The Future of Unions in Australia and the Implications for Labor

February 02, 2018



Shortly before Parliament rose last year, the Reserve Bank Governor, Philip Lowe, again drew attention to the poor rate of wages growth in Australia and its impact on the broader economy. While he was at pains to stress that he wasn’t – in his words – ‘calling on the workers of the world to unite to rise up against the evil capitalists’, he has on a number of occasions recently urged workers to muscle up for a pay rise. Over the past couple of years, I’ve also watched debates proceed in the Economist newspaper and elsewhere about whether the Phillips Curve holds true anymore – or what happened to its poetically-named cousin, the Non-accelerating Inflation Rate of Unemployment.


Rising inequality and wage stagnation have become a barbecue-stopper in Australia. While Scott Morrison put up a half-hearted attempt at pretending last year that Australia was actually becoming more equal under this Government, even he gave up trying that line pretty quickly. Chris Bowen has led Labor’s analysis of these trends and, with the rest of his economic team, is pulling together a thoughtful and progressive platform for Labor to take to the next election. From the back-bench, Wayne Swan has poured his energy and experience into dissecting the threads of post-GFC economics and their impact on Australian households. No-one seriously argues anymore that we don’t have a deep problem on our hands. And we know that dynamics in our labour market lie at the heart of that problem.


It is frankly a bit baffling to me that finance writers, economists and even Reserve Bank Governors might be surprised by what’s happening to wages and economic inequality in this country. Perhaps the mining boom masked for a while a seismic structural shift in Australian workplaces – but what we confront today is an entirely inevitable consequence of deliberate decisions taken over the past three decades by business and governments – in particular, decisions to smash the power of organised labour.


As the National President of the Australian Labor Party, I am deeply concerned about the conditions for Australian workers to exercise their right to organise into unions and to enjoy meaningful workplace democracy. Without a dedicated effort to improve those conditions, we are at risk of losing one of the central planks of Australia’s post-War prosperity and equality – the ability of workers to come together collectively and democratically to improve their living standards. Wage stagnation, the loss of hard-won conditions, and rising inequality will only get worse if we don’t change direction.


Today, I want to set out some thoughts about rediscovering a foundation for a healthy, thriving union movement - in a way that reflects the circumstances of the new century, rather than trying to hang desperately onto every element of our past. While I expect many of these ideas to meet resistance – perhaps even within our own Party – in setting them out, I’m motivated by a deep commitment to see unions remain a powerful force for good within Labor and the broader community.


It’s worth quickly re-capping the importance of the role of unions in post-War Australia. Working people across the developed world came out of World War Two determined to see a fairer social and economic compact than the one that had seen them endure 15 years of economic hardship and devastating conflict. The business community recognised the threat that the allure of communism presented to their interests, and reconciled itself to a series of reforms pursued by progressive governments from Attlee to Truman, to Chifley here in Australia. While all accommodated a structured role for trade unions, Australia more than any other developed economy put the wages system at the heart of the post-War social compact, in contrast to the UK and European countries that developed much deeper – and more expensive – social insurance programs. That unique characteristic of the Australian response is why ours was called by some academics a ‘worker’s welfare state’; a compact built around a fair day’s pay for a fair day’s work.


This compact lasted decades – including through the Menzies and Fraser governments. While those Prime Ministers certainly targeted trade unions they identified as too left-wing or militant, they broadly accepted the central social and economic role played by the union movement. And David Peetz has shown that, right up until well into the 1980s, management surveys also revealed little interest in strategies to do away with unions.


But a series of landmark disputes in the 1980s, and a clear policy shift by the BCA, saw the business community take a much harder line into the 1990s. The influence of the HR Nicholls Society, the rise of the hard-Right in the Liberal Party, and the end of the Cold War all combined to drive a dramatic shift against Australia’s post-War compact.


I started as a full-time official with the Miscellaneous Workers Union – now United Voice – 25 years ago. I spent 15 years at the Misso’s, including 11 years as State Secretary, working with members in child care, aged care, hospitals, cleaning, security, hospitality, food and beverage manufacturing, and many other industries. I can’t express how much pleasure and value I got from the privilege of that work.


