Dec 640/88 M Print H4000
AUSTRALIAN CONCILIATION AND ARBITRATION COMMISSION
Conciliation and Arbitration Act 1904
NATIONAL WAGE CASE AUGUST 1988
s.59 applications for variation
The Clothing and Allied Trades Union of Australia
DRY CLEANING INDUSTRY INTERIM AWARD 1980(1)
(C No. 21376 of 1988)
CLOTHING TRADES AWARD 1982(2)
(C No. 21377 of 1988)
DRY CLEANING INDUSTRY AWARD, 1966(3)
(C No. 21378 of 1988)
The Association of Professional Engineers, Australia
METAL INDUSTRY AWARD 1971 - PART III - PROFESSIONAL ENGINEERS(4)
(C No. 31751 of 1988)
JUSTICE MADDERN, PRESIDENT
DEPUTY PRESIDENT KEOGH
DEPUTY PRESIDENT HANCOCK
COMMISSIONER SWEENEY
COMMISSIONER LEAR Melbourne, 12 August 1988
REASONS FOR DECISION
In the National Wage Case decision of March 1987(5) the Commission adopted a package of wage fixation principles to operate until the next review was completed. That decision indicated that the review would commence in May 1988.(6)
Conferences of the National Wage Case parties were held in Melbourne on 12 May and 2 June 1988 to ascertain the attitudes to the review and the principles and to explore the potential for reducing the differences between
the parties and interveners. These conferences were inconclusive.
_______________________________________________________________________________
(1)Print E6068 [D033]; (1981) 257 CAR 534
(2)Print G0207 [C037]
(3)Print C1539 [D008]; (1974) 162 CAR 904 [title change Print E6052 [D008
V052]; (1981) 256 CAR 810]
(4)Print C1744 [M042]; (1974) 163 CAR 388
(5)Print G6800
(6)ibid., p.34
2 NATIONAL WAGE CASE AUGUST 1988
INDUSTRIAL ACTION
After the public hearing commenced in Melbourne on 16 June 1988, the attention of the Commission was drawn, on a number of occasions, to industrial action and threats of industrial action by the trade union movement and individual unions. On two of those occasions the Commission adjourned the proceedings because of substantial disputation taking place. On 13 July 1988, the Commission determined that by deliberately flouting the recommendation of a Deputy President of the Commission and clearly breaching its commitment to the current wage fixation principles, the Printing and Kindred Industries Union (PKIU) had raised serious doubts as to its understanding and acceptance of its responsibilities as a registered organization and the bona fides of any commitment it might make. The Commission determined that all PKIU applications to give effect to this decision would be dealt with by this National Wage Case Bench after the handing down of the decision in this case.
The actions of the Commission in each instance were based on its firmly-held view that the trade unions, either jointly or individually, cannot have it both ways: they cannot seek the benefits of a centralised and stable system of industrial relations and at the same time destabilise such a system by pursuing sectional claims and taking industrial action.
The statements on industrial action made by the Full Bench during these proceedings are attached as Appendix B to this decision.
THE CLAIMS
The Australian Council of Trade Unions (ACTU) and the Australian Council of Professional Associations (ACPA) used applications in relation to the Clothing Trades Award 1982, the Dry Cleaning Industry Award, 1966, the Dry Cleaning Industry Interim Award 1980 and Part III of the Metal Industry Award 1971 as the vehicle for a review of the wage fixation principles.
The ACTU claim was for an increase in all rates of pay of 3% on and from 1 July 1988 and for a further increase of 3% on and from 1 December 1988 to provide for the maintenance of living standards for employees. The ACTU applications also claimed additional increases (unspecified) in all rates of pay on account of the restructuring of various awards to encourage the acquisition of skill, allow for the flexible application of skill to work and provide career paths for employees.
The ACPA application claimed increases in salaries of 6% to preserve the real value of salaries against cost of living increases and further amounts to be determined on account of restructuring.
In addition to the claims made in the applications to vary, the ACTU argued for scope to be provided for wage adjustments based on ". . . work value, supplementary payments and anomalies or inequities where relevant", the finalisation of existing second tier claims, occupational superannuation and shorter hours. It contended that "these claims together will form the basis of a workable wage fixation system to operate over the course of 1988-89."
The submissions of the ACTU and the ACPA, those of the Commonwealth and various State governments and the views of the employer organizations varied considerably, not only in relation to possible amounts of increase but also as to the basis for any increases, the principles to be applied and the duration of any system. The attitudes adopted by the parties and interveners are
NATIONAL WAGE CASE AUGUST 1988 3
summarised in Appendix C. We do not intend to discuss in this decision the merit or lack of merit of those disparate submissions. It is sufficient to say we have taken them into account in our deliberations. We have also considered in detail the economic context in which this decision has to be made. This economic background is dealt with in Appendix D. Economic considerations, of course, are not the only relevant ones. Matters of equity and industrial realism are important; and the realities of our task include the expectations which have developed from the opinions expressed by governments and employer groups.
THE INCREASE
We have decided that we should determine an amount for increases in labour costs which will not, except in special circumstances, be exceeded by the Commission during the period of operation of the new system introduced by this decision.
In determining the amount of such increase, we have taken into account the need to improve further Australia's economic performance. We have taken particular account of:
(i) award wage movements, increases in average weekly ordinary time earnings and other increases in labour costs in recent times;
(ii) levels of domestic inflation and future prospects;
(iii) the state of the external economy;
(iv) productivity movements;
(v) the level of employment and the likely effects of our decision on that level of employment;
(vi) reductions in real wages for employees on award rates;
(vii) the scope provided by this decision to assist further improvements in productive performance of work; and
(viii)the duration of the system.
In the light of our appreciation of the economic situation, we think that the wage increases allowed by this decision are the most that we can responsibly grant. There would be significant economic benefits in lower increases, but we acknowledge the force of the non-economic concerns which have a contrary implication. In determining the amount of the increases, we have also been influenced strongly by the Commonwealth's stated intentions in relation to personal income tax cuts in 1989-90. In announcing the Government's commitment to "providing all Australians with personal income tax cuts in 1989-90" the Treasurer said:
"Our overriding objective must also be to keep wages growth as close as possible to our trading partners so that we remain competitive on world markets.
After the hard work and sacrifice of recent years, and with inflation now heading towards 5 per cent or lower, this objective is consistent with the overall maintenance of real wages in 1988-89.
4 NATIONAL WAGE CASE AUGUST 1988
The personal tax cuts we have foreshadowed will provide Australia with a unique opportunity to bring our wages growth further into line with our trading partners.
However, the size and timing of those cuts will depend upon the size and timing of future wage rises.
That is, the Government is prepared to provide substantial tax cuts provided there is an acceptable wages outcome in 1988-89 and an appropriate wages/tax trade-off in 1989-90.
The Government will stress this point in its discussions with the ACTU over the next twelve months.
I am confident that an acceptable basis can be established for a sustainable rise in real terms after tax incomes."
We believe that it would not be in the best interests of the Australian community for a general increase of the level we have in mind to be made as a total payment from an early date. Consequently, we have decided that the total increase should not be available in one amount but should apply in two instalments at least six months apart. Without this arrangement, the increases allowed would have been less.
The level of increase allowable and the manner of its application are aimed at achieving:
(i) a further fall in the rate of inflation;
(ii) a further narrowing of the gap between the price and wage movements in this country and those of our major trading partners; and
(iii) improvements in our productivity performance.
FORM OF THE INCREASE
We have decided that there will be two increases at least six months apart.
On a number of occasions, the Commission has indicated its preference for percentage increases, primarily because of a perceived need to preserve existing relativities.
On this occasion, however, we have decided that the second of the increases will be a flat amount. We have taken this decision because of our continuing concern for low wage earners on award rates without the benefit of career paths and with little or no overaward payments (the professed concern of both the trade union movement and the Commonwealth) and the impact on these employees of the recent fall in real award wages. We have also been influenced by the recent significant tax cuts which favour higher income earners.
We are also less concerned on this occasion about preservation of relativities because of what this decision, as detailed later, requires from the parties in relation to the review of current award provisions including classification structures.
The approach we have adopted will grant greater percentage increases to lower wage earners.
NATIONAL WAGE CASE AUGUST 1988 5
THE PRINCIPLES
In its March 1987 National Wage Case decision, the Commission said:
"Our task is to provide a framework in which a combination of restraint and sustained effort to improved efficiency and productivity can be achieved."
and
"The wage outcomes are consistent with a slowing down in the rate of inflation and a narrowing of the gap between Australia's inflation rate and that of our major trading partners."
The principles and the system of wage fixation then determined have been reasonably successful in meeting the Commission's objectives.
The key principle in that system was the restructuring and efficiency principle. It was a response to the positive declaration of purpose by the ACTU, the Confederation of Australian Industry (CAI) and the Business Council of Australia (BCA) in their joint statement issued on 24 September 1986 which said:
"The parties also acknowledge that to achieve the necessary adjustments to take advantage of the situation requires the co-operation of the workforce and management. The question is not the need for change, but the process by which we achieve that change. The objective is to achieve change through co-operation and consultation, not confrontation, and to increase the prospect of meaningful and satisfying work and the fuller realisation of human potential."
The proper application of the restructuring and efficiency principle called for a positive approach by trade unions, their members, and individual workers and by employer organizations, their members and individual employers. In the Commission's experience some were inadequate for the task. Many others made positive efforts: the best not only derived benefits which produced immediate efficiency and productivity improvements but also laid the foundation for future improvement.
Despite the degree of success achieved we are not satisfied that the principle in its present form and as understood and accepted by many parties should be continued. Because of the general approach adopted to its application, some parties have exhausted the usefulness of the principle and it would seem impractical to expect others, who have not yet been capable of applying the principle successfully, to repeat the process.
We consider it essential, however, that any new wage system introduced should build on the steps already taken to encourage greater productivity and efficiency. Attention must now be directed toward the more fundamental, institutionalised elements that operate to reduce the potential for increased productivity and efficiency.
No party or intervener disputed this. It is at least implicit in all the submissions put to us that, to sustain real improvement in productivity and efficiency, we must take steps to ensure that work classifications and functions and the basic work patterns and arrangements in an industry meet the
6 NATIONAL WAGE CASE AUGUST 1988
competitive requirements of that industry. It is accepted, at least by some, that a more highly skilled and flexible labour force is required not only to assist in structural adjustment but also to provide workers with access to more varied, fulfilling and better paid jobs.
Such acceptance needs to be carried past the sloganising stage. We have decided therefore to provide a structural efficiency principle which will be the key element in a new system of wage fixation. That new principle will provide incentive and scope within the wage fixation system for parties to examine their awards with a view to:
. 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 meet the competitive requirements of the industry;
. including properly fixed minimum rates for classifications in awards, related appropriately to one another, with any amounts in excess of these properly fixed minimum rates being expressed as supplementary payments;
. updating and/or rationalising the list of respondents to awards;
. addressing any cases where award provisions discriminate against sections of the work-force.
It is not intended that this principle will be applied in a negative cost-cutting manner or to formalise illusory, short-term benefits. Its purpose is to facilitate the type of fundamental review essential to ensure that existing award structures are relevant to modern competitive requirements of industry and are in the best interests of both management and workers. We will require any union seeking an award variation to give effect to the increases allowable under this decision to commit itself formally to a review of that award to give proper effect to this principle. Such a review will be monitored and assisted as necessary by the Commission.
We expect that any resultant restructuring will be done primarily by consultation and at minimal cost. However, we are not prepared to allow the restructuring of some awards without regard to the relationship of the restructured awards one to another and the overall cost impact. For this reason, at this stage, there should be no restructuring outside that which is allowed in national wage cases or by specially constituted Full Benches. The Commission will sit again in February 1989 to hear detailed reports on progress in individual award reviews so that it can both monitor the effectiveness of this decision and consider any matters of general principle that might need to be resolved.
The principles determined by the Commission in its National Wage Case decision of 10 March 1987 will be changed only by minor drafting alterations. However, those principles (apart from that dealing with superannuation) will, because of the nature of our decision, have little effective operation prior
NATIONAL WAGE CASE AUGUST 1988 7
to 1 July 1989. This is because the increases available as a result of this decision are tied directly to implementation of the new structural efficiency principle. Those groups, however, which have not to this stage benefited from second tier increases made available under the National Wage Case decision of March 1987 will be entitled to continue to seek those benefits in accordance with the principles as laid down in that decision.
METHOD OF IMPLEMENTATION
We have decided that the increases we are prepared to allow should be available to all employees where the relevant union indicates a commitment to work through the system.
It is clear to us that the attitudes of:
(i) the unions, as indicated by their industry-by-industry and/or award-by-award discussions prior to and during the national wage case proceedings;
(ii) the Commonwealth and some States; and
(iii) the various employer organizations who reached agreements prior to or during these proceedings
favour industry-by-industry, award-by-award or employer-by-employer negotiat- ions.
These attitudes, and the different timing of the second tier adjustments in awards of various industrial tribunals, lead us to conclude that we should not grant a general wage increase without regard to the circumstances in the particular awards, industries or companies concerned. Instead, we have decided to set a limit on award wage increases but, subject to this decision, to allow the parties to each award to negotiate the dates of operation of any increases. Some parties have suggested that awards should only be varied for those who can reach agreement, with increases for those who have not negotiated agreements being deferred to some later date. The Commission will not limit its powers as suggested but will arbitrate in accordance with the Act, as required.
Moreover, in general terms we believe that it may be advisable to allow some time to elapse between second tier increases and increases available under this decision. Indeed in cases where the second tier increases have not yet occurred, it may be that the parties will agree, or the Commission will decide, in particular circumstances, to postpone second tier increases until after this decision has been implemented.
The Commission will approve increases in wages and salaries agreed by the parties to an award, provided their agreement does not exceed the increases we have determined in this case. The Commission will not approve a date of effect for any such agreement earlier than the date upon which the agreement is approved by it.
In arbitrating, the Commission will take into account:
(i) the date of operation of increases under the second tier, improvements in superannuation and reduction in hours;
8 NATIONAL WAGE CASE AUGUST 1988
(ii) the extent of agreement under the award;
(iii) the nature and extent of industrial action; and
(iv) the conduct of the employers.
The Commission will not award retrospectivity in any arbitrated case. However, in all matters, before an award variation will be made, the union or unions concerned will be required to undertake that any claims for improvements in pay and conditions will be processed in accordance with this decision and that, until 1 July 1989, it will not pursue any extra claims, award or overaward, except in compliance with this decision.
