Multi-Employer Bargaining: Who Really Wins When Industry Competition Fades?

With 59 applications and 39 approvals to commence authorised multi-employer bargaining at the time of writing, it is worth asking who benefits?

Spoiler alert: it might not be the end customer.

Actually, maybe we should all be thinking whether our own contracts cater for even higher inflationary activity upstream in supply chains.

The Negotiation Argument & Employer Benefits

There is a negotiating argument that multi-employer bargaining could actually erode negotiating power for both unions, employees and employers… but encourage high wage increases anyway.

Unions potentially gain greater coverage, influence and membership. But the employers could benefit too, and not simply because they might negotiate less often. If enough employers in one industry get onto the same agreements:

• Employers are no longer incentivised to escalate wages and conditions for talent attraction and retention (they all pay the same)
• Protected action may cause less competitive damage when the whole industry stops… instead of an individual business.

The Unintended Commercial Consequences

However, the really interesting unintended consequence is that employers may have less commercial motivation to control labour costs because competitive tensions are relieved. After all, you cannot easily lose a tender for being expensive if everyone is equally expensive.

This could create a perverse incentive for costs to rise.

If employers can coordinate labour cost increases and pass them through to customers without the fear of losing share (because everyone’s cost base rises together with multi-employer bargaining), employers could be incentivised to inflate costs in order to earn more gross profit in dollar terms (not necessarily a higher margin percentage).

So it could be less “how much price elasticity do we have before losing market share?” and become more “how much price elasticity before we choke the entire market?”

So less competitive tension could be good for employees, unions and employers alike… the only one not represented at the bargaining table is the customer!

Mutual-Gains Negotiation vs. Zero-Sum Outcomes

Consistent with our mutual-gains philosophy, one party’s win does not automatically require another’s loss. But remove the opportunity for multiple interest-based negotiations, and the process is far more likely to become a zero-sum arm wrestle with clear winners and losers.

What This Means for Negotiators

So what for negotiators?

Apart from the obvious negotiation at the multi-employer bargaining table itself… If your market has exposure to multi-employer bargaining in supply chains now is the time to consider whether your contracts effectively cater for what could become an even higher inflationary period.

• EBA bargaining teams need to think about their sources of power and productivity gain objectives
• Intermediary businesses need to ensure they can pass increased costs through to the end customers.
• End customers need mechanisms to control those inflationary pressures upstream.

We can’t tell you what terms should be in those contracts (we aren’t lawyers), but we are experts at building your teams up to renegotiate and achieve the terms that suit.

Want to ensure your team is ready? Give us a call!