Work, Wages And Division: Creating A Fair And Productive Labour Market

THE HON BRENDAN O’CONNOR
SHADOW MINISTER FOR EMPLOYMENT AND
WORKPLACE RELATIONS
MEMBER FOR GORTON

I acknowledge the traditional owners of the land, the Ngunnawal and Ngambri people, and pay my respects to their elders, past and present. Today, I want to build on an argument I have been making for some time.  

That is, that we cannot tackle inequality or build a future of inclusive prosperity unless Australia has a workplace relations system that is both productive and fair.   We have to both address the challenges in the labour market that exist now, and prepare for what is coming.

Essential to that task is striking the right balance of power between workers and employers.   

The tilt of bargaining power away from workers and to employers has gone too far.

Too many of our fellow Australians can no longer see the link between hard work and fair reward.  

Inequality is at a 75 year high.

Wage growth is flat lining.

Work is too often hard to find, and insecure.

For too many low and middle income earners, access to education and training is limited.

Workers don’t believe they have the power any more to negotiate a better deal at work

And many are deeply anxious about what the future will bring.

The consequences for our society and our economy are profoundly negative.

The Turnbull government seems to be in denial about the challenges confronting working Australians.  But we cannot afford to be.

This country deserves better than a government which puts corporate profits above people’s wellbeing.

It deserves a government that is willing to prepare for ‘the future of work’, so that tomorrow’s workers are beneficiaries, not losers in the technological tumult.

It deserves a government that understands that the challenges in Australia’s labour market and workplaces today are real.

For low and middle income earners, increased productivity has not recently been matched with a commensurate increase in wages.

Over the last 10 years, real labour productivity grew by 20 per cent while real wages grew by only 6 per cent.

Wage’s share of GDP is well below the average of the last 50 years.

And the gap between high income, high wealth individuals and the rest of Australia is getting wider and wider.

Over the last four decades, real wages for the top 10 per cent of income earners have grown by 72 per cent.  

This is more thanthree times the rate of increase in real wages for the bottom 10 per cent of income earners.

Try convincing anyone who is looking to balance a family budget;

hoping to save for their first home;

choosing between paying the electricity bill or putting food on the table –

that corporate profits and executive salaries are trickling down to workers.

Australians are feeling the pinch.

Household incomes have grown about $3 a year in real terms since 2008.  What can you buy with $3 these days?  Not even a cup of coffee.

If that’s not bad enough, the Reserve Bank has warned workers to expect stubbornly low wage growth "for some time" yet.

And it’s the lowest paid workers who are really feeling it.

Retail workers have experienced some of the lowest wage growth of any sector.

Retail workers – the very workers who, thanks to the support of Malcolm Turnbull and his government for cuts to penalty rates, are facing a pay cut EVERY 1 JULY between now and 2020.

The Turnbull government is presiding over the lowest wage growth in a generation, and the Liberals are clueless about what to do about it.

Instead, they obsess about destroying organised labour in all its forms, which will only put downward pressure on wages

What, exactly, is their plan to deal with the wage crisis?

A blind faith in trickle down economics?

$65billion of unfunded subsidies to big business.That’s the Turnbull government’s fiscal response to Australia’s stagnant wages.

That, and an absurd comment by Treasurer Scott Morrison, when he said: “Now is obviously a good time with people coming off enterprise agreements to sit down and work out where things are heading over the next three, five years.”  

This shows how completely out of touch the Liberal/National government is with the nature of Australia’s labour market today.

You’ve all heard the numbers – but it is important to really think about the picture they portray – and the lives they represent.

  • Our unemployment rate is stubbornly high at 5.6 per cent – above countries such as the UK and the US.
  • A further 700,000 Australians have had to take on a second job to make ends meet.
  • Youth unemployment is very high at 12.8 per cent.
  • A record number of Australian, over 1 million, are underemployed.
  • More than 780,000 people are on some form of temporary work visa.

As in the UK, and the US and Canada, Australia’s labour market is more divisible than ever.

