Wages and Wage Determination in 2004

By Martin Watts and William Mitchell

Reviews Australian wage outcomes in 2004 and institutional and legislative developments which will influence future wages determination and employment conditions.

The state of the macro-economy in 2004 is reviewed prior to analyzing wage outcomes. Institutional responses to major concerns expressed about executive remuneration in 2002 and 2003 are considered and some path-breaking wage decisions in child care services are analysed. We then outline decisions made by the Australian Industrial Relations Commission (AIRC) and legislative changes in 2004.

During 2004 workers continued to enjoy modest wage increases, which have been augmented by changes in income tax rates and welfare entitlements. Employment continued to grow and unemployment fell. The rate of labour underutilisation remains too high which signifies the absence of a coherent full employment policy. The last 12 months has seen the playing out of a number of industrial relations matters that

commenced in 2003 or earlier in the areas of unfair dismissal, union bargaining fees, severance pay and work and family initiatives.

The model of compulsory arbitration in the national interest has been replaced by the enterprise model (Callus and Buchanan, 2004). Within that framework, the Federal Government has been adopting a legalistic approach in its attempts to weaken the powers of organised labour within the bargaining process and limit workers' entitlements, often in opposition to the AIRC. The starkest example of the latter is their long-standing attempt to marginalise the Commission's influence on wage setting, which is likely to intensify after 1 July.

Callus and Buchanan (2004) argue that, while these legislative changes provide employers with one of the most favourable labour law environments in the world, they will not resolve the work family issues associated with the care of the young and the old, along with the problems of insufficient hours of work for some employees, and excessive hours for others. They advocate the development of new labour market standards that deliver the benefits of co-ordination and flexibility simultaneously. Employer organisations and the federal government believe that labour market standards inhibit flexibility in the bargaining process. The award system is not seen as a vehicle for countering growing earnings inequality, but merely maintaining the real pre-tax wages of the lowest paid.

Centre of Full Employment and Equity The University of Newcastle, Working Paper No. 05-03