The result of the ballot at Holden this week had workers agreeing to a wages freeze and taking a cut in conditions to preserve their jobs and potentially the very presence of Holden in Australia.
Given the signs that the domestic economy is weakening it is only natural to ponder whether such deals might become commonplace in a post-mining boom Australia – in the manufacturing sector and beyond.
In some ways the Holden case poses a conundrum: Is it an exceptional situation – a deal brokered in a sector that attracts disproportionate political attention and heavy public subsidisation? Or is it a portent of what workers face as economic conditions soften?
Saul Eslake, chief economist at the Bank of America Merrill Lynch, argues for the exceptionalism of this case. He says the Holden case should not be viewed as a precedent but rather a product of the “unusual circumstances” that characterise the Australian car manufacturing sector.
While there is little doubt car manufacturing is unique in terms of the industry support it has been able to attract for its size, it could also be argued the situation confronted by the Holden workers is a muted version of what could face workers in other sectors if the economy falters.
Earlier this year, facing pressure from General Motors HQ in Detroit, Holden proposed to cut the wages of its workers by 10% – a proposition that was strongly opposed by the Australian Manufacturing Workers Union and its members.
It is this opposition by the union – indeed, the very presence of a union – that is the real hallmark of exceptionalism in this case. If the union had not been involved then the workers would have faced an even worse outcome – a devil’s choice in fact – between taking a substantial wage cut or losing their jobs.
Such a choice may well be on the cards for workers in sectors that decline as the economy cools. With just 13% of workers in the private sector in unions, the reality is that many workers, faced with the proposition of an employer cutting their wages, would have little capacity to refuse, especially if the alternative were couched in terms of job loss.
This is particularly the case at the low-paid end of the labour market, where strong employment figures belie the reality for those working in jobs with low skill requirements, low levels of security and minimal bargaining power.
Another obvious and general issue prompted by the Holden situation is what happens after a deal like this? What can be expected by a workforce that has responsibly engaged with a company for their joint benefit? If and when a business recovers from the circumstances that precipitated such concession seeking, will the workforce be invited to share the gains?
A quick review of the aggregate data would suggest otherwise. From a peak of 63% in the mid-1970s, the wages share of total factor income (the income measure of gross domestic product) has dropped to just over 52%. At the same time, the profits share has nearly doubled to be close to 28% in 2012.
This change has coincided with a shifting of risk from business to workers. A report by the University of Sydney’s Workplace Research Centre in 2010 comprehensively chronicled this phenomenon.
It quoted observations made by International Labour Organisation researchers, as the impacts of the global financial crisis were felt, that have a disconcerting resonance in the Holden case:
Firms have used downward adjustments to wages and working conditions as alternative or complementary strategies to lay-offs to cut costs in order to cope with the global economic recession … Thus, workers have borne the brunt … either in the form of lost jobs or impaired wages and working conditions.
So is the Holden case exceptional? Yes, but not for the reasons Eslake and others might suggest. It is exceptional because workers still had a channel to constrain the more extreme measures suggested by management.
It is exceptional because it allowed unions to be part of a difficult change process that ultimately demonstrated an alignment of management and worker goals – showing that collective representation at the workplace need not always be marred by conflict born of intractable ideological positions, but might also be the conduit for a more collaborative relationship that could benefit businesses in tough times.