Key Takeaways
- Multi-enterprise bargaining will allow workers to negotiate better wages and working conditions, but could raise costs and reduce productivity for businesses.
- Concerns about the negative changes multi-enterprise bargaining could bring to businesses.
- Raising the migrant intake will aid Australia’s worker shortage but could also hamper local employment.
After the COVID-19 pandemic hit Australia in March 2020, industrial action across much of the nation stalled. Amid uncertainty over industries’ and employees’ futures, many workers felt that their jobs were precarious. Unions became loath to withdraw labour through strikes and industrial action plummeted over the following two years.
Yet, despite initial fears over nationwide redundancies, more and more positions became vacant in some sectors throughout the pandemic. With many nations closing their borders from 2020, the Australian Government prompted temporary residents and non-permanent visa holders to return to their home countries. This development created a shortage of migrant workers, leaving many industries – such as aged care, hospitality and fruit harvesting – with a serious labour deficit.
These situations – unions’ waning power and Australia’s lack of migrant workers – represented two of the most significant issues that the recent Jobs and Skills Summit addressed.
On 1 and 2 September 2022, the Labor Government met with union and industry leaders to discuss the future of the nation’s economy at the Jobs and Skills Summit. There, Prime Minister Anthony Albanese announced plans to raise migration levels and to allow unions to bargain across multiple enterprises for each agreement.
Multi-enterprise bargaining
The shift to multi-enterprise bargaining is intended to empower workers to negotiate better wages and working conditions. Unsurprisingly, several industry leaders have voiced their concerns about this policy direction. Andrew McKellar, Chief Executive of the Australian Chamber of Commerce and Industry, recently expressed fears that multi-employer bargaining would bring ‘greater risk of industrial action’.
This sentiment has been echoed by Innes Willox, Chief Executive of the Australian Industry Group, who stated that sector-wide negotiations have ‘the potential to shut down key parts of our economy in the pursuit of claims’, and that ‘such a possibility has deeply alarmed industry and must be ruled out’. They have been joined by the Coalition and other business leaders, including the Business Council of Australia’s Jennifer Westacott and the Australian Constructors Association’s Jon Davies.
But what risks could multi-enterprise bargaining pose to business, and what benefits could it bring? Multi-enterprise bargaining would strengthen workers’ ability to exert pressure on businesses. This change could help employees negotiate better working conditions and higher wages, especially in industries like child care and commercial banking, where unions’ lobbying has been largely ineffectual.
Improving working conditions could also benefit businesses indirectly, as the University of Sydney’s Dr John Buchanan asserts. Buchanan recently told ABC News, ‘you usually find that where wages and conditions rise, and you have decent working conditions, rates of labour turnover drop’. Accordingly, businesses could retain human capital more successfully as an indirect effect of the proposed changes to industrial relations laws that have emerged from the summit. Furthermore, rising discretionary incomes could be a boon to society and the economy by stimulating consumption and raising living standards.
Nonetheless, the concerns for businesses are not unfounded. If wages increase as a result of multi-enterprise agreements, the additional costs could erode profitability. Even if wage rises and improved conditions do inspire greater output through retaining valuable staff, significant wage cost rises would likely outweigh efficiency increases. Furthermore, evolving working conditions may entail changes that could raise costs and reduce productivity for businesses.
Should businesses resist employee-related cost increases, unions could potentially take industrial action. In that scenario, multiple businesses would be affected by the industrial dispute, increasing the aggregate loss to business productivity.
For example, profitability for the commercial banking sector has risen over the past decade, while industry employees’ real wages have stagnated. Several major financial institutions have tense relationships with the Financial Services Union, with a number of standing enterprise agreements pending renegotiation. Commercial banking as a sector also has high profit margins, which account for a greater share of revenue than wage costs. In these circumstances, sector-wide worker action is not out of the question if industrial relations rules change to allow multi-employer negotiations.
While striking is illegal for some essential jobs in Australia, banking is generally exempt. Accordingly, strikes or other industrial action could still severely affect worker productivity within Australian financial institutions. In this scenario, wider commercial activity within Australia’s economy could also be disrupted far beyond what is possible in a single enterprise negotiation, as numerous downstream transactions could be delayed or otherwise affected.
In the child care industry, the threat of sector-wide industrial action is much more proximate. Less than a week after the Jobs and Skills Summit concluded, workers at over 1,000 child care centres went on strike seeking higher wages. Although these workers were able to take industrial action under an existing exemption from enterprise bargaining restrictions, they may also have been emboldened by the summit’s outcomes.
Organised strikes by child care workers during protracted sector-wide negotiations could have significant effects on the economy. The child care industry liberates parents’ and guardians’ labour, especially mothers’ labour. Therefore, disruptions to child care services would require many parents to engage in the essential unpaid labour of caring for their children instead of being at work.
If the Labor Government passes its amendments on industrial relations, the results for industries and workers are likely to be mixed. Some industries have allowed wages to stagnate even as profitability has reached unprecedented heights. Increasing unions’ bargaining power would undoubtedly aid negotiations for better wages and conditions for workers. At the same time, doing so could have a harmful effect on multiple enterprises and sectors of the economy.
