We’re more than a month into the financial year but it’s already clear the new payroll sheets aren’t showing meaningful gains for Australian workers.
The long-term decline in workers’ share of national income has flummoxed classical economists averse to political considerations such as power and ideology. The Productivity Commission drew up a long list of possible contributors, including spare labour market capacity (for the non-wonks: not enough quality jobs on offer for workers to feel confident demanding a raise or quitting) and temporary migration.
But even as many of those conditions have abated — unemployment recently hit new lows and our borders are shut to foreign workers — business leaders remain intransigent. The Reserve Bank has recently made relatively rosy predictions for the broader economy but sees little good news on wages.
It is leading many to question whether corporate Australia has developed a cultural pathology of miserliness. They loudly bemoan “labour shortages”, but the real dearth of talent appears to lie in obstinate C-suites, whose post-GFC playbook is hurting their own organisations by subduing consumer demand.
We must then ask: is it time to take matters out of the bosses’ hands?
Unions hunting for a better bargain
Australian executives can exert such a drag on wages because our industrial relations system affords them a prominent role in wage setting.
Enterprise bargaining — the negotiation of wages between the workers and management of single organisations — was made the centrepiece of our IR system by the Keating government in 1993. This transition was supported by some unions at the time, who thought their members might be better off.
This was clearly a strategic error, as the pitfalls of the dispersed model have since become increasingly clear. The number of employees covered by EBAs is in terminal decline as union power has eroded and belligerent bosses increasingly low-ball their industrial adversaries. Even when reasonable conditions are enshrined in EBAs, managers have honed work-around tactics such as outsourcing labour to unprotected contractors.
Case in point: on Monday, the Fair Work Commission scrapped an EBA covering iron ore drivers at Gina Rinehart’s Roy Hill mine. The labour hire company Rinehart contracted, who employed approximately 50 workers for the site, created a separate entity employing only two staff. The duo was misinformed about entitlements and voted in favour of the agreement, after which the firm transferred the remaining staff to the new entity — a tactic used to avoid bargaining with their likely representatives from the CFMMEU. The company was found to have engaged in “corporate manipulation”.
Under a sectoral agreement, such shoddy shape-shifting wouldn’t reap benefits, as all organisations in the industry would be covered by the same conditions.
Sectoral agreements are theoretically lawful in very limited circumstances, but unions have never been able to secure one. This has led the ACTU to recently campaign for the reintroduction of industry-wide agreements.
NZ’s polite radicalism offers an idea
New Zealand will soon make such a move. Jacinda Ardern’s government recently announced its fair pay agreement (FPA) plan which will introduce sectoral bargaining in addition to individual and enterprise contracts.
The PM has undersold her proposal as an “Australian-style” system to allay corporate backlash. And in some ways, the new laws will move the Kiwi IR system — which has very few industry-wide safety nets — away from the deregulated, Americanised model it adopted three decades ago towards its neighbour’s somewhat-better “award” system.
But despite her consensual rhetoric, Ardern’s proposal goes much further than Australia. FPAs can be initiated by workers and, if they attain support from at least 10% of the workforce or 1000 workers, employer groups are compelled to bargain with the relevant union.
Conversely, our Fair Work commissioners sets award rates and conditions, accepting submissions only from relevant parties in a largely bureaucratised process which limits the number, scope and ambition of agreements. And where Australian businesses can force endless delays, NZ’s Employment Relations Authority will be able to determine outcomes for intractable disputes.
Ardern’s proposal is no utopia. Restrictions on the right to strike, for instance, still curtail union power. But FPAs present an opportunity for the Antipodean emulation of what has set many high pay-high productivity European nations apart.
With wage setting no longer in their control, managers’ path to growth relies on collaborating with their workforce to innovate, growing the pie for all instead of fighting over scraps. Such systems make for more productive and equal societies.
The next frontier in the IR wars?
There is little hope of Morrison returning to IR reform after his “omnibus” bill was gutted, let alone pulling an unexpected “Nixon goes to China” move.
This leaves Labor, who signalled support for expanding multi-employer bargaining provisions at the last election but deferred hashing out the details. Albanese has since committed to “change the IR system so there can be proper bargaining”, but again wouldn’t be drawn on the specifics.
Ardern has set her aspiring trans-Tasman counterpart a benchmark for IR ambition. Aspiring to best her example would represent a far more amenable form of global competition than the “race to the bottom” on workers’ rights over the past 30 years.
EBAs were highly useful, for a time, but that lemon has been squeezed, thoroughly. Industry wide deals may provide the background that will allow unions to become relevant again. Somewhat surprisingly, NOT, business was more productive and entrepreneurial when unions were the bête noire of business.
Very well argued.
Who would have thought crushing representation for labour would lead to atomisation, job insecurity, low wage growth and diminished conditions?
But can unions, after winning the battles of 20th century and now hollowed out by neoliberalism, rise to a much more sophisticated mission?
