Chris Wright is Associate Professor in the Discipline of Work and Organisational Studies at the University of Sydney, and a member of the Centre for Future Work’s Advisory Committee. This commentary is based on his submission to the Senate Education and Employment Legislation Committee’s inquiry into the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, and originally appeared in the Sydney Morning Herald.

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The Senate has started reviewing the Australian Government’s Closing Loopholes Bill. If passed, this legislation will allow minimum standards to be set for contract workers, provide stronger penalties against employers who commit wage theft and deter employers from outsourcing to circumvent enterprise bargaining.

These measures will strengthen protections for workers who often face barriers to job security and career development.

Australia’s current system of workplace laws was adopted at a time when enterprise bargaining and awards covered a larger share of the workforce than today. Enterprise bargaining and awards encourage employers to invest in their workers through “standard” employment arrangements underpinned by permanent contracts, decent wages and training.

These arrangements promoting workforce investment benefit both workers and employers. Workers gain job and economic security and career progression opportunities. Employers gain loyal and satisfied workers who contribute to productivity and innovation. As the architects of the current system of workplace laws envisaged, workforce investment thus provides the basis for high-productivity business strategies, which help to make the Australian economy more internationally competitive.

Recently, however, more businesses have opted for a different course. These businesses have tried to compete not through high-productivity strategies but instead by undercutting or evading workplace laws and by engaging workers via “non-standard” arrangements such as casual contracts or via gig economy platforms.

The rising incidence of wage theft in which employers pay workers below their legal entitlements is evidence of this undercutting. The growing numbers of workers hired through labour hire arrangements, which some businesses have used to avoid their enterprise bargaining obligations, is evidence of evasion. So too is the emergence of gig platforms exempt from workplace laws.

Wage theft, gig platforms and use of labour hire as an evasion tactic have become features of Australia’s modern labour market. None of these features existed when the foundations of the current system of workplace laws were first laid in the 1990s.

As the nature of work and the labour market evolves, workplace laws must adapt in response. The Closing Loopholes Bill recognises this by allowing workers on casual contracts to convert more easily to permanent contracts, increasing protections for gig and labour hire workers and introducing new measures against employers who undercut wage laws.

While non-standard workers have flexibility, they have little job and economic security under current laws. For instance, casual workers receive a higher hourly pay rate as compensation for this insecurity but are concentrated in the lowest-paid industries. Like their counterparts in the gig economy, casual workers are less likely to receive training than permanent workers.

The proposed change to give casuals who work regular hours the right to convert to permanent employment will probably improve their access to good quality jobs and career development opportunities.

Business groups have criticised the Closing Loopholes Bill for its supposedly negative impacts on productivity and innovation. They have not offered evidence supporting these claims. To the contrary, research evidence suggests that measures promoting standard employment are more likely to encourage businesses to compete through high-productivity and innovation-enhancing strategies rather than by undercutting or evading.

Winston Churchill once said that without effective workplace laws, “the good employer is undercut by the bad and the bad by the worst… Where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration”.

Workers in Australia are increasingly missing out on legal protections under current laws. The research evidence suggests the Closing Loopholes Bill’s provisions are necessary to avoid a situation like the one Churchill described.