Greater competition to make union officials “feel the heat”

by Miklos Bolza11 Aug 2015
Trade unions and other collective bargaining institutions should be exposed to higher levels of competition to limit corruption and keep insiders “on their toes”, according to a new report.
The paper, Australia’s workplace relations framework: Institutional considerations, was written by Castalia Strategic Advisors and commissioned by the Minerals Council. It says that “Australian labour market arrangements restrict meaningful competition” and therefore “empower trade union officials at the expense of members’ interests”.
“[For] collective organisations such as trade unions to function effectively, members should be able to exercise voice (i.e. internal communication such as complaints or voting mechanisms) and exit (i.e. withdrawal from the organisation to take up other options),” the paper states.
Looking at the latest statistics, the study argues that unions haven’t been able to give employees a larger “share of the pie” under the current framework. In fact, the paper includes an analysis of labour market performance in Australia and reveals that:
  • Employee share of income has remained stable at about 55% despite changes in union membership and shifts in government policy
  • Industries with higher union memberships don’t necessarily offer a higher share of income to workers
  • Employee share of income can be explained by other factors such as capital intensity, skill shortages and risk
  • Enterprise agreements fail to reliably produce better earnings than individual agreements
  • Pay rises have remained consistent with union and non-union members
The report also looked at two common arguments used against greater competition among unions.
In the ‘free riding’ argument, increased competition strips the union of funds which thereby impacts the wider workforce whether they are members or not. According to the report though, greater freedom of choice would likely result in increased levels of membership, thus providing the unions with the funds they need.
In the ‘collective muscle’ argument, competition splits up the workforce and thereby reduces the amount of power that each individual union has. However, “the more ‘collective’ the agreement, the less nuanced it will be to the needs of particular workers and their employers,” the paper states.
Finally, the report insists that “[opening] up trade unions to greater competition is not an anti-union measure”.
“[Better] outcomes can be achieved by reducing entrenchment of insiders and ensuring that union officials feel the heat from their members and are incentivised to serve the interests of those members.”
The paper offers three recommendations when introducing increased competition amongst unions:
  • Replacing awards with an overall safety net of minimum standards without a privileged role for unions
  • Eliminating special rights and preferences for unions and giving equal footing to alternative bargaining agents
  • Removing union rights with regards to the governance of superannuation funds

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