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Tag: Unions & Collective Bargaining

  • The Broken Bargain: Australia’s Growing Wages Crisis with Sally McManus

    Even prior to the COVID-19 pandemic, wage growth in Australia was anemic.

    Historically, a working class with power to organise and bargain, and a broad commitment to the social wage ensured Australia’s wealth was shared. But the last 30 years have seen a dramatic shift of the share of Australia’s prosperity going to profit and away from working people.The shift in the distribution of GDP from the mid-1970s to today has transferred 10% of GDP directly from workers to corporate profits. That’s more than $200 billion – or almost $20,000 per waged worker – per year.

    Australians are facing a wages crisis, and Government actions and inactions are making this problem worse.

    In conversation with Australia Institute Deputy Director Ebony Bennett, and Centre for Future Work Director Jim Stanford, Sally McManus outlines the reasons why wage growth is so poor, and the way back for working people to once again be at the heart of a strong economy.

    Recorded live on 14 July 2021, as part of the Australia Institute’s 2021 webinar series. A transcript of Sally McManus’s speech is available below.

    The post The Broken Bargain: Australia’s Growing Wages Crisis with Sally McManus appeared first on The Australia Institute's Centre for Future Work.

  • How Non-Union Agreements Suppress Wage Growth

    In a new report, Centre for Future Work Senior Economist Alison Pennington assesses the major ways in which the IR bill will accelerate non-union EA-making, and considers three specific ways this in turn will undermine wage growth in Australia compared with existing collective bargaining laws.

    Main findings of the report include:

    • The omnibus bill’s proposals to exempt agreements from the Better Off Overall Test (BOOT), reduce scrutiny by the Fair Work Commission (FWC) and weaken employer obligations to demonstrate that their staff have genuinely agreed to the EA will increase the number of non-union employer-designed EAs.
    • Wage increases under non-union EAs are consistently and significantly lower than in union EAs – on average 1-percentage-point lower than for union-covered EAs since 2010.
    • Alarmingly, the majority of non-union EAs approved 2006-19 did not specify any wage increases at all, instead linking wage increases to non-legislated measures like CPI, minimum wage decisions by the FWC, or entirely to employer discretion.
    • In addition to lower (or no) wage increases, the average duration of non-union EAs is longer than for union EAs, locking in their inferior wage outcomes for longer periods of time.
    • Australia’s experience under WorkChoices when similar policies were implemented demonstrates that if the proposed measures are introduced, both the number of non-union EAs will increase, and the share of EAs without any specified wage increases will grow.
    • Since the majority (66%) of the current EA stock consists of higher-wage union agreements, any increase in the number of lower-wage, non-union EAs would increase their proportion within the total EA stock, reducing rather than lifting wages and conditions delivered through EAs overall.
    • Importantly, non-union EAs delivered significantly worse wages outcomes even while the BOOT was in place. The government’s proposal to exempt EAs from the BOOT will open the floodgates for employers to rush the approval of EAs that undercut Award wages, further suppressing wages growth in 2021 and beyond.
    • The BOOT exemption is proposed for a period of two years, but in reality, the terms of EAs negotiated under the BOOT exemption could stay in effect for many years afterward. This is because EAs continue to apply after their formal expiry date unless they are renegotiated or terminated.
    • The overall share of workers covered by EAs will likely increase if the measures pass. But since more of those EAs will consist of sub-standard, lower-wage deals, Australia’s current record-low wage growth will get worse, not better.

    The post How Non-Union Agreements Suppress Wage Growth – And Why the Omnibus Bill Will Lead to More of Them appeared first on The Australia Institute's Centre for Future Work.

  • Omnibus IR Bill will Further Reduce Wage Growth

    The bill proposes sweeping changes to labour laws which would see an acceleration of EAs written unilaterally by employers, without negotiation with a union. EAs will be exempt from the current Better Off Overall Test, subject to less scrutiny at the Fair Work Commission, and employers will have less stringent tests to ensure their proposed EAs are genuinely approved by their affected workers.

