1

"Decentralization of Industrial Relations in Australia"

Paper prepared for the International Political Science Association

(IPSA) Conference, Montreal, July 19-24, 2014.

Dr.Tatsuhiko Yamabe

Graduate School of Political Science

Waseda University

Session: CS04 Comparative Politics and Institutions

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Chapter 1 Introduction

1.1 Research Question

This paper will explore the reasons why divergence of decentralization of

industrial relations in democracies occurs since 1980s. Due to the first and

second oil crisis, advanced countries during 1970s faced wage explosion, high

inflation, and high unemployment. In order to inhibit these factors from growing,

policy makers in those countries adopted centralized industrial relations so that

industrial relations in those countries tended to converge to centralization(Treu

1987; 148). But since 1980s, the centralized industrial relations of those

countries has an inclination to decentralize to company or individual level（Katz

1993）. The significant change of the world political economy has an influence on

decentralization of industrial relations in advanced countries. Capital market

developed mainly within a country from Great Depression to the oil

crisis(Simmons 1999; 36). But, technological revolution accelerated

liberalization of international economy. As transportation and

telecommunication cost was reduced, free trade and financial regime brought

about the strong flow of goods and capital across the border. Capital control

weakened because of the development of Eurodollar market and so on.

Because US banks and multinationals participated in this offshore market, it

developed into international capital market. Intense international competition

caused many companies to bring about innovation in technology. The

companies went abroad to get cheap labor cost. The pressure that the

companies may transfer their factories into foreign countries forced the

government to reduce the domestic labor cost, to lower the tax rate, and to

expand the domestic market through deregulation(Hall and Soskice 2001;55).

It was said that employers decentralize wage bargaining into company or

individual level（Thelen2001). Indeed the neoliberal economic policy called

Thatcherism was adopted in United Kingdom during 1980s, and that policy

promoted the demise of the centralized industrial relations. The neoliberal policy

was more or less pursed by the economic policy of each country and by the

principle of IMF or World Bank. There is, however, diversity of decentralization

level. Some countries including advanced ones remain relatively centralized

industrial relations systems. Others decentralize them into company or individual

level. Why does this difference occur? This paper will search for the cause of

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that variance.

1.2 Previous studies

The first representative approach explaining the cause of diversity of

decentralization is Neo-Corporatism. This approach focuses on the centralized

structure or the policy coordination of interest groups(mainly trade unions). For

example, Schmitter ranked advanced countries to combine the monopolistic

power over other trade unions with the degree of the organizational

centralization（Schmitter1981：293-4). Cameron ordered advanced countries to

define neo-corporatism as follows: (the organizational integration of the trade

union+ the number of national trade unions)×trade density(Cameron 1984).

Lehmbruch and Schmit ordered developed countries to define neo-corporatism

as the tripartite policy concertation (Lehmbruch 1984, Schmit 1983). These

neo-corporatism studies imply that collective bargaining will not decentralize if

the labor movement is strong and centralized and if government, labor, and

management are cooperative.

The second representative approach about decentralization of industrial

relations is Varieties of Capitalism(VOC). This approach sees firms as the

determinant actors in capitalist economy(Hall and Soskice 2001;6). Soskice

pointed out the significance of the wage coordination based on consideration of

labor and management, concerning influence on the national economy as a

whole(Soskice1990). The wage coordination differs from the direct wage

bargaining between labor and management(Soskice1990). Hall and Soskice

stated that the relationship which firms developed in order to resolve the

coordination problem in significant areas of the economy conditioned the

economic system(Hall and Soskice 2001;7). The advanced capitalist economies

are classified into two groups. One group is liberal market economies(LMEs).

The representative countries belonging to the group are United Kingdom, United

States, Canada, Australia, New Zealand, and Ireland. Employers in LMEs prefer

fragmented industrial relations. Each employer tries to guard himself or herself

from competition for labor by isolating external labor market(Thelen,2001;77).

He (or she) does not often allow his or her employees to have their trade union,

and often encourages local unions to depart from their national union(Thelen

2001;78). As a result, trade unions are likely to be weakened because they lose

their solidarity. The other group is coordinated market economies(CMEs). The

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representative countries belonging to the group is Germany. Employers in CMEs

prefer collective industrial relations. Employers form highly organized employer

groups and centrally coordinated wage market. This VOC approach implies that

collective bargaining will not decentralize if the ability for employers to

coordinate is high.

