Mark McKenzie: ‘Multi-employer’ not ‘industry-wide’ bargaining needed for workplace relations reform

Things are starting to heat up in the lead up to the federal government’s national Jobs Summit to be held in Canberra on September 1 and 2, 2022. Numerous organisations have publicly promoted possible solutions to resolving the current national workforce issues, including a recent statement by the Australian Council of Trade Unions (ACTU) about possible reforms to the operation of the national industrial relations system.

Last week the secretary of the ACTU, Sally McManus, indicated that the current enterprise bargaining system was ‘broken’ with less than 14% of Australian workers covered by up-to-date enterprise bargaining agreements — an outcome described as ‘appalling’. McManus went on to say that the current poor participation rate was in large part due to changes in the structure of Australian business enterprise with more people now employed in small workplaces — with their limited capacity to advance an EBA at an individual business level — than ever before.

The solution, according to the ACTU, is to change the current IR laws to allow sector-wide bargaining, essentially marking a return to the 1970s and 1980s mechanisms that were abandoned following the Wages Accord of the Hawke government nearly 40 years ago.

Sector-wide bargaining is sometimes referred to as ‘pattern bargaining’. This form of bargaining occurs where an agreement is negotiated between a group of businesses to establish a pattern for employment on an industry wide basis. In sectors where there are a large number of employing businesses, workers band together under the leadership of the relevant union to negotiate improvements in wages and conditions. 

While this will inevitably deliver wage rises to workers, there are two obvious downsides of this approach. The first is that it significantly increases the risk of unproductive strike action taken to achieve these increases (the adverse economic and social consequences of which are being graphically demonstrated by the prolonged strike action by rail unions in Sydney at the moment).

The second is that the ‘pattern’ wages and conditions negotiated on an industry wide basis may be affordable to big enterprises but not small businesses, thereby distorting market competition in favour of big businesses.

The suggestion that we return to an IR system that risks increasing the numbers of productive days lost due to strike action to address the flaws of the existing bargaining system is illogical, particularly if the collective goal of the federal government is to increase national workforce productivity and ensure that the benefits of same are shared equitably between employers and their employees.

Australia is at a critical stage with Australian business owners — particularly the nation’s more than 2 million small businesses — struggling to survive in the face of increasing business input costs and recover from the economic damage wrought by two years of pandemic. 

Increasing the risk of strike action as a means of delivering productivity benefits against this background is lunacy.

ACAPMA agrees with the ACTU and the Albanese government that the current system is broken. ACAPMA also agrees that the fact that only 14% of the workforce is covered by a current EBA is totally unsatisfactory. But the biggest reason for this situation is the current unworkable nature of the Better Off Overall Test – the BOOT – which requires new agreements to ensure that every worker is better off as a result of a new enterprise agreement.

While this principle sounds good in theory, nearly a decade of national IR effort has shown that it is almost impossible to implement in practice and that is the principal reason why so many businesses have allowed their EBA’s to expire. In fact, the large number of expired agreements is so significant that they have a name — they are commonly referred to as zombie agreements.

Exposing whole industries and small businesses to an EBA mechanism that has proven ineffective in lifting business productivity and employee wage rates after more than a decade is bizarre — we need to fix the bargaining mechanism first and then consider how to make multi-employer agreements more accessible to businesses that wish to use them.

If business and unions can agree on sensible changes to the current bargaining mechanism (i.e., the BOOT) during the next week’s Jobs Summit then there is certainly room to make it easier for businesses to opt into a multi-employer bargaining process. This is particularly so for small business owners who simply don’t have the necessary knowledge or financial resources to negotiate an EBA on their own.

The BOOT mechanism must be made fit-for-purpose now and then IR processes should be streamlined to allow business owners to ‘opt in’ to multi-employer agreements with the applicable modern award to remain as a ‘backstop’.

Any solution that involves business owners being forced into bargaining processes by the threat of 1970s style industry-wide industrial action by employees should be avoided at all costs, as no one wins in those instances. It will simply result in business owners closing their doors and jobs lost as a result.

In hindsight, and mindful of the conversation above, one really has to ask whether the naming of next week’s federal government summit as a “Jobs Summit” at a time of record low levels of unemployment is appropriate.

Perhaps the summit would have been better framed as a “Workforce Productivity Summit”, with all participants tasked with the objective of identifying the IR reforms that are necessary to better utilise a fully-employed national workforce.

Mark McKenzie is the former chair of the Council of Small Business Organisations of Australia.