Holding the Balance: A History of New Zealand’s Department of Labour 1891-1995
John E Martin
Canturbury University Press, $49.95 limp, $69.95 cased,
ISBN 0 908812 61 2
John Martin’s Holding the Balance is, in his own words, “a reassertion of the importance of the state in the history of labour”. He sees the Department of Labour as “the prime agent of labour policy” and argues that “the state has been so central to the very existence of the trade union movement and to the functioning of labour market historically that it might be said to comprise a constitutive part of it”.
At a time when the ideological fashion runs more in the direction of “rolling back the state” an analysis of the role of a single government department is timely. Created in a burst of reforming zeal of the 1890s, the Department of Labour’s initial ethos was shaped by a mixture of idealism, fabian socialism and middle-class paternalism. There was little pretence of an ideologically neutral wing of the civil service taking its cue from its political masters and attempting to hold the middle ground between the competing interests of labour and capital. Over time the pursuit of its two major objectives — protecting working conditions and improving the functioning of the labour market — took on what we have come to regard as an independent and neutral stance. One hundred years on, as we begin to experience life under MMP, Martin wonders whether the role of public servants and policymakers may well be pulled closer into the orbit of party politics.
One consequence of the department’s origins was that the most creative years were its foundation ones. As Martin argues, the Department of Labour, or the Bureau of Industries, as it was called in 1891, was “perhaps the most powerful and all-embracing government body concerned with the ‘labour problem’ of the nineteenth century”. In Britain and America such bodies were primarily gatherers of information and compilers of statistics which other agencies transformed into policy proposals. Across the Tasman, only in New South Wales did the Employment Bureau develop into a broader organisation comparable to the Department of Labour here. Clearly, New Zealand stood alone in constructing a labour organisation which sought to regulate working conditions and industrial relations directly by assuming a battery of legislative powers.
That this should be so was the result of a variety of impulses. The labour-capital crisis of 1890 which seemed to signal the arrival of Old World ills — poverty, unemployment and class conflict — created an urgency and gave space to men with programmes. Nowhere was this more obvious than in the labour sphere where William Pember Reeves was bent upon using the power of the state experimentally, as he put it, to strengthen the arm of labour, so as to restore industrial harmony. It was this thinking which underlay his celebrated innovation, a state-sponsored arbitration system. Designed to encourage the formation of unions and facilitate dispute-resolution, it was to stand at the heart of industrial relations for the best part of a century. So also was the panoply of state regulation promoted by Reeves as a means of reforming conditions in the colony’s workplaces.
In Edward Tregear, the first Secretary of Labour, Reeves found a fellow fabian socialist, as committed to a programme of “paternalistic reform” as he was. Together they sought to intrude the state into the workplace through a succession of factory and shops acts. In their enthusiasm to sweep up all vestiges of “sweating”, especially as it existed in the employment of women and children, they frequently stirred up a wide spectrum of employers from large-scale factory owners to the proprietors of smaller family concerns. Indeed, giving legislative effect to these reforms was considerably harder than it was to be nearly 100 years later when another generation of “reformers” set about “rolling back the state”, ironically in the name of the free market ideology Reeves and Tregear were bent upon banishing.
In the 1890s there was an antagonistic upper house — the Legislative Council — to deal with. And reformers like Reeves and Tregear worked in a less certain political climate. The party system was still in the throes of consolidation. The centre of gravity within the loose alliance of Liberal and Labour representatives which constituted the John Ballance government shifted appreciably after the 1893 general election. Rural rather than urban interests now predominated and an aggressive labour policy became more difficult to sustain. Yet labour legislation remained the flagship of the Liberal reform initiatives. Even Richard John Seddon, the pragmatic populist who became Premier when John Ballance died and Minister of Labour after Reeves departed to become Agent-General in Britain in 1896, was broadly in sympathy with the direction of labour policy.
Seddon managed the labour portfolio lightly and the Department of Labour came to assume an independence never again to be matched in its history. Tregear seized the chance to place his stamp on the promotion and administration of labour legislation. The ideological enthusiasms he had shared with William Pember Reeves were well known. Indeed, Tregear took few pains to hide his determination to redress what he saw as the unequal bargaining positions of labour and capital. Such a partisan or interventionist attitude was consistent with what Martin describes as the “enabling phase” of the department’s early role. Before it could hold the balance” it had to create one.
