The language used in industrial relations can be a dense forest of acronyms, initialisms and jargon-laden terms such as protected action ballots and industry-wide bargaining.
It can seem off-putting, but it matters because it shapes how we live and work and sets out how we distribute the results of our labour, how we try to achieve fairness in our market economy and how we drive productivity in our workplaces.
Teachers on strike in June.Credit:Brook Mitchell
At its heart, industrial relations is a way to manage inherent conflicts between the interests of businesses wanting to maximise profits and workers and unions wanting to pay the bills, increase pay and improve conditions. Different views on these matters have been at the centre of political conflicts between Labor and the non-Labor parties since Federation.
Currently, profits – the share of income going to business as opposed to employees – are at a 60-year high as a proportion of the Australian economy. Over the past decade, wages have fallen after accounting for inflation, leading to an almost unparalleled period of wage stagnation in Australia’s history.
Now, with the election of a Labor government, unions – represented by their peak body the Australian Council of Trade Unions (ACTU) – will play a more significant role in these debates. Union membership has fallen over time, but they are still influential in how the Labor Party operates, from preselecting candidates to formulating policy.
At the Jobs and Skills Summit, the ACTU wants big changes to how the industrial relations system works. Judging by its public comments and summit agenda, Labor is receptive. But what does it all mean?
What is enterprise bargaining, and why is it failing?
Introduced in the early 1990s by the Keating Labor government, enterprise bargaining meant that single businesses (or enterprise) and its workforce (usually represented by a union) could make industrial agreements. The intention was to unlock higher wages and higher productivity by meeting the needs of both employers and workers. A win-win. In its early years it delivered, and the expectation was it would, over time, become the dominant way to set wages and conditions.
A decade ago, 43.4 per cent of employees were covered by an enterprise agreement. The most recent federal government data shows that has fallen to 35 per cent. Contributing to the decline has been the shift to a more service-oriented economy with smaller workplaces, fewer big manufacturing companies, increased casualisation (and more lately gig work) and a big fall in union membership.
In the early 1990s, about 40 per cent of employees were in unions. It is now 14 per cent. This matters as it is harder for employees to find a way through the complexities of the system without a union. It has meant employees have far less power to negotiate higher wages through bargaining than they did a generation ago.
Gig workers have become far more common in recent years.Credit:Steven Siewert
Labor’s Fair Work Act, introduced in 2009, was meant to breathe life back into the system. It hasn’t. In the absence of an enterprise agreement, many workers’ wages and conditions are set either by an individual contract or the workplace award, which remained in place under Keating’s reforms as a “safety net”. However, over the past decade, more than a million extra workers in Australia have had their pay set by the minimum wages of awards.
There are now 122 awards (reduced by the Rudd government from more than 4000 awards). They set minimum pay and conditions for nearly 3 million employees. But these workers have no ability to bargain or strike for pay rises. Their rates of pay are set each year by the workplace tribunal, the Fair Work Commission, in what’s known as the national minimum wage case.
The consequence is that in some industries, a number of employers have enterprise agreements, but the rest are on a mishmash of staff paid via the award or even expired agreements dating back as far as 15 years. There can be pockets of good pay and conditions and other jobs in the same industry where low pay is commonplace or wage theft proliferates.
What is multi-employer bargaining?
With enterprise bargaining failing, the ACTU argues a shift to industry-based or multi-employer negotiations could increase wages. Under these arrangements, instead of talks occurring between a single employer and a union or workers, they could occur across a number of like-minded employers, a whole industry, or even a supply chain. It’s also sometimes called “pattern bargaining”.
The staff of all high-end restaurants in Melbourne or Sydney’s CBD, for example, could try to negotiate for one single rate of wages and conditions. Such agreements could cover the whole childcare sector or regional nursing homes in South Australia. It would increase the bargaining power of people working in female-dominated industries such as aged care or healthcare and could mean higher wages.
