New South Wales, 1992, Preface.
2. The Appendix to the paper provides a chronology of events and policies associated with labour market deregulation over the period 1975-1999.
3. he material for this section is drawn substantially from J. Buchanan and R. Callus, 'Efficiency nd Equity at Work: the Need for Labour Market Regulation in Australia', Journal of ndustrial Relations, vol. 35, no. 4, 1993.
4. M. Bray, 'A Precarious Victory: the Regulation of Self-Employed Owner-Drivers in New South Wales Road Transport, 1940-1988', Industrial Relations Research Centre Monograph, University of New South Wales, 1990, p. 1.
5. Flanders, Industrial Relations: What is Wrong with the System?, Faber and Faber, 1965, p. 15.
6. ibid.
7. ibid., p. 16.
8. ibid., p. 17.
9. ibid., p. 17-18.
10. Quoted in H. Clegg, 'The Oxford School of Industrial Relations', Warwick Papers in Industrial Relations, Industrial Relations Research Unit, University of Warwick, 1990, p. 4.
11. J. Niland, Compulsory Arbitration and Collective Bargaining in Australia, University of New South Wales Press, 1978.
12. P. Ayres, Malcolm Fraser: a Biography, William Heinemann, 1987, p. 309.
13. Viner, Letter to A. Smith (Sydney Chamber of Commerce), ANU Business and Labour Archives Box Z282/1, 1981.
14. Australian Conciliation and Arbitration Commission (ACAC), National Wage Case: Reasons for Decision, Print G3600, 1986, June 26, p. 4.
15. ALP-ACTU, Statement of Accord by the Australian Labor Party and the Australian Council of Trade Unions Regarding Economic Policy, ALP-ACTU, 1983.
16. P. Kelly, The End of Certainty: the Story of the 1980s, Allen & Unwin, 1992, p. 64.
17. ACAC, 1986, op. cit., appendix one, p. 58.
18. ABS cat. No. 6321.
19. R. Kyloh, 'Flexibility and Structural Adjustment Through Consensus: Some Lessons From Australia', International Labour Review, vol. 128, no. 1, 1989, p. 103.
20. Briggs, The Rise and Fall of the ACTU: Maturation, Hegemony and Decline, PhD Thesis, University of Sydney, 1999.
21. Dabscheck, The Struggle for Australian Industrial Relations in the 1980s, Oxford University Press, 1989, ch. 6; G. Henderson, 'The Industrial Relations Club', Quadrant, 1983; H.R. Nicholls Society, Arbitration in Contempt, The Proceedings of the Inaugural Seminar of the H.R. Nicholls Society held in Melbourne February 28-March 2 1986.
22. J. Buchanan and R. Callus, op. cit., p. 521.
23. For example, the US labour market is sometimes seen as more flexible than Australia's because it has one minimum wage rate whereas Australia also has a minimum wage rate for semi-skilled and skilled occupations.
24. OECD, Labour Market Flexibility, report of high-level group of experts (Dahrendorf Report), 1986.
25. The National Labour Consultative Committee consisted of representatives from the CAI, ACTU and Commonwealth Government.
26. NLCC, op. cit., p. 1.
27. ibid, p. 25.
28. Some commentators have argued highly centralised or highly decentralised wage systems delivered superior economic outcomes than mixed systems e.g.. L. Calmfors & J. Driffill, 'Bargaining Structure, Corporatism and Macroeconomic Performance', Economic Policy: A European Forum, No. 6 April 1988. However, subsequent research noted that they had focused on formal structures to the exclusion of substantive practices. Formally decentralised systems (e.g. Japan, Switzerland) in fact combine decentralised bargaining with informal mechanisms of coordination. See D. Soskice, 'Wage Determination: the Changing Role of Institutions in Advanced Industrialised Countries', Oxford Review of Economic Policy, 6 (4), 1990.
29. ACAC, National Wage Case: Reasons for Decision, Print G8000, 1987, March 10.
30. ACAC, National Wage Case: Reasons for Decision, Print H4000, 1988, August 12.
31. ibid, p. 11.
32. ACTU, ACTU Blueprint for Changing Awards and Agreements, ACTU 1989.
33. Australian Industrial Relations Commission, National Wage Case: Reasons for Decision.
34. BCA, Enterprise-Based Bargaining Units: a Better Way of Working, Report by the Industrial Relations Study Commission, BCA, 1989, part 1, p. 7.
