Total wage concept
Australian Broadcasting Commision (Victorian Branch)
Education Dept.
Series: For the senior student
Title: Total Wage Concept
Date: Monday 21 July 1969 and rpt.. 28.7.69
Time: 2. 10 - 2.30 and 11.00 - 11. 20am
Stations: 3AR & Regionals
S. Writer: Mr R Hawke
Speaker: From the beginning of federal arbitration in this country the awards handed down in determination of industrial disputes contained a wage structure composed of two parts. The foundational element of all awards was the basic wage which emerged out of the famous Harvester judgment of 1907. This wage was determined by Justice Higgins as the amount necessary to enable an unskilled labourer with wife and three children to live in a way which would satisfy "the normal needs of the average employee, regarded as a human being living in a civilized community." All adult male employees - I will refer later to the question of female wages as it basic wage under their award, superimposed upon the basic wage was another element separately identifiable within the award and called a margin. The amount of this margin depended upon the actual occupation of the person concerned and the industry in which he was employed and was intended to reflect the reward appropriate for the particular skills, responsibilities and circumstances of that occupation and that industry.
In the earlier period therefore the basic wage was described as a "needs" wage and provision was made for the adjustment of that wage in accordance with changes in an index of consumer prices issued by the commonwealth statistician. A system of automatic quarterly adjustments continued from 1921 until 1953 when the arbitration tribunal on the employers' application, removed this provision from all awards. The reason given by the tribunal for this decision was that the basic wage had long since ceased to be determined in terms of "needs" and had come to be fixed according to an assessment of the capacity of industry to pay. While the system of adjustment for changes in an index of consumer prices was appropriate to a "needs" wage, said the tribunal, it had no relevance to a wage fixed on considerations of economic capacity. The tribunal did not explain, nor has it since why it had continued for so long to apply to a wage which had been recognised as a capacity wage since the early 1930's a system of adjustments now regarded as inappropriate for that reason.
After this 1953 decision the practice developed of conducting annual hearings before the tribunal at which applications by the unions for increases in the basic wage were heard and determined according to an assessment of general economic considerations. From 1961 in particular the tribunal paid attention to movement in prices and productivity. This latter concept measures the changes in real, not money terms of the output of goods and services in the community.
Coming then to the fixation of margins. Before the second World War individual judges of the Arbitration court had periodically examined particular industries and determined what they regarded as appropriate marginal levels for the various classifications covered by the award with which they were dealing. In 1947 the Government amended the Arbitration Act to provide, in addition to the court composed of judges, a number of conciliation commissioners who were given the primary responsibility for the determination for marginal rates. While these commissioners (in the industries allocated to them) continued to have this primary responsibility for fixing marginal rates according to their assessment of the particular classifications before them, the practice developed whereby test cases were taken under the Metal Trades award and the decisions made therein were extended throughout virtually all awards of the tribunal and determinations of the Public service Arbitrator. These test cases were heard not by the commissioner for the metal trades sitting alone but as part of what is called a "reference bench". Such a bench can be constituted by the President of the Arbitration commission when on the application of a party before the commissioner, he considers that the matters raised by the application are "of such importance in the public interest" that it should be dealt with by a bench of at least three including at least one presidential member (who is equivalent to a judge when the commission before 1956 was called the Arbitration court) and "where practicable" the commissioner concerned in the industry in question. In the major test cases on margins in the Metal Trades considered by the commission the reference bench constituted by the President has consisted of two residential members and the commissioner for the metal trades. In these cases in 1959, 1963 and 1966 the basic arguments as to whether there should be increases, and the extent of the increases, turned on the same type of general economic consideration, in particular the Questions of movements in prices and productivity as in the basic wage cases. It should be said that applications concerned with alteration of the basic wage were also hard by a multiple bench but this was as a matter of law, the Arbitration Act requiring such applications to be heard by a presidential bench consisting of at least three members.
The employers first sought the introduction of the total wage concept by elimination of the two elements of basic wage and margins in 1964. The tribunal unanimously rejected their application, one member saying that "The case for the retention of the basic wage is beyond argument." The employers repeated their application in 1965 and again the tribunal was unanimous in rejecting it. While refusing in 1966 to grant the renewed application made by the employers the commission indicated a prima ficie preparedness to adopt the concept in the following year; and in fact the commission did this in the 1967 judgment handed down following the national wage case of that year.