Where this no extra claims commitment is given, it shall be inserted into the award concerned, in the following terms:
"It is a term of this Award (arising from the decision of the Australian Conciliation and Arbitration Commission in the National Wage Case of 12 August 1988 the terms of which are set out in Print H4000) that the union(s) undertake(s), until 1 July 1989, not to pursue any extra claims, award or overaward, except where consistent with the National Wage Case Principles."
SPECIAL CASES
Any special cases for increases in excess of the increases allowable, which previously went to the Anomalies Conference, should be progressed through the National Wage Case or through specially constituted Full Benches.
One such case was argued in the current proceedings. It related to the Transport Workers Award, 1983.(7) On the material before us, we are unable to determine the nature and extent of the problem in relation to that Award. In particular, we do not have the material necessary to determine whether the employees covered by that Award have a level of actual rates which is lower than that of employees under other transport awards. We are therefore not prepared to grant any increase to the supplementary payments under the Transport Workers Award, 1983.
If the Transport Workers' Union of Australia (TWU) wishes to further pursue its claim when the material becomes available, the claim ought to be dealt with in future national wage case proceedings or by a specially constituted Full Bench.
For the duration of the new package the Anomalies Conference will be required only to deal with those cases presently before it.
PERIOD OF THE SYSTEM
The system will formally operate until 1 July 1989. However, the Commission will begin a hearing on 4 May 1989 to determine whether any wage adjustment should be made to operate from 1 July 1989 having regard to the progress of award restructuring, tax changes, the state of the economy and the extent of commitment given by the unions. No other substantive changes to the principles will be made, unless extraordinary circumstances arise, before 1 January 1990.
_______________________________________________________________________________
(7)Print F2076 [T140]
NATIONAL WAGE CASE AUGUST 1988 9
AMOUNT OF INCREASE
In all these circumstances we are prepared to allow increases of 3 per cent and $10.00 to be approved or arbitrated by the Commission, provided that the first of those increases shall not be available prior to 1 September 1988 and that the increases are at least six months apart.
10 NATIONAL WAGE CASE AUGUST 1988
APPENDIX A
THE PRINCIPLES
These principles have been developed with the aim of providing, for their period of operation, a clear framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that labour costs are monitored; that measures to meet the competitive requirements of industry and to provide workers with access to more varied, fulfilling and better paid jobs are positively examined; and that lower paid workers are protected.
The principles provide that movements in wages and salaries and improvements in conditions - whether they occur in the public or private sector, whether they be award or overaward and whether they result from consent or arbitration - must fall within the level allowable in accordance with the National Wage Case decision of 12 August 1988.
In considering whether wages and salaries or conditions should be awarded or changed for any reason either by consent or arbitration, the Commission will guard against contrived arrangements which would circumvent these principles and their aims.
COMMITMENT
Any claims for improvements in pay and conditions must be processed in accordance with these principles. No adjustments will be approved by the Commission unless a union concerned in an award gives an undertaking until 1 July 1989 that it will not pursue any extra claims, award or overaward, except in compliance with this decision.
When this no extra claims commitment is given, it shall be inserted in the award concerned in the following terms:
"It is a term of this Award (arising from the decision of the Australian Conciliation and Arbitration Commission in the National Wage Case of 12 August 1988, the terms of which are set out in Print H4000) that the union(s) undertake(s), until 1 July 1989, not to pursue any extra claims, award or overaward, except when consistent with the National Wage Case Principles."
WAGE ADJUSTMENTS
(a) There will be allowable under these principles, increases to a maximum of 3 per cent and $10.00. The first increase shall be available no earlier than 1 September 1988. The second amount shall be awarded no earlier than six months after the date of operation of the first increase.
(b) The 3 per cent increase shall apply to award wage rates including supplementary payments. The Commission, after hearing the parties to an award and being satisfied that a proper case has been made, may recommend that overaward payments be increased by this amount.
(c) Any union(s) seeking to vary a specific award to give effect to the increases allowable is required formally to agree that it will co-operate in a review (to be monitored by the Commission) of that award to give effect to the structural efficiency principle.
(d) The dates of operation of the first increase agreed by the parties will be the day the agreement is approved by the Commission.
NATIONAL WAGE CASE AUGUST 1988 11
(e) Where increases in individual awards are arbitrated, retrospectivity will not be granted by the Commission.
(f) Any claims for increases in wages and salaries or improvements in conditions which exceed the maximum allowable increases in accordance with paragraph (a) will be processed in national wage case proceedings or before a specially constituted Full Bench.
STRUCTURAL EFFICIENCY
Increases in wages and salaries or improvements in conditions allowable under the National Wage Case decision of 12 August 1988 shall be justified if the union(s) party to an award formally agree(s) to co-operate positively in a fundamental review of that award with a view to implementing measures to improve the efficiency of industry and provide workers with access to more varied, fulfilling and better paid jobs. The measures to be considered should include but not be limited to:
. 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 the industry;
. including properly fixed minimum rates for classifications in awards, related appropriately to one another, with any amounts in excess of these properly fixed minimum rates being expressed as supplementary payments;
. updating and/or rationalising the list of respondents to awards;
. addressing any cases where award provisions discriminate against sections of the work-force.
WORK VALUE CHANGES
(a) Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification.
These are the only circumstances in which rates may be altered on the ground of work value and the altered rates may be applied only to employees whose work has changed in accordance with this principle.
However, rather than create a new classification it may be more appropriate in the circumstances of a particular case to fix a new rate for an existing classification or to provide for an allowance which is payable in addition to the existing rate for the classification. In such cases the same strict test must be applied.
12 NATIONAL WAGE CASE AUGUST 1988
(b) Where new or changed work justifying a higher rate is performed only from time to time by persons covered by a particular classification or where it is performed only by some of the persons covered by the classification, such new or changed work should be compensated by a special allowance which is payable only when the new or changed work is performed by a particular employee and not by increasing the rate for the classification as a whole.
(c) The time from which work value changes should be measured is the last work value adjustment in the award under consideration but in no case earlier than 1 January 1978. Care should be exercised to ensure that changes which were taken into account in any previous work value adjustments are not included in any work evaluation under this principle.
(d) Where a significant net alteration to work value has been established in accordance with this principle, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment should normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work. However, where appropriate, comparisons may also be made with other wages and work requirements within the award or to wage increases for changed work requirements in the same classification in other awards provided the same changes have occurred.
(e) The expression "the conditions under which the work is performed" relates to the environment in which the work is done.
(f) The Commission should guard against contrived classifications and over-classification of jobs.
(g) Any changes in the nature of the work, skill and responsibility required or the conditions under which the work is performed taken into account in assessing an increase under any other principle shall not be taken into account in any claim under this principle.
SUPPLEMENTARY PAYMENTS
For the purpose of this principle, a supplementary payment is a separate amount in a minimum rates award which is in addition to the minimum rate and which together with the minimum rate becomes the award rate below which no employee may be paid.
Whether by consent or arbitration, a supplementary payment may be introduced into a minimum rates award or an existing supplementary payment may be increased only in accordance with the following criteria:
(a) The prime consideration will be the level of actual payments to the employees covered by the award under review. Where relevant the level of supplementary payments made to similar classifications of employees in other minimum rates awards may also be taken into account.
(b) The relevant union or unions must give appropriate commitments regarding the absorption of overaward payments up to the level of the supplementary payment. Supplementary payments do not justify increases to employees already receiving in excess of the minimum rate plus the supplementary payment.
(c) There must be a clear understanding and acceptance by the unions concerned in the award that the introduction or adjustment of supplementary payments may alter relativities of actual rates within the award and with other awards.
NATIONAL WAGE CASE AUGUST 1988 13
(d) Where appropriate, supplementary payments may vary between classifications and geographic areas.
(e) The date of operation of any supplementary payment will be determined by the Commission.
(f) Any claims for adjustment to existing supplementary payments (except as a result of the first increase allowed by the National Wage Case decision of 12 August 1988) will be processed in national wage case proceedings or by specially constituted Full Benches.
ALLOWANCES
(a) Existing Allowances
(i) Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect the relevant change in the level of such expenses.
(ii) Existing allowances which relate to work or conditions which have not changed may be adjusted from time to time to reflect national wage increases, except where a flat money amount has been awarded, provided that shift allowances expressed in awards as money amounts may be adjusted for flat money amount national wage increases.
(iii) Existing allowances for which an increase is claimed because of changes in the work or conditions will be determined in accordance with the relevant provisions of the work value changes principle.
(b) New Allowances
(i) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses.
(ii) No new allowances shall be created unless changes in work have occurred or new work or conditions have arisen: where changes have occurred or new work and conditions have arisen, the question of a new allowance, if any, shall be determined in accordance with the relevant principle.
The relevant principle in this context may be work value changes or first awards and extensions to existing awards principle.
(c) Service Increments
(i) Existing service increments may be adjusted in the manner prescribed in (a)(ii) of this principle.
(ii) New service increments may only be allowed to compensate for changes in the work and/or conditions and will be determined in accordance with the relevant provisions of the work value changes principle.
SUPERANNUATION
(a) Pursuant to section 28 of the Act, agreements may be certified or consent awards made providing for employer contributions to approved superannuation schemes for employees covered by such agreements or consent awards provided those agreements or consent awards:
14 NATIONAL WAGE CASE AUGUST 1988
(i) operate from a date determined or approved by the Commission; and
(ii) do not involve the equivalent of a wage increase in excess of 3% of ordinary time earnings of employees.
(b) Where, following a claim for employer contributions to approved superannuation schemes for employees, the parties are unable to negotiate an agreement consistent with this principle, and conciliation proceedings before the Commission have also failed to achieve such an agreement, the Commission shall, subject to the provisions of the Conciliation and Arbitration Act, arbitrate on that claim.
(c) In any case in which the Commission determines, pursuant to (b) of this principle, that a claim or part thereof should be granted, it shall award no more than 1.5% of ordinary time earnings to operate no earlier than 1 September 1988 and no more than a further 1.5% to operate no earlier than 1 January 1989; provided that in any such case determined to operate on or after 1 January 1989, the Commission may award 3% of ordinary time earnings.
(d) The Commission will not grant retrospective operation for any matters determined in accordance with this principle.
(e) For the purposes of this principle, approved superannuation scheme means a scheme approved in accordance with the Commonwealth Operational Standards for Occupational Superannuation Funds.
STANDARD HOURS
(a) In dealing with claims for a reduction in standard hours to 38 per week, the cost impact of the shorter week should be minimised. Accordingly, the Commission should satisfy itself that as much as possible of the required cost offset is achieved by changes in work practices.
(b) Claims for reduction in standard weekly hours below 38, even with full cost offsets, will not be allowed.
(c) Changes in work practices designed to minimise the cost of introducing shorter hours will not be a consideration for claims under any other principle.
CONDITIONS OF EMPLOYMENT
Except for the flow-on of test case provisions, applications for changes in conditions other than those provided elsewhere in the principles will be considered in the light of their cost implications both directly and through flow-on and must be processed in national wage case proceedings or before specially constituted Full Benches.
ANOMALIES AND INEQUITIES
(a) Anomalies
(i) In the resolution of anomalies, the overriding concept is that the Commission must be satisfied that any claim under this principle will not be a vehicle for general improvements in pay and conditions and that the circumstances warranting the improvement are of a special and isolated nature.
NATIONAL WAGE CASE AUGUST 1988 15
(ii) Decisions which are inconsistent with the principles of the Commission applicable at the relevant time should not be followed.
(iii) The doctrines of comparative wage justice and maintenance of relativities should not be relied upon to establish an anomaly because there is nothing rare or special in such situations and because resort to these concepts would destroy the overriding concept of this principle.
(b) Inequities
(i) The resolution of inequities existing where employees performing similar work are paid dissimilar rates of pay without good reason, shall be processed through the Anomalies Conference and not otherwise, and shall be subject to all the following conditions:
(1) The work in issue is similar to the other class or classes of work by reference to the nature of the work, the level of skill and responsibility involved and the conditions under which the work is performed.
(2) The classes of work being compared are truly like with like as to all relevant matters and there is no good reason for dissimilar rates of pay.
(3) In addition to similarity of work, there exists some other significant factor which makes the situation inequitable. An historical or geographical nexus between the similar classes of work may not of itself be such a factor.
(4) The rate of pay fixed for the class or classes of work being compared with the work in issue is a reasonable and proper rate of pay for the work and is not vitiated by any reason such as an increase obtained for reasons inconsistent with the principles of the Commission applicable at the relevant time.
(5) Rates of pay in minimum rates awards are not to be compared with those in paid rates awards.
(ii) In dealing with inequities, the following overriding considerations shall apply:
(1) The pay increase sought must be justified on the merits.
(2) There must be no likelihood of flow-on.
(3) The economic cost must be negligible.
(4) The increase must be a once-only matter.
(c) Procedure
(i) An anomaly or inequity which is sought to be rectified must be brought to the Anomalies Conference by the peak union councils, namely, the ACTU and the ACPA, or by any union not affiliated with those bodies.
(ii) The matter is first discussed with the employers and other interested parties at the Conference.
16 NATIONAL WAGE CASE AUGUST 1988
(iii) The broad principles for processing the anomaly or inequity raised are:
(1) If there is complete agreement as to the existence of an anomaly or inequity and its resolution, and the President is of the opinion that there is a genuine anomaly or inequity, the President will make the appropriate order to rectify it.
(2) If there is no agreement at all, one of two situations can arise. Either the President will hold that there is no anomaly or inequity falling within the concept of the Conference which would mean an end of the matter as far as the Conference is concerned or on the other hand the President could hold that there was an arguable case which would then go to a Full Bench of the Commission for consideration.
(3) This procedure can be departed from by agreement and with the President's approval.
(4) Provided that the foregoing procedure shall not apply to any claim made subsequent to 12 August 1988. Any such claim must be processed through national wage case proceedings or by a specially constituted Full Bench.
PAID RATES AWARDS
(a) Except in the case of first awards, the Commission will refrain from making any new paid rates awards. In the making of first awards the conditions as provided in the first awards and extensions to existing awards principle must be complied with.
(b) The rates of pay prescribed by the new award must be expressed in terms of a properly fixed minimum rate plus supplementary payments.
(c) The Commission may convert into a minimum rates award a paid rates award which fails to maintain itself as a true paid rates award. The conversion of such a lapsed paid rates award into a minimum rates award will involve the valuation of the classifications in it by comparison with similar classifications in other minimum rates awards excluding supplementary payments.
FIRST AWARDS AND EXTENSIONS TO EXISTING AWARDS
(a) In the making of a first award, the long established principles shall apply i.e. prima facie the main consideration is the existing rates and conditions.
(b) In the extension of an existing award to new work or to award-free work the rates applicable to such work will be assessed by reference to the value of work already covered by the award.
