The End Of Enterprise Bargaining

In our previous blog on the Secure Jobs, Better Pay Bill, Darren Perry explained that the Bill would change the workplace landscape if passed. Why that is, we will explore here.

Let's put aside the greater regulatory burden on employers for now. We will deal with that in an upcoming blog. For now, let's say workplace compliance registers will need to expand.

But there are more macro considerations that ought to grab the attention of the C-suite.

There's no escaping the fact that the changes will have a profound impact. Workplace bargaining changes lie at the heart. Underpinning them is the philosophy that no employer should have a competitive advantage through labour terms – having a better agreement than a competitor. The aim is to have employers across industries on the same agreement. We already have industry awards setting minimum wage outcomes. In time, we will have industry agreements setting actual wage outcomes.

This is not merely changing the rules of the chess game to favour one side: this is picking up the chess board and moving it.

In time, it will see the end of enterprise bargaining.

Larger price-setting employers who rely on volume and have bigger balance sheets will be the beneficiaries. Smaller players (even those with national significance) might go to the wall or, at least, shrink.

The economics of industries will change. Competition will reduce in some industries.

Employers will be lumped into "agreements " with others with "common interests" over time.

This can happen against their will if "appropriate", and that's what the employees want. Employees will want it because of an inevitable pay increase. Some employers might see the benefit in being lumped into deals with others. Others won't, lest it poses an existential threat. They will effectively assert themselves in the face of long odds – that will involve commitment and resources.

The term "roping-in" will return, which harks back to days when employers were forced into industry awards in a process initiated by unions and mandated by the industrial tribunal of the day.

This will be the new world of multi-employer bargaining. The Fair Work Commission will decide who's in and out of particular industry bargains in a process destined for legal controversy. Workplace laws will confront competition laws like never before.

In some cases, the Fair Work Commission can decide actual pay and conditions rather than approving arrangements. Invariably, these will become industry wide.

Just how the interests of an enterprise, as opposed to "common interests", will be catered for is not answered by the Bill. The bottom line is that terms and conditions will be mandated for most, with the ability to cater for the particular needs of an enterprise uncertain, if not illusory.

Unions and labour academics have complained about the inability of enterprise bargaining to deliver higher wage outcomes. Indeed, some believe it to be the cause of low wage outcomes. This could be – and probably is – a fundamental attribution error. Low wage growth has been a global phenomenon in similar advanced economies with all wage-setting systems. In Australia, mandating wage outcomes is set to be the mechanism to counter the problem.

The irony is that enterprise bargaining was introduced amid a recession as part of a group of economic measures designed to reduce inflation which was at 7.3% in 1990 and dropped sharply in the following years. Centralised industry wage outcomes were the handbrake, and enterprise bargaining was the answer.

Australian inflation has just hit 7.3%, and enterprise bargaining is now the handbrake amid low wage growth. A return to industry-based outcomes is "the answer". The objective is to "get wages moving" – and it will work in the short term. It is the second-order consequences that will be dramatic and undesirable.

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