Multi-employer bargaining risks hikes, strikes: ­Productivity Commission

The expansion of multi-employer bargaining could result in more strikes, supply chain disruptions and wage pressures, warns the Productivity Commission.

The Productivity Commission says changes to multi-­employer bargaining risk diminishing the productivity benefits associated with enterprise bargaining.

The expansion of multi-employer bargaining could result in more strikes, supply chain disruptions, cascading wage pressures and damage to the economy, the ­Productivity Commission has warned.

The commission’s concerns, outlined in its new report into ­labour market productivity, will hand ammunition to employer groups opposed to the Albanese government legislating to ­broaden access to multi-employer bargaining.

Following the Jobs and Skills Summit, Employment Minister Tony Burke started working on legislation to repair the “broken” enterprise-bargaining system, ­including widening access to multi-employer agreements, a move that business warned could spark more strikes by unions.

The government also wants to simplify the legal test used to approve pay deals – known as the better off overall test or BOOT.

The commission’s interim ­report, released on Thursday, ­proposes loosening the application of the BOOT to classes of employees, rather than individual workers.

The report proposed the Fair Work Commission survey employers about making awards less restrictive and explore action to address productivity-impeding clauses in enterprise agreements.

It also warned that categorising gig-economy workers as employees would remove key benefits to both efficiency and flexibility for workers.

The government is proposing to extend traditional employee rights to gig workers who have been classified as independent contractors.

But it is the commission’s commentary on multi-employer bargaining that the government’s critics will highlight.

Warning that the bargaining changes need to be undertaken with caution and be subject to ­detailed, rigorous and transparent analysis, the commission says the impact “would depend very much on its design features”. It says changes to multi-­employer bargaining risk diminishing the productivity benefits associated with enterprise bargaining, and potentially “encourage cost-collusion and broader forms of anti-competitive conduct among businesses, ultimately ­increasing prices and/or reducing quality for consumers”.

“When wages and conditions are set for a group of firms in a ‘one size fits all’ approach, this could prevent more productive firms from attracting higher productive workers, discouraging the pursuit of firm-level and economy-wide productivity improvements,” the commission says.

Key union leaders are backing the right of workers to legally strike in support of multi-­employer bargaining claims, saying an inability to take protected industrial action would unfairly favour employers.

But the commission says removing restrictions on protected industrial action and bargaining orders “would pose significant risks to productivity and real wages if it led to wider industrial action, with impacts on the broader economy”.

“In the extreme, multi-­employer agreements could morph into industry-wide agreements, undermining competition across industries, weakening the growth prospects of the most productive enterprises in any industry, and creating wage pressures that cascade into other industries,” it says.

“Given that industrial action is the most important source of leverage for employee bargaining, the overall level of industrial disruption could also be expected to increase. Stoppages do not just reduce the output and productivity of the businesses affected, but have flow-on effects through disrupted supply chains.”

The commission says that – while cultural attitudes, institutions and laws that underpinned industry-wide determination of wages and conditions have changed over time, and the high levels of industrial disputation ­observed in the 1980s have largely disappeared – these developments occurred in the context of gradual moves towards a more flexible workplace relations system.

“The broader expansion of bargaining orders alone would not pose as significant a risk as their combination with protected industrial action,” it says. “Such orders may force businesses to participate in multi-employer bargaining in good faith. However, this would not necessarily result in agreement so, in principle, firms need not be ‘trapped’ into inappropriate outcomes in terms of wages or conditions.”

Analysing the operation of the BOOT, the commission says the government could consider ­applying the test to classes of ­employees, rather than individual workers.

“By using classes as the basis for the test, the need to ensure all employees be better off would disappear,” it says. “A class would comprise a group of employees whose working patterns and tasks were similar (for example, casual employees working on weekends, or a given classification of employee).”

It says loosening the BOOT’s application could allow for agreements to be put in place without an individual employee holding up the proposed agreement. “It would shift the focus of bargaining back onto overall improvements for employees, while still preventing any significant group of employees being disadvantaged,” it says.

The report says “it may be worth exploring” whether an agreement supported by a large majority of covered employees would not be subject to the BOOT at all. However, there would still be some risk that some class of worker would be made worse off compared with the award.

Commission deputy chair Alex Robson said the report explored “how we might make our business environment more adaptable and flexible, no matter what the future of work looks like or what skills composition we might need”.

“The focus needs to be on matching the right people with the right job, and improving and increasing our pool of skills,” Mr Robson said.

He said platform-based business models presented a number of positive contributions to productivity, including new and more efficiently delivered services.