The clause in your job contract that costs you $500 a year – and Australia $7 billion
Australians handcuffed to their employers by contracts that stop them finding a better job are losing $500 a year, new research shows amid fears that childcare, GP clinics, aged care homes and dentist practices will be the next competition battlegrounds.
In a sign overall economic activity is being reduced, with the cost delivered to consumers through higher prices, Competition Minister Andrew Leigh on Monday will reveal that every Australian household is up to $7500 a year worse off due to a drop in real competition across the country since the turn of the century.
The lack of competition in the economy, and within businesses, is now costing households up to $7500 a year.Credit: Peter Rae
Competition issues around the world have grown in importance due to the rise of digital companies such as Apple, Meta and Google over the past decade and the demise of small to medium-sized businesses in everything from mining to the retail sector.
Increased protectionist policies, including the plans for incoming US president Donald Trump to impose tariffs of between 10 and 20 per cent on the goods of all countries exporting to America, have also added to fears the world economy will endure softer growth over coming years.
One area of concern is employers’ use of non-compete clauses or other restrictions on staff. Almost half of all Australian workers now have so-called restraint clauses as part of their employment agreements.
Non-compete clauses are just one of a range of growing restrictions being imposed on staff by their employers. They include contract clauses that prevent employers taking existing clients with them to a new business, stop working in the same industry for extended periods, and non-disclosure requirements.
Leigh will tell the Competition Policy for the Modern Economy Conference that non-compete clauses, which can prevent employees working for a competitor, mean affected staff earn 4 per cent less on average than someone not hindered by such restrictions.
“Extrapolating across the workforce, and accounting for the fact that one in five workers are subject to a non-compete clause, this implies that non‑competes are driving down average wages by more than $500 every year – equivalent to $7 billion annually,” he will say.
The government has set up a competition taskforce which is examining almost all aspects of the economy. Some of its work has already gone into a shake-up of merger law, which the government is seeking to push through the parliament, and tighter rules around the supermarket sector.
Leigh will reveal that the taskforce, with the Australian Competition and Consumer Commission (ACCC), is already looking at “competition hotspots” where further mergers posed the greatest risk to competition. The government’s new merger laws would enable the treasurer to designate an industry for greater scrutiny by the ACCC.
He will say that it is already evident that there are four parts of the economy in the health and caring sector where anti-competitive pressures are growing. They are childcare, aged care, medical GPs and dentists.
Aged care and childcare are two of the fastest growing parts of the economy, with the government pumping tens of billions of dollars into new services and higher wages to attract and retain staff. They are also areas with low productivity growth.
Of the almost 400,000 jobs created over the past year, 216,000 have been in either the education or health sectors that include aged care, the National Disability Insurance Service and childcare.
Leigh will reveal that new research by Treasury and the Reserve Bank now put the cost of reduced competition since 2000 at between 1 and 3 per cent, or about $25 billion to $75 billion or between $2500 and $7500 per household.
“This is a big number, on par with the estimated gains delivered by the Hilmer reforms,” he will say.
The Hilmer overhaul of competition laws during the 1990s is still considered one of the biggest boosts to the economy over the past half century. The reforms included forcing state government agencies to compete against private enterprises and led to changes in supermarket opening hours to the break-up of grower-controlled marketing agencies for products such as rice or milk.
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