The third approach is Small states hypothesis. This hypothesis focuses on the

international factor while neo-corporatism and VOC do on the domestic factor.

Katzenstein discussed that small open economies in Europe are likely to form

centralized industrial relations(Katzenstein 1985). Unlike large countries,

European small countries fall short of their powerful positions so that they don't

have the choice of protectionism when they are exposed to international market

competition. They therefore share the political strategy for industrial coordination,

combining international liberalization with domestic compensation. In this

process, because small European states cannot help depending on foreign

capital in order to increase their international competition potential, they tend to

have bigger current account deficits than the large industrial states. Katzenstein

said that Balance-of-Payments problems motivated interest groups to take their

cooperative action and this action contributed to the formation of the centralized

industrial relations(Katzenstein 1985; 52). This implication is that small open

economies, exposed to external economic fluctuation, are inclined to have

centralized industrial relations while large industrial economies ,not often

exposed To it, are inclined to have decentralized industrial relations.

The fourth approach explaining decentralization of industrial relations is

Foreign Direct Investment(FDI). This approach focuses on an international factor

like small states hypothesis. It is said that US multinationals are likely to choose

host countries where industrial relations are more decentralized than other

countries(Cooke1997; Cooke and Noble 1998; Bognanno, Keane, and Yang

2005; Ham and Kleiner 2002). The centralized industrial relations may limit the

ability for employers to adopt a nontraditional organization or to adopt protection

based on new technology or productivity(Cooke 1997). And it may limit the ability

for them to enhance flexibility through labor allocation corresponding to market

fluctuation or uncertainty(Cooke 1997). And it may limit the ability for them to cut

their labor costs(Cooke 1997). Cooke extended his interest into multinationals

other than US and said that the amounts of FDI of multinationals are determined

by industrial relations, domestic market, and socio-economic factors in the host

country(Cooke 2001; 702). Cooke pointed out that multinationals assessed two

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points. The first point is the comparable labor cost in industrial relations between

the mother country and the host country. The second is flexible industrial

relations in order for multinationals to transfer their preferable human resource

management (Cooke 2001;712).

Among four approaches regarding decentralization of industrial relations,

Neo-corporatism, Varieties of Capitalism, and small states hypothesis are static

explanations. They are in a position that the transition of the international

environment since 1980s is not critical. Capital controls have been removed

since 1980 while capital had been controlled until 1970s. It was in 1990s that

Washington Consensus as a policy regime spread across the world. This

consensus was derived from the experiences of cumulated debt crises in south

American countries in 1980s which continued current account deficits. And the

financial crisis coming from Bankruptcy of Leman Brothers seriously affected the

countries ,having been characteristic of being current account deficits, such as

Ireland, Iceland, Greece, Spain, United Kingdom, Portugal, and Italy. The crisis

has promoted flexibility in the labor markets of these countries. Among advanced

countries, severe international environment seriously affected Australia. This

country is often in a mid position in the ranking of neo-corporatism(Cameron

1984;Bryth 1979; Calmfors＆Driffill 1988; Schmidt1983;Lehner 1988;Dell‟Arin＆

Lodovici 1992; Tarantelli 1983) and remained centralized wage bargaining level

during 1980s like CMEs(Hall and Soskice 2001). Australia pursed the small open

economy during 1980s in that that country set a high value on the export

oriented growth and the tripartite cooperation between government, labor, and

management. Although Australia had these features, the centralized collective

bargaining system in it has accelerated to decentralization since the balance of

payments crisis deepened during late 1980s. Thus the static approaches, such

as neo-corporatism, Varieties of Capitalism, and small states hypothesis, cannot

fully explain the big change of industrial relations in Australia after 1980s.

Although FDI theories about decentralization of industrial relations can explain

about the change of industrial relations since 1980s when each country

abolished capital control, those approaches cannot explain that some countries

receive a large amount of FDI and others don't. According to the FDI theories, it

is necessarily for a host country to demise centralized industrial relations in order

to receive foreign investment. But the national trade unions and the social

democratic party in the host country may be resistant against decentralization of

industrial relations, especially to company or individual level, because that

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decentralization will damage solidarity of domestic trade unions. In New

Zealand, the government during the early 1990s carried out a reform

decentralizing collective bargaining into company or individual level . Just after

the reform, inward FDI in New Zealand rapidly increased while collective

agreement coverage and union density seriously withdrew (Barry and Wails

2004;439, Blumenfeld, Crawford, and Walsh, 2001). In Australia, the labor

government from1983 to 1996 and the national trade union(ACTU) formed the

centralized industrial relations(Accord). Both the government and the trade

union did not pursue decentralization of labor market soon after that government

was established. They withdrew from it during the balance of payments crisis in

late1980s. Thus it is costly for domestic actors to receive FDI. FDI theories do

not shed light on the reason why a host country receives a large amount of FDI.

