Back to the Future With Labour's Fair Pay Agreements

The Daily Blog has likened Labour’s “Fair Pay Agreements” (FPA) to the 1894 passing of the Industrial Conciliation and Arbitration Act (ICAA). This Act brought employers and workers together to establish minimum rates-of-pay and working conditions across whole industries and occupations. If these negotiations proved fruitless, then binding arbitration was available from a special Arbitration Court.

In an echo of this the Government has set up a working group to develop a plan to introduce Fair Pay Agreements (FPAs) across entire industries and occupations. The working group will make recommendations to Minister for Workplace and Safety Iain Lees-Galloway by the end of 2018, which will then be considered by Cabinet.

FPAs will set minimum standards for wages and employment conditions like allowances, weekend and night rates, hours of work and leave arrangements for all workers within industries.

The agreements will be set through collective bargaining between unions and employers within each sector, without the need for bargaining with each individual employer.

Workplace Relations Minister Iain Lees-Galloway says the aim of FPAs “is to prevent a race to the bottom, where some employers are undercut by others who reduce costs through low wages and poor conditions of employment.”

Crucially, as in the 1894 Act, and unlike existing collective bargaining, industrial action, including strikes and lockouts, will not be permitted during negotiations for an FPA. It is not clear whether an equivalent of the Arbitration Court in the new FPA machinery will be included. Without such a mechanism, the negotiation of anything resembling a useful FPA will be next-to-impossible. Strikes and lockouts have already been ruled out of the process, so in the absence of a binding arbitration mechanism, negotiations between employers and unions could, in theory, be prolonged indefinitely.

The following is an extract from an unpublished manuscript entitled ‘A World To Win – The History of the IWW in New Zealand in the early Twentieth Century’ and demonstrates the arguments against arbitration then that are still relevant today.

In the view of the Industrial Workers of the World (IWW), it was not just capitalists holding back workers’ aspirations in early twentieth Century New Zealand. Through the pages of their newspaper, the Industrial Unionist, they pointed out that the existing trade unions aimed no higher than asking for “a fair day’s pay for a fair day’s work,” and often worked hand-in-hand with employers. Following the passage of the arbitration act employers and the unions usually agreed, without much debate, on what constituted a fair wage and working conditions. Unions believed that employees should work harmoniously with their employers. By contrast, the IWW insisted that if progress was to be made in improving working conditions, it was essential that unions organised along class lines, not according to trade and craft. They should also be organised with the intent of not just protecting and improving conditions today but also “to abolish wage slavery tomorrow.”
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Existing craft unions were threatened by the new militancy of the emerging industrial unionists. They believed that the new radical approach imperilled the law “that has greatly improved the position of many of our workers.” Their attitude can be summed up by Trades and Labour Council (TLC) representative Jim Young, who said that his organisation, “considered arbitration the only civilised method of conducting industrial strife.” The TLC told French observer F. Challaye that arbitration was “part of our religion” and that New Zealand’s trade unionists rejected the “old and barbarous system of strikes.”

The key to New Zealand’s global reputation as a workers’ paradise and a land without strikes that it enjoyed at the time was the world-first Industrial Conciliation and Arbitration Act. It was introduced in 1894 by the Liberal Minister of Labour, William Pember Reeves, who viewed strike action as enormously wasteful not just for employers but for workers and the nation as a whole. The act required employers and registered unions to discuss disputes at district boards of conciliation. If this failed to produce an agreement, then the dispute would be submitted to the national court of arbitration whose decisions were legally enforceable. The act generated considerable global interest. In the first 11 years of its operation there were no strikes, and workers wages and conditions seemingly improved. However, in the eyes of the more radical members of the working class in New Zealand, the arbitration system came to be seen as a failure that damaged their interests.

In an attack on the system, Harry Scott Bennett, organiser for the New Zealand Socialist Party (NZSP) and industrial unionist supporter, said workers should:

Pull shoulder to shoulder against arbitration. Defy the courts on all occasions; throw aside the legal machinery that is binding the workers down as they are bound in older countries. For better is the “old-time strike” with all its misery and distress, than to throw yourself on the mercies of a class-biased court.