(c) In awards regulating the employment of workers previously covered by a State award or determination, existing rates and conditions prima facie will be the proper award rates and conditions.
(d) Where a first award is made it shall contain a minimum rate for each classification of employee covered by it. Where the total rate determined for each classification in accordance with (a) and (c) exceeds the appropriate minimum rate for that classification, the excess amount shall be prescribed as a supplementary payment. For the purposes of this paragraph, the appropriate minimum rate will be assessed by comparison with similar classifications in other minimum rates awards.
NATIONAL WAGE CASE AUGUST 1988 17
ECONOMIC INCAPACITY
Any respondent or group of respondents to an award may apply to reduce and/or postpone the application of any increase in labour costs determined under the principles on the ground of very serious or extreme economic adversity. The merit of such application shall be determined in the light of the particular circumstances of each case and any material relating thereto shall be rigorously tested.
18 NATIONAL WAGE CASE AUGUST 1988
APPENDIX B
STATEMENTS
21 JUNE 1988
It is our general view that industrial action engaged in by sections of industry are appropriately dealt with by Members of the Commission to whom those disputes are allocated and that such action should not generally be allowed to interfere with the conduct of the National Wage Case.
However, in this case:
(i) action is taking place by a Federal union in relation to the very issue that is before this Bench;
(ii) the action is nationwide, total industry stoppage;
(iii) the action will have a serious impact on the Australian economy; and
(iv) the application to adjourn the proceedings by the Confederation of Australian Industry is supported by other employers, the Commonwealth and all State Governments (other than Victoria).
On 2 June at the end of the conference of National Wage Case parties, a statement was made which included the following:
". . . that the Commission will not condone industrial action being taken . . . Industrial action is both unnecessary and undesirable and can only be prejudicial to the union case which will be determined having regard to the submissions and material put before the National Wage Case bench and not otherwise."
In the circumstances we would also indicate that the Commission will not act under duress and it will not certify agreements in respect of a matter conceded under duress, whether the agreements relate to National Wage Case proceedings or otherwise.
The Commission has been informed that the proposed stoppage will last for 24 hours. Accordingly, we will adjourn the proceedings until 10.00 a.m. on Thursday, 23 June.
The notification to the Commission by the employers of the union claims will be listed as soon as practicable.
NATIONAL WAGE CASE AUGUST 1988 19
6 JULY 1988
On three occasions during this case - once in the National Wage Case Conference and twice by this Full Bench - the Commission has expressed its serious concern at the nature and incidence of industrial action about the very matters subject to these proceedings.
We have said that the industrial action is not condoned, that it is unnecessary and that it will not influence our judgment in this case.
Notwithstanding our clearly expressed concern, we are again confronted today with industrial action on a massive scale. Those who have organised the current industrial action are inflicting nothing but hardship on the community, loss of income on workers, their families and industry generally. Moreover, there is the possibility of more industrial action in the immediate future.
The present campaign must raise very real doubts about the trade union movement's bona fides in its stated commitment to a centralised and stable system of industrial relations. It cannot have it both ways. It cannot make National Wage Case applications and threaten industrial action. The Commission indicated in the April 1981 National Wage Case decision:
"Unless the level of industrial disputes is contained and the processes of conciliation and arbitration accepted as the means of resolving issues in dispute, there does not seem much point in searching for a centralised system." [Print E6000; (1981) 254 CAR 341 at 377]
It is important that this be understood.
These proceedings are adjourned until 10.00 a.m. on Thursday, 7 July 1988.
20 NATIONAL WAGE CASE AUGUST 1988
13 JULY 1988
We have been advised that the ACTU "has determined clearly that its priority is to pursue its claims now before the Commission through the Commission and not through industrial action".
Notwithstanding that, the Federal Executive of the Printing and Kindred Industries Union (the union) has directed that the members of that union are to participate today in a 24-hour national strike. That action is stated to be in support of the very claim subject to these National Wage Case proceedings.
In taking this action, the union has clearly rejected warnings from this Full Bench and deliberately flouted the recommendation of a Deputy President of the Commission. This is not the first time the union has done this during the period of the current wage fixation principles. In a decision of 11 December 1987 in matter C No. 5541 of 1987 the union and its members were found to have "deliberately set out to flout a decision and directions of this Commission" and to have clearly breached their commitment to the current wage fixation principles. Their behaviour was stated to raise serious doubts as to the organization's understanding and acceptance of its responsibilities as a registered organization and the bona fides of any commitments it might make.
The current behaviour of the union does nothing to dispel these doubts.
In these circumstances, we have decided not to treat the PKIU as a party to the ACTU applications in this case.
All applications which the PKIU has made, or will make, to vary its awards to give effect to the decision of this Commission in this case will be dealt with by this National Wage Case Bench. Any such applications will not be listed for hearing before the handing down of our decision in this case.
NATIONAL WAGE CASE AUGUST 1988 21
APPENDIX C
EXTRACTS FROM SUBMISSIONS
Australian Council of Trade Unions
General Wage Adjustments
". . . the current two tier system of wage fixation cannot form the basis of a workable wage fixation package for the future and should be replaced by a system which better reflects current circumstances and is capable . . . of forming the basis of a workable wage fixation package." (Pages 9-10 of transcript)
"The claim is for the first two cost of living cases of 3% from 1 July 1988 and a further 3% from 1 December 1988 to cover cost of living for the financial year ending June 1989."
". . . the granting of the claim is necessary in order to protect real wages, particularly so in the context of very significant reductions in living standards imposed on wage and salary earners over recent years." (p.155)
Further Adjustments - Secondary Claims
"Further adjustments secondary claims based on restructuring, work value, supplementary payment, anomalies or inequities where relevant . . . the finalisation of existing second tier claims, occupational superannuation and shorter hours."
"The timing of secondary claims and their very limited cost impact in 1988-89 is consistent with our acceptance of economically appropriate wage outcomes in 1988-89, an outcome consistent with realising further progress in reducing inflation . . . the finalisation of outstanding second tier claims, standard hours reductions and superannuation would equally have minimal impact . . ." (p.155)
Principles
". . . the system did assist the sustained effort in addressing Australia's economic problems and in particular the balance of payments constraint . . . has also contributed to a sensible and constructive wages policy within a broader policy framework, resulting in controlled aggregate wages outcomes whilst also facilitating and enhancing efficiency improvement, notwithstanding some features of its operation which weakened support for it."
"The package has provided some impetus to improve productivity and efficiency. It has accorded some protection to the lower paid by way of flat general increases and supplementary payments in relevant areas . . . the success of the system in broadly meeting the Commission's objectives reflects the balance achieved by the Commission between restraint and a workable wages system capable of attracting support and between aggregate wage outcomes and a capacity to address efficiency issues at an enterprise or industry level." (p.118)
"The ACTU supports the development of a set of wage fixation principles to operate over the course of 1988-89. Such principles should reflect and accommodate the economic, social and industrial relations environment at the current time and expected over the duration of the system. It should also reflect the experience of past wage fixation systems, including the current system." (p.138)
22 NATIONAL WAGE CASE AUGUST 1988
". . . the system needs to be simpler . . ." (p.138) ". . . there needs to be a greater understanding of the system amongst more workers."
". . . the outcomes need to be assured . . . if there is a maximum placed on unions, there must be an assured minimum."
". . . living standards must be maintained." (p.139)
". . . the future rate of inflation is more important than the past." (p.140)
"Social bargaining through tax and in some cases expenditure policies must be retained."
"All workers should receive the benefits of the existing two tier system."
"There should continue to be steps towards the restructuring of awards based on multi-skilling, career development and simplification of awards."
"We should continue steps towards a fairer award system, particularly in respect of paid rates awards." (p.141)
". . . there should be an objective examination of the relationship between the public sector and the private sector." (p.142)
"Further wage fixing principles also need to provide for a clear ongoing role for supplementary payments and allow for the conclusion of a 38-hour week as a general standard and the establishment of a 3% universal superannuation entitlement." (p.143)
". . . right across the spectrum of the Commission's awards there exists legitimate and important secondary claims which need to be accommodated within any future wage fixation . . ." (p.288) ". . . it is . . . necessary to allow such secondary claims to be addressed fully without the stifling effect of an arbitrary ceiling . . . by their nature (they) will have a limited cost impact in 1988-89 due to . . . progression over time and phased implementation . . ." (p.289)
". . . the ACTU is not opposed to a precondition for access to the benefits of the package, and we recognise and accept that adherence to the system and wages outcomes within it is inextricably linked to the provision within the system of minimum wage outcomes, and that one could not be expected to occur without the other . . . our position remains in favour of a collective commitment by the trade union movement." (p.296)
"To work effectively the package will need to be given effect to by State tribunals. Any wages package will need to be consistently applied by all tribunals, State and Federal, if a centralised system is to operate to maximum effect." (p.310)
Australian Council of Professional Associations
General Wage Adjustments
". . . a 6% increase in pay rates to preserve the real value of wages against cost of living increases over the year ending June 1989 and . . . further unspecified salary increases on grounds to be determined." (p.314)
". . . there is a common ground in the form of the national wage adjustment sought by the ACTU and the ACPA and that is a uniform percentage adjustment for all employees." (p.319)
NATIONAL WAGE CASE AUGUST 1988 23
Further Adjustments - Secondary Claims
"ACPA proposes that wage increases based on . . . restructuring and efficiency, work value changes, supplementary payments, allowances, anomalies and inequities and conditions of employment not be subject to arbitrary cost ceiling and that the restructuring and efficiency ground not be limited to a narrow concentration on work practices, nor subject to a short-term cost offset requirement." (p.314)
". . . should also allow the processing and finalisation of claims under the 10 March 1987 principles relating to second tier grounds, superannuation and reduction of standard hours to 38 per week." (p.315)
Principles
". . . ACPA proposes that the following wage fixing principles set out at pages 36 to 41 of Print G6800 of March 1987 generally form appropriate grounds for wage increases in addition to a 6% cost of living adjustment . . ." (p.314)
". . . ACPA supports the continuation of the following principles in the current system into a new system to apply for the next year. Work value changes, supplementary payments, anomalies and inequities, allowances and conditions of employment. The ACPA also supports in principle the existence of a principle in the new system designed to facilitate the necessary process of structural adjustment in the Australian economy with the objectives of greater efficiency and productivity in the economy." (p.327)
". . . it may be appropriate in the new system to revise the existing restructuring efficiency principle to allow the parties to address broader and longer-term issues such as skill development and acquisition; appropriateness of award classifications structures; and improved work organisation without the constraint of a requirement to meet an immediate or short-term cost offset."
". . . a restructuring principle and the other principles referred to previously could operate responsibly without an arbitrary cost ceiling over the next year." (p.328)
". . . there is a trend developing in some industries for companies to increase ordinary hours of work for professional employees and to alter hours of work arrangements . . . to the detriment of professional employees."
"The issue of employers reducing standards either unilaterally or through the processes of this Commission was discussed in the June 1986 National Wage Case and commented upon by the Bench in its decision . . ." (p.329)
"The new system should continue the current principles . . . with the modification suggested, and allow for the finalisation of claims under the current principles." (p.330)
National Pay Equity Coalition
General Wage Adjustments
"None of the wage fixing principles devised over the past 15 or so years has facilitated the implementation of the 1972 equal pay principle and . . . in every national wage case the principle of equal pay should be taken into account in setting the principles for the national wage, because . . . the national wage principles cannot effectively or properly be set without regard to that principle of equal pay." (p.364)
24 NATIONAL WAGE CASE AUGUST 1988
"A centralised wage system should apply . . ."
"Full automatic quarterly CPI adjustments, with additional payments as a flat rate up to average weekly earnings and thereafter as a percentage." (p.377)
Principles
". . . principles for national wage fixing cannot be drawn up in an appropriate manner in ignorance of or ignoring the principle of equal pay for work of equal value . . ." (p.330)
". . . the new wage fixing guidelines must allow for a full and comprehensive reassessment of the work value of work traditionally performed by women in order to ensure that award restructures do not merely replicate existing skills hierarchies, entrench existing relativities between male and female held jobs, and therefore perpetuate the need for equal pay cases indefinitely." (p.365)
"As technologies, production processes and the requirements of service industries become more demanding, . . . special measures are required to ensure women get equal access to enterprise training schemes and to external, accredited, formal education." (p.367)
". . . a mopping-up provision for those awards and industries which have not yet received the 4% second tier increase . . ." (p.377)
". . . continuing access for supplementary payments claims . . ."
". . . continuing access for claims under the 1972 equal pay principle . . ."
". . . award restructuring and training packages put forward under national wage guidelines include an equal opportunity assessment of the measures proposed." (p.378)
Confederation of Australian Industry
General Wage Adjustments
". . . estimates that productivity growth will be of the order of 2 to 2.5% in the period ahead . . . it is sensible to recognise this fact and to structure wages policy accordingly." (p.658)
"The Commission should establish a labour cost ceiling for the first year of operation of the wages principles beyond which increases in labour costs would not be permitted. Secondly, any increase granted or awarded during the first year of the operation of the wages principles should apply in two parts, with the first part not to commence before 1 September 1988. There should be an interval of at least six months between the operation of the two parts. Thirdly, the level of the wage ceiling to operate during the first year of the principles should be determined taking into account the expected increases in national productivity, the capacity of the economy to sustain any such increase and its effect on international competitiveness. Fourthly, increases up to the level of the ceiling may be negotiated by the parties, or awarded, in such a manner that these provide for improvements in productivity and efficiency at enterprise or industry levels." (pp.659/660)
"Increases beyond the ceiling should only be permitted under the anomalies principle." (p.660)
NATIONAL WAGE CASE AUGUST 1988 25
Principles
". . . the system we propose is not simply a costs offsets or bean counting system. What we are seeking is a system where the gains sought are gains designed to increase productivity improvement into the future." (pp.836-837)
". . . there is a need for a preamble and that preamble is important in setting the scene for the principles." (p.840)
". . . the issue of commitment is crucial to the operation of any system of wage fixation." (p.841) ". . . urges the Bench to again emphasise the need for unconditional, individual commitment."
