The psychological assumption behind multi enterprise bargaining
In our previous blog, Chris Gardner and I explained why in our view, if the Secure Jobs, Better Pay Bill was made law, it would spell the end of single-enterprise bargaining. We said this would happen because many employers would be roped-in or otherwise pressured to join multi-enterprise deals, resulting in industry-level enterprise agreements much like industry awards.
More fundamentally, we made observations on the impact on competition, which have since been echoed in numerous forums.
On Wednesday this week, The Hon Tony Burke MP, the Minister for Employment and Workplace Relations, gave a speech to the National Press Club in which the Minister prosecuted his case for the Bill. The Minister explained the Government’s intentions in leaving the single-enterprise stream in the Bill. The Minister said (and this is a direct transcript hence the errors):
But who would access the single interest test? Let me give you two examples. Sheet metal workers involved in assembling air conditioning systems – their industry rate of pay, the accepted industry rate of pay, is well above the award. Both the employers and the workforce want to be in a situation where they can bargain a multi employer agreement to make sure that they don’t constantly get new competitors undercutting the industry rate in a race to the bottom. They’ve all seen too many times the same people who try to undercut the industry rate in a race to the bottom aren’t just making shortcuts on wages; they’re making shortcuts on safety as well. They see it too many times and they want a system where you can protect against that race to the bottom.
And then later:
So what does the world look like on the other side of this legislation if we make it law? The first thing that will happen won’t be able to multi employer bargaining. The first thing that will happen will be single enterprise agreements will start being made by businesses that have walked away from the bargaining table. They’ll do for two reasons. They’ll do it because the Better Off Overall Test has become workable again and that will bring some businesses back to the table straightaway. But also, there will be some businesses that don’t want to have anything to do with multi employer bargaining and know if you have a single enterprise agreement in place then you’re not affected by multi employer bargaining. So, you’ll get single enterprise agreements going for both those reasons. You’ll find smaller businesses starting to opt in on easier agreements for their workplaces, than having to deal with the complexity of an award. (Our emphasis added).
These passages are revealing. What can we take from them?
First, Minister Burke confirms the underlying philosophy driving the Bill: no employer should have a competitive advantage over another because of their labour arrangements. The “common interest” test is a deliberately low bar to jump so that unions and employers can bring other employers into their labour arrangements. The idea is that employers and unions that have put in place high watermark terms and conditions will take this step, which will lift the remainder of the industry and “get wages moving”. In terms of its likely effectiveness, this is a clever scheme. It turns entrepreneurial market players against each other and saves the repetitious and difficult work of unions having to bargain company by company and site by site.
Second, there is a psychological assumption at play. By bringing in the new single-interest multi-enterprise bargaining stream, the Government has designed a stream it knows many employers will want to avoid. How? By making a single-enterprise agreement that keeps them out of that stream, at least initially. The Minister (to his credit) could not be more candid that this is the first thing he expects to happen if the Bill becomes law. So, whilst in theory, the single-enterprise stream will remain and will be used more, that will occur to avoid a more undesirable outcome being an even less attractive multi-enterprise deal. Less attractive because the employer cannot negotiate it. The employer is simply ‘roped-in’ to a deal done by others. In management speak, the BATNA (Best Alternative to a Negotiated Agreement) is worse, so better to take the deal in front of you, even if you don’t want that either.
Will there be more single employer enterprise agreements made? Probably yes, in the short term, given that a single employer enterprise agreement will insulate an employer from the multi-enterprise system, and it will take some time post the six-month grace period for the multi-employer system to get up and running.
What next? At the time of writing, the passage of the Bill rests with the Senate and a few Senators who hold immense power in the cusp of their hands.