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Explain how Australia's labour market policies have affected work practices and employment

Over recent decades, the increasing economic integration between nations has exposed the Australia
economy to a number of real and financial shocks, which significant impacts on economic growth and
internal balance. However, microeconomic policies in the form of labour market reforms have had
significant impacts on work practices and employment underpinning the success of the Australian
economy.
Microeconomic policies are supply-side policies which aim to increase the efficiency, productivity
and flexibility of specific product or factor markets this leads to an increase in the productive
capacity or aggregate supply in a economy, making it easier for macro-managers to maintain internal
balance.
AD/AS diagram showing increase in AS
For example, labour market policies have shifted the AS to the right, from AS to AS1. This will lead
to a growth in national income or real GDP, from Ye to Y1, as well a reduction in price levels from P
to P1, signalling reduced cost push inflation.
Types of efficiency gains?
Labour market reforms began in Australia with the introduction of enterprise bargaining (1991) by the
Hawke-Keating Government, with a general trend towards a less regulated labour market and a more
decentralised system of wage determination. This has underpinned the low levels of unemployment
over the past decade, by linking wage increases to productivity improvements. It has seen
unemployment fall from peaks of 10.6% (92/93) to its current level of 5.8% (Aug 2013), averaging
approximately 5% over the past decade.
In 1996, the Workplace Relations Act came into effect. This saw a significant reduction in the
regulation of the labour market, as it introduced AWAs (type of enterprise agreement), reduced the
power of trade unions, and relaxed unfair dismissal laws shifting the power away from employees
and towards employers.
1996 also saw the introduction of Australian 457 Visas, a skilled migration program which aimed to
cater for the shortfall in skilled labour boosting productivity and economic growth. At present, it has
been an important considering the ageing population reducing the number of skilled workers.
In 2006, Howards WorkChoices reinforced the 1996 reforms, emphasising the use of AWAs and
reducing the number of minimum employment standards to 5 leaving many basic employment
conditions such as public holiday leave, up for bargaining; from which the No Disadvantages Test
was removed. This raised concerns about the equality of such a policy, as it allowed employers to
more easily exploit their workers.
In response, Rudd introduced his Fair Work Act (2009), which actually increased the regulation of the
labour market, but found a better balance between equity and efficiency. The main priority of the
policy was to strengthen the safety net for workers, as he introduced the 10 NES, Modern Awards,
National Minimum Wage, with renewed emphasis on collective bargaining, supported by the BOOT
and restoring unfair dismissal rights. This has played a part in reducing the inequality of income
distribution.

Furthermore, other labour market policies are in the form of government programs and their allocation
of resources towards improving the level of human capital fostering improvements in skills,
education and training, while encouraging greater participation in the workforce. For example, the
2013/13 budget allocated $9.8b over 6 years for the Gonski Reforms (improving levels of
education) as well as $1b for the Plan for Australia Jobs (improving the skills and training of
workers, as well as encouraging innovation by small/medium businesses), both programs benefiting
the economy through an increased future productive capacity.
Also, as the impacts of the ageing population begin to adversely affect economic growth and
employment, the government has implemented various programs to encourage greater workforce
participation from the elderly and women. This has been achieved with the Work Bonus allowing
$250fortnightly exemptions from their pensioners income test, as well as the Child Care Rebates and
strengthened Paid Parental Leave making it more appealing for women to enter/re-enter the
workforce. This has been supplemented by an increase in the tax free threshold in 2012 from $6000 to
$18,000 providing further incentives to the unemployed to find work.
Overall, labour market policies have been an important source of economic growth. The system of
enterprise bargaining in particular, has helped to increase labour productivity over the past 2 decades.
It was 2.3% (90s) compared to the OECD average of 1.8% (90s) and 2.2% (2000s) compared to the
OECD average of 2% (2000s). In 2012, labour productivity rose 3.2%, its highest increase since
2003. In some respects, this may have been caused by the Fair Work Act increasing the on-costs of
labour, reducing the desirability for employers to increase the size of their workforce. Instead, there
has been an increase in the total hours worked, increasing 2% over 2013; signally a greater focus on
productivity improvements. Ultimately, it has helped to improve economic growth, which averaged
2.8% (80-93) and ____ ( ). Find some relevant stats.
In terms of unemployment, enterprise bargaining has led to a permanent decrease in unemployment,
which has declined from above 10% in the 90s, to an average of 5% over the past decade (03-13).
This can be credited to the improvements in both the flexibility and productivity of labour. Increased
productivity and efficiency has increased the demand for labour.
Also, the flexibility of the labour market has seen a trend of increasing part-time work and casual
work. For example, during the GFC, unemployment rose from a low of 4.2% (07/08) to 5.8% (08/09);
a minor increase relative to other advanced economies who saw unemployment rise above the 10%
mark. This was in part a result of quick and effective macroeconomic response from the government
and RBA, but also a case of firms shifting workers from full-time to part-time work a movement not
reflected in the unemployment rate. Note: underemployment stats?.
Over 2013, this flexibility has seen a similar trend for increasing part time work which has increased
66k compared to full time work which is up 10k. Along with the government incentives such as the
Child Care Rebate, this year has seen the largest growth in employment for part-time female workers
an important factor towards securing the economys growth in light of the ageing population.
However, one of the major downfalls of the system of enterprise bargaining are the cases of labour
market segmentation which emerge. This occurs as the highly skilled have greater opportunities to
increase their wages, with stronger bargaining power, compared to the lower skilled. This has played
a part in the increase of the Gini coefficient from 0.28 (1990) to 0.32 (11/12). For example, the
commodities boom has driven growth in the mining sector over the past decade, leading to an
inequality of income distribution amongst the states, with WA and QLD recording the highest levels

of employment growth, with considerably higher wages. Although, the strengthened safety net as part
of the FWA (2009) has also slightly reduced inequality.
Nonetheless, labour market policies have been successful in generating improvements in productivity
and flexibility, contributing to the low levels of employment as well as Australias 22 consecutive
years of economic growth. These reforms, and the flexibility of the labour market, will continue to
have a big role in preserving and increasing the nations future productive capacity, with the need to
deal with the ageing population, the currently soft labour market, and the subdued growth as the
economy moves away from mining-investment led growth.