Australian industrial relations in 2018: Inequality,policy stagnation and a brewing storm

Introduction

This article introduces the Journal of Industrial Relations’ Annual Review for 2018 and presents an overview of the six articles that examine major industrial relations developments during the past year, and two international and practitioner review articles that offer theoretical and policy provocations, respectively. It was a year characterised by general political instability, but relative stagnation of industrial relations policy itself. Key players were clearly positioning for change in 2019.

The political instability was courtesy of Australia’s fifth change of prime minister, and the fourth mid-term change, in 8 years. On 25 August 2018, Scott Morrison replaced Malcolm Turnbull, becoming Australia’s 30th prime minister. The leadership uncertainty and change within the Coalition government leadership, including in the Jobs and Industrial Relations portfolio, in the context of an already slim parliamentary majority, seems to have contributed to another quiet year for industrial relations reform.

With a federal general election due in mid-2019, the minds of the industrial relations actors appeared to be firmly focused on major reform that may occur under the next government more than short-term minor change. After 10 years of operation, both unions and businesses expressed dissatisfaction with bargaining under the Fair Work Act 2009 (Cth). There appears to be some consensus on the need for reform, but a gulf remains as to why change is needed and what form it should take. The union movement’s ‘Change the Rules’ campaign, which commenced in 2017 (Wright, 2018), continued to press for major reform to address continuing stagnant wage growth by allowing industry bargaining and the right to strike to support it (Bray et al., 2019). The Shadow Minister for Employment and Workplace Relations indicated that, should Labor form government after the 2019 election, it might be open to industry-wide bargaining (McCauley, 2018). As noted by Rawling and Schofield-Georgeson (2019) in their review of industrial legislation, the Australian Labor Party pledged at its December national conference to facilitate ‘multi-employer collective bargaining’. On the other hand, employer associations were pushing for reform of the industrial relations system to one that encourages collaboration, is less complex and rigid, and less centralised (Thornthwaite and Sheldon, 2019).

So the stage is set for potential major industrial relations policy reform in 2019 but, after three decades of such change in Australia, what should be the balance between continuity and change in industrial relations institutions? In his international review article, Chris Howell (2019) examines this question observing that, while comparative industrial relations theory has emphasised path-dependent continuity of institutions with allowance for incremental change (Hall and Taylor, 1996; Steinmo et al., 1992; Thelen, 2009), advanced capitalist societies have travelled a 35-year path of liberalisation of industrial relations. Indeed, over this period, constant change has been a characteristic of Australian industrial relations policy, including departure from the longstanding system of conciliation and arbitration in favour of decentralised bargaining. Australia’s various reforms have been motivated by numerous factors, including party politics (Wright, 2018) and neoliberal ideology (Cooper and Ellem, 2008), and following the pendulum swinging on the continuum between equity and flexibility (Befort and Budd, 2009; Buchanan and Callus, 1993; Wright, 2017).

Following the considerable and regular change in industrial relations policy over recent decades, there have been calls for continuity of industrial relations policy. The Honourable Geoffrey Giudice (2014), in an earlier practitioner review article in this journal, mounted a strong argument for greater continuity, citing the benefits of a stable industrial relations environment for business and, in turn, the economy. Similarly, the report of the Productivity Commission’s (2015) inquiry into the workplace relations framework recommended continuity, positing that ‘repair, not replacement should be the policy imperative’ (p.2).

These calls for continuity appeared to have been heeded with the regulatory framework remaining largely stable in the following years. Certainly Rawling and Schofield-Georgeson (2019) observe that 2018 was a quiet year for industrial relations in the federal legislature. While there has been some policy adjustment at the margins, such as the ‘protecting vulnerable workers’ amendments to the Fair Work Act, there has been no major overhaul of the Fair Work legislative framework (Clibborn and Wright, 2018; Wright, 2017). Some state governments have returned to regulating private sector enterprise industrial relations, which has been the primary domain of the federal government since the WorkChoices legislation of 2005, addressing in particular labour hire registration, modern slavery and wage theft. This revitalisation of the states’ role in industrial relations is a significant development since all, except Western Australia, had formally ceded this territory to the Commonwealth by the Fair Work Act era.

But in 2018, the pressure for federal industrial relations reform increased. Giudice’s call for stability is the starting point for this year’s practitioner review, in which Josh Bornstein argues for reform to address declining employee bargaining power and growing inequality. The challenge of growing inequality was examined in last year’s annual review (Wright, 2018) and the issue continued to cause concerns in 2018. Bornstein argues that Australia’s bargaining framework has not kept pace with major structural changes in the labour market, reducing workers’ bargaining power, contributing to rising inequality, and raising concerns about potential social, economic and political costs.

