Fwd: Thinking 07 Aug 2018 What could impact the next chapter of workplace relations in Australia?

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It goes without saying that many factors impact on workplace relations in Australia. The key indicators, however, are sending mixed messages about what might come next:

Ordinary time earnings

Since the Global Financial Crisis, growth in ordinary time earnings has collapsed from 5% or more per year to not much more than 2%. 

Decline in enterprise bargaining

The slowdown in wages growth has gone hand in hand with a decline in wage increases achieved through enterprise bargaining. And fewer employees are covered by enterprise bargaining. In 2010, 44% of employees had their wages directly set by collective agreements. Six years later, in 2016, only 36% of employees were covered by collective bargaining agreements. The other side of this development is an increase in the number of employees who have their wages directly set by awards. In 2010 only 15% of employees had their wages directly set by awards. By 2016 that figure had risen to 24% - an increase of more than half. It is fair to say that enterprise bargaining is experiencing a real decline.

Reduced union influence

The decline in wages growth is often related to the decline in the bargaining power of organised labour. A number of factors have worked in combination to reduce union influence. The exposure of many of our industries, particularly manufacturing, to international trade pressures and the related transfer of employment into industries which are less likely to have high rates of unionisation have been very significant. There have been other factors. Many basic employment conditions are provided through awards and legislation, including superannuation. Other changes in the industrial relations framework, such as the whittling away of compulsory arbitration, the legitimization of collective bargaining confined to the enterprise level and limitations on strike action, have also played a part. When you take into consideration the low level of union membership and the relative rarity of industrial action, it appears unlikely that the enterprise bargaining system will generate higher wages growth, at least within the current economic and regulatory settings.

Overseas experience

Many other countries are also experiencing low wages growth. The OECD has recently noted that while real wage gains are the most direct mechanism for transmitting labour productivity increases, over the past two decades wage growth in most OECD countries has decoupled from labour productivity growth. The trend away from enterprise bargaining is not confined to Australia. According to the OECD, even in countries where enterprise bargaining coverage remains high, there are concerns about the ability of enterprise bargaining to deliver good jobs in a time of global competition, technological change and a trend towards decentralisation of bargaining.

Federal Government reform

The current Federal Government has made limited progress in reforming the workplace relations system. Successes include some changes in the regulation of union and employer organisations, alterations in the transmission of business rules and measures to provide greater protection for vulnerable workers. The Government has introduced a bill for a Modern Slavery Act, which has a measure of bipartisan support. Other proposals have foundered in the Senate.

The Government is relying primarily on economic growth rather than changes in the workplace relations framework to promote wage growth.

ACTU agenda

The ACTU has an extensive agenda for legislative intervention including increased security of employment, greater access to protected industrial action, permitting industry and sector level bargaining and an expanded arbitral role for the Fair Work Commission. The ACTU claims these measures will counter low wage growth although that is only one of its objectives. A key issue here is how to achieve higher wages growth without adverse effects on productivity and, incidentally, wage inequality.

ALP platform

It remains to be seen how much of the ACTU agenda finds its way into the ALP election policy. Should the ALP win government at the next election, its appetite for fundamental reform of the kind advocated by the ACTU, and the make-up of the Senate, will be important factors. It is rare for a government to have the numbers in the Senate and history shows that, more often than not, political parties which embrace major workplace relations change do so at their electoral peril.

Is public interest enough?

In the absence of political solutions, do we have a public policy-making process which can address the problems of low productivity and low wages growth? Is there a chance that the point-scoring and deal-making of the political process will be replaced by serious bi-partisan discussion of the public interest? Maybe one day, if things get bad enough. In the meantime we will just have to hope that the market yields the answers.

Author: Geoff Giudice, Consultant

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