Media Release: Deal on IR Reforms Sets Stage for Faster Wage Growth

MEDIA RELEASE | 28 November 2022

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.

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Rough times ahead for Austalia's economy as oil, gas and coal companies celebrate

The latest economic outlook from the OECD highlights the precarious path for Australia over the next few years. 

As Labour market and Fiscal Policy Director, Greg Jericho, notes in in his Guardian Australia column, the OECD predicts in both 2023 and 2024 Australia's economy will grow by less than 2%. In the past such weak growth has been associated with recessions. And while a recession is not predicted, unlike for the UK and Germany, the OECD also notes the risks the lie ahead.

One major problem is that most nations around the world are lifting interest rates to attempt to slow their economies and thus reduce inflation. The OECD notes however that when nations act in concert the impact of higher interest rates on slowing the economy is greater, while the impact on slowing inflation is weaker. 

Given Australia has a higher proportion of mortgage holders with variable rates this increases the risk that higher interest rates will slow our economy more than in other nations, and still have less impact on inflation.  

But one sector of the economy are rejoicing at the current conditions that are causing the rising inflaiton - energy companies. 

The OECD notes that the share of GDP being spent on energy by OECD nations is higher now than it was during the OPEC crisis in 1974 and 1980. The evidence again is clear that a windfall profits tax should be levied on coal, oil and gas companies who a reaping massive profits while the cost of living rises sharply for households. 

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Go Home On Time Day: Unpaid Overtime and the Right to Disconnect

Wednesday November 23 is the 14th annual 'Go Home On Time Day', hosted by the Centre for Future Work and the Australia Institute. It's our light-hearted effort to remind Australians of the value of free time -- and to shine a spotlight on the steady, exploitive creep of work duties into the rest of our lives.

This year we are also releasing new research on the 'Right to Disconnect'. This is a new idea, with growing worldwide momentum, to give workers the explicit right to turn off their smart phones and email for work purposes after normal working hours.

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Public Services Drive Jobs and Living Standards in the Hunter

The provision of essential public services generates extraordinary and far-reaching economic and social benefits for the Hunter region. A new report prepared by the Centre for Future Work documents the scale of these benefits for workers, families and communities across the Hunter. The fact sheets provide a portrait of the different ways public services build a stronger economy, strong communities, and better lives.

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Multi-Employer Bargaining Necessary for Fixing Wages Crisis

Proposed reforms to Commonwealth industrial relations laws would create more opportunities for collective bargaining to occur on a multi-employer basis, rather than being limited solely to individual workplaces or enterprises. Business groups have attacked this proposal as a dramatic change that would supposedly spark widespread work stoppages and industrial chaos.

But as our Policy Director Fiona Macdonald argues in this new commentary for The Conversation, multi-employer bargaining is already allowed under variousexisting provisions of the Fair Work Act. The problem is that those provisions do not work. For example, the low-paid bargaining stream in the Fair Work Act has yet to result in a single multi-employer agreement, due to its stringent conditions and inconsistent application by the Fair Work Commission.

Dr Macdonald argues that reforming these multi-employer bargaining streams so they can actually work will be an important part of any strategy to revitalise stagnant wages in Australia. See her full commentary here.

For more details on the failure of existing multi-employer bargaining streams, and core principles for a stronger bargaining system, please also see the Centre for Future Work's submission to the Senate inquiry on the Secure Jobs, Better Wages reform package (co-authord by Dr Macdonald, Jim Stanford, and Lily Raynes), available here.


Wages growth improves but real wages fall at a record rate

The latest wages price index figures show that for the first time since 2013 wages grew by more than 3% in the past year. 

This growth is very welcome. It highlights that far from wages driving inflation, wage growth is only now beginning to grow at a pace that would be expected given the low level of unemployment. But as Labour Market and Fiscal Policy Director, Greg Jericho notes in his Guardian Australia column, while the level of wage growth we are seeing remains well below what would have been expected in the past with a 3.5% unemployment rate. 

The strong growth came mostly from the private sector through a combination of new financial year individual contracts and the 5.2% minimum wage increase.

But even this is not enough to prevent real wages from falling for the 9th straight quarter. For more than 2 years now prices have been rising faster the wages. It has seen real wages fall back to 2011 levels after a 4.6% fall since September 2020. 

The figures show that greater bargaining power is required for workers as they continue to lose out. The fastest wage growth for a decade should not see the biggest fall in real wages on record. 

