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WAGES, FAIRNESS AND INCLUSIVE PROSPERITY - NATIONAL PRESS CLUB WEDNESDAY, 12 DECEMBER 2018

December 12, 2018

I acknowledge the traditional owners of the land, the Ngunnawal people, and pay my respects to their elders, past and present.

Just over a year ago, I stood at this lectern and outlined Labor’s argument that, in order to tackle rising inequality and build a future of inclusive prosperity, we must ensure that Australia has a workplace relations system that is both productive and fair.

That is, a workplace relations system that is fit for purpose – now and into the future.

A workplace relations system that provides for security of employment, that allows people to balance work and leisure, and that upholds the right to be safe at work.

Particularly in this time of rapid change, we need a system that fosters cooperation at the workplace and supports inclusive economic growth.
A workplace relations system that ensures workers receive decent wage rises and enjoy good conditions, and that employers are productive and profitable.

The intervening twelve months have only strengthened that argument.

It is the role of good government to acknowledge when the system is not delivering, and to introduce reforms to address failures.

So, you may have thought that, over the last 12 months, the government might have at least acknowledged, let alone looked to address, what economist Saul Eslake has referred to as

‘…one of the most pressing challenges facing Australian policy makers’,

and what Governor Lowe of the Reserve Bank has described as not just having negative economic consequences, but as also

‘…diminishing our sense of shared prosperity’.

They are referring to, of course, the stagnant wages growth presided over by this Liberal- National government.

Over the last 6 years, nominal wages growth has been the slowest of any sustained period since the Second World War.

This is despite the Fair Work Commission providing for increases to the minimum and award wages well above CPI for each of the last two years.

And, while slow wages growth is not unique to Australia, our experience recently is amongst the most severe of OECD countries.

Wages growth hit a record low of 1.9 per cent last year.

Under this government, Australia has experienced a fall in real private sector wages.

The most recent ABS data shows private sector wages growth was only slightly better over the year to September, at 2.1 per cent.
Better, but hardly cause for celebration.

While Australia has experienced a remarkable 27 years of continued economic growth, the benefits of prosperity have not been fairly shared.

Labour’s share has declined under this government.

Is it any wonder that our ‘sense of shared prosperity is diminishing’ when last week’s economic figures showed corporate profits have grown six times faster than average compensation per employee?

When labour productivity has outstripped growth in real wages over the past two decades?

Why wouldn’t workers feel that they aren’t receiving their fair share when the average ASX 100 CEO pay has risen four times faster than average wage growth, to be 75 times the average pay of a full time worker?

When the CEO of Dominoes earned nearly $37 million last year at the same time that allegations were aired that Dominos workers were being paid under the award?

No wonder that, for too many people, it seems that the link between hard work and fair reward has broken.

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.

Morrison’s approach to stagnant wages is to sit back and hope that the market delivers. But the market is not delivering, particularly for low and middle income earners.

In contrast, Labor acknowledges that the problem with wages is real, complex and requires positive action from government.

Today I will outline some of the ways that a Labor government will tackle the defects in the workplace relations system that are contributing to wage stagnation - the modern precariousness of work, widespread underpayment of workers, and declining collective bargaining.

Since introduction of the Fair Work Act in 2009 the labour market has changed at a pace and in ways which we did not and could not have predicted.

As a result, many people’s experience of work is more precarious.

The Curtin Economic Centre recently looked at job attributes and labour force circumstances and found that, since 2009, work in Australia has become more precarious. Despite greater workforce participation and lower unemployment rates, the quality of jobs in Australia has been declining.

I recently met Pepe, who works on the production line in a factory, and who came to parliament to talk to me about what is happening at her workplace.

She told me of a colleague who has been employed as a casual for 12 years – 12 years with no security of employment from one roster to the next, no security of income, and little power to change the situation.

She also told me about her employer’s increasing use of labour hire – about how a harmonious workplace has turned fractious because workers doing the same job side by side are being paid different wages, and because fewer workers feel that they have any real connection with or input into the business they work for.

I remember the time when corporate employers used to give their employees bonuses at Christmas – to show them how much their contribution to the company was valued.

This year, Qantas asked their employees to ‘volunteer’ to work for free over the holidays. That’s a strange way to say Merry Christmas from a company that recorded a profit in excess of $1 billion.

