The Impact of Employment Relationship and Labor Market Changes on Wage Inequality in Australia
Since the mid-1980s, there have been significant changes in employment relationship and the labor market in Australia. These changes can be attributed to the policies implemented by the Hawke and Keating Governments during that time, which aimed at deregulating the labor market and decentralizing wage fixing. As a result, enterprise bargaining and informal employment provisions became increasingly common, leading to a growth in wage inequality between male and female employees.
2. Employment relationship and labor market changes in Australia since mid-1980s
2.1 Post-war settlements and early Hawke and Keating governments
The changes in employment relationship and labor market in Australia since mid-1980s can be traced back to the post-war settlements, which aimed at maintaining full employment through Keynesian economic management. However, these policies were not successful in dealing with stagflationary pressures in the economy, resulting in high unemployment and inflation rates by the end of 1970s.
In order to address these problems, the Hawke and Keating Governments implemented a series of reforms known as the “ Accord ” from 1983 onwards. These reforms included deregulating the labor market, decentralizing wage fixing, and introducing enterprise bargaining. As a result of these reforms, the unemployment rate fell from 10% in 1983 to 6% in 1990 (Australian Bureau of Statistics, 1991).
2. 2 Deregulating the labor market
One of the key objectives of the Accord was to deregulate the labor market by removing restrictions on hiring and firing workers, as well as abolishing compulsory unionism. These reforms made it easier for employers to sack workers, which resulted in a growth in job insecurity among employees.
2. 3 Decentralization of wage fixing
Another key objective of the Accord was to decentralize wage fixing from the national level to the enterprise level. This meant that wages would be determined through enterprise bargaining between employers and employees, rather than being set by central government bodies such as the Australian Conciliation and Arbitration Commission (ACAC).
As a result of this decentralization, there was a growth in wage inequality between different enterprises, as well as between male and female employees within enterprises. For instance, women were often paid less than men for doing comparable work.
2. 4 Enterprise bargaining
Enterprise bargaining is a process whereby employers and employees negotiate over wages and conditions of work at the enterprise level. This process was introduced as part of the Accord reforms and led to a growth in union membership, as unions were seen as necessary for protecting workers’ interests in these negotiations.
However, enterprise bargaining also had some negative impacts on workers, as it gave employers more power to unilaterally impose changes to working conditions (such as longer hours or lower wages) without having to consult with or gain agreement from employees first. Moreover, it also made it easier for employers to sack individual workers who refused to accept these changes.
2. 5 Informal employment provisions
Informal employment provisions are those that are not written into law or formal contracts, but are agreed upon informally between employers and employees (for example, verbal agreements about working from home). These types of provisions became increasingly common during the 1980s as a result of enterprise bargaining.
While informal employment provisions can be beneficial for employees (such as giving them more flexibility in how they work), they can also be used by employers to exploit workers. For instance, employers may use informal employment provisions to avoid paying overtime rates or providing other benefits that are required by law.
3. Growth in wage inequality since the 1980s
The growth in wage inequality since the 1980s can be attributed to a number of factors, including the decentralization of wage fixing, the introduction of enterprise bargaining, and the growth in informal employment provisions.
3. 1 Male and female employees
One of the key contributors to the growth in wage inequality since the 1980s has been the decentralization of wage fixing, which has resulted in a growth in wages for male employees relative to female employees. This is because male employees are more likely to be in occupations that are unionized and covered by enterprise agreements, while female employees are more likely to be working in non-unionized jobs with no formal contract.
Moreover, male employees are also more likely to benefit from training opportunities and other forms of human capital investment, as they are more likely to be in occupations that require these investments. As a result, they tend to earn higher wages than female employees.
3. 2 Training
Another factor that has contributed to the growth in wage inequality since the 1980s is the lack of investment in human capital by employers. This is because Training costs money and takes time, and there is no guarantee that the employee will stay with the organization for a long period of time. As a result, employers have been reluctant to invest in training their employees, leading to a growth in wage inequality between those who have access to training and those who do not.
3. 3 Consultations
A further factor that has contributed to the growth in wage inequality since the 1980s is the decline in consultation between employers and employees over changes to working conditions. This is because enterprise bargaining has made it easier for employers to unilaterally impose changes to working conditions without having to consult with or gain agreement from employees first. As a result, workers have less power to negotiate over their wages and conditions of work, leading to a growth in wage inequality.
3. 4 Ratification of organization restructuring agreements
Finally, another factor that has contributed to the growth in wage inequality since the 1980s is the ratification of organization restructuring agreements. These agreements allow employers to sack individual workers who refuse to accept changes to their working conditions (such as longer hours or lower wages). This often leads to a growth in wages for those workers who agree to these changes, while those who do not agree see their wages stagnate or even decline.
In conclusion, the changes in employment relationship and labor market in Australia since mid-1980s have led to a growth in wage inequality between male and female employees. This is due to a number of factors, including the decentralization of wage fixing, the introduction of enterprise bargaining, and the growth in informal employment provisions.