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Low wages and workforce insecurity are major problems for Australia’s labour market that affect not only workers, but also employers.
Despite a 14-year low in unemployment, wages growth is persistently weak. This is a key reason why employers face such a challenge attracting and retaining workers. This is particularly true for essential, yet low-paid and insecure jobs in the care sector.
Despite a 14-year low in unemployment, wages growth is persistently weak.Credit:Phil Carrick
Deficient policies governing the labour market which the previous Labor government developed and which the Coalition government has maintained are root causes of these problems. Our labour market policies are stuck in an outdated paradigm fixated on solving problems that have diminished or no longer exist, such as excessive union power and inflationary wage pressures.
Origins of current labour market policies can be traced to the stagflation crisis of the 1970s which governments struggled to control due to powerful unions pushing for higher wages.
While the Hawke government’s Prices and Incomes Accord resolved this crisis, subsequent governments remained fixated with ensuring that union power would not derail the economy.
The Howard government’s WorkChoices reforms, aimed at crippling unions, exemplified this fixation. The current Fair Work Act, introduced by the Rudd government, continues to impose restrictions on union activity and multi-employer bargaining.
Record low levels of union membership and soaring corporate profits highlight that union power is no longer a problem. Instead, the weakness of unions and the constraints that current policies impose on the ability of workers to negotiate fairer wages and better working conditions are crippling Australia’s labour market.
These are key reasons why wage growth is so sluggish, why so many workers are on insecure contracts, why the gender pay gap remains persistently wide, and why many workers – especially migrants on temporary visas – are underpaid.
To address these challenges, a new labour market policy framework that empowers workers is needed. The findings emerging from a large body of research indicate that a greater focus on creating quality employment, fairer redistribution in bargaining and wage setting, more effective measures to address gender-based workplace inequalities, more equitable labour immigration policies and stronger job security are all needed.