National Wage Case August 1977

[1977] FCA 68

I

i 6 8

m / THE AUSTRALIAN CONCILIATION

AND ARBITRATION COMMISSION

CONCILIATION AND ARBITRATION

ACT 1904

C. Nos. 1193, 1194, 1196 and

1197 of 1977

!

PUBLIC SERVICE ARBITRATION

ACT 1920

C. No. 1214 of 1977

NATIONAL WAGE CASE AUGUST 1977

EELBOURNE ,22 AUGUST 1977

SIR JOHN MOORE, PRESIDENT

MR. JUSTICE ROBINSON

MR. DEPUTY PRESIDENT ISAAC

I

MR. ACTING PUBLIC SERVICE ARBITRATOR WATSON

MR. COMMISSIONER MATTHEWS

REASONS FOR DECISION

I

2 .

For the June quarter 1977 the Six Capitals figure of the

Conswner Price Index rose by 2.4 per cent. Consequently

claims were made as described below, with any increase to

operate from 15 August 1977. The claims and the attitude

of parties and interveners are as follows:

Australian Council of Trade Unions 2.4 per cent increase

and Australian Council of Salaried plus an amount to

and Professional Associations compensate for full percentage increases not awarded in the past.

Council of Australian Government

Employee Organizations and

I

Council of Professional Associations 2.4 per cent Increase.

Australian Public Service Federation

2.4 per cent increase.

New South Wales

2.4 per cent increase

up to Average Weekly

Earnings then a flat

amount.

South Australia and Tasmania

2.4 per cent increase.

Comonwealth and Western Australia

no increase.

Victoria

discount 2.4 per cent by

0.4 per cent for devaluation

then award half, i.e. 1 per

cent increase.

Queensland

matter for Commission but

if an increase a uniform

percentage increase less

than 2.4 per cent.

E

I ' \

I .

I 3.

Master Builders' Federation no increase unt i l substant ia l

compliance.

National Employers' Policy

Committee no increase.

No one i n terms suggested that the indexation package

should be abandoned.

As a re su l t of the Commission's decision of 24 May 1977

the par t ies are act ively involved in a thoroughgoing review

of wage f ixing pr inciples in a conference under the chairmanship

of the President. Central to that inquiry i s the fu ture of

indexation. Inevitably our deliberations in the present case

haye been influenced by the 47-going nature of the review and

the wish not to prejudice the possibil i ty of consensus emerging

from the discussions. We consider it would be undesirable

for us to depart from the pa t te rn which the Comission has

created over the	last two years or to	make any statements about
general principles.

Hence, as to subs t an t i a l compliance rre simply say tha t

having considered the statist ics and the evidence of disputation

we are prepared to follow the reasoning of the May decision and

conclude that here has been substantial compliance. This

conclusion has been made the more d i f f i c u l t by certain unions

openly s t a t ing that they are seeking to destroy the package

and taking act ion in an attempt to bring this about.

Following the same approach we say that we a r e n o t a t

I

present prepared to implement the employers continuing claim

f o r six monthly hearings nor are w e prepared on this occasion

t o recommend the indexation of over-award payments.

The claim for catch-up was made by only two out of the

four peak union councils and was not debated at any length

before us. It should be clear by now tha t the Commission

w i l l not grant such	claims and accordingly this par t	of	the
claim is dismissed.

4 .

I n i t s last National Wage decision the Commission

noted that the economic outlook continued to cause

concern with no clear s igns of economlc recovery i n

sight. Since then, unemployment has worsened.

Apart from a f a in t no te of optimism from the Commonwealth,

there vas general agreement tha t the economic indicators

do not point to an early recovery.

However, once again the Commission t7as faced with

s t rongly confl ic t ing views on the reasons for the

continued economic stagnation. The Commonwealth blamed

t h i s on the la rge increase in the leve l of r e a l wages

during 1973174 and 197415 which had d is tor ted "key economic

relationships" by great ly ra is ing real labour costs and

lowering the share of profits. Therefore, it argued, i n

i	order t o allow a speedy and sustained economic recovery
to take place, it was necessary f i rs t to reduce real wages
and real abour costs. The Commonwealth on this occaslon
sought to support its analysis by comparing the movement
of productivity and labour costs (including payroll tax
and workers compensation charges) over the period from
1966/67 t o 1975176, t o show that labour costs were excessive
i n relat ion to product ivi ty by about 10 per cent for the
year 1975176.

Although taking a somewhat d i f fe ren t ana ly t ica l

approach, i n substance the private employers' submissions

were along similar llnes: labour costs were too high and

fur ther wage increases led to continued "shedding" of

labour as employers tried to minimise the addition to costs.