In contrast with the mixed outcomes that multi-enterprise bargaining may bring, the Federal Government’s proposals for migrant labour reform are anticipated to be more positive for the Australian economy.
Migrant labour
Since the beginning of the COVID-19 pandemic, approximately half a million migrants have departed Australia’s shores, leaving a void in the labour force. Over this time, the number of job vacancies in Australian industries has almost doubled. There was an average of 228,000 job vacancies across four quarterly surveys in 2019, while the first two quarters of 2022 averaged 451,000 vacancies.
Currently, the hospitality industry alone is shorthanded by an estimated 102,000 workers. In Australia, hospitality has traditionally served as a ‘refuge industry’, attracting migrants who are unable to attain work in their preferred fields. Hospitality, similarly to other relatively low-skilled industries like aged care and fruit harvesting, has come to rely on foreign labour.
These industries are currently ailing, and are set to benefit most from the proposed reforms to migration announced at the Jobs and Skills Summit. However, considering that the vast majority of migrants currently enter Australia through skilled – rather than family – visas, increasing migration would also help address the current scarcity of registered nurses, early childhood teachers and software programmers.
In response to these labour shortages, the Albanese Government has pledged to raise the annual migration intake by 35,000, to reach 195,000 places in 2022. An additional 35,000 migrants each year can gradually reverse the recent increases in job vacancies, as a greater number of migrants would expand the labour pool for Australian industries and boost productivity by filling current job vacancies.
Entering more services into the economy in this way will likely exert downward pressure on inflation, easing some of the difficulties Australian consumers have experienced over the past twelve months. Yet, Australia will not be alone in seeking to address labour shortages by inducing greater migration.
Advanced economies across the globe are also experiencing deficits in skilled labour, and Australia may have to compete to attract skilled migrants in the coming years. In recognition of this possibility, the Prime Minister recently asserted that the decision to allow a mass departure of migrants during the first two years of the pandemic has hurt Australia’s standing as a destination for overseas workers. Prime Minister Albanese stated, ‘we’ve got a globalised labour market… we need to enhance our reputation’.
Perhaps the very fact that the Australian Government intends to raise migration levels will signal that the country is becoming more welcoming to overseas workers. In any case, despite this perceived reputational decline, Australia already has a backlog of almost one million would-be migrants awaiting a decision on their visas. For the short term at least, there is still an excess of migrant labour ready to enter the country.
Beyond attracting greater numbers of skilled migrants, Prime Minister Albanese stated that it is inefficient to ‘train someone and bring them out here for a couple of years and then… find someone else to do the same job’. Retaining more human capital by enabling more migrant workers to stay in Australia for longer would benefit various professional industries and the people consuming the services that working migrants provide.
Both major parties have limited migration through punitive means in recent decades to widespread support, despite the controversial use of detention centres. Accordingly, it may seem as though raising migration levels and making it easier for migrants to stay for longer could carry political risks. A recent study by the Grattan Institute also asserts that expanding migration without increasing housing supply and raising rent assistance would drive rental costs higher. Furthermore, if migrants fill too many job vacancies, local employment could suffer.
Nevertheless, the net result of raising Australia’s migration intake is anticipated to be positive for the economy. Boosting migration to Australia will likely improve productivity and bring new consumers into the market, while also exerting downward pressure on inflation by introducing more services into the economy.
Final Word
The Jobs and Skills Summit has sought to address labour deficits and stagnating real wages through increasing migration and strengthening unions’ bargaining power. The proposed changes to industrial relations will likely aid workers’ capacity to negotiate better conditions and wages, while also bringing risks to profitability and productivity for many sectors of the Australian economy. The proposed changes to migration would likely benefit productivity and consumption.
However, these changes would also carry a minor risk of the labour market becoming more competitive for naturalised Australians, reducing employment in that demographic. Overall, these proposed solutions to two of the most pressing issues in the Australian economy could serve the purpose for which they are designed, but they could also create new issues in the process.
Some doubt remains as to whether the Federal Government will be able to enact the proposals that have come out of the summit. As noted above, several key business leaders have publicly expressed their opposition to the multi-enterprise bargaining proposal. Indeed, the summit’s agenda has been noted to be union driven, with limited representation from the business world.
While the Coalition has expressed some support for increasing migration, the party may ultimately be reluctant to support this new policy direction. The Coalition is also more than likely to oppose the government’s new industrial relations plans. Similarly, the Greens, who hold the balance of power in the Senate, have expressed that they will not allow Labor’s industrial relations legislation to pass unless female-dominated industries receive a mandated rise in the minimum wage.
It appears that the Albanese Government intends to use multi-enterprise agreements to close the gender wage gap. However, the question remains as to whether the government will consider the Greens’ demands, while support from the Coalition appears less than likely. Indeed, whether the proposals that have emerged from the Jobs and Skills Summit will receive the necessary political support from the Greens and the Coalition to become actualised is also mired in considerable doubt.
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IBISWorld reports used to develop this release:
Aged Care Residential Services in Australia
Cafes and Coffee Shops in Australia
Child Care Services in Australia
