Labour+Market+Reform+-+Andrew+Bonazinga

The labour market reforms have generally taken place over the past twenty years and have involved a shift away from a centralised system to one that is decentralised and less regulated. The labour market ensures that the system of industrial relations is one that achieves the most efficient allocation of resources. Labour market reform involves the process of restructuring the market to make sure that the industrial relations is one that achieves the most efficient allocation of resources. Over the past 20 years the Australian labour market has moved from a centralised to a decentralised system. Under the decentralised system, it has allowed wages and conditions of employees to be connected with the performance of employees. There was very little flexibility within the centralised system, and an emphasis on equity and fairness. This centralised system became outdated because the productivity of employees was lacking and also Australia was becoming exposed to international competition. In 1992, the Labour government amended the existing Industrial Relations Act to allow the AIRC to approve a limited form of enterprise bargaining. Then in 1993, The Labour Government introduced the Industrial Relations Reform Act (1993). This was to facilitate the push to enterprise bargaining. The main aim of this act was to improve flexibility and productivity in the workplace by increasing the extent to which wages and conditions were determined at individual levels. From this point, they introduced many new acts, such as WorkChoices (EXPLAINED IN THE NEGATIVES SECTION) and the Fair Work Act (EXPLAINED IN VIDEO BELOW).

media type="youtube" key="6pV7q4xo1Lk" height="349" width="560"

A brief 5 minute video, outlining the new Fair Work Act (2009)



If employees gain from higher levels of productivity at work places, there would be more incentive to reform or restructure the productivity at workplaces. Should the productivity increase, it will reduce the real cost of employing labour, which means there will be more room for pay increases based on performance.

How the labour market reform increases productivity

//In any reform, there are bound to be negatives and implications revolving the change. This was apparent in the labour market reform, when the Liberal government introduced the Workplace Relations Amendment Act (or more commonly known as Workchoices).// Workchoices Laws were seen to be negative because they the push towards individual contracts as the key plank in wages negotiations, were unpopular and politically damaging because it moved the industrial relations too far to the right. This means that the employers were provided with a lot more power than the employees. One of the biggest concerns with Workchoices, was the unfair dismissal protection changes. Prior to workchoices unfair dismissal protections existed in awards or through industrial relation commissions. However, they were changed and reduced the protections of previous unfair dismissal laws. This left many people unemployed, which would ultimately increase inflation, because there would be many unemployed and not willing to spend. The WorkChoices made many people angry and upset :(
 * 1) If a business was suffering from economic hardship, a decentralised system would enable the employees and employers negotiate wages and conditions, to reduce labour costs and protect both the business and the jobs.
 * 2) It would enable employers and employees to make an agreement that if, productivity or performance increases, so does the employees wage.
 * 3) Small businesses will be able to dismiss any unproductive employees without reason. This will give the business added flexibility to more closely adapt employment levels to business activity.
 * 4) Employees will be more accountable for their performance. Bad performances could lead to a decrease in pay.

A boost in productivity would help contain inflationary pressures because an increase in productivity leads to higher Aggregate Supply, shifting the AS curve to the right. Therefore a greater number of goods and services can be produced with the given resources. This increase in productivity will also lead to an increase in economic growth, whilst keeping the level of demand inflation at bay. The Labour market reform, particularly has a strong impact on the employees of a business. It allowed for negotiations between employers and employees, which means they would be able to work out contracts stating that if productivity increases, wages increase. This ability to negotiate contracts like these, will vastly increase the willingness to work and productivity will increase. This reduces the impact of cost inflation as it is now costing the business less to make their products. As the firms feel the benefits of low cost of production, the competition increases because it now becomes cheaper to produce goods and services, which means more will be created, and prices will drop.