Bob Hawke at the Arbitration Commission

Have you heard about this part of Bob's career?

Did you know that long before he was Prime Minister, Bob Hawke was the ACTU’s Advocate at the Arbitration Commission arguing for regular pay rises for Australian workers?

Ever since I first read Blanch D’Alpuget’s biography, Hawke: The Early Years, I have been fascinated with how Hawke’s time at the ACTU set the basis for his later rise to the prime ministership.

It is remarkable to see how Hawke made the transition from a scholar of industrial relations, to one of its most famous practitioners, to the prime minister who would transform the industrial system altogether.

Hawke was born at the end of 1929, just as Australia was snared in the international cataclysm of the Great Depression.

Aged 10, Hawke’s family moved from South Australia to Perth. Hawke later gained a degree in Arts and Law from the University of Western Australia in 1953.

Later that year Hawke, selected as a Rhodes Scholar, departed for Oxford to pursue a thesis on a topic not usually explored there: the history of Australian wage fixation.

He returned to Australia after his studies with a near-obsession with a particular decision that had been made by the Arbitration Court in 1953.  As he later recounted, ‘I steeped myself in that decision as I had no other and determined to destroy it.’

How did the Court/Commission work, and why was the 1953 decision so important?

In the 1890s, as Australia was gripped by the international depression of that decade, a series of bitter industrial disputes broke out. Large employer groups were determined to break the power of unions to collectively represent workers.

This prompted a generation of liberal reformers to embrace the idea of creating an industrial court that could help mediate such disputes, and to arbitrate an outcome.

After defeats in the disputes of the 1890s a growing number of unions came to support this idea, and it inspired the creation of a federal court of conciliation and arbitration (which I will just call the Arbitration Court).

This Court was always controversial. It was legislated for in 1904 after a fierce debate, with originally quite limited powers to hold a hearing when a dispute took place in multiple states.

In practice, over time, these powers widened considerably, but the basic logic remained the same. The court would hold hearings on disputes where unions and employers would make their case before a Justice (later several Justices) who could then hand down a binding decision.

In 1907 the second President of the Court, Justice Henry Bournes Higgins, handed down a special ruling in a case with defining consequences. An employer applied under legislation at the time for exemption for an excise tax, which he could only receive if Higgins signed off that this employer paid a ‘fair and reasonable wage.’ The employer was Hugh McKay who owned the Sunshine Harvester company (which the Melbourne suburb of Sunshine is named after).

Higgins heard testimony from McKay and ruled that he did not pay a fair and reasonable wage – which would be an amount that would meet ‘the normal needs of the average employee regarded as a human being living in a civilised community’. This was known as the ‘basic wage’.

This was, in effect, the principle for a new minimum wage, and it was one that Higgins consistently applied in the years to come. For decades, the Arbitration system was informed by this decision and its enumeration that wages should be based on more than the dictates of the market, but also on the social needs of the worker.

Fast forward to 1953, and there had been many significant changes to the system. One innovation had been the introduction of automatic quarterly indexation – where the Court would automatically award an increase to wages to make sure that they kept up with rises in prices.

But in 1953 the Court decided to end the practice of automatic quarterly indexation – and this is what infuriated Hawke so much.

This decision was strongly associated with the President of the Court, William Kelly. Kelly was a figure of great controversy due to his staunch and deeply held conservative beliefs. He advocated the moral and social value of a reinvigoration of peasant-based lifestyles, and dreamed of a return of the Australian population to a more bucolic form of living. Seriously.

After 1953, instead of regular and automatic increases, the basic wage would rise only when the Court had met decided an increase was appropriate after lengthy consideration of whether the economy could afford an increase (this was known as the ‘capacity to pay’).

In his scholarly work, Hawke polemicised against this decision, arguing that the court had not just broken with its past practice, but assumed an economic role that exceeded its intended function as the mediator of industrial disputes.

The 1953 decision, to Hawke, ‘marked the final stages of the unmistakeable evolution of the Court into an institution affecting, fundamentally, the whole economic and social life of the nation.’

To attain an increase in the basic wage, the union movement had to demonstrate that economic indicators showed a rise could be afforded by employers. This placed great strains on the movement to build up its economic credentials, and to frame its arguments for increases with detailed and complex economic analysis based on the latest data and trends.

Against them, stood the employer organisations, determined to insist at every opportunity that the economy did not have the capacity to pay for wage increases.

It was a tense and difficult situation. In 1956, an appeal by the Boilermakers Society against fines imposed by the Arbitration Court led to a High Court ruling that the tribunal did not have the constitutional power to impose such penalties. As a result of this ruling, a new Industrial Court was formed for enforcement, and the Arbitration Court became the Arbitration Commission.

In 1956, the ACTU hosted a special Congress to deal with the consequences of all these changes in the arbitration system.

