A Naked Conflict Between Profits And Wages


"The enigma of trade is that it can make a whole country richer and yet most of its people poorer," writes US economist Dean Baker in a recent book. This melancholy conundrum is the crux of the Qantas dispute.

Baker is writing about the way trade liberalisation has eroded jobs and wages in the US manufacturing industries, but the experience of airlines in Australia is no different. Exposed to stiff gales of creative destruction in the form of the cut-throat international airline industry, even famous brands like Qantas are experiencing fierce competitive pressures. Running an airline is a brutal equation at the best of times: wages, fuel and the planes themselves make up a huge proportion of an airline’s cost structure, and there is relentless pressure on management to keep these costs under control.

In the old days, Australia’s airlines solved this problem by charging very high fares, protected by government regulations that ensured the most lucrative routes and airport slots were saved for Qantas and Ansett and kept international competitors away from lucrative domestic routes.

But nothing lasts forever, and the new strategy at Qantas is to turn the airline into a low-cost carrier, apparently by whatever means necessary. This means all the airline’s resources and capital will be ploughed into Jetstar, allowing Qantas to wither away into a legacy business carrier that flies a few remaining profitable routes.

And that in turn means driving down the wages and conditions of Qantas’ staff, by shifting pilots, maintenance and other operations offshore. It’s Offshoring 101, and it should be no surprise that the airline is undertaking it.

But nor should there be any surprise that the unions are resisting it. The underlying logic of offshoring is all about reducing the wages and conditions of a corporate workforce. The idea that unions should somehow see this as business as usual — indeed, as the only way to ensure Qantas’ survival — is neoliberal ideology, pure and simple. In the fantasy land of the business lobby, self-interest is something that only applies to management and shareholders, not to unions and workers.

The planes are now back flying and the airline and its workers are back at the negotiating table. But the real lesson of the Qantas lockout is about capitalism itself. It’s not surprising that management wants to cut costs and lower its wages bill. So why should we be surprised that unions and workers want to protect job security?

The minute-to-minute details of the dispute are revealing. By grounding the fleet at a moment’s notice, Qantas CEO Alan Joyce forced the hand of the Gillard Government. The Prime Minister was in Perth for the Commonwealth Heads of Government Meeting, which was due to break up, leaving thousands of diplomats and public officials stranded in Western Australia. Qantas must have known that cancelling half the flights in Australia was an unacceptable proposition for any government, and so indeed it proved.

As a result, the Government invoked its rights under the Fair Work Act to refer the matter straight to the industrial umpire, the full bench of Fair Work Australia, under Howard appointee Justice Giudice. After a marathon overnight hearing stretching into Monday morning, Fair Work Australia ruled that Qantas and the unions had to stop all industrial action and return to the negotiating table.

It was a victory of sorts for Qantas, which was able to shut down the rolling strikes by engineers and baggage, and a blow to the unions. The balance of legal opinion seems to believe that issues of so-called managerial prerogative, such as job security and offshoring, will not be subject to a binding judicial arbitration. In other words, the workers might get a pay rise, but Qantas will be free to continue its ambitious plans to turn itself into a low-cost Asian-based carrier.

The Qantas dispute has become a handy yardstick for gauging just how hostile our general public conversation has become to unions and organised labour. Much of the media has covered the dispute as though it is a litmus test for the Gillard Government’s industrial relations legislation, the Fair Work Act. While it certainly is this, the foundation of the dispute is much simpler than arcane legal arguments about protected action and managerial prerogative.

Here is an old-fashioned showdown between organised labour determined to negotiate to protect the interests of workers, and a company management determined to use any means at its disposal to break that union power, in order to drive down the costs of its labour and make more money. This dispute could have happened in any earlier industrial relations regime: yes, even under Work Choices.

And yet much of the media seems unable to understand this dispute for what it is: the naked and unpleasant conflict between wages and profits inherent to capitalism. For instance, the rolling industrial action by the Transport Workers Union and the licensed aircraft engineers has been widely portrayed as holding a gun to the airline’s head, or threatening it with a "death by a thousand cuts". On the other hand, when the CEO shut down an entire airline because his enterprise bargaining negotiations weren’t going well, this has been justified as a bold tactic to resolve the industrial action and bring the dispute to arbitration.

In reality, of course, the notion that Alan Joyce had no alternative but to lock out his workforce and ground the airline is absurd. There was an alternative: Qantas could have kept negotiating. Perish the thought, it could have even accepted the demands of the three unions, which amounted to below-CPI pay rises and a commitment to keep Australian jobs onshore.

Indeed, as Bill Shorten pointed out on Lateline last night, if Qantas was really committed to bringing its workforce with it on its low-cost journey, it should have started three years ago. "Qantas has had 1150 days to persuade some of their workforce, who are intelligent, educated, dedicated professionals, that things need to be done differently," he said.

But Qantas clearly didn’t want to persuade its workforce. Indeed, its actions over the past few days seem to have confirmed that it has been pursuing a premeditated strategy of open warfare with its unions. If Qantas truly wanted to engage with its workforce, why did it lock out its pilots, whose industrial action has so far amounted to nothing more militant than making announcements on aircraft intercoms and wearing different coloured ties? The reason Qantas decided to ground its fleet was not because it had no alternative. The reason was because the unions were winning.

It seems clear that Qantas has in fact long been preparing for this action. The appointment of Alan Joyce himself may well be part of this strategy. Joyce’s background before Jetstar was in low-cost, de-unionised airline operators in Europe. In contrast, the man who many think should have got the job, John Borghetti, seems to be pursuing a much friendlier industrial relations strategy at the helm of Virgin Australia.

The man ultimately responsible for appointing Joyce is Qantas’ chairman, Leigh Clifford. Clifford is a veteran industrial warrior with a background in some of Australia’s most bitter industrial disputes of the 1990s, including Rio Tinto’s Robe River conflict. There are many who believe he is actively driving the current round of union-busting under Alan Joyce.

The other thing that shows us this dispute is about union-busting is that the sticking point on the negotiations is not wages, but rather job security. Unions want a say in how the airline operates, for instance by guaranteeing that Qantas flights will be flown by Qantas pilots. If you think that sounds reasonable, you’ve obviously not been listening to Alan Joyce. For Joyce and Qantas’ management, conditions like these are an unacceptable intrusion on the right of the management to make tough decisions. Joyce and Clifford obviously decided it was better to bring the crisis to a head than to cede any authority in the running of the airline to their staff.

But is Qantas’ new low-cost Asian strategy necessarily the right one? And is it necessarily bad for unions to have a seat at the management table? The hard-line economists and management theorists say no, of course. And yet in Germany, all companies with more than 500 employees must have staff representatives on their board as a matter of law. Despite this, Germany still manages to be an industrial and manufacturing powerhouse.

No, the real lesson of the Qantas dispute is about capitalism itself. In a system of brutal competition, unscrupulous managers and owners will do whatever it takes to drive down wages and grow profits. That’s what they’re paid the big bucks for.

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Ben Eltham is New Matilda's National Affairs Correspondent.