Academic journal article The Economic and Labour Relations Review : ELRR

Australian Labour Market Institutions, 'Deregulation' and the Open Economy

Academic journal article The Economic and Labour Relations Review : ELRR

Australian Labour Market Institutions, 'Deregulation' and the Open Economy

Article excerpt

1. Introduction

What is labour market 'deregulation'? Of course, it means different things to different people in the policy debate. Some argue that it means the removal of all 'interventions' in the labour market, such as minimum wage laws, trade unions, occupational health and safety laws, leave provisions, and so on. Others think it refers to the decentralisation of wage bargaining; for others, to the diminution of industrial tribunals. Some argue that they are for 'deregulation' but ironically, in practice, they advocate 're-regulation' (for example in the case of having individual contracts replace awards or collective bargaining agreements) (for a discussion, see Dabscheck 1995 and Buchanan and Callus 1993). There are many definitions, but for our purposes labour market 'deregulation' refers to the removal or marginalisation of collective industrial relations institutions such as trade unions and industrial tribunals (and with them minimum wage laws, awards, occupational health and safety laws and collective bargaining agreements etc.) in favour of individual arrangements and a general 'free for all' in the labour market.

This form of labour market deregulation (or re-regulation) has been described as a panacea for much of Australia's economic ills (particularly unemployment) since the mid-1980s. Dabscheck (1987) has written about the political economy of labour market 'deregulation' in Australia with the rise of the 'New Right'. A major criticism by the 'New Right' was that Australia's labour market institutions were run by the 'industrial relations club' and hence did not produce economic and employment outcomes that were in the public interest. This form of labour market 'deregulation' has also been advocated by major media interests, especially the editorial page of the Australian Financial Review (see for example 'Get tough on IR reform', 14 October 1998). Ironically the critics of the 'club' have themselves formed a network of individuals who have influenced the current Government's industrial relations policies and attempts to re-regulate the labour market.

The demand for labour market deregulation also emanates from beyond Australia's shores. The reaction to the oil shocks in the 1970s and the persistence of unemployment not seen during the post-war 'golden age' created new policy approaches by official policy makers. Many of these officials noted the rise of the 'NAIRU' (the non-accelerating inflation rate of unemployment) and saw labour market deregulation rather than macroeconomic policies as the only way of reducing it. This position became particularly prevalent amongst central bankers in industrialized economies. The international popularity of the notion of labour market deregulation gave heart to its local advocates who argued that it was even more necessary as Australia became integrated with the world economy.

This paper does three things. Firstly, it tracks the demand for labour market deregulation in international economic circles in the 1970s and 1980s which has persisted in the 1990s. Secondly, it compares Australian debate on labour market deregulation to those elsewhere in the OECD. It tracks the argument and evidence about decentralism and centralism in Australian industrial relations and the impact of Australian institutions on the labour market compared to other countries. It finds from the evidence surveyed that overall, Australia's institutions have little effect on efficiency and labour market 'flexibility' in terms of labour market outcomes. However it does find that Australian institutions have played a distributional role in making labour market outcomes more egalitarian than they might have been. The implication of the evidence is that labour market 'deregulation' may have disastrous implications for equity in the labour market without any improvement in economic efficiency (that is, labour market deregulation is not a 'Pareto efficient' policy). …

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