On the brink: The erosion of enterprise agreement coverage in Australia’s private sector
The proportion of national income paid to Australian workers has been eroding for the last 40 years: from over 58 per cent labour share of GDP in the mid-1970s, falling to a record post-war low of just 47 per cent in 2017 (Stanford 2018a). Ninety per cent of what labour has lost has been reflected in an increase in the corporate profit share. This observed experience is unravelling traditional expectations that a rising GDP inevitably increases labour incomes, and that labour incomes will automatically rise in step with real labour productivity. A key reason why growth, productivity and wages have been de-linked is the weakening of the redistributive institutions which Australia built during the long post-war expansion – when the country became known as the ‘land of a fair go.’ One of the most important dimensions of this institutional decline has been the dramatic retrenchment in the collective bargaining regime. Introduced in the 1990s as the main pay-setting mechanism for employees, the enterprise bargaining system is now on the brink of collapse. There are far fewer enterprise agreements (EAs), an upturn in employer-led EA terminations, and around 660,000 less workers covered by current EAs at June 2018 than at end-2013. The flip side of this coin has been a noted increase in the proportion of Australian workers whose pay and conditions are set according to the minimum standards of Modern Awards. This report provides a detailed description of the erosion of enterprise bargaining: including its composition and dynamics, and its causes and consequences. It focuses attention on the private sector, where two-thirds of all EA-covered employees worked in 2018 – and where coverage decline has been dramatic. In the private sector the number of current EAs has almost halved, and the number of employees covered has dropped by 34 per cent since end-2013 (peak year), a decline of 662,461 employees. Only 12 per cent of Australians employed in the private sector are now covered by current EAs. Without urgent action to reverse the underlying factors driving down EA coverage, and rebuild a more viable and effective collective bargaining system, coverage could fall to below 2 per cent of private sector workers by 2030.