A number of articles in this annual review raise concerns about inequality. Oliver and Yu (2019), Bornstein (2019) and Thornthwaite and Sheldon (2019) argue that a bargaining power disparity between labour and capital is contributing to weak wage growth. They suggest that contributors to this disparity include structural problems with collective bargaining, particularly in small and medium enterprises and fissured workplaces, as well as restrictions on industrial action (McCrystal, 2019). Oliver and Yu (2019) note that businesses are exercising greater discretion in pay setting due to the decline in collective bargaining (see also Oliver and Walpole, 2018). Williamson et al. (2019) note continued workplace inequality along gender lines despite a decade (and more) of reforms designed to narrow the gap. Oliver and Yu note a policy change to reduce permanent migration and skilled temporary migration but to relax eligibility requirements for temporary unskilled visas. These changes in labour supply risk further widening the gap between the pay levels for high-skilled and low-skilled jobs and growth of the population of workers without voice and at risk of suffering wage theft (Clibborn, 2018; Clibborn and Wright, 2018).

Articles in the annual review

Each of the articles in this Annual Review considers a distinct aspect of Australian industrial relations in 2018 or provides relevant theoretical and policy contexts for these developments. In their examination of the Australian labour market, Damian Oliver and Serena Yu note continued modest wages growth of about 2%, against the historical norm of 3–4%, despite strong employment growth and low unemployment, consistent with international trends. Against this backdrop, the Fair Work Commission increased the National Minimum Wage by 3.5%. However, the awards to which this increase applied were being used less for their intended purpose as safety nets to underpin collective bargaining, and instead as actual pay rates, due to private sector collective bargaining coverage continuing to decline to historic lows. They also note employment growth concentrated in part-time jobs in both manufacturing and white-collar industries. The most notable shift in labour market policy of 2018 that they identify is the significant reduction in permanent skilled migration and the impact of stricter eligibility requirements for temporary skilled migration. They raise the prospect that these developments may contribute to future increasing pressure on wages.

Sue Williamson, Meraiah Foley and Natalie Cartwright review women, work and industrial relations in 2018 in the context of developments over the previous 10 years since the first review on this topic was published in this journal and the Fair Work Act was introduced. The authors argue that women continue to face inequality in the labour market. Despite policy and employment frameworks that have created a foundation on which to build gender equality (Baird and Williamson, 2009), progress has been sporadic. For instance, they find that, despite the introduction of legislation such as the Paid Parental Leave Act 2010 (Cth) and the Workplace Gender Equality Agency Act 2012 (Cth), the gender pay gap and undervaluation of feminised work are persistent. Women carry much of the caring burden, while little attention is paid to men taking parental leave. However, the authors do note the passage in 2018 of new unpaid leave entitlements for employees experiencing family and domestic violence, via both Fair Work Commission determination regarding modern awards, and amendments to the National Employment Standards.

Mark Bray, Johanna Macneil and Leslee Speiss’s article on unions and collective bargaining observes a storm brewing. Identifying unions’ frustration with perceived restrictions on their ability to protect workers’ rights, they report that unions are seeking to ‘change the rules’. The authors argue that employers have found new ways to exclude unions and, supported by their associations, have succeeded in recent years in influencing the Coalition government to reduce collective bargaining rights. Union membership and the number and coverage of collective agreements continue to decline, with wages failing to keep up with inflation and productivity increases. Some unions have responded by merging, with the new Construction, Forestry, Maritime, Mining and Energy Union of Australia approved by the Fair Work Commission in 2018, and United Voice and the National Union of Workers merger plans progressing. The major focus for the union movement is on potential legislative change, particularly for the collective bargaining framework, after the 2019 federal election.

In their article on employers and employer associations, Louise Thornthwaite and Peter Sheldon find those parties spending considerable resources on lobbying and submissions to a range of inquiries. Apart from this type of regular work for employer associations, they too are anticipating change to the industrial relations landscape. The authors identify escalating public discontent with business in relation to industrial relations and broader socio-political issues. This questioning of business’ social licence, together with the looming federal election, has provided cause for concern amongst employers and employer associations as they pursue their own industrial relations agendas. In essence, employers and their associations have succeeded, since the late 1980s, in shaping the industrial relations rules to suit their purposes generating, in many cases, negative outcomes for other industrial relations parties. Those other parties’ voices are now gaining volume, calling to ‘change the rules’. Nonetheless, employer associations continued to pursue their own reform goals, criticising the current industrial relations system as ‘overregulated’, ‘overly complex’ and ‘rigid’ (Thornthwaite and Sheldon, 2019). For example, they sought increased access to individual agreement-making, reform of the better of overall test (BOOT) that they argued is now unworkable, simplification of workplace health and safety regulations, and diluted application of the primary duty, and they argued against additional regulation of non-employee workers’ entitlements.

