Labor national president Mark Butler says the time has come to address the "deep crisis" facing Australia's union movement.
Mr Butler told an Australia Institute event in Sydney on Friday the union movement could reach a "tipping point" without reform in the workplace, within unions and inside the ALP.
"Membership could be expected to hold up in the public sector and a few areas of the private sector," Mr Butler said.
"But, unions in time would cease to exist as a broad-based movement that truly speaks for the whole workforce and is able to exert a positive influence across the whole economy."
Australia risked ever-widening levels of inequality and an ongoing wage freeze without a concerted effort to address the decline in unions.
The ALP could also be changed "dramatically for the worst".
"We must make the case for the survival and strength of trade unions in Australia as the cornerstone of workplace democracy," Mr Butler said.
That meant arguing for a greater capacity for unions to organise, citing changes to the law to allow UK-style "union recognition arrangements" or "works councils" as exist in Scandinavia and continental Europe.
In the UK, unions ask employers to recognise them voluntarily, but if the business has more than 21 employees a union can apply for statutory recognition.
In Europe, general labour agreements are made at the national level by national unions and employer associations, and local plants and firms then meet with works councils to adjust the agreements to local circumstances.
Mr Butler, who is re-contesting the ALP presidency, said the party needed to modernise its relationship with the union movement.
The debate about whether unions should continue to have 50 per cent of votes at party conferences missed the point, he said.
"I think unions should retain 50 per cent of the delegations to state policy conferences, and the same share of voting for delegates to the national conference," the former union secretary said.
"But when it comes to voting for parliamentary candidates, party leadership positions and the like, we should be handing power to individual members of affiliated unions who choose to take part, rather than leaving it in the hands of union secretaries alone."
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