In trying to analyse why the commission moved in three years from a position where it was said that "the case for the retention of the basic wage is beyond argument" to the actual abolition of that wage it is necessary to look at the reasons given by the commission and, to some extent, behind those reasons. Clearly one of the reasons weighing most heavily with the commission was the fact that in the 1966 national wage for the first time both the employers and the unions had claims before the tribunal in respect of both elements of the award wage. As far as the employers were concerned this was by definition involved in the form of their total wage application. The unions had considered it necessary to put applications in respect of both basic wage and margins because in previous year's decision, the majority judgment of the commission without having any margins application from the unions before it had nevertheless determined that the increases awarded should be applied to the marginal element. The commission recognised the likelihood of the practice continuing in the future of both parties having before it claims in respect of both elements and were aware of the relevance of general economic arguments which it and the parties attached to the claims in respect of each element. As already pointed out the Arbitration Act provided for the constitution of separate benches to deal with each element and if not embarassed by this apparently cumbersome and und unduly technical necessi ty, the relative elegance of having one bench to consider the whole wage on the same grounds was clearly a powerful factor in the minds of members of the tribunal and was so acknowledged.
In its 1967 judgment the commission went out of its way to stress that the decision was concerned with procedural changes rather than principles of assessment. It said:
"The new procedures will ensure greater industrial justice to all concerned with our wage fixation. We are creating new up-to-date fixation procedures and not changing principles of wage assessment."
From this position the commission asserted that better results would flow for workers. It said:
"This new approach will ensure that under our awards wage and salary earners will annually have applied to them the increases for economic reasons which it is common ground they may normally expect and the increases will be applied to the whole wage instead of only to part of the wage as at present."
As a mathematical proposition this statement was accurate but of course it had to be tested in action. As we shall see the proposition was not in fact applied in the 1968 national wage decision and this is relevant to the attitude adopted by some parties to the total wage decision.
If we go behind the actual judgment, it is possible to discern other considerations that could have played some part in the commission's decision to adopt the total wage concept. These considerations turn upon the introduction by the commission in 1966 of another concept new to federal award wage fixation - the minimum wage, which operated in this way. No adult male was to receive less than $36.55 which with a basic wage fixed by the judgment at $32.80 would be satisfied for all persons in receipt of a margin of $3.75 or more; where persons had an award margin of less than $3.75 the employers' obligation under the minimum wage provision was still met if the person received an over-award payment which together with the award basic wage and margin took the total payment to at least the $36.55.
By framing the minimum wage provision in this way the commission attempted with the lowest possible cost impact to do something for those people who because of their lower bargaining power had not been able through over-award payments to make up for the inadequacy of the basic wage to provide a reasonable standard of living. speaking of the existing award wage at this lower level one of the members of the commission said of it:
"It is not necessary to undertake an elaborate, lengthy or widespread examination to discover that a man with a wife and children would have extreme difficulty in living in conformity with the reasonable needs of this civilized community •••• "
Leaving aside any question as to whether the minimum wage fixed by the commission was in fact sufficient to enable the recipient and his family to live "in conformity with the reasonable needs of the civilized community", the commission was now faced with an anomaly since both the basic wage and the minimum wage purported to satisfy the concept of being that wage below which no person should be employed.
However the commission by the very act of introducing the minimum wage had acknowledged the inadequacy of the amount of the basic wage and had recognised that a significant increase in that wage would have been necessary to bring it up to level regarded by the commission as minimally acceptable. In 1966, while increasing the basic wage by $2 to $32.80 the commission indicated that an increase of $5.75 would have been required indicated by its new minimum wage concept. But as distinct from the minimum wage provision that could be satisfied by margins or over-award payments an increase of that amount in the basic wage would have actually gone to every person as an additional award entitlement. In these circumstances it is a reasonable interpretation to suggest that the commission faced with the anomaly of the two wages - basic wage and minimum wage - purporting to satisfy the same concept chose to resolve what it considered to be a dilemma by abolishing the basic wage, as an increase in that wage to what it regarded as a tolerable "needs" level would have required a greater outlay than using the new mechanism of the minimum wage.
Although the decision to abolish the two elements of basic wage and margins and to embrace the total wage concept was made by the federal commission in June 1967 there has to date been only a limited adoption within the state systems of that decision. In Victoria the state Industrial Appeals court has written the same provisions into the determinations of Victorian Wages Boards but in all other state jurisdiction' awards still contain basic wages and margins.