The unions on the o ther hand argued that the Commonwealth's

economic s t ra tegy was a t f a u l t and that no recovery could be

expected without a st imulus to demand from the Government and I

appropriate manpower measures to dea l wi th the ex is t ing

s t ruc tu ra l unemployment. A reduct ion in rea l wages in these

circumstances, it was argued, would discourage consumption

i .

5 .

spending further and adversely affect investment and

employment. It was noted that he percentage Increase

in average weekly earnings assumed i n t h e 1976177 Budget

strategy, had i n f a c t eventuated despite which the anticipated

improvement i n unemployment had not aken place. Instead,

unemployment had deteriorated. In re la t ion to the ana lys i s

showing a gap between labour costs and product iv i ty in

1975176, the unions pointed out that the figures were out of

date , that the gap would have narrowed considerably smce

then, and tha t the gap w a s a normal fea ture of an economy

i n a s t a t e of unused capacity.

Again, on this occasion, detailed submissions were

made both by the Commonwealth and the unions on the shares

of p r o f i t s and wages, a f a c t o r c r i t i c a l t o t h e Commonwealth's

argument on the res tora t ion of normal economic relationships.

The unions referred to the progressive recovery in the share

of prof i t s , the leve l of p r o f i t s having r isen a t a substant ia l ly

fas te r ra te than wages and pr ices s ince September 1975.

However, desp i t e t h i s improvement i n p r o f i t a b i l i t y , unemployment

has continued to increase. The current profit share, the

unions submitted, is l i t t l e s h o r t of the average figure and is

consistent with experience for the present phase of the economic

cycle. Further, they argued, the normal share would be

automatically restored with an expansion in economic ac t iv i ty .

As for the argument that the high pr ice of labour had

resulted in the shedding of labour and i ts subst i tut ion by

capital, the unions pointed to the absence of any persuasive

evidence on th i s i s sue . In any case, the unions argued,

payroll tax and the special investment allo~rance, one ra i s ing

the cost of labour and the other lowering the cost of cap i ta l ,

both within government control, were providing important

incentives in the substi tution process. Moreover, they said,

t he f igu res r e l a t ing to the r a t io between male and female

unemployment and the numbers of unemployed persons in various

industry groups contradicted this argument.

i I . '

e 6.

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New South Wales, South Australia and Tasmania

generally supported the economic submissions of t he

unions while Victoria, Queensland and Western Australia

generally supported those of the Comonwealth and the

pr ivate employers. But Victoria took the view t h a t i n

all the circumstances an increase of not more than 1 per

cent should be granted.

The arguments and evidence before us were essent ia l ly

the same as those presented in the two National Wage Cases

ear l ie r th i s year . The Commission commented then that

I

the confl ic t ing arguments a s t o what is the proper course

for wages placed it i n a d i f f icu l t pos i t lon . It concluded

tha t on the material submitted, i t was not sa t i s f ied tha t

simply reducing the r e a l income of wage and salary earners

would promote economic recovery.	The submissions on t h i s
occasion reinforce thls conclusion.

Although p r o f i t s have not qui te re turned to "normal"

leve ls , we are impressed that they have recovered

progressively and s igni f icant ly s ince the Cmiss ion

introduced the indexation principles. But the recovery

in prof i t s has been accompanied by increasing rather than

reduced unemployment and we are unable to conclude that it

is lack of p r o f i t a b i l i t y which is preventing a recovery

from	taking place.
It may well be, a s t he private employers submitted,

tha t there i s a cr is is in confidence but we question the

view tha t the leve l of r e a l wages is the most c r i t i c a l

fac tor among the various influences currently affecting

confidence. On the material before us and especially

the steady recovery of profits, we are not persuaded tha t

granting no increase a t th i s time IS an e s sen t i a l element

i n economic recovery,

7.

However, as on the last occasion, we are faced with

a C.P.I. increase which bears the effect of devaluation

since November 1976. In >Jay 1977 the Comission

said that it could not ignore the fact that the devaluation

had occurred under conditions of an uncomfortably high rate

of inflation and that it should as far as possible minimise

any action which would reduce the benefits conferred by

devaluation on the competitiveness of the Australian economy.

Nothing put to us on this occasion persuades us to take a

different course and we propose to discount the June quarter

C.P.I. for the effect of devaluation.

We note that in answer to a question as to the treatment

of the C.P.I. in the event of an upward revaluation, the does recognize the appropriateness of an evenhanded approach to the underlying exchange rate changes when it comes to adjusting the C.P.I. for wage indexation purposes".