Once the balancing mechanisms were in place, however, the emphasis necessarily shifted to enforcing compliance. And it was here that Tregear found himself at odds with the new and revolutionary currents of opinion within the labour movement. Much influenced by syndicalist writings, the new labour leaders saw state-sponsored arbitration systems as “labour’s leg iron” rather than its saviour. They favoured taking their struggles with employers as close to the point of production as possible. The emergence of radical unionism determined to discredit the arbitration system by demonstrating to its members that more was to be gained by striking than by continued cooperation with the state, threatened to undermine the system of industrial relations Reeves had created. Employers, who had once opposed the new system, now wanted its coercive potential exploited more fully. Tregear was ill-at-ease in this new environment and slipped into retirement. And when the Reform party came to power in 1912, the Department of Labour’s partisan days of social engineering were at an end.
Around its core function of regulating labour, however, the department continued to grow in eclectic fashion. In part this too was rooted in the circumstances of its creation. The depressed economic circumstances of the early 1890s bred not only a willingness to accept new levels of state activity but also the increased centralisation which came with it. The “nationalisation of regional life”, as one historian has called this transfer of power to Wellington, was one of the most significant consequences of the burst of legislative activity of the Liberal era. And here, as Martin shows, the importance of labour legislation in refloating the colonial economy and rebuilding social harmony ensured that the Department of Labour was at the forefront of this administrative revolution. As its officers and agents became a part of colonial life — and one which frequently drew criticism from those who claimed to be the victims of a burgeoning bureaucracy — so too did the opportunity for expansion into new areas present themselves. The department’s district structure — a product of its initial function as a labour bureau — was attractive to politicians seeking the administrative means of giving effect to new legislation.
At times, “administrative creep” stemmed as much from the imperialistic designs of the officials as it did from the pragmatism of the politicians. This was especially so in early efforts by the state to provide housing for workers. The initiative had been Tregear’s. In his view, the low wage levels which prevailed at the turn of the century put workers at the mercy of landlords. Providing working class families with the means of acquiring a home of their own would not only raise the standard of housing generally but also, he believed, give workers a stake in the country.
In practice, the scheme was a disappointment. It proved impossible to provide quality housing which wage-earners could afford either to rent or buy within a system required to be economically self-sustaining. Nonetheless, responsibility for state housing continued to rest with the Department of Labour. Indeed, when the 1918 influenza epidemic highlighted once more the overcrowded and often squalid housing conditions, especially in the main centres, a housing branch was established . And there state housing activity remained until 1936 when the first Labour government launched a construction programme and established a separate department to administer it.
If the years before World War I were the Department of Labour’s most dynamic those between the wars were ones in which it seemed to lose its way. The shift from the creeping and fluctuating unemployment of the 1920s to the more permanent variety of the early 1930s might, as Martin speculates, have been expected to produce an expansion of both the work and the importance of the department. Instead, the slump of the 1930s, unlike that of the 1880s and early 1890s, brought not growth but stagnation.
The department, as we have observed , was created primarily in response to growing joblessness but a new government agency — the Unemployment Board — now emerged to cope with the unprecedented levels of unemployment. Similarly, the opportunities for growth implicit in the expansion of the state during World War II very largely passed the department by. Whereas its counterpart in Britain assumed responsibility for “manpowering”, in New Zealand the power to direct labour was shifted elsewhere. And, as Martin explains, the Department of Labour drifted into a backwater. Its role in industrial relations shrank, staffing levels fell sharply and the routine functions of policing labour laws and inspecting factories absorbed its energies.
That the Department of Labour was unable to sustain the impetus of its early years is unsurprising. There was an inevitable ageing of the bureaucratic structure at both the national and the regional level. The halcyon days of Tregear had drifted into history and the department failed to throw up another leader with a programme determined to play a more assertive role in the manoeuvring which characterised relations with ministers struggles for influence. Whatever the reason, the department’s response to the economic uncertainties of the “bit in between” the wars failed to match the energy or inventiveness exhibited in the depressed 1890s.