Michael Rawling and Eugene Schofield-Georgeson observe, in their review of industrial legislation, that 2018 was another quiet year for the passing of federal industrial legislation. They identify the reasons for this as political turmoil in the Coalition government and its lack of an overall reform agenda for labour law. Nonetheless, they examine a number of major pieces of legislation passed, including the Modern Slavery Act 2018 (Cth) and its New South Wales counterpart legislation. They also observe the federal Coalition government’s continued attempts to introduce increased union governance measures, but with less success than in previous years. The stagnation that they observe in the federal Parliament has left a legislative void, which some state governments are seeking to fill in relation to, for example, labour hire and protecting vulnerable workers.

While 2018 was a relatively quiet year for legislative reform, Ingrid Landau and Dominique Allen’s article on major court and tribunal decisions confirms that the courts and Fair Work Commission made notable contributions. Significant decisions dealt with issues including the definition of ‘casual’ for the purposes of the National Employment Standards, labour hire employers’ obligations to treat their employees fairly, the employment status of food delivery workers in the gig economy, and the 4-yearly awards review by the Fair Work Commission. Important decisions impacting collective bargaining were also made in relation to the application of the BOOT test and employees’ entitlement to pay during lockouts.

In his practitioner review, Josh Bornstein makes the case for significant industrial relations reform. Articulating a crisis of weak employee bargaining power, he identifies a number of factors also addressed in the other articles of this annual review that are contributing to inequality between labour and capital. He places the blame for inequality, a symptom of which is wage stagnation, on Australia’s bargaining framework that has not served workers well, particularly those in small and medium enterprises and fissured workplaces. Bornstein argues that employer associations have successfully lobbied for an industrial relations system that is flexible for employers to the detriment of equity.

Finally, Chris Howell provides the international review, which offers a deep theoretical grounding for many of the observations in the other articles. He situates his annual review in the international context of liberalisation of industrial relations policy in developed nations driven by debt-led and export-led capitalist growth models. This review focuses on three key issues for industrial relations: the balance between continuity and change, the drivers of change, and the implications of industrial relations change for the role of political regulation. By examining the various strategies of state labour regulation to bring order to liberalisation, Howell invites us to rethink the role of industrial relations institutions, in particular their ability to shape or respond to powerful forces in order to pursue more equitable or efficient growth models and change the balance of class power. These are salient questions for policy makers and industrial actors in Australia on the cusp of potential change. They also present a strong and constructive challenge for researchers seeking to explain change.

Conclusion

In the context of political uncertainty and policy stagnation there is much anticipation of change, and agitation for change, in 2019. There remain a number of open questions. Will Labor win government as has been suggested by the polls consistently since the last election in 2016? If they do, will they introduce transformational change of industrial relations policy or continue to merely introduce further minor reform? If the Liberal-National Coalition achieves a surprise election victory, will they continue a liberalisation agenda or will their moderate voices seek to address public discontent with business in relation to industrial relations? Where on the continuum from efficiency to equity will any changes sit?

Australia’s 20th-century industrial relations system was built on the assumptions of the male breadwinner, direct employment, permanent migration, strong unions and enforced employment laws. It is well established that each of these has changed, with close to equal workforce participation by gender, more complex forms of participation including casual, part-time and independent contracting and the rise of fissured work structures, large temporary migration intakes with restricted work and social rights, weak unions in terms of both continued reducing membership density and disappearing rights, and widespread non-compliance with employment laws.

To what extent will any policy reform in 2019 address these fundamental changes? Will unions be further marginalised or granted a greater role in industry-wide collective bargaining to raise wages and greater rights of entry to aid organising and enforcement of employment laws? Will the National Employment Standards rights to request flexible working arrangements be made enforceable? Will difficulties faced by those seeking to amend award wages for low-paid female-dominated industries be addressed (Williamson et al., 2019)? Will measures be introduced to properly address non-compliance with minimum employment standards? While court and tribunal decisions have addressed, for relatively narrow purposes, the definition of ‘casual’ and classification of particular workers in the gig economy (Landau and Allen, 2019), will these issues be left to private regulation or will they be addressed through more fundamental reform in the public arena?

As concerns over inequality were left unaddressed in 2018 a storm was brewing, and whether or not that storm blows winds of change is the key question for 2019.