Academic journal article Australian Journal of Social Issues

Work Choices: The Low Productivity Road to an Underclass

Academic journal article Australian Journal of Social Issues

Work Choices: The Low Productivity Road to an Underclass

Article excerpt

1. Introduction

The Workplace Relations Amendment (Work Choices) Act 2005 was proclaimed on March 27, 2006. The Australian Government (2005) posits that the reforms will generate a fairer balance of forces within the labour market and lead to higher employment, productivity and real wages. These changes are deemed essential given Australia's increasing exposure in a globalised economy.

The origins of Work Choices can be traced to the neo-liberal economic reform agenda that emerged in response to the inflation breakout following the first oil price shock in the mid-1970s. This agenda gained additional impetus with the publication of the Jobs Study by the Organisation of Economic Cooperation and Development (OECD) in 1994. This blueprint for reform was grounded in the primacy of markets, and the imperative to remove the institutional fetters which allegedly inhibited their operation. Active macroeconomic policy was eschewed and the pursuit of tight monetary policy and budget surpluses, to constrain inflation, was advocated.

In embracing these prescriptions, the Australian Government has ignored the macroeconomic consequences of having nearly 1.8 million workers without sufficient work (Keating, 2005) and has established pernicious compliance regimes to ensure that unemployed and marginalised workers are blamed and punished for their circumstances.

With the introduction of Work Choices, one of the last symbols of fairness in our society--the judicially-determined conciliation and arbitration system and wage-setting machinery--has been eliminated. The economic and social consequences already being experienced are likely to be more profound than those flowing from previous changes in the conduct of industrial relations. While low-paid workers will bear the brunt of the impact, few workers will be garrisoned from the radical and damaging transformation in the way we work, earn income, take leisure, and engage in social relationships.

2. A conceptual framework

2.1 Methodological Individualism

The theoretical perspective underpinning the Work Choices Act argues that reducing the rights and protections for workers will promote individual bargaining with employers, providing both parties with a broader range of choices about workplace arrangements and producing superior labour market outcomes. Two caveats are important here. First, despite the mantra of flexibility, the legislation is highly prescriptive, particularly with respect to allowable matters in agreements. Second, the current macroeconomic policy framework, which remains entrenched as the backdrop to the legislation, has resulted in the stagnation of median real minimum wages over two decades.

The neo-liberal policy approach draws on the textbook model of perfect competition for its theoretical imprimatur. This orthodox model argues that the establishment of market-clearing equilibrium is guaranteed by the presence of wage and price flexibility. Ipso facto the failure of markets to clear is a result of prices and/or wages being inflexible, which would reflect market imperfections, including labour market regulations, impinging on the exercise of free choice by economic agents.

This model is devoid of the institutional, social and political context in which asymmetries of power and information, bounded rationality, tradition, myopia and a myriad of other influences bring about so-called imperfections in the functioning of markets. In particular, no power is assumed to be exercised by the large number of autonomous agents who interact in impersonal product and labour markets, with the labour exchange indistinguishable from the exchange for lemons or any other commodity (Polanyi, 1957). Accordingly, the object is exchanged for money and use values are transferred between worker and employer to be consumed outside the exchange. This construction fails to recognise that labour is a special commodity because the employer consumes the use values of the exchange during the work process rather than after the exchange, and because the worker relies on employment for both sustenance and social identity (Cowling and Mitchell, 2005: 201). …

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