THE ALBANESE GOVERNMENT’S IR LEGISLATION: TWO VIEWS

The Albanese Government’s 2024 industrial relations reform legislation generated tension with employers who saw it as a hand shake with the union movement. Others saw it as a long overdue update on handling the gig economy and increasing use of casual labour. Two voices at the centre of the debate – Jessica Tinsley, Director Workplace Relations at the Australian Chamber of Commerce & Industry and Ed Cavanough, Director of Policy & Acting CEO, McKell Institute – addressed The Sydney Institute on Monday 25 March 2024 to offer some explanation as to how the new rules will work.

 THE ALBANESE GOVERNMENT’S IR LEGISLATION: TWO VIEWS

 ED CAVANOUGH

Can I begin by acknowledging we’re meeting today on the land of the Gadigal people, and pay my respects to elders past present and emerging.

My name’s Ed Cavanough, I’m the CEO of the McKell Institute — a public policy think tank that works with a cross section of organisations, from unions to corporates, government departments to charities — on policy and advocacy, often on industrial relations. It is an honour to be here at The Sydney Institute.

Gerard, thank you for having extended the McKell Institute this invitation. And for all of the work you and Anne do at the Sydney Institute, creating this important forum. And thank you Jessica for being here, too. Jessica and I didn’t know each other prior to today, but it’s clear she brings a formidable expertise in industrial relations to this discussion. I know she has a mastery of these pieces of legislation. So I’ll do my best today to keep up.

Folks,  can I cast your mind back to the eve of the 2022 election. In the weeks leading up to polling day, we heard ample criticism that the Albanese opposition was running a small target strategy. That their ambitions, if they were to take office, were too modest. Nearing two years since its election, we now often hear the opposite from certain corners of our debate — that the Albanese Government is going too far. That they are imposing some kind of radical left-wing agenda on Australia. The critics point to the government’s ambitious IR agenda as the evidence of this. We’ve even been told it’s all part of a union conspiracy. Laden with “hidden motives” and “paybacks”. Well, folks, I hope tonight I can alleviate any concerns you may have.

Now I accept — the government has been truly ambitious on IR. And we don’t have time this evening to go through every individual change. So, what I wanted to do tonight is explore some of the most contentious aspects of the government’s IR agenda, which I view as representative of their broader approach. And, I hope, explain why this agenda is not inconsistent with the broader pursuit of building a more productive, more efficient, and fundamentally fairer economy for both working people, and importantly, the risk takers that employ them.

Setting the scene

But let me first start here. Back in 2020, I spent a few weeks traipsing around Northern NSW, undertaking an investigative research project.  The Coffs Coast is truly one of our country’s wonders. But, until very recently, it had a dark underbelly.

About 15 years ago, the region began uprooting its bananas, replacing them with lucrative berry crops. As this cash crop exploded, so too did the need for fast labour.  And, capitalising on weak regulatory environment, a cluster of bad faith labour hire firms and other intermediaries popped up in town, promising farmers cheap, quick workers in time for harvest.

For many of the workers, their dream working holiday soon became a nightmare. The piece rates were manipulated — set at rates that meant achieving a minimum wage was next to impossible. After deductions were made, some workers were earning $3 to $4 an hour. I saw this at first hand.

One of those workers was Garnot, a German living in Australia, doing everything right by his visa conditions, but being let down by gaps in an IR system that was being exploited by a number of bad actors who thought, correctly, they could get away with it.

Garnot was one of the 9 per cent of workers in Australia the Grattan Institute estimated, just last year, earn below the minimum wage. It’s a stat that doesn’t just hurt workers, but also the vast majority of businesses that don’t do the wrong thing.

Thankfully, piece-rates have now been reformed and the sky hasn’t fallen in.

But other gaps remain. And I worry that, if they aren’t fixed, similar bad-faith operators would find them, harming workers – yes – but also harming every business that operates in good faith, are good employers, respect their staff, and don’t deserve to be undercut.

It is in this context that the Albanese Government’s IR agenda has been undertaken, focusing on plugging these gaps, while preserving the features of competitive, efficient labour market, and restroing some bargaining power to those typically without any.

Albo’s commitments

As I said, the Government’s IR is ambitous. But it isn’t a surprise, with most of its major changes fulfilling pre-election pledges we were all warned about.

The first major change came in late 2022, with the Secure Jobs, Better Pay Act. It saw changes to flexible work, pay secrecy, and included the abolition of the ABCC. But the most significant of these was the changes to multi-employer bargaining.

