Pearls and Irritations

Malcom Turnbull’s recent comment that he couldn’t work with Sally McManus the recently elected Secretary of the Australian Council of Trade Unions (ACTU) is just another excuse against strong union representation for ordinary waged workers.

Sally McManus’s bio from the ACTU:-

“Previously Secretary of the Australian Services Union (ASU) was a hard working advocate for her members. During Sally’s time as ASU Secretary their membership grew from 9,500 to 12,000 members. She has led many successful campaigns in the private, public and community sectors including the first collective agreement in the work for IBM workers, a campaign preventing water privatisation and the Equal Pay campaign for community workers which was a seven year campaign that delivered between 18-40% pay increases for all workers.”(See ACTU website http://www.actu.org.au/about-the-actu/elected-officers.) When strong union leaders challenge the tactics and policies of government by supporting their members against unjust industrial laws, processes and procedures, anti-union politicians never miss an opportunity to jump on the bandwagon to criticise unions.

Union membership and industrial disputation

Do Australian unions have too much power? Lets check the facts by looking at two important factors, trade union membership and the level of industrial disputation. Latest ABS data was collected up to August 2013. At August 2013, 17% of all employees (1.7 million) were trade union members in relation to their main job. Trade union membership was higher in the public sector (42% of all employees were trade union members in their main job), compared to the private sector (12% of employees) Employees in the Education and training industry had the highest proportion of trade union membership in their main job (37%), followed by Public administration and safety (34%) The occupation groups with the highest rates of trade union membership in relation to their main job were Machinery operators and drivers (26%) followed by Professionals (24%) and Community and personal service workers (22%). Trade union membership has steadily declined over recent years, with 2013 being the lowest proportion in the history of the series. In 2003 Trade union membership was around 23% of the Australian workforce, so the decrease has been dramatic over 10 years. Industrial disputation data can be looked at over the short term or over the last 30 years to get a good picture about what is happening. If we look at the last six years industrial disputation has increased by 12%. ABS data shows the total number of industrial disputes in the 12 months ending December 2010 at 227 and at December 2016 was 259. However if we look at disputes from 1985 where 1954 days were lost to December 2016 where 259 days were lost we notice a marked six-fold decline in working days lost (See ABS Table 6310.0 – Employee Earnings, Benefits and Trade Union Membership, Australia, August 2013.)

When Malcolm Turnbull gave his March 29 2016 speech to the Macarthur Chamber of Commerce about Building and Construction disputation pre and post Australian Building and Construction Commission (ABCC) he failed to give the full picture. Mr Turnbull attempted to create the impression that disputation increased dramatically only after the abolishment of the ABCC in March 2012 by the Labor government. There were other factors that contributed to disputation. In construction, working days lost due to industrial disputes fell after 2005 and stayed low to 2009. There was an increase in 2010 and big spikes in 2011 and 2012. The big spike in construction sector working days lost due to industrial disputes in between 2010 and 2012 coincided with several atypical large construction sector disputes and strikes. 4 .As two academics Gerard de Valence and David R Chandler correctly state in The Conversation on 8 April 2016 doing a fact check on Malcolm Turnbull:-

“The PM’s statement that two-thirds of all industrial disputes in Australia are in the construction sector is correct for December 2015 only.

Overall, his comment is misleading because the PM is using the unusually high December 2015 quarter as a benchmark. The long run average for 2010 to 2015 is just under 30% of all days lost (still the highest share of any industry). The average between 2005 and 2009, with the ABCC, was around 10% of all days lost The PM’s assertion that industrial disputes in Australia are at their highest level since 2010 is correct, but relies on a selective choice of time periods. There were more disputes in March 2010 and December 2009 than December 2015.” See https://theconversation.com/factcheck-are-two-thirds-of-all-industrial-disputes-in-australia-in-the-construction-sector-57052 

We can all take statistics out of objective context and use them to justify an ideological viewpoint or opinion. In fact an opposite argument could be put forward that the unions that have real power in Australia today are the employer associations like the Business Council of Australia. This council of big employers has openly asked the Turnbull government to give tax cuts to big business, whilst pushing Turnbull for a budget policy of fiscal austerity combined with a subtle hinted suggestion that deregulated working conditions and static or reduced rates of pay for workers are a necessary condition for innovation and prosperity Go to their website and take a look. (See http://www.bca.com.au/

http://www.bca.com.au/media/workplace-relations-reform-article-by-jennifer-westacott

http://www.bca.com.au/media/opening-remarks-to-productivity-commission-hearing-on-workplace-relations) Sensible people must ask the question whose prosperity? because over the last 25 years ordinary workers haven’t got their fair share.

Worker productivity and minimum wage growth

The next question we have to ask is why has there been a recent increase in industrial disputation. Well we could identify a few reasons why workers are not happy. Lets leave out the construction sector for specific analysis, as it has unique, peculiar factors that aren’t available generally to other sectors and is too complex to address properly in this short essay. To answer this question adequately for most workers, we could firstly look at minimum wage growth in relation to decreases in real unit labour costs and increases in worker productivity, secondly we could look at the increase in profits relative to labour costs, thirdly we could look at the dramatic increases in the remuneration of senior management executives and fourthly look at the increase in personal household debt. I would argue with the last measurement, that there is a direct correlation between little or no wage increases over a considerable period of time and increases in personal household debt to compensate for the loss of wage increases.