    Key findings:

    • Wage increases under non-union EAs are consistently and significantly lower than in union EAs; on average one-percentage-point lower since 2010.
    • The majority of non-union EAs approved between 2006 and 2019 did not specify any wage increases at all, instead linking wage increases to non-legislated measures like CPI, minimum wage decisions by the Fair Work Commission, or employer discretion.
    • In addition to lower (or no) wage increases, the average duration of a non-union EA is longer than for union EAs, locking in inferior wage outcomes for longer periods of time.
    • The exemption for EAs to meet the Better Off Overall Test (BOOT), which shows whether employees would be better off under a proposed EA than under the relevant Award, is supposed to last for two years. But in reality, the terms of EAs negotiated under the BOOT exemption could stay in effect for many years, unless they are renegotiated or terminated.
    • While the overall share of workers covered by EAs will likely increase if these measures pass, a higher proportion of EAs will consist of sub-standard, lower-wage deals, which will see Australia’s current record-low wage growth get worse, not better.

    “When the COVID-19 pandemic hit, wage growth slowed virtually to zero. The omnibus bill will lock in that wage stagnation, by further weakening the already-constrained ability of workers to negotiate genuine collective agreements,” said Alison Pennington, senior economist at the Australia Institute’s Centre for Future Work.

    “Australia’s experience under WorkChoices, when similar policies were implemented, demonstrates that if the proposed bill is introduced both the number of non-union EAs will increase, and the share of EAs without any specified wage increases will grow.

    “Non-union EAs deliver significantly worse wage outcomes that union-EAs, even with the BOOT in place. Removing the BOOT will open the floodgates for employers to rush the approval of EAs that undercut Award wages, further suppressing wages growth in 2021 and beyond.

    “Any increase in the number of lower-wage, non-union EAs will reduce rather than lift the wages and conditions delivered through EAs overall, leaving Australian workers worse-off.”

    The post Omnibus IR Bill will Further Reduce Wage Growth appeared first on The Australia Institute's Centre for Future Work.

  • New Research Centre Established to Honour Union Leader Laurie Carmichael

    The newly formed Carmichael Centre will be established at the Australia Institute’s Centre for Future Work, in the name of legendary manufacturing unionist Laurie Carmichael, who passed away in 2018 at the age of 93.

    Laurie Carmichael played a pivotal role in Australia’s union movement over several decades. He campaigned to protect the right to strike, negotiated shorter working hours, developed innovative workers’ education and training programs, helped to negotiate the Prices and Incomes Accords in the 1980s, served on several federal government boards and commissions under the Hawke and Keating governments, and opposed Australia’s involvement in the Vietnam War. He served in numerous leadership capacities during his career, including with the Amalgamated Engineering Union, the Amalgamated Metal Workers Union, and the Australian Council of Trade Unions.

    The Carmichael Centre is being established with the support of Carmichael’s family, and with funding from two of the organisations which Carmichael led: the Australian Manufacturing Workers’ Union (AMWU, formed in 1995 through a merger that included successors to Carmichael’s former unions) and the Australian Council of Trade Unions (for which Carmichael served as Assistant Secretary from 1987 through 1993).

    Among other activities, the new Carmichael Centre will:

    • Host a Distinguished Research Fellow position, who will conduct and publish research on themes related to Carmichael’s legacy, including: industrial relations, social policy, manufacturing and industry policy, vocational education, international labour solidarity and peace, and the impact of unions on social well-being.
    • Organise an annual lecture by a prominent labour speaker on Carmichael’s legacy.
    • Develop and publish an annotated on-line bibliography of Carmichael’s writings and other contributions.

    The formation of the Carmichael Centre follows two years of discussions among unions and colleagues to plan an appropriate recognition of Carmichael’s influence and legacy. The Centre for Future Work is launching a public search for the first Distinguished Research Fellow, who will be appointed early in 2021.

