Enterprise Bargaining and Productivity: Evidence from the Business Longitudinal Survey

The 1990s has seen bargaining, and more specifically, enterprising bargaining supplant arbitration as the dominant industrial relations paradigm. In large part, this change reflects widespread belief that enterprise bargaining would stimulate greater levels of productivity. Evidence in support of this link between enterprise bargaining and productivity, however, is both scant and unconvincing. In this paper the relationship between enterprise bargaining and productivity is revisited using data from the Business Longitudinal Study. This data source is unique in that it provides firm-level data for Australia where the individual firms are tracked over a four-year period. Further, the survey period commenced in 1994-95, which is ideal for studying the impacts of the emerging growth in enterprise agreement coverage. Finally, the BLS data provide an objective measure of value added output. Estimation of a simple production function using a random effects model revealed evidence of a strong contemporaneous relationship between registered enterprise agreements and productivity. Indeed, firms where all employees are on such agreements are estimated to have productivity levels that are 8.8 per cent higher than comparable firms but where no employees are covered by an enterprise agreement and are forced instead to rely on conditions specified in an industry award. However, despite this finding, it still proved impossible to establish a direct causal relationship between the introduction of enterprise agreements and subsequent productivity growth.