Wage rises don’t mean job losses

Lisbeth Latham

Almost immediately after the Rudd Labor government’s Fair Work Australia came into effect on July 2, the Australian and other News Ltd newspapers launched a sustained attack on the Australian Manufacturing Workers Union’s (AMWU) wage claim for the manufacturing industry.

Business associations, the government and corporate media have been running a concerted campaign for more than year to convince working people that they have to show wage restraint if they want to avoid losing their jobs.

This is part of a campaign to foist the brunt of the global economic crisis onto working people and protect the interests of big business. However, the historical lessons the Australian draws on to back up its claims do not show a necessary relationship between wage rises and job losses.

On July 2, the Australian featured front-page headlines reading: “Unions defy PM Kevin Rudd’s restraint call as New IR Era Begins” and “Lost lessons of the 100,000 `dead men'”.

These articles followed a statement by AMWU national secretary Julius Roe, reported in the July 1 Australian: “If companies are performing well, workers should get some share of those outcomes. In some cases, yes, we are achieving (6 per cent), and we will achieve that in the future.

“The fairest thing to say is where companies are performing well, we should be able to achieve real wage increases. Elsewhere, we want to at least maintain real wages. This year, it's probably around [a] 4 per cent [pay rise].”


Pattern bargaining
The articles raised fears of a return to pattern bargaining — under which unions lodge identical claims across industry and campaign for employers to provide minimum improvements in conditions by using sites of union strength to support workers in less well organised or less strategic workplaces.

It also raised the potential of a broader “wages breakout”.

The Australian quoted former head of the Metal Trades Industry Association Bert Evans, saying that the AMWU’s claim, if successful, would lead to jobs going overseas.

The articles further argued that the huge job losses in Australian manufacturing during the recession of the early 1980s were a result of the AMWU’s (then the Amalgamated Metal Workers and Shipwrights Union — AMWSU) 1981 campaign for pay rises and a 35-hour week with no loss in pay.

The Australian’s articles are part of a wider campaign to shatter the confidence of AMWU members in pursuing collective bargaining and undermine support for the AMWU. The campaign aims to build and reinforce the argument that wage rises during an economic downturn would result in job losses, and the AMWU, in pursuing its “unreasonable claim”, is threatening the livelihood of all workers.

But did the AMWSU’s 1981 wage campaign really cause the collapse in employment? And, more broadly, is there really a connection between wage levels and employment?

What happened in 1981
After its election victory in 1975, the Liberal Coalition government of Malcolm Fraser moved to “fight inflation” by, among other things, seeking to cut real wages by limiting the extent to which wages were indexed with inflation in the centralised national wage cases.

As a result, real wages fell through the late 1970s, but the government’s policy was unsuccessful in reducing inflation.

In response to falling real wages, debates began to emerge at the 1979 Australian Council of Trade Unions (ACTU) congress to move away from centralised wage fixing. At the 1981 congress, the militant pace-setter unions, led by the AMWSU, won support for a partial break from centralised wage fixing.

In July 1981, the Conciliation and Arbitration Commission abandoned wage indexation entirely as unions began to win wage increases outside of indexation.

In 1980, the AMWSU launched its campaign to “defend and extend working and living standards, workers’ rights and quality of life”. This campaign included a push for a 35-hour week with no loss in pay. The AMWSU’s claim was aimed at defending workers’ buying power and creating jobs through the reduction in the working week.

It was also motivated by the Fraser government’s predictions of a looming minerals boom. Employers and the government united to reject outright reducing ordinary working hours below 40 hours a week.

Despite this, the AMWSU led a wide-reaching campaign, which included a 48-hour strike in 1981 involving 400,000 manufacturing workers. As a result, the union won an increase of $20 a week and a 38-hour week. The agreement also allowed for a second increase of $14 in 1982, based on projected inflation for the next six months.

However, part the deal was that, in exchange for the improved conditions, the AMWSU agreed to a 12-month “no extra claims” clause, through which all future claims for increased wages or reduced hours were held back for 12 months.