35. BCA, 1989, op. cit., p. 25.
36. ACAC, op. cit., 1986, p. 4.
37. M. Angwin and P. McLaughlin, 'Enterprise Bargaining. The Business Council's Reform Agenda', Labour and Industry, vol. 3, no.1, 1990; BCA, 'Towards an Enterprise Based Industrial Relations System', BCA Bulletin, no. 32, 1987.
38. M. Angwin and P. McLaughlin, ibid., p. 17.
39. BCA, 1989, op. cit., part 1, pp. 94-96.
40. B. Dabscheck, 'Industrial Relations and the Irresistible Magic Wand: the BCA's Plan to Americanise Australian Industrial Relations' in M. Easson and J. Shaw eds, Transforming Industrial Relations, Pluto Press, 1990.
41. S. Frenkel and D. Peetz, 'Enterprise Bargaining: the BCA's Report on Industrial Relations Reform', Journal of Industrial Relations, vol. 32, no. 1, 1990.
42. BCA, op. cit., 1989, Part 2, p. 46.
43. B. Dabscheck, op. cit., p. 126.
44. P. Kelly, The End of Certainty: the Story of the 1980s, Revised Edition, Allen & Unwin, St Leonards NSW, 1994.
45. P. Kelly, The End of Certainty: the Story of the 1980s, Allen & Unwin, 1992, p. 253.
46. This summary of the evolution of the Coalition's industrial relations policy is drawn from: B. Dabscheck, 'The Coalition's Plan to Regulate Industrial Relations', Economic and Labour Relations Review, vol. 4 (1), 1993.
47. AIRC, National Wage Case. Reasons for Decision, print J7400, 1991, April. Note the Commission was renamed from the 'Australian Conciliation and Arbitration Commission' in the Industrial Relations Act 1988.
48. AIRC, National Wage Case. Reasons for Decision, print K0300, 1991, October.
49. M. Goodwin and G. Maconachie, 'Voluntary Employment Agreements: Labour Flexibility in Queensland', Labour and Industry, vol. 3, no. 1, 1990.
50. CCH Australia Limited, Australian Labour Law Reporter, 1998, 8-002.
51. CCH, op. cit., 11-505.
52. J. Ludeke, The Line in the Sand: the Long Road to Staff Employment at Comalco, Wilkinson Books, 1996, p. 35.
53. K. Hancock and D. Rawson. 'The Metamorphosis of Australian Industrial Relations', British Journal of Industrial Relations, vol. 31 (4), 1993, p. 501.
54. Briggs, 'The Transition and Decline of the ACTU During the 1990s: From a "Governing Instiution" to a "Servicing" Organisation', New Zealand Journal of Industrial Relations, V24 (3), p. 263-64.
55. Industrial Relations Reform Act, Section 3 (a), 1993.
56. ibid, Section 88A.
57. Australian Chamber of Commerce and Industry, The Federal Industrial Relations Reform Act 1993: an Employer Review, Australian Chamber of Commerce and Industry, 1993; Evatt Foundation, Unions 2001: a Blueprint for Trade Union Activism, Evatt Foundation, 1995, p. 86.
58. M. Gardner and P. Ronfeldt, 'The Arbitral Model: What Remains?' in R. Fells and T. Todd eds, Current Research in Industrial Relations-Proceedings of the 10th Australian Industrial Relations Academics and New Zealand Conference, 1996, p. 163.
59. J. Ludeke, op. cit., p. 88.
60. B. Pragnell, T. O'Loughlin, S. O'Keefe and J. Buchanan, 'Wages Policy and Wage Determination in 1995', Journal of Industrial Relations, vol. 38, no. 1.
61. Australian Centre for Industrial Relations Research and Teaching (ACIRRT), Australia at Work: Just Managing?, Prentice Hall, 1999, pp. 41-43.
62. ibid., pp. 75-76; Workforce/ACIRRT, 'Pattern Bargaining ', IR Intelligence Report: Quarterly Analysis of Workplace Trends, no. 1, 1998.
63. Department of Industrial Relations, Enterprise Bargaining in Australia: Annual Report, AGPS, 1996, p. 83.
64. Peetz, Unions in a Contrary World: the Future of the Australian Trade Union Movement, Cambridge University Press, 1998.
