2. Labour Market Reforms

3. 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.

4. 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.

5. 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.

6. 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

7. 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.

8. 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.

9. 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

10. 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.

11. 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?