One year after the AMWSU won its new agreements, the global economic downturn hit in full force, driving down demand for consumer and capital goods. This downturn had already begun to be felt in Australia before the wage campaign, but the AMWSU had been protected from it initially due to residual demand for skilled workers.

In response to the crisis, manufacturing employers started to rapidly shed jobs, and about 90,000 workers were sacked. In the face of this assault the AMWSU’s leaders abided by the “no strike” agreements and did not take industrial action to try to protect jobs.

At some shops, workers tried to secure jobs by agreeing to reduce their hours to a four-day week at four days’ wages.

While this experience would appear to support the Australian’s claim that wage rises lead to job losses, it only indicates that a wage rise occurred at about the same time as large-scale job losses during an economic downturn.

To sustain the Australian’s argument, there would need to be a consistent pattern that wage rises during recession result in job losses while wage restraint during recessions result in job creation.

No link
The pattern of wages and employment in manufacturing over the past 30 years does not indicate the direct link argued by the Australian and other supporters of a wage freeze in the current period.

Indeed, there are periods of significant job losses during the downturns of the late 1980s and early 1990s. During this period, real wages remained at best stagnant, and what wage rises were won were tied to productivity gains or loss of conditions, which limited the cost for capital for wage gains.

Moreover, if the decline in jobs was a result of wage gains and economic decline, as the economy recovers you would expect to see a significant recovery of jobs. However, such employment recovery has been more limited.

This reflects the extent to which capital has used periods of economic decline to restructure and force through increases in labour productivity at the cost of employment.

The Australian’s articles are part of a broader offensive in Australia and internationally to ensure that workers bear the brunt of the current economic crisis and to ensure bosses are in a position to reap the greatest share of the next recovery.

With this in mind, workers and unions must struggle to maintain and extend wages and conditions, and they should be supported by all working people.

This article was originally published in Green Left Weekly Issue #803

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Socialist Alliance: Open Letter to delegates to the 2009 ACTU Congress

Dear fellow unionists,

As delegates to this ACTU Congress you have piles of policy before you, but one basic decision to make.

Should you back the ACTU leadership’s support for Rudd’s Fair Work Act or oppose it?

The Congress papers say that “the Fair Work Act sees the end of the direct legislative assault on organised labour” and “represents a substantial, albeit imperfect, transition of the 2006 ACTU Congress policy into legislation.”

That’s just spin! Read the Congress’s own Industrial Relations Legislation Factsheet and the truth comes out (see the basic facts about the Fair Work Act below, mainly taken from this Factsheet). Workers are still losing.

The draft Congress Industrial Relation Policy says that the new legislation gives the union movement a chance to “grow unions, protect jobs and advance workers’ interests”.


If the economy were booming we could almost believe this, even though it would still be a recipe for a stagnant union movement. But we’re entering the biggest recession in 70 years, with thousands of jobs already lost and one-and-a-half hands tied behind our backs by Rudd’s law.

If more workers have joined unions since 2006, it’s because the Your Rights at Work campaign was seen as defending their interests. To keep growing we must keep campaigning for our rights, which remain crippled by Fair Work Australia.

It’s high time to drop business-as-usual-don’t-embarrass–Kevin-and-Julia-too-much unionism. This compromised approach gave the vast majority of workers lower wage increases during the resources boom than would otherwise have been the case, and meant that profits and CEO packages skyrocketed (check the Congress Wages and Collective Bargaining Factsheet for detail).

Instead of a vague, feel-good resolution about “campaigning” and waiting for Kevin 2010 to remove the bad bits of the Fair Work Bill, this Congress must adopt two basic positions:

1. For a full-scale, cross-union industrial and community campaign against the Australian Building and Construction Commission, one that will continue until it or any replacement scheme is abolished, and building workers have the same rights as all other workers;
2. For a campaign of industrial disobedience to the most crippling provisions of the Fair Work Act, including its ban on pattern-bargaining, restrictions on the right to take industrial action, restrictions on the rights of unions to organise and enter work sites and restrictions on the contents of industrial agreements.
   

