Labour Market Reforms
Labour Market Reform
 Since
1908 Australia has operated a
centralised wage system that determined
what wage was paid in what type of
industry. Wages changes were the role of
the Arbitration Commission which was a
legal body that set wage rates in the
economy.
 Australia
was the first country in the world
to have a centralised wage system
governed by a legal body.
Labour Market Reform
 The
problem with a centralised wage
system is that the law of demand and
supply of labour is not used as a price
system for wages.
 As
a result there are substantial
inefficiecies in the economy in relation to
the price of labour and productivity of
labour.
Labour Market Reform
 In
the early 1990’s in an attempt to make
the market operate better Australia’s
labour market moved towards enterprise
bargaining.
 Enterprise bargaining is where bargaining
between employers and employees is
carried on an industry basis.
Labour Market Reform
 The
Howard Liberal government went one
step further in the 2005’s with the
introduction of “work choices” that
introduced individual wage contracts
between the individual and the employer
 They also reduced a number of protective
measures existing in the labour market
e.g. unfair dismissal laws
Labour Market Reform
 The
result is that the labour market is now
based on a number of systems in different
industries, some areas are centralised,
some areas are enterprise or collective
bargaining, some areas are individual
contracts.
 State government employees have
different wage awards from Federal
government employees.
 We have a minimum wage rule by law
that all employers must pay.
Labour Market Reform
 There
is no free labour market system in
Australia.
 After the Howard Liberal government lost
government in 2007 the Labour Govt
introduced a New body to oversea the
labour market called Fair Work Australia
and brought back many restrictive labour
laws to re-regulate the market.
Labour Market Reform

At this stage it is
difficult to judge the
impact of the
changes in labour
market reform policy
in Australia
 There are still many
critics of the
Australian hybrid
system and the area
is highly political
Labour Market Reform - Pros

Decentralised negotiations are more flexible
and reflect the demand and supply of labour
and their skill base.
 Working towards agreement leads to
cooperation, and therefore fewer strikes.
 Efficiency is vital for achieving
macroeconomic goals.
 Overseas markets have all gone in a similar
direction.
 Workers and managers are held accountable
for their actions.
Labour Market Reform - Cons

Only 35% of people have taken up the
chance to negotiate. Centralisation in
Australia is still the main form of wage setting.
 Minimum wages are still used.
 Better negotiators get better pay, which leads
to inequality.
 How can the average worker measure their
own productivity objectively?