Back to the Waterfront

Waterfront Reform and Industrial Relations

Dr Peter Barnard

What an unexpected pleasure this invitation is. I feel a bit like Saddam Hussein being invited to address Congress. I will try and make my points as forcefully as Saddam, but less disastrously.

Actually, of course the whole industrial relations structure in this country, of which your Society has been called 'the Club at Play', and which forms an integral part of that structure, is a lot like the Gulf States. Like the Gulf Sates our industrial system is an artificial creation. Like them it has its own aristocracy. In lieu of Sheikhs and Emirs you have Deputy Presidents and Commissioners.

The ability to travel and live well at others' expense, although not as great for Australian Industrial practitioners as for the Gulf Sheikhs, is still none the less way above that available for the mere mortals.

Of course, no one gets all of these privileges without a corresponding responsibility. In the Gulf that responsibility is discharged periodically by raising the price of oil. Here it is the price of labour.

The difference is that at least the Arabs have a mechanism that permits them to allow the price of oil to decline, they do not just have to pour it out into the desert. Here we have no such mechanism for the price of labour, we just cast people out into the desert of unemployment. And of course we are about to cast quite a lot in that direction.

What has been the response from the industrial relations world to the changing economic circumstances?

The ACTU, that absolute paragon of accordance rectitude is now saying the IRC is irrelevant to their claims and saying they will take on the Employers.

CAI has responded courageously by saying this is not the time for that sort of thing.

The Federal Treasurer, in his 'man of the people' mode has said that he 'bloody well won't, bang workers around the head'. Not him, particularly if they are tailors.

The IRC, itself the temple of this lay sect, is silent. It is obviously preoccupied with such esoterics as Structural Efficiency Principles, Broadbanding, Multiskilling, Skills Enhancement, and so on, and so on.

Like Saddam, the IRC is always interested in expanding its territory. It used to be that the IRC confined itself to the setting of basic wage rates and work conditions. No longer. We have become used to industrial relations orders relating to manning levels and union coverage. But grand new territories were claimed in the Industrial Relations Club early this year during the trucking dispute.

In the Industrial Commission, NSW and AIRC, actually made recommendations on traffic laws.

In a remarkable decision the worthy Sweeney J. and Harrison C 'strongly' recommended that the speed limit for trucks be increased to 100 kms/hr on 'principal inter-State routes'. This was the proposal of the NSWTA and TWU. The NSW Government believed that the speed increase should be confined to 'low trafficked, high quality roads'.

What expertise Sweeney J. and Harrison C. possessed in speed limit regulation was not revealed. One would hardly view knowledge of industrial relations as an ideal background to advise on traffic laws.

The decision represented a stunning, audacious incursion into new areas. Hussein's march into Kuwait has, of course, been correctly described in similar terms.

The Gulf crisis arose from Hussein's desire for port access. Australian rural producers can well understand this---we have a similar desire for port access. Our access to competitive international shipping is choked by poor port performance. Fortunately, Australian rural producers have thus far refrained from actions akin to those of Hussein.

Hussein's march into Kuwait has irrevocably changed the structure of world affairs. It is a pity that the Australian Government's actions on our waterfront have not had a similar effect on our affairs. The basic structures of our waterfront are still intact.

That the waterfront reform program was never intended to be of the structural variety is clear from its stated objectives as outlined in the In-principle Agreement (IPA). This is the document which establishes the major parameters of the reform process. The commitment made by the parties to the IPA was to ensure:

'a reliable, efficient and competitive industry through:

• more effective management responsibility;
• a more flexible and skilled workforce;
• a rejuvenating of the age structure of the industry;
• a more satisfying career structure for all employees, and
• real productivity gains'.

Nought is there here about increasing the underlying contestability of the industry. Nought is there here about increasing ease of entry into the stevedoring industry. Nought is there here about removing existing labour monopolies. And as if to emphasize the centralized, administered, interventionist nature of the reform program, the Federal Government is itself a signatory to the Agreement.

There is no structural change. The State Governments will maintain control over the port authorities.

On the whim of the new Victorian Minister for Transport, for instance, Peter Rocke was not appointed to another term as Chairman of the Port of Melbourne Authority, (PMA) despite being widely respected among importers and exporters.

Here was a man attempting to eliminate some of the more reprehensible work practices within the Authority. Would you believe that the PMA still go to the Trade Halls Council for permission every time they wish to engage an outside contractor to maintain their heavy equipment?

There is no structural change. The stevedoring industry is still highly concentrated.

Indeed, in the past year, the stevedoring industry has become even more concentrated with the mergers of NTAL and Patricks and Strangs and Patricks.

Australia's largest terminal stevedore is still 60% Government owned. Given that the Government is proposing to sell Aussat and the airlines, there is a striking contradiction in retaining AML in public ownership. Why, might we ask isn't this issue being discussed on 24 September?

There is no structural change. The Industrial Relations Commission still holds sway over virtually every aspect of employer/employee relations.

In stating this I am, of course, well aware that the intention is to strip back the national award and provide increased emphasis to negotiations at the enterprise level.

But when these negotiations break down either of the parties can take unresolved matters to the IRC, for arbitration.

