Increase wages, improve bargaining for workers, and we’ll reap the economic benefits?

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Have we wrapped our heads around multi-employer bargaining yet?

It doesn’t feel like it.

But it’s not a new concept, and researchers say it’s working well in multiple countries overseas, so let’s get more familiar with it.

Could it work in Australia?

It touches on an old argument

Let’s begin with a quote:

“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.

“By ‘business’ I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level — I mean the wages of decent living.”

That quote comes from US president Franklin Roosevelt. He said those words in 1933 after his National Industrial Recovery Act (NIRA) passed Congress.

Roosevelt had only been president for three months, and that Act was part of his early attempt to drag the US economy out of the Great Depression.

Historians say the Act ended up being a policy failure, for numerous reasons (part of it was ruled unconstitutional in 1935) but as an early statement of principle from Roosevelt it pointed towards his later and more successful industrial policies.

It was built on the belief that it would be easier to revitalise US economic activity if every worker in the country was decently paid.

Instead of businesses trying to make profits by competing heavily on wage costs (which puts downward pressure on wages), they should dedicate more energy to competing on the quality of the goods and services they’re selling.

Roosevelt figured a change in long-standing business attitudes could be achieved by making part of the cost-base non-negotiable: wages and conditions had to improve everywhere.

But he also knew that, for his ideas to work, he’d have to keep the business community onside. Good businesses would need to have confidence that they wouldn’t be undercut by bad businesses refusing to play by the new rules.

So there would have to be a level playing field on wages and conditions, robustly supported by government.

“Throughout industry, the change from starvation wages and starvation employment to living wages and sustained employment can, in large part, be made by an industrial covenant to which all employers shall subscribe,” he said.

“If we ask our trade groups to do that which exposes their business, as never before, to undermining by members who are unwilling to do their part, we must guard those who play the game for the general good against those who may seek selfish gains from the unselfishness of others.

“The challenge of this law is whether we can sink selfish interest and present a solid front against a common peril,” he said.

I think about those principles often.

What type of industry, or economy, or society, will emerge from a “race to the bottom” on wage costs, compared to one that’s built on a “race to the top” on a properly-remunerated workforce with quality product offerings?

What about multi-employer bargaining?

Well, consider the issue of multi-employer bargaining, where such principles are involved.

Last weekend I wrote an article about the Albanese government’s plan to make multi-employer bargaining more prevalent in Australia.

It explained why the Organisation for Economic Cooperation and Development (OECD) has had an ideological conversion on collective bargaining in recent decades (including on multi-employer bargaining), and why OECD officials are now saying there should be more of such bargaining globally.

It also said that, according to European researchers, recent policy changes in Europe will ensure that multi-employer bargaining will be increasing globally in the next decade.

But one of the Australian researchers I quoted briefly in that piece, Associate Professor Chris F Wright from Sydney University, has his own take on this topic.

Professor Wright is an expert on industrial relations systems around the world.

He has co-edited a book, “International and Comparative Employment Relations,” that compares industrial relations systems globally and is recognised internationally as the leading book in its field.

He has written a submission to the senate inquiry into the Albanese government’s “Secure Jobs, Better Pay” Bill (the bill that includes provisions on multi-employer bargaining) which I didn’t have space to talk about last weekend.

In that submission, he explains why multi-employer bargaining would benefit Australia.

He said part of the reason why Australian employers were currently struggling to attract and retain staff in essential jobs such as those in the care sector — despite a 48-year low in unemployment — was because of deficient laws governing our labour markets.

He said Australia’s policymakers had become fixated, in recent decades, on making it increasingly harder for workers to negotiate fairer wages and better working conditions, as though the stagflation crisis of the 1970s could return in a heartbeat if workers had slightly more bargaining power and wages were allowed to pick up a bit.

He said that partly explained why wage growth was so sluggish, why so many workers were stuck on insecure contracts these days, and why the gender pay gap was still so large.

“Australia’s industrial relations laws are stuck in an outdated paradigm fixated on solving problems that have diminished or no longer exist, such as perceived excess union power and inflationary wage pressures,” he wrote.

So what does he recommend?

Some of the research evidence

Remember the distinction between a “race to the bottom” on wages and conditions and a “race to the top” on quality economic output?

Professor Wright says the findings from a large body of academic research indicate just how beneficial multi-employer bargaining can be for workers and employers when policies are focused on creating “stronger job security” and a “fairer redistribution in bargaining and wage setting”.

And he summarised some of research findings, which I’ve copied below:

  • Improving employment and wage distribution: A 2019 OECD report found that countries with multi-employer arrangements have “higher employment, lower unemployment, a better integration of vulnerable groups and less wage inequality” and more cooperative industrial relations than countries with single-employer bargaining systems like Australia.
  • Addressing gender inequality: Multi-employer bargaining is important for helping to address gender pay inequality by narrowing pay gaps between male-dominated and female-dominated jobs and sectors. A 2020 OECD report found that multi-employer arrangements are “necessary to negotiate targeted raises in female-dominated and low-paid sectors”.
  • Macroeconomic performance: In Austria, Denmark, Germany, the Netherlands, Norway, Sweden and Japan, multi-employer bargaining is an important part of macroeconomic policy because it allows wages to be coordinated across sectors and enterprises. It involves employer associations and unions ensuring wages negotiated in multi-employer and single-employer agreements are consistent with established wage targets that align with inflation benchmarks.
  • Skills and training investment: Coordinating training activities via multi-employer bargaining in Denmark, Norway and Germany helps to address skills shortages. That’s because multi-employer bargaining encourages employers to work together to devise common strategies to meet their workforce needs, rather than poaching each other’s skilled workers, as tends to happen in Australia.
  • Procedural efficiency: Agreements that cover sectors or multiple enterprises can reduce transaction costs for smaller employers who might not have the internal resources to negotiate an enterprise agreement.

Professor Wright said questions obviously remained about the “precise shape” the proposed system might take in Australia.

But multi-employer bargaining had delivered clear benefits in other countries and there was no reason why it couldn’t work here.

“The concerns raised [in Australia] about multi-employer bargaining overlook the extensive international evidence regarding its benefits, including for employers,” he said.

It’s a different way of thinking about things, right?

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By business reporter Gareth Hutchens (Original ABC Article)