    “The Carmichael Centre will carry on Laurie Carmichael’s mission, based on his conviction that strong, innovative unions can help build a better society for all,” said Andrew Dettmer, National President of the AMWU

    “Laurie Carmichael was a principled, innovative, progressive union leader who understood that workers need collective power to make economic, social and democratic progress. We are so glad his ideas will receive the continued attention and study they deserve, through the work of the Carmichael Centre,” said Sally McManus, National Secretary of the ACTU.

    Carmichael is survived by his son, Laurie Carmichael Jr. “The values Dad fought for all his life are more important than ever: fairness, equality, democracy, and peace. I am deeply proud that his legacy lives on, including through the work of the Carmichael Centre,” Carmichael Jr. said.

    “The Distinguished Research Fellow will make a very important contribution to progressive labour research in Australia. We are deeply honoured to host the Carmichael Centre, and to advance Laurie’s vision of a better, fairer world of work,” said Ben Oquist, Executive Director of the Australia Institute.

    The post New Research Centre Established to Honour Union Leader Laurie Carmichael appeared first on The Australia Institute's Centre for Future Work.

  • Where To Now for Union Campaign?

    Workplace Express is Australia’s leading labour policy and industrial relations newsletter. Please visit its website to subscribe.

    Where to Now For Unions?: Experts

    Reprinted from Workplace Express, May 27, 2019.

    Future union membership numbers will depend on how effectively unions organise without being able to rely on the political system delivering changes to workplace laws, according to an expert on employment relations.

    In the immediate aftermath of the Morrison Government’s election win, Griffith University’s Professor David Peetz said it was likely that it would be harder to grow union membership under the Coalition than under Labor.

    “In the end, it’s up to unions to organise effectively, they can’t rely on the political system to deliver what they would like, even though it can’t be denied that politics makes a big difference,” he told Workplace Express.

    Whether union membership would fall under three more years with the Coalition in power depended on a range factors, said Peetz, including the government’s ability to pass inhibiting legislation; the movement’s own organising performance; and the effects of underemployment, which both put a brake on union bargaining power and reduced wages growth.

    “Has the focus on political campaigning taken the edge away from workplace organisation, or has it reinforced it?” said Peetz.

    “Will union activists feel so disillusioned by the election result that they give up?

    “Or will they put more effort into workplace action in recognition of the failure of political action?

    “I think these are all things that will become clearer over the next couple of years.”

    Deal ‘protections’ weaker at the margins: Peetz

    Union membership is currently running at less than 15% of the workforce, with unions having a stronghold in the public or government sector thanks to nurses, teachers, public servants and police (see Related Article).

    However, private sector membership remains a weak point, amid a shift away from enterprise bargaining to award coverage.

    Peetz, who is currently a visiting fellow at City University of New York, said the fall in enterprise bargaining coverage was mostly a delayed result of the decline in union density.

    “EB coverage held up for a while because it suited some employers to stick with union bargaining arrangements when unions were weaker,” he said.

    “But eventually a point had to come where those employers would decide to circumvent unions altogether and/or the award simply caught up with what the EB rates were.

    “Of course it means that fewer people are now getting the ‘protection’ of EBAs, but that protection was getting weaker at the margins anyway, and the bigger picture is the decline in the proportion of people getting the ‘protection’ of unions.”

    Peetz said the biggest impact would be felt in non-union workplaces.

    “In unionised workplaces, it’s workers’ own experiences of unions that will determine how well or badly unions go.

    “Unionism is, to use econo-speak, an ‘experience good’.

    “There, unions’ future is very much in their hands.

    “In non-union workplaces, where quite a few employees have no direct experience of unions – or it was so long ago it’s not really relevant – the ideology that comes through the media is more important, and the question of who’s in government and what they say and do, and what employers with government support do, and what the media themselves do, becomes more important.”

    Private sector bargaining ‘out of reach’: Pennington

    Last year, the Centre for Future Work released a report, On the Brink, contending that enterprise bargaining was on the edge of collapse, largely due to its abandonment by the private sector (see Related Article).

    The report, by Centre economist Alison Pennington, said that more than half of the reduction in private sector coverage is due to the termination or expiry of large agreements in the retail sector and the accommodation and food service sector.

