Chris F.Wright, William Brown and Russell Lansbury

The changing roles of trade unions in national political economies: a comparison between Australia and the UK

Chris F.Wright, William Brown and Russell Lansbury

Introduction

Trade unions in Australia and the UK are historically closely related to the labour parties in each country but their influence over economic policies over the years have differed quite markedly. This paper compares the influence of the union movements on government economic policies over the past three decades under both labour and non labour regimes. As globalisation increasingly concentrates trade unionism within public sectors, the paper raises more general questions about changes in union political influence in Europe and beyond.

During the 1980s and 1990s both Australia and the UK implemented market-oriented structural reforms in response to substantial economic pressures. In the UK, the Thatcher Conservative government introduced neo-liberal economic policies in the face of strong union opposition. Unions experienced a major decline in power and influence, which contributed to rising economic inequality. By contrast in Australia, the Labor government implemented liberal market regulation complemented by ‘social wage’ provisions to protect standards of living for workers and their families, which unions managed to negotiate in exchange for their support of economic reform. In both countries, levels of union density declined substantially during this period and unions were confronted by conservative governments hostile to organised labour. But the union movement in Australia was able to successfully mobilise opposition to anti-union legislation by the Howard coalition government and was influential in returning Labor to power in 2007.

Under both the Blair Labour government in Britain and the Rudd and Gillard Labor governments in Australia, unions had some of their bargaining rights restored, and they managed to slow the fall in membership density. Despite this, in neither country did the unions regain the power which they exercised under previous labour governments. Nevertheless, the success of the Accord between the union movement and the Labor governments in Australia contrasted with the failure of the attempt at achieving an effective ‘social partnership’ in the UK, despite the favourable climate of the European Union. Australian unions have retained greater influence with the current Australian Labor government compared with British unions under the Blair Labour government. A new Accord has not been sought by the current leadership of either the unions or the Labor Party in Australia. But the success of the previous Accord laid the foundation for the relatively greater success of the Australian union movement in influencing economic policy compared with their British counterparts. Australian unions have also been more successful at retaining institutional influence within industrial relations regulatory system.

The paper begins with a comparison between the trade union movements in Australia and the UK during the 1980s and 1990s. During this period the governments of both countries introduced liberal market economic reforms, but with significantly different involvement of the trade unions. The resilience of the unions in Australia during the conservative Liberal-National coalition government is during the next decade is then contrasted with the failure of the British unions to prosper under the ‘New Labour’ government in the UK. Finally, the contrasting fortunes of the two union movements are compared in the most recent period when the Australian unions might have expected to achieve greater influence under a reformist Labor government than they did. Nevertheless, the paper concludes that the union movement in Australia has fared somewhat better than their British counterparts due to their political leverage and the continuing importance of labour market institutions such as the federal industrial relations commission

Unions and the transition to liberal economies: Similar ends, different means

Our starting point for comparing the divergent fortunes of the labour movement is the economic crises of the late 1970s/early 1980s and the liberal market policies adopted by governments in Australia and Britain in their aftermath. Although these crises had their origins in the recessions and inflation, prompted by the oil shocks of the early 1970s, the presence of uncoordinated systems of collective bargaining compounded problems of high unemployment and high inflation in a number of countries, including Britain and Australia. In Britain, uncoordinated bargaining had its origins in the emergence of the ‘informal system’ of workplace bargaining that had developed alongside the ‘formal system’ of industryand national collective agreements. A lack of control by unions and employer associations over (informal) bargaining at the workplace level led to wage outcomes above the terms of the (formal) agreements. The widespread practice of workplace union representatives seeking to maintain ‘wage relativities’ contributed to ‘leapfrogging’, thus resulting in wage-price spirals. Similar developments occurred in Australia, where unions pursuing wage outcomes at the workplace which exceeded those established by occupational and industry awards produced inflationary wage increases. The system of compulsory arbitration in Australia gave the state more capacity to respond to these problems than in Britain, where the tradition of ‘collective laissez-faire’ was manifested in an aversion among unions and employers towards state intervention in wage bargaining. Nevertheless, the problems of wage-led inflation and high unemployment persisted in both countries until the early 1980s.

Both countries were also beset by industrial decline with inefficient manufacturing sectors. A legacy of tariff protection that shielded Australian manufacturers from competition had entrenched structural inefficiencies. A rising international demand for Australian commodities contributed to declining for protectionism, which prompted the Whitlam government to cut all tariffs on imported goods by 25 per cent in 1973. Australian manufacturers struggled through the 1970s against a rising tide of cheaper, higher quality goods. Many manufacturing firms collapsed under the combined weight of increased international competition and workers’ demands for higher wages, which culminated in the economic recession of 1981 (Wright, Clibborn and Lansbury, 2011).

