Why unions are vital to Advance Australia Fair - Speech, Melbourne

WHY UNIONS ARE VITAL TO ADVANCE AUSTRALIA FAIR

MAURICE BLACKBURN

MELBOURNE

2 OCTOBER 2018

I acknowledge that we meet on the land of the Boon Wurrung and Woiwurrung (Wurundjeri) peoples of the Kulin Nation, and pay respect to their elders past and present. Special thanks to Emma Dawson for organising this Per Capita event, and Josh Bornstein and Ben Hubbard for the hospitality of Maurice Blackburn. Among the many hardworking unionists in the room, I want to make special note of the presence of Australian Council of Trade Unions secretary Sally McManus and president Michele O'Neil.

The Engels Pause

In the late-1700s, one of the most dramatic transformations in world economic history took place. Starting in Britain, the Industrial Revolution saw production move from hand work to mechanisation. Steam-powered factories massively increased the output of textiles. In previous centuries, economic growth had puttered along so slowly that shops would sometimes carve their prices in stone on the wall. With the industrial revolution, output per worker began to surge. Alongside the domestication of plants and animals, the Industrial Revolution marks one of the major turning points for the world economy.

And yet for the first half century after the Industrial Revolution began, most of the benefits did not flow to workers.[1] From 1790 to 1830, the profit share doubled. Productivity rose, as workers used the new technology to produce more output. But real wages barely budged. Living standards in the cities were often worse than in the countryside, with housing overcrowding rife and sewage flowing in the streets. The most famous expose of workers’ conditions was Friedrich Engels’ 1844 book The Condition of the Working Class in England, which concluded ‘The English middle classes prefer to ignore the distress of the workers and this is particularly true of the industrialists, who grow rich on the misery of the mass of wage earners’. Economic historians refer to the flatlining of real wages for the first half-century of the Industrial Revolution as ‘the Engels Pause’.

There are various theories as to why real wages eventually began to rise, but it is difficult to escape the conclusion that it had something to do with collective action. In 1833, six agricultural labourers in Dorset swore an oath to stand together against attempts to cut their pay from seven shillings a week to six. The Tolpuddle Martyrs were convicted of swearing a secret oath, and transported to Australia. So strong was the support for the union cause that 800,000 people signed a petition calling for them to be pardoned, which was done in 1836. From the factory to the farm, workers kept pushing for the right to organise and strike, through petitions, speeches and the revolutions of 1848. Eventually, workers began to get a fair share of the productivity gains, and the Industrial Revolution became a major driver of better living standards across the world.

Another Engels Pause?

184 years after the Tolpuddle Martyrs swore their oath, Margaret Peacock and her fellow workers went on strike.[2] Margaret worked at Australian Paper, the nation’s largest envelope manufacturing plant. She earned $21 an hour. Their decision at the end of 2017 to go on strike was not taken lightly. Their union, the Australian Manufacturing Workers Union, had gone to the Fair Work Commission three times. They were asking for a pay rise of 2.5 percent a year over three years. The company was offering a deal that averaged 1.6 percent.

Now, it’s important to bear in mind what this means in real terms. As a community, we have given the Reserve Bank of Australia a mandate to keep inflation between 2 and 3 percent. So 2½ percent inflation is right in the middle of their target. This effectively means that Margaret and her fellow envelope manufacturers were putting in a pay claim for zero real wage growth, while the employer wanted to cut their real wages. Like the Tolpuddle Martyrs, the envelope workers were simply asking not to have their real wages cut. After an eight week strike, Australian Paper agreed to the workers’ pay claim. Margaret estimated that the the strike cost her and her husband – who also works at the plant – around $7,000 in lost earnings.

A decade ago, the world faced the challenge of the global financial crisis, which led to 20 million job losses worldwide.[3] At that time, Australian policymakers could claim credit for timely fiscal stimulus, which kept the unemployment rate below 6 percent while joblessness in other nations went into double-digits. Today, our employment performance looks much less impressive. At around 5½ percent, Australia’s unemployment rate exceeds the OECD average. If we had an unemployment rate as low as Germany or the United States, hundreds of thousands more Australians would be in work.