    She found that private sector agreements dropped by 46% between December 2013 and June 2018 (from 22,638 to 10,333), while the number of employees under agreements fell by 34% (from 1,950,561 to 1,288,100).

    Last week, Pennington told Workplace Express that new data from the Department of Jobs showed the number of employees covered by enterprise bargaining has shrunk by another 170,000 in the six months to December 2018.

    She did not expect to see any reversal of the trend without reforms to the bargaining systems and freeing unions from restrictive “anti-organising laws”.

    “What it says, for me, is that bargaining rights are out of reach for the vast majority of private sector workers.”

    Nonetheless, Pennington says that private sector union membership is unlikely to fall further than what she believes to be levels already below 10%.

    And on a positive note for unions, she argued the Changes the Rules campaign was successful in terms of recruiting members, with some unions doing “a lot better than others”.

    Union campaign heard: Stanford

    Centre for Future Work director, Professor Jim Stanford, also said the ACTU campaign succeeded in its first aim to “influence the debate” in the lead-up to the election on wage stagnation, work exploitation and job security.

    “Now the question is how do convert that public opinion that workers need fairer treatment into policy reform given the government that’s in power,” said Stanford.

    “That will be challenging, but it’s not impossible because the Coalition has to keep an eye on where people are at.”

    Stanford said the Coalition could not be “deaf” to public opinion on wage stagnation and job security, and the same was true for the FWC, which last year awarded a 3.5% in minimum wages.

    “I think they [the Commission] heard the concerns about wage stagnation and they recognised they had a role to play.

    “I think the public education and organising that the union movement did will still pay dividends, even with a generally hostile government in power.

    “The wage crisis is not going to go away and I think Australians are well aware are that their pay packers are going nowhere relative to consumer prices.

    “That combination of continued wage suppression with an awakened, angry population … is a pretty potent mix.”

    ‘Remain bold,’ Forsyth tells ACTU

    RMIT University’s Professor Anthony Forsyth has argued on his blog that unions can still tap into “deep problems” in the workplace that Labor sought to address.

    These problems included underpayments, “dodgy” labour hire contractors, workers trapped in long-term casual engagement and the widespread use of rolling, fixed-term contracts.

    “We still have the collapse of collective bargaining in the private sector, and employer ‘work-arounds’ to avoid negotiating an enterprise agreement or get out of an existing one,” says Forsyth.

    “We still don’t have the basis for a real living wage.

    “Rather than shrinking back to a ‘small target’ strategy, as is now being contemplated in other policy areas, I reckon the ACTU should remain bold in its reform ambitions.

    “It should make a more substantive case for ‘changing the rules’ with strong underlying research that precisely measures the nature of the current problems (such as the nature and incidence of ‘insecure work’, a concept that business groups constantly debunk in the media).”

    But Forsyth argued that “organising and connecting with workers on the ground in new and innovative ways” are also essential, as shown by United Voice’s ‘Hospo Voice’ initiative and both the Young Workers Centre and Migrant Workers Centre at Victorian Trades Hall Council.

    “As the National Union of Workers and United Voice put it in the context of their current amalgamation proposal: ‘We need to change the rules, but we also need to change the game’.”

    The post Where To Now for Union Campaign? Workplace Express appeared first on The Australia Institute's Centre for Future Work.

  • Minimum Wage to Rise 3% for 2019-20

    The Fair Work Commission has announced a 3% hike in Australia’s national Minimum Wage.

  • Industry-Wide Bargaining Good for Efficiency, as Well as Equity

    In this commentary, Centre for Future Work Associate Dr. Anis Chowdhury discusses the economic benefits of industry-wide collective bargaining. In addition to supporting wage growth, industry-wide wage agreements generate significant efficiency benefits, by pressuring lagging firms to improve their innovation and productivity performance. The experience of other countries (such as Germany and Singapore) suggests that this system promotes greater efficiency, as well as equity — although other wealth-sharing policies are also needed.