Qantas advised me today that they’ve reviewed and revised this proposal which is a positive development.

Larger employers and corporations are outsourcing their labour to smaller employers - through franchises, subsidiaries and related corporate entities, subcontracting, independent contracting (both real and sham) and labour hire.

This practice means that it is less likely that a worker is employed by the economic decision maker, and their wages are effectively set by the head of the chain, not by their direct employer.

It makes it harder for workers to collectively bargain, because although they may work at the same site or in the same business, it is not necessarily for the same employer.

It can also set up a situation where the only point of competitive tension in the industry is the cost of labour.

This means that employers who do negotiate better pay and conditions with their workers are vulnerable to being undercut by those who won’t.

Or by those unscrupulous or greedy employers, for whom the temptation to underpay and exploit workers in order to make a profit seems to be irresistible.

And, with union density about 15 per cent, many Australian workers do not have a bargaining representative to help them get a better deal or an advocate at their workplace to stand up for their rights.

Five years into this Liberal-National government, and it seems as though there is a new example of corporate greed and worker exploitation almost every week.

Two recently released reports illustrate the extent of the problem.

According to the FWO National Compliance Monitoring report, in the twelve months to 2017, almost 40 per cent of all workplaces audited by the FWO had either failed to pay workers properly or to keep proper records.

The non-compliance rate in the food and accommodation services industry was almost 60 per cent.

Staggeringly, when the Fair Work Ombudsman revisited 479 employers who had previously breached the law, it found that more than one third of them had continued to do so.

The UNSW UTS report, ‘Wage Theft in Silence’ revealed that more than half of the 4,000 temporary migrant workers interviewed by the authors had been underpaid. Nine out of ten didn’t make any attempt to recover their wages – and of those who did, most of them didn’t get any unpaid wages back.

How are good employers to compete with employers who are not even paying their workers the minimum wage?

There are more than 1.6 million temporary visa holders with work rights in Australia. They should not be used as cheap labour – and they should not be here on a skilled visa doing a job for a day longer than it takes to train an Australian worker.

And of course, local workers should always be given the first shot at local jobs.

Is it any wonder that many Australians don’t feel secure in their jobs when there are such high numbers of temporary overseas workers and the outsourcing of work?

As I travel the country, I am increasingly hearing about workers – in the gig economy and more broadly – who are being told by their employers that they are independent contractors rather than employees. As a consequence, they are not receiving basic entitlements such as super, paid sick and holiday leave, or workers compensation.

They are not able to bargain for better pay and conditions – or even demand to be paid the minimum wage.

To be clear, Labor’s position on the emergence of the ‘gig economy’ is that there is a place for new forms of work organisation.

But, if your business model can only succeed on the basis of undermining workers’ rights, avoiding workers’ entitlements, and avoiding paying tax, that is not acceptable.

Of course, the sourcing of labour over digital platforms is not the only way in which technology is impacting upon the nature of work.

It is a statement of the obvious that we are living in a time of rapid developments in technology and automation.

While opinion is divided as to the extent of the impact this will have on the availability of jobs overall, there is no doubt that in many industries it will significantly change the type of jobs available and the nature of work. And with this, the skills and training that workers need.

This is both a policy challenge for governments and a source of deep anxiety for many workers.

I might pause here to note that it is now more than two years – and two Ministers – since then Minister Cash launched a CSIRO report on ‘Tomorrow’s digitally enabled workforce’, declaring that “the future of work is upon us…” and calling for “…a conversation as Australians as to where the next IR system is going to take us.”

Twelve months ago I asked, What ever happened to that conversation?

Well, as was shown by the recent Senate Inquiry that Labor initiated into the future of work, and the significant list of education, training and industrial relations policies we have already announced, Labor and the rest of the country are having it.

It’s just that this government can’t seem to find its way out of chaos, dysfunction and union bashing in order to join us.

If elected, a Labor government will stop the use of labour hire by employers to undermine the pay and conditions of direct employees, by requiring that workers at a site who do the same job get the same pay.

And we will introduce a national labour hire licensing scheme, to rid the industry of those unscrupulous employers who exploit vulnerable workers by denying them even their minimum legal entitlements.

We will give job security to workers and legal certainty to employers by introducing an objective definition of casual employment.

We want to make sure people have options other than being stuck in precarious employment, with all the hours and commitment to a full-time job but few of the benefits.

