As collective bargaining erodes in Australia, solutions from other countries could strengthen bargaining and lift wages 

New research on international collective bargaining systems, released today in a special issue of the peer-reviewed journal, Labour and Industry, finds that Australia’s industrial relations system is rapidly losing its ability to support wages in the face of numerous challenges (now including the Omicron outbreak).

On the heels of new data showing further erosion of Australia’s collective bargaining system, researchers and practitioners from five countries have identified best practices from other countries that could strengthen collective bargaining and lift wages.

Key findings of the research include: 

  • The Ardern government in New Zealand has implemented a new sector-wide bargaining system (called ‘Fair Pay Agreements’) that could be a model for similar changes in Australia. It would enhance workers’ ability to win more stable jobs and higher wages in highly fragmented industries (like security, cleaning or childcare).
  • New Zealand-style reforms could also improve the effectiveness of Australia’s pay equity legislation. Recent changes in New Zealand’s pay equity system prove that wider scope for bargaining can address persistent gendered pay discrimination. One recent enterprise agreement in Australia (covering public sector workers in Victoria) has already applies that model here.
  • Nordic and continental European countries have used coordinated sectoral bargaining systems to enhance vocational training and technology adoption. Australia could learn from that experience to better integrate skills programs with secure job pathways.
  • In Germany, a combination of sector-wide bargaining over wages and other core compensation, combined with workplace-level consultations (under that country’s ‘works council’ system), produces employment outcomes that are both flexible and fair.

“The erosion of collective bargaining has been a major factor in Australia’s record-weak wage growth over the past decade,” said Alison Pennington, Senior Economist at the Centre for Future Work and co-editor (with Dr. Jim Stanford) of the special issue. 

“This research confirms that other countries are implementing innovative and powerful measures to strengthen collective bargaining and support a healthier post-COVID recovery. Australia should learn from those countries and take urgent measures to stop the decline of collective bargaining here.”

“A wealth of experience from other countries proves collective bargaining can be strengthened and modernised, to provide workers with a decent shot at fair compensation and better jobs. Unfortunately, Australian governments seem more obsessed with vilifying and policing unions, instead of engaging them as full and constructive partners. The resulting erosion of collective bargaining will only lead to even weaker wages in the future,” said Pennington.

New data released this week from the Commonwealth government confirm that collective bargaining coverage has declined further during the pandemic, with 600,000 workers losing enterprise agreement coverage since end-2019. That erosion of collective bargaining has been a key reason for Australia’s record-weak wage growth.

The newly released special issue of Labour and Industry contains 13 contributions from academics, union leaders, and practitioners around the world.

“Australian workers need an effective system of collective bargaining that goes beyond the legal entity that directly employs them,” said Tim Kennedy, Secretary of the United Workers Union, and co-author one of the articles in the special issue. “This is a vital mechanism to ensure workers have greater control over the safety of their work, across sectors, industries, franchises, labour hire arrangements, supply chains – or however work is configured.”

“Australia is currently deprived of the skill formation benefits that arise from strong sectoral collective bargaining between social partners in Nordic nations,” said Andrew Scott, Professor of Politics and Policy at Deakin University, and author of another article in the special issue.  

“It’s exacerbating deficiencies in our training arrangements, evident in high rates of misalignment between jobs and skills. Australia can learn much from the Nordic countries’ superior economic and social policy outcomes that arise from well-integrated skills and collective bargaining systems,” said Professor Scott.

The research is the culmination of a two-year project coordinated by the Centre for Future Work at the Australia Institute.

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