    Dr. Chowdhury’s full comment is posted below.

    INDUSTRY-WIDE BARGAINING CAN BOOST EFFICIENCY AS WELL AS WAGES

    by Dr. Anis Chowdhury

    In an effort to reverse long-term wage stagnation, the ACTU is calling for an end to current industrial rules which effectively prohibit sector- or industry-wide wage bargaining. Predictably, the business community is opposed. Australian Industry Group chief executive, Innes Willox, said, “The ACTU’s latest proposals would destroy jobs and the competitiveness of Australian businesses…If the ACTU got its way, unions would be able to make unreasonable claims and cripple whole industries and supply chains until employers capitulated.”

    No doubt, the issue will be a hot topic in the upcoming Federal Elections. The Labor Party conference is debating the ACTU’s call. And the Liberal-National Coalition will surely accuse Labor of capitulating to the vested interest of the union movement.

    Mr. Willox’s claim that the sector-wide wage bargaining would destroy jobs and Australia’s competitiveness has no basis. A powerful example is provided by Germany, Europe’s strongest economy. In Germany, wages, hours, and other aspects of working conditions are decided by unions, work councils (organisations complementing unions by representing workers at the firm level in negotiations), and employers’ associations. Collective wage bargaining takes place not at the company or enterprise level but at the industry and regional levels, between unions and employers’ associations. If a company recognises the trade union, all of its workers are effectively covered by the union contract.

    Yet, Germany’s competitiveness did not decline. On the contrary, Germany experiences both strong productivity growth and strong wage growth. Despite ongoing real wage improvements, unit labour costs are stable or even declining – further enhancing Germany’s competitiveness.

    How is this possible? The answer was given by more than half a century ago by two leading Australian academics – WEG Salter and Eric Russel. By de-linking productivity-based wage increases at the enterprise level and adhering to the industry-wide average productivity-based wage increases, an industry bargaining system raises relative unit labour costs of firms with below-industry-average productivity, thereby forcing them to improve their productivity or else exit the industry. At the same time, firms with above-industry-average productivity enjoy lower unit labour costs, hence higher profit rates for reinvestment. Singapore also used this approach to restructure its industry in the 1980s towards higher value-added activities, with great success.

    Trying to compete on the basis of low wages is a recipe for failure. As a matter of fact, low-wage countries typically demonstrate lower productivity; and research by a leading French economist, Edmond Malinvaud, showed that a reduction in the wage rates has a depressing effect on capital intensity. Salter’s research implies that the availability of a growing pool of low paid workers makes firms complacent with regard to innovation and technological or skill upgrading. Other researchers show that under-paid labour provides a way for inefficient producers and obsolete technologies to survive. Firms become caught in a low-level productivity trap from which they have little incentive to escape – a form of Gresham’s Law’ whereby bad labour standards drive out good. The discipline imposed on all firms as a result of negotiated industry-wide wage increases forces all of them to innovate and become more efficient.

    So, sector-wide wage bargaining is good for the economy: favouring efficient firms, stimulating investment, and lifting wages. Of course, industry-wide bargaining alone cannot solve all the problems of wage inequity or wage stagnation. It must be part of a broader suite of policy measures, to provide all-round support for greater equality and inclusive prosperity.

    In particular, we must address the system that produces sky-rocketing executive pays at the expense of workers. A lower marginal tax rate is one of the incentives for the executives to pay themselves heftily, while tax cuts are not found to boost growth or employment. Share options for CEOs, which encourage job cuts and discourage re-investment, also must be reined in. If anything that is making the Australian economy vulnerable, is growing economic disparity between self-serving executive compensation and stagnant wages for the rest of the population.

    Reforms also need to address the macroeconomic policy paradigm, where fiscal policy is focused on creating needless budget surpluses by cutting social services and public infrastructure investment. Meanwhile, monetary policy is focused on a pre-determined inflation target regardless of the economic cycle. All of this stifles economic growth prospects and increases job insecurity – both of which are detrimental for wage recovery.