Bob Hawke, recently returned from his studies at Oxford and working at the Australian National University, asked if he could attend to share his expertise. The ACTU agreed. Connections Hawke made at the conference were pivotal to his appointment as the ACTU’s Research Officer in 1958.

According to the sparse reportage of Hawke’s new position, the most notable thing about him was that his Uncle Bert was Premier of Western Australia.

‘We envisaged we would employ him for a couple of years’, recalled ACTU Secretary Harold Souter, ‘then replace him with someone else from the universities.’ He did better than a couple of years.

The life of the ACTU Advocate was far from glamorous. Hawke worked punishingly long hours in his new role. The ACTU was based in a small two-storey ‘red brick box’ building, directly across from the Trades Hall Building in Melbourne, close to the Lygon Hotel (now the John Curtin Hotel), that Hawke frequented too often.

Hawke worked in a pokey little office in the top floor of the building, up the rickety stairs, where the temperatures during summer would reach close to 50 degrees Celsius.

Hawke recalled the pressurised working environment when preparing and arguing a case before the Commission:

‘I’d leave home at four or four-thirty in the morning and work for five hours before going into court. I taught myself to lie on the floor and sleep during the lunch adjournment, then could return fresh to court. I’d have a nap in the late afternoon, and work into the night. The pressure was unbelievable. In the peak periods it was seven days a week, eighteen hours a day, for several weeks.’

Hawke made his case with great passion. Sometimes too much, as he could slip into an overly polemical and phlegmatic mode that alienated rather than persuaded the bench to whom he was making his case.

He spoke with extraordinary speed, at such a pace that all but the best shorthand writers had trouble keeping up with him. He was loud! It was often joked that union officials several blocks away in the Trades Hall building could hear him delivering his sermons at the Commission.

And he was devastating.

One of my favourite stories about Hawke at this time was from his first case, the 1959 wage case.

At the hearing, Hawke called into question the evidence that had been provided for the employers by RP Truman, an accountant and company director whose testimony had been used against unions previously on five separate occasions. Hawke explained that he intended to demonstrate the fallaciousness of this evidence, to which the President of the Commission stated ‘Mr Truman … can always very ruggedly defend himself.’

Hawke replied: ‘We’ll see about that.’

Hawke challenged Truman’s use of the Commonwealth Bank’s measurement of company profits in his evidence. Hawke later recounted:

‘When pressed in cross-examination he maintained that a certain officer in the research section of the Bank had given him this information. When contacted, the officer denied this, acknowledging the method used by the Bank was as stated by us [the ACTU]. We proposed calling the officer to give evidence and in the event Truman and the employers abandoned the position originally adopted, admitting to the Commission that the position was as stated by us.’

Truman’s testimony was never used at the Commission again.

In addition to disproving his opponents, Hawke made the positive argument that workers had a right to receive wages that enabled them to have a decent standard of living.

Hawke’s first case was a success – though he did not realise his ambition of destroying the 1953 decision.

The Commission accepted that the vagaries of the application of ‘capacity to pay’ had allowed real wages to stagnate. It ruled in favour of a substantial increase in the basic wage that raised it above the level it would have been had automatic indexation been applied since 1953.

In the years that followed, Hawke used his appearances at the Commission to build a consistent case that the tribunal’s primary responsibility was to set a just wage, which could not be said to have been done if real wages were declining against rising costs at the same time that productivity was improving and the economy was growing.

Workers were, Hawke argued, trapped in a snare: real wages would decline if they were only adjusted for productivity while prices were increasing – wages needed to be adjusted for both productivity and price increases.

He later summarised what he understood to be at stake:

‘Between 1953 and 1961 you had this situation where the tribunal attempted to make decisions which were calculated not to rock the boat. On every occasion the employers came along, assisted by the Commonwealth Government, and said, “there is some particular reason why, regretfully” – regretfully, of course; regretfully always – “we cannot give you the increase which is necessary to enable you to have the same standard in your wage that has existed previously in real purchasing power.’

Hawke was ultimately successful in winning wage rises for workers, and even in getting the logic of the 1953 decision overturned.

Through his advocacy, Hawke had been successful in shifting the Commission’s emphasis from predominantly considering industry’s ‘capacity to pay’ to also re-incorporating focus on ensuring wages allowed working people to earn enough to live on.

He was deeply concerned, however, from the mid-1960s when the Commission adopted a new means of setting wages that departed from past practice and set what was known as the ‘total wage’ – a whole other saga. If you want to know more, I strongly recommend D’Alpuget’s biography, and also the fantastic collection of essays on the history of arbitration edited by Joe Isaac and Stuart Macintyre, A New Province for Law and Order.

His success and prominence in these years set him up for his lection to the ACTU Presidency in 1969. This was a tight race against the ACTU’s Secretary, Harold Souter, whom Hawke defeated by 49 votes.

Hawke was ACTU President for 11 years before winning the seat of Wills at the 1980 election – and the rest, as they say, is history.