Peter Franks - The Nil Wage Order

Peter Franks – The Nil Wage Order

Peter Franks was a trade union official for over 20 years and now works as an employment mediator. He has published numerous articles on New Zealand labour history. His history of the printing trade unions, Print and Politics, was published in 2001. He is a long-standing committee member of the LHP.

Was the 1968 Nill Wage Order the death knell of the arbitration system?

In June 1968 the Arbitration Court turned down the Federation of Labour’s application for a 7.6% general wage order and issued its infamous Nil Wage Order. There was a furious reaction from unions, widespread industrial action and an angry demonstration at the opening of Parliament. There was widespread talk of industrial chaos and the National Government is said to have prepared emergency regulations in case essential services were disrupted.

The Nil Wage Order has been described as a watershed in NZ industrial relations and an event which marked the death knell of the arbitration system. The significance of the Nil Order is the subject of my presentation this afternoon.

To understand what happened in 1968 it is important to understand the industrial relations context of the times. There was a highly regulated system that had its origins in the 1894 Industrial Arbitration and Conciliation Act. This gave unions the legal right to bargain with employers and to take unsettled negotiations to the Arbitration Court for a decision. In exchange, unions gave up the right to strike.

For the first 40 years, the arbitration system covered only a minority of workers. This changed with the election of the first Labour Government in 1935. Compulsory unionism brought the majority of workers into the system. Industrial relations became highly centralised. A largely quiescent union movement accepted the conservative leadership of the Federation of Labour (FOL). Minority, militant opposition was defeated in the 1951 Waterfront Lockout.

After World War II, wage bargaining between unions and employers was overshadowed by national cases taken by the FOL for general wage orders. These were hearings before the Arbitration Court which decided whether there should be a general increase in wages of all workers covered by the arbitration system (and, by extension, public service workers as well). Strikes were at historically low levels.

By the 1960s cracks had started to appear in the system. There was a growth of direct bargaining between unions and employers on large industrial sites. A tight labour market meant that many employers, particularly in the cities, paid higher wages than the minimum rates in Arbitration Court awards. There was growing dissatisfaction with the Court’s conservative approach to margins for skill and ruling rates. Unions were changing with an increasing number prepared to take industrial action and improve organisation on the job.

The political consensus around the arbitration system had also fractured. After the National Government threatened to introduce voluntary unionism, the FOL refused to pass its traditional vote of support for arbitration.

In 1967 there was a collapse in wool prices and the National Government introduced a raft of deflationary measures, including devaluation. There was increasing union pressure on the FOL to apply for a General Wage Order. After much prevarication, it did so in December 1967, asking for a 7.6% general increase.

The FOL presented its case in March 1968. Behind the scenes, there was a lot of pressure on Judge Blair to reject the unions’ case. In a majority decision, with the workers’ representative dissenting, the Arbitration Court acknowledged that the FOL had established that there had been an increase in the cost of living and that the burden would fall more heavily on lower paid workers. However the Court decided that in a difficult economic climate a general order should not be made.

Unions were outraged. There was widespread industrial action by Trades Councils and unions in support of the FOL’s claim for a general increase and calls for nationally co-ordinated action. The intensity of this response took the FOL by surprise, as it did the government and the employers. Recently, some have claimed that the FOL leadership took the initiative in organising mass strike action to defeat the Nil Wage Order. However this is a very romantic view of what actually happened.

There was a lot of anger among workers, a wave of strikes and demands for national action. A special FOL conference on 4 July 1968 unanimously supported unions using ‘all available channels’ to get an immediate 5% increase from employers. But rather than organising and leading a national campaign, Tom Skinner, the FOL President, worked overtime to defuse the crisis by creating favourable conditions for a second general wage order application. First, he tried to persuade the government to change the regulations that set out the criteria for general wage orders. When that failed, he worked to persuade the employers to agree to a joint application to the Court and asked unions to scale down industrial action in the meantime. The Employers Federation agreed and the Arbitration Court granted a 5% general wage order. This time the workers’ and employers’ representatives on the Court outvoted the Judge. Rob Muldoon, the National Minister of Finance, denounced this as an ‘unholy alliance.’

Not all unions were happy. Frank Barnard, President of the Auckland Freezing Workers Union, said of Skinner’s decision to go for a second application: ‘I think it stinks. Mr Skinner might at least have had the decency to call another national conference to discuss the question. But no, he decides he’s going back to the Court.’ While Skinner was certainly motivated by a disdain for industrial action, he was also concerned to preserve the arbitration system as he believed that weak and vulnerable groups of workers would not survive in a deregulated system of wage bargaining. The Employers Federation and Tom Shand, the National Minister of Labour, were also determined to save the arbitration system.

The Nil Wage Order was certainly a watershed in NZ industrial relations. It undermined the credibility of the Arbitration Court and marked the end of its pre-eminence in wage fixing.

While the industrial protest against the Nil Order was short-lived, it was followed by a wave of industrial action over the next two years as unions engaged in extensive second-tier bargaining outside the arbitration system. In 1970, the equivalent of 12 per cent of workers were involved in strikes. From the late 1960s to the late 1980s, strike action reached levels that were unprecedented since 1951.

It is important not to exaggerate the extent of the industrial action that followed the Nil Wage Order. Militancy was concentrated among particular groups of workers. For example, the Department of Labour’s analysis of strike statistics for 1968 shows that the meat industry accounted for 61.1 percent of all time lost through industrial disputes in 1968. 27 per cent of time lost in 1968 was in four other industries: pulp and paper, building and construction, boilermaking, engineering and road transport. In 1970, when over a quarter of a million working days were lost through strikes, the highest since 195,. 41% of the workers involved were freezing workers, 38% worked in transport and storage and 17% in manufacturing.

Politically, the industrial action in this period was tempered by the consensus between the FOL, the Employers Federation and the National and Labour parties that the arbitration system must be preserved. This was the main driver behind changes to the industrial laws in the 1970s. It was not until the late 1980s that the political consensus collapsed. Behind this, of course, were major changes in the NZ economy. The arbitration system was part and parcel of a protected economy, secure in its position as Britain’s farm. The economic changes of the 1970s and 1980s, for example Britain’s entry to the European Community, changed all that.

If the Nil Order was the death knell of the arbitration system, its demise was a long time coming. The arbitration system continued for another 23 years until it was swept away by the Employment Contracts Act in 1991. This was almost as long a period as it’s hey day from 1938 to 1968. Despite the rise in militancy after the Nil Order, unions as a whole were very reluctant to abandon arbitration.