Labour Market Policies

Question 1

All contracts in Australia must meet…

Answer 1

The 11 National Minimum Employment Standards
AND
The minimum wage

Question 2

Which of the following is NOT a National Employment Standard?

a) Minimum wage
b) Flexible work arrangements
c) Redundancy pay
d) Paid holiday leave

Answer 2

a) The minimum wage: it is seperate from the 11 NES

Question 3

Which of the following is NOT a National Employment Standard?

a) Paid holiday leave
b) Flexible work arrangements
c) Redundancy pay
d) Paid parental leave

Answer 3

d) Parental leave does NOT have to be paid leave

Question 4

Which of the following is NOT a National Employment Standard?

a) Flexible work arrangements
b) Minimum work hours
c) Redundancy pay
d) Paid holiday leave

Answer 4

b) There are MAXIMUM work hours, NOT minimum

Question 5

What is an award?

Answer 5

The minimum pay and conditions for employees in a particular industry

Question 6

How are awards determined?

Answer 6

They are set by the Fair Work Commission, and are at least as good as the 11 National Employment Standards

Question 7

What is an enterprise agreement?

Answer 7

A contract negotiated between a firm (or multiple firms) and a group of employees

Question 8

How are enterprise agreements determined?

Answer 8

They are negotiated between the firm, union and employees, and then must pass the BOOT

Question 9

In what circumstances can an employee negotiate an individual contract?

Answer 9

If the individual is a high-income earner (above $158,000 per year)

OR

There is no relevant award

OR

The contract meets all award conditions and then offers additional benefits

Question 10

An individual contract must meet or be better than…

Answer 10

the 11 National Employment Standards

Question 11

An enterprise agreement must be…

Answer 11

better overall compared to the relevant award

Question 12

What is labour market decentralisation?

Answer 12

A reduction in government control of employment contracts

Question 13

What are 3 benefits of labour market decentralisation?

Answer 13

• Dynamic efficiency (labour will move to industries where labour is most demanded and wages are higher)
• Labour productivity (employees will work hard to get a raise)
• Avoids excessive inflation (because pay raises are constrained to specific workers and industries)

Question 14

What is the main cost of labour market decentralisation?

Answer 14

• Wider inequality (because high-skilled workers receive pay raises)

Question 15

To what extent has the Australian Government decentralised the labour market?

Answer 15

The labour market was highly centralised until the 1990s, but now has a balance between decentralisation and some government intervention as a safety net:

• In the 1990s the government introduced enterprise bargaining, and then some individual contracts.
• In the 2000s, the government introduced WorkChoices to substantially decentralise the labour market
• In 2009, the government introduced the Fair Work Act to reverse the most extreme aspects of WorkChoices

Question 16

What are the main roles of the Fair Work Act?

Answer 16

• sets a safety net for workers
• allows for flexibility (EAs and individual contracts)
• reduces the amount of industrial action (e.g. strikes)
• standardised minimum conditions across most employees in most states (to reduce red tape for firms)

Question 17

What are 3 recent policy changes related to the Fair Work Act?

Answer 17

• The FWA was amended in 2021 to increase protections for casual workers (especially the ‘casual conversion’ requirement)
• In 2023, the FWC raised the minimum wage by 5.75% and award wages by 8.6% to keep pace with inflation
• The Government is introducing a Same Job, Same Pay measure to ensure that labour hire staff (outsourcing) are paid the same as employees doing the same job

Question 18

How are industrial disputes resolved under the Fair Work Act?

Answer 18

Employees and firms can only take industrial action (e.g. strikes) if approved by the FWC.

The FWC helps resolve disputes by:

1) Mediation (a third party helps the firm and employees come to an agreement, without offering advice)
2) Conciliation (FWC provides advice and options for them to come to an agreement)
3) Arbitration (FWC makes a ruling on the agreement)

Question 19

What are 4 examples of employment programs by the Australian Government?

Answer 19

• $100b on JobKeeper payments in 2020
• $4b available for JobMaker (but only around 7000 people were hired)
• Childcare: temporarily free in the pandemic, and the Albanese Government increased the subsidy in 2023 to increase female participation
• Job matching services: Jobactive replaced with Workforce Australia in 2022 (to reduce the administrative burden on jobseekers)

Question 20

What are 3 examples of education/training programs by the Australian Government?

Answer 20

1) Gonski school funding (Federal Government school funding will double between 2015 and 2027 in a needs-based way)

2) HECS and VET loans: The Jobs and Skills Summit in 2022 led to $1 billion extra in joint federal-state funding for fee-free TAFE in 2023 and accelerated creation of 465,000 fee-free TAFE places

3) University funding changes depending on skills shortages (e.g. decreased subsidy for law and humanities, increased subsidy for nursing and teaching)

Question 21

How do labour market policies help to reduce the NAIRU?

Answer 21

1) Training and job-matching help to reduce structural and frictional unemployment
2) Decentralisation restricts wage rises to individuals rather than all employees, so unemployment can fall lower before wages and cost-inflation start to rise dramatically

Question 22

How does labour market decentralisation affect the unemployed and the employed?

Answer 22

The unemployed benefit because firms will be more willing to hire them

The employed will be worse off as they will have fewer minimum conditions and less job security. However, high-skilled workers may be able to negotiate a higher wage.

Question 23

How does labour decentralisation affect growth?

Answer 23

Increases efficiency and aggregate supply, increasing growth

Question 24

How does labour decentralisation affect inflation?

Answer 24

Increases efficiency and means only some workers / industries get pay raises, reducing inflation

Question 25

How does labour decentralisation affect unemployment?

Answer 25

Firms are more willing to hire people because there is less regulation of the conditions they must provide

Question 26

How does labour decentralisation affect external stability?

Answer 26

Increased efficiency leads to improved international competitiveness and exports

Question 27

How well has the Australian Government conducted labour market policies?

Answer 27

Labour productivity growth is falling, suggesting that more decentralisation and better education policies are needed.

However, the Fair Work Act does allow for decentralised contract negotiations while providing a safety net for workers. It has also reduced the frequency of industrial disputes. Therefore, overall the FWA has struck an appropriate balance between protecting workers and encouraging productivity.