But the world I confronted as a fresh official in 1992 is barely recognisable today. Back then, Australia was only beginning its shift from decades of centralised wage fixing to enterprise bargaining. Disputes were resolved in a no-nonsense fashion by industrial commissions, without the need for lawyers at twenty paces. Workplace delegates were recognised as legitimate parts of an enterprise. And union membership was still encouraged through preference arrangements.


Union membership was running then at about 40 per cent of the workforce. That was a significant drop from the levels in excess of 50 per cent seen in the mid-1970s, but the actual number of members had increased over that period to more than 2.5 million – so union leaders were feeling pretty good about things. The month before I started work at the Misso’s, though, Jeff Kennett had been elected Victorian Premier. Kennett was the first Liberal leader to get the chance to put the new Liberal and business sector ideology into practice – and he did it with gusto!


Over the decade of the 1990s, pretty much all of those underpinnings to the way unions operated when I started as a new official were demolished. The role of the Commission in resolving disputes was progressively curtailed and replaced by legal action. Union delegates were increasingly targeted at the workplace level. Economy-wide wage increases were heavily restricted as the system tried to shift workplaces to enterprise bargaining, such that the many sectors that found that shift difficult started to see real wages suffer. But arguably the most significant change was the prohibition against ‘closed shop’ or union preference arrangements – what Peetz called the ‘institutional break’.


The loss of union density through the late 1970s and 1980s was a product of changes in the labour market – in particular, a decline in job numbers in highly-unionised industries. As I said earlier, though, the actual number of union members continued to rise. The 1990s were different in both respects. Both density and numbers plummeted across that decade, with unions losing around 800,000 members in just ten years. And it’s broadly agreed that the bulk of that decline was driven by an aggressive attack on unions and collectivism – that ‘institutional break’ described by Peetz.


As soon as he took over the ACTU from Bill Kelty, Greg Combet marshalled unions towards a reform agenda that would better-equip them for the new operating environment. Earlier flirtations with gimmicks like free movie tickets and cut-price computers to entice workers into the union were discarded in favour of a focussed approach on building our organising and campaigning capacity. I led a union Branch at the time that was often used by the ACTU as a testing ground to see if some of our more ambitious ideas would fly, so to speak. And they overwhelmingly did fly – with strong support from our members - meaning that unions were far better-equipped to respond to Howard’s WorkChoices laws, and to run the Your Rights at Work campaign than we would have been without Greg’s reform agenda. But seeing off Howard and his laws didn’t deal with some of those more structural challenges that face unions.


Most developed-world industrial relations systems operate on the premise that the ability of workers to bargain collectively and enjoy meaningful workplace democracy is a ‘public good’ – it delivers better wages, greater social equality and dignity at work. As a result, they feature some form of structured support for unions to organise a workplace effectively. The removal in Australia of the top-down form of unionism driven by preference arrangements is no bad thing. There was quite a bit of evidence that they led to a degree of atrophy in effective workplace organisation, and conscripted some workers to union membership who didn’t want it. I don’t think many people support a return to the old preference system – I certainly don’t.


The enduring problem with the 1990s prohibition against closed shops or preference, though, is that nothing has been put in their place instead to underpin workplace democracy and effective union organising. From the perspective of John Howard and his fellow-travellers, that’s a good thing – Howard used to list the decline in union membership as one of his key achievements. But for those who see workplace democracy and healthy unions as a key feature of our social and economic fabric, it’s a problem.


I also fear that people who haven’t experienced what those changes actually mean for Australian unions don’t really understand it. Most people still imagine union organising against a backdrop of relatively large workplaces with a stable workforce – traditional factory organising if you like. A modern workplace is far more likely to be small and difficult to access, with a workforce that has high levels of turnover. Even if you’re able to organise the workplace into the union, the high turnover that is common in much of the services sector means that you pretty quickly need to go back and do it all over again – a bit like painting the Sydney Harbour Bridge.