    The post Industry-Wide Bargaining Good for Efficiency, as Well as Equity appeared first on The Australia Institute's Centre for Future Work.

  • On the Brink: Erosion of Enterprise Agreement Coverage

    The report shows that the number of current enterprise agreements in private Australian businesses has collapsed by 46% since the end of 2013. The number of private sector workers covered by enterprise agreements has plunged 34% in the same time. In 2017, just 12% of employed private sector workers were covered by an enterprise agreement – down from 19% in 2013.

    If current trends in renewals, new agreements, and terminations continue, less than 1800 agreements would survive to 2030, at which point just 2% of private sector workers would be covered by a collective agreement.

    The dramatic downturn in collective bargaining in Australian businesses reflects a number of simultaneous trends, creating a ‘perfect storm’ that jeopardises the future of private sector bargaining. These trends include a drop-off of renewals of expired enterprise agreements; the dramatic decline in the number of newly negotiated agreements; and a surge in terminations of agreements.

    “It is no exaggeration to conclude that collective bargaining in private businesses will go extinct in coming years if these devastating trends are not reversed,” said Alison Pennington, Economist with the Centre for Future Work and author of the report.

    The report provides a forward simulation of enterprise agreement-making if current trends in renewals, new agreements, and terminations continue. The simulation indicates that the total number of private sector enterprise agreements would fall by half (to below 6000) by 2023, and the proportion of private sector workers covered by agreements would fall below 6%. Things get worse in subsequent years, with less than 1800 agreements surviving by 2030, when only 2% of private sector workers would be covered by a collective agreement – unless urgent action is taken the change existing policies and restore effective access to collective bargaining.

    “The accelerated collapse of enterprise bargaining in the private sector has been a key cause of the unprecedented weakness in wage growth experienced in Australia since 2013,” Pennington said. “When workers have no collective voice or collective bargaining power, they have no chance of successfully negotiating better wage increases from their employers.”

    The report also shows that the rapid decline in enterprise agreement coverage for private sector workers has been mirrored by a rapid increase in the proportion of workers paid according to the minimum terms of Modern Awards.

    “The evidence is overwhelming that Australia’s current system of collective bargaining is completely inadequate for representing workers in our evolving economy, with an increasingly fragmented labour market,” Pennington concluded. “A viable collective bargaining system is essential to shared prosperity, but it will require far-reaching changes to the current rules to keep collective bargaining alive.” The report proposes several broad directions for reforming current laws and practices, to stop and reverse the dramatic decline in collective agreement coverage.

    PLEASE NOTE: This posted version of the paper corrects a previous error arising from a data coding problem which resulted in an inaccurate allocation of newly approved enterprise agreements between new and renewal agreements.

    The post On the Brink appeared first on The Australia Institute's Centre for Future Work.

  • Centre for Future Work at ACTUCongress18

    Come and check out our information booth in the exhibitors’ area: meet our staff, learn more about our work, and sign up for updates.

    Our Director Jim Stanford will be presenting as part of a session on The Future of Work (good title!), Tuesday July 17 at 2:15 pm in conference room P1.

    And we will be distributing copies of a brochure with links to some of our most recent research (attached below).

    We are glad that our research can support the campaign to #ChangeTheRules!

    The post Centre for Future Work at #ACTUCongress18 appeared first on The Australia Institute's Centre for Future Work.

  • Employers’ pyrrhic penalty rates win reflects self-defeating economics

    The equity implications of the commission’s decision are odious. Store clerks and baristas are already among the least-paid, least-secure members of Australia’s workforce. The retail and hospitality workforce is disproportionately female, young and immigrant. Most work part time, and casual and labour-hire positions are common. In short, the burden of this decision will be borne by those who can least afford it.

    Penalty rate cut: how did it happen?

    Workplace reporter Nick Toscano contextualises the Fair Work Commission’s announcement on Thursday that Sunday penalty rates paid in retail, fast food, hospitality and pharmacy industries will be reduced from the existing levels.