But the other major challenge for the Australian economy is sharing prosperity across the workforce. Immediately after the crisis, wages bounced back along with output. But in the past six years, real wage growth has all but ground to a halt. After a decade and a half in which real wage growth averaged around 1 percent a year, average wages have barely budged since 2012.[4] This shows up in the share of national income going to workers in the form of wages, salaries and superannuation benefits. Since the late-1970s, the labour share has dropped by 7-10 percentage points (depending on precisely how you measure it).[5]

In principle, stagnant real wages for average workers could reflect poor productivity. But that isn’t true this time. Just as in the first fifty years of the Industrial Revolution, productivity is growing at a solid rate. Australia is not enjoying the same kind of productivity surge that we saw in the 1990s, but neither has productivity growth ground to a halt.

Unions Today

A bigger problem for employees is that they have less bargaining power. Just 13 percent of Australian workers are in unions, down from half the workforce in the early-1980s.[6] Trade union membership is lowest among private sector workers (9 percent), 20-somethings (9 percent), recent migrants (5 percent), and people who have been working for less than a year (5 percent). In agriculture, accommodation, real estate and professional services, union membership rates are only around 2 percent. Little wonder that the share of Australians who say that unions have too much power fell from 82 percent in 1979 to 47 percent in 2016, while the proportion who are concerned about the power of big business has risen.[7]

We tend to think of the United States as having a famously low union membership rate, compared to Australia. But in 2017, the US union membership rate was 11 percent, only 2 percentage points below ours.[8] While Australian membership rates are declining, US unionisation held steady from 2016 to 2017.[9] Twelve US states have a higher union membership rate than Australia, so if you find yourself in California or New York, Connecticut or Hawaii, you’re more likely to bump into a union member than you are in Australia.[10] On current trends, Australia and the United States will have the same union membership rates within a decade.

Another way is to take a historic look. From 1920 to 1980, the union membership rate in Australia averaged 49 percent, which is where it was in 1982. Then it began to plunge. Forty percent in 1992. Thirty percent in 1997. Twenty percent in 2006. My own long-run series suggests that we have to go back to 1904 to find a time when the union membership rate was lower than it is today.[11] Not since the before Harvester Judgment has Australia had such a low union membership rate. 

What has caused union membership to fall? Part of the answer lies in changing laws. The abolition of closed shop laws in the early-1990s, the anti-union WorkChoices legislation of 2006, and a myriad of small tweaks by conservative governments that made it harder for unions to organise. The structure of the economy has also tilted the scales against organised labour. Union membership is typically higher among full-time workers, in manufacturing and in the public sector. Analysis by David Peetz suggests that changes in the economy explain a significant portion of the drop in union membership, especially during the early period of the decline.[12] There is also a feedback loop problem: workers appear less inclined to join a union in highly unequal workplaces.[13]

To see why this matters for Australia, it’s worth reviewing the achievements of the union movement. 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. Paid public holidays. Long service leave. Unions helped create the first occupational superannuation schemes, which grew into universal superannuation today. Unions spearheaded the campaign for parental leave, and are now at the centre of the campaign for family violence leave.

It was unions who campaigned for firms in dangerous industries to provide safety equipment, rather than expecting workers to bring their own. Careful economic research finds that unions have a causal impact on making workplaces safer.[14] More workers returned home safely to their families today thanks to the work of unions. And for those injured on the job, unions advocated for workers’ compensation payments.

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. 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.

And that’s before we get to inequality, which is the main focus of my talk.

