The Accord and Employment





June 2006


Your editorial on "Industrial Relations Reform and Sunday Observance" (November 2005) is rightly critical of the "firm belief amongst lawyers that the law can not just affect human behaviour but change the realities of the economic system". You name Henry Bourne Higgins as one whose wage decisions (including what became known as the basic wage) were based on trying to achieve social standards while ignoring or not understanding the adverse effects on employment. Judicial names still occupying tribunal and court benches should also have been identified in the same vein, along with those of many others.


Justice Michael Kirby, for example, proclaimed at the centennial celebration last year of Australia's compulsory conciliation and arbitration system that "there is no room in this nation for industrial ayatollahs. who see no future whatever in the Australian Industrial Relations Commission", who want it "closed down lock stock and barrel". Such people, he judged, "tend to live in a remote world of fantasy, inflaming themselves by their rhetoric into more and more unreal passions, usually engaged in serious dialogue only with people of like persuasion". By contrast, the determination of the minimum wage "remains an ongoing function Australians expect of their national tribunal for industrial conciliation and arbitration".


One would have thought that, having made such comments, His Honour would have recused himself from any industrial relations cases coming before the court. But undeterred, His Honour subsequently sat on the High Court hearings on the constitutionality of the government's spending on advertising its workplace relations proposals and reportedly drew a comparison with the advertising of the propaganda policies of former communist regimes, "like Bulgaria used to do". His decision in the advertising case can only be described as predictable.


But, returning to the question of the influence of decisions outside the labour market on economic reality. Your editorial suggests that the Accord - astonishingly categorised as one of "two great things" realised under the last Labor Government - brought about "a decline in real wages, thus overcoming the 'real wage overhang' inherited from the foolish policies of the Whitlam government". This observation reflects what seems to have become an entrenched belief in the economics profession that the Accord was responsible for that obviously helpful (from an economic recovery viewpoint) reduction in real wages after 1982-83.


However, as I pointed in the Australian Bulletin of Labour in June 1989, this completely overlooks that the reduction occurred following the very big jump in unemployment to over 10 per cent in July 1883, which followed the earlier wage explosion.  In other words, it was the reaction of the labour market, not the Accord, that was largely responsible for bringing about the economic reality of real wage reductions.


This is not to say that the regulatory policies pursued under the Accord had no influence on economic reality. Those policies doubtless operated to inhibit businesses from adding to employment and undertaking structural changes, which in turn contributed to the major slowing in productivity growth from 1981-82 to 1987-88.


In short, it is quite wrong to describe such a piece of centralism as a "great thing".