The Chief Economist of the Bank of England, Andrew Haldane, when analysing the cause of stagnant wages in the UK, recently observed that profound changes in UK workplaces had produced a period of "divide and conquer" that in turn had left workers less able to bargain for higher wages.

As Mr Haldane said:

"There is power in numbers. A workforce that is more easily divided than in the past may find itself more easily conquered. In other words, a world of divisible work may reduce workers' wage-bargaining power…"

What is ‘divisible work’?

Well, it’s non-standard employment: casual jobs, fixed term contracts, self-employment, labour hire, internships, temporary visa holders.

And Australia has the third highest rate of non-standard employment in the OECD.

While all of these forms of employment may suit some people at certain stages of their working life, and used properly, are a legitimate part of the labour market, for too many it is not much more than a poverty trap. 

And it has put downward pressure on all wages.

The divisible nature of work makes it harder for workers to collectively bargain for better pay. 

We see this in the fall in union density over the last 30 years, from over 45 per cent to 15 per cent of the workforce.

We see it in the number of employees covered by federal enterprise agreements, which has declined to one third of the Australian labour market.

Disturbingly, in the new enterprise agreements which are being made, wage increases are below the average of previously made agreements.[1]

At the same time, almost one in four workers are now award reliant, up from one in six in 2008.  This is a significant negative change, as more than two thirds of award-reliant employees are in the bottom half of the distribution of income and almost half are in the bottom three deciles.

Recently, I met with Adelaide farm workers employed by Perfection Fresh.  Of the 440 workers employed by the company, only 70 have permanent jobs, the rest are casual, some of whom have worked there for almost a decade.

These workers do the hard yards, preparing the produce sold in the multi-billion dollar supermarket industry, yet they are left with low pay and insecure work.

As I said, the numbers represent real people - all too often under paid, all too often afraid to complain, all too often without the power to negotiate for a better deal.

What is also increasing in today’s labour market is the ‘gaming’ of our industrial relations laws by employers, cheered on by a complicit government. 

As I have previously contended, with the advantage of hindsight it may now be said that the last Labor Government, in righting one of the greatest wrongs ever done to workers in this country by repealing WorkChoices, perhaps should have recognised that the labour market was changing, at a speed and in ways that would mean that simply restoring industrial relations laws would not be sufficient.

The growth of divisible work makes today’s labour market unrecognisable from the labour market of Hawke or Keating or Howard; which, once acknowledged, should be enough to put paid to the argument that Labor wants to turn back the clock.

We are not interested in laws that regulate a non-existent world. We intend to reform existing laws for the 21st century, including attending to divisible work and the challenges of the gig economy.

In contrast, the Turnbull government has shown no interest in this pursuit.

In fact, what they have done, is to set the bar very low for the way in which employers treat their employees.

Look at the way the Turnbull government treats its own workforce: dragging out bargaining, outsourcing jobs, privatising services and fighting every step of the way the efforts of the CPSU to protect the pay and conditions of Commonwealth public servants. 

By word and deed, this government has emboldened too many employers to avoid their workplace obligations, secure in the knowledge that this government cares more about destroying unions than it does about ensuring workers receive decent pay, conditions and job security.

Of course, it’s not most employers, but it is too many, and it is growing.

And it’s not just fly-by-night operations – it’s often by big corporate flagships that are household names.

There is nothing wrong with a business using contractors to carry out services for them.  

But there is something wrong with Myer subcontractors employing cleaners on sham contracts so that they can be paid below award wages.

And with Pizza Hut putting delivery drivers on sham contracts so that they can pay them as little as $6 an hour.

That’s why a Shorten Labor government will amend the law to prevent employers forcing their workers into sham contracting arrangements to avoid direct employment.

There is nothing wrong with taking a risk on starting a business and not succeeding. 

But there is something wrong with walking away from a business to avoid paying workers what they are due – and then starting up all over again, the same business but under a new name, debt free but ex-employees unpaid.

That’s why the next Labor government will implement a suite of measures to combat phoenixing, including requiring all company directors to get a Director Identification Number, and increasing penalties for phoenix activity.

