Andrew Leigh

Why Unions Matter in Australia, The Canberra Times, 10 December 2016

Last week, I read in the press that the Turnbull Government intends to spend 2017 saying to the electorate that unions do a lot of damage to the economy. But while we prepare to re-live Groundhog Day, it’s worth answering the question ‘what did unions ever do for us?’.

Over the years, unions have brought about lasting gains in the workplace. Sick leave in the 1920s. Annual leave in the 1930s. The eight hour day in the 1940s. Unfair dismissal protection in the 1970s. Banning asbestos in the 1980s. The weekend. Careful economic research finds that unions have a causal impact on making workplaces safer. Today, unions are making the case for family and domestic violence leave.

Unions have often found themselves on the right side of history. Maritime unions refused to load ‘pig iron’ onto Japanese ships in the late-1930s because they foresaw the risk that it would come back in bombs. When 200 Gurindji people walked off the Wave Hill cattle station in 1966, it was the trade union movement that supported the right of Indigenous people to be fairly paid. If you’ve ever enjoyed Centennial Park and the Sydney Botanic Gardens, then you should thank the union members who stopped them being destroyed in the 1970s.

Unsurprisingly, unions also increase wages. One recent study finds that unions increase wages by 5-10 percent. Given that union dues are generally 1 percent or less, this is a pretty good rate of return.

The impact of unions is strongest at the bottom of the distribution. Unions often campaign for dollar pay increases rather than percentage increases, for pay equity across workplaces, and for pay equity across industries.

One analysis by Jeff Borland estimates that in the 1980s and 1990s, declining union membership was responsible for up to one-third of the increase in Australian wage inequality. This parallels what has been found in Britain and the United States. To illustrate the point, take the gender pay gap. Using the Melbourne Institute’s Household, Income and Labour Dynamics in Australia survey (HILDA), I calculated the gender pay gap in hourly earnings across nearly 8000 workers. Among non-union workers, women earned 13 percent less than men. But among unionised workers, the gap is 7 percent, approximately half as large. This suggests that unions play a role in narrowing the gender pay gap.

The same holds true for Indigenous workers. My analysis suggests that if they’re not in a union, Indigenous people earn 18 percent lower hourly wages. But among unionised workers, the wage gap between Indigenous and non-Indigenous workers closes to 5 percent. As with the gender gap, unions don’t close the racial pay gap entirely, but they make a big difference.

The 2012 Social and Community Sector Equal Pay Case is a good example of how unions improve pay equity. In bringing the case, the five unions noted that around 80 percent of workers in the social and community sector were women. They argued that because social and community sector workers did ‘caring work’, they had been systematically underpaid, compared with those in other occupations who had comparable skills and worked in similar conditions. Fair Work Australia agreed, and laid down an eight-year transition to better pay for these workers.

Today, one of the striking things about the attacks on unions is that they come at a time when union membership is low and falling. From 1920 to 1980, the union membership rate in Australia averaged 49 percent. Then it began to plunge. Forty percent in 1992. Thirty percent in 1997. Twenty percent in 2006. According to the latest figures from the Australian Bureau of Statistics, 15 percent of the workforce are now in a union. Union membership is now back where it was in 1906 – 110 years ago.

Among private sector workers, the official membership estimate is 11 percent. For overseas-born workers, it’s 12 percent. For workers aged under 25, it’s 7 percent. Among the industries where union membership has now fallen below one in ten area accommodation, agriculture, defence, printing and performing arts. Australia’s 15 percent union membership rate isn’t much higher than the US unionisation rate of 11 percent. If the current rate of decline continues, Australia’s union membership rate will reach 10 percent by 2022. This will make it steadily more difficult for unions to make workplaces safer and promote pay equity.

Every time you see someone proposing policies that make it harder for unions to organise, remember what this means for our economy. A larger gender pay gap. Indigenous Australians being left further behind. More economic inequality.

Andrew Leigh is the Shadow Assistant Treasurer. This is an edited extract of a speech delivered at the Per Capita think tank and first appeared in the Canberra Times on Saturday, 10 December 2016.