Changes in the Australian Labour Market - Case Study Example

Running Head: CHANGES IN THE AUSTRALIAN LABOUR MARKET Changes in the Australian Labour Market [The Writer’s Name] [The Name of the Institution] Changes in the Australian Labour Market To begin with, let’s describe a Labour Market. It is where individuals seeking employment interact with employers who want to obtain the most appropriate labour skills for their production process. Labour markets are significantly affected when wages rise, as they create an increase in unemployment or an increase in employment or have no effect at all, causing economic growth. When wage rates increase, it increases the quantity of labour supplied, as firms can no longer afford to pay all its employees the increased rate, therefore employers need to make a decision in dismissing some employees. This is because firms need to accommodate to the higher costs of paying employees a higher wage. This can lead to higher unemployment levels, as too many wage increases will result in higher cost within businesses that don't change their employees' structures. For the past two decades, it is clear that successive governments have looked towards labour reform for growths in productivity. It must be clear though that labour reform has not always been the mantra of the day. The commencement of Labour Market regulation began in 1907 when the President of the Commonwealth Court of Conciliation and Arbitration (Now the AIRC), Justice Higgins', made a decision on the fixed wages of workers. The Harvester judgement' established the first precedent for wage fixing in Australia. Since that decision, regulation in the economy has begun to become greater and more complex in nature. Since the 1980's however, there has been a greater emphasis on de-centralised bargaining as Governments have looked for greater labour productivity. (Norris, 1986, 44-49)It was recognised that in order to increase productivity, changes had to be made in labour regulation and legislation and later (with coalition governments) with the disruption of unfettered union power. Prior to 1983, the increases of wages caused uncertainty for many businesses, wages would increase during boom periods however would slow with the onset of recession (Burgess, and Watt, 1999, 87). In 1983, the government recognised that the many economic policies of the state must be brought under the same arm, which led to the creation of the first Accord (Mark I, 146), which attempted to create incentives for business to employ more staff and increase productivity. However this approach did not realise the growth it expected (Burgess, and Watt, 1999, 87). The next target of reform under the new coalition government was the Australian Industrial Relations Commission (AIRC). This method of centrally controlling wages was believed to cause problems as the increases did not reflect the conditions of the individual workplace or employee. The government sought to increase the flexibility of workplaces by the creation of tailored agreements for individual workplaces. The introduction of several acts such as the Workplace Relations Act 1996 the Workplace relations and legislation amendment (more jobs, better pay) Bill 1999. Various other acts led to the diffusion of union power and greater labour reform. With these reforms the Australian Workplace Agreements were introduced in order to suit the needs of the workplace. With this reform, individual businesses could make individual contracts with their employee(s). This has since supposedly led to greater flexibility and productivity in the workplace. Since the late 1970's Australia has faced a large decrease in the amount of time lost to Industrial disputes. With the movement towards a decentralised and de-regulation of the labour market has since seen a twenty fold reduction in the working days lost per employee (Burgess, and Watt, 1999, 86-90). It is clear that most of these gains have been made with the simultaneous decline the union movement. In sectors such as manufacturing, the disputes have decreased by 90% from 1973-1975 to 2000-2002. A labour market is considerable different from a product market. As demand for labour is a derived demand, lower wages will reduce production costs for an individual business firm; lower wages will reduce production costs for an individual business firm. Lower wages also reduce the purchasing power of consumers, and reduce demand for a business product. However, wage rises do not have any negative impacts on employment level for perfectly competitive markets, as oligopolies and even monopolies enjoy substantial sustained profits, some of which may be redistributed to employees through better wage outcomes. On the other hand, pay rise can create employment. As pay rise increases, more people are willing to work, and therefore labour productivity increases. The demand for goods and services will also increase because of the money injected into the economy. If employees are earning higher wage, the supply of labour is in higher demand to supply goods and services to individuals who have higher purchasing power, due to their increased wage rate. Therefore, lower wage rates would restrict the power of individuals purchasing goods and services, which will cause an economic fall. Wage rise can have no effect at all, causing an economic growth. This is because in reality, the major cause of changes to level of unemployment has been the ups and downs of the business cycle. This is due to the price elasticity of demand, which is the responsiveness of demand to prices, or the responsiveness of labour demand to changes in wage. If wage rates increase, it may not have nay effect on the labour market because the labour market experiences times of weakness at times, or an economic growth at other times. The labour market usually experiences an overall trend of growth in their output, which is not based on wage rate. A boom in economic growth can occur, not only due to wage rate, but