Brendan Long: Confusing end and means - Analysis of recent industrial relations changes from the perspective of Catholic social teaching

FEBRUARY 2006 - ISSUE 6 - ISSN 1448 - 6326

Confusing End and Means -

Analysis of Recent Industrial Relations Changes from the Perspective of Catholic Social Teaching

BRENDAN LONG

ABSTRACT

The tradition of Catholic social thought presents a strong, coherent and unifying perspective to evaluate the recent changes to the Workplace Relations Act.

From the perspective of this tradition the proposed changes are problematic because they obscure the process of minimum wage setting, seek to undermine scope for employee choice of union representation and tend to favour a rather low and overly economistic view of work.

The Fair Pay Commission should form part of wider strategy of poverty reduction.

This paper focuses on the changes to wage setting and the role of trade unions in the Government’s new Work Choices legislation. Rather than a forensic examination of the changes it seeks to evaluate in broad terms some moral and ethical issues associated with the changes from the framework of Catholic social thought.

There are some who are quite surprised at the strength of opposition the Government has faced from the churches in relation to the new IR legislation. However, the position taken by the Catholic Church is really rather traditional. Insistence on effective employee representation and wages set at levels to avoid poverty are central principles of Catholic social thought. Not long before the bill was introduced into the Parliament Cardinal Pell made this position clear at a Press Club address. He was worried over the need to protect the incomes of the low paid and called for a slight increase in the minimum wage. He also defended the role of trade unions in Australian society and stated that he would welcome a modest increase in their influence.

It is worth noting that the Church neither now, nor in recent history, has sought to prescribe any model of wage fixation. The challenge is that wages are to be seen as more than a cost that the economic models call to be forever minimised in order to yield maximum profit. Wage fixation has a social dimension. Employees are not simply inputs to the production process but are the people, who through work provide the means to build, create and celebrate a society.

The Catholic tradition of social reflection

The Australian approach to industrial relations has been from conception one that has been a brew in which Catholic social thought has been a key ingredient. The point of departure for Catholic social thought in the modern era is of course Rerum Novarum (RN) by Leo XIII in 1891. The central thesis of Rerum Novarum was the call to deal with the needs of working people at the time the encyclical was written, a time when exploitation of labour was a manifest problem:

some opportune remedy must be found quickly for the misery and wretchedness pressing so unjustly on the majority of the working class (RN 3).

Rerum Novarum endorsed the legitimate role of trade unions, affirmed the responsibility of the state to intervene on behalf of the working poor and upheld the claim of workers to decent wages (see Coleman, p.17). It enshrined the notion of the living wage as a core Catholic principle.

The influence of Rerum Novarum is integral in the Australian industrial relations story.

Rerum Novarum had a profound influence on the father of Australian conciliation and arbitration Henry Bourne Higgins as both a legislator and then as President of the Arbitration Court. In the famous Harvester judgement, the case that founded the notion of a social wage, Higgins noted that determining “fair and reasonable remuneration” required him to conceive of a wage that permitted the ordinary Australian to enjoy, in the words of Rerum Novarum, “a condition of modest comfort”. [THIS CAPTURES THE ORGINAL LATIN BETTER]. This notion has played a key role in guiding the Australian Industrial Relations Commission in its responsibility under the Workplace Relations Act 1996 to “ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment.”

This position in Rerum Novarum has consistently been ratified by the Church. In the experience of the global recession in 1931 Pope Puis XI (in Quadragesimo Anno) reaffirmed the doctrine put by Leo XIII forty years previously. However, in this encyclical the agenda was broadened beyond the question of the living wage to the call for social justice. This encyclical first coined the term in the Catholic lexicon, and gave impetus to the movement that lies now at the heart of Catholic thought:

the riches that economic-social developments constantly increase ought to be so distributed among individual persons and classes that the common advantage of all, which Leo XIII had praised, will be safeguarded; in other words, that the common good of all society will be kept inviolate. By this law of social justice, one class is forbidden to exclude the other from sharing in the benefits.

