Future directions for industrial relations

Australia has been characterised by a consensus between labour and capital for most of the last 100 years; by cooperation within the workplace. However, in the past three years companies have been encouraged by the federal government to de-unionise their workplaces and engage in conflict with their workforce. To varying extents the Commonwealth Bank, BHP, and Telstra have all sought to de-unionise their workforces. Together, five per cent of the Australian Union Movement is employed in these three companies. It represents the single biggest employer sponsored de-unionisation campaign in our country's history.

The debate was initiated when CRA/Rio Tinto sought to de-unionise its workforce in the late 1980s. They did so with some success by importing into Australia a culture of US industrial relations. This is a culture which does not acknowledge a consensus between labour and capital. In many senses this is a debate between the American and Australian industrial relations cultures.

The rush to Americanise industrial relations is understandable in one sense. America has been for all but four of the past 60 years the most productive economy on the planet. But the nature of America and the role of their industrial relations culture needs to be properly understood. What also needs to be understood is whether the sole difference between Australian and American economic productivity is the industrial relations environment.

The US industrial relations culture was founded upon an idea, namely individual human rights. It is arguably the most rights-based society on the planet. Much of the thought behind the rights of the individual in America represents an enormous contribution to the global human rights debate. The field of political debate in the United States was marked out in an amazing set of correspondence between the second and third American Presidents: John Adams and Thomas Jefferson. John Adams represented the individual liberal view, which is in broad terms taken up by the Republican Party today. And Thomas Jefferson articulated the reform liberal view, which in broad terms is articulated by the Democratic Party today. However, this debate was much more significant for what they agreed upon than for what they differed about. Both men agreed on notions of individual liberty, freedom of capital, popular government and small government.

At one level these are basic ideas. On many issues members of the Australian Labor Party and members of the American Democratic Party would have similar positions. However, there are also profound differences, reflecting the different cultures in America and Australia. For example there is a consensus in America about a limited role for government in the economy. Similarly, there is a consensus about the freedom and primacy of capital. As a result in the second half of the 19th Century trade unions did not take off in the United States in the way that they did in both the UK and here.

The American consensus about the primacy of capital did not acknowledge the differing interests of labour in a market economy. As a result there is no consensus between labour and capital. Yet in a modern and mature market economy, where the interests of labour are very apparently different from those of capital, it has meant that those seeking to represent labour are in a state of war in attempting to get their interests acknowledged and obtain fairness for working people. I use the word "war" advisedly because that is the word often used by our colleagues in the union movement in America when they describe the environment in which they work.

Our later separation from the United Kingdom meant that Australia inherited much more of the UK's traditions than did the United States. In a way, we had our own war in the 1890s between labour and capital. Then in 1904, through the introduction of the Conciliation and Arbitration Court, which ultimately became the Australian Industrial Relations Commission, we had an entity whose aim was to allow the differing interests of capital and labour in the economy to be resolved through civilised debate rather than the law of the jungle. Our war ended with a treaty: a consensus between labour and capital about each other's role in the economy. This consensus has had bi-partisan support of all Australian Governments up until 1996. While conservative governments from Menzies through to Fraser generally supported the employer argument, they nevertheless supported the rules of the game. Those rules acknowledged the role of labour and unions in the industrial relations system.

In the past few years, however, there has been an attempt to introduce an American style of industrial relations into the Australian setting. This commenced with the de-unionisation strategies of CRA/Rio Tinto in the late 1980s and early 1990s and continued with the respective campaigns of the Commonwealth Bank, BHP and Telstra. The current Federal Government is actively inviting this culture into Australia. They have sponsored a debate that challenges the consensus between labour and capital. They ask employers to assume what they perceive to be a natural right of control in the economy. In so doing they seek to strip working people of the dignity and rights which they have enjoyed while this consensus has been in place.

Trade unions must not only resist this push but should also analyse it in a dispassionate way. Is there a natural conflict between labour and capital which can only be resolved by strength ? Is the American way THE way in terms of industrial relations ? Or do companies and unions have a mutual interest, which has been forgotten?

