Last week’s wage decision by the Australian Industrial Relations Commission to award a small pay rise two million of Australia’s lowest paid workers illustrates the evolution of Australia’s industrial relations landscape. The evolution has taken some pain and has taken place in a changing international climate in which Australia of necessity was a part.
The commission ruled that workers on awards earning up to and including $510 a week get $12, and those earning more than $510 get $10. The pay rise does not apply to higher paid workers in enterprise agreements. The outcome was closer to the Federal Government’s suggestion of a $8 pay rise than the ACTU’s claim for $26.60 per week.
The commission rejected an ACTU claim for a five per
cent increase for those earning $527.80 or more, which would have given a pay rise of $35 to those on $700 a week.
The commission’s president, Geoffrey Giudice, said an increase was warranted “”to provide fair minimum standards for employees”. In saying that he illustrated that the commission has only one significant role to play – the setting of minimum wages. All else either is or should be matters to be worked out between employers and employees themselves. The commission should be a shrinking institution.
Gone are the days of high tariff walls behind which inefficient local manufacturers could prosper at the expense of Australian consumers, passing on the high wages awarded by the commission in the form of higher prices. Gone, too, are the days when wages could be awarded across whole industries irrespective of the capacity of the individual enterprises to pay those wages.
Enterprise-based wage agreements are a far better way to work out pay and conditions for both employers and employees. Both Labor and Liberal Governments have recognised that, but with different degrees of enthusiasm. Many unions have not, however. They prefer the industry approach because its gives union officials more power. Many unions have not adapted well to the new situation. Rather than evolving and staying relevant, however, many have clung to old ways and lost membership.
There is room for unions in the new environment. Indeed, for some workers they could be more relevant. Many employees do not feel competent to negotiate wages and conditions and need representation. If employees want union representation they should have it. Conversely, if an employee or group of employees feel they can manage on their own they should not be pressured into dealing with a union. And in the new environment, unions should concentrate on the enterprise level and not attempt to impose industry-wide conditions. That requires more work, but it will make unions more relevant.
Unions also have a role in enforcing minimum wages and conditions. The principle laid down by Justice Higgins of the first Arbitration Commission in the Harvester decision of 1907 still applies. Businesses should be required to pay a living wage, the bare minimum required to support a family, otherwise they should not be in business. But in the ensuing 70 or 80 years Australia went down the path of arbitrating the details of wages and conditions across industries. This was largely a product of the Constitution which gave the Commonwealth a restricted power in industrial relations. It could only intervene in interstate industrial disputes. That led to the growth of federal unions and ambit claims to ensure as many disputes as possible could come within the federal sphere.
Winding that economically destructive model down has been a long process. And more reform is needed. The commission itself should be less judicial and adversary. It should be more a mediator and an administrative setter of minimum standards.
Higher wages and living standards in society ultimately can only come from better economic performance. They cannot be created by quasi-judicial bodies bringing down detailed awards of pay and conditions.