Taking the Low Road: Minimum Wage Determination under Work Choices

Abstract

The Workplace Relations Amendment (Work Choices) Act 2005 changes the architecture of labour market regulation in Australia in a significant way. The focus of this article is on changes to the regulatory framework for minimum wage determination and the rationale for, and likely consequences of, conferring this power on the Australian Fair Pay Commission. Underpinning the Work Choices package is the view that Safety Net wage rises awarded by the Australian Industrial Relations Commission have had negative effects on employment. In this article we establish that the evidence to support this claim is weak, and is being used to engineer a historic shift in the objectives of the Australian wage setting process. We argue that the new legislation will act as a downward drag on the pay and conditions of minimum wage workers and advance an alternative policy approach in which attaining full employment does not require us to abandon the principle of fairness or a decent wage floor.

Individual contracting, collective bargaining and wages in Australia

“…While observing that several countries with highly regulated labour markets and active labour market programmes (Austria, Denmark, Ireland, the Netherlands, Norway and Sweden) had, on average, better employment rates than 'market-reliant' countries such as the UK, the United States, Australia and New Zealand and conceding that 'there is no single combination of policies and institutions to achieve and maintain good labour market performance', the OECD continued to advocate 'flexible working-time arrangements' and 'wage flexibility ', with qualifications (OECD, 2006a: 18, 12, 13). Such nuances in OECD analysis were not reflected in Australian government policy in the development and implementation of the 'WorkChoices' reforms (Cowling and Mitchell, 2006).…”

Labour Markets and Wages in 2008

“…Prior to the establishment of the AFPC the Australian Industrial Relations Commission (AIRC) was responsible for setting and adjusting minimum wages. As noted in Cowling and Mitchell (2007), consistent with OECD recommendations, in transferring minimum wage setting responsibility from the AIRC to the AFPC, policy makers were hoping to see a reduction in the real value of the minimum wage in the belief that this would, in turn, improve the employment prospects of low skilled workers. As Issac (2008) notes, unlike Workplace Relations Act 1996 where there was an emphasis on fairness and the needs of the low paid, Work Choices contained no such reference.…”

“…The OECD, for example, has long been an advocate of decentralized bargaining (OECD, 1994(OECD, , 2004 and wage flexibility to ensure the low paid are not priced out of the job market. More recently the OECD has, however, softened its tone, noting that the link between minimum wages and unemployment is not as strong as previously thought (Cowling and Mitchell, 2007).…”

The Quest for Fairness in Australian Minimum Wages

“…Despite the AFPC's name, its statutory responsibilities included no reference to 'fairness' and instead prioritized the labour-market 'competitiveness' of low-paid workers and the unemployed. This change was widely seen as abandoning a long-standing Australian commitment to the principle of 'fair and reasonable' wages (Cowling and Mitchell, 2007;Fenwick, 2006;Owens, 2006).…”