An Empirical Analysis of Australian Strike Activity: Estimating the Industrial Relations Effect of the First Three Years of the Prices and Incomes Accord*

Abstract

Australian strike activity war relatively low in the 1983(2)‐1986(1) period. Some part of this experience is attributable to changes in the macroeconomic environment and some is a consequence of improvements in industrial relations. This paper attempts to determine the role of each by estimating econometric models for the 1959(3)‐1983(1) period and forecasting indicators of strike activity over the subsequent three years. We find that working days lost per unionist decreased because of macroeconomic conditions, but that these variables explain less than half of the actual decline. This suggests that, for the initial three‐year period of its institution, the Accord helped deliver a favorable industrial relations environment, a situation that is not necessarily long‐lasting. More generally, the results show strike activity to be pro‐cyclical and influenced by profits and inflation.

What Do Australian Unions Do?*

“…A second issue given prominence in the Australian literature by Beggs and Chapman (1987a) is muscle flexing. This involves the use of short strikes to maintain the credibility of the threat of industrial action 14 .…”

“…In this regard strikes are held to be related to the discrepancy between actual and desired levels of inventory [Beggs and Chapman (1987a)]. …”

“…Phipps (1977), Perry (1978a)(1979 and Chapman (1987a)(1987b) include the inflation rate, Phipps (1977) and Beggs and Chapman (1987a) include a measure of company profits, while Beggs and Chapman (1987a) also include the job vacancy rate and a measure of inventory levels. Most studies [Bentley and Hughes (1970), Phipps (1977) and Chapman (1987a)(1987b)] include a time trend, those based on quarterly data include seasonal dummies, and dummies for special events [such as politically motivated strikes in Beggs and Chapman (1987a), the Prices and Incomes Accord in Beggs and Chapman (1987b), and for the recession of 1929-1932 in Perry (1979)]. " Creigh and Wooden (1985) provide a comprehensive review of strikes over the period .…”

“…Some analyses provide little more than a classical time-series analysis that decomposes a time series into its trend, cyclical, seasonal and random components. Thus, a measure of the business cycle is included in all studies [unemployment rate for Bentley and Hughes (1970), Perry (1979) Beggs and Chapman (1987b), excess labour demand as measured by vacancy rate minus unemployment rate for Perry (1978a), overtime for Beggs and Chapman (1987a)]. …”

Policy by Contract: electoral cycles, parties and social pacts, 1974–2000

“…Nevertheless, there is some prima facie evidence that pacts have had effects on policy, elections, and outcomes in specific cases. In Australia, there is evidence that the Accord of the 1980s-90s lowered strike activity (Beggs and Chapman, 1987;Chapman, 1998), compressed wages, and reduced real wage growth and unemployment (Chapman, 2000;Chapman et al, 1991). It seems likely that the Accord was effective in helping Labor win the 1983 and 1986 Australian federal elections (Ahlquist, 2007;Singleton, 1990).…”