Research Report 7/2013 Minimum wages and their role in the process and incentives to bargain John Buchanan, Tanya Bretherton, Betty Frino, Michelle Jakubauskas, Johanna Schutz, Garima Verma, Serena Yu Workplace Research Centre, University of Sydney Business School December 2013 The contents of this paper are the responsibility of the author and the research has been conducted without the involvement of members of the Fair Work Commission. ISBN 978-0-9874935-5-2 © Commonwealth of Australia 2013 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. Requests and inquiries concerning reproduction and rights should be addressed to: Diana Lloyd, Manager, Media and Communications GPO Box 1994 Melbourne VIC 3001 Phone: 03 8661 7680 Email: [email protected] All research undertaken by or commissioned by the Fair Work Commission for the Annual Wage Review 2013–2014 has been agreed by the Research Group. The Research Group comprises a Chair from the Workplace and Economic Research Section, Tribunal Services Branch of the Fair Work Commission, and representatives nominated by: Australian Chamber of Commerce and Industry (ACCI); Australian Industry Group (Ai Group); Australian Council of Social Service (ACOSS); Australian Council of Trade Unions (ACTU); Australian Government; and state and territory governments. This paper is the work of John Buchanan, Tanya Bretherton, Betty Frino, Michelle Jakubauskas, Johanna Schutz, Garima Verma and Serena Yu of the Workplace Research Centre, University of Sydney, Business School. A draft of this paper was workshopped with the Research Group prior to finalisation. The authors would also like to thank the Research Group for its comments. The contents of this research paper remain the responsibility of the authors. Acknowledgement This report has been several years in the making and involved many, many people. This acknowledgement gives recognition to only the most obvious contributors. This report is based on extensive new empirical material, most of which was provided freely by employers and employees. Over the last 20 years it has become increasingly difficult to gain access to workplaces because people are just so busy. While practitioners want to share information, most simply cannot fit this extra demand into tight work schedules. In undertaking this project the research team had the very positive experience of finding that most organisations and individuals approached to participate willingly accepted. This outcome was primarily made possible by the very active support provided by key experts, especially those in employer organisations and unions, who helped to clarify the key issues to explore and the key sites to approach. This support was greatly appreciated by the research team. This support was matched by the high response by employers to the Award Reliance Survey in Australian organisations. Full details about this cooperation and the report it helped produce are provided in the companion research report to this study titled Award reliance.1 Moreover, in keeping with the high level of goodwill associated with the information sharing surrounding this project, the federal Department of Employment (formerly part of the Department of Education, Employment and Workplace Relations (DEEWR)) made information on its Workplace Agreements Database desired by the research team available as soon as it was needed. If there are problems with this report they do not arise from a lack of access to information—the research team got the information it needed. The project team would also like to thank Fair Work Commission staff for their assistance, in particular Miranda Pointon, Samantha Farmakis-Gamboni, Kim Rusling and Joelle Leggett. Miranda Pointon in particular devoted extensive attention to negotiating the original contract and engaged very actively during the initial project scoping stage. This group greatly assisted ensuring a very tight and robust product has been produced. Within the research team at the Workplace Research Centre (WRC), many people contributed a huge amount of time and expertise. Justine Evesson drove the development of the original project proposal and the first round of project scoping. Her initial research identified the importance of undertaking workplace case studies on the basis of ‘like for like’ comparisons. This provided the discipline for the entire research design underpinning this project. Toby Fattore conducted follow- up scoping work on identifying industries for potential inclusion and exclusion. Sarah Oxenbridge undertook the initial specification of field work procedures, including production of a detailed ‘workplace case studies guide book’. The agreements analysis component of this project was only possible because of the very active support of DEEWR personnel, especially Sue Devereux and Phil Swinton—custodians of the Workplace Agreements Database at the time. The selection of agreements for qualitative analysis was guided by experts within employer associations and unions. All those approached for assistance gave their time generously. The qualitative analysis of agreements was undertaken by Betty Frino, Michelle Jakubauskas and Johanna Schutz of WRC. Their work on relativities broke new ground in how data on enterprise agreements can shed important new light on wage determination in contemporary Australia. The quantitative analysis of agreements was driven by 1 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne. Serena Yu. Serena, together with Garima Verma, made major contributions to the presentation of the findings concerning relativities. Extensive assistance with drafting and improving the analytical coherence in the quantitative study of agreements was provided by Damian Oliver. The workplace case studies were prepared by a team including Johanna Schutz, Michelle Jakubauskas, Betty Frino and Tanya Bretherton. Assistance with editing these was provided by Damian Oliver and Rose Ryan. Tanya conducted the heavy lifting to generate a sensitive narrative out of the very rich empirical material contained in Section 2.4. The original statistical material on the incidence and nature of different wage arrangements within organisations and across the labour market was prepared by the team that undertook the Award Reliance Survey. The project manager and prime researcher on this study was Sally Wright. She was assisted by a range of staff at the WRC and the experts at ORC International, especially Phil Hughes, Kerry Sproston, Danielle Belleville and John Nielsen. Full details of all the people involved in that study are provided in the report on that project. A number of staff within the WRC have helped with formatting and copy editing the report. This has included Cate Murray, Rebecca Fielding and Stacey Young. In the later stages of the project Garima Verma worked tirelessly and with good humour to tighten up drafting, and ensure consistency in presentation and formatting. She also contributed to the analytical coherence of the final product. The final acknowledgement needs to go to the Fair Work Commission itself. This is a body that has, in one form or another, existed for over 100 years. Its research program is exemplary in providing evidence to help it better execute its very important but difficult work. Without its funding and support this project would not have happened. I have been involved through all stages of the project—from proposal development, scoping, all stages of field work, data analysis and report finalisation. It’s been a privilege and pleasure to work with such a great team of researchers and to be the recipient of so much goodwill from those with such important information to share. Professor John Buchanan Director Workplace Research Centre University of Sydney Business School December 2013 Minimum wages and their role in the process and incentive to bargain Table of Contents List of Abbreviations and Glossary .......................................................................................... i Executive Summary ................................................................................................................. iv Research Questions, Terminology and Methods.................................................................... 1 Research questions ............................................................................................................................... 2 Annual wage review decisions and wage outcomes ..................................................................... 2 Annual wage review decisions and bargaining behaviours ........................................................... 2 Terminology ........................................................................................................................................... 2 Awards and agreements: formally mutually exclusive categories, in reality often intimately connected ....................................................................................................................... 5 Bargaining and agreement making: not necessarily the same thing ............................................. 5 Formal wages policy decisions need not necessarily have any impact on substantive outcomes ........................................................................................................................ 6 Research design ...................................................................................................................................