Same Job, Same Pay Is A ‘Short-sighted’ Union Power Grab That Will Worsen Australia’s Already Anaemic Economic Growth Prospects

Written by:
12 June 2023
Originally Appeared In

In this article, Saxon Davidson contextualises and disseminates the findings of the IPA’s research into Australia’s worker shortage crisis and how that affects Australia’s economic freedom and prosperity. The IPA has been dedicated to preserving and strengthening the foundations of economic freedom through research and analysis since its inception in 1943.

Labor’s proposed industrial relations reforms will worsen Australia’s unprecedented worker shortage and ensure productivity remains at a 60-year low, writes Saxon Davidson.

The Federal Government’s planned crackdown on labour hire arrangements through its proposed “same job, same pay” policy will further exacerbate Australia’s unprecedented worker shortage and keep Australia’s productivity growth at 60-year lows.

The “same job, same pay” reforms aim to place third-party workers, who have been employed to work alongside full-time workers on particular projects through an agency, within the scope and control of the unions.

These workers have chosen to be employed through an agency, often because it is a more flexible arrangement, and because it is not subject to rigid regulation.

The introduction of this policy has been a long-term goal of Prime Minister Anthony Albanese, who introduced a private member’s bill back in 2021 to try and push it through parliament.

It is a proposal that would have multiple short and long-term implications for Australia’s economic future.

As industry leaders warned this week, it will likely result in the loss of jobs, and a decrease in economic productivity.

The business community – largely outplayed by the unions since Mr Albanese’s election – has rallied together in opposition to the government’s industrial relations agenda.

Minerals Council of Australia CEO Tania Constable last week said the reforms, which should be about fairness and opportunity, were anything but.

“With the proposal as it stands, businesses are not sure how this is going to work in practice,” she told Sky News Australia host Chris Kenny.

“There is quite a lot of concern that somebody that has been there for six months will be paid the same as someone that’s been there for six years.”

The proposed changes come amid declining productivity, rising inflation and unprecedented worker shortages.

Labor has proposed the "same job, same pay" policy to ensure workers hired through a labour hire firm are paid the same as their employed equivalents. Pictured is Workplace Relations Minister Tony Burke. Picture: NCA NewsWire/ Martin Ollman
Labor has proposed the “same job, same pay” policy to ensure workers hired through a labour hire firm are paid the same as their employed equivalents. Pictured is Workplace Relations Minister Tony Burke. Picture: NCA NewsWire/ Martin Ollman

Data released last week by the Australian Bureau of Statistics shows labour productivity declined by 4.5 per cent over the past year, the largest annual decline since records began in 1979.

Wages are also increasing, which will have an inflationary effect across the economy.

Compounding the urgent productivity problem is a worker shortage crisis that has been in the making since the pandemic.

Today, there are currently more than 438,000 job vacancies across the economy, which is almost double the pre-COVID level, with more than one in four businesses unable to find the workers they need.

Every state and every industry is experiencing a shortage of workers, with businesses in regional and rural parts of the country the most heavily impacted.

Economic analysis from the Institute of Public Affairs reveals the worker shortage is costing Australians $32 billion in foregone wages, and the Federal Government $7 billion in income tax.

The same analysis found that Australia’s worker shortage crisis is attributable to a lack of flexibility in the labour market, specifically the prevalence of red tape and tax barriers facing Australian pensioners and students.

Currently, an Australian pensioner can only work a day and a half per week before their pension benefits are reduced by 50 cents in the dollar; when combined with income tax this means they are subject to an effective marginal tax rate of 69 per cent should they choose to work more.

Similarly, students on the Youth Allowance face an effective marginal tax rate of 79 per cent should they earn more than just $288 per week.

These barriers are a major reason why only three per cent of pensioners in Australia are in work, compared with one quarter in New Zealand, which does not have the same tax and red tape barriers.

It is also why fewer than half of students on the Youth Allowance payment currently work, compared with 73 per cent of the working-age population.

Removing flexibility and adding more regulation during a worker shortage crisis will only exacerbate and prolong the crisis.

This is particularly damning given that the government’s own consultation paper regarding this policy reads on page seven: “Labour hire arrangements can be used to supplement short term workforce shortages.”

Limiting flexible forms of employment at a time of declining productivity, worker shortages, and inflationary pressures is short-sighted and risks further damaging Australia’s already anaemic economic growth prospects.

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