Unions and Inequality

To discuss inequality with those on the right can be like talking temperance with a drunkard. One moment they’re telling us that inequality doesn’t matter – all that counts is equality of opportunity, not equality of outcome. Next, they’re admitting that maybe inequality does matter, but it really hasn’t gotten any worse. As one Liberal backbencher confidently told parliament recently, ‘Inequality is at a record low in Australia because of the policies of this government’. Another approach is to admit that inequality is worsening in Australia, but to argue that the problem isn’t worse here than in the United States – which is a bit like saying that Australians shouldn’t worry about climate change because temperatures are rising in other countries too.

But as Senator Daniel Patrick Moynihan liked to say, you can have your own opinion – but not your own facts. Over the past forty years, real wages have risen by 72 percent for the top tenth, but just 23 percent for the bottom tenth. If low wage earners had enjoyed the same percentage gains as those at the top, they would be $16,000 a year better off. Since the early-1980s, household income inequality, wealth inequality, and top income inequality measures have all risen. The massive increase in housing prices since the turn of the century has boosted the property portfolio of the wealthiest fifth by more than half a million dollars, while delivering almost nothing for the poorest. The number of billionaires on the AFR Rich List grew from 60 to 76 last year, and the combined wealth of the top 200 rose by a whopping 21 percent.

If you truly think inequality doesn’t matter, you must believe that Australians would be just as content if we took all our resources and gave them to one person. If you think that’s absurd – congratulations, you’re an egalitarian. Excessive inequality also has indirect costs: undermining our sense of shared community, reducing social mobility, and undercutting our egalitarian democracy.

It’s almost impossible to care about inequality, and not care about unions. Across the world, unions are one of the most powerful forces for boosting equality. United States unions were especially effective at equalising the income distribution in the mid-20th century, because they had large numbers of low-skilled workers, who benefited from a large union wage premium.[15] Declining unionisation explains much of the increase in American inequality in the 1980s, and most of the gap in inequality between the United States and United Kingdom.[16] In Britain, firms with a strong union presence are less likely to overpay their corporate executives.[17] Falling union membership explains about one-third of the rise in Australian inequality over the past generation.[18]

Unions have a long history of lending their strongest voice to their lowest-paid members; identifying those most in need, and making their case. Percentage pay claims keep inequality unchanged; dollar pay claims reduce within-firm inequality. We can think of raising earnings of the lowest-paid as ‘flow up’ economics – a theory that has a good deal more empirical support than the discredited notion of ‘trickle down’.

Today, we take for granted that employers should not be legally allowed to pay people less because of their race or gender. But it took unions to fight for that change.

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. Unions filed claims in the mid-1960s to remove racially discriminatory clauses from the Pastoral Industry and Station Hands Awards. Indigenous workers were among the lowest-paid workers in Australia, so these cases helped equalise the distribution of wages.

A few years later, it was the Australian Council of Trade Union’s Equal Pay Cases of 1969 and 1972 that led to the removal of institutionalised gender pay discrimination from industrial agreements. Without union activism, it would have taken longer for these outdated clauses to be scrapped. Because women tend to earn less than men, the equal pay cases also helped reduce earnings inequality.

Unsurprisingly, unions increase wages. One recent study finds that unions increase wages by 5-10 percent.[19] As an aside, given that union dues are generally 1 percent or less, this is a pretty good rate of return.[20] It suggests that if Australia today had the same union membership rate as in the early-1980s, average wages could be up to 4 percent higher.

For the purposes of thinking about inequality, it is important to note that the impact of unions is strongest at the bottom of the distribution. Unions often campaign for pay equity across workplaces and industries. The 2012 Social and Community Sector Equal Pay Case is a good example of this. 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 they 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.

To illustrate the point, take the gender pay gap. Using the Melbourne Institute’s Household, Income and Labour Dynamics in Australia survey, I calculated the gender pay gap in hourly earnings across nearly 8,000 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.

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.