". . . secondary claims and special cases . . . as set out by the ACTU will not lead to negligible cost impact . . ." (p.844)
". . . the change that the March 1987 principles brought has been of major benefit to the Australian economy." (p.846)
". . . the second tier was a very positive first step towards creating a better system of wage fixation in Australia . . . the principles that CAI has developed seek to maintain the positive impetus that is apparent from the second tier system and to build upon it." (p.848)
". . . we live in a changing world and that change in itself cannot and should not be seen as a justification for a wage increase." (p.850)
". . . the Commission should take a more positive role in requiring report backs from the parties on the implementation of their restructuring and efficiency agreements." (p.852) ". . . we believe that it is very important that the widest possible means of achieving productivity and efficiency gains be pursued." (pp.860-861) ". . . the emphasis on the proposed principle is at the enterprise level." (p.866)
". . . award conditions are not sacrosanct but should be reviewed in the light of changing circumstances." (p.867)
"It must be possible for relative wages to change over time . . . in the efficiency and productivity principle, the need to look at alterations to relativities must form part of any efficiency and productivity exercise, particularly in the issue of award restructuring . . ." (pp.882/883)
". . . it is in both the employers' and the employees' interests to provide a wider range of choices in ordinary hours to be worked . . ." (p.888)
". . . the most appropriate place for issues resolving more flexible arrangements such as flexibility in working hours or what are the most appropriate working hour arrangements are best determined at the enterprise level in consultation with the work-force." (p.906)
". . . the Commission must give the lead to fostering the ability to introduce different work patterns." (p.907)
". . . in some awards, a need to review the type of classification structure that exists." (p.908)
". . . it is very clear that a broad banding exercise may not necessarily constitute a ground for wage increases . . . The aim of broad banding is to provide a more workable award to reduce demarcation issues, if those issues occur, and to provide a more flexible means of operating a work-force . . . the test of any broad banding exercise should be the efficiencies that will accrue from that particular exercise." (p.910)
26 NATIONAL WAGE CASE AUGUST 1988
". . . multi-skilling reviews do not necessarily of themselves constitute a ground for a wage increase." (p.910) . . . "It is those changes in efficiency and productivity that can lead to wage increases, not the actual multi- skilling exercise itself." (p.911)
"Enhanced work skills have major implications to the industrial relations system in Australia." (p.914) . . . "Skill enhancement has to be at the very minimum self-financing or the country's competitive position will decline rather than grow . . . agreements that involve training or retraining do not in themselves constitute reasons for wage increases. What may constitute a reason for wage increases is the outcomes that are achieved from introducing training into an award structure." (p.914a)
"Inherent in the training and retraining must be that wage increases are only available to those who have taken the training and who use it." (p.915)
"There is a need . . . to go forward from the current restructuring and efficiency principle to place greater emphasis on the need for long term and more permanent change." (p.920)
"Our proposed principle 4: new or changed work, continues to recognise that there must be a very strict test applied when there is a claim for work value increases . . . Our proposed principle therefore does repeat that requirement to limit its application to those persons who can prove that there has been significant net addition. The proposal also allows the introduction of allowance when that significant net addition to work requirements is spasmodic rather than occurring on a continuing basis . . . It should be only when that new function is being performed that the allowance is paid." (p.924)
"The . . . principle . . . on allowances . . . has been drafted to ensure that firstly it is subject to whatever ceiling the Commission determines is appropriate . . . and secondly to provide that the existing allowances which constitute a reimbursement of expenses may be reviewed from time to time." (p.926)
"In relation to service related allowances . . . the mere period of service of an employee does not necessarily mean that there are increases in either productivity or efficiency . . . and . . . there is no intrinsic merit in an employee's pay being increased simply because that employee has worked for the particular employer over a period of time. It is for that reason that CAI does not believe that there is a role for service payments in award structures." (p.927)
". . . there should be no further reduction in standard hours without a proper assessment of those reductions on a national basis . . . There has . . . been ample time for those who wish to pursue a 38-hour week via that mechanism to process their claims . . . no further claims for reductions in standard hours should be processed."
". . . the inequities principle which has provided for a limited form of comparative wage justice is inconsistent with the whole thrust of a productivity and efficiency-based system." (p.932) ". . . the inequities principle . . . should not be retained." (p.933)
". . . in assessing a claim that a matter is special and extraordinary . . . firstly, reliance cannot be placed on a decision or agreement which is inconsistent with the principles as a whole. Secondly, the doctrines of comparative wage justice and maintenance of relativities cannot be relied upon. Thirdly, there cannot be a comparison between minimum rates and paid rates awards. Fourthly, the cost must be consistent with the National Wage Case decision and fifthly, it must be a once only matter and that there should be . . . no flow-on or likelihood of flow-on." (p.934)
NATIONAL WAGE CASE AUGUST 1988 27
". . . with respect to applications for first awards and extensions to existing awards those applications should be consistent with a maximum increase as determined under the principles."
". . . there has been a radical change proposed to the current principle on supplementary payments." (p.935)
"The operation of the supplementary payments principle . . . has been an intrusion by the Commission into the area of overaward payments. An area which has traditionally been held not to be an area in which the Commission should be involved . . . our principle calls for a virtual freeze on supplementary payments." (p.936)
"Much of the concern that employers have always had in this principle goes to ensuring supplementary payments are only introduced in circumstances where overaward payments apply generally through the industry." (p.939)
"The major problems that employers have identified in relation to the operation of the supplementary payments principle are firstly, unions pursuing the supplementary principle in lieu of the restructuring and efficiency principle; secondly, the difficulties in many awards, especially when the matter is to be arbitrated, in determining what is the level of overaward payments being made in the industry; thirdly, the difficulty in identifying what is an appropriate . . . overaward payment to take into account when determining whether supplementary payments should be introduced into the award, and if so, the level of overaward to consider, that is the issue of the different reasons for the making of overaward payments. Fourthly, the argument that has been pursued by the union movement in attempting to create a de facto pay rates concept stating that a minimum rates award is a de facto pay rates award because the union has not actively campaigned for overaward payments. Fifthly, the issue of the so-called lower paid worker and, lastly . . . the likely long term consequences in introducing supplementary payments into many awards." (p.957)
". . . the adjustment of paid rates awards under this principle should be restricted as most paid rates awards did receive a market rate adjustment under the pre-existing anomalies principle. Adjustment for paid rates awards . . . can only occur where there has been a substantial alteration to the market in which those paid rates awards operate." (p.978)
". . . this Commission should not involve itself with superannuation except with the consent of the parties." (p.981)
". . . superannuation can only properly operate in a consent situation. It is not . . . an appropriate area for arbitration . . . superannuation is very much an enterprise concern and is not capable of being imposed without creating severe problems by arbitration on either non-consent parties or even . . . on parties that have not even been identified." (p.981a)
". . . our proposed principle is that it must be clear that the principle should only apply to enterprises or industries in which there is currently no provision for superannuation . . . it is not for this Commission to determine whether current arrangements are, or are not, suitable . . . superannuation should be subject to the maximum labour cost increase determined by this Commission so that unions can determine whether in pursuing increases in wages and conditions of employment that the increase should be translated into superannuation, or increases in wages or changes in the conditions of employment." (p.983)
28 NATIONAL WAGE CASE AUGUST 1988
". . . changes in conditions of employment should be a feature of our proposed . . . efficiency and productivity principle, and that it should come within the labour cost ceiling." (p.988)
"The final principle . . . goes to . . . exemptions from labour cost increases . . . this principle has been recast to ensure that the incapacity principle is applied in such a way as to protect employment levels. This . . . is necessary because in a sense capacity to pay a wage increase can be artificially enhanced by shedding labour." (p.992)
". . . secondary claims will not be allowed in excess of the predetermined level of wages outcome for the year . . ." (p.995)
". . . on the introduction of the new system, existing second tier claims should still be able to be processed consistent with the March 1987 principles . . . all second tier claims should be lodged prior to the end of the year. Any claims lodged after that date should be processed through the anomalies conference." (p.1000)
Business Council of Australia
General Wage Adjustments
". . . determine an overall maximum increase within which there could be negotiations at the enterprise level or improvements in award wages and conditions of employment related to improvements in productivity, competitiveness and efficiency in those enterprises." (p.1062)
"An increase of 4.5% for award wage increases and/or improvements in conditions of employment, including superannuation, with enterprise based negotiations able to commence from September/October, could result in all wage earners after tax real earnings being maintained, assuming that the government does deliver substantial real tax cuts in mid-1989." (p.1102)
". . . the next wage system should be built on the best features of the two tier system, being as conducive as possible to productivity improvement and workplace reform. It should provide sufficient scope for negotiations on wage rises to achieve those reforms. It should last into 1990; it should offer a modest increase in the middle of 1989 to those who have not negotiated wage agreements by then; and it should have a maximum outcome which enables Australia to match the labour cost outcomes of its trading partners within the next 18 months." (pp.1120/1121)
Principles
". . . there needs to be a cut off point, coinciding with the introduction of the next system, after which no new claims should be capable of being made under the existing principles." (p.1025)
". . . the council proposes some changes to the restructuring and efficiency principle . . . to emphasise the broadness of the concept and its applicability to changes in award as well as non-award matters (and) to exemplify working time arrangements, including changes to standard hours, as a matter which should be addressed in improving efficiency." (pp.1064/1065)
". . . the council continues to oppose reductions in standard hours on an across-the-board basis . . . nevertheless . . . as a part of an exercise carried out to lift productivity in a single enterprise, changes to standard hours could be a possibility."
NATIONAL WAGE CASE AUGUST 1988 29
". . . the council submits that the existing employment conditions principle can be subsumed into the restructuring principle." (p.1065)
"(re) work value, the council proposes only one minor change to the existing principle . . . an addition intended to provide guidance for dealing with the implications of skill formation efforts . . . an addition is necessary to ensure that firms were not required to go beyond the point of paying higher wages to employees who actually acquire or apply the new levels of skills . . . strongly opposed to one emerging view that the acquisition of new or higher skills should be compensated for even if that acquisition is never used." (p.1066)
". . . allowances . . . the council has not proposed any change to that."
". . . amend the existing principle to rule out second bites at superannuation for those who have already benefited." (p.1067)
". . . part (a)(iv) of the anomalies principle and the whole of the inequities principle should be deleted." (p.1070)
". . . supplementary payments . . . the Commission should do no more than permit the introduction of or increase the supplementary payments on a single- employer basis and by consent only . . ."
"Supplementary payments . . . be introduced through the making of paid rates awards in accordance with the proposed (BCA) paid rates principle . . . The actual level of overaward being paid to the employees employed in the enterprise concerned would be the level of supplementary payment to be incorporated in an enterprise paid rates award. There may be no direct labour cost increase . . . Alternatively, . . . where new supplementary payments are to be introduced, the cost . . . be no more than the overall maximum increase allowed by the package . . ."
". . . the existing or actual rates and conditions as opposed to the so-called standards contained in the generality of awards would apply in the case of first awards." (p.1072)
Australian Mines and Metals Association
General Wage Adjustments
"Support for the submissions presented by the CAI."
"The National Wage Case Bench should have particular regard to the very real problems faced by employers in export oriented industries when considering applications for across the board wage increases." (p.1308)
". . . scope for pay rates and conditions to result from direct negotiation between employer and employee in respect of each business." (p.1343)
Metal Trades Industry Association of Australia
General Wage Adjustments
"MTIA's agreement with the metal trades unions commits MTIA to support the Commonwealth's submission in this case as to an outcome which provides the capacity to maintain real wages in 1988-89.
30 NATIONAL WAGE CASE AUGUST 1988
Accordingly, our position is as follows:
1. MTIA supports the ceiling on wages in 1988-89 of 5.5%. MTIA proposes that there should be limited opportunities under the close supervision of this Commission for further increases based on award restructuring and skill enhancement . . .
2. MTIA supports a two-stage wage adjustment. The first stage being an amount of about half of the ceiling and the second being the balance of the amount up to the ceiling of 5.5%.
3. MTIA supports the Commonwealth's proposed scheme of negotiated settlements and minimum arbitrated outcomes; and
4. MTIA supports the operative dates proposed by the Commonwealth." (pp.1131/1132)
Principles
"MTIA urges the Commission that in framing any new wage fixing principles the process of change, which is taking place in work practices, management techniques, utilisation of labour skills, and perhaps more fundamentally in attitudes, be given added impetus." (p.1133)
"Wage increases under the second tier principle should continue to be accessible to those employees who have not . . . yet received such . . . increase."
"The restructuring and efficiency principle should be revised so that it is consistent with the Commonwealth's negotiated settlements concept . . ." (p.1168)
". . . the no extra claims commitment must be retained . . . the existing principle relating to work value changes should be retained."
". . . limited and exceptional situations might arise wherein the extent of work value change with particular classifications and groups might have a cost in excess of the proposed ceiling and that cases falling into this category could be processed through the anomalies conference or through the National Wage Case Full Bench taking care that no double counting arises out of the operation of the restructure and efficiency and work value principles."
". . . the supplementary payments principle should be retained . . . the allowance principle should be retained."
". . . a superannuation principle which enables employers and employees to reach consent arrangements providing for contributions by the employer not exceeding 3% of ordinary time earnings to an approved superannuation scheme . . . should not be the subject of the wages ceiling."
". . . no objection to the standard hours principle being retained . . . the conditions of employment principle should be retained . . . MTIA supports the retention of the anomalies and inequities principle . . . the present principle relating to paid rates award should be retained . . . however . . . it may be appropriate to make provision for a conference to be held on this matter at some later time."
". . . the first awards and extension to existing awards be retained . . . the principle dealing with economic incapacity must . . . be retained." (p.1169)
NATIONAL WAGE CASE AUGUST 1988 31
National Farmers' Federation
Australian Chamber of Commerce
General Wage Adjustments
". . . neither the NFF nor the ACC supports centralised wage fixation, nor do they support industry by industry wage fixation under the auspices of this Commission. Their preferred system is that wages be fixed by direct negotiation between employers and employees, and be subject to market forces with all that that entails . . . We understand that . . . is outside the control of this Commission and (we) . . . intend to pursue that in the appropriate place with legislatives. (pp.1262/1263)
". . . real wage maintenance after tax . . . would be more appropriately delivered by modest personal income tax now." (p.1263)
". . . for 88-89 total earnings growth should not exceed, and preferably should fall below the average for our trading partners which we fix at being on expectation between about 4 and 5%." (p.1263)
". . . when fixing award rates a mechanism for taking into account wages drift which we estimate to be about 1.5%; processing of current second tier claims, which we estimate to be between about 1 and 1.5%; processing of current superannuation claims and the like, leaving scope for award wage increases between 1 and 2%." (p.1264)
Principles
". . . the objectives of the wage fixing principles ought to be four-fold; lowering inflation, creating employment, improving the international competitiveness of the Australian economy, and increasing real wages over time in line with increased productivity." (p.1269)
". . . the Commission . . . should annually review its principles and determine whether there is an increase in labour productivity in the preceding 12 months. If it concludes that there is to express it in percentage terms and make that a vehicle for individual enterprises or industries under individual award to share in that productivity to the percentage of movement in the previous 12 months." (p.1274)
"The reason why the commitment is required is if the trade union movement is to have access to the national labour productivity finding, it ought to commit itself to the principles . . ." (p.1281)
". . . those who have not yet taken advantage of the current second tier can still do so." (p.1282-1283)
". . . work value changes ought to be assessed back to the March 1987 principles, and not before . . . wind up all avenues under the old principles before creating new avenues under the new principles."
