Analysis: Employer group anger over IR reform that affects 327,100 labour-hire workers

The reaction of business groups and the Coalition to the government securing passage of its same job, same pay bill on Thursday — legislation that will prevent employers from outsourcing jobs to labour-hire firms that pay contracted workers less than award rates — was apoplectic.

“Make no mistake,” said the Australian Industry Group, “the bill will hurt industry, undermine productivity and result in fewer job opportunities as well as higher costs that will potentially be passed on to consumers.” “The cost of living for millions of Australians will rise, and the job-creation capacity of businesses will be smothered”, reckoned the Australian Chamber of Commerce and Industry. It will “impact every business and every worker in Australia”, said the Business Council.

“The Albanese government has declared war against the Australian resources sector and weakened Australia’s economy,” said the Minerals Council. “By rushing controversial workplace changes through the Senate, the government has dramatically increased the cost of doing business in Australia, costs that will undoubtedly flow through to consumers, in the midst of a cost of living crisis.” “The cost of health will go up, local council rates will rise and it will take longer to find a relief teacher for your child’s class,” warned a labour-hire lobbyist.

The Coalition’s Michaelia Cash was positively froth-mouthed with fury. “Today is a devastating day for Australians … this is a desperate ploy by an embattled government to distract Australians from the rolling trainwreck that is the released detainees’ crisis. The government’s new labour-hire laws will substantially increase the burden and costs imposed on businesses.”

You can see a recurring theme: costs are going to go up for business, and will therefore push inflation up. But where will those rising costs come from? Unmentioned by any of the employer groups or the Coalition is why, exactly, they’re so convinced that it will push costs up: because the whole point of the bill is to prevent employers from underpaying workers compared to the enterprise agreement applying to the job they’re doing, just by outsourcing to a labour-hire company.

Rather than impact “every worker in Australia”, as the Business Council claims, it will in fact affect around 327,100 people — that’s the total number of labour-hire workers, at June 2023, according to the Australian Bureau of Statistics (ABS). That’s 2.3% of all workers. In fact, it won’t even affect that number, because energy lobby group the Australian Resources and Energy Employers Association convinced the government to exclude what it claimed was genuine outsourcing, where another firm provided a service, not just labour, meaning a large fraction of that workforce won’t be affected.

The ABS figures show labour hire, which originated in the mining industry, has steadily expanded in recent years — since 2014, the number of workers in labour hire has increased by more than a third — which has probably played at least a small role in the wage stagnation of the past decade. We’re not exactly talking about average workers here — labour-hire workers are lower paid, more likely to be from overseas and much more likely to have a precarious job. More than a quarter are labourers. According to the ABS:

In 2019-20, the median annual earnings (in main job) of people employed in labour supply services was $33,100. Almost 20% of people employed in Labour supply services earned less than $10,000 in 2019-20, while almost 10% earned between $60,000 and $80,000.

These are the people that employers don’t want to pay award or agreed enterprise bargain pay rates, because they can pretend to “outsource” the work to a labour-hire firm that will underpay them.

Let’s do a rough calculation, erring on the side of employers: say every single worker in the labour-hire industry gets a whopping $10,000-a-year pay rise as a result of the legislation — a wildly unlikely outcome. That means employers are up for an extra $3.3 billion a year in wages. Sounds a lot! But based on the September quarter business indicators data, Australia’s total annual wages bill at the moment is around $740 billion, meaning that would translate into an increase of… less than half of one percent, even with the most generous possible assumptions.

What the adjustment would do for the likely couple of hundred thousand workers who gain a few thousand dollars a year is provide some much-needed breathing space given they’re some of the lowest-paid workers in the country, the victims of a persistent ploy by employers to get around their obligations to workers by pretending they’re hired contractors, not employees.

Strangely, there’s no mention of that in the hysterical claims of business and the Coalition.

This article was first published by Crikey.