The Real Wage Underhang

Today, a central challenge for Australia is the sluggish growth in wages. As Reserve Bank Governor Philip Lowe observes, ‘low wage growth diminishes our sense of shared prosperity’. As the Reserve Bank’s most recent Statement on Monetary Policy observes, ‘Weak growth in household income has posed a risk to the consumption outlook for some time. Consumption could be particularly sensitive to unexpected weakness in income given the context of high household debt.’

Phillip Lowe’s international counterparts share the same concerns. At a recent press conference, US Federal Reserve chair Jerome Powell admitted that the lack of pay rises was ‘a bit of a puzzle’.[21] In the wake of many US companies responding to the Trump company tax cut with share buybacks rather than wage rises, Powell admitted ‘we don't really have the tools that will address the distribution of profits and that kind of thing’. Historically, a scarcity of workers has led to higher pay – a relationship documented in the ‘Phillips Curve’. Yet despite historically low unemployment, many American workers are experiencing flat wages.

Short-sighted businesses want low-paid workers and high-paid customers. Farsighted businesses recognise that workers and customers are the same people. As the Guardian’s Greg Jericho noted recently, ‘households have shut their wallets as the lack of real wage growth continues’. The annual retail spending figures are, he says, ‘bloody awful on an historical basis’, while new car sales are down 8 percent.[22] If you want to boost retail sales, putting money into the hands of the lowest-paid workers is the best strategy. While high income earners save a significant share of their wages, low-wage workers spend it all.[23]

As I’ve noted, the gap between productivity growth and wage growth opened up around 2012, and shows no signs of abating. It is large and it is persistent. It has driven down the labour share of national income. And it is hurting economic growth. As Sally McManus puts it, ‘Australia needs a pay rise’.

Economist Saul Eslake contrasts the situation now with the economic circumstances Australia faced in the late-1970s. Back then, real wages were accelerating faster than productivity. Economists dubbed the situation the ‘real wage overhang’. The solution was the Accord: an agreement that promised wage moderation in exchange for improvements in the social wage. It was a drastic measure, but it worked.

Today, the problem is reversed. Australia is experiencing a ‘real wage underhang’. Workers have failed to get their share of productivity growth. The union movement’s ‘Change the Rules’ campaign is about getting some balance and fairness back into the system. If unions are relegated to the margins, and the safety net is eroded, then not only will low-paid workers suffer, but so too will our economy as a whole. As Saul Eslake points out, corporate managers aren’t judged on their share of profits, but on their actual profits. Firms would be better with a smaller share of a growing pie than a larger slice of a shrinking one.

You don’t need to march under the Eureka flag to see that there’s a problem. As the Bank of England’s chief economist Andy Haldane noted that Britain has seen a growth in self-employment, temporary work, zero-hours contracts, and non-union jobs.[24] Haldane argues that this makes work more ‘divisible’ than in the past. Even if these trends have not spread across the entire economy, ‘the marginal worker is much more likely than in the past to be self-employed, to work flexibly and to not be part of a union’. Because wages are set at the margin, this may help explain wage stagnation. Haldane summarises his argument: ‘One story here is “divide and conquer”. There is power in numbers. A workforce that is more easily divided than in the past may find itself more easily conquered. In other words, a world of divisible work may reduce workers’ wage-bargaining power.’

Already, Bill Shorten and Brendan O’Connor have announced some of the ways that a Labor Government would restore fairness to our industrial relations system.

  • We will reverse the arbitrary cut to Sunday penalty rates for 700,000 workers
  • We will tackle sham contracting and dodgy phoenixing
  • We will end the oxymoron of ‘permanent casuals’
  • We will prevent labour hire being used to erode earnings by legislating the simple principle: same job, same pay

But tackling inequality needs to apply across the board, including in the boardroom. So tonight I want to announce another policy to promote fairness and improve equality.

