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ARBITRATION AND THE TASK AHEADAFR Tuesday 9 January 2001 The highly interventionistarrangements of our industrial relations system have served Australia poorly since the 1900s, argues Des Moore Beyond federationWage arbitration The framers of the
Commonwealth Constitution thought they left the regulation of employment
conditions primarily to the States. The only direct power given the
Commonwealth was in Section 51 xxxv, which allows the “conciliation and
arbitration for the prevention and settlement” of industrial disputes judged as
interstate. Thus, when introducing the
Bill that established the Conciliation and Arbitration Commission (CAC) in
1904, even protectionist Alfred Deakin declared Parliament would be incompetent
to regulate industrial affairs generally
" because of the impossibility of drafting provisions, however well
devised, so that they would meet all the contingencies, changes, and
difficulties of different industries, which are subject in themselves to
continuous alteration." Wise words, but he overlooked the capacity of
quasi-judicial institutions such as the CAC to effect a major regulatory
capture. Why was that allowed to
occur? US jurist Professor Richard Epstein has pointed to various intellectual
trends in the late nineteenth century consistent with the idea of modifying the
basic principle of common law that workers and employers should largely decide
the content of their relationship. Action was thought necessary to redress the
misconceived perception of a bargaining imbalance between employers and
employees. The apparent case for such action was reinforced by
considerable political, economic and industrial turmoil in the 1890s. Major
strikes (lost by the unions) and a period of economic stagnation extending over
twenty years led some to seek ways of preventing a repetition of the
disputation, and achieving more equitable outcomes. The naďve Justice Higgins*
envisaged that with the CAC “there should be no more necessity for strikes and stoppages” because
“reason is to displace force; the might of the State is to enforce peace
between industrial combatants as well as between other combatants; and all in
the interests of the public”. Over
time, the CAC in fact captured the system by attempting to compel industrial
disputants to settle because that is allegedly in the public interest. To
“assist” in settlement, a wide range of employment conditions, including even
wage levels, thus came to be proscribed. Unions readily contrived with the CAC
to create “interstate” disputes requiring judicial intervention. As
early as 1907, Justice Higgins even pronounced in the infamous Harvester case
the need for a minimum wage for an unskilled worker, his wife and three
children. Never mind that, by setting it above market rates, employment was
deterred: the CAC had portrayed itself as a protector of the low paid and a
provider of social welfare. Astonishingly,
many still espouse the Higgins gospel today. While nobody can say definitively
how it has worked in practice, the resultant highly interventionist
arrangements have apparently served us poorly, viz:
Any evaluation
must also assess the overall riskiness of our labour market institutional
arrangements because that has an important influence on economic performance.
An unbiased observer would surely conclude that the extent of third party
intervention in employer-employee relationships has significantly inhibited
risk-taking relating to both employment and investment. That has also almost
certainly inhibited decisions to apply new technology requiring changes to
workforce structures. Thus, from having the highest income per head at century
start, our relative living standards have slipped despite our large resources. The
current interventionist and one-sided interpretations of the law, particularly
by the Federal Court, and the not infrequent union boasts that they hardly ever comply with tribunal orders, continues
to exacerbate social and economic divisiveness. Australia needs to convert the
Commission into a voluntary advisory/mediation service but offering subsidised
services to low wage earners. Present legislation should be replaced with legal
arrangements designed to limit judicial intervention and allow employers and
employees to enter contractual relationships applying under not 19th but 21st
century common law/equity. * “Higgins was the first judge of Australia’s arbitration system. His most famous decision, the Harvester Judgement, established the concept of the basic wage in Australi.” |