Chapter 2 Hypothesis

In consideration of points of previous studies, we focus on international

balance of payments in order to explain a divergence between the group of

countries with decentralization of industrial relations and that with

centralization. The incentive for a state to decentralize industrial relations under

a current account deficit comes from the domestic and the external factors.

The domestic factor would mean that a current account deficit forces a state to

adopt a fiscal austerity. This expectation comes from the following twin deficits

hypothesis.

Y=C+I+G+NX …①

Y=C+S+T …②

⇔(S－I)＋（T－G)=NX …③

(Y=gross domestic product; C=consumption; I=investment; G=all government

expenditure; NX=current account balance; S= private sector savings; T=tax

revenue )

According to this hypothesis, a government must reduce investment(I) and all

government expenditure(G) and must raise tax revenue(T). The current account

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deficits are the foundation bringing about the financial and the currency

crisis(Aytül Ganioğlu 2013, Edwards 2002). In order to avoid these crises, the

government may choose to take a high interest rate policy and an fiscal strain

policy. The high interest rate policy means to reduce I ,and the fiscal strain policy

means to reduce G and to increase T. Under these austerity conditions,

domestic interest actors, especially trade unions and employer groups, may

boost incentives to prefer more decentralized industrial relations. The trade

unions may raise incentives to pursue wage bargaining at company level

because the fiscal strain leads to cutting social wage which is an indispensable

condition for social corporatism. The employer groups may regard centralized

industrial relations as too rigid under the recession by the high interest rate policy.

The above is the domestic incentive for a state to decentralize industrial relations

under the situation of continuing current account deficits.

The external factor means that a state has to depend on Foreign Direct

Investment(FDI) under the current account deficit. According to Balance of

Payments Manual by International Monetary Fund, the components of balance

of payments are as follows.

Balance of payments = 0 = current account balance+ capital account balance

+foreign exchange reserve change …④

Current account balance = trade account balance+ service account balance+

income account balance+ current account transfer error

Capital account = investment account balance(outward FDI+ inward FDI+

portfolio investment+ etc）+asset transfer + etc …⑤

As shown in the equation ④, the current account deficit leads to capital account

surplus. Judging from the equation ⑤, it is possible for us to explain that a

current account deficit encourages a state to receive more lots of FDI. It is clear

that current account balance and FDI have positive correlation as shown in

Figure 1. Thus, a host country will be more influenced by the preference of

foreign multinationals if it continues current account deficits for a long period.

Multinationals may demand flexibility in industrial relations in a host country in

order to transfer their preferable human resource management(Cooke

2001;712). A host country may try to decentralize industrial relations to predict

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the demand. The above is the external incentive for the state to decentralize

industrial relations under the environment of current account deficits. We

summarize our hypothesis in Figure 2.

Figure 1 the correlation between FDI(the percentage of GDP) and the current

account (CA= the median per ten years of the current account , Source: IMF and

UNCTAD)

Figure 2 The process in which current account deficits decentralize industrial relations

・domestic factor

・government: austerity

・ trade union and

employer group:

opposition to centralized

industrial relations

more

decentralized

industrial

relations

Current account

deficits

・external factor

・government: reception of

FDI

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Chapter 3 The multiple regression analysis for the impact of the current

account balance on wage coordination level

In this chapter, the impact of the current account deficit on decentralization of

industrial relations is explored in 38 democracies. The period is from 1980s

when globalization accelerated to 2011 in Bankruptcy of Leman Brothers. New

democracies are dealt with from the year when they democratized up to 2011.

We use the multiple regression analysis.

