Wage Negotiations Could Inflate Prices of Goods and Services: Australian Productivity Commission

A bartender pours beer for his customers at a pub in Sydney, Australia, on Oct. 11, 2021. Saeed Khan/AFP via Getty Images

The Australian Productivity Commission (PC) has warned that customers across the country could bear the brunt if the federal government does not correctly handle industrial relations reforms.

In its five-year productivity inquiry report, the PC said well-crafted changes to multisector bargaining and other industrial relations reforms could facilitate cooperation between small firms and allow them to secure higher wages for employees.

However, the commission said this outcome would depend on the design features of the reforms.

The report came after the federal government hinted at new changes to multi-employer bargaining regulations, which could allow workers in small businesses to band together under similar workplace conditions, following the jobs and skills summit in September.

Multi-employer bargaining occurs when two or more employers agree to bargain together with workers on an employment contract. However, this practice is generally not legal under current Australian laws.

Employees covered by multi-employer agreements could go on strike at the same time to ask for better working conditions, which stokes fears of increasing levels of industrial action among industries.

While worker unions have been pushing for the legislation of multi-employer bargaining, business groups so far have opposed the idea.

The Potential Consequences of Poor Reforms

The PC warned in the report that making poorly designed changes to multi-employer bargaining regulations could result in a drop in productivity. In addition, businesses could collude together to raise the prices of goods and services.

However, the commission acknowledged that well-designed changes would facilitate bargaining among small businesses as they could join forces and share the costs.

Meanwhile, Australian Council of Trade Unions secretary Sally McManus criticised the PC for its report, saying it was a “politicised relic” of the former Coalition government tasked with attacking workers’ rights.

“They have no idea how wage bargaining works, do not consult and ignore international research. No credibility,” McManus said.

A food delivery rider cycles down a deserted Murray Street mall in Perth, Australia, on Jan. 31, 2021. Paul Kane/Getty Images

Nevertheless, some business groups shared a similar view to the PC on multisector bargaining.

“No one wants to return to the uncertainty and disruption of a workplace relations system that saps productivity by stoking conflict and strike action. That’s bad for workers, bad for consumers and bad for businesses,” Business Council Chief Executive Jennifer Westacott said.

“The best way to get wages growing is by reinvigorating bargaining at an enterprise level to drive productivity,” she said.

On another topic, the report suggested the government limit the better-off overall test, which is used by the Fair Work Commission to assess whether an employee is better off under an employment contract, to improve the efficiency of the enterprise bargaining system.

It also raised concerns that categorising gig workers as employees would take away major benefits to efficiency and flexibility for workers.

“Many platform-based occupations are a direct extension of existing independent contracting arrangements, which can involve relatively high rates of pay,” the report said.