Ron McCallum Debate: where to now for collective bargaining?

Ron McCallum Debate: where to now for collective bargaining?

By Mike Toten on 10 October 2018
The use of collective bargaining has declined sharply in Australia over the past decade or so, and some people blame this for the problems being caused by low levels of wages growth.

But is there a link between the two? Should more collective bargaining be encouraged? What amendments to bargaining provisions should be made?

These were among the questions debated by participants at the 2018 Ron McCallum Debate, run by the Australian Institute of Employment Rights (AIER) this week in Sydney.
The debate was timely given the recent announcement by the ACTU of its Change the Rules campaign for workplace relations law reform and to increase union membership.

The participants included an employer, an employer association (the AiGroup), a union, two workplace relations academics, a past chair of the Workplace Relations Commission (replaced by Fair Work Commission) and Emeritus Professor Ron McCallum. 

The statistics

Between them, the speakers presented the following statistics:
  • Wage increase rates have more than halved since the global financial crisis of about a decade ago, and wages’ share of Gross Domestic Product is the lowest post-war rate ever (now 47%). These trends have occurred in various other countries too.
  • Wage increases in enterprise agreements averaged 4.4% in 2008 versus 2.5% in 2017. 
  • Enterprise agreements are covering fewer and fewer employees. In the private sector, the number of agreements has halved in the past five years, and they cover about 40% fewer employees. Only 14% of private sector employees are now covered.
  • While more than 2000 new enterprise agreements were approved in 2010, only 68 were approved in 2017.
Professor McCallum noted that wage increases lagging behind productivity increases had led to revenue shortfalls for the federal government. In the USA, widening inequalities appear to have led to a loss of faith in major institutions, and a similar trend could be emerging in Australia. 

What is causing the trends?

Many employees who used to be under enterprise agreements are now covered by award provisions instead. 

Some speakers commented that a now-common employer tactic was to attempt to stall agreement negotiations until after an agreement expires, in which case it rolls over with no wage increases occurring. They attributed this to technical provisions in the Fair Work Act, such as some of the “good faith bargaining” provisions. They said they acted as an incentive not to negotiate.

Expansion of the “gig economy” workforce, continuing decline in union membership, fewer resources for unions and employees, and some provisions designed to impede the operation of unions (such as stricter right of entry provisions) were cited by some, but not all speakers.

Stephen Smith, from the AiGroup, claimed that the Act’s too-technical requirements for approving agreements was the main cause of their decline in use, and low productivity growth was the main cause of low wages growth.

Some solutions: McCallum

Professor McCallum made several suggestions that he claimed could stop or reverse most of the above trends and result in “a more equal society”:
  • Replace the Fair Work Act’s current definition of “employee” with the one used in sec 12 of the Superannuation Guarantee (Administration) Act 1992. This definition would include most “gig economy” workers, but still exclude genuine independent contractors. 
  • Where enterprise agreements are terminated (or about to be), the Fair Work Commission should have the power to order compulsory conciliation after a specified period of time. Negotiations are stalled by intractable disputes.
  • If progress stalls due to an intractable dispute, the FWC should be able to certify that it is intractable and impose arbitration of it.
  • Collective agreements already negotiated could be extended to employees in low-paid industries.
Professor McCallum saw no need to amend current industrial action or majority agreement provisions.

Others suggested that unions could revive their membership by becoming more “service-oriented” and looking to represent workers who are “outside the traditional system”.

Revival of collective bargaining: for and against

The ACTU campaign is promoting wider use of industry-wide collective bargaining, claiming that increased coverage by collective agreements would address the inequalities mentioned above.

A UK researcher claimed that there is a direct link between reduced use of collective bargaining and increased inequality. However, if it is revived it will have to adapt to changes in the nature of work, such as increased dominance by the services sector and non-standard patterns of work.
The employer organisation representative argued that industry-wide bargaining would override the modern award system. The two would clash, as the award system sets industry-wide minimum standards. He added that industry-wide agreements would financially benefit unions at the expense of employers, and that the current enterprise bargaining system needed no more than some technical tweaks, for example to make the Better Off Overall Test (BOOT) apply to groups (eg occupational) instead of individuals.
Further information about this event is available from the AIER.

The debate was moderated by former FWA and AIRC president the Honourable Geoffrey Giudice AO. It featured presentations from:
  • Emeritus Professor Ron McCallum AO
  • Professor Anthony Forsyth, RMIT University
  • John Hendy QC, chair, British Institute of Employment Rights
  • Kate Minter, research director, Unions NSW
  • Kim Parish, chief people officer, House with No Steps
  • Alison Pennington, research economist, Centre for Future Work,The Australia Institute, and
  • Stephen Smith, head of National Workplace Relations Policy, AiGroup


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