Menu Close

Striking out: the system for Australian workers to achieve higher wages is broken. What comes next?

8th June, 2022

Anthony Forsyth, RMIT University and Labour Law Down Under Blog. This is an edited version of an article published in The Conversation on 1 June 2022.

Whether we should be trying to lift workers’ wages was a contest that dominated the final weeks of the federal election campaign.

With the election of the Albanese Labor Government, the central question now is: how do we stimulate wages growth?

There are several avenues which the new government has committed to, including support for an increase in the minimum wage for Australia’s 2.2 million award-covered workers in the current Fair Work Commission wage case.

Labor has also pledged to fix several problems in the enterprise bargaining framework under the Fair Work Act.

This is essential: enterprise bargaining is the principal gateway to above-award improvements in wages and conditions, but it has not been delivering for workers.

Enterprise bargaining was designed by the Hawke/Keating Labor Governments in the late 1980s-early 1990s, in partnership with the Australian Council of Trade Unions.

The Business Council of Australia had also lobbied strongly for an enterprise focus for negotiating employment conditions, to unleash productivity at firm-level.

After 30 years, though, enterprise bargaining is in terminal decline following ten years of shrinking agreement coverage – in line with stagnant wages growth.

Recent research by Stewart, Stanford and Hardy shows that ‘the total number of current (that is, non-expired) agreements fell by more than half between end-2013 and 2021 (from 23,500 agreements to 10,000)’. Further, ‘the share of workers covered by a current EA has eroded even more sharply … from an average of 27% of employees in 2012, to just 15% by late 2021’. (Andrew Stewart, Jim Stanford and Tess Hardy, The Wages Crisis Revisited, Centre for Future Work/Australia Institute, May 2022)

The Australian Industry Group and other business representatives blame this on the FWC’s strict approach to the ‘better off overall test’ and other statutory protections of employees’ interests in agreement-making.

But for unions, this is not the reason enterprise bargaining is in free-fall. Rather, workers have very limited negotiating power due to design flaws in the current laws and employer ‘gaming’ to avoid the obligation to bargain.

The main problem: enterprise bargaining was designed for an economy that no longer exists.

Employees and unions can only bargain, and take industrial action, for an agreement with a single business or part of a business. That worked fine when we still had many large worksites, like factories, where thousands of employees worked for the same employer.

However, businesses in key economic sectors like food production, logistics, warehousing, building management and ‘big box’ retail have hived off large parts of their operations to other entities.

They have used labour hire, independent contracting and supply chains to distance themselves from responsibility for minimum employment standards – and collective bargaining.  

Because bargaining is limited to the direct employer of a group of workers, unions can only get an agreement (for example) covering one supermarket operator – rather than negotiating a deal that covers all of the supermarkets, or the whole fresh food supply chain (including transport, distribution and the farms).

If we are going to lift wages, workers will need the boost to bargaining power that comes from being able to negotiate – and strike – across entire industries.

Labour hire workers have to be able to bargain not just with the agency that employs them – but with a business like Amazon, which has relied heavily on outsourced labour in its Australian operations.

And the workers who clean and provide security services in commercial buildings need to have the capacity to pursue pay increases from the lead firms that ultimately control labour’s share of profits.

The new ALP Government has a commitment in its policy platform to improve access to collective bargaining including through multi-employer bargaining (where appropriate). But Labor did not mention this leading up to the election, and in contrast to 2019’s ‘Change the Rules’ campaign the ACTU didn’t either.

Instead, Labor pledged to address other problems which have emerged in the enterprise bargaining system: weak good faith negotiation requirements, and the ease with which employers can have existing agreements terminated by the FWC.

The Greens’ 2022 election policy explicitly states that: ‘Workers should be free to collectively bargain at whatever level they consider appropriate and with whoever has real control over their work, whether at a workplace, industry, sector or other level.’ The Greens also committed to industrial action rights that are not ‘limited to artificially restricted bargaining periods’.

The future of enterprise bargaining, along with properly tackling insecure work, will be a major focus of the new government’s Jobs Summit to be held soon.

Employers are already talking up the need for productivity gains to underpin any changes to the bargaining laws.

But given their likely influence in the newly-configured Parliament, we can expect The Greens – and many unions – to push Labor to ‘go bold’ with its industrial reform legislation.

share this article:
Share on facebook
Share on twitter
Share on linkedin