Think tank warns collective bargaining is on life support in Australia’s private sector, with coverage down to 11%

This article is more than 10 months old

This article is more than 10 months old

Workers stand to lose hundreds of dollars a year in wages if employer demands for reforming collective bargaining are met and more people are pushed onto non-union deals, the Centre for Future Work has warned.

In a paper by senior economist Alison Pennington, the Australia Institute’s workplace thinktank has warned collective bargaining is on life support in the private sector, with coverage down to 11% and only 46 new collective pay deals negotiated in 2018.

The paper released on Tuesday models the effect of key employer demands such as abolishing the better off overall test, removing checks that ensure workers genuinely agree to workplace pay deals, expanding the range of material banned from deals and introducing whole-of-life project agreements.

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The latter proposal – to abolish the four-year cap on wage deals for new work sites – is the subject of one of the first two consultation papers commissioned by the industrial relations minister, Christian Porter. Labor said it was open to the reform before the 2019 election.

Pennington noted the government has indicated it will push ahead with the change “casting doubt on the extent to which the current ‘review’ constitutes a genuine inquiry, rather than an exercise to prepare the ground for changes it has already decided on”.

The paper models the full suite of employer demands by assuming they will increase the proportion of non-union workplace pay deals to 60% – as occurred in the WorkChoices era – and calculates lost wages by reference to the fact union agreements increase wages by 1% more per year than non-union deals.

The shift to non-union agreements would cost the average private sector employee on an enterprise agreement $333 in the first year, growing to $1,072 in the third year for a total loss of $2,094 wages over three years, the model suggests.

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The paper argues the decline in collective bargaining in the private sector is a “significant factor in the unprecedented deceleration of wages in Australia”.

It cites the fact that since 2013 private sector enterprise agreement coverage has halved to 11%, triggering a “dramatic and lasting deceleration in wages”, down to less than 2% in 2016 and 2017.

In September, Porter told the Committee for the Economic Development of Australia the Morrison government is searching for industrial relations reforms that are “actually possible” and can achieve consensus in parliament.

He said that reforms needed to “create jobs and put upward pressure on wages to benefit workers, help business by boosting productivity” and help the economy grow overall.

But the Centre for Future Work director, Jim Stanford, told Guardian Australia that project-life agreements are “a step towards limiting collective negotiation” which would “clearly suppress wages” by preventing renegotiation mid-project.

He said the reform could have “unexpected” and “dangerous” consequences if pay deals cover not just the construction phase but operation of the projects.

When combined with the ability to strike deals at new sites without unions, the reform could result in “a situation where employers can unilaterally set and lock wages and conditions for a long period of time – collective bargaining without the bargaining”.

The Coalition is also considering harsher penalties for wage theft. In its submission, released on Monday, the Australian Industry Group strongly opposes the introduction of criminal penalties, warning they would discourage employers from self-disclosing underpayments.

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Ai Group said wage theft was an “inappropriate, misleading and overly emotive term which is leading to some employers being branded as thieves as a result of underpayments which were the result of genuine payroll errors”.

On Friday the Senate employment legislation committee delivered a report recommending the passage of the Coalition’s bill to increase court powers to deregister unions or disqualify their officials.

But Centre Alliance’s Rex Patrick called for a range of changes, including removing the public interest test for union mergers and lifting the threshold so that trivial or technical breaches of the law will not trigger deregistration or disqualification.

Porter described the proposed changes as “largely workable”, adding that “a resolution is now much closer”.

Porter can now guarantee passage of the bill by making amendments to accommodate Centre Alliance while counting on the vote of Jacqui Lambie, who will vote for it because controversial unionist John Setka has refused to resign, or seek to push it through with Lambie and One Nation’s support.