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Collective bargaining balances collective capital

By Krystian Seibert - posted Tuesday, 10 October 2006

Kim Beazley recently announced that a majority collective bargaining system would form part of Labor’s industrial relations policy for the next federal election.

Under the system, in workplaces where an employer refuses to collectively bargain with employees, there would be a ballot of employees in order to determine whether the employees would like to bargain collectively with their employer. Where a majority of employees vote in favour of doing so, the employer would be bound by law to collectively bargain in good faith with those employees. The whole process would be overseen by the Australian Industrial Relations Commission.

The policy would mark a move towards realigning the way we structure labour, with the way we structure capital. This is because corporations, the main employers of labour, are effectively collective entities. As pointed out by David Peetz in his book Brave New Workplace, corporations are basically collectives of capital where owners of capital unite for their common benefit.


There a number of reasons why this process takes place. First, it provides owners of capital with more power in the market, especially negotiating power. This is not only relevant when negotiating with employees but is also relevant in other situations such as negotiating with suppliers of products they purchase. Just think of the example of a major supermarket versus a corner store: a major supermarket is generally able to negotiate much better prices from the suppliers of its products than a corner store.

Second, it provides economies of scale. Larger corporations have many hundreds or even thousands of employees. With so many employees, they have the ability to employ lawyers and human resources professionals to manage their relations with their employees.

Even the management of smaller corporations with 10 or 20 employees are likely to have more experience with negotiating than the employees themselves. In the case of industrial relations, the combined effect of having more power in the market and having economies of scale is that corporations generally have more power than individual employees when negotiating the terms and conditions of employment.

In response to this, the collectivisation of labour is used to provide employees with more power in the market and economies of scale. More power in the market for labour is obtained because a group of employees are more likely to be able to negotiate improved terms and conditions of employment than an individual. Economies of scale are obtained because a group of employees can afford to hire lawyers and human resources professionals to assist with their negotiations or they can access the resources of a union if they are represented by one. This acts to decrease any imbalance of power between employers and employees.

Currently, our government policies focus on making capital collectivisation an easy process. If a group of investors want to combine their capital and form a corporation, this can be done quickly and easily. On the other hand, the process of labour collectivisation is hindered. Even if a group of employees wants to join together and negotiate collectively with their employer, there is no requirement that an employer recognises this group, let alone undertakes to negotiate with them. A majority collective bargaining system makes the process of labour collectivisation easier.

Of course, not all employees are likely to be happy with an arrangement where they negotiate collectively with other employees. Despite the fact that employees on collective agreements are generally employed under better terms and conditions than those under individual agreements, there may be a few employees who would like to negotiate individually rather than collectively.


In response to this, it needs to be pointed out that this situation is common in the case of capital collectivisation, where a minority of shareholders in a corporation can sometimes be unhappy with a particular decision of the majority of shareholders. But this does not mean that the entire corporate structure is flawed. If a minority shareholder is so unhappy with a particular decision of the majority of shareholders, they can sell their share of the corporation’s capital and invest somewhere else.

In the same way, if an employee is unhappy with a decision of the majority of employees to negotiate collectively there will always be the option for them to find work with an organisation where the majority of employees did not vote in favour of negotiating collectively with their employer.

Given that the collectivisation of capital has provided benefits to the owners of capital, it is only sensible that the owners of labour have access to the same benefits. And given that government policy has long supported collectivisation of capital, it is time that it also starts supporting collectivisation of labour. A majority collective bargaining system is one step in this direction.

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About the Author

Krystian Seibert is a public policy professional based in Melbourne. He has worked as a policy adviser to two Australian Ministers and studied regulatory policy at the London School of Economics.

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