65. Australian Centre for Industrial Relations Research and Teaching (ACIRRT), Australia at Work: Just Managing?, Prentice Hall, Sydney, 1999, especially chapters 3, 4 and 5.
66. The title of this department has now been changed to the Department of Workplace Relations and Small Business.
67. R. Callus, A. Morehead, M. Cully and J. Buchanan, Industrial Relations at Work: the Australian Workplace Industrial Relations Survey, AGPS., 1991, chapter 9; M. Short, J. Romeyn and R. Callus, Reform and Bargaining at the Workplace and Enterprise: Evidence From Two Surveys, Industrial Relations Research Series, Department of Industrial Relations, no. 12, 1994.
68. ibid., pp. 130-133, pp. 151-155.
69. ACIRRT, op. cit., 1999, p. 49.
70. ibid., chapters 3 and 5.
71. ibid., p. 77.
72. The principle of comparative wage justice was: '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 and industry'. J. Hutson, Six Wage Concepts, Australian Engineering Union: Sydney, 1972, p. 146.
73. J. Buchanan, R. Callus and C. Briggs, 'What impact has the Howard Government had on wages and hours of work?', Journal of Australian Political Economy, 1999,
74. Australian Chamber of Commerce and Industry, The Operation of the Workplace Relations Act 1996, Australian Chamber of Commerce and Industry, 1998; Australian Industry Group 'The Workplace Relations Act 1996: Some Proposals for Change', Submission by the Australian Industry Group to the Minister for Workplace Relations and Small Business, 1998, August 27; Business Council of Australia Discussion Paper: Rebuilding the Safety Net., BCA, 1999.
75. D. Moore, 'IR Legislation-Further Deregulation?', Address to Australian Industry Group Conference, March 5 1999, p. 3.
76. BCA, op. cit. 1989, part 1, p. 46
77. Note that the resistance of non-unionised and unionised employees are measured together meaning union resistance is even less significant than this figure suggests at first glance.
78. BCA, op. cit., 1999.
79. The 'five economists' sent a letter to the Prime Minister which was published in The Australian newspaper. For a critical analysis, see commentary by I. Watson, 'Proposals for a Wage Freeze and Tax Credits: Will Subsidising Low Wage Jobs Solve Unemployment?', Research Paper, no. 29, Department of the Parliamentary Library, 1998-99.
80. D. Moore, op. cit., pp. 5 and 8.
81. L. Mishel, J. Bernstein and J. Schmitt, The State of Working America 1998-99, Economic Policy Institute, Cornell University Press, 1999, tables 8.9 and 8.21.
82. L. Katz, 'Reflections on the US Labor Market Performance', Fairly Efficient? Equity and Productivity in the Australian Labour Market Conference, Australian National University, June 16-17 1998, p. 1.
83. L. Mishel et. al., op. cit., p. 385.
84. ibid, p. 225.
85. ibid, p. 388.
86. R. Brenner, 'The Economics of Global Turbulence: a Special Report on the World Economy, 1950-98', New Left Review, no. 229, p. 206-07.
87. Joint Coalition Governments', Submission to the 2000 Safety Net Adjustment Case, 1999, Table 3.3, p. 3-9.
88. ACTU, Living Wage 1997/98: ACTU Written Submission. The ACTU commissioned data from the ABS Business Growth and Performance Survey 1995/96. 'Low wage firms' were defined as those firms 'whose wage bill per full-time equivalent employee was 80 per cent or less of the all-industry average.' ACTU, op. cit., 1998, p. 138.
89. T. Hobbes cited by S. Chorover, From Genesis to Genocide: the Meaning of Human Nature and the Power of Behaviour Control, MIT Press, 1979, p. 182.
90. Schmid, et. al., International Handbook of Labour Market Policy and Evaluation, Edward Edgar, 1996; G. Schmid and P. Auer, 'Transitional Labour Markets: Concepts and Examples in Europe' in European Academy of the Urban Environment, New Institutional Arrangements in the Labour Market: Transitional Labour Markets as a New Full Employment Concept, 1998.

Appendix: Labour Market Deregulation: a Chronology of Events and Policies, 1975-1999

Comments to: web.library@aph.gov.au
Last reviewed 27 September 2001 by the Parliamentary Library Web Manager
© Commonwealth of Australia
Parliament of Australia Web Site Privacy Statement
Images courtesy of AUSPIC