We were presented with four alternative discounting

figures :

1. The Statistician's estimate of 0.4 per cent

as a measure of the extent to which prices of

I

C.P.I. goods wholly or largely Imported had increased during the June quarter.

2. The Cornonwealth's figure of 0.7 per cent

I, based merely on a judgment" of the extent of

understatement in the Statlstician's figure.

3. The A.C.T.U's figure of between 0.2 and 0.3 per cent on the argument that the Statistician's

figure overstated the extent of the devaluation

effect.

8.

4. The pr iva te employers f lgure of 0.8 per

cent. This figure vas based on a

calculat ion of the contribution of imports

of goods and services to the increase in

the implici t pr ice def la tor of national

turnover for the March 1977 quarter.

We a r e in some d i f f i cu l ty in having t o choose between

these al ternat ives and w e are concerned tha t there is no

r e l i ab le measure f o r t h e f u l l e f f e c t of devaluation on

the C.P.I.. In the circumstances we bel ieve that we

should adopt the course followed by the Commission i n

the March quarter decision and use the S ta t i s t ic ian ' s

figure to discount for the devaluation effect although

w e a r e aware that to an unknown but small extent this

f igure may on balance overstate or unders ta te the fu l l

e f fec t of devaluation.

The unions and in particular the white collar unions

have pressed strongly that we should award a uniform

percentage increase. In four out of t h e l a s t f i v e

quarterly adjustments, the Commission applied various forms

of plateau indexation which have resu l ted in a compression

of r e l a t i v i t i e s and a s ignif icant reduct ion in real pay

for those in the upper half of the pay structure. We

believe that these circumstances call for	a	uniform
adjustment i n pay on t h i s occasion.

Accordingly, le have decided t h a t a l l award r a t e s

and m i n i m u m wages w i l l b e increased by 2 pe r cent as from

the first pay p e r i o d to commence on o r a f t e r today. It IS

not our intent ion that t h e increase be apphed to

weraward payments including those covered by a recommendation

provision such as appears in the Metal Industry Award.

9.

We have made th i s dec is ion in the knowledge tha t the

conference on wage f ixing pr inciples current ly in progress

will affect not only the future of wage indexation but also

indus t r ia l re la t ions and consequently the economy.

We should also make certain observations in view of

apparent misunderstanding of the Commission's decisions.

First , using the C.P.I. a s t he measure of changes i n

the purchasing power of money, on the most r ecen t s t a t i s t i c s

published by the Stat is t ic ian the fol lowing f igures show tha t

there has	been	some dec l ine i n r ea l	wages since May	and June of
last year.

Increase in C.P.I. (Six Capitals)

from June quarter 1976 t o

June quarter 1977 13.4%

Increase in Average Weekly Earnings

(seasonally adjusted) per

employed male uni t from June

quarter 1976 t o June quarter 1977 10.8%

Increase in Adult Male Minimum

Weekly Wage Rates from May 1976

t o May 1977 10.9%

I

Increase in Adult Female Minimum

I	Weekly IdJage Rates from May 1976
t o Xay 1977 11.8%

Second, on a l l the evidence and argument before the

Commission, it remains highly contentious whether employment

recovery would have been greater or less merely i f t h e

Commission had awarded smaller wage increases during 1976/1977.

The causes of the present unemployment a re complex. This

is evident from the Commonwealth's own submission. In answer

t o a question f rom the Bench in connection with the arguments

of Mr. Hartnett for A.C.S.P.A., on the causes of unemployment,

the Commonwealth through i ts Counsel said:

10.

"I come now to deal br ief ly with a question

or a suggestion made by His Honour Mr. Jus t ice

Robinson as to vhether the Commonwealth desired

t o comment on what Mr. Hartnett had to say on the

causes of unemployment.	We	would offer	only	a
very brief observation.

In essence Mr. Hartnett seems t o have been

arguing that most of the current unemployment stems from s t ruc tu ra l imbalances in the labour

market. The f a c t is tha t a number of fac tors

have contributed to the present unemployment

s i tuat ion. Certainly there are s t ructural

imbalances. The main feature is, i n our

submission, the slackness in economic a c t i v i t y

which in tu rn is l inked in l imited measure to

excessive real wage costs, and w e have stressed t h i s i n t h i s and previous national wage cases."

I

Third, we believe there is a tendency to ove r s t a t e

the power of the Commission to control actual wage movements.

The Commission has t r ied to opera te a s e t of wage pr inciples

i n a d i f f i c u l t i n d u s t r i a l and economic climate, and from the

chaos of 1973-74, to bring order and r e s t r a i n t t o wage f ixing

as an essential ingredient for economic recovery. I n

pursuit of the objective of an orderly system of wage

determination the Commission has assumed that the only viable

basis for operating such a system l i e s i n wide consensus;

and i n coming t o its wage decisions i t has acted with considered

judgment in discharging its obligations under the Act.

