COMPULSORY ARBITRATION.

Press, Volume LXIII, Issue 19148, 3 November 1927, Page 14

COMPULSORY ARBITRATION.

(iFECULLT WRITTEN JOB THE FBI 88.) (By Professor A. H Tocker, Canterbury College.) The introduction of a Bill to amend the Industrial Conciliation and Arbitration Act is a candid admission that all is not right with our machinery for eettling industrial disputes. But the amendments proposed indicate scant appreciation either of the faults of our system or of its effects on the general economic well-being of the country. They suggest, too, that the machinery is to be tinkered with and patched up, rather than examined in all its bearings, and either refashioned or scrapped as need dictates. Amid the heat of controversy engendered by discussion cf the amending Bill broader and more important issues tend to be obscured, and it is well that they should be recalled and held steadily in view. The main points relevant to a general discussion of the efficiency of our system of compulsory arbitration may be summarised as follows: (I) Compulsory arbitration was an experiment, initiated more than thirty y*>ars ago, and designed mainly to fcceure industrial peace. It has failed, recently in increasing degree, to fcrhievc that end. From 1921 to 1925 about 6 per cent, of the wage-earners of the Dominion accounted for 90 per cent, of the industrial stoppages. These 6 per cent, are the more militant unionists, engaged' in shipping and waterside working, mining, and the freezing industries. Some of them do not use the Court at all; others use it or free themselves from it at their convenience. Tho remaining 94 per cent, of wage-earners were responsible for only 10 per cent. of the stoppages of work, and amongst this major part serious industrial strife, with or without the Court, is very improbable. The Court therefore fails to operate in that part of tho industry where its services are most needed to secure industrial peaee; it operates effectively only where! its services are but little required for this

end. (2) Failing to achieve the object it was set up to attain, the Court has developed along lines never intended foi it, and the effects of which-, have been neither fully appreciated nor fully considered by the Government or tho community at large. The Court has become a tribunal for the State regulation of wages and labour conditions, wielding a wide influence over the industry 01 the Dominion. It has standardised and rtereotyped wage-rates mainly upon a fallacious basis, tha-t o*f the cost of living, and has imposed on industry a system of minute and rigid regulation which has greatly increased production costs and has seriously retarded the development of better organisation and methods of production. \ (3) The scope of the Court's investigations is more limited than is generally supposed. It is used only by trade unionists. Out of about 400.000 wageearners in New Zealand, 100,000 are registered unionists, and a considerable number of these never approach the Court. Hence the Court investigated the conditions of at most about one-fourth'-of the - wage-earners, but iu settling disputes raised in this narrow field, it makes awards which are binding over a inoch wider field and which exert a profound influence on other industries and on ' important factors in our economic life lying beyond the purview of the Court. Amongst the three-fourths of the. wage-earners who have no recourse to the Court, there are some workers' organisations and fcome collective bargaining, but there is no evidence of 'Sweating, bad conditions,' or industrial strife. For three- . fourths of the wage-earners the Court is not used, and not required. , (4) Outside' New Zealand and Australia/ the method of compulsory arbitration is almost universally rejected. •Great industrial countries like Britain and. the United States,: counting- their unionists by millions, and subjected-at times to the fiercest industrial strife, follow for the., most part the precept formulated by one of the world's greatest authorities on labour, Professor Clay, of Manchester: "Governments should! " do all in' their. power to promote collective bargaining, conciliation, and arbitration, but should never ; on any account, fix a wage rate." And by arbitration Professor Clay means, and other countries understand, the method of securing real agreement between the disputants .'through' the agency of a 'mediator, not the imposition of a legally binding award by an authority external to the. dispute. It is at least curious that New Zealand, a country of sparse and scattered population, little industrialised, but dependent in exceptional measure on rural industries, and running little risk of serious industrial strife, should be the country to impose, mainly for the purpose of preventing strife, what a visiting American authority termed , "the most complete system' of State regulation of industry ever known in the modern world ''

Broadly speaking, the. above points ■re matters of fact they are therefore not controvertible. The Court has not secured industrial peace, it is doubtful now whether it appreciably diminishes industrial strife. There is no evidence'* that it is needed to prevent sweating or exploitation, for there is no indication that these exist even amongst the most defenceless and least organised wage-earners outside the jurisdiction of the Court—typists and domestic are instances showing that demand for services is an effective regulator of wages. The minimum wage of the Court has become a standard wage; it fails to Tecognise human variability, and denies to human capacity the . stimulus, of differential rates of pay, the Court even penalises payment by results. Because disputes are created and the Court has to settle disputes, awards are made covering wide fields and concerning the. minutest details of industrial regulation. This mass of regulation binds industry in a strait-jackc:, preventing experiments, adjustments, and changes, increasing costs, and thereby reducing den\and and narrowing markets.' The Court, too. has an unduly great influence over a field much wider than that from which \ r , draws its information. Directly its awards concern mainly manual workers in sheltered industries indirectly their effects are felt by every producer and consumer in the Dominion. For the sheltered traders and many employers in thoso trades are, as-a ruie. troubled little by higher costs du*» to the relative inefficiency of production under award conditions Those costs .ire passed on in higher prices to local consumers, who have no alternative source of supply, they affect the cost of living and the cost of production in unsheltered industries, which must stll against world eompjti-1 tio'n. 'lhe leal burden of our arbitra- j lion system falls ultimately on consumers i>id on the unsheltered primary industries. Other countries elder and ! more experienced than ourselves in in-J duntrial organisation recognise the futility and the harm done by Statu I regulation of wages, and will have none ' of it. j