CEO Pay Transparency

According to the most recent annual report by the Australian Council of Superannuation Investors, the average realised pay of ASX100 CEOs rose by 9 percent last year.[25] That’s four times faster than average wage growth. Among the ASX100, median CEO pay is now $4 million, while mean CEO pay is $6 million. Since 2001, reported pay for ASX100 CEOs has doubled.[26]

Even if we take the most generous measure of workers’ pay – full time adult average total earnings – the average pay for ASX100 CEOs was 75 times the average pay of full-time workers.[27] This means that a CEO takes home in a single year what it would take the average worker nearly two lifetimes to accrue. Put another way, average ASX100 CEOs earn an average worker’s annual salary every five days.

The report noted that best-paid CEO was Domino’s Don Meij, whose total remuneration was $37 million. This was after a year in which the Fair Work Ombudsman publicly complained that Domino’s had failed to comply with requests to provide information into claims that Domino’s franchisees were paying workers as little as $10 an hour.[28]

Last year, Mr Meij earned $10 every eight seconds.

In 2016, Australians were similarly outraged by the news that – amidst controversies surrounding Australia’s big four banks, the Commonwealth Bank CEO’s realised pay was $12 million. Last year, in the aftermath of the AUSTRAC scandal, the bank announced that it would be cutting executive bonuses and directors’ fees.

It wasn’t always this way. A few years ago, economist Mike Pottenger and I wrote a paper in which we calculated the ratio of the pay of the BHP CEO to the average worker from 1887 onwards.[29] We found that by the late-1970s, the BHP CEO was earning only around 6 or 7 times what an average Australian worker took home. Yet last year, the BHP CEO earned 74 times the wage of an average Australian worker.[30]

Rising CEO pay isn’t just an Australian problem. In the wake of the Global Financial Crisis, many pointed to the remuneration packets of executives as a contributing factor to the crisis, citing their potential effects on risk-taking. In 2017, the average pay packet for CEOs of S&P500 companies was 361 times what the typical US worker earned.[31] In the UK, the mean pay ratio between FTSE 100 CEOs and the mean pay package of their employees is 145 to 1.[32]

But in both those countries, legislators have acted to provide greater transparency. Under the 2010 Dodd-Frank Act and rules signed off by the U.S. Securities and Exchange Commission in 2015, companies are now required to calculate and disclose a ratio of total CEO pay to median employee pay within their firm. The first reports are being released during this year’s proxy season.

This new reporting has seen Bloomberg Media start a CEO Pay Tracker.[33] Recent media attention has focused on record CEO pay ratios, such as Mattel’s CEO receiving 4,987 times as much as the firm’s average worker. At the other end of the spectrum, Salesforce’s CEO earns 30 times the wage of its average worker. The difference is on both ends. Compared with Mattel, Salesforce pays its CEO less and its workers more.

In Britain Conservative Prime Minister Teresa May introduced regulations to Parliament in June that will require large listed UK companies to publish ratios of CEO pay to their average worker. Firms are also provided with the opportunity to explain their wage strategy to shareholders and justify the gap in remuneration. The first reports are likely due in 2020.

Stephen Martin, Director General of the UK Institute of Directors, said companies ‘will have to prepare themselves to explain how pay as a whole in their business operates, and why executives are worth their packages’.

So today I announce that a Shorten Labor Government will require all listed firms with more than 250 employees to report the ratio of their CEO pay to the pay of the median employee. By focusing on the median employee, people will get an accurate picture of how the pay of the person at the top of the firm compares with the pay of the typical employee. Firms will also have an opportunity to provide a public explanation of their remuneration strategy.

There is nothing in free market capitalism that says CEOs need to be overpaid. Indeed, excessive CEO pay makes firms less profitable than they should be. Peter Drucker, frequently credited as the father of modern management theory, says ‘I have often advised managers that a 20-to-one salary ratio is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies’.[34]

Labor’s policy addresses public concern about the disproportionate growth in executive remuneration and extends current market reporting requirements for public companies in a way that will help inform investors as they calculate risk in their investment decisions. This is a pro-growth reform.