First of all, wage coordination is observed as the operation variable of

decentralization of industrial relations. We tend to analyze the centralized

industrial relations by mixing Coordination with Centralization. Wage bargaining

may be informally coordinated in association with the whole economy even

though that bargaining seems to be dominant at company level(Radulescu and

Robson 2006;663). In order to consider such a case, we adopt Coordination

which reflects the reality of the wage bargaining system. The Coordination is

the variable which Visser collected each year until 2011(Visser 2013). The

Visser's data record the fluctuations of wage coordination level in more than 40

countries. The coordination score of the Visser index is divided into 5 stages.

The wage coordination score as the operation variable of decentralization of

industrial relations in this paper is the median per ten years in democracies in

the Visser's data.

We adopt the Current account deficit(CA) variable and the dummy variable of

CA as the independent variable. CA is the median per ten years in International

Monetary Fund(IMF) data. The CA dummy variable is as follows: the CA dummy

is 0 when the median is minus and the CA dummy is 1 when the median is plus.

Other variables are sectoral organization, inflation, unemployment, and trade

dependent. The sectoral organization from the Visser's data is as follows: score

2 shows strong institutions (both employers and unions, and some joint

institutions), score 1 is medium (only one side, no joint institutions), and score 0

is weak, or none. The variable in our paper is the median per ten years. The

sectoral organization represents Neo-corporatism and Varieties of Capitalism.

We also issue inflation and unemployment as control variables. Iversen and

Wren said that the unemployment rate in the country where labor market is

flexible is more likely to drop than in the country where it is inflexible(Iversen and

Wren 1998). Flexibilization introduced for reducing unemployment rate may

promote decentralization of centralized wage coordination. So we use IMF data

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and the unemployment rate is the median per ten years. The important goal of

Thatcherism which promoted flexibility of labor market was to restrain

inflation(Matthews and Minford1987). The centralized industrial relations is the

foundation of the trade union power. In order to restrain inflation, the government

may try to break the power of trade union which is likely to bring about wage

inflation. This trial may lead to the deconstruction of the centralized industrial

relations. So the higher inflation rate is, the stronger the pressure for

decentralization may be. The final variable is trade dependent in order to

observe Small States Hypothesis by Katzenstein(Katzenstein 1985). Tripartite

coordination and centralized industrial relations may occur in small open

economies because they are exposed to external vulnerability. The operation

variable is the median per 10 years in each county in UNCTAD data.

Table 1 The result of the multiple regression analysis

Variable

CA

CA dummy

Sectoral

organization

Inflation

Unemployment

Trade dependent

intercept

Model1 Model2 Model3 Model4

Model5

0.066**

(2.954)

0.069**

(3.245)

0.072**

(3.392)

0.071**

(3.393)

0.974**

(5.092)

0.901**

(7.743)

0.897**

(7.758)

0.903**

(7.827)

0.911**

(7.827)

0.845**

(7.936)

-0.008

(-0.863)

-0.009

(-0.948)

-0.011

(-0.523)

-0.003

(1.042)

0.003

(1.014)

0.003

(1.025)

1.885**

(6.980)

1.812**

(7.859)

1.756**

(7.885)

1.924**

(12.705)

1.583**

(12.740)

R2=0.6 R2=0.599 R2=0.595 R2=0.59 R2=0.64

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The result is shown in Table 1. CA and sectoral organization are positively

correlated to wage coordination level at 1 percent significant level from model

1 to model 4. On the other hand, unemployment, inflation, and trade dependent

are not statistically significant. CA dummy and sectoral organization are

positively correlated to wage coordination at 1 percent significant level in

model 5. Just like former models, unemployment, inflation, and trade dependent

are not statistically significant . This result means that the current account has

significant influence on centralization or decentralization of industrial relations

while Neo-corporatism and Varieties of Capitalism also do.

Chapter 4 The case of industrial relations in Australia

4.1 The background of industrial relations in Australia

Industrial relations in Australia has been determined by the centralized

bargaining system which is called Award. This award is determined by the

federal and state governments. In 1904, the federal court set the high standard

of basic wage. This was defined as the socially appropriate level of living for a

family of four. The wage standard was proposed to be the same within one

occupation in any industry or company（Plowman 1980). The Award binds

workers and employers ,in an industry covered by it, who have action and don't

generally go to the federal court. On the other hand, labor movement in Australia

was divided into that of industrial unions and many small occupational ones

(Schwartz 2000).