There is nothing wrong with sourcing labour through a labour hire firm to fill gaps in a business skill set, deal with fluctuations in demand or replace workers on leave.

But there is something wrong with a company like CNC Labour Hire underpaying, by $5 an hour, the people who pick tomatoes for Woolworths, Aldi, IGA and Costco.

Or with Baiada, a supplier of chickens to big supermarket chains and fast food franchises, using labour hire companies which paid workers as little as $11.50 an hour – well below the minimum wage – for shifts of up to 19 hours a day!

There is something really wrong when those big, household-name companies apparently feel absolutely no responsibility, or consider themselves immune from reputational risk, for exploitation of the workers on whose labour they make a vast profit.

This is why at the last election, Labor promised a National Labour Hire licencing scheme.   We said we would issue a licence to only those who have a clean record of complying with employment, tax and OH&S laws, and that licences would be revoked for serious misconduct. 

We will also reform the definition of “casual” work, so that it is used for the purposes for which it was originally intended. 

Day after day after day another story about workers being ripped off hits the media – so much so that wage theft appears to be reaching epidemic proportions across our economy.

It’s not just 7-Eleven, or Dominos Pizza, or a certain celebrity chef underpaying workers.

Over the 12 months from June 2015 to July 2016, the Fair Work Ombudsman recovered more than $27million owed to over 11,000 workers, from almost 30,000 allegations of Fair Work Act breaches. 

And these phenomenal numbers represent just those instances of underpayment and exploitation of workers that were reported to the Ombudsman.

That’s why Labor took a policy to the last election to:

  • increase penalties for employers who systematically underpay workers,
  • make companies responsible for business practices which rely on underpaying workers, and
  • ensure that Australian and temporary overseas workers are not being exploited.

Increasingly, we are seeing that when one company successfully avoids their Fair Work obligations, or games the system, the tactic rapidly spreads across the economy. 

Take the termination of enterprise agreements.

In 2015 the Fair Work Commission terminated 12 Aurizon enterprise agreements, covering 6,000 workers – throwing those workers back on award conditions, cutting their wages and taking away conditions – such as redundancy pay - won over decades of collective bargaining.

What has followed this decision is a sharp rise in the number of enterprise agreements terminated. It has more than trebled, from 156 in 2014 to over 500 in 2016, with the trend continuing this year.

And the threat of termination is now being used as a bargaining strategy by employers across the economy.

It is not illegal, but it is bad law. 

It acts as a disincentive to bargain collectively and in good faith. 

And the Liberal government is complicit in it every step of the way.

The Minister for Education, for example, recently encouraged other universities to do as Murdoch University did in August – abandon bargaining with their workforce, apply to terminate their enterprise agreement, and effectively slash their employees’ wages by more than 30 per cent.

When you have a government which calls for employers to terminate enterprise agreements, there is no doubt that they put profits before people. And that they have no interest in enterprise bargaining.

Therefore, if elected, Labor will enact laws to prevent employers from simply going to the nuclear option of terminating agreements. 

Take, as another example of gaming the system, companies reducing pay and conditions by using subsidiaries or contractors who impose enterprise agreements upon a workforce who had no say in them.

The Senate Inquiry into Corporate Avoidance of the Fair Work Act revealed that companies are increasingly using enterprise agreements ‘voted on’ by short-term casuals to bind permanent workers, or by workers in one state to bind workers anywhere in Australia, or by management staff to bind the rest of the workforce.

We saw it happen at Carlton United Breweries.

As the Senate inquiry noted, there are now new owners at CUB, who I’m advised take a very different approach to the former owners, which Labor welcomes.

But what happened at CUB was a display of corporate tactics that can only be described as gaming the Fair Work laws.

The simple version of a complex situation is that last year, CUB changed the labour hire provider it used for its existing Victorian maintenance workers.  As a result, 55 people were told that they were all sacked – but they could have their jobs back, with one catch. 

They would have to be employed under the new labour hire company’s enterprise agreement.  That agreement was struck with a few casual workers in Western Australia, who had no connection to CUB or to the Victorian maintenance workers.

Under that sham enterprise agreement, their wages would have more than halved.