This pursuit of the common good is now seen as a prime value.

What does this mean for the legislation before the Australian body politic? It means that the benefits and costs of the proposed changes are to be evaluated from the perspective of whether they will make Australia a fairer society: will they make the distribution of wealth and opportunity more equal? From this perspective the challenge is clear, can the Government assure the Australian people that the proposed changes will make Australia a fairer society, will they advance social justice? This is not an argument that the Government has taken up.

The Church in the Modern World

At Vatican Two the Church produced a major document about engagement with the modern world entitled: Gaudium et Spes (GS). It is a wide ranging document covering areas as diverse as religious freedom, relationship with other religions, family life, atheism and war.

Gaudium et Spes includes a chapter on economic matters that is relevant to consideration of the proposed industrial relations changes. The document emphasises the primary the role of labour in all economic concerns.

Human labour which is expended in the production and exchange of goods or in the performance of economic services is superior to the other elements of economic life, for the latter have only the nature of tools. (GS 67)

The wording here is interesting. Instead of presenting labour and capital as opposite poles in a class oriented political sense, labour’s primacy is held in relation to the production and exchange process of goods and services. This updating of the language indicates a realisation in the Church that the debate has moved on from the more political labour/capital distinction, more relevant at the advent of the Twentieth Century. In the first half of the last century the Church’s vocal support for organised labour was implicated with its desire to encourage Catholic politicians in Europe, especially Germany, Italy and France to find a basis to combat the perceived threat from highly secular governments in these countries. But the language of Gaudium et Spes reveals a deeper philosophical desire: to show that there is something inherent in labour itself that is different from the other factors of production. It combats the view that labour can be seen instrumentally in an economic sense but asserts that it has as a special moral and ethical dimension relative to other factors. This is the precursor the doctrine of the subjectivity of work that John Paul II promotes.

But before turning to the late Pope’s powerful insights there are two other points in the Gaudium et Spes that are of direct application to any interpretation of the current proposals for change. One of these is relates to the setting of wages. The principal quote is as follows:

remuneration for labour is to be such that man may be furnished the means to cultivate worthily his own material, social, cultural, and spiritual life and that of his dependents, in view of the function and productiveness of each one, the conditions of the factory or workshop, and the common good.(GS 6).

For an economist, wages should be set at the marginal revenue product of labour. This means at the rate of productivity in both current levels and future changes. This is not what the Church is saying. In contrast, the Church has called for wages to produce a basis by which a household can enjoy a holistic sense of wellbeing: material, familial and spiritual. The Church looks to the broad needs of the person as a member of society and especially the society of the family.

At first glance this gap in the perspectives seems hard to bridge. How can an employer, in a small business or any business, consider anything but the bottom line in staff recruitment and remuneration decisions? But this perspective is to read the Catholic position too narrowly. Catholic social teaching does not condemn the economic theorists who seek to devise a paradigm to explain labour demand and supply conditions. However, it denies the view that the reality of work can be squeezed into the rigid philosophical box of describing wages as simply the point where the budget constraint of an individual equates his/her point of difference between work and leisure. There is simply more at stake.

The point is not that a businessmen needs to focus on the total welfare of a family unit when seeking a cost structure for the firm. The challenge of Catholic social doctrine is directed to the state. It is the state that must ensure that work is not poverty and that employment meets the legitimate social expectation that work can provide a sound basis to raise a family.

Gaudium et Spes maintains the Church’s strong advocacy of the role of organised labour. The Church’s position in relation to the role of trade unions is puzzling to many people, in fact to many Catholics as well. It seems to defy the prevailing conservative position of the Church on so many issues: why then is it siding with the left! But once we move beyond the most cursory form of political analysis the logic of Catholic attitude to organised labour is clearly evident. Firstly, of course, Catholic social action in the trade union movement presented a potent opportunity to combat the spread of communism that found its base in the labour movement. It was a case of fighting fire with fire.