Thus the department’s second half-century began inauspiciously. The demands of war provided an environment which allowed a corporatist, consensual state to flourish. The economic stabilisation regulations first promulgated in wartime continued to shape labour relations. Central to their operation was the proclamation of a general wage order by the Arbitration Court. It was a system which suited the major players in the labour market and while economic conditions remained buoyant it appeared to have the virtue of providing stability.
Whatever its merits as a broad economic framework, it did little for the Department of Labour. The relative prosperity of the 1950s and 1960s banished the bogey of unemployment and greatly reduced the department’s employment function. Industrial relations, after a flurry of union activity in protest at the continuance of the stabilisation regulations which culminated in the 1951 waterfront dispute, were relatively quiet. Indeed, the combination of continuous prosperity, low unemployment and broad consensus produced an administration immersed in its routines. Some indication of this relative stagnation is reflected in the department’s own employment statistics; in the 1950s and 1960s, a time when the public service as a whole grew by some 45%, the number employed declined by 10%.
Significantly, Martin sees the period of postwar decline as ending more or less with the “nil” decision of the Arbitration Court in 1968. The latter may be taken also as marking the end of the centralised wage-fixing system . During the next 20 years governments struggled to find something to replace it. Until the Employment Contracts Act and the demise of the principle of a state-organised wage bargaining system in 1981, interventionism was the order of the day. Tripartite arrangements, incomes policies, wage controls and wage freezes all featured as part of government attempts to find a new formula for the maintenance of industrial stability.
Throughout all these twists and turns Department of Labour officials struggled to remain on the sidelines. Its officials were drawn, albeit unwillingly, into industrial disputes as Ministers of Labour adopted a more interventionist role. And, as the issue of labour market deregulation became part of the political agenda, the department’s preference for the more neutral stance of “holding the balance “ between labour and capital, came to assume a new significance.
It is here that Martin’s plea to historians of labour to bring the “state” back into their accounts is especially relevant. The debates among the policy framers which preceded deregulation are a reminder of the dangers of seeing the state as a monolithic phenomenon. Plainly, what Martin calls the “internal development of government policy” is a process which leaves room for divergent viewpoints. Tracing the resolution of these differences undoubtedly provides an insight into policy formulation.
This is clearly demonstrated in the case of labour market deregulation where the major players were the Department of Labour and the Treasury. The latter, as Martin explains, supported deregulation, the abandonment of a minimum wage, an end to both uniform wage increases and the registration of unions. Against this, the Department of Labour argued for the retention of existing national awards but wanted second-tier bargaining separated from it. Its preference was for a wide range of wage bargaining options ranging from national awards to enterprise bargaining and for larger, stronger and better organised unions whose coverage was subject to a degree of contestability. This thinking was very largely enshrined in the Labour Relations Act 1987 which assigned the state — the Arbitration Court, the minister and the Department of Labour — a lesser role in the nation’s industrial relations system.
The Employment Contracts Act 1991 was to carry the process of deregulation into the labour market. Industrial relations now became a matter of civil contracts between buyers and sellers. Wage bargaining moved dramatically from the national to the enterprise level and the number of unions and unionists fell sharply.
In most respects the role of the Department of Labour had thus come full circle. Its life had begun in 1891 primarily to deal with the problems of unemployment and 100 years later it is this function which again looms largest in its operations. If sustained joblessness has produced growth in one area of the department’s work, the drive for efficiencies and the inevitable restructurings has reduced its size. Its future, like that of the rest of the public service, rests on the shifting sands of a political system currently devoid of quiet backwaters. Whether the age of MMP brings more politics to public administration and a subsequent erosion of traditional notions of independence and neutrality only time will tell. Meanwhile, Martin’s skilful dissection of the complex relationships between one branch of public administration and a century of politicians offers a salutary reminder that it is time for the state to be rolled back into the calculations of those who seek to understand the world of labour.
Len Richardson is a labour historian whose special interests are work and play.