    Remember, too, that it’s in retail and hospitality that recent scandals regarding underpayment of wages and other violations of labour law have been rife. Weakening labour standards that are already poorly enforced thus constitutes a double jeopardy for service workers.

    It’s notable that the commission only targeted low-paid service workers with this review of penalty rates. There are many other people who need to work Sundays and holidays, including emergency personnel, essential service workers, healthcare workers and others. The commission stressed it wasn’t calling for those workers to lose their penalties, too (although employers everywhere are no doubt preparing to push to extend this precedent to other industries). If it’s all about changing “cultural norms” regarding weekend work, then why have these low-paid service jobs been singled out?

    All of this says much about the political and economic context for the Fair Work Commission’s deliberations. There was no emergency in Australia’s retail and hospitality sector; no crisis that needed immediate attention. It’s not that stores and restaurants couldn’t do business on Sundays under the existing rules; any casual observer can attest to the brisk trade that now takes place right through the weekend. It’s just that those businesses would be considerably more profitable if wages were lower.

    So penalty rates became the target of a sustained pressure campaign by business, backed by conservative political leaders. The commission heard those complaints and acceded to them. Whatever the precise wording of the commission’s legislative mandate, it was never envisioned as a mechanism for rolling back employment standards; it was supposed to protect them. This decision will therefore spark a political debate not only over the merits of this specific decision, but over the commission’s overall mandate and function.

    The politics of that debate will be complicated. Coalition leaders are hiding behind the commission’s supposed neutrality – although they are clearly pleased with the decision (and many explicitly lobbied for it). Labor’s response, meanwhile, is coloured by the fact that it created this commission; Bill Shorten now promises to adjust its mandate. None of this will stop the anger among working-class families who’ll lose income because of this decision. The threat to penalty rates was a potent doorstep issue for union campaigners across Australia before the last election, which the Coalition almost lost. It will be an even hotter button in the next one.

    The economics of the rollback are even more muddled than the politics. Retail lobbyists claim the decision will unleash a surge of new job creation, but those promises are hollow. After all, the market for retail and hospitality services depends primarily on the strength of domestic consumer spending power – more so than any other part of the economy. Australians have a certain amount of disposable income. Will they shop more, and eat out more, just because stores and restaurants stay open longer? Of course not.

    To the contrary, slashing retail and hospitality wages can only undermine demand for the very services that these businesses are selling. It’s incredibly ironic that, even as the commission’s Judge Iain Ross read his judgment on live television, the Australian Bureau of Statistics was releasing yet another dismal report on national wage trends. Average weekly earnings in the period to last November grew at an annualised rate of just 0.4 per cent: slower than any other point in the history of the data, and well behind the rate of inflation. This reflects both the stagnation of hourly wages, and the continuing shift to part-time and casual work (for which retail and hospitality employers are among the worst culprits).

    So this won’t increase the amount of money Australians have to spend in shops and restaurants. Instead, there will be an incremental decline. If stores actually do stay open longer hours, the same spending must now be spread across longer operating hours, driving down productivity. Retail lobbyists should be careful what they ask for.

    Meanwhile, employment in these industries will continue to reflect bigger, structural forces. For example, the whole Australian retail sector has created precisely zero net jobs over the last three years, largely because of the structural shift to big-box retailing (which employs fewer workers per unit of sales). That’s not going to change just because big-box stores can now pay their staff $10 an hour less.

    In short, Australia’s economy isn’t held back because wages are too high. It’s held back because wages are too low. And the stagnation of wages is no accident: it’s the cumulative result of years of deliberate efforts to weaken the power of wage-setting institutions (including unions, minimum wages and awards). The Fair Work Commission chopped away a little more of that edifice this week.

    The greatest irony is that it’s retail and hospitality businesses – which led the push to cut weekend wages – that confront the weakness of household spending power most directly. Each employer may individually celebrate the prospect of paying lower wages. Yet for their industry as a whole, this decision is collectively irrational and ultimately self-defeating.

    Jim Stanford is economist and director of the Centre for Future Work at The Australia Institute.

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