Australia’s View of Workforce Productivity Needs to Have Moved Past the 1980s

In Australia, workers are entitled to basic labour and employment rights and protections under the Fair Work Act 2009. This legislation also provides a framework for employers and employees to engage in a form of collective bargaining known as “enterprise bargaining”, in which wages and working conditions are agreed upon. Employees have the right to take legal strike action to support their claims in the negotiations. However, these rights have generally been restricted to employees in a single employer’s workplace. The legislation has historically encouraged this type of collective bargaining as a way of growing wages and achieving productivity gains in exchange for them.

In 2022, Australia held a Federal election, resulting in the Australian Labor Party (ALP) forming a majority government. In October, as part of its election mandate, the ALP introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 into the legislature. With this Bill, the ALP is seeking to change, among other things, the way enterprise bargaining is conducted by permitting collective bargaining (supported by strike action) to occur across multiple employer’s workplaces at the same time.

Make no mistake about it, the Secure Jobs, Better Pay Bill is the most significant thing to happen to this country’s industrial relations landscape since the introduction of WorkChoices in 2005. Australia's coalition government led by John Howard introduced the Workplace Relations Amendment (Work Choices) Act 2005. However, it faced strong opposition from unions and the public for being too complex and biased in favour of employers. WorkChoices was eventually repealed in 2009 and replaced by the Fair Work Act we have today.

Putting even WorkChoices to one side, the Bill is the most significant development since the introduction of enterprise bargaining in 1993, when the then Prime Minster of Australia, Paul Keating said: “Let me describe the model of industrial relations we are working towards. It is a model which places primary emphasis on bargaining at the workplace level within a framework of minimum standards provided by arbitral tribunals.”

This heralded a shift away from centrally fixed industry awards to the negotiation of enterprise specific terms and conditions. By the 1990s the setting of centralised terms and conditions by the ‘industrial umpire’ had run its course, with broad acceptance of the need to meet the needs of a more modern economy. Centralised wages and conditions were a handbrake. Enterprise based bargaining was the answer. Thirty years later, there is a view that enterprise bargaining is now the handbrake, and the imposition of more centralised outcomes the answer.

The Bill is said to be about secure jobs and better pay. They are – of course – desirable objectives, and few will quibble with the policy rationale for reform in the areas of fixed term contracts, sexual harassment and flexible work requests.

But what is this Bill really about?

First, this Bill is about re-empowering the union movement. The jewel in the crown of the Bill, the multi-enterprise agreement, is only available where there are workers who are in a union. Unions will be able to promote lawful industrial action across multiple employers, maximising their bargaining power while minimising the extent of the effort traditionally required to organise employees across an industry. The unions will have broader rights to compel employers to bargain with them.

The second thing this Bill is about is re-empowering the Commission. It is the Commission who gets very broad discretion to decide who can bargain for a multi-enterprise agreement and with whom. It is the Commission who gets to decide when time should be called on negotiations because they have become “intractable” (whatever that means). It is then the Commission who gets to impose an outcome on the parties.

Even where parties reach agreement, they cannot be sure the Commission will uphold it. The Commission will be able to set standards for what constitutes genuine agreement, and these will have legislative force. If its broad ranging judgment about the better off overall test so determines, the Commission can amend the agreement of the parties. It can then be asked to come back again later and make further amendments if it thinks things have changed. Industrial parties simply cannot be sure that their bargain will stand; bargaining is no longer a way for the parties to definitively settle their rights and provide for stability and certainty.

This Bill is about taking away from employers and their own employees the right to decide what is best for them in their own particular circumstances. Those decisions are increasingly to be put in the hands of third parties who know less about the workplace concerned and what makes it tick.

There is no real evidence that employment is less secure today than it was under previous legislation. There is however plenty of evidence to support the proposition that real wage growth is only achieved in periods of productivity growth. Despite this, we do not see a reference to productivity in any of the enterprise bargaining amendments.

The promulgation of productivity was the lynchpin of the Keating enterprise bargaining legislation. The enterprise bargaining system became broken because it lost sight of productivity as its true north. Given the power delivered to the union movement, in the short term this Bill will drive higher wage outcomes. However, these will be false ones that will come at a cost to the viability of the businesses that will be required to pay them. Unless productivity flourishes, real wages will inevitable falter again.

When the Howard government gained control of the Senate in 2005, it got to implement its workplace relations agenda. History has judged the WorkChoices reforms as overreach, and the Coalition has been gun shy on industrial relations ever since. Is the Bill a similar act of overreach by the Albanese government? Will it shine light on the need to return to an enterprise bargaining system based on productivity and the genuine needs of the workplace as determined by employers and their employees? By turning back the clock is this legislation going to demonstrate once and for all what is really needed? These will be the questions of the coming years.

For now, “better pay” is a certainty in the short term, at least for some. “Secure jobs” is more questionable.