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.

“These measures will rebuild collective bargaining, enhance gender equity, ensure greater transparency, and equip workers with critical tools to pursue fair treatment,” Dr Stanford said.

Research published by the Centre for Future Work suggests collective bargaining coverage will rebound under the new laws, which will allow for multi-employer collective bargaining in certain circumstances. Bargaining coverage in Australia has declined dramatically since 2013, with just 11% of private sector workers now covered by a current enterprise agreement. That fall in coverage has been the largest single cause of record-slow wage growth over the last decade.

Based on the historical relationship between bargaining coverage and wage growth, rebuilding coverage toward pre-2013 levels will lift nominal wage growth by 1.6 percentage points per year. Additional wage growth of that magnitude would lift annual incomes for a typical worker by almost $1500 in just one year, and a cumulative total of almost $24,000 over five years.

Another provision in the reform package is a new limit on the ability of employers to unilaterally terminate expired enterprise agreements during their renegotiation. Many employers have used this loophole to wipe out years of collective bargaining gains. A recent example was Qantas’s threat earlier this year to terminate its agreement for cabin crew. Centre for Future Work modeling shows that could have cost senior staff as much as $67,000 per year. This so-called ‘nuclear option’ in employers’ arsenal will be prohibited under the new laws.

“With the post-pandemic acceleration of inflation, many years of wage stagnation have now tipped over into the fastest decline in real wages in Australian history,” said Dr Stanford.

“This bill is a needed and timely response to an unprecedented crisis in workers’ living standards.

“I congratulate the legislators, including Minister Tony Burke, Greens Leader Adam Bandt, and Senator David Pocock, for negotiating this package and working to approve it in Parliament,” Dr Stanford said.

New research shows Australian workers are on average working 6 weeks unpaid overtime per year, costing over $92 billion dollars in unpaid wages across the economy. The average worker is losing over $8,000 per year or $315 per fortnight due to what researchers have branded “time theft”.

23 November 2022 marks Go Home on Time Day, an initiative run by the Australia Institute’s Centre for Future Work, and now in its fourteenth year.

Economists have recommended a ‘Right to Disconnect’ to tackle what they say is the systemic problem of unpaid overtime. The research reveals that employers are profiting from 2.5 billion hours of time theft worth over $92 billion in unpaid wages amid a cost-of-living crisis and declining real wages.

Key Findings:

• The average Australian worker performs 6 weeks unpaid overtime per year, worth over $8,000 per worker per year
• The ‘Right to Disconnect’ is supported by six in seven (84%) workers, and has recently been recommended by the Senate Select Committee on Work & Care
• Across the workforce, this equates to $92 billion in lost income per year, roughly the same as the Commonwealth’s annual expenditure on healthcare
• Workers share of national income is at an all-time low of 44% in 2022, while the profit share of income is at an almost record high of 30%
• Respondents reported 4.3 hours of unpaid work per week, equivalent to 15% of total working hours. This equates to 224.3 hours per year per worker, or six standard 38- hour work weeks.
• Across the whole labour market, over half of all workers (56%) are unsatisfied with their working hours
• Almost one in two (46%) workers in Australia reported that they wanted more paid hours
• 84% workers support the Federal Government legislating a ‘Right to Disconnect’ that directs employers to avoid contacting workers outside of work hours, unless in an emergency, with only 8% who oppose

Negative impacts from unpaid overtime:

• The most commonly experienced negative consequences were physical tiredness (35%), followed by stress and anxiety (32%), and being mentally drained (31%), each affecting around a third of workers.
• Over a quarter of workers reported that overtime interfered with their personal life and relationships (27%), and 17% responded that it led to disrupted or unfulfilling non-work time.
• One in five workers identified that working outside scheduled hours negatively affected their relationship with work, with 22% who reported reduced motivation to work and 19% experienced poor job satisfaction.

“Our research shows unpaid overtime is a systemic, multibillion-dollar problem which robs Australian workers of time and money,” said Eliza Littleton, research economist at the Australia Institute and report author.

“This is time theft. Unpaid overtime harms our quality of life and reduces our time with family, friends, and those we care for.

“This Go Home on Time Day, our research reveals that unpaid overtime is robbing Australian workers and the economy of over $92 billion per year. This time theft only further exacerbates our current cost of living crisis.

“With workers share of national income at the lowest point ever, a focus on reducing unpaid overtime would improve quality of life and ease the cost of living pressure for millions.

“The prevalence of overtime suggests that ‘availability creep’ has eroded the boundaries between work and life.

“Workplace laws could be updated, including creating a ‘Right to Disconnect’ as recommended by the Senate Select Committee into Work & Care, and as exists for employees of Victoria Police, and Queensland Teachers”

Proposed reforms to Australia’s industrial relations laws are likely to support higher coverage for collective bargaining in the national labour market, and provide a boost to stagnant wage growth according to new research from the Centre for Future Work.

The report reviews historical data on the erosion of collective bargaining in Australia, and its close correlation to the slowdown in wage growth visible after 2013. The authors find that the decline of collective bargaining coverage (which fell by almost half in the private sector since 2013) explains over 50% of the change in wage growth during that same time.

“Restoring collective bargaining is vital to any strategy to get wages growing again in Australia,” said Dr. Jim Stanford, co-author of the report and Director of the Centre for Future Work.

“International evidence indicates that requires the ability to undertake bargaining at a multi-employer level.”

Key Points from Report:

• Each one percentage point loss of bargaining coverage has been associated with a reduction in annual wage growth of 0.15 percentage points.
• There is a clear and predictable relationship between countries which support broader multi-employer bargaining, and the level of bargaining coverage which they achieve.
• The reforms contemplated in the Secure Jobs, Better Wages legislation would incrementally restore collective bargaining coverage in Australia: by relaxing current restrictions on multi-employer bargaining, and supporting bargaining through other measures (such as limitations on employer termination of enterprise agreements, stronger dispute settlement provisions, and streamlined processes for approving new agreements).
• These reforms would elevate bargaining coverage in Australia toward a level typical of other countries where most bargaining still occurs at the enterprise level (as would be true under these reforms), but supplemented by some multi-employer bargaining and broader coordination. The OECD has identified a group of these countries, with an average bargaining coverage rate of 33%.
• That would reverse most (but not all) of the loss in coverage experienced over the past decade.
• Considering the observed correlation between bargaining coverage and wage growth, this would lead to an improvement in nominal wage growth of 1.6 percentage points per year.
• Just one year of wage growth at this faster pace would boost annual earnings for a worker with average full-time wages by $1473. That increment would expand to $8300 by the fifth year of (compounded) faster wage growth. On a cumulative basis over the first five years alone, the average worker would receive additional income of almost $24,000.
• The 1.6-percentage-point increment in annual wage growth would boost aggregate wage incomes by $15 billion in the first year, and $75 billion in the fifth year.