". . . the Commission . . . determine whether to reduce or delete supplementary payments . . . (to) set a minimum wage universally applicable . . . provide a legally fixed minimum which no adult employee shall be paid below for standard hours . . ." (p.1284)
". . . the paid rate should be the rate which is necessary to attract labour and reward effort . . . the fact that . . . people are being paid substantially over minimum rates, and . . . that this justifies an increase in the award . . . for . . . everybody else who is in the same classification, takes incentive out of the wages system." (pp.1285/1286)
32 NATIONAL WAGE CASE AUGUST 1988
". . . leave scope for allowances which are reimbursements of expenses to be adjusted . . . but . . . not for the introduction or . . . increase of allowances."
". . . superannuation . . . claims currently outstanding be dealt with . . . New claims . . . or improvements to superannuation (be) dealt with under the enterprise restructuring principle . . . the Commission should not be drawn into arbitrating . . . between particular superannuation funds." (p.1293)
". . . changes in hours of employment can be allowed . . . by a mechanism of striking the hourly rate, then changing the hours and striking the new rate as the number of hours times the hourly rate." (p.1299)
". . . conditions of employment . . . ought to be considered against the unitary tier" (wages ceiling).
". . . anomalies and inequities which are outstanding ought to be processed . . . but apart from that . . . removed from the system."
". . . strenuously oppose the making of paid rates awards . . . set minimum rates awards . . . there . . . be flexibility in relation to overawards . . ."
". . . first awards and extensions to existing awards . . . shall . . . be governed by the minimum rate . . ." (p.1300)
". . . make application for exemption from increase in labour costs on the grounds that such proposal or award would have adverse economic effect . . . the object of creating employment would be very relevant so that . . . persons who came before the Commission and said this award increase will have an adverse effect on the object of creating employment . . . by creating unemployment in our enterprise or our company ought to have the option to opt out of the particular increase proposed." (pp.1300/1301)
". . . if industry associations want to go down the track of - as it has misleadingly been called - maintaining real wages, they can do so . . . we object . . . that those associations can come to this Commission and say: We have gone down that track; you, the Commission, send everybody down that track with us, by adopting our proposal . . . everyone should be free to go to hell in his own way, but he should not have the freedom to coerce others to join him. And those industry associations who have done that should know that they do it for their own reasons and at their own peril . . ."
"We believe that the best way of allowing other employer bodies the freedom to follow their own path and the freedom to protect their own competitiveness and the freedom to protect their own efficiencies, is to allow a system where wages are based on negotiation under our unitary system where the obligation goes right back to those employers, those unions and those employees directly concerned to look after and protect their own interests." (p.1305)
Australian Coal Association
General Wage Adjustments
"The new system of wage fixation should be applied in accordance with the following broad principles to guide developments over the medium to longer term.
1. The system should have a life of at least 5 years.
NATIONAL WAGE CASE AUGUST 1988 33
2. Across-the-board movement in wages should be agreed or arbitrated from time to time. The outcome must be a level of wage increase which does not impair the competitiveness of Australian goods and services internationally.
3. Enterprise or industry level movements in wages to a defined maximum should be agreed or arbitrated from time to time reflecting improved economic performance in those enterprises or industries through improvement in productivity.
4. Annual reviews to determine appropriate wage movements in accordance with points 2 and 3 should be undertaken.
5. The principle of comparative wage justice should not apply to any adjustments at enterprise or industry level.
6. Wage increases in accordance with point 3 . . . may arise from improved flexibility and efficiency in work organisation and practices, significantly enhance skill levels and the exchange for restructuring of rates and allowances.
7. Individual enterprise agreements should be encouraged, embracing wages and conditions . . .
8. Discussions and/or arbitrations at the enterprise or industry level shall pay regard to the competitiveness and profitability of the industry and the extent to which this has come about through productivity improvements.
. . . a minimal increase be awarded across all wage and salary earners on this occasion. The greater portion of the maximum increase to be determined should be allocated at enterprise and industry discussions in light of improvements in efficiency and productivity . . .
The level of increase within that determined maximum and its timing should be left to discussions within the enterprise or industry, and the result quarantined to that particular enterprise or industry." (pp.1349/1350)
Principles
". . . bring down guidelines or principles that would govern future wage increases, whilst encouraging individual industry or workplace negotiations to gain productivity or efficiency, but not that the Commission would bring down a set of principles that would allow uncontrolled cost increases to flow to the coal industry." (pp.1357/1358)
Australian Federation of Construction Contractors
General Wage Adjustments
"AFCC supports the submission by the ACTU that the real value of award wages should be maintained for a period of 12 months." (p.1370)
Further Adjustments - Secondary Claims
". . . the only other source of wage increase . . . should arise as an offset for improvements in efficiency which result in demonstrable cost savings."
". . . any new wage fixing principles be so drafted as to permit employers and unions in the building industry to negotiate at a site level about wage increases which complement a comprehensive site approach to improvements in efficiency and productivity." (p.1371)
34 NATIONAL WAGE CASE AUGUST 1988
Master Builders Construction and Housing Association of Australia
General Wage Adjustments
". . . the substance of an agreement which has been reached with building unions in relation to what became known as the 6% claim and a number of other claims". (p.1389)
"(i) The new principles should provide for the maintenance of real wages for a period of 12 months from the date of operation of such new system.
(ii) That any wage increase during the 12 months period should be paid in two parts.
(iii) MB-CHAA will support a union application to vary Federal building awards by increasing wage rates by 3% across the board, and . . . support a union request to the Commission that such increase should operate from a date set by the Commission not later than 1 July 1988.
(iv) MB-CHAA would further support an additional percentage wage increase to reflect the balance of CPI movements during the remainder of the 12 months over which the principles operate. This increase would be payable from a date set by the Commission but not later than the end of calendar year 1988." (extract from Exhibit MBA1)
Australian Wool Selling Brokers Employers Federation
General Wage Adjustments
"We . . . oppose the continuation of centralised wage fixation; we oppose price movements as the criterion for wage movements. There should . . . be no presumption that there can and should be increases in wages and salaries at any particular time interval, or at all, until and unless an enterprise's performance warrants it and can sustain it." (p.1403)
Principles
"Nothing . . . is more calculated to engender extreme hostility and rejection than the extension of the Commission's intrusion into the area of superannuation . . . the ambiguity and . . . uncertainty of the restructuring and efficiency provisions . . . and . . . the . . . intrinsically inequitable supplementary payments provisions." (p.1406)
". . . there should not . . . be any supplementary payments imposed upon non-consenting parties."
"Our strongly preferred position is for these major wage cases to be abandoned . . . to be less rather than more structure and for there to be a diminution in the Commission's generalised activity . . ." (p.1427)
Australian Road Transport Industrial Organization
General Wage Adjustments
"In the current procedures before this National Wage Bench, the ACTU has made submissions on two issues which relate to wage rates in the transport industry."
"The second matter relates to the negotiations between the ACTU, the TWU, and ARTIO with regard to future wage fixation." (p.1432)
NATIONAL WAGE CASE AUGUST 1988 35
". . . ARTIO has agreed . . . to support an outcome . . . which facilitates the maintenance of real wages, provided . . . Commission deems . . . such an outcome is economically sustainable." (p.1438)
National Transport Federation
General Wage Adjustments
"The . . . National Wage Case has the opportunity to finally relate wages to performance and incentive, rather than through inflation, which creates expectation without participation by employees who are so vital to company and industry performance."
". . . facilitate a carefully structured transition from the current inflation-based wage structure to performance-based wages."
". . . there is no justification or rationale in a 6% inflation-based wage increase based on a predicted inflation movement, when other major trading countries have an inflation rate well below our own."
"Wage increases need to be based on national performance relative to our major trading partners, otherwise we will pay the price as a nation." (extracts from written submission received 27 July 1988)
Commonwealth Government
General Wage Adjustments
"The Commonwealth considers that the new wage system should have a duration of at least 12 months and be reviewed later in 1989."
"In addition, our proposals should be considered against the personal tax cuts foreshadowed in the May economic statement." (p.558)
"The Commonwealth submits that minimum arbitrated wage increases should be on a percentage basis."
"In determining the overall ceiling for the system . . . have regard to the economic, industrial and social objectives . . . in particular, the need to bring wage growth closer to that of our major trading partners and to reduce inflation further . . . the ceiling should be set at no more than 5.5%."
". . . the first stage of increases being about half the ceiling proposed . . . but not . . . payable before 1 September 1988." (p.559)
"A major thrust . . . is toward negotiated agreements involving commitments by the parties to the award restructuring task . . ."
". . . in a limited number of cases such as the metal industry, parties may achieve a more advanced level of progress and so be in a position to pursue the implementation of at least some elements of new classification structures. Should this occur, it may involve claims for wage and salary increases above the 5.5% ceiling . . . these should be dealt with by the National Wage Case Bench." (p.1474)
Further Adjustments - Secondary Claims
"The parties should be able to negotiate wage packages up to the level of that ceiling (5.5%) with incentives in the system relating to both quantum and timing of increases to encourage negotiations which lay the basis for enhanced
36 NATIONAL WAGE CASE AUGUST 1988
productivity primarily through award restructuring exercises . . . for those unable to reach negotiated settlements, the system should incorporate provision for the subsequent implementation of a significant minimum arbitrated wage outcome determined by the Commission and reflecting both economic and equity objectives for the system." (p.406)
Principles
"The system, through the granting of flat first tier increases and the provision for supplementary payments, was also notable for the assistance provided to lower income earners in a period of reduced community living standards."
"It would be inappropriate to retain the two tier system in the face of widespread support for its amendment." (p.548)
"The wage system must . . . continue to support the process of economic adjustment by delivering ongoing restraint whilst being conducive to increased productivity and efficiency gains. Because of progress to date, further reductions in real wages are no longer essential and indeed are avoidable. However, ongoing restraint in nominal wages growth is required in order to keep wages growth in Australia as close as possible to that of our trading partners and to bring inflation down further. In this way, Australia's international competitiveness can be preserved, with consequent advantage in terms of real wage prospects over the medium term." (p.552)
". . . the objectives we support will best be achieved through the retention of a centralised framework for wage fixation and the improvements in wages or conditions of employment should therefore be subject to a structured set of wage principles, including the ongoing requirement for no extra claims commitments from trade unions." (p.555)
". . . the next wage system . . . outcome would . . . involve the following elements . . . within an overall wage ceiling, the capacity to maintain real wages with sufficient certainty of outcomes to secure commitment to the system overall . . . continued scope for bargaining, with the outcome being staggered wage increases, the operative dates reflecting the progress of negotiations between sectors . . . provision of a significant minimum arbitrated outcome for those workers that do not benefit from negotiated increases, and . . . the phasing of wage increases, whether from negotiations or under the minimum arbitrated outcome." (p.556)
". . . 1988-89 should be a time of consolidation of the gains of the two tier system and negotiations over new award structures and related efficiency changes. Other existing principles should be retained in the new system substantially as at present but with some modifications. Except for the standard hours and superannuation principles, all principles should remain within the ceiling. Scope for any increases beyond the ceiling must be strictly confined to rare and isolated cases . . ." (p.558)
". . . the existing principle relating to work value changes had operated reasonably well and should be retained without major alteration . . . we see the role of work value assessment in restructuring exercises being extended . . ."
"In supplementary payments . . . the Commonwealth would expect there to be relatively limited activity under this principle in the new system . . . the principle should be retained in its present form . . . being subject to a ceiling . . ."
NATIONAL WAGE CASE AUGUST 1988 37
". . . the Commonwealth reiterates its commitment to the establishment of genuine superannuation for all wage and salary earners as an integral element of its retirement benefits strategy." (p.566)
". . . the anomalies and inequities principle . . . be retained in the new system with only minor modifications . . . reworded to provide continued access to the finalisation of outstanding claims . . ." (p.567)
". . . paid rates awards . . . the Commonwealth . . . is not supporting any major changes to this principle . . . would be prepared to participate in conferences . . . if the major parties or the Commission considered that such conferences were desirable . . ."
". . . other principles . . . should remain substantially the same but with appropriate modifications to reflect the nature of the new system." (p.568)
Western Australian Government
General Wage Adjustments
"The maintenance of real wages will be a significant factor in determining the success of a new centralised wages system. We believe that the Australian economy has the capacity to fulfil this objective if payments are made in such a way as not to lead to inflationary pressures."
". . . there be increases in wages of 2% from August 1, and a further 2% from December 1, 1988 . . . conditional upon an indication that the unions are willing to negotiate necessary industry restructuring and increased productivity."
"A third instalment . . . no more than would exceed a ceiling of 6% in total, be payable from 1 March 1989 . . . having elicited from unions a commitment to restructuring as a precondition." (pp.601/602)
Further Adjustments - Secondary Claims
". . . the West Australian Government . . . see an additional amount of up to 1.5% to be available from the end of the 1988-89 period on an enterprise basis where the agreement to restructure has been given effect leading to a significant decrease in costs."
". . . the finalisation of 4% second tier wage increases under the existing system . . ." (p.603)
". . . the provision of superannuation as an integral part of the existing wage fixing system . . . 3% of ordinary time earnings should be available to all employees." (p.609)
Principles
"The effective implementation of the restructuring and efficiency principles in Western Australia has contributed towards productivity improvement which otherwise would have been difficult to achieve . . . leads the Western Australian Government to support its continuation under a new system." (p.601)
". . . the allowances principle should be either varied to remove the requirements for applications for new site allowances in the metal/electrical awards when they exceed any nationally set wage limit . . ." (p.609)
38 NATIONAL WAGE CASE AUGUST 1988
". . . the superannuation principle should be amended to allow the Commission to award, where agreement cannot be reached, the full 3% from 1 January 1989." (p.610)
Victorian Government
General Wage Adjustments
". . . a 3% increase, payable from the first pay period on or after 1 September, and a subsequent 2.5% increase payable from the first pay period on or after 1 March." (p.612)
"Victoria supports the Commonwealth's submission that the wage system deliver ongoing restraint and supports continued progress towards enhanced efficiencies, productivity and suitably directed restructuring." (p.625)
Principles
"The Victorian Government, as an employer, supports the making of paid rates awards." (p.622)
"As well as providing a guaranteed (wages) outcome the Commission should provide for special wage adjustment under a series of principles . . . The principles should not provide a vehicle for general increase." (p.626)
". . . the Commission could consider early involvement in restructuring exercises to assist with the direction and check the growth of expectations."
