Employers say Labor's new industrial relations bill threatens the economy. Denmark tells a different story

Labor’s proposed amendment to the Fair Work Act (subtitled its Secure Jobs, Better Pay bill) has drawn fire from Australia’s three leading employer groups:

The Senate has begun an inquiry, but it is already easy to see the worst of these fears are misplaced.

Along with banning pay secrecy clauses, putting gender equity at the heart of the Fair Work Commission’s pay-setting process, and giving it new powers to resolve long-running disputes, the bill expands access to multi-employer bargaining, something that withered away at the start of the 1990s.

While multi-employer bargaining is allowed under current laws, no such agreements have been made since 2009, and few since the introduction of enterprise bargaining in 1993.

Read more: Why unions and small business want industry bargaining from the jobs summit – and big business doesn't

Before enterprise bargaining, pay was set by hundreds of awards – most covering more than one employer in a sector or occupation – negotiated between employers and unions before being arbitrated by the Fair Work Commission.

Enterprise bargaining largely replaced that process with agreements individually negotiated in each workplace, and merely registered with the Commission, which checks whether they have passed a “Better Off Overall Test” and meet minimum standards.

A smaller number of awards continued, renamed “modern awards”, and used as a backup for enterprises in which agreements couldn’t be reached.

Enterprise bargains are becoming rarer

It was thought enterprise bargaining would boost productivity, because workers would be able to suggest changes to the way their enterprise worked that would make things more efficient in return for more pay. However, the extent to which this happened is unclear.

Lately, enterprise bargaining has been declining, with the number of operational federally-registered enterprise agreeements falling by more than half from 23,500 to 10,000 between the ends of 2013 and 2021.

In part this has been because pay rises offered under enterprise bargains have been too low to represent value for workers in the enterprise or their union.

Read more: There's one big reason wages are stagnating: the enterprise bargaining system is broken, and in terminal decline

Under the current enterprise bargaining rules, introduced by the Rudd government in 2009, employers are not legally obliged to offer higher pay in return for demands such as longer working days.

The Australian Council of Trade Unions believes bargaining with multiple employers will enable employers to offer more, knowing others can. It wants the government to be part of the process where it funds the pay rate set, as it effectively does for childcare and aged care.

Employer representatives say it would be a return to the 1970s, or the 1960s, when industrial action was common and prices and wages chased each other up.

Our research on Denmark suggests these fears are misplaced.

Denmark shows what’s possible

Denmark has enterprise agreements, similar to Australia’s, but they are linked to multi-employer “sectoral” agreements bargained between unions and employer associations representing workers and employers across a particular sector.

These sectoral agreements provide “frameworks” that can be varied at the level of each enterprise. Like Australia’s awards, the sectoral agreements are the default in enterprises that are unable to strike enterprise bargains.

The difference is that Denmark’s sectoral agreements provide a stronger set of minimum conditions and protections than Australia’s awards, which are more limited by law in what they can cover.

Danish workers have the right to strike and employers have the right to “lockout” their workers by preventing them from working. Despite these powers, industrial action is relatively rare in Denmark.

Read more: Wages and women top Albanese's IR agenda: the big question is how Labor keeps its promises

In recent years fewer days have been lost to industrial disputes in Denmark than in Australia. Taking into account the relative sizes of their workforces, Australia lost about 10 times as many days to industrial action as Denmark in 2021.

This is despite unions being much stronger in Denmark – 65% of Danish workers are union members compared to only 14% of Australian workers – and industrial disputes in Australia falling to historically low levels.

And Denmark does not have out-of-control wages growth. In the past year average Denmark wages climbed 2.5% compared to a similarly-calculated 3% in Australia. In August, Denmark’s unemployment rate was 2.7%. Australia’s was 3.5%

Multi-employer bargaining won’t solve all of Australia’s workplace relations problems, but it’s unlikely to make many of them worse.