Australia adopted Scandinavian EFO inflation model. This model has the

system which stimulates the level of wage in international competitive sectors to

spread to that in domestic sectors. Australia mainly exported primary products

and imported industrial products. The percentage of exported industrial

products consistently remained low in Australia while the percentage of them in

European countries was already high in the period after WW2 and continued to

become higher since it (see Figure 3 and Figure 4). The Australian

manufacturing sector was externally protected by high tariffs because it played a

role as the domestic sector employing workers.

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Figure 3 The percentage of industrial products in export goods from 1956 to

1982(Australia and New Zealand)

（Source: Yearbook of international trade statistics and International trade

statistics yearbook）

Figure 4 The percentage of exported industrial products from 1957 to

1982(European countries, mainly CMEs )

（Source: Yearbook of international trade statistics and International trade

statistics yearbook）

4.2 Current account deficits in Australia

During most of the twentieth century, Australia suffered current account

deficits. The first reason is that the export of the primary products is not enough

to make up for current account deficits(Schwartz 2000). In addition, because

0

20

40

60

80

1001956

1957

1958

1959

1962

1963

1964

1965

1966

1967

1968

1969

1973

1974

1975

1976

1979

1980

1981

1982

AUS

NZ

0

20

40

60

80

100

120

1957

1958

1959

1962

1963

1964

1965

1966

1967

1968

1969

1973

1974

1975

1976

1979

1980

1981

1982

AUT

BEL

LUXDEN

FIN

FRA

GER

IRE

ITA

JAP

NE

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there were many industrial products not only for consumption but also for capital

investment in terms of imports, the ratio of imports was more and more

increasing. The second reason is that the income account deficit seriously

continued to deteriorate the current account balance. United Kingdom, the

former colonizing nation, historically made enormous sum of investments in

Australia so that it had to continue to pay the interests to UK（森健 1969；20）.

Australia had to continue to receive new foreign capital in order to make up for

current account deficits. This new foreign investment means capital account

surplus including FDI. The third reason is that transport item in the income

balance is in deficit, which came from the fact that Australia depended on British

merchant ships for the export（森健 1969；20-21). This item continued in deficit

during most of the time and the sum of deficits amounted to about 7.5 billion

dollars from 1970-1971 to 1980-1981（クロウ and ホイールライト 1987;277）.

It took a high cost to rely on United Kingdom with transport means for export

because Australia is the country on the island continent distant from the

international main production base regions（クロウ and ホイールライト 1987；

282）. The fourth reason is that Australia continued to add up the trade balance

and the current balance deficit to United Kingdom and United States. Australia

was the very important client for UK exporters since the colonial period and

played a role in compensating for the shrinkage of other markets to the UK

traditional industrial area（ケイン＆ホプキンス 1997；65）.As shown in Figure 5,

the current balance of Australia continues to mark deficits by the huge income

deficits.

Figure 5 The breakdown of current account balance (Australia)

-45000-40000-35000-30000-25000-20000-15000-10000

-50000

500010000

Goods account

service account

income account

current transfer

account

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Vertical axis: US dollar Horizontal axis: year

（source: IMF International Financial Statistics Yearbook）

4.3 Hawke labor government from 1983 to 1987

The Accord Mark 1 was concluded by labor party and ACTU(Australian

national trade union) . However it became unstable by external pressure of

current account deficits. The Accord Mark 1 was a highly centralized wage

bargaining by the active industry policy and by the social wage policy in

exchange for wage restraint（Higgins 1980,1985; Jackson 2006;262－263,

John Quiggin 2001). The important goal of the Accord Mark1 was inflation

control and economic growth, and the increase in wages was based on CPI

growth per 6 months. A few weeks ago before 1983 national election, 27

million dollars flowed out of Australia when foreign investors responded to

the regulation of foreign investment by the new labor government. The

government responded to this situation by devaluating Australia dollar

(Jackson 2006;265). The expansionary fiscal policy that the labor party

pledged in the 1983 national election campaign was abolished soon after

the election(Kelly1992; 57). While currency devaluation may have been

advantageous to the export oriented industries, it increased the foreign

debts to be repaid. Tripartite national economic summit(NES) in1983 was

dominated by the concern about the unstable status of Australian economy

(Jackson 2006;266）. The greatest cause for concern of Hawke was the

foreign debts（Hawke 1994;174). In order to tackle the current account

deficit, it is necessary to reduce the budget deficit. Thus it was the most

economic priority in 1983/1984 that the government cut the budget deficit

and tackled the increasing foreign debts (Edwards 1996;197). The Accord

Mark 1 was concluded under such serious circumstance.