In Britain, the decline in manufacturing can be linked to inadequate adjustment to increasing competition for the recovery of the German and Japanese economies and the steady loss of traditional empire markets. More immediately, the arrival of North Sea oil in the 1970s strongly affected the sterling exchange rate at which Britain traded.

Although governments in Britain and Australia successfully resolved problems relating to economic underperformance and the impact of uncoordinated bargaining on wage inflation, the process by which they achieved this outcome differed markedly. In Britain, the Conservative governments of Margaret Thatcher and John Major orchestrated a shift in the macroeconomic policy framework away from Keynesian demand management towards monetarism, with inflation containment replacing full employment as the principle economic policy objective of government (Hall, 1993). The state retreated as an active participant in the marketplace. A new competition policy was introduced, government-owned utilities and services were privatised and industries hitherto protected from market competition were deregulated. Tripartite institutions that governed workforce planning, industry training and minimum wage rate for workers in low-paid industries were all abolished. Although these reforms prompted significant protest from the union movement, this did not deter the Thatcher and Major governments, which saw unions and collective labour market institutions as central to Britain’s economic problems. As such, unions were marginalised from any formal dialogue on national economic matters, to such an extent that they were ‘virtually ignored by the government’ (Taylor, 1993: 265).

A shift in trade union power also occurred at the workplace through changes to labour market regulation in the form of prescriptive employment laws that constrained the activity of unions, which were seen as impediments to increased labour mobility and workforce participation (Taylor, 1993).Secondary industrial action and closed shop arrangements were banned and secret ballot procedures before industrial action could proceed were introduced. This undermined the ability of unions to create and maintain industry-wide standards through the collective bargaining process. National and industry-wide agreements were broken up and laws obliging government contractors to comply with the terms of public sector collective agreements were repealed. Unions struggled to maintain influence in many industries and workplacesas a consequence of these significant shifts in economic and labour market regulation (Brown, 1993; Brown et al., 2009). The defeat of union control in the nationalised coal mining industry,following an industrial dispute lasting more than a year (or more than a decade by some measures), was emblematic of the success with which the Conservative governments were able to cripple the power of organised labour, both politically and industrially. As well as heralding a sea-change from ownership of the state to the private sector in many strategically important and hitherto highly unionised industries, it also saw the demise of joint determination of working arrangements in favour of the principle of managerial prerogative.

The Conservative’s economic and labour market reforms were effective in weakening the influence of unions, most significantly at the workplace. The proportion of workers in the private sector covered by collective agreements or wage councils declined from 70 per cent in 1980 to 20 per cent in 2004, while the proportion of workers whose pay was determined by individual negotiation with managers increased correspondingly (Brown, 2010: 254).Wage inflation consequently ceased to be a major economic policy concern.

Similar outcomes were reached in Australia through rather different means. Upon its election to government in 1983, the Australian Labor Party (ALP) led by Bob Hawke and subsequently by Paul Keating entered into an agreement with the Australian Council of Trade Unions (ACTU) known as the ‘Prices and Incomes Accord’ (the Accord). The Accord involved unions agreeing to moderate their wage demands in exchange for a ‘social wage’ provided by the federal government in the form of universal health coverage, welfare initiatives and superannuation reform.To this end, its central object was to reduce both unemployment and inflation by controlling wage adjustments and allowing interest rates and fiscal policy to be more expansionary than would otherwise be possible(Lansbury, 1985).

The Accord provided the union movement, particularly the leaders of the ACTU, with considerable influence on key decisions affecting the Australian economy undertaken by the Hawke and Keating governments from 1983 to 1996. For the union movement, the initial trade-off for this influence was short-term wage restraint delivered through centralised indexation. National Wage Case decisions, handed down by the Australian Industrial Relations Commission, supported wage indexation on the condition that the union movement adhere to the commitment to ‘no extra claims’, that is, no demand for additional wage increases except under exceptional circumstances. After the severe economic crisis of 1985-86, however, the government and the ACTU agreed to shift to partial indexation involving a ‘two tier’ wages system. This began a steady movement towards a more decentralised system of wage determination which culminated in the introduction of enterprise bargaining in 1991 (Davis and Lansbury, 1998).