The November 2008 suspension of charges against CFMEU official Noel Washington shows that workers and their unions can win if they organise to act against injustice. It’s the sort of unionism we´ll need just as much under the Rudd government as under Howard.

Let’s build a campaign now against all that is still anti-worker in the Fair Work Act—beginning with the anti-democratic Australian Building and Construction Commission.

Socialist Alliance National Trade Union Committee
Distributed by Tim Gooden, Secretary, Geelong Trades Hall Council, as a contribution to debate at the 2009 ACTU Congress


Yes, the Fair Work Act is WorkChoices Lite!
Check out the following powers of the Fair Work Act, detailed in the Congress’s own Industrial Relations Legislation Factsheet.

If Malcolm Turnbull introduced such anti-worker industrial laws—which violate International Labour Organisation standards—wouldn’t the union movement be fighting them?

1. The Fair Work Act cuts back unions’ right to organise
   ↓ 24 hours notice of right of workplace entry, restricted access to employee records ↓Bans pattern bargaining, allowing very restricted “multi-employer bargaining” only for low paid
   ↓No restriction on employers using pattern bargaining
   ↓Employer right to seek injunctions against unions using pattern bargaining ↓Employer right to challenge the conduct of ballots to frustrate protected industrial action
   ↓No positive rights for union delegates
   ↓No positive rights for workers to join unions and participate in their work ↓Almost no recognition of the role of delegates in representing workers in bargaining process
   ↓ No requirement for employers to facilitate union access to workplaces
2. The Fair Work Act prevents workers from improving their living standards
   ↓Limits award content to 10 listed matters
   ↓Fails to enshrine in minimum standards: 11 public holidays per annum, a right for parents of pre-school children to part-time work, rights to information and consultation in the workplace, retrenchment pay for employees of smaller businesses, and any guarantee that workers entitlements will be paid first in the case of company failure
   ↓Restricts matters that can be covered in an agreement, banning enterprise-specific unfair dismissal and right of entry agreements.
   ↓Allows award modernisation that could result in reduced standards in some industries and occupations
   ↓Maintains existing AWAs, including ones that would not meet the government’s own standard for fair agreements
   ↓Allows an employer taking over a company to refuse to employ workers transferring from business being taken over
3. The Fair Work Act keeps penal powers, including those established by Work Choices
   ↓Requires secret ballots for protected industrial action
   ↓Preserves the Work Choices requirement that employers deduct strike pay even in circumstances where employees are at work
   ↓Allows the use of scab labour
   ↓Doesn´t give workers the right to conduct meetings to prepare for bargaining ↓Increases the penalties Fair Work Australia can apply to “ensure compliance” with its rulings
   ↓Bans industrial action in support of economic and social campaigns (like that against Work Choices)
   ↓Bans industrial action even where an employer proposes radical workplace restructuring
   ↓Keeps the anti-union provisions of the Trades Practices Act
   ↓Leaves a dispute with the boss to be settled in the normal court system unless the boss agrees to have it judged by Fair Work Australia
4. The Fair Work Act discriminates against different groups of workers
   ↓Removes “high income” earners from award coverage
   ↓ Leaves contract workers with fewer rights than employees, including no rights to union representation or collective bargaining
   ↓ Allows a longer qualifying period for employees in small business
   ↓Makes it easier for small business to sack workers
5. The Fair Work Act maintains unions in a weakened legal position
   ↓ Does not actually define the rights of unions
   ↓Abolishes unions as parties to agreements, which are made between employers and their employees
   ↓Does not require unions to consent to changes to an agreement, even when the union is covered by the agreement.
   ↓Fails to enshrine a right for all employees and unions to be informed about the strategic designs of the employers
   ↓Provides no clarity about where federal or state laws apply, much less enable workers to opt into the federal or state systems
   
   

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