But the support for organised labour runs deeper than political motives. Support of the those without economic and political power is a core Christian value, reaching back to a tradition of advocacy on behalf of the poor in pre-Christian Israel and supported in so many and various forms in Catholic movements over the ages, often at times against the Catholic hierarchy itself. The support for trade unions is fundamentally linked to the Church’s social justice concerns. Unions are seen as a vehicle of ensuring that workers and their families escape poverty.

The summary of this position in Gaudium et Spes is unequivocal:

Among the basic rights of the human person is to be numbered the right of freely founding unions for working people. These should be able truly to represent them and to contribute to the organizing of economic life in the right way. Included is the right of freely taking part in the activity of these unions without risk of reprisal (GS 68).

Do the proposed industrial relations changes support this viewpoint? To the contrary, they seek to bypass choices of workers to freely choose a union. One of the key components of the changes is that there will purportedly be a two-tiered system. On one hand, existing employees who have negotiated a collective agreement or are subject to an industrial award will lock in their current benefits. However, new employees, especially new labour market entrants, will not have access to the same level of protection of entitlements. They will potentially be employed on a low cost business model that will presumably provide lesser benefits than those negotiated collectively by unions for workers in the same job in the past. The Federal Government’s Work Choices paper provides the example of a labour market entrant who in order to get a job is required to sacrifice existing entitlements to public holidays, rest breaks, penalty rates and shift/overtime loadings. The changes go further and provide mechanisms that allow employers the scope to eventually move all employees to such a low cost model. It is difficult not to see this as an approach designed to encourage an employer to pull employees out of the union negotiated framework. This is a denial of the right to “freely take part” in the role of unions that the Vatican Two document calls for.

Laborem Exercens (LE): work as becoming more fully human

The extraordinary and spontaneous outpouring of affection and grief at the passing of John Paul II surprised everybody. How can one forget millions of pilgrims who poured into Rome and waited for days just to pass his coffin? The author remembers the television shots of that extraordinary wind at the solemn mass for the Pope billowing the liturgical vestments of the assembled cardinals, to symbolise, as it were, the power of the man and his living legacy . The surprise at this outpouring of emotion was probably due to the controversy of the later years of his papacy associated over his decision to resist changes many in the Church have called for. Still, whatever position is taken in relation to his ecclesiastical decisions his philosophical and social legacy endures. And one of his core themes was the right way to understand work.

Attitudes to work relations depend on many cultural factors. Pope John Paul ’s reading of the role of employment also reflects his own experience as an Eastern European who lived for so long behind the I ron Curtain. The communist economic ethic was that the worker existed to advance the interests of the state. Individual enterprise was curtailed and the economy was subject to meta-planning. Personal economic initiative tended only to thrive in the black economy. John Paul II clearly reacted against this, but he did so in a very interesting way. He did not just call for expanded personal economic opportunity. He provided an account of how work is implicated in the personal development of the individual. Work is about much more than meeting state quotas or striving for economic gain. What he provided was an economic anthropology of work: a way of being and becoming more fully human.

Only man is capable of work, and only man works, at the same time by work occupying his existence on earth. Thus work bears a particular mark of man and of humanity, the mark of a person operating within a community of persons. And this mark decides its interior characteristics; in a sense it constitutes its very nature. (LE intro)

Work is a good thing for man - a good thing for his humanity - because through work man not only transforms nature, adapting it to his own needs, but he also achieves fulfilment as a human being and indeed, in a sense, becomes "more a human being". (LE 9)

The new element here is a sense of the subjective dimension of work. The first element of what John Paul II was referring to is that work can and should be an expression of the contribution an individual makes to society, to the community. The social beneficial role of all work, not just those in helping professions, has ethical value.

The second and probably more contemporary viewpoint he offers is the understanding of the role work plays in the personal development of the worker. We are social animals and employment forces us to engage with each other, to cooperate with each other for something greater than ourselves. This aspect helps to emphasise the positive personal role workers, no matter how lowly or menial the labour. So employment gives dignity and empowers people to express their abilities for the good of others.