increased investment and production. Economic growth can decrease, due to other factors such as production of goods and services not at its best quality. (Alexander and Lewer, 1994, 176-82) The pertinence of labour market flexibility within the Australian context is also highlighted by the sectoral shift in employment from manufacturing to service sector employment. Deery (Deery et al, 2001, 119-22) present the banking and retail industries usage of part-time and casual employees as a strategy to achieve 'numerical flexibility,' with particularly reference to their implementation of a 'core-peripheral' approach in managing their organizational structure. There have also been important changes in the demand for labour arising from, among other things, new technology, microeconomic reform and the internationalization of product markets, which have had an enormous impact on the occupational and industrial composition of employment. Let’s now focus on the main employment feature of the Australian Labour Market. As many disputes arise amongst employers and employees, industrials tribunals are designed to prevent and settle industrial disputes between employers and employees. In regards to the roles of industrial tribunals determining wage and setting disputes has been reduced over these past few years. The Australian Industrial Relations Commission or AIRC determines a minimum set of work and pay condition through setting awards. The most common agreement for settling wage outcomes is a collective agreement, known as a Certified Agreement. They are the most popular stream, with wage increases for entire workplaces being negotiated between employers and employees, who are usually represented by unions. The Government is also seeking to encourage the growth of individual agreements, known as Australia Workplace Agreements. Australian workplace Agreements are individual contracts negotiated with employers that are administrated by the Employment Advocate. Increased wage rates has different effects on labour markets, as it either causes an increase in unemployment, increase in unemployment or have no effect at all. This is an issue that will continually be argued about and raises the question to labour markets as to whether it is right to distribute higher wage rates or not. Something that will affect around two-thirds of employees due to the Industrial Relations changes is the removal of employment protection laws. 'Unfair Dismissal' laws have been abolished for all businesses with less than 101 employees, creating a less secure working environment. This means that people under this category cannot complain about losing their job, and can be sacked at any time at the digression of their employer. The only grounds for complaints are if there is a breach of the anti-discrimination laws, and this becomes known as 'unlawful dismissal'. With these significant changes made by the government, more power and flexibility has been given to the employer. The government's main aim in introducing these new workplace relations laws was to deregulate the labour market and simplify rules relating to pay and conditions of employees. The Howard government believes that by allowing employers a freer hand in determining wages and conditions for workers, such as through individual contracts, there will be an increase in job creation, encouragement of investment, a lift in productivity and higher wages. These new laws are believed to be a continuation of the reforms that took place under the Keating government in the early 1990s, when centralised wage fixation was abandoned and enterprise bargaining was introduced. With more flexibility given to employers, more jobs may be created and there is room for growth with potential re-structuring, as employers are not restricted by various employment protection laws. Currently, the Howard government is defending its new policy formulation, as it has come under severe criticism from the opposition and other interest and lobby groups. Nevertheless, they remain strong in their stance and have a firm belief that the new laws will keep the Australian economy strong, and maintain one of the lowest unemployment rates in recent Australian history. The main institutional features need some attention. There are many factors affecting the demand and supply of labour in the Australian labour market. As the demand for labour is a derived demand. This means that labour is demanded by the firm when there is demand for the firm's goods or services. Thus, the demand for the firm's products is the most important factor affecting the demand for labour. Generally, when the economy is booming, the firm will experience increasing demand for its products. This will directly lead to higher demand for labour. However, during an economic downturn, more labour will be laid off as the demand for the firm's products decreases. Secondly, the productivity of labour is another important factor. The productivity of labour is defined as the output per unit of labour per unit of time. (Norris, 1986, 44-49) Thanks to the government policies aiming to increase labour productivity, during recent years the productivity of Australian labour has raised significantly. This means that the firm can maintain the same amount of production will less labour employed. Thus, the firms will lay off the excess labour. However, this can be offset by increasing demand for the firm's products in the economy. Lastly, the cost of other inputs also plays an important role in the labour market. Nowadays machines are becoming more important in the production process enabling firms to have choices of combining both capital and labour. If the cost of labour, e.g. wage rate, becomes too high, the firm will choose the less expensive capital to maintain production. This will trigger a decrease in the demand for labour. On the supply side, there are also many factors affecting the supply of labour. As people work for a return, namely wages and salaries for