On November 16, 2016, the ABS released the latest Wage Price Index, Australia for the September-quarter 2016. The annual growth in wages recorded its lowest level since the data series began in the December-quarter 1997.7. If you extrapolate conservatively the productivity data from the June-quarter 2016 using the average growth rate for the last 10 years to smooth out cycles and other variables, the real hourly wage index has grown by 12 per cent, while the hourly productivity index has grown by 33.7 per cent. Using this approach you can work your way back to the mid1980’s and the overall gap is huge. Therefore real wages are growing well below trend productivity growth as Real Unit Labour Costs (RULC) continue to fall. This means that the gap between real wages growth and productivity growth continues to widen as the wage share in national income falls. In effect there has been a massive redistribution of national income from workers to capital over three decades, since centralized bargaining was abandoned. You would think that as profits grew enormously that they would have been reinvested to create more jobs, but instead senior management took some of the profits as remuneration in the form of obscene salaries and shares and options with the remainder of the profits going into various forms of speculative activity.

(See ABS 6345.0 – Wage Price Index, Australia, Sep 2016 and 6345.0 – Wage Price Index, Australia, Dec 2016 and http://www.smartcompany.com.au/finance/myths-justify-huge-pay-packets-chief-executives and From Pearls and Irritations blog, David Peetz, Why everybody knows CEOs are overpaid, but nothing happens. 9 February 2017)

Ordinary workers have compensated for their loss in wages by the use of credit card debt or personal loans. Increasing private household debt has reached 123.10 percent of GDP in the third quarter of 2016 from 123 % of GDP in the second quarter of 2016. Australia’s ratio of household debt to GDP was the third highest in the world according to data released by the Bank for International Settlements, (BIS) only eclipsed by Denmark and Switzerland at 124 % and 128 % of GDP respectively. Australia’s household debt servicing ratio (DSR) is also the third highest in the world. 9. Until recently, banks encouraged workers to use their credit cards and take out personal loans to attract bank interest and administrative charges.

Other financial institutions and money lenders were even less concerned about their lending practices. Banks can leave many people in dire financial straits, if interest rates rise by only a few percentage points, or there are jobs losses The effects on families can be devastating.

(See https://www.theguardian.com/business/2016/jan/15/how-australian-households-became-the-most-indebted-in-the-world and http://www.tradingeconomics.com/australia/households-debt-to-gdp and

https://www.macrobusiness.com.au/2017/02/australian-household-debt-control/ and

http://www.telegraph.co.uk/business/2016/12/07/australias-household-debt-binge-has-left-country-vulnerable/)

Workers and unions

Australian unions have been a reflection of the industries that their members were working in at a particular time in history. Technological change and the reduction of workers in agriculture and manufacturing means that more workers have found themselves working in service industries whether private or public. In particular, unions have not moved fast enough to keep pace with the creation and array of new private sector service jobs to meet the different needs of their members. The reinvention of unions to meet those 21st century work challenges is an on-going project. The polling company Essential Report released figures in 2015 which showed that 62% of Australians believe unions are important, and this belief has grown since 2012.10. Of course unions are handicapped by a number of factors, not the least of all industrial legislation. Due to restrictions in Australian law, employees can only strike:

• with other employees of the same employer for an agreement to cover that enterprise,
• during a bargaining period after the expiry of an old agreement;
• for rights that can be put into an agreement, not other legal or policy measures even when they directly affect workers, (such as striking against a public-sector pay cap or workers’ compensation cuts)
• for their own rights, not in sympathy with other workers through secondary boycotts;
• in isolation, not through pattern bargaining to achieve common agreements across multiple employers or supply chains. (See https://www.theguardian.com/australia-news/2017/mar/16/why-union-boss-sally-mcmanus-endorsed-unlawful-strikes)

The Fair Work Commission also has the power to terminate or suspend industrial action.

So these impediments for union action through different processes and procedures are considerable, despite contravening the freedom to associate under international labour law.12. In addition, unions have failed to capture the imagination of younger workers or older workers, in industries where unions are not commonly seen.

Considering all these handicaps there is still good evidence that belonging to a union can have benefits. Generally wages for union members are higher than for non-members, despite differences across industries and gender. In Labour Economics the term ‘union wage premium’ is the increase in wages across industry produced by being a union member.

In Australia, union wage premiums are found across almost the entire wage distribution for both males and females. While for males it is evident that the union wage effect or wage premium decreases when moving up the wage distribution, the effect for females is relatively stable except at the extremities of the distribution. (See Lixin Cai, Amy Y.C. Liu ’Union Wage Effects Australia: Are There Variations in Distribution,’? The Economic Record, 2008 and Alex Bryson, ‘Union wage effects: What are the economic implications of union wage bargaining for workers, firms, and society’? IZA World of Labour, May 2014.)

In addition, unions are good resource centres on labour law, industrial rights, rates of pay, working conditions and occupational health and safety. Many unions have developed legal advocacy services, financial counselling and in house training for members, delegates or representatives. 

Conclusion

It’s clear that Australian unions are not all-powerful horrible organisations that do nothing for Australian workers except take their union dues or make sweetheart deals with employers behind their backs. When they act on behalf of workers in good faith, unions in Australia are a viable, countervailing force to deal with powerful employer interests and unsympathetic governments. Unions can be a strong, independent, positive force for economic, social and political change, but they will need to reinvent themselves as a new resource for workers in 21^st century Australia, similar to community service organisations. Compared to employer associations unions are well behind in the power stakes and have limited power, it’s like comparing David to Goliath. However just occasionally, David gets a win when his members support him. The old union adage that ‘together we bargain, divided we beg’ has never been more apt in 21^st century Australian workplaces. If unions are to continue to be strong representatives for Australian workers, then their elected representatives will definitely need to take a leaf out of the book of Sally McManus and provide bold, passionate and courageous leadership combined with intelligent strategies and tactics.

Wayne McMillan has been a proud union member of the NSW Public Service Association for 30 years. He has been involved with many private and public sector unions. Wayne comes from a long line of decent working folk, who were all staunch union supporters.

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