We will increase penalties for systemic and intentional underpayment of wages, making employers liable to a penalty three times the size of the underpayment.

Under a Labor government, corporations who are the economic decision makers will be held responsible for underpayments that occur along their supply chain unless they can prove that they took all reasonable steps to prevent it from occurring.

We will, as was recommended by the Productivity Commission 2015 report into the workplace relations system that the Liberal government commissioned but has not even bothered to respond to, tighten up the definition of sham independent contracting.

Under a Labor government, if a reasonable person would think someone is an employee, then the person must be treated as an employee, with access to workplace entitlements.

But there is more to do.

The Keating Labor government introduced enterprise bargaining into workplace relations legislation in 1993.

At that time, the Accord partners stated that it was with the aspiration that the majority of the workforce would be covered by workplace agreements.

And, as then Prime Minister Keating made clear, awards were to be a safety net ‘…to catch those unable to make workplace agreements with employers’, not to prescribe the conditions of employment of most employees.

25 years and three tranches of changes to the workplace relations system later, the trend is that fewer employees are making workplace agreements with their employers and more employees are on the minimum pay and conditions set by awards.

Today, a worker is 50 per cent more likely to have their wages and conditions set by the minimum award than just a decade ago.

About one in four employees – more than 2.3 million people - are reliant on what was supposed to be a safety net.

Many more are paid scarcely above award wages.

And as I just noted, far too many are paid below it.

When about 1 in four employees are award reliant, those employers who do the right thing and negotiate with their workforce for greater output in return for better wages and conditions are disadvantaged.

It also leaves too many Australians relying on a minimum wage that is no longer a living wage, and which doesn’t give adequate consideration to contemporary life and cost of living pressures.

This is why, since 2015, Labor has made submissions to the Fair Work Commission calling for a fair and reasonable increase to the minimum wage.

It is why a Labor Government will restore penalty rates for up to 700,000 low-paid workers, and will make sure that award variations never reduce take home pay.

We are also committed to addressing the gendered undervaluation of work which persists within our system.

To date, there has only been one successful case using the equal remuneration provisions of the Act.

That was the Social and Community Service Workers Case, which achieved an outcome with support from the Gillard government.
Since then, two things have become very clear:
• the equal remuneration laws are not acting effectively; and
• the Liberal government does not care.

Labor does. We accept that our industrial relations system does not seem to be able to deliver for low paid women – and that this needs to change.

We have already announced a number of measures to address the gender pay gap, including:
• requiring companies with more than 1000 employees to report their gender pay gap; and
• banning pay secrecy clauses in industrial instruments, which disproportionately disadvantage women

But there is more to do to make ‘equal pay for equal work’ other than just a slogan, and Labor will have more to say on this topic.

We also need to re-invigorate collective bargaining - for better wages outcomes, better productivity outcomes, and more cohesive, cooperative workplaces.

The long term basis for better a successful economy is not cutting costs and cutting corners. It is collaborative and respectful partnerships between workers and employers.

Last Thursday the latest report of the General Manager of the Fair Work Commission into enterprise agreement making was tabled in parliament.

That report confirmed that agreement making is in decline, and that fewer workers are benefiting from it.

There were 5,000 fewer enterprise agreements, covering about half a million fewer employees, approved between 2015 and 2018 compared to the preceding three years. There were fewer enterprise agreements struck overall, and fewer in every industry.

Average annualised wage increases for new enterprise agreements have been in steady decline over the last decade.

The average wage increase for new enterprise agreements was 2.5 per cent last year, making 2017 the worst year for bargained wages in at least 2 decades.

Of course, there is variation across industries.

Some industries have experienced better wages growth, but others have experienced a decline in real earnings.

We need to ask the question – is our bargaining framework fit for purpose across the modern labour market and economy?

Enterprise bargaining has been at the centre of workplace relations since the 1993 Keating reforms. However, every iteration of Australia’s national workplace laws over the 25 years since (including even WorkChoices) has provided for multi-employer agreements in certain circumstances.

When Labor introduced the Fair Work Act in 2009, it was clear that the aspiration of the Accord partners that workplace agreements would cover the majority of workplaces had not been realised.

Enterprise bargaining had proven particularly elusive for low paid, low skilled, part-time and casual employees, and for women.