The Accord Mark 2 also continued to be exposed to the external economic

pressure. The Australian dollar was devalued by 16 percent while reflecting

the increasing current account deficit. The market participants became

concerned about inflation through this fact(Wignall, Fahrer, and Heath

1993). Kelty, the leader of ACTU, accepted to discount wage increase by 2

percent less than CPI in order not only to exchange for the comprehensive

package including the launch of the pension regime but also to prevent wage

inflation spiral(Hampson 1997;551). The Accord Mark 2 prohibited company

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level bargaining. Efficiency and flexibility of competitiveness was not

considered by the policy marker（Jackson 2006;268).

It can be said that the political support for the Accord by domestic interest

groups was stable (Hampson 1997). The left wings did not withdraw from

their labor party while they were unsatisfied with the Accord between the

party and ACTU. And in the Accord the policy makers made much of the

goal of business maximizing profits and promoting industrial peace

(Hampson 1997;550). So far from being removed from the influence on the

Accord, Employer associations were a key force for the reform agenda by the

labor party（Hampson 1997;550). Confederation of Australian

Industry(CAI) which was the major employer group at that time ,and Metal

Trades Industry Association(MTIA) were the main bargaining players with

ACTU. These employer groups kept a lookout for growing neo liberal

employers cooperating with Liberal party during 1980s(Kelly 1992; 263) .

Until Balance of Payments crisis occurred in 1987, Business Council of

Australia(BCA), which Australian major companies participate in, was

skeptical about the idea that the centralized Accord should be demised(Kelly

1992; 264). John Howard and other members of Liberal party who pursued

decentralization of industrial relations had a meeting with BCA in February

1986 and explained about their proposal for decentralization. The BCA

chairperson, however, questioned about the feasibility of their proposal and

stated that the chaos of wage explosion might happen if the centralized

industrial relations was deconstructed(Kelly 1992: 264). It was not until the

balance of payments crisis deepened that BCA started to assert

decentralization of the centralized industrial relations. In this way, it was

until the economic crisis coming from the current account deficit deepened

that the pressure for abolishment and decentralization of the Accord was not

strong in Australia.

4.5 The balance of payments crisis and decentralization of industrial relations

from 1985 to 1991.

The increasing current account deficit in 1985 led to more serious market

turmoil. The devaluation of Australian dollar in November 1985 might be

caused mainly by news about deterioration of the current account deficit

（Wignall, Fahrer and Heath.1993). The increasing current account deficit

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was due to the rapid decrease in domestic savings as a result of an

investment boom in 1981(Wignall, Fahrer, and Heath.1993;42). Most of

the foreign debts at that time were settled by foreign currencies, especially

US dollar. So these foreign debts rapidly increased from 25 percent of GDP in

1985 to 34 percent of GDP in 1987 by the depreciation of the exchange rate.

The Australian government bonds were downgraded by the credit rating

agencies and the Australian dollar fell from 70 US cent per Australian dollar

in March 1985 to 60 US cent per Australian dollar in June 1985. The

exchange rate continued to be unstable under condition that the financial policy

was inconsistent, the terms of trade became worse ,and the current account

deficits and foreign debts increased rapidly（Wignall, Farhrer, and Heath

1993;42). Under this situation, the MX missile crisis, the declaration regarding

the abolishment of the deduction of the withholding tax, and the rumor about the

sale of Australian government bonds to Japan all caused sharp fluctuations in

value of Australian dollar(Wignall, Farhrer, and Heath. 1993;42).

The goal of the Accord changed from inflation control to business

efficiency(Jackson. 2006). Having known that increasing trade deficits recorded

1 billion, 480 million dollars, Keating ,Treasure of Australia, made "Banana

Republic" remark. This remark caused the further crash of Australian dollar. This

event strengthened the forces of neoliberal business communities which took

the standpoint of anti-trade unionism. The event prompted the employers and

the government to receive a neoliberal way of decentralizing the centralized

industrial relations(Kelly 1992; 269). BCA shifted its attention to company level