Pay transparency should also have positive flow-ons for other workers. As Australian National University economists Kristen Sobeck and Robert Breunig observe: ‘More pay transparency would likely realign the bargaining power between employers and employees and potentially improve outcomes for workers, employers, and society as a whole. It could encourage firms to develop more transparent mechanisms for pay determination.’[35]

CEO pay transparency complements other transparency initiatives announced by Labor, including the public release of gender pay gaps within firms, our Tax Haven Transparency package, and the annual release of tax data for more large private firms.

Now, I fully expect that some of our frothier critics will say that this is an attack on capitalism. Nothing could be further from the truth.

We have deliberately chosen not to impose a financial burden on firms that choose a particular level of CEO pay. Companies differ in their size and complexity, and we should expect the remuneration of the management team to differ accordingly. Additionally, there are significant risks of unintended consequences that can flow from a cap. It is now generally acknowledged that the Clinton Administration’s 1993 budget, which capped the tax deductibility of CEO pay at US$1 million (but excluded performance-based pay), was a major factor in the explosion of stock options for CEOs in the following decade.[36] Experts now believe that capping deductibility risks making the problem worse, and that a better approach is transparency.

I hope our policy will be welcomed by thoughtful sections of the business community. At the very least, I hope those who have been telling us repeatedly that we should follow the United States in its corporate tax system will not now complain when we are following the United States in its corporate transparency system. And I hope that Australia’s conservatives are not so extreme that they would reject a measure currently being championed by conservative Prime Minister Teresa May.

Conclusion

Getting wage growth going again is a central economic challenge for Australia. This is not just about fairness – though it certainly would reduce inequality. Wage growth would spur consumer spending, allowing retailers to expand. With the household debt ratio at historic highs, decent wage growth will provide a buffer against an increase in interest rates or a sudden economic shock (trade war, anyone?). It may even lead to higher productivity growth. As economist Robert Allen notes, artificially low labour costs can deter firms from experimenting with new technologies.[37]

Part of the answer to boosting wages must lie in improving our industrial laws. As history teaches us, collective action has been behind many of the significant improvements in pay and conditions for Australian workers. Yet today, with the rise of non-standard forms of work such as part-time employment and labour hire, workers are more ‘divisible’. Shifting the balance back towards employees isn’t too radical for central bankers. So it makes you wonder why the Abbott-Turnbull-Morrison Government wants to take us in the opposite direction.

A Shorten Government will not only ensure Australia gets a pay rise, but will encourage a stronger conversation within firms about the pay gap between the corner office and the factory floor. By requiring large listed firms to report the pay ratio between the CEO and the median employee, companies will be encouraged to think about how they are serving all their workers, and society as a whole. In the Banking Royal Commission, we have seen the result of a ‘greed is good’ philosophy that extracts value for managers and investors at the expense of customers and workers.

A smarter approach, set out by corporate management expert Lynn Stout, is to recognise that a company’s purpose is not only provide equity investors with solid returns, ‘but also to build great products, to provide decent livelihoods for employees, and to contribute to the community and nation’.[38] It’s not just a more equitable, but more sustainable. And in the long-run, it’s likely to leave us less vulnerable to the boom-and-bust cycle.

Stronger unions, better wage growth, and fairer firms are the recipe for a more prosperous society.

ENDS

Authorised by Noah Carroll, ALP, Canberra.

[1] Allen, R.C., 2009. Engels’ pause: Technical change, capital accumulation, and inequality in the british industrial revolution. Explorations in Economic History, 46(4), pp.418-435.

[2] Greg Jericho and Gareth Hutchens, ‘Whatever happened to wage rises in Australia?’, The Guardian, 28 February 2018.

[3] International Labour Organization, 2009, World of Work Report 2009: Global Jobs Crisis and Beyond, ILO, Geneva.

[4] Greg Jericho and Gareth Hutchens, ‘Whatever happened to wage rises in Australia?’, The Guardian, 28 February 2018.