Only through a long industrial and community campaign by the workers and their unions – and the good sense of the incoming owner – was this matter resolved.

The same tactic is being used right now at ESSO and other companies across the country.

I can announce today that Labor will legislate to make clear that the workers who vote on an agreement must be representative of the workers who may ultimately be covered by the agreement.

Labor will also change the law so that workers and their unions can apply to the Fair Work Commission to re-negotiate sham enterprise agreements.

When I speak about the balance of power tilting too far in favour of employers, these examples – and hundreds and hundreds more just like them - is what I mean.

And it is their cumulative impact, along with the growth in divisible work and decline in union density, that is making wages fall and working life less secure.

Unlike Labor, the Government has no plan to deal with any of it – apart from to allow job security to suffer this death by a thousand cuts. 

And I contend that worker’s loss of bargaining power is not only a threat to wages growth, but also to economic growth.

It plays a direct role in rising inequality.  As I’ve said before inequality is not the price of economic progress, it is an impediment.

When working fairly, collective bargaining generates productive outcomes for businesses and delivers better wages and conditions for workers, whether or not they are union members.

And the economy benefits through more cooperative and innovative workplaces and more committed and respected workers.

You just have to look at what is being said by the OECD, the IMF, the World Bank, to understand the damaging consequences of the Liberal’s ideological war on unions and workers.

Yet, piece after piece of Turnbull government legislation is attacking workers’ democratic rights; undermining their ability to collectively bargain – hurting working people and our economy at the same time. 

Now it’s true that Liberals love nothing more than putting unions in the dock.

The last conservative prime minister not to deploy a Royal Commission into trade unions was Billy McMahon (1971-1972).

But, the current Liberal government must win the prize as the most virulent anti-worker, anti-union government this country has ever seen.

In fact it is a government divided on almost every area of public policy other than what to do to unions and penalty rates.

As the government goes into hyper drive with its assault on unions and workers and industry super funds, it’s worth taking a moment to remember the indispensable role the union movement played in the establishment of universal health care, superannuation, family tax benefits, occupational health and safety, the eight hour day, penalty rates and the minimum wage – in combination commonly known as our enviable social wage.

The sort of things an investment banker might not prioritise!

These reforms were introduced by Labor governments which recognised the value of taking a collaborative, forward looking approach to national leadership.

The most concrete example of this is when Labor achieved the landmark Prices and Incomes Accord in 1983 by bringing employers, unions and the government together. 

The Accord set the foundation of the nation's economic, social and industrial relations policies for the next 30 plus years, because it placed industrial relations into its broader economic and social context. 

Contrast that with the Liberal approach.

The Abbott and Turnbull Government, like the Howard Government before it, have sought to divide employers and workers at the very time that our economy demands more collaborative and innovative workplaces.

One of the consequences of seeking to exile unions is to deny workers and their representatives a role in dealing with the tough decisions which have to be taken in dealing with contemporary challenges. 

Labor does not and will not lock out anyone from the national debate.

The challenges facing the Australian economy in 2017 are no less challenging than those in 1983. 

Now is the time for a government to again work with unions and employers in the spirit of the Accord era – but with a distinctly 2017 approach - to develop a sustainable base for Australia's economy that acknowledges the challenges of low wages growth and rising inequality and job insecurity. 

This is exactly the point that Bill Shorten was making just last week when he called for something truly radical - cooperation. 

Labor believes that better, more lasting solutions arise when all stakeholders have a seat at the table; when we negotiate our differences to find solutions that benefit the many.

That’s how we get an economy where people see reward for their hard work and a return on their contribution.

Because, the growing inequalities of today are not inevitable.

Many of them stem from policy decisions such as tax cuts for the wealthy and big business, the social immobility that comes from underinvestment in education and training, and the steady erosion of worker rights.

Some of them reflect rapid changes in technology, and the way those changes have impacted and will impact on the type and nature of work. 

Aside from the list of Labor reforms to directly and immediately address current problems in our workplace system, our policy work is continuing.