Naturally, in the Christian tradition this is seen as flowing form a sense of cooperation in God’s creation to build a world of freedom. The tradition seeks to stand against a secular materialism that seeks to reduce employment to a mere contract for money. It reacts against the attitude that work is purely a labour market statistic, with wages simply the price the market will bear.

But although this viewpoint of the subjective value and dignity of work seems obvious, it appears that it had not featured in the values that have inspired the changes to the industrial relations framework. Take, for example, the comments of Minister Andrews in response to criticism from Church leaders in relation to the legislation. Andrews stated he is prepared to listen to the Church leaders if they can make an economic argument for not supporting the changes. Everything must be reducable to a narrownly economic argument. The problem is, rather, not that economic factors should be ignored, but in terms of reform to workplace relations they are one factor to be considered from a holistic social viewpoint.

This way of stating the issue contained a fundamental error, what we can call the error of economism, that of considering human labour solely according to its economic purpose. (LE 13)

The Church’s position is that the social and spiritual are primary: works exists for us not us for work—which would be, in effect, a form of materialism.

This fundamental error of thought can and must be called an error of materialism, in that economism directly or indirectly includes a conviction of the primacy and superiority of the material, and directly or indirectly places the spiritual and the personal (man's activity, moral values and such matters) in a position of subordination to material reality. (LE 13)

In philosophical terms this means reducing work to an ‘ontic level’ phenomenon: a thing like other things, demand for labour is seen at the same level as demand for apples or oranges (LE 13). But what John Paul calls for is the appreciation of the philosophical richness of work as having an “ontological’ dimension”. This means that work is one of the fundamental ways by which we express our humanness, our being, the existential dimension. It is about how we become persons, become more fully human, living our lives to the full, in abundance, for the sake of others and thus ultimately also ourselves.

Rather than calling on the Church leaders to present an economic argument, Minister Andrews needs to ensure that the economic perspective he seeks to advocate can sustain an ultimate social and spiritual outcome. But has he done this? A key test relates to how he deals with a primary concern for the Church and for us all, the pressing problem of poverty, including working poverty.

The Fair Pay Commission

The appointment of Ian Harper as the President of the proposed Fair Pay Commission (FPC) is deliberately controversial. Professor Harper has expressed views on wage fixation that are at odds with the tradition that was first expressed in the Harvester judgement. Indeed, in a paper released in 2000, Professor Harper, in considering the Harvester judgment, lamented on the loss of an entire industry as a consequence of the determination of “fair and reasonable remuneration”![1] Given this history, it is a difficult to know whether the FPC will deliver just outcomes. The Government has not clearly expressed the methodologies, processes and evidence the FPC will be required to take into account. We simply do not know how transparent those processes will be. We have little assurance that this administrative body will have the same arm-length relationship with Government enjoyed by the AIRC.

The Government argues that the AIRC has run its race as the body responsible for wage fixation. It is the Government’s stated position that the AIRC has not given due consideration to economic circumstances in the determination of wage outcomes. However, the AIRC is obliged to take into account the pursuit of high employment and protecting the competitive position of young people in the labour market, promoting youth employment, as well as maintaining a fair safety net of wages and conditions. Will the FPC really enjoy this broad mandate or will it simply make wage determination subject to current economic conditions? We are asked to take this matter on trust.

The economic case for the changes remains unproven. The measures are targeted at increasing labour demand in an already tight labour market. But the deficiencies in current labour market are on the supply side not the demand side as shown by skills shortages in key sectors. In the last three wage cases the AIRC has rejected the particular evidence provided attempting to link wage case outcomes with levels of unemployment. The AIRC has made it clear that the Government has failed to show a connection between the moderate quantum of pay increases determined by the AIRC and unemployment levels. What hard econometric evidence has been presented to show a correlation between current minimum wage levels and unemployment? If such evidence exists why has the Government not presented it?

The problem of working poverty

Catholic social thought has taken a st ron g position in the defence of those experiencing poverty. This is revealed in the doctrine of the “preferential option for the poor” which calls on government to make the problem of poverty a primary focus of policy and social concern.