[5] Labour compensation as a share of GDP has fallen from over 55 percent in the 1970s to a historic low of 46.5 percent in 2017. Labour compensation as a share of factor income (which excludes net indirect taxes less subsidies received by government), fell from over 60 percent in the 1970s to 53 percent in 2017. Similar trends can be seen in other advanced nations. See Stanford, J. (2018) ‘The Declining Labour Share in Australia: Definition, Measurement, and International Comparisons’ Journal of Australian Political Economy No. 81, pp. 11-32.

[6] Australian Bureau of Statistics, 2017, Characteristics of Employment, Australia, August 2016, Cat No 6333.0, ABS, Canberra.

[7] Sarah M. Cameron and Ian McAllister, 2017, ‘Trends in Australian Political Opinion: Results from the Australian Election Study 1987– 2016’, ANU, Canberra, p.84.

[8] US Bureau of Labor Statistics, Union Members Summary, 19 January 2018.

[9] For a thoughtful discussion, see Sarah Jaffe, Writing the Unions’ ‘Fight-or-Die Survival Chapter’, New York Times, 2 September 2018.

[10] In decreasing order of union membership rates, the US states with higher union membership rates than Australia are New York, Hawaii, Washington, Alaska, Connecticut, New Jersey, Rhode Island, Michigan, California, Minnesota, Illinois, Oregon.

[11] Andrew Leigh, 2013, Battlers and Billionaires: The Story of Inequality in Australia, Black Inc, Melbourne, Fig 9.

[12] David Peetz, Unions in a Contrary World: The Future of the Australian Trade Union Movement, Cambridge University Press, Melbourne, 1998

[13] Acemoglu, D., Aghion, P. and Violante, G.L., 2001, December. Deunionization, technical change and inequality. In Carnegie-Rochester conference series on public policy (Vol. 55, No. 1, pp. 229-264). North-Holland.

[14] Donado, Alejandro. "How trade unions increase welfare." Economic Journal 122, no. 563 (2012): 990-1009.

[15] Henry S. Farber, Daniel Herbst, Ilyana Kuziemko, Suresh Naidu, 2018, ‘Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data’, NBER Working Paper No. 24587, NBER, Cambridge MA.

[16] John DiNardo, Nicole M. Fortin and Thomas Lemieux, 1996, ‘Labor Market Institutions and the Distribution of Wages, 1973–1992: A Semiparametric Approach’, Econometrica, Vol. 64, No. 5, pp. 1001–1044; David Card, Thomas Lemieux and W. Craig Riddell, 2003, ‘Unionization And Wage Inequality: A Comparative Study of the U.S., the U.K., and Canada’, NBER Working Paper 9473, NBER, Cambridge, MA.

[17] Gomez, R. and Tzioumis, K., 2006. ‘What do unions do to executive compensation?’ CEPR Discussion Paper 720. Centre for Economic Performance, London School of Economics and Political Science.

[18] Borland, Jeff. "Union effects on earnings dispersion in Australia, 1986–1994." British Journal of Industrial Relations 34, no. 2 (1996): 237-248.

[19] Cai, Lixin, and Amy YC Liu. "Union wage effects in Australia: Is there variation along the distribution?." Economic Record 84, no. 267 (2008): 496-510. See also Wooden, Mark. "Union wage effects in the presence of enterprise bargaining." Economic Record 77, no. 236 (2001): 1-18.

[20] Given that union dues are mostly 1 percent or lower, why don’t all employees join an organization that raises their wages by 5-10 percent? One possible answer is that – unlike in the United States – the benefits of union-negotiated pay deals flow to all workers, regardless of whether or not they are in the union. 

[21] ‘Weak pay growth puzzles Fed chief, just like everyone else’, Chicago Tribune, 14 June 2018.

[22] Greg Jericho, ‘Low inflation hasn’t led to more spending. Only wage growth will do that’, The Guardian, 7 August 2018.

[23] Finlay, R. and Price, F., 2015. Household saving in Australia. The BE Journal of Macroeconomics, 15(2), pp.677-704.