Before coming finally to a consideration of some particular issues that have arisen Wider the total wage concept some comment should be made on the attitude to the concept of major interests within the federal jurisdiction. First, the trade unions. The unions in all the applications before 1967 and in the 1968 hearing unanimously opposed the total wage concept. The 1967 congress of the Australian council of Trade unions held soon after the decision implementing the total wage declared that the basic wage was "an integral part of an equitable and sound wage system in the Australian community." In making this declaration the congress quoted with approval a unanimous statement of the Industrial commission of N.S.W. in March 1967:
"It remains a sheet anchor for the lower paid employee which, we believe he values. It is the one industrial prescription with which almost everybody is familiar. Although legally it relates only to awards, its moral influence controls a substantial amount of work outside awards. It has a specially protective value in remote areas where work is either not covered by awards or the awards cannot be properly supervised. It has reduced wage cutting in many circumstances where the employee would otherwise be too weak to drive a decent bargain."
The question of total wage will no doubt be discussed again at the forthcoming A.C.T.D. congress in September of this year. One factor that will arise in that discussion is the failure of the commission in 1968 to demonstrate what in 1967 had been proposed by it as an advantage of the concept i.e. that there would be applied annually to the whole wage increases for economic reasons. In 1968 movements in prices alone since the 1967 decision would have required an increase of $1.80; the commission granted $1.35.
Second, the employers In the actual hearings before the federal tribunal dealing with the total wage, employers have spoken through the counsel in favour of the concept. However in proceedings before the N.S.W. Industrial commission some significant groups of employers including those in the retail trade opposed applications by other employers to have the concept introduced into N.S.W. state awards. A similar division of opinion was reflected in submissions in the recent equal pay case.
Third, the Commonwealth Government. The commonwealth intervenes in major national wages cases before the federal tribunal. Until the 1966 hearing it had opposed the employers' application for total wage. The indication by the commonwealth in the 1966 case that it no longer opposed the introduction of total wage may well have been a significant factor in removing reservations previously held by the commission.
Three particular issues warranting comment have arisen in connection with the commission's 1967 decision to introduce total wage. First, the question of female rates of pay under federal awards. From 1950 until 1967 the female basic wage component was 75% of the male basic wage. Margins for females presented no consistent pattern, some being equal to males others being of varying percentages. In the 1967 decision the Commission broke new ground in awarding the same increase of $1 to adult males and females and associated this decision with the observation that "own adoption of the concept of a total wage has allowed us to take an important step forward in regard to female wages”. The commission invited the parties to "give careful study" to the question of equal pay for equal work. These observations Were followed up by the decision in the 1968 national wage case to grant an equal increase of $1.35 to the total wage rates of adult males and females.
This is not the time to consider in detail the equal pay case subsequently undertaken in 1969 or the decision given by the commission in that case. It is sufficient to say that the Very limited decision by the commission to provide in federal awards a similar pattern to that operating in N.S.W., S.A. and W.A. of equal pay for females performing work of the same or a like nature and of equal value where doing the same range and volume of work and under the same conditions can, to that extent, be seen as a development arising out of the way in which the commission introduced the total wage in 1967; although it should be understood that the basis of the union application in the 1969 equal pay case did not depend upon the 1967 decision.
Second, the commission although awarding flat increases in both the 1967 and 1968 decision has indicated clearly that future decisions could also be in the form of flat percentages, varying percentages according to the level of the wage rate give a relatively greater advantage to people on lower wage rates; higher classifications necessarily, in the absence of work-value adjustments, suffer a compression of their differentials for skill and responsibility. Clearly, very real conflicting interests of equity arise in considering what for the unions is the appropriate form of application and what, for the commission, is the appropriate form of increase to be awarded.
Mention of work-value cases bring us finally to the question of the function of such cases under the total wage system. In introducing the concept in 1967 the commission said:
"We are sure that in work-value cases the fixation of total wages will bring to award-making both greater flexibility and greater reality."
Insofar as individual commissioners in examining the particular circumstances of each classification in a work-value case under the current system will be dealing not with the marginal component alone but the total rate then the above statement could be regarded as theoretically valid. But again what is important is - what happens in fact? The employers have indicated a determination to restrict the scope of work-value cases; the unions will attempt to use them as a significant supplement to national wage cases in their pursuit of what they regard as wage justice for their membership. We can conclude on the note that one of the potentially major areas of conflict in the industrial field is going to turn on the preparedness of the commission, for so long as it adheres to the total wage concept, to give effect to that statement concerning work-value cases which it made when introducing the concept.