By Chris F Wright, University of Sydney, | 4 min
Strengthening collective bargaining is vital for addressing the UK’s longstanding workforce problems. Stagnant wage growth and widespread insecure work are making it hard for many workers to meet their living costs. These conditions are prompting many workers to leave their jobs, which is contributing to staff shortages.
Sectoral or multi-employer bargaining can provide a circuit breaker to this situation. Extensive research shows that these forms of bargaining lead to fairer wage outcomes and more secure jobs, which increases workers’ satisfaction and job retention.
But establishing sectoral or multi-employer bargaining is challenging in ‘liberal market economies’ like the UK which lack institutions to support these arrangements. Business groups in these countries tend to fiercely resist attempts to strengthen workers’ rights or boost wage growth.
Australia and New Zealand are two liberal market economies where governments have recently stared down business opposition to strengthen multi-employer bargaining. The Australian example provides insights into how a future government could successfully introduce similar reforms in the UK.
The Australian reforms were implemented by the Albanese Labor government soon after its May 2022 election victory. The reforms were aimed at addressing workforce problems like those evident in the UK. Low wage growth, a high proportion of workers on insecure contracts and the perceived impacts on living costs were key election issues.
Labor pledged support for pay increases to keep pace with price inflation and to find ways to promote collective bargaining. But multi-employer bargaining was not mentioned explicitly as a campaign promise. Labor merely identified the problems and vowed to solve them without specifying precisely how. This neutralised potential criticism from conservative opponents and business groups.
Soon after the election, the Labor government held a national ‘Jobs and Skills Summit’ where unions and business groups were invited to discuss the challenges facing the Australian economy. There was broad consensus – including from business – that creating secure, well-paid jobs and addressing inequalities were important goals for improving productivity and inclusive growth. Once this consensus was attained, Labor unveiled multi-employer bargaining as the mechanism for achieving these goals.
Business groups voiced strong opposition to the proposed multi-employer bargaining reforms. They claimed the reforms would lead to strikes, unemployment and economic decline. But these arguments rested on hollow foundations. Aside from invoking fears of a return to “the 1970s”, there was very little evidence to support the business groups’ case.
In contrast, the Labor government’s case for strengthening multi-employer bargaining was robust. The government marshalled unions and sympathetic minor parties and called upon researchers to provide evidence in support of the reform agenda.
The evidence for strengthening multi-employer bargaining was compelling. Australia’s existing industrial relations system disproportionately favoured employers and made it hard for workers to collectively bargain. It was relatively easy for employers to avoid bargaining including in sectors where unions were strong. Even the high priests of wage restraint at the Reserve Bank of Australia – the central bank – acknowledged the employer-friendly system was contributing to low-wage growth and wider economic problems.
International evidence also supported the government’s agenda. Countries with strong, co-ordinated systems of multi-employer bargaining like Denmark achieved better economic and social results than countries with weak bargaining systems like Australia and the UK. OECD research had found that multi-employer bargaining led to improved macroeconomic performance and better employment and gender equality outcomes. And the European Union’s new minimum wages directive encouraged member states to strengthen sectoral bargaining to increase bargaining coverage rates.
This evidence-based case for reform debunked business group criticisms. It allowed government leaders to successfully articulate why reform would help to address established labour market and economic problems. This helped Labor gain the parliamentary support needed to pass its multi-employer bargaining laws.
Connecting economic problems to low-wage growth and living cost pressures and developing an evidence-based narrative were critical for winning the contest of ideas in Australia. UK unions and future governments can learn from this example of how the battle for bargaining reform can be won.
