On Tuesday, an estimated 150,000 people took to the streets in Melbourne and elsewhere, demanding that the federal government take action on the wage freeze sweeping our country. For the first time in living memory, workers are living through a low wage crisis. Since 2013, their income has gone backwards. Meanwhile, profits are rising five times faster than wages.

When he declared a low wage crisis in August 2017, Reserve Bank governor Philip Lowe urged workers to ask their boss for a pay rise. Having been commended for the diagnosis but widely ridiculed for the suggested cure, Lowe is slowly but surely changing his message. He told an audience of central bankers in Portugal in June that when he questions Australian business people about why they don’t pay more for highly sought after workers, “they look at me as if I’m completely mad”. Lowe has discovered that workers need to collectively bargain to secure decent wage rises. In a speech to the Australian Industry Group, he noted that changes in the bargaining power of workers were contributing to wage stagnation.

Australia is one of the world’s most affluent countries. Enormous wealth has been generated by 27 years of consecutive economic growth. But it is no longer flowing on to employees.

So how did things get so out of whack? The answer is that the enterprise bargaining system, the main way to negotiate a pay rise for workers, is redundant. It is out of reach for the overwhelming majority of workers and enterprise agreement coverage is in free fall.

The system, introduced in 1993, was designed for workplaces that are now in terminal decline; factories with lots of workers engaged in secure full time employment. Large numbers of workers employed by the same employer in secure jobs are well placed to collectively bargain to secure higher wages. This form of work organisation became prevalent after the second world war and peaked in the 1980s

The enterprise bargaining system, the main way to negotiate a pay rise for workers, is redundant

Since then, the labour market has undergone a radical transformation. Business has cut the cost of labour by getting out of the business of direct employment and sourcing workers more cheaply through different structures. Those structures include supply chains, labour hire companies and franchising. A minority of Australian workers enjoy secure employment.

Add to that the millions of workers employed by other small businesses and you have a growing proportion of the workforce who are unable to collectively bargain for wage increases.

In almost five years, the number of workers employed on an enterprise agreement in the private sector has tanked by about 40%. Last year, those numbers shrunk by another 170,000 workers.

Enterprise bargaining is useless for most employees of small business. Two or three workers employed at 7 Eleven cannot effectively bargain for wage increases. Each franchise is a separate enterprise with a handful of vulnerable employees. The entity that calls the shots is the 7 Eleven head office but the workers are not allowed to bargain with it.

Gig workers can’t bargain with an app. Casual workers have no bargaining power. If they annoy the boss, they risk not getting another shift. As we know these employees are vulnerable to predatory and unlawful wage theft. How are they supposed to bargain?

Consider also the lot of early childhood educators, low paid workers who have tried to use the system. They have walked off the job six times in the last two years. Overwhelmingly women, they are paid less than a living wage for incredibly important work. Over 80% of the workers are employed in small centres with an average of 15 employees. They simply don’t have the bargaining power to obtain an enterprise agreement, leaving them dependent on the safety net of award rates.

What early childhood educators really need, like workers in franchises, small business and labour hire, is an ability to come together and bargain with the sector as a whole, to raise standards across the board, and win fair outcomes. Sector wide bargaining is permitted in a clear majority of wealthy countries.

The workers pounding the pavement on Tuesday yesterday were making demands that echo a growing economic consensus. Conservative institutions that have until recently pushed policies that suppress unions, bargaining and wage rises, are changing their message. The OECD examined wages policies in 35 advanced economies over the period 1980 to 2015. It found that countries that allow unions and employers to bargain across a whole sector, covering many workplaces and employers at once, significantly out-perform countries focused on enterprise bargaining.

That our workplace laws have not kept pace with changes in our labour market is not a coincidence. Business lobbyists and conservative politicians, both in Australia and the US, have promoted wage suppressing policies very effectively for decades. As much was recognised by the Economist which argued in 2015 that: “The fundamental problem is that in America, as in many other rich countries, employment law has failed to keep up with the changing realities of modern work.”

We need a modern system for the modern workplace that gives workers employed across small, dispersed workplaces, often moving from job to job, working for numerous employers over their career, an ability to bargain for a fair wage rise.

• Josh Bornstein is an employment lawyer and writer