". . . broad-banding of classifications and training of themselves should not lead to increases. Increases should only be awarded under this principle to employees directly affected by a significant alteration to their skills used or their flexibility. Matters . . . appropriate to a restructuring exercise would include broad banding, multi-skilling, skills and career enhancement, award updating and examination and elimination of barriers to efficiency. Award conditions should not be regarded as sacrosanct but should be examined in the context of their contribution to efficiency."
"The work value principle should . . . continue in a broadly similar form as it is . . . at present . . ."
"Access to the anomalies and inequities principle should remain in their present form . . ." (p.627)
"Standard hours and superannuation should be seen as being outside the negligible cost requirement. Other principles should be retained largely as at present . . ." (p.628)
South Australian Government
General Wage Adjustments
". . . supports the submission of the Commonwealth Government in relation to the form, quantum and timing for general wage increases . . . (and) . . . agrees with the Commonwealth that there should be an overall ceiling to wage rises over the next 12 months of 5.5%." (p.633)
Principles
". . . it would be equitable . . . to have continued access to the second tier principles of the March 1987 decision." (p.633)
NATIONAL WAGE CASE AUGUST 1988 39
". . . the 3% superannuation and 38 hours should continue to be available under the 1987 principles . . ."
". . . the restructuring and efficiency principle should be revised, with more emphasis placed on award restructuring and measures aimed at improving the efficiency of enterprises . . . but increases to come within the ceiling."
". . . work value principle should be retained subject to the ceiling . . ."
". . . supplementary payments principle should be substantially the same as in the March 1987 decision . . . increases should also come within the . . . ceiling."
". . . any new system must maintain an appropriate balance between broad economic considerations, equity and the need to retain a commitment of unions." (p.634)
New South Wales Government
General Wage Adjustments
"The amount by which wages can generally be increased for the financial year 1988-89 should be determined only by full and proper consideration of improving Australia's international competitiveness . . . a general ceiling of 2.5% . . . for the next 12 months . . . will result in an estimated 4.5% increase in average weekly ordinary time earnings over the period." (p.1171)
Principles
". . . the commitment required under the March 1987 principles is sufficient to ensure commitment to the proposed principles."
". . . restructuring of award classifications . . . enables an allowance to be paid where new or changed work is performed only part of the time."
". . . new or changed work should be measured from the time when work value was last assessed, provided there is no double counting . . ." (p.1198)
". . . all allowances relating to work performed including service related increments will be treated equally . . . increased allowances must be justified under principles . . ."
". . . access to a reduction in standard hours to 38 hours per week should be retained." (p.1199)
". . . matters not finalised under the second tier of the March 1987 principles to be processed under these principles provided that safeguards are included which prohibit double counting . . ."
". . . the use of supplementary payments has failed to provide equitably for lower paid workers and consideration of a return to the concept of the general minimum wage rate is necessary." (p.1200)
". . . the paid rates awards principle found in the March 1987 principles should be retained . . ."
". . . the benefits of a limited superannuation contribution should continue to remain open for those who have not benefited from . . . the March 1987 principles." (p.1201)
40 NATIONAL WAGE CASE AUGUST 1988
". . . the proposed principles . . . will at the least allow the excess fat to continue to be trimmed whilst at the other end of the scale will provide an avenue whereby genuine attempts to significantly redesign the whole structure can be accommodated either at an enterprise, industry or award level." (p.1206)
Queensland Government
General Wage Adjustments
"It is submitted that an increase of 2.7% should be awarded on a plateau based on the dollar value of the weighted average minimum weekly award rate of pay for adult wage earners . . .
This would give 2.7% for those earning up to $306.60 per week with a flat amount of $8.30 per week for employees earning in excess of $306.60." (p.1217)
Principles
". . . they (the principles) be developed in the context of economic problems facing Australia, that changes in economic costs should be clearly monitored, opportunities be given to increasing efficiency and productivity at the industry and enterprise level, and protection be accorded to the lower paid . . . any increase in labour costs emanating from application of the principles should be minimal." (p.1221)
". . . advantage in retaining the restructuring and efficiency provision."
". . . the allowance principle . . . the automatic adjustment of existing allowances relating to work or conditions by percentage wage variations may not always be the most appropriate course to follow . . . an opportunity be now given to review the nature of such allowances." (pp.1222/1223)
". . . the other principles, apart from any necessary updating of wording, should remain in their present form."
". . . in relation to standard hours . . . cost offsetting has always been a requirement under this principle and there is no justification for its removal." (p.1223)
". . . any new package would operate for a period of two years with provision for an interim review after 12 months should this be necessary." (p.1224)
Tasmanian Government
General Wage Adjustments
"Wage increases amounting to 6% over the life of the package. The first instalment of 3% available from 1 November this year, a further increase not exceeding 3% payable from a date no earlier than 1 June 1989." (p.1230)
Principles
". . . on restructuring and efficiency . . . we would prefer to see this principle . . . amended or revised to reflect an emphasis on productivity and efficiency . . . increases . . . must be totally offset and . . . outmoded award conditions should not be regarded as sacrosanct . . ."
". . . the point from which work value increases should be measured . . . should be moved forward to the commencement date of the current centralised wage fixing system, namely 23 September 1983."
NATIONAL WAGE CASE AUGUST 1988 41
". . . it may be more appropriate to deal with the issue of service increments under a separate principle." (p.1230)
". . . provisions should be made in the principles to permit those employees who had not yet received their second tier adjustment to do so under the pre-existing provisions." (p.1231)
". . . in the current economic climate a centralised wage fixing system is an appropriate mechanism for administering controls on wages growth . . . allowing a degree of flexibility for unions to pursue justice based on the criteria contained under the principles.
A carefully controlled centralised system is a fair system and one which has helped put our economy on the road to recovery and real growth. We recommend the continuance of the system, subject to specific amendments being made to the existing principles." (p.1232)
Northern Territory Government
General Wage Adjustments
"The best way to achieve a level of restraint that would ensure continued economic improvement is to grant no wage increase at all as a result of this hearing . . . if the Bench is persuaded to grant an increase . . . that increase should be as small as possible, but under no circumstances exceed 3% in total value for the next 12 months, but not in the form of a general wage increase . . . expressed as a percentage . . . on an enterprise by enterprise or industry by industry basis, after the Commission has carried out an investigation to establish productivity improvements and efficiencies . . ." (p.1235)
Principles
"Essentially the Northern Territory Government . . . advocate . . . the adoption of the principles submitted by the Confederation of Australian Industry . . ." (p.1233)
". . . the second tier principle . . . should come to an end when the existing system ceases to operate . . . only claims actually before the Commission and genuinely under negotiation when a decision in this wage case is handed down should proceed to finality." (p.1239)
". . . the 38 hour week is not yet a standard and any move to reduce hours to below 38 would place an additional financial burden on employers . . ." (p.1240)
". . . new or changed work . . . a new provision is required which would make it clear that employers are able to make application to the Commission for reductions in some classifications where appropriate." (p.1241)
". . . special and extraordinary problems . . . be designed to improve consultation in matters before the anomalies conference." (p.1244)
". . . the Commission not be allowed to include in any first award conditions which could be regarded as in excess of industry standards."
"It should very clearly state that the 3% superannuation as provided in existing principles, if approved by the Commission, is a once only grant, and that a new 3% is not available under each set of new principles . . ." (p.1245)
42 NATIONAL WAGE CASE AUGUST 1988
APPENDIX D
THE ECONOMIC CONTEXT
1. Introduction
During this case, much information about the state of the economy was presented to us, interpretations were offered and issues of economic analysis were canvassed. In this Appendix, we make no attempt to survey all of that material. Our objective, rather, is to highlight the information, interpretations and analyses which have the greatest bearing upon the decisions which we must make.
Our task, in the simplest terms, is to balance against each other the benefits likely to flow to employees from wage increases and other benefits likely to emerge from minimising the increases. The Commission does not control real wages, but it affects them by decisions about nominal wages. Its influence over real wages is greater in the period immediately after a decision than in the long term. We accept that concerns about real wages, such as those expressed by the ACTU, are properly to be taken into account in a case such as this. To say this is in no way to endorse any form of indexation. The case for short term enhancement or maintenance of real wages is to be weighed against the benefits of wage restraint; and the outcome of this balancing exercise will vary with circumstances.
The principal benefits of wage restraint are a lesser rate of inflation, a higher level of economic activity (with more employment and less unemployment), more investment, more rapid economic growth and less difficulty in adjusting the domestic economy to external constraints. Each of these benefits may be pursued by other means. Wage restraint, however, has the unique feature of promoting them all simultaneously. The cost of wage restraint, in the short term, is a less favourable outcome for real wages.
In the next section of this Appendix, we outline our assessment of the current state of the Australian economy. Against the background of that assessment, we return, in the final section, to the issue of balancing the costs and benefits of wage increases.
2. The State of the Economy
Economic Activity
Economic activity has been growing quite strongly. Evidence from the national accounts is summarised in Table 1, which shows the increases in the gross domestic product achieved since 1980-81. It is apparent that there was a pause in the economic recovery as between 1985-86 and 1986-87; but higher growth rates have prevailed more recently.
NATIONAL WAGE CASE AUGUST 1988 43
Table 1
Increases in Gross Non-farm Product at Constant Prices,
1980-81 to 1987-88
_______________________________________________________________________________
Percentage increase since previous year
_______________________________________
Income-based Expenditure-based
estimates estimates
_______________________________________
1981-82 1.2 2.5
1982-83 -0.3 -0.9
1983-84 3.4 3.9
1984-85 5.5 4.4
1985-86 4.7 4.6
1986-87 2.6 1.0
1987-88* 4.4 3.7
_______________________________________________________________________________
*Increase to three quarters ended March 1988, expressed at annual rate.
Source: ABS, Australian National Accounts : National Income and Expenditure, Special Issue, March Quarter 1988, Cat. No. 5206.0.
The sources of recent growth are indicated by Table 2, which shows the rates of increase of the various components of the gross domestic product in successive half-year periods. An increase in the growth rate of private investment is the most significant feature of the data set out in the table. A dissection of private investment shows that between the half-year to September 1987 and the half-year to March 1988 expenditure on dwelling construction grew at an annual rate of 21.4 per cent, non-dwelling construction at a rate of 14.7 per cent and equipment at a rate of 9.7 per cent. In 1986-87, gross private fixed investment contributed 16.5 per cent of gross national expenditure (excluding the statistical discrepancy), but it accounted for 57.8 per cent of the growth in expenditure between the two half years ended September 1987 and March 1988. The short term trend toward higher levels of investment, and especially the growth in business investment, is a welcome development - the more so because it has occurred despite the share market collapse of October 1987. It is important that it be sustained. Unfortunately, the most recent estimates of the future private capital expenditure, based on surveys of expectations, indicate that there will be less investment in mining and manufacturing, although investment levels will be maintained in financial services and significantly increased in other industries. The data of building approvals, which are an indicator of building activity in the near future, suggests that dwelling construction will continue to grow; but they also suggest that non-dwelling construction will not rise further in the near future.
44 NATIONAL WAGE CASE AUGUST 1988
Table 2
Changes in the Gross Domestic Product*
_______________________________________________________________________________
Growth rates since previous half-year
_____________________________________
Half-year to Half-year to
September 1987 March 1988
_____________________________________
Final consumption
expenditure
Private 2.8 2.5
Public 3.1 6.5
Gross fixed capital
expenditure
Private 4.3 15.6
Public -5.2 -15.0
Gross National expenditure 5.3 4.4
Exports 1.4 15.5
Imports 2.5 16.2
Gross non-farm product 5.9 4.5
Gross farm product -8.2 4.5
Gross domestic
expenditure
Income-based 5.0 4.5
Expenditure-based 1.5 5.1
_______________________________________________________________________________
*Calculated from seasonally-adjusted data. Growth rates are expressed as annual equivalents.
Source: The Treasury, Economic Round-up, June 1988.
The Australian Bureau of Statistics' index of manufacturing production was 8.2 per cent higher in the March quarter of 1988 than a year earlier, (bringing it to a level which was still only 6.3 per cent above that of 1979-80). Retail sales in the March quarter were 3.7 per cent higher (in constant prices) than a year earlier; and registrations of new motor vehicles in the three months to May exceeded those of the same period in 1987 by 15.7 per cent. None of these indicators suggests any recent loss of momentum.
Notwithstanding the broadly satisfactory development of economic activity, we note the cautious attitude expressed in the OECD Economic Outlook for June 1983: "GDP growth (in Australia) is expected to decline progessively throughout the projection period, largely reflecting a smaller contribution to growth from the real foreign balance in 1988 and slower domestic demand growth in 1989". If signs of a falling growth rate do emerge during 1988-89, tax reductions early in 1989-90, such as the Commonwealth foreshadowed in this case, may be an effective corrective.
NATIONAL WAGE CASE AUGUST 1988 45
Employment and Unemployment
Along with economic activity, employment has risen substantially since the recession of 1982-83. The ACTU said in this case:
Since 1983 over one million new jobs have been created in Australia. Our job growth has been the highest in the OECD area . . . Indeed, from all indications the labour market is very tight. In accepting this view, the ACTU unequivocally rejects the notion that Australia has reached full employment . . . We regard the current rate of unemployment at 7-1/2 per cent as unacceptably high and a tragic waste of human potential . . . Nonetheless, the consistent steady fall in the rate of unemployment from the peak in excess of 10 per cent to the current level in the vicinity of 7-1/2 per cent is a substantial achievement by any standards.
Certainly, the growth of employment in the last five years represents a significant achievement, and there is every reason to suppose that the wage restraint of that period has contributed materially to it.
Unemployment in June 1988 was 7.4 per cent (seasonally adjusted). Female unemployment (8.1 per cent) exceeded male unemployment (6.9 per cent); and unemployment rates among full-time and part-time workers were similar (7.4 per cent and 7.2 per cent, respectively). The impact of rising employment on the unemployment rate had been diminished by an increase in labour force participation rates. This effect may be illustrated by supposing that the participation rate had been constant and, on that assumption, to calculate adjusted unemployment percentages. The CAI provided data of unemployment calculated for a participation rate of 61.4 per cent (the average for the period from 1973-74 to 1983-84). Comparing these adjusted unemployment rates with the actual rates (seasonally adjusted) for three selected quarters, we have the following:
Quarter Actual Adjusted
ended unemployment unemployment
(%) (%)
June 1981 5.5 5.9
June 1983 10.1 11.7
June 1988 7.6 5.9
Although the assumption of a constant participation rate is purely an illustrative device - and unemployment would not have been exactly as shown in the right-hand column if the participation rate had been constant at 61.4 per cent - it is clear that the actual unemployment rates understate both the deterioration of the labour market which occurred in the 1982-83 recession and the recovery thereafter.