Does the new IR model provide a superior approach to deal with poverty? Here one of authors of this paper recalls a tutorial given at ANU economics in the mid-1980s when the lecturer indicated that in relation to income support policies the Government should seek to provide assistance in a manner that did not distort prices. The zonal tax rebate was seen as the paradigm. This then-student economist continues to be impressed with the rigour of the lecturer’s analysis even now in his present position. The lecturer’s name was then Dr, now Professor, Ian Harper. Time changes us all but one suspects that the now Professor Harper might retain the same view he then held. In short, the question is should wages, which are of course prices, be used as a social justice strategy or should this be left to income support policies seen as not distorting prices?

Sadly, the reality of the Australian income transfer system is that we now longer have the luxury of making such a neat theoretical distinction. This is because now the system of wages, taxes and family payments at the point of the transition from welfare to work are so intermixed that is all just a big bowl of scrambled eggs. A single parent, especially working part-time on the minimum wage, pays tax, and loses family tax benefits. The effective tax rate after the impact of withdrawal of benefits is over 60 per cent and sometimes much higher. So unless we move to a full negative income tax system we cannot get back to the nice neat theoretical world of Dr Harper ’s tutorial. Wages, tax and family benefit regimes interact. So social justice policies must deal with all three simultaneously.

Is this the way that Professor Harper will approach the issue on the Fair Pay Commission? This is one of the key questions he will have to face. John Ryan of the Australian Catholic Commission for Employment Relations has stated that the test of the new system will be whether it provides a reasonable minimum income to a family as distinct from focusing on the individual. Ryan is on safe ground here from the perspective of Catholic social teaching.

Should the Fair Pay Commission provide a minimum wage model for dealing with a family’s needs? Theoretically the position can be stated easily enough. Development economics measures relative poverty as the half median on the income distribution (half of the middle income). This must be adjusted for the cost of caring for dependants. The minimum wage might account for the half median for a single person but it does not account for the half median for family units.

This is one of the problems that Harper will face. He might be able to agree to a wage fixation formula that accounts for current economic conditions and seeks to reduce unemployment while still providing a half median income for single persons. However, he will be powerless to help struggling working families facing crippling effective marginal tax rates not enjoying a half median wage after adjusting for the costs of dependants. He will preside over a Fair Pay Commission but would not be able to say whether this going to provide a fair wage for low income families. He will have to say “oh well, tax and social support policy is a matter for the Government”. The point is clear: one cannot have a Fair Pay Commission that is not integrated into a comprehensive anti-poverty strategy.

The Catholic Church in Australia has taken a st ron g position in favour of poverty reduction. This is most clearly seen in the submission of Catholic Welfare Australia to the Inquiry into Poverty in Australia . Catholic Welfare called for a Poverty Reduction Commission to be established encompassing targets for poverty alleviation as has been implemented in the UK . This independent agency would measure poverty independently and implement the overall strategy. The notion of the working poor was a key theme of the report.

The implication for the Fair Pay Commission is that it can only work for social justice if it operates as a component, an arm of an agency that deals with poverty comprehensively. This would then enable the setting of the minimum wage to be linked to the difficult questions of taxation reform and setting a reasonable minimum family wage. The Fair Pay Commission as proposed can only focus on minimum wage levels for the single person. This is not sufficient and will not be able to set a basic standard of income for a family with dependants.

If the FPC is not to be a covert mechanism for reducing real minimum wages then it will require a broader, more transparent, frame of reference. This frame of reference needs to include an overarching strategy of reform that creates an acceptable wage for families as well as single employers. In this manner, it will be co-ordinated with a process of reform of the tax and the family tax payment system. Without a broader approach to redressing the pervasive problem of working poverty, the FPC cannot but appear to be a body that risks compromising social justice notions of a fair family income in order to achieve a macroeconomic outcome, which may or may not be actually achievable. This is the economic materialism that Pope John Paul has condemned.

Economists vs the Church?