Form of Orders

The var ia t ions of the awards and determination w i l l

operate from the beginning of t h e f i r s t pay period to

commence on or a f t e r 22 August 1977. The var ia t ions of

the awards w i l l operate for a period of three months from

22 August. Minimum wages w i l l be increased by 2%.

Leading Hand rates will also be increased by 2%, a s w i l l

s h i f t allowances which are expressed i n money terms, rounded

11.

off to the nearest 1 cent i f on a dai ly or sh i f t bas i s .

No increase w i l l be made t o any other allowances.

Junior ra tes prescr ibed only as money amounts w i l l be

increased by 2%. Weekly rates payable are t o be

calculated to the nearest 10 cents and annual rates to the

nearest one dol lar . The form of the orders necessary to

give effect to the decision under the Conciliation and

Arbitration Act w i l l be se t t l ed by the Registrar with

recourse to a member of t h i s Commission. The form

of the determination will be se t t l ed by the Public

Service Arbitrator.

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NATIONAL WAGE CASE AUGUST 1977

MELBOURNE, MONDAY 22 AUGUST 1977

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STATEMENT BY PRESIDENT

As a r e s u l t of t h e Commission’s decision of 24 May

1977 the par t ies are actively involved in a thoroughgoing

revlew of wage f ix ing pr inc ip les in a conference under the

chairmanship of the President. Central to that inquiry i s

the future of indexation. Inevitably our deliberations in

the present case have been influenced by the on-going nature -

of the review and the .wish not to prejudice the possibi l i ty

of consensus emerging from the discussions. We consider

i t would be undesirable for us to depart from the pat tern

which the Comission has created over the last two years or

to make any statements about general principles.

Hence, as to subs tan t ia l compliance we simply say

that having considered the statistics and the evidence of

disputation we are prepared to follow the reasoning of the

May decision and conclude that there has been substantial

I compliance. This conclusion has been made the more d i f f i c u l t

by certain unions openly stating that they are seeking to

destroy the package and taking action in an attempt to bring

t h i s about.

The claim for catch-up was made by only two out of

the four peak union councils and was not debated a t any length

before us. It should be clear by now that the Comission

nil1 not grant such claims	and	accordingly this par t	of	the
claim is dismissed.

2.

I n Its last Nat ional Wage decision the Commission

noted tha t the economic outlook continued t o cause concern

with no clear s igns of economic recovery in s ight . Since

then, unemployment has worsened. Apart from a f a in t no te

of optimism from the Cormnonv7ealth. there was general agreement

tha t the economic indicators do not po in t to an early recovery.

However, once again the Commission was faced with

s t rongly confl ic t ing views on the reasons	for the continued
economic stagnation.

The arguments and evidence before us were essent ia l ly

the same as those presented in the two National Wage Cases

ea r l i e r t h i s yea r . The Commission commented then that he

confl ic t ing arguments as t o what is the proper course for

wages placed i t i n a d i f f icu l t pos i t ion . It concluded tha t

on the material submitted, it vas not satisfied that simply

reducing the real income of wage and salary earners would promote

economic recovery. The submissions on this occasion reinforce

I

t h i s conclusion.

Although p r o f i t s have not qui te re turned to "normal" .

levels, b7e are impressed that they have recovered progressively

and s ignif icant ly s ince the Commission introduced the indexation

principles. But the recovery in profits has been accompanied

by increasing rather than reduced unemployment and we are unable

t o conclude tha t it is lack of p r o f i t a b i l i t y which is preventing

a recovery from taking place.

It may vel1 be, as the pr iva te employers submitted,

tha t there i s a c r i s i s i n confidence but 17e question the view

tha t the leve l of real wages is the most c r i t i c a l f a c t o r among

the various influences currently affectlng confidence. On the

material before us and especially the steady recovery of p ro f i t s ,

we are not persuaded that granting no increase at t h i s time is

an essential element i n economic recovery.

3.

However, as on the last occasion, we are faced with

a C.P.I. increase which bears the effect of devaluation since

November 1976. I n May 1977 the Commlssion said that it could

not ignore the fact that the devaluation had occurred under

conditions of an uncomfortably high rate of i n f l a t ion and tha t

i t should as f a r as possible minimise any act ion which would

reduce the benefits conferred by devaluation on the competitiveness

of the Australian economy. Nothing put t o us on this occasion

persuades us to take a different course and we propose to discount

the June quarter C.P.I. fo r the e f fec t of devaluation.