Other indicators of the demand for labour are the amount of overtime worked, the efforts of employers to attract labour by newspaper advertisements and statistics of unfilled vacancies. The average hours of overtime per employee were 12.6 per cent greater in February 1988 than a year earlier; and in May 1988 the number of job advertisements ascertained by the ANZ Bank exceeded the number in May 1987 by 15.9 per cent. These two measures, along with the unemployment statistics, suggest a growth of demand exceeding the growth of labour supply. A contrary indication is given by the Australian Bureau of Statistics' estimates of job vacancies: there were 1.6 per cent fewer vacancies in February 1988 than a year earlier. These conflicting signs are perplexing, but overall the evidence leads us to agree with the diagnosis of a strong growth of demand.
46 NATIONAL WAGE CASE AUGUST 1988
It was put to us by the ACTU that the existence of a high component of long-term unemployment among the total unemployment population demonstrated a growing need for "active labour market policies". By implication, the ACTU expects the absorption of unemployed people into work by the growth of economic activity to encounter mounting structural resistances. This expectation is probably correct. It weakens the case for macro-economic measures, including general wage restraint, to further the growth of demand for labour. On the other hand, it increases the likely incidence of market- driven wage increases, forming part of the wage drift (discussed below); and this prospect argues for restraint on the tribunals' part to contain the total growth of labour costs.
Inflation
The annual rates of inflation between successive financial years are set out in Table 3, which shows the reduction of price inflation achieved between 1982 and early 1985, the subsequent resurgence of inflation and the return in 1986 to a downward trend.
Table 3
Rates of Inflation, 1980-81 to 1987-88
_______________________________________________________________________________
Percentage increases since previous year
________________________________________
CPI* Implicit deflator:Gross
non-farm product
________________________________________
1981-82 10.4 11.5 1982-83 11.5 10.5 1983-84 7.9 7.3 1984-85 5.8 5.9 1985-86 8.4 6.8 1986-87 9.3 7.5 1987-88 7.3 7.4**
_______________________________________________________________________________
* Adjusted to remove Medicare effect.
** Estimate based on three quarters to March 1988.
Sources: The Treasury, Economic Round-up, June 1988; ABS, Australian National Accounts : National Income and Expenditure, Special Issue, March 1988, Cat. No. 5206.0: ABS, Consumer Price Index - June Quarter 1988, Cat. No. 6401.0.
There is ground for disquiet in recent increases in the CPI. For the past four quarters those increases have been:
Increases since
Previous quarter Year earlier
September 1987 1.7 8.3
December 1987 1.7 7.1
March 1988 1.8 6.9
June 1988 1.7 7.1
NATIONAL WAGE CASE AUGUST 1988 47
This evidence that the decline of inflation rates has lost momentum is borne out by other measures of price movements. For example, the prices of articles produced by manufacturing industry, which had risen by 6.5 per cent in the year to the March quarter of 1987, increased by 7.4 per cent (preliminary estimate) in the year to the March quarter of 1988. A similar comparison for prices of materials used in house building shows an increase in the rate of inflation from 5.6 per cent to 7.9 per cent (preliminary estimate); and for materials used in other building, from 7.2 per cent to 9.6 per cent (preliminary estimate).
The Commonwealth stressed the sensitivity of the domestic inflation rate to the prices of traded and tradeable goods and services. It saw the resurgence of inflation in 1985 as being due largely to the depreciation of the Australian dollar, which raised the price of both imports and exportable goods and services used locally. The subsequent partial recovery of the dollar helped to reduce the inflation rate, but this effect was countered by the temporary fall in the dollar which occurred after the share market collapse of October 1987. It would follow that the buoyancy of the dollar in 1988 (to date) will restore the trend toward lower inflation rates over 1988-89. Such an expectation underlies the Commonwealth's prediction of the inflation rate (about 4-1/2 per cent) in mid-1989.
This analysis was disputed by the CAI, whose view of the experience set out in Table 3 accords more weight to domestic labour costs. The CAI questioned the size of the impact which a given variation of external prices has on local prices. Moreover, it argued that wage increases in Australia have a strong effect on the exchange rate. Consequently, we should not assume that inflation seemingly due to external price increases is independent of the behaviour of Australian wages. The CAI did not predict a resurgence of inflation but contended, rather, that much would depend on the outcome of this case.
The recent rise in the inflation rate causes us concern, despite the Commonwealth's anticipation of a substantial reduction.
Nominal and Real Wages
Table 4 sets out the movements in award wages and average earnings for ordinary time work between 1980-81 and 1987. Over the period from 1982-83 (when the centralised wage policy was restored) to the latter half of 1988, award rates grew, on average, by 4.8 per cent and ordinary time earnings by 7.0 per cent, the average wage drift being 2.1 per cent. Thus the wage drift, to which we return below, has been an important component of the growth of wage levels.
48 NATIONAL WAGE CASE AUGUST 1988
Table 4
Increases in Wage Rates and Earnings, 1980-81 to 1987
_______________________________________________________________________________
Increase (%) since previous year Wage drift
________________________________
Award rates Ordinary time earnings
_____________________________________________________________
1981-82 12.3 13.4 1.0
1982-83 11.1 14.2 2.8
1983-84 5.3 7.8 2.4
1984-85 5.4 7.6 2.1
1985-86 4.6 6.2 1.5
1986-87 4.8 7.2 2.3
1987* 3.6 6.1 2.4
_______________________________________________________________________________
* Second half of 1987 relative to 1986-87, expressed at an annual rate.
Sources: The Treasury, Economic Round-up, June 1988; ABS, Award Rates of Pay Indexes : Australia, December 1987; Exhibit CAI 2.
Between February and March 1987, the index of award rates of pay increased by 3.2 per cent, reflecting the first tier increase of $10 granted in March. In the remainder of 1987, the increase in average award rates was 1.0 per cent, indicating a slow spread of second tier increases. The Australian Bureau of Statistics states that at the time of the November 1987 survey of average weekly earnings, about 20 per cent of full-time adult employees had received second tier increases; and that by February 1988 the proportion had risen to 50 per cent. Undoubtedly, the percentage of employees in receipt of second tier increases is now much higher, but no statistics of the implementation of the second tier since February 1988 are yet available. The index will also rise to reflect the first tier increase of $6.00 granted on 5 February 1988.
The changes in real wages corresponding to the nominal wage movements set out in Table 4 were as follows:
Ordinary
Award rates time earnings
1981-82 1.7 2.7
1982-83 -0.4 2.4
1983-84 -1.5 0.8
1984-85 1.1 3.2
1985-86 -3.5 -2.0
1986-87 -4.1 -1.9
1987 -3.4 -1.1
In the period after 1982-83, real award rates and real earnings declined at average annual rates of 2.2 per cent and 0.2 per cent, respectively. Hence the wage drift offset a substantial proportion of the reduction in the real value of award rates.
NATIONAL WAGE CASE AUGUST 1988 49
The ACTU argued that the wage drift was not significantly due to any growth of overaward payments. It emphasised the effects of salary increases of managerial workers (to a large extent award-free) and compositional changes in the labour force. Unpublished data provided by the Australian Bureau of Statistics (ABS) and tendered by the ACTU show that between May 1983 and May 1987 ordinary time earnings grew by the following percentages:
Non-managerial 29.6
Managerial 34.6
Total 32.0
These estimates imply that the growth of managerial salaries relative to non-managerial wages and salaries has contributed rather less than 0.5 per cent
per year to the wage drift. In relation to compositional effects, the ACTU compared movements of award rates for full-time non-managerial employees calculated on a fixed weight basis with movements which incorporate the effects
of compositional change. Again, the period of comparison was from May 1983 to May 1987. For adult males, the increase in the fixed weight series was 22.8 per
cent, whereas the varying weight estimates grew by 28.9 per cent; for adult females, the corresponding percentages were 24.6 and 29.9. These data suggest that compositional effects have caused much of the recent wage drift (about 1.1
per cent per year). This inference was challenged by the CAI, which tendered an
analysis of compositional effects wherein the male labour force was disaggregated into 12 industry groups. The analysis showed that shifts in employment between the groups raised earnings by 0.3 or 0.4 per cent over the four years to August 1987. A dissection by broad industry groups, such as that used by the CAI, may fail to capture the compositional changes which the ACTU postulates. Nevertheless, there must be some remaining uncertainty about the forces which generate wage drift.
Productivity
Estimates of productivity growth published by the OECD allow Australia's performance to be compared with the achievements of other countries. These data have been used in the preparation of Table 5, which shows:
. that Australia's labour productivity, like that of most other OECD countries, has grown more slowly since 1973 than previously;
. that the growth rate of labour productivity in Australia has generally been less than that of the other countries;
. that the prospects for labour productivity growth in the period 1986-89, as seen by the OECD, are poor; and
. that capital productivity in Australia has declined less than in most OECD countries.
50 NATIONAL WAGE CASE AUGUST 1988
Table 5
Productivity Growth in Australia and OECD Countries
_______________________________________________________________________________
Pre-1973 1973-79 1979-86 1986-89*
_______________________________________________________________________________
Labour Productivity
Australia % growth per year 2.9 1.8 1.1 0.7
OECD average % growth per year 4.2 1.6 1.4 1.4
Australia's rank** 18 15.5 15.5 15.5
Capital Productivity
Australia % growth per year -0.3 -1.7 -0.6 0.0
OECD average % growth per year -0.3 -1.4 -1.3 -1.0
Australia's rank** 9 9.5 3.5 2
Total Factor Productivity
Australia % growth per year 1.8 0.6 0.5 0.4
OECD average % growth per year 2.9 0.7 0.6 0.7
Australia's rank** 15.5 15 13 12 _______________________________________________________________________________
* OECD estimates and projections
** Among 19 OECD countries
Source: OECD Economic Outlook, June 1988.
Increasing the ratio of capital to labour tends to raise the productivity of labour and to reduce the productivity of capital. The contrast between Australia's relative records in labour productivity and capital productivity may well signal the potential gains in labour productivity which Australia can realize if it raises the level of investment. This is not to suggest that other sources of productivity growth should be ignored: better management, greater national commitment to research and development, a more highly trained labour force, fewer restrictive work practices and the removal of institutional barriers to efficiency will raise the productivities of both labour and capital.
Profitability
The perceived opportunity for profit is, in the private sector, a condition for expanded production and employment. It is, too, a motivator of investment and innovation; and profits actually achieved generate funds for reinvestment.
Australia's profit performance has recovered during recent years, but the evidence is ambiguous as to whether the profitability levels of the late 1960s and the early 1970s have been regained. The profit share of factor increases in the non-farm sector was 16.8 per cent in the years from 1966-67 to 1972-73; fell to 10.9 per cent in 1982-83; and recovered to 14.3 per cent in the year ended March 1988. In the private non-farm corporate sector, profits absorbed 31.1 per cent of the gross product at factor cost in the period from 1966-67 to 1972-73; 25.0 per cent in 1982-83; and 31.5 per cent in 1986-87 [The statistics of profit shares to this point are derived from Exhibit Commonwealth 2, Table 18]. The Commonwealth Treasury has calculated
NATIONAL WAGE CASE AUGUST 1988 51
approximate estimates of the share of after-tax company income in gross profit at factor cost taking account of the effect of inflation on the real cost of debt. These show that the profit share fell from an average of 13.0 per cent in the years from 1975-76 to 1980-81 to 6.5 per cent in the next two years and averaged 10.2 per cent for the period from 1983-84 to 1986-87 [The Treasury, Economic Round-up, June 1988].
A statistic which focuses attention on the profitability of hiring labour is the index of average real unit labour costs. This measure, in effect, relates the labour cost of a unit of output to the average price received for the output. An index of real unit labour costs captures, amongst other things, the effect of labour productivity on the labour cost of production. Indices calculated by the Treasury take into account not only wages and salaries, but also supplements, payroll tax and fringe benefit tax [Economic Round-up, June 1988]. For the private non-farm corporate sector and the total non-farm sector, the indices (1972-73=100) are as follows:
Corporate Total
1980-81 103.4 105.4
1981-82 107.8 107.8
1982-83 108.9 108.4
1983-84 101.8 104.1
1984-85 100.1 102.4
1985-86 99.7 101.1
1986-87 99.7 100.5
1987-88* N.A. 99.1
[* Three quarters]
The use of indices of real unit labour costs in the Commission's assessment of the economy is vigorously criticised by the CAI. We accept the CAI's contentions that there is no uniquely desirable level of an index of real unit labour costs and that given values of the index may have different implications at different times. For example, no particular significance attaches to the fact that the indices were about the same in 1986-87 as in 1972-73: over such a period, other changes would have occurred in the economics of production such that the incentives to expand employment may have been quite different. On the other hand, short term changes in the indices are likely to be relevant to decisions about expansion or contraction. The reductions in real unit labour costs which occurred between 1982-83 and 1984-85 were probably an important generator of economic recovery. Thereafter, only modest reductions have occurred, suggesting that this particular source of expansion is having a diminishing effect.
The External Economy
To appreciate the state of Australia's economic relations with the rest of the world, it is necessary to take into account:
. the current account deficit;
. the accumulated capital inflow and the consequent income payments due to foreigners;
. the terms of trade;
. the exchange rate; and
. volumes of exports and imports.
52 NATIONAL WAGE CASE AUGUST 1988
In discussing Australia's performance in these areas, we must entertain an overall concern for the future derived from an awareness of conditions beyond Australia's control. The world trading system has not achieved the automatic self-correcting attributes foreseen by more optimistic experts when the Bretton Woods system of fixed exchange rates was abandoned. Moreover, countries with surpluses have been less inclined to adopt corrective policies than those with deficits; and the efforts of deficit countries to rectify their external accounts impact upon other deficit countries as much as on the surplus countries. In such an environment, the task of any one deficit country is difficult; and the volatility of the trading situation requires policies to be flexible.
Table 6 summarises Australia's balance of payments experience in the 1980s. It also shows the growth in the nation's indebtedness and the increasing claim of interest payments relative on export earnings. The statistics of net indebtedness and interest relate only to the interest bearing obligations of Australia. Much of the current account deficit has been financed by foreign investment of other kinds - for example, in equities and property. These other investments, which generate income for foreigners, also impose strains upon Australia's external earning power. Realized capital gains and the repatriation of the proceeds are, in this context, similar to income payments (realised capital losses being offsets). Hence the last two columns of Table 6 understate Australia's commitments to the rest of the world.