[24] Andrew G Haldane, ‘Work, Wages and Monetary Policy’, Speech at the National Science and Media Museum, Bradford, 20 June 2017

[25] Specifically, mean realised pay for ASX100 CEOs rose 9.3 percent to $6.23 million, while median realised pay for ASX100 CEOs rose 12.4 percent  to $4.36 million. See Australian Council of Superannuation Investors, 2018, CEO Pay in ASX200 Companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration, ASCI and Ownership Matters, Melbourne, p.5.

[26] Although realised pay is a more complete measure than reported pay, ASCI has only been calculating it for the past four years. Mean reported pay for ASX100 CEOs was $5,544,284 in 2017. In 2001, it was $2,450,513 (excluding News Corp) or $2,644,393 (including News Corp). See Australian Council of Superannuation Investors, 2018, CEO Pay in ASX200 Companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration, ASCI and Ownership Matters, Melbourne, p.34.

[27] In May 2017, full-time adult average weekly total earnings were $1605.60, which equates to $83,491 per year: Australian Bureau of Statistics, 2017, Average Weekly Earnings, Australia, May 2017, Cat No 6302.0, ABS, Canberra. Mean realised pay for ASX100 CEOs in 2017 was $6.23 million: Australian Council of Superannuation Investors, 2018, CEO Pay in ASX200 Companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration, ASCI and Ownership Matters, Melbourne, p.5.

[28] Adele Ferguson, Domino's served with notices to produce by Fair Work Ombudsman, Australian Financial Review, 5 November 2017.

[29] Pottenger, M. and Leigh, A., 2016. Long‐Run Trends in Australian Executive Remuneration: BHP, 1887–2012. Australian Economic History Review, 56(1), pp.2-20.

[30] Realised pay for the BHP CEO in 2017 was $6,182,356: Australian Council of Superannuation Investors, 2018, CEO Pay in ASX200 Companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration, ASCI and Ownership Matters, Melbourne, p.11. I again use the generous figure of full-time adult average weekly total earnings, which was $83,491 per year in May 2017.

[31] See AFL-CIO, ‘Executive Paywatch’, available at https://aflcio.org/paywatch

[32] High Pay Centre/CIPD executive pay survey 2018, available at http://highpaycentre.org/pubs/high-pay-centre-cipd-executive-pay-survey-2018

[33] Available at https://www.bloomberg.com/graphics/ceo-pay-ratio/

[34] Quoted in Jena McGregor, ‘What’s the right ratio for CEO-to-worker pay?’, Washington Post, 19 September 2013.

[35] Sobeck,  Kristen  &  Breunig,  Robert,  (2018),  Pay Disclosure: Information Is Power for Employers and Empowers Employees,  Austaxpolicy: Tax and Transfer Policy Blog,  23 July 2018,

[36] Dylan Matthews, ‘Bill Clinton Tried to Limit Executive Pay: Here’s Why it Didn’t Work’, Washington Post, 16 August 2012

[37] Allen, R.C., 2011, January. The British industrial revolution in global perspective. In Proceedings of the British Academy (Vol. 167, p. 199).

[38] Quoted in Steve Denning, ‘How To Fix Stagnant Wages: Dump The World's Dumbest Idea’, Forbes, 26 July 2018.


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  • Wayne McMillan
    commented 2018-10-07 15:30:41 +1100
    Hi Andrew,
    Another well-researched speech worthy of reading. However it neglects the period during the Hawke/Keating era under the Accord where unions traded off wage increases and the right to strike in some cases for superannuation. This retrograde move weakened unions right across Australia and they have never recovered. If unions are going to function properly as representatives of 21 st century workers, then they need to reinvent themselves to be relevant for 21 st century working conditions. Unions are going to have to radically change the way they function and operate.
    Regards
    Wayne J McMillan

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | Andrew.Leigh.MP@aph.gov.au | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.