Effectively, this change has expanded the ability of unions and workers to negotiate with more than one business at a time, across industries — helping to achieve outcomes across highly disaggregated, but low paid, sectors like the care economy.

We can perhaps discuss multi-employer bargaining more later, but I’d just note this: one of the key arguments against multi-employer bargaining was that it would destroy jobs and lower pay. In the 18 months since the bill passed, though, the opposite has eventuated. And the unfulfilled warnings we saw on multi-employer bargaining is, I believe, predictive of some of the outcomes I expect we’ll see with some of the more recently legislated changes.

Closing loopholes

Now, I want to focus mainly on a few features of the Closing Loopholes bill, which passed in two separate pieces of legislation over the summer. This bill did a lot: it expanded delegate rights and right of entry for officials; formalised definitions of employee and casuals; addressed unfair contract terms and more.

But I’m going to highlight three specific changes, that I feel highlight the broader approach of the governments mission.

First, same job same pay

Ahead of the 2022 election, Labor committed to legislating the principle of “Same Job, Same Pay”, responding to the growing use of labour hire as a means of some employers — mainly a handful of large, corporate employers — to avoid EBA conditions their direct employees were working under.

Now I want to be clear — I have nothing against labour hire whatsoever. Labour hire can play a critical role, especially where short term labour or specialist skills are required that a firm doesn’t hold. But few can genuinely concede that labour hire wasn’t being used by a handful of companies primarily to drive down wages.

Qantas famously created their own labour hire firms — subsidiaries of Qantas. Through these, they’d orient new hiring, then contract labour from their own firms at paygrades lower than their own established EBAs. Does anyone really think that is fair? Or being done in good faith? Or being done to meet a genuine skills gap in their business? So, it is clear we had a problem here.

But when Labor committed to plugging this gap, soon came entirely disingenuous scare campaign. We were told that the bill would mean employers could no longer reward good performing workers and recognise experience — an interpretation that intentionally mischaracterised the title “Same Job, Same Pay”.

One of the reasons, in my view, the crossbench eventually backed the bill was because the campaign against this provision was extremely misleading. As the cross bench could plainly see, legislation does nothing to change EBAs themselves. It does nothing to prohibit an employer rewarding experience.

It also doesn’t change anything automatically: any worker or union still has to make a claim to the FWC if they believe labour hire is being misused. What it does do is create a check on mainly large companies exploiting labour hire simply to lower their wages bill, not to meet a genuine need.

Secondly, wage theft:

I began by telling the story of Garnot, the German backpacker who for two months earned as little as $3 an hour picking blueberries back in 2020. For the first time, the Closing Loopholes bill treats intentional, systematic wage theft with the seriousness it deserves, strengthening financial penalties while also imposing a new criminal sanction for the most egregious cases.

I’m glad that, under the weight of evidence, traditional opponents of wage theft laws have conceded action is required. At times, though, unrealistic hypothetical scenarios about the consequences of wage theft action have been deployed to slow progress on this necessary reform.

I’ve heard arguments, for example, that the new wage theft laws would punish small businesses whose payroll systems had genuinely malfunctioned, or been delayed by third-party software glitches. But the bill doesn’t do that — no court would view a genuine technical glitch as means for criminal sanction.

It both punishes and deters intentional underpayment. That this common-sense change was so difficult to achieve speaks to the fact that even the simplest changes to our IR laws are often subject to significant, powerful roadblocks.

We need strong wage theft laws — not just to protect workers like Garnot, but to protect the vast majority of businesses that would never underpay their workers intentionally, and don’t deserve to be undercut by a handful of rogue actors.

Government’s gig economy reform.

The third major change I want to highlight is the government’s gig economy reform.

And I want to do so because I believe this is one of the most significant reforms the government has achieved. Its introduction of basic regulations and protections for gig economy workers is truly world leading. And it’s a pragmatic response to the gigification of work — an approach that accepts gig work exists, but disagrees that it should be a back door to lowering pay and conditions.

Critics of these changes claim this reform approach is radical — that by granting the FWC powers to set minimum standards for “regulated workers” on these platforms, the entire contactor-employee dichotomy is being upended. But my contention is this — the government is not the one that upended this dichotomy. It was the the gig economy proponents who fired the first shot. And the government’s response is an inevitable response to a type of insecure work that was imposed, illegally, upon our labour market by distant venture capitalists whose claims to be true innovators, in my view, stand on shaky ground.

