A Liberal–Labour government was elected soon after the 1890 maritime strike, and was anxious to avoid further large strikes. The new government believed that unions would not need to take such drastic action if they could negotiate with employers on a more equal basis.
An Act to end strikes
In 1894 the Industrial Conciliation and Arbitration (I. C. and A.) Act, drawn up by Minister of Labour William Pember Reeves, was passed. Unions registered under the Act had the exclusive right to represent all their members in a particular job or industry. It was compulsory for employers to negotiate with those unions over a dispute. First the dispute was heard by a local conciliation board. If no agreement was reached, the dispute went to a national arbitration court, which made a decision both sides were bound to accept.
The court also had the power to set wages. Its decisions gradually established a nationwide system of ‘awards’, setting minimum wages and working conditions for particular groups of workers. Strikes by workers or lockouts by employers were illegal while a dispute was being negotiated and once an agreement had been settled.
The I. C. and A. system was the first in the world and attracted great international interest. People arrived from the United States, France, Britain, Russia and elsewhere to study the ‘country without strikes’. Although later legislation made many changes to the original Act, the basic arbitration system remained in place for almost a century.
In 1906 the British labour leader Ramsay MacDonald visited New Zealand to study the arbitration system. He was not impressed, saying, ‘A trades union in New Zealand exists mainly to get an award out of the Arbitration Court … They cannot strike; it is no good their grumbling; they simply pay their fees into the union funds because they are legally bound to do it.’ A Wellington trade union leader told MacDonald, ‘Our laws have taken all the steel out of us.’ 1
Losing faith in arbitration
The compulsory arbitration system appeared very successful for the first few years. Hundreds of new unions, mostly small and local, were formed. Although most workers were still not union members, wages and working conditions steadily improved, in part because economic conditions were buoyant. However, the larger and more powerful unions disliked the legislation because they were giving up the right to strike. Employers also opposed placing decisions on wages and working conditions in the hands of a judge, instead of relying on the labour market. From about 1902, the Arbitration Court became bogged down in so many cases that they could take up to a year to be heard. Dissatisfaction became widespread and in 1906 ‘the country without strikes’ saw its first strike since the Act was passed 12 years before.
In November 1906 Auckland tramwaymen stopped work for three hours after two members of their union were fired. This strike was illegal, but it succeeded in having the two men re-employed. More strikes followed, most significantly by freezing workers in 1907. These showed that unions could often win better results by striking than by following the processes of the arbitration system.