This is as it has always been.

And although negotiations have been decentralised on the employer side of the equation on the employee side all significant matters are passed through to the Federal Waterside Workers' Federation (WWF) Office.

Union officials are not stupid. That they are well aware of the score-card is exemplified in an internal WWP memo dated 13 July 1990, and titled Negotiation of New Award and Enterprise Agreements. 'Dear Comrades', the memo begins, 'the In-Principle Agreement provided for a new framework for the operation of award in the industry ... and enterprise agreements are to operate in conjunction with the award'. It went on to note:

'A critical issue has not been resolved. The issue concerns the delineation of industry award matters as opposed to matters which should be contained in the agreements.

The Federation ... has consistently argued that we will not accept any reduction in, or removal of, conditions in the establishment of a new award. In particular we have argued that the award should be a 'paid rates' award as opposed to a 'minimum rates' award. Given the superior conditions obtaining in stevedoring industry awards, it would clearly be a major tactical error to accept a minimum rates award in the current negotiations.

The simultaneous negotiation of a new award and the enterprise agreements has placed the Federation in 'double jeopardy'...The obvious strategy is to focus on the enterprise agreement and to endeavour to divide the employers negotiating position on the award.

This strategy is now in place and has been achieved by the making of an interim new stevedoring award. The interim award will enable the award negotiations to be put on 'hold' while enterprise agreements are progressed.'

This is evidence of the sort of detailed planning and strategic development that characterised the British waterfront reform program. Unfortunately, over here it is the employees who are doing all the planning and strategic thinking, not the employers (or, for that matter, the importers and exporters).

Under the process, as it now exists, unions have not one, not two, but three chances at securing desirable outcomes from the Enterprise Based Agreements (EBAs).

First, the stevedoring firms place their developed EBAs before the unions. The unions can select those elements of the EBAs that are acceptable and reject the rest.

Second, either of the parties can then take the matters in dispute to WIRA for assistance in achieving a resolution.

Third, if the WIRA recommendations are not to their liking the unions can go to the IRC for an arbitrated settlement.

The inescapable conclusion is that for any change in the current employer/employee arrangements stevedoring management must rely entirely on the good offices of the IRC. Stevedoring labour force control is not in the hands of management, but the IRC.

The IRC is able to exert much greater control over the waterfront workforce than over labour in most other industries. The Conciliation and Arbitration Act 1904 contained a separate Division (Division 4, Part III) relating to industrial matters---waterside workers. Whereas the balance of the Act principally relied on placitum 51 (xxxv), the conciliation and arbitration power, for its constitutional validity, this division relied on placitum 51(i), the trade and commerce power.

In the Industrial Relations Act 1988 there was no need for separate provisions to apply to waterfront industrial matters, since the general provisions were drawn more widely. Jurisdiction in relation to the waterside can be upheld either under the conciliation and arbitration power or the trade and commerce power.

It is as a result of the trade and commerce power that the Commission's jurisdiction in relation to stevedoring is wider than it is in relation to other industries. The Commission is not even restricted to conciliating and arbitrating. In so far as stevedores load ships which engage in trade and commerce with other countries and between states, the Commission has almost unlimited powers to determine matters or things affecting or relating to work done or to be done.

The Commission has jurisdiction to order that members of the WWF are employed in stevedoring operations.

The Commission has jurisdiction to order that recruitment of employees be made from a union register.

The Commission has jurisdiction to require a new entrant to pay and observe all terms and conditions on which members of the WWF are currently employed.

The Commission has jurisdiction to rule on how many men are used for particular stevedoring tasks.

With labour costs representing 90-100% of total stevedoring costs in bulk operations, 80-90% in break bulk operations and 50-70% in container terminal operations, the role of the IRC does not leave much for management to manage.

The IRC has abused the great powers available to it. No less a body than the ISC came to this conclusion. In a remarkable condemnation of another judicial institution the ISC stated:

'Some of the past decisions (of the Conciliation and Arbitration Commission) relating to the container depots have not resulted in satisfactory working arrangements when considered from a national economic perspective.'[1]

No doubt, when the three wise men of the ISC referred to the need for attitudinal change in waterfront institutions the IRC was uppermost in their mind. Of particular concern to them was that the Conciliation and Arbitration Commission had tended to limit opportunities for third party invention. The ISC in its Final Report urged both the Trade Practices Commission and importers and exporters to in future intervene in waterfront industrial hearings.

The Industrial Relations Commissioners, if they have read the ISC report at all, apparently skipped over pages 246-248. It is just as difficult today to intervene in IRC hearings as it was prior to the ISC report. NFF attempted to intervene in waterfront proceedings earlier this year. Predictably, up jumped the WWF, ACTU and AEWL, one, two, three to oppose the intervention. Predictably full intervention rights were not provided.

How ill versed these Commissioner's must be in economics. Do they not realize that it is this country's farmers and consumers that end up paying the lion's share of the increased labour costs of waterfront employees?

If the centralized control over stevedoring labour exercised by the IRC was not enough, the waterfront workforce rejuvenation program utterly constrains individual firms optimizing their labour mix.