A move such as this would be the most significant change to the industrial relations system in decades. To work, the law would need to change to allow unions and workers to take industrial action across multiple businesses or entire sectors – something that is currently unlawful. The ACTU says it is the only way to force employers to increase wages in some industries. But many business groups hate the idea of industry-wide bargaining and fewer restrictions on strikes, and will oppose it vigorously.
Some business groups do not oppose the idea. The ACTU and the Council of Small Business Organisations Australia have said they want to work towards multi-employer bargaining – there is currently negligible bargaining involving smaller businesses.
However, they say doing that would require a “simpler BOOT”.
What is the BOOT, and why is it important?
The BOOT is the “better off overall test”. It’s a legal test that ensures that when an enterprise agreement is struck, every worker is “better off overall” than they would be if they were paid the minimum wage in the award.
Some employers argue the BOOT is unworkable and that the Fair Work Commission spends too much time considering hypothetical situations of how workers could be disadvantaged. It has resulted in delays and red tape, and has caused bargaining to collapse.
Part of the problem stems from 2016, when the full bench of the Fair Work Commission found that Coles, in a deal with the shop assistants’ union (SDA), had struck a workplace deal that failed the BOOT as it paid some workers “significantly” less than the award. Coles’ data indicated more than half its workforce was underpaid under deals the Fair Work Commission should never have approved.
Bargaining in retail and fast food ground to a halt as an Age investigation from the time showed these underpayments were prevalent at Australia’s largest employers, including Woolworths, McDonald’s, KFC and Red Rooster. It affected up to 250,000 workers and was Australia’s largest wages scandal. The Fair Work Commission has since been far more stringent.
The ACTU is open to simplifying the test, as part of a previous deal it struck with the Business Council of Australia, to encourage more small businesses to bargain and to give faster approvals for union-negotiated deals.
But it is a fraught area. When the Howard government introduced its WorkChoices laws in 2005 and removed an earlier test (then called the “no disadvantage test”), it allowed employers to slash the pay and conditions of low-paid workers. What happened as a result contributed to an electoral backlash that cost John Howard both the prime ministership and his seat in parliament.
Is this all a return to the 1970s?
Opposition Leader Peter Dutton has warned the proposals from ACTU secretary Sally McManus to allow multi-employer or “pattern” bargaining are a “throwback from the ’70s” and an industrial relations system that would “cripple families and small businesses”.
“The economy-wide strikes she advocates for, the increased taxation on small businesses, the inability for small business to have a final say about employees in their own business – this is an agenda of the Labor Party from the 1970s,” Dutton said.
But the industrial relations and economic environment today could not be further from the 1970s. Then, Australia was a manufacturing-heavy economy with union membership in excess of half the workforce, and major strikes were common, including “general strikes”.
In the past 15 years, Australia has endured minimal industrial action, though that has risen this year to its highest level in almost 10 years, as inflation drives pressure for bigger pay rises. Among these were the teachers’ strike in NSW and industrial action in logistics and transport.
In the 1970s, Australia’s economy was still mostly shielded from global competition through tariffs and industry protection. The share of the economic pie going to workers was at a record high, exceeding 60 per cent. In the early 1980s, metalworkers were able to secure pay rises of more than 20 per cent a year and wages were growing so fast they were causing inflation.
Now, Australia faces a very different scenario. In a service-heavy, mostly deindustrialised economy, wages as a share of the economy have fallen significantly. Real wages (wages plotted against inflation) have also plummeted as prices rise and wages stay stubbornly stagnant.
The imbalances in the economy have fed into income and wealth inequality, which has risen since the 1980s. Reserve Bank governor Philip Lowe observed in 2018: “Slow wages growth is diminishing our sense of shared prosperity.”
Age investigative journalist Ben Schneiders has written a book on these issues, Hard Labour: Wage theft in the age of inequality, now on sale via pre-order: https://scribepublications.com.au/books-authors/authors/schneiders-ben
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