Table 6
The Current Account Deficit and Indebtedness,
1980-81 to 1987-1988
_______________________________________________________________________________
Deficit as % Net external debt Interest payments
of GDP at end of period as % of GDP
as % of GDP
_______________________________________________________________________________
1980-81 4.0 6.1 4.2
1981-82 5.9 10.5 6.7
1982-83 4.0 13.5 9.2
1983-84 3.8 15.5 10.3
1984-85 5.2 23.8 12.7
1985-86 6.2 31.5 16.5
1986-87 5.2 31.5 18.1
1987-88* 3.8 30.9 16.7
_______________________________________________________________________________
* Three quarters to end of March.
Source: The Treasury, Economic Round-up, June 1988.
The improvement in the current account in 1987-88 was a modest step toward a satisfactory trading situation. For the whole of 1987-88, the deficit on current account (on preliminary estimates) was $1.678 billion, or about 13 per cent, lower than in 1986-87. In the quarter ended June 1988, the deficit was 6.4 per cent less than in the corresponding quarter of 1987.
NATIONAL WAGE CASE AUGUST 1988 53
The terms of trade (the ratio of export to import prices) and the exchange value of the Australian dollar have moved as shown in Table 7. Adverse movement of the terms of trade between 1983-84 and 1986-87 represented, roughly, a loss of 2.5 per cent in effective productivity. Moreover, the reduced capacity of exports to fund imports contributed materially to the balance of payments deficits in 1984-85 and later years. The causal connections between the terms of trade and the exchange rate were discussed in this case, but we do not think it necessary to pursue that question.
Table 7
Terms of Trade and the Exchange Rate,
1980-81 to 1987-88
(1980-81=100)
_______________________________________________________________________________
Terms of trade Exchange rate*
_____________________________________
Year
1980-81 100.0 100.0
1981-82 98.3 103.9
1982-83 96.5 93.4
1983-84 100.0 93.0
1984-85 97.2 86.3
1985-86 87.6 71.1
1986-87 83.0 61.4
Quarter
1987 September 86.1 64.0
1987 December 87.0 60.5
1988 March 88.5 60.5
Month
1988 May N.A. 64.8
_______________________________________________________________________________
* Trade weighted index
Source: The Treasury, Economic Round-up, June 1988.
A fall in the exchange rate encourages exports and discourages imports. These, of course, are the principal benefits likely to flow from enhancing "international competitiveness", whether this occurs through movements of the exchange rate or by reducing local costs of production relative to those abroad. All things being equal, a lower growth rate of nominal wages has a favourable effect on competitiveness; but movements of the exchange rate such as the 40 per cent reduction which occurred between 1981-82 and 1986-87 far outweigh the effect of wage increases exceeding somewhat those of Australia's trading partners and competitors.
The changes of export and income volumes which occurred during this period of increased competitiveness are shown in Table 8. Exports grew in a manner consistent with enhanced competitiveness, but it is of course impossible to specify, purely from the coincidence of timing, the quantitative effect of the exchange depreciation. Imports did not fall, but grew more slowly
54 NATIONAL WAGE CASE AUGUST 1988
than exports. The level of imports is sensitive to the state of economic activity and its growth in the face of the depreciation probably reflects the strength of the recovery since 1982-83. Overall, we see no reason to doubt that the depreciation had a significant and appropriate effect on Australia's trade. The gain to the balance of payments was cancelled, however, by the worsening of the terms of trade.
Table 8
Exports and Imports at Constant Prices,
1980-81 to 1987-88
(1980-81=100)
_______________________________________________________________________________
Exports Imports
______________________________
1980-81 100.0 100.0
1981-82 100.9 110.8
1982-83 101.2 100.9
1983-84 109.6 106.2
1984-85 124.8 123.1
1985-86 132.0 124.8
1986-87 143.1 121.1
1987-88* 154.5 130.8
_______________________________________________________________________________
* Three quarters to March, seasonally adjusted.
Source: ABS, Australian National Accounts : National Income and Expenditure, Special Issue, March Quarter 1988, Cat. No. 5206.0.
With the exchange rate no longer falling and the economy more buoyant than for some time, improvement in the quantitative relation of exports to imports may be increasingly difficult to achieve. In the first three quarters of 1987-88, the ratio of imports to sales was about six per cent above the level of 1986-87. Such a development impedes the achievement of a satisfactory external balance. The recovery of investment apparent in Table 2, though welcome, may be partly responsible for the higher propensity to import.
The Commonwealth, in an exhibit tendered in this case, referred to the "risks and uncertainties" in the external position. It said:
"The volatility of commodity markets, and the extent of price increases in recent months, raise questions as to the sustainability of the commodity price recovery. As noted, world economic activity over the next year or so is not projected by the OECD to weaken seriously and there are no deflationary expectations. Lower stockpiles may partially offset any weakness in demand. Nonetheless, movements in commodity prices remain a key determinant of the Australian balance of payment. In 1987-88, a 5 per cent difference in prices from those received would have altered export revenue by nearly $2 billion."
Against this background, it is of concern that commodity prices fell in July 1988. The Commonwealth added that in 1987-88 Australia benefited from "the unusual concurrence of strengthening commodity prices and falling world interest rates". It also drew the following points to our attention:
NATIONAL WAGE CASE AUGUST 1988 55
. The future course of the world recovery is difficult to chart particularly while large fiscal and external balances remain unresolved . . .
. With a now enlarged stock of external debt, much at floating rates, and enlarged net interest payments relative to the current account deficit, current account outcomes are more sensitive to movements in world interest rates and the Australian dollar exchange rate than in the past, increasing Australia's vulnerability to changes in the world economic environment.
We agree with these opinions. The external economy, though improved in 1987-88, has features which cause serious concern.
3. Implications
The economic burden of rising labour costs depends not only upon the amount of award wage increases and the cost of other alterations of award conditions but also upon increases occurring outside the framework of awards, such as are encompassed in the wage drift. The costs of achieving any given wage objective are, of course, offset by advances in productivity caused by measures such as the restructuring and efficiency aspect of the second tier. In the present case, we expect productivity enhancement to result from award restructuring and other measures, but these gains will take time to emerge.
In considering the reduction of real wages which has occurred over the past five years, we should not lose sight of the likelihood that the level of real wages at the commencement of the period was unsustainable in the economic conditions of the time. Ordinary time earnings had grown by 10.5 per cent, in real terms, between 1979-80 and 1982-83. Accompanying this was a severe reduction of profitability which was certain to affect adversely the level of employment and investment. Economic recovery could be expected to involve, and probably required, a return of profitability to more normal levels. This in itself implied, at the least, a pause in the growth of real wages and more probably some reduction. In the event, that effect was accentuated by the adverse movement of the terms of trade.
The wage drift constitutes a component of wage increases to be taken into account both in assessing macro-economic consequences of wage increases and in judging the extent to which wage and salary earners, on average, move forward or backward. This reality is not materially affected by the question (discussed in section 2 of this Appendix) of the causes of wage drift. If it is true, as the ACTU argued, that the wage drift has recently arisen mainly from compositional effects, many wage and salary earners must have enhanced their position by moving toward more remunerative work. This is perhaps a beneficial form of micro-economic flexibility. If the wage drift is due to increases in overaward payments, it remains true that labour costs rise; and in this case, too, there may be micro-economic benefits. Micro-economic benefits which accrue from the wage drift are a component of productivity advance, which is properly to be taken into account as an offset to the economic burden of higher wages. It would, of course, be double-counting to rely upon the general productivity advance as a ground for general wage increases and to invoke the productivity benefits of wage drift as a reason to ignore it.
56 NATIONAL WAGE CASE AUGUST 1988
The foregoing expressions of opinion are not intended to suggest that the position of award wage earners who have experienced none of the benefits of the wage drift merits no consideration. On the contrary, our decision has been influenced significantly by our concern for those wage earners. Our purpose is to insist upon the relevance of the total increases in labour costs (and hence the additional benefits enjoyed by some wage earners) to an appreciation of the economic consequences of award wage increases. Moreover, it is inescapable - and largely outside the Commission's control - that the wage drift precludes advances in real wages which might otherwise be available.
Wage restraint since 1982-83 has contributed significantly, in our view, to economic recovery. It has facilitated a growth of profitability, enhanced the attractiveness of employing labour and averted some of the inflationary effects which would have followed more vigorous attempts to maintain or increase real wages. In considering the justification for wage increases in the period ahead, we have taken into account the fact that economic activity, employment and profitability are all at more favourable levels than for some time and also our cautious optimism that these improvements have not yet lost their momentum. The economy, in these respects, is better placed to sustain wage increases than for some time. There are some contrary indicators. They include the recent interruption of the decline in the inflation rate which had been in progress since 1986 and an apparently poor and deteriorating growth rate of productivity.
The relevance of the external economy to decisions affecting wages and other labour costs is not straightforward. Simply to emphasise the role of wage restraint in enhancing competitiveness is to ignore the variability of exchange rates, which far exceeds the range within which wage rises may conceivably lie. Indeed, the CAI in this case argued that excessive wage increases were a major cause of reductions in the exchange value of the Australian dollar. If this is correct, wage increases may perversely enhance competitiveness. Of course, this possibility is not a justification for wage increases - it would be irresponsible to induce a growth in the inflation rate by a succession of interrelated depreciations and wage rises. The point to be made, rather, is that to emphasise the wage movements of "trading partners" as a guide to Australian wage policy is to assume a non-existent stability of the exchange rate.
There are other reasons, however, why the possible weaknesses of the external situation warrant caution in granting wage increases. These reasons are related to the level and possible alterations of the exchange rate. First, the currently high levels of interest rates arise, in part, from the use of monetary policy to counter inflationary forces within the economy. The high rates of interest induce a capital inflow which, in turn, tends to sustain the dollar at a higher level than would otherwise obtain; and there is a danger that the adverse effects on competitiveness of a high exchange rate will imperil the changes in export and import quantities necessary to correct the imbalance in the external account. Accordingly, it would be helpful if lesser domestic inflation allowed a moderation of interest rates, permitting the exchange rate to move somewhat lower. A reduction of the exchange rate so occurring would itself tend to raise the inflation rate. The adjustment of the exchange rate to enhance competitiveness would be least inflationary in an environment wherein higher prices for imports and tradeable goods and services were not accompanied by increases in labour costs.
NATIONAL WAGE CASE AUGUST 1988 57
Secondly, there is a continuing risk of a significant reduction of commodity prices. This would be likely to cause a fall in the exchange rate and the extent of the fall would, in all probability, be exacerbated by market concerns about the level of Australian indebtedness. A fall in the value of the dollar would intensify the inflationary influences already present in the economy. While the current uncertainty of the international economic outlook persists, there is an argument of prudence for curbing domestic sources of inflation so as to minimise the risk that external and internal pressures for more serious inflation may coincide.
Thirdly, there is an undeniable danger that a perception of Australia as an economy wherein wage and price movements are not adequately restrained might cause a loss of confidence in the currency, even if there is no deterioration of the terms of trade. There may, as we have suggested above, be advantages in some decline of the exchange rate from its present levels if this can be achieved through a reduction of interest rates. The fall in the exchange rate which could follow a loss of confidence might be so great, however, as to generate severe inflationary effects and complicate greatly the management of the economy.
In summary, the current state of the economy does not call for the refusal of any wage increases. Nevertheless, the amounts of any increases in wages must be decided after having regard to economic problems confronting Australia and the benefits likely to result from limiting the growth of nominal wages.
58 NATIONAL WAGE CASE AUGUST 1988
Appearances:
I. Watson for the Australian Council of Trade Unions with W. Kelty for The
Clothing and Allied Trades Union of Australia.
R. Overall with S. Green and L. Stephens for the Australian Council of
Professional Associations and The Association of Professional Engineers,
Australia.
C. Polites of Counsel for the Confederation of Australian Industry with
E. Callander for the Confederation of A.C.T. Industry, the Clothing Industries
Division of the Queensland Confederation of Industry Limited, The Victorian
Employers Federation, respondent members of the Tasmanian Confederation of
Industries, The Retail Traders' Association of New South Wales, the Chamber of
Manufactures of New South Wales, the Australian Confederation of Apparel
Manufacturers - N.S.W. (Division of the Chamber of Manufactures of New South
Wales), the Chamber of Commerce and Industry of South Australia Incorporated,
the Confederation of Western Australian Industry, the South Australian
Employers Federation, the Australian Institute of Dry Cleaning - N.S.W., the
Australian Institute of Dry Cleaning - Queensland, with E. Taylor for The
Australian Chamber of Manufactures, with R. Whiffin for the Australian Mines
and Metals Association (Inc.), with M. Angwin for the Business Council of
Australia.
R.P. Boland, with N. Scott, N. Anderson and A.J. Ashbridge for the Metal Trades
Industry Association of Australia and the Engineering Employers Association,
South Australia.
B. Yates with L. Tacy for the Minister of State for Industrial Relations on
behalf of the Commonwealth (intervening).
D. Grozier with J. O'Brien for Her Majesty the Queen in Right of the State of
Victoria (intervening).
C.L. Cullen QC with P. Menzies of Counsel and D. White for Her Majesty the
Queen in Right of the State of New South Wales (intervening).
K.F. Scholes with S. Beach for Her Majesty the Queen in Right of the State of
Queensland (intervening).
G. Harbord of Counsel with D. Shone and F. Meredith for Her Majesty the Queen
in Right of the State of South Australia (intervening).
M. Jarman with J. McCabe for Her Majesty the Queen in Right of the State of
Tasmania (intervening).
G. Overman of Counsel with G. Bull for Her Majesty the Queen in Right of the
State of Western Australia (intervening).
P. Costello of Counsel with G. Carmody for the National Farmers Federation and
the Australian Chamber of Commerce (intervening).
B.D. Purvis for the Australian Wool Selling Brokers Employers Federation
(intervening).
Dr J. Scutt of Counsel for the National Pay Equity Coalition (intervening).
P.M. Davies, R.J. Macleod with S. McGrath and G. Gerard for the Australian
Coal Association (intervening).
NATIONAL WAGE CASE AUGUST 1988 59
D.B. Moore for the Australian Federation of Construction Contractors
(intervening).
M. Jones for the Government of the Northern Territory (intervening).
D.L. Brooker of Counsel for Visypack Pty Ltd (intervening).
I. Douglas QC with N.J. Green of Counsel for the Exclusive Brethren
(intervening).
C. Bubb for the Master Builders Construction and Housing Association of
Australia (intervening).
P. Gaynor for the National Transport Federation Ltd (intervening).
R. Rees for the Australian Road Transport Industrial Organization
(intervening).
* * END OF TEXT * *