The program involves 3,000 older waterside workers leaving the industry and 1,000 young waterside workers being recruited. Since there are currently, approximately, 9,000 waterside workers the manning reduction is 23%, or, put another way, the implied labour productivity improvement is 30%.

Part of the Government established Waterfront Industry Reform Authority's (WIRA's) responsibility is to survey and approve the restructuring plans of individual enterprises. Such a degree of interference in the operations of individual firms, wads of dollar notes were dangled in front of industry participants.

The 30% labour productivity improvement is going to be achieved at a cost of $300 million, over three years. But stevedoring firms will not have to meet one cent of the redundancy payments to their waterside workers. Half of the redundancy payments are to be met from general revenue and half from statutory levies on imports and exports.

There has never been a clearer demonstration of that old adage about 'throwing money at your problems'.

But despite the gift of $300 million to their industry, stevedoring companies are predicting no price reductions for their customers. NTAL, for instance, at a recent Prices Surveillance Authority (PSA) hearing stated that:

'The bottom line in cost terms to a terminal that achieves say a 25% manning reduction should be a 25% reduction in labour costs. However, it is important that the broader requirements are fully understood before calculating the net impact of the reform process. On-costs could clearly negate most, or all, of the gains through manning reductions. National Terminals does not, at this stage, envisage that major labour cost savings, if any, will result from the WIRA process.'

National Terminals estimate that the labour cost savings from manning reductions will be swallowed up by:

• training costs increasing to 5% of payroll;
• wage increases from multi-skilling induced re-classifications, amounting to 15%;
• extra payments associated with the possible need to introduce productivity incentive schemes; and
• capital financing expenses associated with new investment.

NTAL is to invest $102 million over the next 5 years. Indeed it is this massive capital injection that accounts for a significant slice of the manning reductions. It is not increases in labour productivity, by substitutions of capital for labour that is driving NTAL's restructuring.

NTAL assert that ship turnaround times will vastly improve. Short term I have no doubt that they will. This will occur if for no other reason than the ISC's astute observation that in the stevedoring Industry 'matters improve considerably while they are under investigation'.

But ship turnaround times can be turned on and off like a tap. To again quote the ISC 'matters will lapse once the pressure is removed'.

Meanwhile the union movement is adroitly using the reform process to vastly strengthen its position. No longer will we have to merely deal with the labour monopoly in stevedoring, but now this monopoly is to be extended to port authorities and other areas of waterfront operation.

Those men of the ACTU have met and decided. A new super union, the Maritime Union of Australia, is to receive coverage of all operations in all of the major ports and in many of the minor ports, including all NSW ports, all Victorian ports, all Tasmanian ports, and all South Australian ports.

What is amazing is that shipping companies, port authorities and many importers and exporters are unreservedly enthusiastic about the ACTU proposal.

Of course, any monopoly's behaviour will be tempered if its territory is spread wide enough. If a firm has a monopoly over the supply of motor vehicles and fuel, it will not set the price of fuel at as high a level as it would if it just had a monopoly over the supply of fuel.

This is the logic that leads on to advocate longer and longer labour monopolies.

But any monopoly, labour market monopoly or product market monopoly, breeds inefficiency. This much has been admitted by even some of the union movement. For example, one official of the OTC union, the Professional Radio and Electrical Institution of Australia, Mr Michael Roberts[2], said in a recent radio interview:

'The only thing that produces efficiency is the need to produce profit comparative to a competitor ... I believe any monopoly stymies efficiency, whether it is a monopoly of a union over telecommunications or the monopoly of one airline in the country'.

There is a world of difference between single enterprise unions and single industry unions.

Reform need not be of this ilk. Last year New Zealand achieved waterfront reforms of only dreamt of proportions in Australia.

Overall since the beginning of 1989 New Zealand's waterfront workforce has been reduced by 50%.

Since October 1989, the date of the legislative changes, it has been reduced by 44%. This follows on from a 40% reduction in the port authority workforce.

The port of Tauranga represents a good example of the benefits of waterfront reform in New Zealand.

Pre-reform in this port there were 441 waterside workers; now there are 202.

Pre-reform in this port it was normal to average 350,000 tonnes of cargo per month, with berth occupancy rates of 65-70%, but recently 500,000 tonnes of cargo were handled in one month with a berth occupancy of 48%.

Pre-reform in this port log ships used to be in port for 8-9 days; now they are in for only 2-3 days.

Pre-reform in this port conventional ships used to be in port for 11 days; but now they sail in 4-5 days.

While we seek to achieve a 30% waterfront labour productivity improvement over 3 years, New Zealand and Britain have achieved waterfront labour productivity improvements of 100% in the space of 12 months. Our reform waterfront program, like our coastal shipping, aviation and telecommunications reform programs do not seek to match, or better, best overseas practice. In micro-economic reform under the Hawke Government we strive for mediocrity, not excellence.

References:

1. Inter-State Commission 'Waterfront Investigation, Conclusions and Recommendations', Vol. 1, AGPS, 1989, p.231.

2. Michael Roberts, President, PRE,2CN Radio, 26 July 1990.