We know that greater enterprise bargaining producers better wages growth. That business groups are so against the provision in the Fair Work Amendment Bill demonstrates how worried they are about the ability of workers to have increased ability to bargain. 

Profits have been growing faster than inflation, but wages are not. 

The latest wage growth figures are pleasing to see, but they also demonstrate the challenges ahead, and just how greatly workers' living standards have been hit by price rises that they did nothing to cause. 

 

 

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Restoring Collective Bargaining Coverage Would Boost Wage Growth

Proposed reforms to Australia’s industrial relations laws will help rebuild collective bargaining coverage in the national labour market, and provide a major boost to long-stagnant wage growth, according to new research from the Centre for Future Work.

In particular, proposals in the legislation to extend opportunities for collective bargaining across multiple employers hold potential to significantly boost collective bargaining coverage, based on the experience of other industrial countries. International comparisons show that the existence of multi-employer bargaining is strongly associated with higher coverage.

Higher collective bargaining coverage, in turn, is vital to stronger wage growth. The decline in coverage in Australia (which has fallen by close to half since 2013) explains over half of the change in wage growth over this period.

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Gas companies are profiting off of human misery - we need a windfall profits tax

Russia's illegal invasion of Ukraine caused a massive surge in gas and LNG prices that have enabled gas companies around the world, including Australia to make record-level profits. 

But none of these profits have come from either management decisions or productive investments. The price rise has not come from any economic improvements. No, they have come only from an illegal invasion that is causing great human misery. 

Labour market and fiscal policy director Greg Jericho notes research suggests that the gas sector has accrued around $26bn in profits due to price rises affected by the Russian invasion. He argues that all of these profits should be garnered in taxation - a view that echoes that of former Treasurer Secretary Ken Henry.

This revenue would be enough to cover the cost of rewiring the nation and greatly assist the tradition to renewables.

But the problem of revenue are much deeper than the need for a windfall profits tax.

Jericho's analysis of industry data reveals that the industry pays much less company tax relative to production than it did in the past. 

Had the industry paid the same level of company tax relative to revenue that is had in the decade prior to the opening of the Gladstone port, in 2019-20 alone, an extra $9.1bn in tax revenue would have been raised. 

Oil and gas are Australia's resources. Not only are their emissions causing climate change but the profits are largely headed overseas, and more than in the past not flowing through into taxation.

As Australians demand better and wider government services, and the costs of dealing with climate change grow ever higher, we need to ensure the fossil fuel companies pay their rightful share 

 

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Qantas Termination Threat Shows Why IR Reform is Crucial

New research from the Centre for Future Work quantifies the dramatic risks faced by workers whose employers unilaterally terminate enterprise agreements during the course of renegotiations. This aggressive employer strategy, which became common after a precedent-setting 2015 court decision, would be curtailed by new industrial relations legislation proposed by the Commonwealth government.

The paper reviews one dramatic example of this termination threat – dubbed the ‘nuclear option’ by labour law experts (because it ‘blows up’ years of collective bargaining embodied in existing enterprise agreements). Earlier this year, Qantas threatened termination of the EA covering its international cabin crew unless they accepted significant contract concessions.

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With household incomes set to fall, we need to think about what matters in the economy

The current tightening of monetary policy is undoubtedly having an impact. While it may take some time for the slowing of inflation to flow through to the official CPI figures - especially given the level of inflation that is being imported - the economy is set to slow drastically. 

As Labor Market and Fiscal Policy Director Greg Jericho notes in his Guardian Australia column the Reserve Bank in last week's Statement on Monetary Policy, has forecast GDP growth to slow to levels normally associated with recessions - even if the RBA is not actually forecasting a recession. 

However, in one area the RBA is not hedging at all - that of real household disposable income. This measure, which essentially examines the living standards of the average household, is forecast to decline at a pace as bad as any experienced in the past 60 years. 

While a fall in household incomes was always expected given the abnormal level of stimulus that occurred during the pandemic, the fall is predicted to be much greater than just going back to where we were. The Reserve Bank predict incomes will fall well below the pre-pandemic trend level. 

That such a drastic fall has received little coverage highlights that the orthodox commentary and debate around the economy largely focuses on aspects that minimise workers and households in place of corporations and the "broader" economy of GDP. 

The cost of taming inflation is too often discussed in terms of whether it will send the economy into a recession, without examining if that measure misses the real-life experience of most people. 

If the RBA forecast comes true, inflation will have been brought back to the RBA target, GDP will have kept growing, but household living standards will have plunged. 

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