The ALP governments of this period also embarked upon sweeping economic reforms that went well beyond incomes and labour market policy. Market regulations were liberalised extensively in order to improve economic performance, which resulted in the floating of the Australian dollar, the deregulation of financial markets and the banking sector, the privatisation of public assets and a competition policy being introduced. Trade barriers were further reduced, significantly but gradually. To cushion to impact of increased competition, the government introduced assistance programs and ‘industry plans’ to facilitate their transition towards more productive and competitive business models.

The period from the early 1980s to the mid-1990s saw the establishment of a liberal market policy paradigm (Hall, 1993) in both countries, as economic and labour market reform heralded the shift award from regulations aimed at protecting the position of local producers and workers towards one aimed at exposing these actors to greater market pressure in order to improve their competitive standing in a more integrated international economic environment. Superficially at least, the transitionsof the two countries towards this new paradigm were quite similar, at least in the sphere of the labour market. Liberal policies that ushered greater competition into product markets and the decentralisation of wage determination undermined the influence of unions at the workplace level. Union membership levels in both countries declined precipitously. Wage inflation and uncoordinated bargaining became less of a problem. But these similarities disguise some importance differences with respect to labour market outcomes, particularly for workers, and the institutional standing of trade unions, which was severely weakened in Britain but remained reasonably strong in Australia. To properly understand this, we need to look at the period since the mid-1990s.

The institutional strength of organised labour in the new economic orthodoxy

The mid-1990s represented a turning point in the influence of unions in both countries. In Australia, the election in 1996 of the centre-right Liberal-National (‘Coalition’) government of John Howard, which remained in office until 2007, marked an end to the Accord and the privileged involvement it afforded unions over public policymaking. In Britain, the 18-year reign of the Conservative party came to aclose with the period of ‘New Labour’ government from 1997 to 2010 under the leadership of Tony Blair and Gordon Brown. The changed political landscape saw a hostile government seeking to marginalise the union movement from policymaking and at the workplace in Australia, and the ascent of a government with more benign attitudes towards organised labour in Britain. However, the institutional position of unions remained relatively unchanged in both countries. The Australian union movement maintained an important role in the employment relations landscape via the award system and managed to defeat the Howard government’s attempts to weaken it industrially and politically. A number of key reforms to improve the standing of workers failed to disguise the ambivalence of New Labour governments in Britain.

John Howard’s statement that “the goals of meaningful reforms, more jobs and better higher wages, cannot be achieved unless the union monopoly over the bargaining processes in our industrial relations system is dismantled” best captures the Howard government’s philosophy towards employment relations (Cooper et al., 2009: 341). To this end, it secured the passage of the Workplace Relations Act soon after coming to power, which operated from 1997 to 2005. The Act affirmed the shift towards enterprise bargaining ushered by the Accord, but sought to weaken the involvement of unions and industrial tribunals in this process. This was achieved by introducing provision for the use of individual contracts and promoting non-union enterprise bargaining. Although the status of occupational and industry awards were weakened, in order to encourage more enterprise bargaining, the award and industrial tribunal system remained prominent features of the employment relations system. And unions retained substantial capacity to be involved in the bargaining process, despite the limitations on union industrial action and the prohibition on union preference (Cooper et al., 2009).

The Howard government’s objectives to decentralise and individualise the employment relationship more comprehensively were thwarted by the bicameral nature of the Commonwealth Parliament. The Coalition had a majority in the House of Representatives but was forced to modify more extreme elements in order to secure the passage of the Workplace Relations Act through the Senate. Such constraints were removed when the Coalition won a majority in both houses during the 2004 election, which allowed it to pass the more radical ‘Work Choices’ legislation the following year unencumbered by the views of other parties. Work Choices imposed major restrictions upon union activity and involvement in wage setting and workplace negotiations. Furthermore, it permitted employers to use individual contracts to undercut the minimum standards of awards (which were also weakened by the legislation), further eroded the power of industrial tribunals and abolished unfair dismissal laws for any business employing 100 or fewer employees (Peetz and Bailey, 2010).These reforms represented a serious threat to the union movement and its members. The ACTU responded by coordinating a campaign to mobilise electoral opposition to the Coalition and the Work Choices legislation at the 2007 election. The strategy, which relied upon a strong media campaign and local community organisingin marginal electorates, proved to be highly successful: an analysis of post-election polling shows the union campaign to be the decisive factor behind ALP’s defeat of the Coalition (Wilson and Spies-Butcher, 2011).