Incremental labor reforms in Australia, including some that promote sectoral bargaining, are showing early promise in boosting bargaining coverage, union membership, and wage growth. The Australian reforms have only recently gone into effect, so additional time and further analysis will be required to draw definitive conclusions. Still, initial results have been good.
This suggests that policies to promote sectoral bargaining (union bargaining with multiple firms for an entire industry of the economy, rather than with just a single employer), in conjunction with other reforms to support workers and unions, can produce real benefits in a relatively short time frame. Australia’s labor reforms provide crucial lessons for the United States, where policies to increase union power and worker compensation are sorely needed.
Though there are many differences between Australia and the United States, the Australian experience is likely to be relevant to America. Both countries are large geographically, share British origins and legal traditions, and have labor systems that share common elements. Union density in both countries is quite low by international standards, and in Australia, as is the case in the United States, most bargaining is done at the firm level or below and employers have significant powers to oppose unions.
Given these similarities, it is worth looking in more detail at Australia’s labor reforms, including its sectoral bargaining components, which provide insights into how the United States might reform its labor system.
Background on the Australian bargaining system
Prior to the 1990s, Australia’s labor system was based on sectoral standards and fostered union density of more than 40 percent and collective bargaining coverage of around 80 percent. But that system was gutted starting in the mid-1990s, as Australia shifted its collective bargaining system to more closely resemble the U.S. labor system—with a focus on firm-level bargaining, among other changes.
These American-style labor reforms led to sharp declines in collective bargaining coverage and union membership, with union density falling to 12.5 percent by 2022. Moreover, multiemployer bargaining was so limited that from 2013 to 2022, 99.5 percent of all new labor agreements were for a single enterprise.
The decline in union density and bargaining coverage in Australia led to predictable problems: Inequality rose sharply, and wages for most workers stagnated. In addition, wage theft increased, as did the fissuring of work through practices such as contracting out that enable large firms to evade responsibility for ensuring standards.
Incremental reforms to support workers and promote sectoral bargaining
Starting in December 2022, the Australian Labor Party-controlled government passed a series of pro-worker reforms to boost wages, crack down on wage theft, regulate the gig economy, increase gender equity, and promote collective bargaining, particularly sectoral bargaining. Although most of the individual changes in the labor reform packages are modest, taken together they are relatively significant.
The most noteworthy changes to support unions and collective bargaining include enhanced workplace access rights for union delegates, simplification of the seldom-used process for contract arbitration, and reforms to remove barriers to multiemployer bargaining in some sectors. Specifically, the multiemployer, or sectoral, bargaining policies create:
- A supported bargaining stream that applies to low-wage sectors that face structural barriers to bargaining—for example, the old-age and disability care sector and early childhood education.
- A single-interest bargaining stream that allows unions or employers to apply for the creation, extension, or variation of an agreement covering multiple employers whose operations or activities are deemed to be “reasonably comparable.”
However, these sectoral reforms have their limitations. Specifically, they don’t alter Australia’s underlying union rules or bargaining structure but rather offer access to multiemployer bargaining streams for some workers. As a consequence, they provide less power to workers and their unions than did, for example, the briefly enacted sectoral bargaining reforms in neighboring New Zealand.
The multiemployer bargaining provisions were the most contentious element of the first legislative package, with unions strongly supporting it and most employer groups claiming it would harm their interests. However, some employers have been supportive. The HVAC Manufacturing and Installation Association argued that multiemployer bargaining can provide for fairer competition, as well as support worker training, with the association’s president stating, “It’s about not having a race to the bottom, to put it bluntly.” Similarly, the Australian Retailers Association appreciated reforms that made it clear franchisees can bargain as one unit rather than individually.
Early outcomes trending positively
In the wake of Australia’s labor reforms, economic outcomes have been quite positive, with collective bargaining coverage, union density, and wages all growing after the reforms. As the independent review conducted for the Australian government summarized:
[T]he reforms are operating appropriately, effectively and with minimal unintended consequences. … [T]he early signs show that the incidence and coverage of collective bargaining is increasing and wages (plus other indicators of workers’ economic circumstances) have started to improve.
Record number of workers covered by collective agreements
As can be seen in Figure 1, the number of employees covered by a collective agreement reached 2.67 million employees in March 2025, the highest level on record, up from 1.8 million in December 2022. As the independent review put it, “coverage of collective bargaining has increased markedly since the passing of the amendments.”
Increase in union density
In August 2024, the most recent period for which data are available, 13.1 percent of employees were trade union members, an increase from the 12.5 percent recorded in August 2022. Sally McManus, secretary of the Australian Council of Trade Unions, called this a “historically high surge in union membership.”
Looking more closely at the union data indicates that the Australian system has a free-rider problem, where some workers can avoid paying union dues while benefiting from union efforts to bargain single-employer or multiemployer agreements. Even so, more than 40 percent of workers covered by collective agreements are union members, suggesting that high coverage rates are helpful for supporting high membership.
Wage growth
Through March 2025, real wages (wages adjusted for inflation) have grown for six straight quarters—after a recent period of decline, due in significant part to high inflation but also relatively low nominal wage growth. As the independent review explained, “Since the inflationary peak in the December quarter of 2022 there has been a slow, but gradual, recovery of real wage growth.”
In addition, the gender wage gap has declined since the reforms and is now the lowest ever recorded. The multiemployer bargaining reforms likely contributed to this, as sectoral bargaining is particularly good at ensuring similar work receives similar pay, and many of the sectors where multiemployer agreements have been reached are in female-dominated sectors such as early childhood education.
Still, it may be too early to draw definitive conclusions. It is possible that other factors could have led to wage growth and other results. Adding to the difficulty in analysis, some labor policies have had little time for implementation. Indeed, certain provisions from the initial December 2022 legislative package did not go into effect until late 2023, and still other reforms were not passed until February 2024. Further, there are data limitations. For example, government reports on union density are produced only every two years.
In addition, some policies may have a bigger impact than shown directly in the data. Only a handful of collective agreements have been arbitrated under the streamlined system, but the increased availability of arbitration may encourage parties to try to reach agreement on their own. Similarly, the new multiemployer bargaining streams have directly created a relatively small number of new agreements thus far, but decisions in these initial cases can establish procedures that allow future agreements to proceed more quickly. Further, the availability of these new bargaining streams likely pushed employers to bargain through other processes.
Even with these caveats, the data show a positive story of improvement for workers after labor reforms were enacted.
Conclusion
Thus far, Australia’s labor reforms appear to be working well, with pro-worker and pro-sectoral bargaining policies leading to increased collective bargaining coverage, union density, and wage growth. Positive labor market outcomes may be the expected result from these types of reforms, but the initial results are still quite important. They help Australian workers, add to the significant body of evidence showing the benefits of sectoral approaches to unionization and bargaining, and could help point the way for reforms in the United States.
The outcomes from the reforms demonstrate that a series of changes to support workers and their unions and to promote sectoral bargaining can help produce relatively rapid improvements. This is a lesson that U.S. policymakers should take to heart.