We know more must be done, for example, to reduce the gender pay gap, to make industrial relations more user friendly for small business, to bring intractable disputes and negotiations to an end, to make the Fair Work Commission easier to access, to create job pathways for people with disabilities, to tackle discrimination of older workers so they stay in the workforce, and to help younger people to enter it in the first place. 

I am also acutely aware that a central plank in addressing inequality is ensuring that our industrial relations system is not only adaptable to the changes we see in today’s labour market; but also to the changes that are coming.

Some people see the future of work as utopia.  Others, dystopia.

While I don’t fall into either of the extremes, I do believe that the potential impacts of technological change on work, life and society are profound, where opportunities and challenges are plentiful.

And that it is the responsibility of government to make sure that those profound impacts benefit workers across the economy – not just the big end of town.

For millions of people, new technologies have unlocked opportunity and prosperity, and enabled them to lead more rewarding and more meaningful lives.

But not always for everyone.

In fact, the distributional divide of technological change is greater today than at any time in modern history. There is a real risk that its gains will be concentrated among those at the very top, in a small number of leading firms, in a small number of locations close to the CBDs of our big cities.

And that sort of inequality is not acceptable to Labor.

Take also the emergence of the gig economy, discussion of which too often resembles a child-like embrace of the seductive new thing. 

There are undoubtedly some remarkable benefits to this, and there is a place for new forms of work organisation.

However, let me be clear.  If your business model can only succeed on the basis of undermining workers’ rights, avoiding workers’ entitlements, and avoiding paying tax, well that is not something that Labor supports.

This is why, at the last election, we put in place six principles on the sharing economy, including that new services must support good wages and conditions, pay their fair share of tax, and provide access for people with disabilities.

Around the world, governments and oppositions alike know that future of work challenges are coming – report after report has told us so.

As my colleague Ed Husic - who has advocated the need to prepare for the challenges and opportunities we confront - has recently noted, technological developments and automation are likely to be pervasive, impacting both white and blue collar, possibly affecting 3.5million Australian jobs. 

The most recent international evidence tells us that not only STEM, but also creative, social and problem solving skills, will be needed and that sectors such as health, education, food and engineering may offer a wider range of opportunities.

Yet Australia’s current government has been inactive on these questions to the point of negligence.

More than a year ago, Minister Cash launched a CSIRO report on ‘Tomorrow’s digitally enabled workforce’ – and then did nothing with it.

She declared then – well after others had arrived at this conclusion – that “the future of work is upon us…” and called for “… having a conversation as Australians as to where the next IR system is going to take us.”

What ever happened to that conversation?  Just as the Prime Minister ran dead on the role of innovation, the Minister has been notably silent on the industrial relations system and the future of work.

The Liberal government simply refuses to acknowledge the challenges of insecurity, inequality and social immobility flowing from automation and technological change.

The economist John Kenneth Galbraith noted that all great leaders have had one common characteristic – the willingness to confront unequivocally the major anxiety of their people in their time. 

As I travel around the country talking to workers, there are few issues about which they are more anxious.  For themselves and for their children. 

Labor will move to establish a Senate Inquiry into the Future of Work, and just as importantly, the Future of Workers.  This inquiry will consider the implications of new technologies, social trends and policy choices affecting the regulation of work, and will make practical recommendations to address the most pressing challenges and opportunities these present to our labour market and system of workplace laws.

We have to create the future we want, not drift into a future we will regret.

Governments make choices about the base on which we build our future economy and society.

Our economy is stronger when our society is more equal; when our workers are skilled, confident and capable; when governments, businesses, unions and workers are engaged in dialogue; and when there is a broad base of participation, contribution and reward.

The future we want is an Australia that aspires to higher living standards, better life chances and a life of dignity for all of its people

When we stand up for working people and their communities, and when we listen to business concerns, we stand up for a fairer, more equitable, more inclusive Australia – and a more prosperous one

That’s the future Labor wants to help realise.

MEDIA CONTACT: ERIN SMITH 0458 950 010

[1] September Reserve Bank Board Meeting Minutes; Department of Employment, Trends in Federal Enterprise Bargaining, March Quarter 2017.