Employees, not business, are wrapped in red tape and it’s killed wage growth

In the 1980s and ’90s, the union movement entered into a series of accords with the Labor government, agreeing to moderate wage demands in exchange for improvements in the “social wage”. In doing so, it effectively traded away its ascendant bargaining power to address the urgent need to curb surging inflation and underemployment.

Thirty years later, is the ascendant business sector considering a similar change to reduce its power?

Red tape is a factor in stagnant wage growth.Credit: Michael Mucci

Just days before the Jobs and Skills Summit, the ACTU and the Council of Small Business Organisations Australia have agreed to jointly consider laws allowing multi-employer bargaining among employees of small business. This would make it easier to strike pay deals across multiple employers. The Business Council is yet to sign up but has acknowledged that “people need to be paid more”.

Right now, company profits have never been higher and the share of the economic pie paid to workers has never been smaller. A decade of wage stagnation has moved seamlessly into a new era of cuts to real wages.

For years, we have heard business complain that our industrial relations system is too complex and riddled with red tape. But it is employees who face the greatest red-tape burden under current industrial relations laws. Their burden is so overwhelming that it has stopped them bargaining for pay rises for decades.

Indeed, bargaining has become so rare in our labour market that in 2021 just 11 per cent of private sector workers were covered by an enterprise agreement. Many workers have never experienced bargaining in their entire working lives.

How did it come to this?

Our system of bargaining, introduced in 1993, restricted bargaining to single businesses only. The system was designed for workplaces that had already started to decline; big factories with lots of (mainly male) workers engaged in secure full-time employment.

Since 2004, Australia has lost 18,000 medium-sized firms, and 900 large firms employing over 200 people. Meanwhile, small firm growth has exploded, with 340,000 more businesses employing fewer than 20 workers.

Today, there are about 5 million employees in small businesses, representing over 40 per cent of the workforce. If you work in a small business, forget about enterprise bargaining. Non-negotiable employment contracts are the norm.

The introduction of the enterprise bargaining system also coincided with a radical change in business structures which saw large workplaces “fissured” into different smaller structures, characterised by less secure working arrangements. These structures included franchising, labour hire, contracting and sub-contracting, and more recently, the gig economy.

Excessive red tape prevents employees in fissured workplaces from genuinely bargaining. The notorious 7-Eleven wage underpayment scandal in 2015 demonstrated the power of the franchisor, which forced 7-Eleven franchisees to sign contracts restricting their power to pay decent wages to their workers. Red tape stops 7-Eleven employees from banding together across franchisees and meaningfully negotiating wage rises with the franchisees and the franchisor.

It’s not just franchisee workers who are left to stagnate. Gig workers are locked out of wage bargaining by an inflexible system that designates them not as workers but as entrepreneurs.

More than 80 per cent of the feminised early childhood educator workforce work in small centres, alongside an average 15 co-workers. Chronically underpaid for incredibly important and demanding work, it is extreme red tape in the bargaining system that stops these workers fighting to address low pay and fixing the workforce retention crisis.

Big businesses continue to fissure their operations to avoid bargaining with workers. Qantas recently seized the “window of opportunity” presented by the coronavirus crisis to outsource more than 1800 secure, ground-handling jobs to third-party providers. Even though the Federal Court agreed the sackings were illegal because Qantas sought to defeat the collective bargaining rights of its workers, the sacked workers won’t be reinstated.

ACTU and the small business council’s deal to pursue multi-employer bargaining will help employees better match bargaining strategy with real business operations. But there’s much more red tape to review in the bargaining system, which since the 1990s has rendered the system so complex that it has virtually collapsed.

The Fair Work Act offers many opportunities for business to tie up employees trying to bargain in lengthy, costly disputes. The system doesn’t function to guarantee collectively negotiated pay rises. The bargaining process is replete with numerous hoops to be cleared including “majority support determinations”, “scope orders”, “protected action ballot orders”, and “good faith bargaining” requirements including questions about whether bargaining representatives are “genuinely seeking agreement”.

If the labyrinth is successfully navigated, employee collective bargaining efforts are often stopped dead because our laws require any protected industrial action not to be too disruptive. Since protected action is disruptive by its very nature, it has almost disappeared.

If employers were subjected to the same red tape as unions, they’d go out of business.

The jobs summit must confront the need to replace a moribund, monolithic bargaining system with one that matches the complex needs of a 21st-century labour market.

A flexible bargaining system would allow workers and their unions to elect to bargain across multiple enterprises or to bargain with employer associations across an industry. Whether other business groups follow the lead of the council of small business in accepting the need for true flexibility in the bargaining system will be made clear today in Canberra.