We no te tha t i n ansr.7er t o a question as to the treatment

of the C.P.I. in the event of an upward revaluation, the Commonwealth

assured the Commission that " the Commonvealth does recognize the

appropriateness of an evenhanded approach to the underlying exchange

r a t e changes which it comes to adjust ing the C.P.I.	f o r wage
indexation purposes".

We were presented with four alternative discounting

figures. tJe are i n some d i f f i c u l t y in having t o choose between

these al ternat ives and we are concerned tha t there is no r e l i ab le

measure f o r t h e f u l l e f f e c t of devaluation on t h e C.P.I.. I n

the circumstances we believe that we should adopt the course

followed by the Commisslon i n t h e March quarter decision and use

the Statist ician's f igure to discount for the devaluation effect

although t7e a r e aware that to an unknown but small exten t th i s

f igure may	on balance overstate or understate the full effect	of
devaluation.
The unions and in particular the white collar unions

have pressed strongly that we should award a uniform percentage

increase. In four out of the last five quarterly adjustments,

, the Commission applied various forms of plateau indexation which

have resu l ted in a compression of r e l a t i v i t i e s and a s ign i f icant

reduction i n real pay for those in the upper half of the pay

structure. Fe believe that hese circumstances call for a

uniform adjustment i n pay on t h i s occasion.

4 .

I

Accordingly, we have decided that a l l award rates

and minimum vages will be increased by 2 per cent as from

t h e f i r s t pay period to commence on or a f t e r today. It is

not our intention that the increase be applied to overavard

I

payments including those covered by a recommendation provision

such as appears in the Metal Industry Award.

Ne have made th i s dec i s ion i n t he knowledge tha t the

Conference on wage f ixing pr inciples current ly in progress

w i l l a f f ec t not only the future of wage indexation but also

indus t r i a l r e l a t ions and consequently the economy.

IJe should a l s o make certain observations in view of

apparent misunderstanding of the Commission’s decisions.

!

Firs t , us ing the C.P.I. a s t h e measure of changes in

the purchasing power of money, on the most r e c e n t s t a t i s t i c s

published by the Stat is t ic ian the fol lowing f igures show that there

has been some decline i n r e a l wages since May and June of l a s t year.

Increase in C.P.I. ( S i x Capitals)

from June quarter 1976 to

June quarter 1977 13.4X

Increase in Average Weekly Earnings

(seasonally adjusted) per

employed male uni t from June

! quarter 1976 t o June quarter 1977 10.8%

Increase in Adult Male Minimum

Weekly Uage Rates from May 1976

ko May 1977 10.9%

Increase in Adult Female Minimum

Weekly Wage Rates from May 1976

to May 1977 11.8%

5.

Second, on a l l the evidence and argument before the

Commission, i t remains highly contentious whether employment

recovery would have been greater or l e s s merely i f t h e Commission

had awarded smaller wage increases during 1976/1977. The causes

of the present unemployment a r e complex. This is evident from

the Comonrrealth's oqm submission. In answer to a question from

the Bench i n connection with the arguments of Mr. Hartnet t for

A.C.S.P.A., on the causes of unemployment, the Commonwealth

through i ts Counsel sald:

"I come now t o d e a l b r i e f l y 131th a question

or a suggestion made by H i s Honour Mr. Jus t i ce

Robmson as to whether the Commonwealth desired

to coment on what Mr. Hartnett had t o say on the

causes of unemployment.	We	would offer only a
very brlef observation.

In essence Mr. Hartnett seems t o have been

arguing that most of the current unemployment stems from s t ruc tu ra l imbalances i n the labour

market. The f ac t is tha t a number of fac tors

have contributed to the present unemployment

s i tuat ion. Certainly there are s t ructural

imbalances. The main feature is, i n our

submission, the slackness i n economic a c t i v i t y

which i n t u r n is linked III limited measure t o

excessive real wage costs , and we have s t ressed

t h i s i n t h i s and previous national wage cases."

Third, we believe there i s a tendency to overstate the

power of the Commission to control actual wage movements. The

Commission has t r ied to operate a set of wage pr inc ip les in a

d i f f i c u l t i n d u s t r i a l and economic climate, and from the chaos

of 1973-74, to br ing order and r e s t r a i n t t o wage f ixing as an

essent ia l ingredien t for economic recovery. In pursui t of

the objective of an orderly system of wage deterrmnation the Commission has assumed that the only viable basis for operating

such a system lies i n wide consensus; and i n coming t o Its wage

decisions i t has acted with considered judgment in discharging

its obligations under the Act.

The var ia t ions will operate from the beginning of t h e f i r s t

pay period to commence on o r a f t e r today.