We need to be honest about the gig economy. The great innovation of gig economy platforms is often not found in their services, but in their mainstreaming of a form of work that skirts established labour laws and the most basic of workplace rights.

Centuries ago, the working-class had nothing but gig work to choose from. They rocked up each day at a port or factory, saw what work was available, offered their price, and off they went. Gig economy entrepreneurs have, in essence, dusted off this archaic nineteenth century employment model — but put it on an app.

It is nothing to celebrate. This is a form of work which a quarter of its participants routinely earn below the minimum wage. And in which all of the risks associated with working are borne solely the worker.

We get told — don’t worry, gig workers are just side hustlers. But data shows that most gig workers aren’t side-hustlers. Gig work is often their job. It is a job with no benefits. It is a job with no workers compensation. It is a job where, if you die at work, as in the case of 14 gig workers in Australia, your family is often subjected to lengthy court proceedings just to get compensation, with the gig platforms themselves often completely AWOL. This impersonal form of employment is a relic from the past, being re-branded as a model for the future. And it’s moving from rideshare to healthcare, cleaning to marketing, and beyond.

The idea that any responsible government — especially a Labor government — could look at this new reality and not do anything about it is radical. One of the loudest arguments against gig work reform was that striving for basic rights, like a minimum wage, for gig workers would make food deliveries more expensive. This argument concedes that the price of these goods has been artificially lowered through the maintenance of sub-minimum wages.

To achieve competitive prices, businesses should find genuine efficiencies — not achieve artificially cheap prices through the back-doors of underpayment and exploitation. The gig economy has major problems. But nevertheless, it is here.

So the prudent way forward isn’t to abolish it. Nor can it be simply to let its excesses go unanswered. The government has found a middle ground — creating a framework that allows the FWC to view gig work for what it really is, and provide basic minimum standards for that work so that fewer people get underpaid, and fewer people get hurt at work.

 Our jobs market is thriving

There are, of course, more aspects to these bills, which perhaps we can discuss further. But I want to turn to the consequences the agenda overall. Because so far, much of the hyperbole that has framed this debate just hasn’t materialised.

Last week, incredible jobs data was released. We were told all the IR bills wouldn’t create a single job. But the unemployment rate fell last month to 3.7 percent. My home state, South Australia, now has its lowest ever unemployment rate at 3.2 per cent. So while, of course, certain provisions within the IR agenda are yet to take force, I’m yet to see a serious impact on jobs.

Meanwhile, real wages have started to grow, inflation has moderated — and many of our larger business are recording record profits.

Now this doesn’t look like the dystopia we’ve been warned about.

A people-first productivity & flexible work agenda .

There is, though, an elephant in the room — productivity. One of the major criticisms of this IR agenda that it will further weaken productivity. It is true that Australia’s productivity is in a dismal state. But to fix it, we need to look at productivity wholistically, and understand that the government’s efforts to provide basic workplace protections isn’t inconsistent with the agenda we need to see if we’re to to enhance labour productivity.

We need to accept that it is not just the productivity numbers that matter, but the way in which we achieve those numbers. There are two roads towards better labour productivity.

The first is a lower road: a path that squeezes productivity out of our workforce, chasing greater output with the twin sticks of insecurity and gigification. Achieving productivity through this approach would be a pyrrhic victory — it would improve living standards for some, while making working lives harder for others.

My preference is that we take the higher road towards a productive economy. This path would tackle productivity by addressing all of its determinants. I want to see a productivity agenda that doesn’t discard the best features and protections of our IR framework — basic protections like sick leave, workers compensation, and superannuation. But, instead, works to modernise those institutions, so that they can apply flexibility to the dynamic nature of a modern economy.

I want to see flexibility in the jobs market achieved not by worsening job insecurity, but by dismantling employer-driven rigidities, like the excessive use of non-compete clauses, and making entitlements like sick leave more portable. I want to see a productivity agenda that better leverages competition policy to drive firm level innovation, and that more aggressively invests in the skills of our workers. And I want to see this achieved with a renewed sense of collaboration, and far less vitriol, in our industrial relations debate.

Younger voices, such as Jessica’s and mine, aren’t beholden to the tired old tropes of the past. We no longer need to rail against activities of “union thugs”. Nor should we treat bosses with an innate suspicion or animus.

There is a middle path: A path that brings people along for the journey, expands our economic dynamism, eliminates exploitation, creates a level playing field for all businesses, and increases living standards. And it is a path I believe the government’s IR agenda is consistent with.