To the workers themselves, too compulsory arbitration has almost certainly flnne mnrh more harm than eood. The results of the Court awards hare been rather to depress than to increase. wages, for the indirect effect of ihe conditions imposed on industry is stronger than the direct effect of the wage rates awarded Statistics indicate that in New Zealand the standard under award rates fcjw little ,fanv better than in 1900. ••rtainJy no better thin in 1914. In

the United States and Canada, the purchasing power of average wages has been increased by about 2o per cent, since 1914. But in those countries State interference is reduced to a minimum, and wages and conditions are the results of collective bargaining between employers and employees, both of whom recognise that wages can be paid only out of production. In New Zealand trade unionists, regarding the Court as the sole arbiter of wages, have become obhe.ss.ed with the idea of providing work ant] wages, regardless of cost, and use the Court for this end. Hence we

I get agitations for shorter hours, limiI tation of the range of ta.sks to lie done by one man, demarkation of functions carried to an intolerable degree, slogans of ''one man,- one jo'>." etc. Such views disregard the fact that since wages come out of the product of industry, every limitation of a worker** product necessarily limits his earnings. By imposing such regulations, costs of production are increased greatly, mar-' j kets absorb of the product owing j to its higher price, and both the de- ! mand for labour and the wages that can be paid are diminished, and notincreased. Much better results might be achieved were it realised that no employer can pay a man more than the value' added to the total product by that man's labour, and that the greater the liberty ol labour organisation allowed to employers, the greater the product' of labour, tho higher must wages be. Further, .every additional producer is' an additional earner, and thereto! o spender, and the added expenditure creates a demand for more goods and therefore for more labour to produce tlipm. The greatest freedom of organisation and experiment within industry, and particularly the utmost flexibility of job arrangements, are essential to efficient and expanding production. It is mainly the recognition of this need for freedom of organisation that has limited State regulation of industry elsewhere, as in Britain and America : it is because we have failed to recognise the need and the value of such, freedom that regulation has been carried to extreme lengths in New Zealand.

. There is a further aspect of wage regulation particularly ■ important) ;i; discussing compulsory arbitration ; at the present time. It is the prime function of any price, whether of goods or of services, to secure adjustment of supply and demand. Where . price is fixed, either demand or supply must l>e adjusted to that price. Court awards have raised labour costs, and .tho return to labour per unit of output, .n sheltered industries having a *>urely local market. They have increased many costs which must be borne by unsheltered exporting industries, and those industries therefore cannot give labour a return -'per unit of output equal to „t(io award rates. The .tendency -is . then" for "labour todrift ;fVoin the unsheltered to . the sheltered : industries, where'conditions are more attractive. But the market for the output of those sheltered industries.is limited,'and they cannot absorb,' under' award rates and conditions, the supply of- labour offering. The result is unemployment. The standard rate is inoperative .for those workers who cannot find eriiploynient, and the real minimum'of'the'''country us the. rate at which the unemployed" can find work. Unemployment in Now Zealand is unlikely to be permanently cured while wage rates and labour conditions are rigidly fixed; but it would settle itself were conditions to be made .flexiblo enough, for tho demand of labour to be adjusted to the supply! This does not necessarily mean reduced wages; nominal-wages might he higher, : and real wages higher still were the conditions made such as would increase labour output and decrease labour costs. Compulsory arbitration .fails to recognise that the price paid for labour is the product-of an infinite number of far-reaching, and variable factors; most of\ which are beyond the scope of the Court.;-. ''-.,'< This is by no means a. complete indictment Of our system but it is.surely sufficient. ' Against it, what is.there' to be said? Conditions \in \ew r Zealand are such that serious industrial strife, under;any likely conditions, •is improbable, and in any case the Court can help but little in preventing it.There is no reason for believing that exploitation" of-'labour would occur without State wage fixing,, for ..State' regulation in. this sphere is applied to only. an infinitesimal fraction ..of the world's industry—the overwhelming majority of workers know/that Jjiey are better off without it. Qur system will 'be supported by some of the .•..individuals and organisations who have vested interests •. in its maintenance, by employers and employees who have learned to.lean on the Court for protection, and .to secure from it services which they could discharge much more beneficially: themselv.es, ; and by conservatives whose opinions are based on habit, custom, and: fear of change. But an impartial review of its development, its direct' and --indirect effects on industry and industrial organisation, and its present part in promoting rather than removing industrial difficulties, - must condemn the system' as both futile and harmful. There is no, really necessary . service performed by the Court that-could not be- discharged" equally well by other organisations. There is much that it does which were better left undone.

Industry would be more self-reliant, vital, and progressive, trade unionism healthier, sounder, and saner if real conciliation and collective bargaining, bringing mutual /understanding between the parties, were to replace the State tribunal which now makes their differences matters for litigation. The members of the Court are' hot to blame for its faults. They have done their Best. But the principles of State compulsion and standardised wage rates and conditions are injurious and thoroughly objectionable. They are an integral part pf our system, and it is. the svstem which is at fault. Compulsory''arbitration should therefore be not revised, but abolished. .