Latvian-born anarchist Philip Josephs, who had arrived in New Zealand in 1904, added to the criticism. He wrote in the Commonweal (the journal of the NZSP) that after the arbitration court was set up:

The exploiter and the exploited meet and mutually arrange the amount of exploitation which satisfied the rapaciousness of the former, and to which the latter will submit and still manage to exist and propagate his species!

The mainstream media was appalled by the attacks on the arbitration act. In the Maoriland Worker, the paper of the New Zealand Federation of Labour (NZFL – a rival body to the TLC and nicknamed the Red Feds), Ted Howard, a regular contributor often writing under the name The Vag and a prominent figure in radical trade union circles, wrote how the mainstream media criticised “these ignorant men daring to attack an act which had been quoted all over the world as a blessing to the working class.” One of the leaders of the NZFL, Pat Hickey, reminiscing a decade later in the Maoriland Worker, wrote that to criticise the arbitration system was “like a good Mohammedan doubting the existence of the Prophet’s whiskers.”

Not all overseas observers spoke fondly of the arbitration act. One critic was Ramsey MacDonald, the British Labour leader, who after a visit to New Zealand in 1906, remarked that:

A Trade Union in New Zealand exists mainly to get an award out of the Arbitration Court…they cannot strike, it is no good their grumbling; they simply pay their dues into the union funds because they are legally bound to do it, and they take little interest in trade unionism as an industrial and political factor.

The IWW in the Industrial Unionist concurred with his view, to them the act encouraged docility among workers and fostered dependence on officials.

The fact that the TLC was still comfortable with the system of arbitration suggests that they were out of touch with their members. Contemporary observers G. G. Hancox and Dr. J. Hight of Canterbury College put forward a number reasons why there was an increase in the number of strikes in New Zealand during the latter half of the first decade of the twentieth decade: employers increased attempts to control workers in their workplaces; the growing difference between workers’ wages and their expectations; and the influence of radical ideas. Perhaps the most significant factor they highlighted though was the growing feeling that the Liberal Party and the arbitration court could no longer be trusted to look after workers’ interests. A new generation of workers had little memory of the failures of strike action in the last century, nor reason to feel grateful to a Liberal government that had passed worker friendly laws. John A. Miller, who was the president of the Maritime Council during the 1890 strike and Minister of Labour between 1908 and 1911, remarked that in terms of labour relations, “a new generation seems to have arisen.” The 1911 census shows that that approximately a quarter of coal miners and labourers were aged 25 or under.

Irrespective of the specific advantages and disadvantages of the arbitration system, it failed to keep workers fairly reimbursed for their labour. By the end of the first decade of the 1900s almost every union had a grievance concerning wage rates. In 1909, a visiting American, Colonel Weinstock, noted his surprise that the advance in wages had not been greater considering the worldwide increase in wages. Although prosperity had increased, wage increases had not kept up with the cost of living throughout the decade. Moreover, the difference accelerated in the first couple of years of the second decade.

Pat Hickey, in an address to a NZFL conference in 1910, pointed out that since the passing of the arbitration act wages had increased 17.5 per cent, while the cost of living had increased by 19 per cent. Meanwhile, employers’ profits had increased by over 180 per cent. This was proof that the arbitration court was no friend to workers. It consistently ruled that high profits were no justification for an increase in wages, stating outright that it did not view its role as setting wages on a profit-sharing basis. Rather, it was sympathetic to employers who claimed they could not afford wage increases.

The liberal reformer Edward Treager noted as early as 1904 that the advantages bestowed by the progressive legislation of the Liberal Party were gradually being nullified by the economic situation. A commission established by the Liberal government in 1911 to investigate the cost of living found that although it appeared overall wages had kept up with the increase in prices since 1890, the effect across different classes was not the same. From 1900 to 1911 the cost of cooking fuel, gas for lighting, and food rose by at least 5 per cent, while housing costs rose by 10 per cent and clothing by 34 per cent. This affected the poorest communities most, as they spent a greater proportion of their wages on these goods. Yet the wages of the lowest paid unskilled workers had remained almost stable since 1902.