On the Brink

The Erosion of Enterprise Agreement Coverage in Australia’s Private Sector
by Alison Pennington

Australia’s enterprise bargaining system is crumbling rapidly in private sector workplaces, according to dramatic findings from the Centre for Future Work.

The report shows that the number of current enterprise agreements in private Australian businesses has collapsed by 46% since the end of 2013.  The number of private sector workers covered by enterprise agreements has plunged 34% in the same time. In 2017, just 12% of employed private sector workers were covered by an enterprise agreement – down from 19% in 2013.

If current trends in renewals, new agreements, and terminations continue, less than 1800 agreements would survive to 2030, at which point just 2% of private sector workers would be covered by a collective agreement.

The dramatic downturn in collective bargaining in Australian businesses reflects a number of simultaneous trends, creating a ‘perfect storm’ that jeopardises the future of private sector bargaining. These trends include a drop-off of renewals of expired enterprise agreements; the dramatic decline in the number of newly negotiated agreements; and a surge in terminations of agreements.

“It is no exaggeration to conclude that collective bargaining in private businesses will go extinct in coming years if these devastating trends are not reversed,” said Alison Pennington, Economist with the Centre for Future Work and author of the report.

The report provides a forward simulation of enterprise agreement-making if current trends in renewals, new agreements, and terminations continue. The simulation indicates that the total number of private sector enterprise agreements would fall by half (to below 6000) by 2023, and the proportion of private sector workers covered by agreements would fall below 6%. Things get worse in subsequent years, with less than 1800 agreements surviving by 2030, when only 2% of private sector workers would be covered by a collective agreement – unless urgent action is taken the change existing policies and restore effective access to collective bargaining.

“The accelerated collapse of enterprise bargaining in the private sector has been a key cause of the unprecedented weakness in wage growth experienced in Australia since 2013,” Pennington said. “When workers have no collective voice or collective bargaining power, they have no chance of successfully negotiating better wage increases from their employers.”

The report also shows that the rapid decline in enterprise agreement coverage for private sector workers has been mirrored by a rapid increase in the proportion of workers paid according to the minimum terms of Modern Awards.

“The evidence is overwhelming that Australia’s current system of collective bargaining is completely inadequate for representing workers in our evolving economy, with an increasingly fragmented labour market,” Pennington concluded. “A viable collective bargaining system is essential to shared prosperity, but it will require far-reaching changes to the current rules to keep collective bargaining alive.”  The report proposes several broad directions for reforming current laws and practices, to stop and reverse the dramatic decline in collective agreement coverage.

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