In a recent speech, ‘Rethinking Trade Unionism’, the former High Court Judge Mary Gaudron urged unions to do better ‘to connect with non-members’. She proposed inviting a member for a drink after work and suggesting they bring a non-union colleague along. Of course, unions have responded to the 1990s assault with sophisticated new communications and recruitment strategies. But, with all due respect to an otherwise timely and thoughtful speech, that sort of suggestion profoundly misreads the scale of the challenge for Australian unions.


To frame the position confronted by Australian unions in an American context, our organising environment matches the Deep South. Organising in Australia is more like organising workers in Alabama than in California. As a result, we’ve quickly gone from a position of having some unwilling conscripts in unions 25 years ago – to now having vast numbers of Australian workers who want to be part of their union, but have no real opportunity to do so in a way that respects their desire for meaningful workplace democracy.


The difference between organising in Alabama and California is described by the Americans as the difference between a ‘right to work’ State and a ‘right to organise’ one. In California and 21 other American states, workers can elect through a vote of their entire workplace that everyone who is enjoying the benefits of union-negotiated wages and conditions must contribute to that result – if not through union membership, then by paying a service or agency fee. By contrast, the Taft-Hartley Act of 1947 has allowed Alabama and 27 other states to prohibit any form of support for union membership or agency fee arrangements.


The ACTU Congress in 2000 adopted a policy encouraging unions to pursue California-style agency arrangements, usually called bargaining fees here in Australia. They would operate as part of an enterprise agreement process, only able to be approved by a majority of affected workers in a transparent vote of the whole workforce. Workers covered by the Agreement, but not in the union, would pay a bargaining fee, typically set at a reduced portion of union fees. Members of our Branch of United Voice thought the policy was a terrific idea and, as a loyal affiliate of the ACTU, we went out and negotiated such an arrangement. I then argued a case in the South Australian Industrial Commission over 18 months – in front of a special five-member Bench – that such a fee should be approved. That case was ultimately successful, but John Howard introduced tailor-made laws to override the Commission’s decision within a matter of days. The ETU had negotiated similar arrangements in the Federal jurisdiction, which had also been overruled by Howard with tailor-made legislation.


Bargaining fees – or something like them - are opposed by some on the philosophical grounds that they compel payment regardless of individual choice. On the other hand, they effectively deal with the so-called ‘free-rider’ problem that arises where some individuals choose not to make a contribution to the achievement of an outcome enjoyed by all. Unions are not able to continue forever plowing resources into negotiating and enforcing superior wages and conditions paid for by a diminishing number of union members. As all economists know, leaving a ‘free rider’ situation unaddressed will usually mean that the ever-diminishing pool of contributors falls below a critical mass – with the result that the benefits disappear altogether and everyone end up worse off. That’s exactly what we’re seeing today with the plummeting rates of collective bargaining in the private sector revealed by the Government’s latest EBA data.


It was generally expected that Labor would lift the legislative prohibition imposed by Howard on bargaining fees when it won the 2007 election - until the 2007 National Conference when Kevin Rudd took an executive decision to keep it in place. I understand that there are different views about ‘bargaining fee’ arrangements. But, while reasonable people might debate whether Rudd’s decision was a good or a bad thing, the real problem with it has been that nothing has been implemented instead - to underpin meaningful workplace democracy and effective union organising. If we agree that the ability of workers to do those things is a ‘public good’ – that it’s an extension of our love for democracy, and has undeniable benefits for overall living standards - then that leaves a yawning gap in our social and economic fabric.


After the collapse in the 1990s, union membership largely flatlined for much of the first fifteen years of this century, hovering around 1.8 million members, though union density continued to drop. Actual membership itself has now also fallen substantially over the past five years. When I started as an official 25 years ago, 40 per cent of the workforce was in a union – a movement more than 2.5 million strong. Today, unions are down to a little over 1.5 million members – and union density in the private sector has fallen below 10 per cent, a threshold we regarded years ago as existentially threatening.