If the Church has set itself up in opposition to the Government has it also put itself in conflict with mainstream economic opinion? Certainly, the Government has attempted to minimise such conflict through the appointment of Professor Ian Harper to the proposed Fair Pay Commission. He is a formidable Australian economist and a committed churchman. The Government believes that Harper is the the choice in this scenario, being acceptable both to the economic and policy-making authorities, and also to the Churches. However, the Government may have miscalculated here.

Church opposition is not best expressed as an instance of political lobbying with some vaguely religious motivation. There is a tradition of thought and reflection at stake here that is deeply entrenched, not just in the Church, but incarnated also in the values and institutions that Australia most respects.

. Ian Harper may be able to bring in some religious ideas to support his economics.. But there is a deeper issue at stake. For the Church’s position on economic policy calls for an inversion for what is currently presumed.: economics must serve the human situation, not the reverse. Human values are the end, while economic practise is the means. Any attempt, therefore, to co-opt religion as a a means to the prescribed economic end, will simply sharpen the emerging lines of division. This is the problem that Professor Harper must face.

It appears that the Government takes the view that in the end the churches won’t stand up to the economists they line up, but beat a retreat to the cathedral, there to celebrate their unchallenging beliefs. But this is to fail in realising that in the contemporary Australian Catholic Church, with its world-wide connections, what is at stake are core theological concerns. They make a difference, and are meant to make a difference in how any society acts—or does not act, with justice and concern for the poor.

Conclusion

From the perspective of Catholic social thought what can be said for the Government’s changes? The first point is that the ethical and philosophical bases for the arrangements are problematic. Instead of focusing on the dignity of employment and the need for just remuneration for a family or an individual, economic outcomes are preferred at the expense of social justice outcomes. This either/or approach is simplistic and dangerous. A better model would be to focus on a co-ordinated anti-poverty strategy that embodies wages, taxes and unemployment by a poverty reduction agency.

The second major problem is that the changes appear to be driven by a desire to reduce the role of unions in the wage fixation process. From the perspective of Catholic social thought this is a denial of basic right of employees and cannot be regarded as ethical.

The third and most significant problem with the proposal is that it treats employment and wages as purely economic variables. There is no recognition of the dignity of employment, the creative value of work and the necessity of employment if the human person and the human community is to flourish within a just and fair society.. An an industrial relations system must see economic outcomes as instrumental ends, improving the overall wellbeing of workers and the community.

The prescribed changes confuse means and ends. . There is need for the philosophical basis of these changes to be reimagined. More particularly, the focus must be on the dignity of work, and not diminishing through an economic materialism that might or might not improve the balance sheet, but in the end would do nothing to address the problem of working poverty.

The Government’s justifies its position as an argument for greater choice. But the real focus should be on families’ needs. The intention to dispense with the consideration of the needs of families in wage setting in isolation from a broader social justice agenda risks entrenching the problem of working poverty further. For lower income families it’s a poor choice.

References

Coleman J (ed) (1991), One hundred years of Catholic social thought: celebration and challenge, Orbis, New York

Harper, Ian (2000), ‘Quo Vadis Australia ?’, Policy, vol.18, no.1.

Leo III, Rerum Novarum (May 15, 1891), English translation from Vatican.va.

Pontifical Council for Justice and Peace (2005), Compendium of the social doctrine of the Church (2005), St Pauls Publications, Strathfield.

The Sixteen Documents of Vatican II, St. Paul , Boston , 1999/1967.

Pope John Paul II, Laborem Exercens ( 14 September 1981 ), English translation from Vatican.va.

Pope Pius XI , Quadragesimo Anno (May 15, 1931), English translation from Vatican.va.

[1] Harper (2000).

I acknowledge and thank David Smith, an industrial relations expert in the ACT for his advice in preparing this work.

Brendan Long is currently an economic adviser to the Australian Labor Party Federally. He holds degrees in economics and philosophy and a doctorate from the University of Cambridge.
David Smith is currently an industrial officer with the Australian Federal Police Association and has worked as an industrial relations adviser to the ACT Government.