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The high cost of militant unions

By Tony Abbott - posted Saturday, 15 December 2001


Since 1996, there has been little pressure for industrial reform because people imagine that it has already been achieved. It’s true that Australia has come a long way in the last decade. Peter Reith’s Workplace Relations Act has driven the shift to workplace agreements over one-size-fits-all industrial awards and ended the unions’ century-old quasi-monopoly over representing workers in wage bargaining. At the level of the national economy, a more flexible industrial system has meant more jobs and higher wages – as well as fewer strikes.

Even so, it’s a big mistake to conclude that counter-productive or bloody-minded strikes are a thing of the past or that – twelve years after the fall of the Berlin Wall – everyone believes that markets should be free. The simple truth that the worker can’t earn a wage unless the boss makes a profit still escapes many union leaders. Generally low strike rates obscure the serious damage that selective industrial disruption still does to the long-term employment prospects and pay rates of Australian workers.

The collapse of unionisation from more than half to under a quarter of the workforce in just 20 years masks unions’ continuing ability to target key industries. In the 1970s, unions cost jobs by pursuing unsustainable across-the-board wage rises. In the 1980s and early 90s, unions cost jobs by holding back productivity increases. Australia is still paying the high price of militant unions in jobs lost through campaigns which have much more to do with union interests than worker interests.

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Too many union leaders still see the workplace in terms of a fundamental struggle between capital and labour where every dollar in profit is a dollar less in wages. That’s why a common union response to business downsizing is an immediate strike rather than an immediate offer to change systems to restore profitability and employment.

The difference between doctrinaire and pragmatic union leaders is whether industrial action is their first or their last resort. Intelligent unionists understand that strikes cost jobs but the decline of the AWU and amalgamations between some of the largest "right-wing" unions mean that neo-marxists can still wreak havoc. Brought up on various versions of the class struggle, union leaders have mostly missed the point that competition occurs between businesses as well as inside them. It’s the ability to cope with external competition rather than internal politics which ultimately determines whether people have jobs.

A clear understanding that the people in a particular business – from managing director to office cleaner – have a greater interest in common with each other than with people doing the same jobs in different businesses is the exception rather than the rule among union leaders. Too often union leadership has seen its task as helping to re-distribute wealth rather than helping to create it. This preoccupation with beating the boss rather than beating the competition means that some union leaders would rather see a business close than compromise their demands. If a business subsequently complains that its cost structure is too high, the standard union response is to reduce competition rather than boost productivity because the competition unions understand is between capital and labour rather than between business and business.

A classic case of strike action which has more to do with industrial machismo than workers’ welfare is the campaign to put up to 20 per cent of payroll into the union-controlled Manusafe fund.

The recent Tristar dispute caused workers at one plant to lose three weeks’ wages and the car industry generally to lose a week’s production just when Mitsubishi was considering whether to keep manufacturing in Australia. As things turned out, workers lost because they eventually settled for much the same pay increase as the company had originally offered. Shareholders lost because the company agreed to pay an additional two per cent of payroll for an insurance bond to cover entitlements in the unlikely event of insolvency. Everyone lost because Australia’s hard-won standing as a place to invest and trade was shamelessly sabotaged.

Unions are continuing the Manusafe campaign even though less than one tenth of one per cent of workers are at risk of losing entitlements in any one year and even though the Federal Government has now guaranteed to cover all wages, leave, pay in lieu of notice and up to eight weeks redundancy for workers in that situation. Up to eight weeks pay is the redundancy test case standard set by the Industrial Relations Commission. On the basis of experience over the past 18 months, the Government’s improved and extended scheme means that 92 per cent of the one tenth of one per cent of workers whose entitlements are jeopardised by business insolvency would have 100 per cent protection.

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The only workers who might lose some entitlements under the Government’s scheme are those with redundancy agreements such as Ansett’s (which provided for two weeks pay a year up to five years of service, three weeks pay a year up to 15 years service and four weeks pay a year for service beyond 15 years up to a maximum of 104 weeks or $175,000). Under the Government’s new arrangements, less than one hundredth of one per cent of workers can anticipate losing some of their entitlements yet to secure workers against this remote possibility unions are now campaigning for a scheme which, if fully implemented, would cost up to 160,000 jobs in manufacturing industry alone. The late BA Santamaria would have described this as "a moonbeam from the larger lunacy".

Manusafe is an extension to manufacturing of the Victorian construction industry’s Incolink portability fund which provides for long-service leave regardless of time spent with any particular employer and redundancy regardless of whether workers actually lose their jobs. Turning contingencies into actual liabilities via Incolink is generally reckoned to add 20 per cent to Melbourne CBD construction costs. Unlike the construction industry (which is largely insulated from foreign competition), a similar increase in manufacturing costs means many companies will go out of business.

If Manusafe were implemented there would be a series of leap-frogging claims for Ansett-style redundancy payments. There would be a morbid pre-occupation with business failure rather than commercial opportunity. There would be little incentive for business to avoid "sweetheart deals" over redundancy if someone else might pick up the tab. Large established businesses could hardly afford to re-structure themselves in the event of market changes and there would be more pressure for government-funded rescue packages for businesses in trouble.

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This article is based on a speech given to the Australian Confectioners Association in Melbourne on December 7, 2001.



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Tony Abbott is Australian Prime Minister.

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