Perhaps even more concerning is the age profile of union members. Fairfax reported recently that, 25 years ago, there were more union members aged 15 to 24 years of age than in their 50s. Today, there are 3.5 members in their 50s for every member in that younger age group. Union density for workers under the age of 25 is running at around 5 per cent. This will have obvious consequences over coming years through simple attrition.


The challenges involved in organising workplaces in much of the modern labour market have collided with shortcomings in wage fixing arrangements to produce the wage stagnation and rising inequality we see today. The intellectual grunt behind the shift 25 years ago to enterprise bargaining was provided by Keating, Kelty and the Metalworkers Union. It transformed industry awards into safety nets, rather than mechanisms to distribute - relatively equally - the fruits of growing national prosperity. Instead, workers would bargain enterprise by enterprise for a more calibrated return from that prosperity. This was a shift heavily driven by a desire to lift productivity in manufacturing workplaces after the dramatic industry restructuring exercises of the 1980s and in the face of growing global competition. From that perspective, it was a clever policy response which has served large parts of our economy very well.


But enterprise bargaining has not been as effective in a range of workplaces in the growing private services sector – many of which were covered by the union I worked for. Small, dispersed enterprises – where funding for wage increases is often controlled by third parties, like clients or government funders – have consistently been unable to navigate the enterprise bargaining system in a way that works for them and their workforce. Attempts by the Rudd and Gillard governments to introduce alternative mechanisms – such as low-paid bargaining or pay equity streams – provided some important relief. But they still failed to place the demands of the increasingly typical modern workplace at the centre of our wages system, rather than seeing it as an apparent after-thought. As a result, wages have been even flatter in those sectors of the economy than the anaemic economy-wide figures we commonly see reported today. This requires substantial thought to ensure that the substantial benefits of the Keating reforms are preserved, while meaningfully addressing the needs and aspirations of workplaces that struggle to work within that system.


Beyond these substantial structural challenges, unions today confront employers who are increasingly emboldened by decades of reform aimed at crimping the power of workers. Employers are far more likely today to take drastic action to get their own way, such as terminating workplace agreements or locking their workforce out for weeks or months at a time. And even the Industrial Commission has taken the extraordinary decision to reduce penalty rates for hundreds of thousands of low paid workers in retail and hospitality without any compensation. Protecting hard-won wages and conditions is tough today, let alone winning substantial improvements. Brendan O’Connor has laid out a comprehensive plan for Labor to relieve a number of those pressure points in a series of thoughtful speeches last year. And Sally McManus’ leadership at the ACTU has brought a new level of energy to the campaigning capacity of unions to confront these challenges.


But the time has come also to address openly the deep crisis facing the union movement in Australia. None of us expects the Liberal Party to start that debate – or even to take a mature approach to the question. But I fear that, if these structural challenges that see Australian unions expected to operate under Alabama conditions aren’t dealt with in a measured, effective and durable way, then the union movement as we understand it will start to reach a tipping point. Membership could be expected to hold up in the public sector and a few areas of the private sector. But, unions in time would cease to exist as a broad-based movement that truly speaks for the whole workforce and is able to exert a positive influence across the whole economy.


As National President of the Labor Party, that obviously concerns me deeply. The decline of private sector unions as a mass movement, let alone the possibility that some might cease to exist, would change our Party dramatically for the worse. I’m also confident, though, that the majority of Australians would not choose an Australia without trade unions. Australians intrinsically understand the role unions play in advancing the living standards of the many, rather than the few. I remember clearly many discussions during the ‘Your Rights at Work’ campaign with people who weren’t union members and didn’t much like union officials – but who still thought it important that unions survive and thrive in Australia. Because they understand that the power of working people to achieve dignity at work and decent wages depends on sticking together.


