Should unions be able to charge ‘free riders’ for pay rises?

If a union negotiates a pay rise for a workplace, but only some of the workforce are union members, should it be able to charge non-members a compensation fee? Or should non-members be allowed to “free ride”, receiving benefits without paying those who worked to achieve them?

It’s currently illegal to include such “union security” clauses in Australian industrial agreements. But last week, multiple union officials renewed their push for removing the ban. Australian Manufacturing Workers’ Union secretary Steve Murphy told The Sydney Morning Herald: “Imagine walking into a fishing club or a footy club and demanding all the benefits without being a member. You wouldn’t even get through the door.”

Albanese government sources didn’t rule out making the change, but suggested it won’t be part of this year’s second round of industrial relations reforms, which will focus on labour hire and the gig economy.

Meanwhile, the Coalition and business groups flipped their collective lids, with opposition workplace relations spokesperson Michaelia Cash criticising the union push as a “disgraceful demand which trashes the fundamental right of all Australians to freedom of association. Australians have the right not to join a union and they should never be forced to do so”.

As Cash should well know as a former employment lawyer, this mischaracterises the nature of union security clauses. Unions aren’t asking to forcefully conscript people as members, or operate “closed shops” where non-union candidates can’t be hired. Rather, they’d like to charge non-members a fee for the negotiating services they provide when a successful agreement is reached. Non-members would still be charged less, be denied the full benefits of membership, and couldn’t vote in union elections.

Comrade Milton defends the ‘scab tax’

Even so, are union security clauses an affront to freedom? The Howard government certainly thought so when it tightened legislation to restrict the practice. But funnily enough, in the 1970s, economist Milton Friedman, the doyen of conservative freedom lovers, pondered the issue and uncharacteristically came down on the unions’ side.

He argued that laws banning union security clauses (called “right to work” laws in the US) would violate the freedom of companies and unions to negotiate freely. “Right-to-work laws are in principle wrong because they are an interference with the right of employers to contract,” Friedman told a US lecture audience.

ACTU president Michele O’Neil justified her support for revising Australian law similarly, saying Australia was “unusual internationally by having workplace laws restricting the content of collective agreements”. Indeed, union security clauses are common in many countries, though specific provisions differ.

But in Australia, unions remain smothered in the kind of red tape that conservatives would usually oppose. Unions cannot negotiate agreements for their members alone — differentiated pay scales are prohibited. And even though other bargaining agents generally charge for their services, unions cannot insert clauses charging non-members for theirs, even though the agreements containing such clauses would have to be voted for by a majority of employees regardless.

This is despite the fact employees who don’t want to be represented by a union can represent themselves at the bargaining table — though few would, given the required time, effort and expertise.

The ‘right to work’ or the ‘right to be poorer’?

Why should we care about how much unions get paid? Because their resources help determine the number and quality of industrial agreements unions can pursue, which help determine the standards by which we all get paid — whether you’re a union member or not.

New US research finds right-to-work laws “significantly reduce” unionisation rates (by an average of 4%) and subsequently wages (by an average of 1%). In highly unionised industries, they reduce unionisation by between 12% and 20%, and wages by 4% to 7.5%.

Right-to-work laws also increase economic inequality by reducing the bargaining power of the lowest paid. Conversely, one study found such laws can modestly increase union members’ satisfaction by increasing the level of competition between unions to offer the best deal, but Australia’s industrial system does not facilitate much within-industry union competition anyway.

Unions still need to recruit more members

Even if the Albanese government eventually proceeds with the proposal, unions will still need to organise to broaden membership. Unions don’t just need members for money; they need on-ground expertise, volunteer efforts, and, crucially, a willingness to strike if necessary. Without an engaged membership, unions can’t assuredly advance pay and conditions, failing to fulfil their social mission and flattening their pay-graded membership fees.

The percentage of Australian workers who are union members is now just 12.5% — its lowest level in nearly 120 years. And that number drops to 5% for those aged 20-24, boding poorly for the future.

To turn this around, the labour movement will need more than just legislative change. It’ll need to educate increasingly fragmented workers about how collective action can make the economy fairer, so fewer will want to free-ride in the first place.