example. The pay levels will largely affect the supply of labour. The higher the wages and salaries, the more people would be to work and ice versa. Secondly, nowadays people demand better working conditions and flexible working hours. Therefore, if a firm is prepared to offer these, in return, more workers will be willing to work for this firm, thus causing an increase the supply of labour. Moreover, during recent years, more and more firms require labour with better skills, high education attainment and past working experiences. These requirements will narrow the supply of labour as significant amount of time and effort is required to achieve these requirements. Lastly, the labour force participation rates will also affect the level of supply of labour in the economy. The bargaining system has evolved with the changes in the labour market and so, is their relationship. Unions have been much more successful in negotiating wage increases than employer groups have been in persuading wage rises. However, the actions of employers have benefited employers and employees. This is because, through lobbying the government for protection from foreign competition or for industry assistance, employer associations, they have been able to secure for Australian produces a larger share of the domestic market for their output. The Demand and supply of labour are influenced by both macroeconomic and microeconomic factors. Macroeconomics refers to conditions in the whole economy affecting the general labour market. Microeconomic factors include specific industry and firm conditions that influence the demand and supply of labour for particular occupations and labour skills. The demand for labour at a microeconomic level are influenced by a number of factors that are industry or firm specific, these include the nature and size of the industry, the pattern of consumer demand and output, the wage rate and conditions of employment offered, the productivity of labour, the rate of capital/labour substitution and the rate of structural change and entrepreneurial expectations. (Beaumont, 1990, 22-26) Large labour intensive industries such as TCF's and service are usually big users of labour. Traditionally industries like mining and building were labour intensive jobs but in developed countries these industries have turned to being capital intensive industries. The nature of an industry's output also influences the quality of labour demanded; for e.g. professional and unskilled worker. Since the demand for labour is derived form the demand for final goods and services a change in the pattern of consumer demand will affect the demand for labour. A decline in the demand for wool may lead to less wool workers being employed. The wage rate and conditions of employment offered in industries affect the demand for labour. More profitable industries with job security and future prospects attract labour by offering higher wages and fringe benefits. Less profitable industries may only offer minimum wage rates and minimal benefits and attract less labour. Again, the level and characteristics of industrial conflict have changed with changes in the labour market. The major change to the Australian industrial relations system has been the movement away of the labour market from the 'core' employment to the 'periphery.' This has been particularly evident in the Australian labour market over the past decade due to an extensive policy process of labour market deregulation. Burgess et al (Burgess et al, 1998, 86-90) advocate that this process has involved the decentralisation of the industrial relations system, the removal of collective norms from this system, the decollectivisation of the workforce, the fragmentation of employment arrangements, the restructuring of labour market programs, and the privatisation of the public sector employment placement agency. The shift towards part-time and casual employment represents a significant shift away from the traditional work arrangement of full-time, permanent waged work. (Casperz, 2004, 12-16) Also another aspect of growth in non-standardized work arrangements has been an increased use of contract employment, especially self-employed contractors. Changes in aggregate demand will influence labour demand. Some other changes at a macroeconomic level include the total level of economic activity, productivity of labour, general wage rate, government industrial relatio9ns policies and the level of industrial disputation. If economic growth is high there will be an increased demand for labour as spending and output will rise. The rate of unemployment will tend to fall over time as those unable to find work are employed. If there is a decline in economic activity then spending and production would fall and reduce the demand for labour. Rising productivity levels in an economy will lead to an increased demand for labour as employers will be willing to hire more workers. The relationship between changes in the labour market and changes in trade union membership density will now be discussed. Trade unions are associations of workers that have joined together to protect and better their wages, hours of work, and conditions of employment. Unions are based on the idea that a group of workers will be stronger than individuals working by themselves to further their interests in the workplace. Trade unions are accepted by almost Australians as having a legitimate role in any democracy. (Hunt and Provis, 1995, 51-54) Unions are accepted as legitimate representatives of their membership. Trade unions have as their overall aim that of protecting and advancing the interests of their members. Unions are essentially organizations of a number of workpeople that collectively aim to ensure they keep what they already have and to improve on them. The ability of trade unions to achieve their primary purpose is based on the important factor that individuals within a group or organization have a common set of goals and these can be best achieved