It’s time for the labour movement, in its broadest sense, to have a ‘no holds barred’ debate about the place of unions in Australia. We must make the case for the survival and strength of trade unions in Australia as the cornerstone of workplace democracy. And that means being forthright about the fact that current laws are inconsistent with that objective. We must make the argument for reforms that deliver meaningful workplace democracy and the capacity for unions to organise effectively. I don’t presume to say what the best model for Australia might be – but it’s not Alabama! There are plenty of other models around the world to consider beyond the agency shop arrangements (or bargaining fees) that exist in parts of the US and Canada. Many of us are familiar with union recognition arrangements in the UK and long-standing Works Councils in Scandinavia and continental Europe. They should all be examined.


And – while arguing the case for greater democracy in Australian workplaces, we should also be arguing for greater democracy in the Australian Labor Party. It’s time to have a serious discussion about how unions operate within our Party. That’s not just my view. Bill Shorten said in his 2014 speech to the Wheeler Centre that ‘if we are serious about modernising the Labor Party, we need to modernise our relationship with the union movement’. In the book he published the same year, Greg Combet said ‘the relationship between unions and the ALP needs to change – it needs to be democratised’. Like Greg, I think a debate about whether unions should continue to have 50 per cent of votes at Party conferences – to use Greg’s words - ‘misses the point’. Adjusting that figure up or down won’t do anything to revitalise the Party – and may simply distance the Party from the most sophisticated and energetic campaigning capacity we have in the labour movement.


I think unions should retain 50 per cent of the delegations to State policy conferences, and the same share of voting for delegates to the National Conference. That preserves the ability of unions to operate in a collective fashion in our important policy debates. But I agree with the suggestion contained in Combet’s book that - when it comes to voting for Parliamentary candidates, Party leadership positions and the like - we should be handing power to individual members of affiliated unions who choose to take part, rather than leaving it in the hands of union secretaries alone.


As I’ve said, I was a union secretary for more than a decade who exercised that power in South Australia. Union rules are set up on the basis that the executive and officers are able to take action on behalf of the collective membership. There is nothing illegitimate about that concept, but it just doesn’t sit comfortably with the more personalised nature of political activism demanded today. Some unions have already set up participatory structures internally to inform the decision taken by their union secretary. The AMWU here in New South Wales is a good example of that. But, like Greg, I’m convinced the time has come to look at formally dealing individual members directly into the voting process. This was the position in most branches of the Party until the upheaval of the mid-1950s, and lasted in Queensland right up until 1980. And, as many of you know, it’s a central feature of the reforms within British Labour.


A couple of weeks ago, I gave a speech about Party reform more broadly, and argued that we should be expanding our voting arrangements beyond full members, to include registered Party supporters. Members of affiliated unions in particular electorates – or for statewide Senate and upper house ballots – should also be part of that reform direction if they choose. I don’t have a fixed view about how that mix of voting pools should operate. The British Labour Party has moved to a ‘one vote, one value’ system. On the other hand, Bracks, Carr and Faulkner recommended in their 2011 Party Review that we trial a ballot which involves a college for each of the three voting categories. Those options should be debated further within the Party. In broad terms, though - not only would such a move deliver a new level of energy to Party ballots - it would also send an important signal about the democratisation of the way unions engage in politics.


These questions obviously don’t span the full spectrum of challenges confronting Australian workers and their unions. But, the capacity of trade unions to survive and thrive is under very real threat. And, to those who might say - ‘such is life in the dynamic, disruptive twenty-first century’ – I’d ask ‘what’s your alternative way of underpinning a fair system of distribution of the nation’s prosperity and opportunity’? Because the Australian people are not going to stand for ever-widening levels of inequality and this ongoing freeze in their wages.


When I was an official, making the case for one change or another within our union, I’d point to our movement’s proud history of ensuring that every generation in Australia had done better than their parents – but, also, to the very real danger that, if we’re not careful, ours will be the first generation to hand down a set of wages, conditions and living standards to our children that is worse than those we inherited from our parents. That is the scale of the challenge – the seriousness of the fork in the road that Australia now confronts. Ensuring Australia continues to have a strong, vibrant and democratic union movement is essential to helping us choose the right path.