bargaining since this event (Jackson.2006;274). BCA issued its report about

rigid workplace practice in Economic Program Advisory Assembly in September

1987. After this meeting, Hawke, the Prime Minister, announced the end of wage

indexation and the onset of two tier wage bargaining system（Dabscheck

1990;31-32). ACTU also had significant influence on this announcement(Kelly

1992; 284). Kelty, the chairman of ACTU, thought that the current account crisis

dampened the wage level of workers. He was unsatisfied with the centralized

Accords because the Accord Mark1 forced ACTU to restrain wage growth and

the Accord Mark2 did it to cut wage level(Kelly 1992; 284). So the employers

and ACTU supported the announcement of Hawke. It was the economic shock in

1986 that expanded consensus on the need for the introduction of the two tier

wage system(Jackson 2006;278). Thus the balance of payments crisis in 1986

was one of the turning points in decentralization of industrial relations in

17

Australia.

Moreover, the heavy fall in stock prices in November 1987 brought pressure

to bear on the government(Jackson 2006;282). In the national wage case in

December 1987, even Ralph Willis, Minister for Employment and Industrial

Relations, who had used to be cautious of decentralization of industrial relations,

referred to the urgency for more wage flexibility and for wider range of company

level bargaining(Jackson 2006;282).

There was difference among the domestic actors on decentralized industrial

relations. Roderic Carnegy, Chairperson of BCA, researched the member

companies of the organization and concluded that the balance of payments

crisis expanded the national debts and it was necessary for industrial relations to

be reformed. Afterwards, BCA issued a short report "Toward An Enterprise

Based Industrial Relations System" in May 1987 and asserted the shift into

company or individual level bargaining. And Liberal/ National Coalition(the major

opponents at that time) introduced the Voluntary Employment Agreement at

state level in 1987 and pursued company or individual level bargaining at

national level too. On the other hand, CAI and MTIA pursued the two tier wage

bargaining system(Barnett 1987; 184). MTIA opposed the company level

bargaining and preferred industry level bargaining based on "the structural

efficiency principle". ACTU issued "Australian restructured" to pursue the new

industrial relations like Swedish model(Scott 2009). Thus, Hawke labor

government, ACTU,CAI and MTIA agreed with the introduction of the two tier

wage bargaining system. Like this, there was difference of attitudes among

domestic actors.

But, the trend toward company level bargaining further accelerated in the early

1990. The government adopted the high interest rate policy so as to respond to

the balance of payments crisis in the late 1980s so that the recession deepened

and the unemployment rate rose highly. Under this recession, the percentage

supporting Hawke labor government fell and the percentage doing the

Liberal/National Coalition rose. Because there was more and more a risk that

Hawke labor government would lose 1990 national election, that government

conceded the BCA and decided to introduce company level bargaining with

some limits in order to forestall the Coalition. ACTU predicted that the Coalition

would pass the draconian law for trade unions if it returned to power. For that

reason, ACTU approved of the proposal for more flexible industrial relations in

order to guard the labor government. In this way, the full fledged introduction of

18

the company level bargaining was determined in the Accord Mark 6 in 1990.

There was more necessity to attract foreign capital when the current account

deficit increased. Hawke labor government decided to liberalize the foreign

investment policy in the mid 1980s(Pokarier 2004; 219). The Australian- Japan

symposium substantially began with 1986. The policy maker implemented

flexibility in industrial relations in order to promote investment from

Japan(Hampson 1997;551). This trend continued after 1990s and Paul Keating,

new labor government, appealed more flexibility of industrial relations so as to

attract investment from Japan.

As stated above, it is a likely aspect that the external crisis arising from the

current account deficit during the mid 1980s prompted the trade union, the

government, and the employer groups to form the agreement on company level

bargaining.

Chapter 5 Concluding remarks

In this paper, the current account deficit as the important cause of

decentralization of industrial relations is explored. There are many domestic

approaches about industrial relations , such as Neo-Corporatism and Varieties of

Capitalism. While the number of the external approaches about industrial

relations such as FDI theories has been increasing since 1980, still it is limited.

We focus on the impact of the current account deficit on industrial relations while

we appreciate those domestic and external approaches. When globalization

advances, there have been increasing numbers of financial and currency crises

affected by international market. Under this situation, the role of the current

account deficit is more increasingly important. The goal of our study is to

research the impact of the current account deficit on industrial relations by the

multiple regression analysis and the case of industrial relations in Australia from

the early 1980s to the mid 1990s.

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