by collective organization. (Snell, 1996, 189-93) While the individuals in a group hold a variety of views, which sometimes may be in conflict, the groups has a cohesiveness which leads to permanency, based on the common interest of improving their conditions at work. Trade unions try to influence government policy regardless of which party is in power. The issues unions have campaigned for have included law reform, health and safety, the welfare state, economic policy and even foreign policy. The aim of this is to provide a better working life for their member, such as improve public security, social services and the terms of employment. Moreover, they will achieve industrial democracy, a voice in government, public control and planning of industry. The unions have supported the award restructuring process which aims to provide workers with simpler classifications structures, and career paths linked to skills and training. The role of unions and collective bargaining has changed considerably in the Australian industrial relations system. The industrial union is often considered the ideal form of unionism, because it cuts across craft and occupational divisions. It can be of benefit in limiting demarcation disputes that between members of different unions over the exclusive right to perform particular work. It is also of benefit in reducing competing union representation in negotiations with the employer over conditions of employment. (Storper and Scott, 1990, 210-216) The creation of powerful pressure group can disrupt an entire organization, bringing the conflict to immediate action. Arguments against large unions include the possibly of organizations becoming overly bureaucratic, with individual members feeling remote from policy-making and influence. The union movement has also supported the push for enterprise bargaining. It is this move to greater input at the workplace level through enterprise bargaining, which is probably the key challenge for the union movement in 1990s. Unions were founded on the principle that employees on their own, without union advocates and resources are unequal in the bargaining process and prone for exploitation. The trend towards enterprise-based industrial relations is occurring when trade union presence is diminishing at the 'shop floor'. (Keenoy and Kelly, 1998, 133-38) The Australian Workplace Industrial Relations Survey found that 34 per cent of unionized workplaces had no union delegate. The tread towards negotiations on qualitative improvements such as training and job satisfaction makes workplace industrial negotiations for the unions' even more complex, necessitating substantial support for those involved in negotiating these issues at the workplace. Further, many of the key issues on the union movement's negotiating agenda-skill formation, career paths and employee participation- are not historically 'industrial issue'. (Keenoy and Kelly, 1998, 133-38). While the major aims and objectives of trade unions have not changed significantly since their inception, changes in the composition of the workforce and the nature of work have had an effect on trade union operations. The Australian industrial relations system has fostered the collective representation of employer interests in the same way as it has with unions. Employer associations that group of business enterprise have combined to pursue common goals. Their activities are set out in registered constitutions and rules, and they often have elected and employed officers. They will represent employers, industry, trade and commerce before any courts, tribunals, commissions or committees. Moreover, they will represent the interests and views of employers, industry, trade and commerce at government level. The industrial relations activities of employers associations are varied. Many national associations of federations are involved in concluding national agreements with corresponding union or union confederation, such as National Farmers Union. A further important function of employers association is the setting up and operating of disputes procedures. These procedures are agreed at national level and apply in each federated firm. A disputes procedure starts at shop floor level, but if the matter remains unresolved it can go to works conference, local conference and eventually to a national conference. Other activities include giving advice and assistance. Associations have officials who disseminate information to members and go to firms to give advice on specific problems. Some run courses on a variety of topics and provide specialist's service for things like recruitment, training, works study and so on. Legal advice, and sometimes representation, is given especially as more and more industrial relations topics are covered by legislation, which can lead to tribunal cases. References Alexander, R. and Lewer, J. 1994, Understanding Australian industrial relations, 3rd, Harcourt Brace & Company, Australia. 176-82 Beaumont, P. B. 1990, Change in Industrial relations: the organization and environment, Routledge, London. 22-26 Belchamber G (2006) For Whom Will the Boom Pay? The Need for a Decent Minimum Wage, Proceedings of the 4th Economic and Social Outlook Conference November 2 2006, Melbourne, Australia. Bray M, Waring P (2005) Complexity and Congruence in Australian Labour Regulation, Journal of Industrial Relations, 47, 1-15. Burgess. J and Watt. 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Shah, C & Burke, G 2003a, Changing skill requirements in the Australian labour force in a knowledge economy, Working paper no. 48, ACER-Monash University Centre for the Economics of Education and Training, Melbourne. Snell. B, (1996) Building competitive advantage, Oxford Pub, London 189-93 Stewart, A. (2004), The AIRC's Evolving Role in Policing Bargaining, Australian Journal of Labour Law, vol. 17, pp. 245-275. Storper & Scott: (1990): 575 in Benner, C. 2002. Work in the New Economy, Oxford. Blackwell Pub, 210-17 Read More