Collective Bargaining “Reform”

What Does Business Want? And What Would Actually Fix the System?
by Alison Pennington

Coalition leaders hardly mentioned industrial relations topics during the recent federal election campaign, but now that the party is back in power, an aggressive and wide-ranging agenda for changing Australia’s labour laws has been quickly assembled—with the enthusiastic backing of business lobbyists.

In a new report, Centre for Future Work Senior Economist Alison Pennington has compiled the various proposals advanced by employers, and shows that together they would constitute a thorough reorientation of Australia’s collective bargaining system. The end result would be a situation (very similar to the Work Choices regime of the late 2000s) whereby employers have unilateral power to determine terms and conditions, wages can be locked in for very long periods of time (contrary to employer’s calls for greater “flexibility”), and the scope for true workplace negotiations is compressed.

Main findings of the report include:

  • The share of private sector workers covered by enterprise agreements (EAs) has now been halved since 2013, to only 11%.
  • This decline reflects three simultaneous negative trends: declining agreement renewals, sharp decline in new agreements being negotiated, and high rates of agreement termination.
  • Only 917 new private sector EAs were negotiated in 2018 (down on 7,623 in 2009).
  • The changes to industrial relations rules now being proposed by business broadly signal a return to the Work Choices pattern of unilateral employer wage-setting power in enterprise agreements.
  • The changes to enterprise bargaining proposed by business lobbyists include: weakening or removing the Better Off Overall Test; weakening scrutiny of non-union EAs; diminishing the scope of matters employees may negotiate with their employers; and blocking bargaining altogether through introduction of “whole of life” greenfields agreements.
  • Based on the experience of the Work Choices era, when similar measures were in place, we can expect a resurgence of non-union EAs if those proposals are accepted.
  • It is possible that EA coverage might increase, but on the basis of non-union EAs that are motivated primarily by the desire of employers to evade minimum conditions in Awards (a perverse strategy that would be facilitated by the elimination of the BOOT test and watering down of EA scrutiny & approval processes).
  • In short, employers are aiming for a collective “bargaining” system that has little room for actual bargaining – it would instead be characterised by employers with increasing power to unilaterally set the terms and conditions of work.
  • The growth in non-union EAs would come at the expense of both genuine collective bargaining and Award coverage, and would produce a decline in average wage increases for EA-covered workers (since wage increases in non-union EAs are consistently lower than for EAs negotiated with union involvement).
  • Simulations project a slowdown in average wage growth across all private sector EAs of at least 0.4 percentage points. That is just the direct effect of the changing make-up of EAs (with more lower-wage non-union deals); the indirect effect (weakening unions’ ability to negotiate better wages in their EAs) would be even worse.

The loss of wages resulting from that slowdown slowdown in (already-weak) wage growth could cost an average private sector EA-covered worker over $2000 in lost income over just the first three years.

PLEASE NOTE: This posted version of the paper corrects a previous error arising from a data coding problem which resulted in an inaccurate allocation of newly approved enterprise agreements between new and renewal agreements.

Full report