In an attempt to help these types of employees to access bargaining, Labor introduced the low-paid bargaining stream, which provides a mechanism by which employees can compel multiple employers to come to the bargaining table and allows for arbitration when an agreement can’t be reached.

‘Child care, community work, security and cleaning’ were identified as examples of industries where workers had struggled to benefit from enterprise bargaining.

The low-paid multi-employer process was intended to overcome barriers to bargaining such as employee lack of skills and industrial power, employer lack of time and resources, and third parties effectively controlling pay rates.

Almost ten years later, the low-paid bargaining stream has comprehensively failed to deliver – for workers in these industries and more broadly.

While there may be some debate about whether that failure is due to poorly drafted and complicated provisions, narrow legislative interpretations by the Commission, problems with the applications for determinations, or a combination of all of the above – the bottom line is that the low-paid bargaining stream has not delivered the boost to collective bargaining that was intended.

Meanwhile, as I have just discussed, enterprise bargaining is also struggling to deliver.

This is why, in a careful and considered way, looking at the evidence and consulting with experts, employers and unions, we are examining whether there is scope to enhance the role of multi-employer bargaining.

Despite what the Morrison government may say, there is no evidence that multi-employer bargaining leads to increased industrial disputation, let alone their hysterical forecast of economic doom.

That argument is felled by the simple fact that most of the world’s leading economies have some variant of multi-employer or sector bargaining combined with local or enterprise negotiations.

In fact, according to the OECD 2018 Employment Outcome Report, systems which have a mix of sector or multi-employer bargaining and enterprise agreements tend to deliver good employment performance, better productivity outcomes and higher wages for covered workers.

These are the outcomes that Labor wants for Australia’s workers and employers.

There is no one-size fits all solution to stimulate collective bargaining – which is why Labor is looking at enhancing the way our system works, to make it fit for purpose.

Labor is guided by the principle that workers should have the right to genuinely bargain collectively to get a fair and reasonable outcome.

What Labor has been doing and will continue to do is the hard policy work necessary to ensure that our system is fit for the nature of today’s labour market – which is very different to the one that existed in the 70s, let alone a decade ago.

The Morrison government might confuse an ideological crusade against unions with an industrial relations agenda, but Labor knows that the people of Australia are smarter than that.

We will not be distracted by a scare campaign from a Government desperate to distract attention from their own chaos and lack of direction.

Since the last election, Labor has announced a number of reforms to the Fair Work Act which will restore some balance into workplace bargaining.

We will not allow employers to enter into sham enterprise agreements with unrepresentative groups of employees and then use those agreements to cover different employees in different work sites.

We will change the test for the termination of enterprise agreements.

With the encouragement of this government, employers are now using the threat of termination of expired agreements as a bargaining weapon.

This has a chilling effect on negotiation of wages and conditions and it can not be allowed to continue.

And, we will not allow workers to languish on zombie WorkChoices agreements, where they are paid below the legal minimum.
Before I conclude, I just want to make some comments about the latest Liberal attack on the tradition of a balanced and fair composition of the Fair Work Commission.

This is not just a political issue – it has serious consequences for the way the entire system operates.

Between them, Ministers O’Dwyer, Cash and Abetz have appointed 20 commissioners, none of whom emanate from the workers’ side of the bargaining table.

From Menzies to Keating, up until Howard, there was a convention that governments appointed experienced representatives from both sides of the bargaining table.

It was Howard who distorted it enormously when he had Peter Reith and Tony Abbott as his Ministers and they appointed 18 out of 20 Commissioners from an employer background.

Abbott, Turnbull and now Morrison have followed in Howard’s footsteps.

The appointment of 20 consecutive employer representatives to the Fair Work Commission is an abuse of power by a desperate government happy to take instructions from a few of their business mates and trash the independence of a century old institution.

It is utterly reprehensible conduct that shows only hostility to workers in the labour market.

It is the opposite of the approach that Labor brings to industrial relations.

We showed, through the Accord, what can be accomplished when government, industry and unions are all around the table.

This Liberal government has shown what happens when they are not.

Australians deserve better.

They deserve a Shorten Labor Government focussed on restoring the balance in bargaining, repairing the link between hard work and fair reward, and building a future of inclusive prosperity.

 

WE'LL PUT PEOPLE FIRST