The irresponsible rejection by the
Democrats of the Government's legislative proposals to deal with unions' threat
to mount a wage campaign across the manufacturing industry makes it virtually
certain that such a campaign will take place. Moreover, the manifold
difficulties faced by businesses in resisting union intimidation mean there is
now a serious threat to levels of economic activity and employment from
inflationary wage increases.
Democrat Leader, Meg Lees, has displayed
extreme naivety in accepting assurances from unions that their campaign will be
"responsible". The unions involved have a long history of
militancy, leading to the employment-destroying wage increases of mid 1970s and
early 1980s, and their current leaders are basically opposed to the capitalist
system. The reality is that, after initially indicating preparedness to
seriously consider legislative changes, the Democrats collapsed in a heap when
union threatened to target in the next election any Democrat who supported the
Of course, the Democrats are not the only
ones to have caved in to union power and Labor must share the blame for what
happens now. Opposition Leader, Kim Beazley, had already created the precedent
last week when he announced that Labor's policy for the next election would be
to enhance the role of the Australian Industrial Relations Commission, to give
specific recognition to the right to collective bargaining, and to abolish
individual agreements (known as AWAs).
In short, under Labor a system that is
already unique in the extent of third party intervention in employer-employee
relations and the privileged position given unions, would have further
deterrents to employment. With Victoria's manufacturing industry now likely to
be the initial union target, Premier Bracks will hardly be thanking his Federal
counterpart, particularly as sections of the Victorian public service have
recently secured a 9 per cent wage increase for the past year and Victorian
teachers have lodged a claim for a 30 per cent increase over three years.
Some will suggest that employers and
supporters of free enterprise should not complain if they have to fight it out
with unions in the market place. Indeed, on one view, the Government's
amendments would have increased the regulation of the labour market. But the
reason is that the tribunals have continued to find ways of interpreting the
law in favour of unions, to such an extent that employers have to fight with
one hand tied behind their backs.
The most recent example is the
extraordinary interventionist, pro-union decisions of the Federal Court in the
recent building industry dispute in Victoria. Those decisions effectively
neutered two important statutory provisions clearly designed to protect
employers against union intimidation and forced the Government into trying to
amend the legislation. Suggestions by the Democrats that the Government was
conducting a "vendetta" against the Federal Court are absurd: that
Court was acting irresponsibly and legislation to correct its behaviour was
Thus, it is almost certain that
manufacturing industry unions will now go out in the field and target one or
two of the companies most likely to cave in, possibly in the protected motor
vehicle industry. This will then lead to a flow-on through the rest of the
industry, as happened in the Victorian building industry dispute, where unions
eventually obtained wage increases ranging between 15- 24 per cent over three
years, plus a 36 hour week. Is it any wonder that business confidence has
Just what concessions the unions extract
from manufacturers, and with what flow-on potential, cannot be predicted.
Structural changes in the economy and the role of the AIRC have reduced the
potential for flow-ons to the rest of the economy. Even so, union militancy in
manufacturing will encourage radicals in other unions to press claims too.
The Reserve Bank, which has the
responsibility for keeping inflation to the 2-3 per cent target, could soon
face a major test. If the manufacturing unions obtain wage increases and other
concessions inconsistent with sustaining the inflation target, the Bank will
have no option but to raise interest rates, despite the adverse employment and
activity consequences that would flow.
The Government's right to govern is under
threat. There is only one way of dealing with that.