Deal on IR Reforms Sets Stage for Faster Wage Growth

Industrial Relations Reform Sets Stage for Significant Acceleration of Wage Growth.

A legislative consensus reached over the weekend to approve reforms to industrial relations laws sets the stage for rebuilding collective bargaining and a significant acceleration of wage growth, according to research from the Australia Institute’s Centre for Future Work.

“These reforms will lift wage growth and improve fairness in workplaces across Australia, big and small, in all sectors of the economy,” said Dr Jim Stanford, Economist and Director of the Centre for Future Work.

“These measures will rebuild collective bargaining, enhance gender equity, ensure greater transparency, and equip workers with critical tools to pursue fair treatment,” Dr Stanford said.

Research published by the Centre for Future Work suggests collective bargaining coverage will rebound under the new laws, which will allow for multi-employer collective bargaining in certain circumstances. Bargaining coverage in Australia has declined dramatically since 2013, with just 11% of private sector workers now covered by a current enterprise agreement. That fall in coverage has been the largest single cause of record-slow wage growth over the last decade.

Based on the historical relationship between bargaining coverage and wage growth, rebuilding coverage toward pre-2013 levels will lift nominal wage growth by 1.6 percentage points per year. Additional wage growth of that magnitude would lift annual incomes for a typical worker by almost $1500 in just one year, and a cumulative total of almost $24,000 over five years.

Another provision in the reform package is a new limit on the ability of employers to unilaterally terminate expired enterprise agreements during their renegotiation. Many employers have used this loophole to wipe out years of collective bargaining gains. A recent example was Qantas’s threat earlier this year to terminate its agreement for cabin crew. Centre for Future Work modeling shows that could have cost senior staff as much as $67,000 per year. This so-called ‘nuclear option’ in employers’ arsenal will be prohibited under the new laws.

“With the post-pandemic acceleration of inflation, many years of wage stagnation have now tipped over into the fastest decline in real wages in Australian history,” said Dr Stanford.

“This bill is a needed and timely response to an unprecedented crisis in workers’ living standards.

“I congratulate the legislators, including Minister Tony Burke, Greens Leader Adam Bandt, and Senator David Pocock, for negotiating this package and working to approve it in Parliament,” Dr Stanford said.

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