The federal minister responsible for competition policy has raised concerns about restrictive terms in employee contracts that keep wages depressed, and has called on the consumer watchdog to investigate.
Assistant Minister for Competition Andrew Leigh is worried that “non-compete clauses” are preventing job mobility and keeping wages low, and has asked the Australian Competition and Consumer Commission to look into the issue.
He has also flagged no-poach clauses in franchise agreements as a barrier to job switching, and says the prevalence of such terms is not well understood.
During a speech to legal firm Maurice Blackburn on Thursday, Dr Leigh will point to evidence that Australia’s heavily concentrated markets are hurting workers, especially in the regions.
He says that in markets where there is limited employer choice, workers have less bargaining power to swap jobs for better pay and conditions with another employer.
Dr Leigh says this is clearly evident in regional areas, where workers often have very limited choices when it comes to employment.
He points to a new Treasury working paper that measured the relationship between real wages growth and market concentration before the pandemic.
The research found that wages tended to be lower in concentrated markets, and although these markets weren’t getting more concentrated, the downward pressure on wages was intensifying.
“For any given level of concentration, its negative impact on wages has more than doubled compared to the mid-2000s,” Dr Leigh will say.
He says this suggests employer market power has influenced slow growth over the past decade, with the Treasury analysis suggesting it has lowered wages by about one per cent between 2011 and 2015.
Dr Leigh says non-compete clauses and no-poach clauses in employee contracts are a particular concern for dynamism and mobility in the labour market.
In Australia, “non-compete clauses” – which can stop workers joining competitors for a period of time – are only enforceable if they can be shown to reasonably protect a legitimate business interest.
But Dr Leigh says there is evidence to suggest non-compete clauses can still limit worker mobility, including a lack of understanding about worker rights, and the financial risk of taking a former employer to court.
In the US, officials are considering a ban on non-competes across the economy to improve wage growth and drive innovation.
Dr Leigh says “no-poach” clauses – which are arrangements between employers to not recruit the other’s employees – are used by major franchisors operating in Australia, including McDonald’s, Bakers Delight and Domino’s.
“Most McDonald’s workers would have no idea about this clause, which directly affects their ability to get a better-paying job at another McDonald’s store,” he will say.
Dr Leigh has delivered a series of speeches on the lack of competition in Australia’s economy, with almost every Australian industry – including department stores, newspapers, banking and supermarkets – dominated by a few big players.
When firms have few competitors, they are able to charge higher prices because consumers have no other choice but to buy their products.
– AAP