An answer to these questions came to me from the most surprising of places. It came in a piece of evidence given by John Hannah, the president of BHP Iron Ore when it offered individual contracts to its Pilbara workers in an attempt to de-unionise that workforce. Hannah referred to US research containing some very interesting findings. It said that world's best practice in terms of industrial relations and productivity involved having a highly unionised workforce where there were co-operative relations between the union and management. The research also found that world's mediocre practice involved having a de-unionised workforce, where there was a degree of hostility in the workplace, but where management was clearly in control.

Now if that was all the research said one could reasonably ask: why on earth would a company seek to de-unionise when world's best practice is based on having collective arrangements in the workforce? Well, the research also found that the world's worst practice involved having a unionised workforce where there were poor relations between management and unions. Where you have unionised workforces there can be a great spread of outcomes from the very best to the very worst. However, where you have a non-union workforce the results are far more consistent albeit mediocre.

The message for employers is that world's best practice involves a union in their workplace in a co-operative relationship. That is common sense. A ship obviously will run most smoothly where the company is productive but in turn is providing secure jobs and dignified terms and conditions of employment. The opposite is also common sense. If you declare war on your workforce you are unlikely to get very productive results. Further, if an employer seeks to de-unionise its workforce and individualise it, it is going for a mediocre option.

The messages for unions are also very significant. Our relations with traditional union companies in the union economy must be very well managed. Unions must take on companies who seek to de-unionise with the ferocity of an organisation battling for its survival. However, we must acknowledge that where we contribute to world's worst practice in terms of industrial relations this is to our own detriment. To a certain extent, the union movement must get its own house in order.

Unions must be absolutely passionate advocates for the consensus between labour and capital. A highly unionised co-operative workplace not only provides the best productivity but also the best conditions of employment and the greatest stability. Unions must passionately resist the introduction of a US-style culture of industrial relations into Australia.

The US economy has demonstrated enormous productivity. It has been by and large the most productive economy in the world ever since the Second World War. This has produced enormous wealth across a population of 280 million people. By any measure that is an extraordinary achievement, but it comes at a price. Levels of unionisation in America are very low. There is an enormous gap between rich and poor in the American economy. Indeed, it is the biggest gap between rich and poor in the OECD. If you consider all those people living in America in third-world conditions then America becomes one of the biggest third-world countries in the world.

In Australia we used to have the greatest wage equity in the OECD. Moreover, at the same time we had very high levels of unionisation. Our economy did not produce any significant numbers of real losers. However, the gap between rich and poor is now growing faster in Australia than in any other developed country. While we still rank in the middle of OECD countries we are falling down the ladder at a faster rate than anybody else. Although our productivity has improved over the last few years, the US path is not the only path to a productive economy. In fact, the most productive economy in the world today is that of France. Continental Europe is very productive – more productive than Australia. The consensus between labour and capital is as strong in Continental Europe as in Australia.

In adopting the American industrial-relations culture we would be getting the worst of both worlds. We would inherit all the down-sides of the individual, capital based US economy; namely a massive gap between rich and poor and the development of an under-class. However, we would not gain the benefits of the American economy. A US-style industrial relations culture will not give us a domestic population of 280 million people, which is critical to providing the large domestic market which makes the American economy work. Moreover, we would forego the benefits that exist in a smaller country, where macro solutions to public problems can be found. Arguably the way forward for a smaller economy like ours is for governments to play an active and leading role in our economic development.

Ultimately this is a debate between conflict and cooperation. We have in Australia a national culture of which to be proud. We sit in the new world free of the class divisions of the old while not embracing the individualistic nature of North America. We retain a caring society which regards everyone as equal. Were we to turn our backs on this culture in a simplistic rush to American public policy, which is based on an economy and a country ten times the size of our own, then we would be changing ourselves much for the worse and robbing the world of Australia's unique contribution to humanity.