There had been some presentation of ‘research’ via business journalists claiming employees could get either a SCG Super Contribution Guarantee increase or wage rise, but not both by ignoring the award system for the latter (while former Treasure and Future Fund from general revenue was nominated as a potential solo superannuation fund…. evidence of libertarians’ socialism for themselves….).
Further, superannuation itself has come under attack (by some sore losers) and the tactic employed in some ‘research’ was to use the raw population data (including the NOM Net Overseas Migration temporary cohort misleadingly described as ‘immigrants’ when dominated by international students) in building a ‘population pyramid’ for presentation with a significant working eg cohort (15-64) hence, presenting lower dependency ratios (in fact false as there are fewer kids but far more oldies to be supported by fewer tax paying workers i.e. an ageing population).
The distorted research allows the conclusion that superannuation is not even needed as there are plenty of workers to support increasing numbers of aged pensioners in future when in fact the reality is like elsewhere; rising dependency ratios due to ageing which first hits budgets (less for public service funding and increased taxes for working age) then those nations without immigration and/or churn over have a more existential issue, ‘demographic death spiral’.
Interesting article. The norm used to be that labour shortages (sort of) led to wage rises, as you noted too, but I presume since it is so long since employers have had to do this they have forgotten it may help them gain a workforce. Workforces generally allow employers to make profits.
I suppose the supposedly low unemployment figure is a disincentive for this to happen.
Employers have been emboldened by the current Coalition Government to utilize the various classes of Visas to bring in “skilled” workers from overseas that they can pay minimum wages to, with the Government over the last number of years, having increased numbers of this type of immigration.
Without such high immigration of workers, businesses would have to return to Training, something which has almost disappeared in a lot of businesses, and the playing field would be leveled to a better degree than it currently is.
Another thing that has developed and is severely impacting on wage rises, is the increased casualization of the workforce, once again pushed by our current Federal Government.
Think overstated depending upon sector, occupation and postcode; most people underestimate the size of occupations whereby ‘immigrants’ are often minimal or insignificant but useful to deny award wage and/or SCG increases.
Somewhat off-topic, but an interesting side-note:
Why provide training when you can insist that prospective employees have a Certificate II in Barista Operations? And neo-CON governments, spearheaded by “distant monarch” John Brumby (a Labor guy, FFS), are only too happy to remove quotas on training places and let the kids study whatever they want regardless of whether there are jobs for them at the end of it. They can truthfully claim to be spending more on post-secondary education than ever before, while ignoring whether or not they’re getting bang for the buck, and shovelling millions to private colleges run by party donors in the name of “contestability”.
Add to this the cluster truck that is competency-based assessment: courses based on “training packages” comprising “units of competency” which purport to represent skill sets required in occupations but are padded out with bureaucratic garbage that your typical worker in said occupation would never do. And each iteration only makes them worse.
Here’s an example: Music Industry, originally written by now-defunct consultancy Create Australia, handed to Innovation and Business Skills Australia who around 2006 pulled the funding on what was looking like a very promising revision and produced what was a minor and extremely flawed re-write of Create’s already execrable work. Then, in 2018 for no reason that anyone will divulge, the now re-badged and expanded Creative Arts training package was taken off IBSA and given to… wait for it… parasitical grifters extraordinaire Price Waterhouse Coopers. PwC of course did another minimal rewrite and completely and utterly farked it.
Here’s a turn of events: Patricia Neden, once Education Department Secretary in charge of the Victorian Office of Tertiary Training and Education (later fatuously renamed to “Skills Victoria”, and who knows what it’s called this week), is rumoured to have resigned when Brumby’s office came up with the plan to massively increase fees and no longer prioritise training places according to demand for skills. She then went on to become CEO of IBSA, responsible for several of the training packages contributing just as much to the degradation of vocational training as Brumby’s funding changes.
John Brumby is now Chancellor of La Trobe University. Just as well the Vice-Chancellor actually runs the joint and the position of Chancellor is a largely ceremonial, or one might suspect him of trying to do to the university sector what he did to vocational training.
You need to look a bit harder at what happened with training packages. They are/were a federal government responsibility. You will find that the upgrading was hampered by funding and bureaucratic mismanagement after the closure of ANTA in 2005 (by the federal government) when all responsibility was taken back into the federal department – which did not have the expertise to run the process. Then the federal government decided that the whole thing should be taken away from the industry bodies and run by – you guessed it – their favourite large private consulting firms – in particular PWC.
Now the industry bodies (Industry Skills Councils) were not without flaws, but they were at least working for their industries and not-for-profit. The big consultancy companies are in it to make a buck – so don’t expect them to change their business model and apply themselves too hard.
It’s true. IBSA ran a good review process. But my beef is not so much with the regulatory framework surrounding training packages. Rather it’s the shyte that’s in them, and that’s been the problem since the very start. Ask any body adminstering a tracking package, whether a skills council or a parasite, and they’ll claim to have consulted widely but won’t divulge whom they consulted. So there is zero accountability for the content of units of competency.
Enterprise bargaining! Give me break. As soon as unions started doing deals with corporations we could see what was ahead. Certainly lots of very wealthy union leaders these days…