Omnibus IR Bill will Further Reduce Wage Growth

New research by the Australia Institute’s Centre for Future Work shows the Federal Government’s omnibus industrial relations bill will lead to a significant increase in employer-designed enterprise agreements (EA) that reduce workers’ pay and conditions, rather than improve them—signaling a return to the WorkChoices pattern of EA-making and putting further downward pressure on Australia’s already record-low wages growth.

The bill proposes sweeping changes to labour laws which would see an acceleration of EAs written unilaterally by employers, without negotiation with a union. EAs will be exempt from the current Better Off Overall Test, subject to less scrutiny at the Fair Work Commission, and employers will have less stringent tests to ensure their proposed EAs are genuinely approved by their affected workers.

Key findings:

  • Wage increases under non-union EAs are consistently and significantly lower than in union EAs; on average one-percentage-point lower since 2010.
  • The majority of non-union EAs approved between 2006 and 2019 did not specify any wage increases at all, instead linking wage increases to non-legislated measures like CPI, minimum wage decisions by the Fair Work Commission, or employer discretion.
  • In addition to lower (or no) wage increases, the average duration of a non-union EA is longer than for union EAs, locking in inferior wage outcomes for longer periods of time.
  • The exemption for EAs to meet the Better Off Overall Test (BOOT), which shows whether employees would be better off under a proposed EA than under the relevant Award, is supposed to last for two years. But in reality, the terms of EAs negotiated under the BOOT exemption could stay in effect for many years, unless they are renegotiated or terminated.
  • While the overall share of workers covered by EAs will likely increase if these measures pass, a higher proportion of EAs will consist of sub-standard, lower-wage deals, which will see Australia’s current record-low wage growth get worse, not better.

“When the COVID-19 pandemic hit, wage growth slowed virtually to zero. The omnibus bill will lock in that wage stagnation, by further weakening the already-constrained ability of workers to negotiate genuine collective agreements,” said Alison Pennington, senior economist at the Australia Institute’s Centre for Future Work.

“Australia’s experience under WorkChoices, when similar policies were implemented, demonstrates that if the proposed bill is introduced both the number of non-union EAs will increase, and the share of EAs without any specified wage increases will grow.

“Non-union EAs deliver significantly worse wage outcomes that union-EAs, even with the BOOT in place. Removing the BOOT will open the floodgates for employers to rush the approval of EAs that undercut Award wages, further suppressing wages growth in 2021 and beyond.

“Any increase in the number of lower-wage, non-union EAs will reduce rather than lift the wages and conditions delivered through EAs overall, leaving Australian workers worse-off.”

The new Centre for Future Work report, How Non-Union Agreements Suppress Wage Growth and Why the Omnibus Bill Will Lead to More of Them by senior economist Alison Pennington can be found here.

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Anna Chang Communications Director

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anna@australiainstitute.org.au