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Chapter 17
Labour Market Policy
THE ROLE OF THE NATIONAL AND STATE INDUSTRIAL
RELATIONS SYSTEMS
Industrial relations (or workplace relations) refers to the system used to determine wages and working
conditions between employers and employees. Historically Australia has used a centralised system
of federal and state industrial commissions or tribunals to determine award wages and conditions of
employment for employees in workplaces. Awards set out the legal minimum wages and conditions of
employment for employees according to their occupation or the nature of work they perform. There are
both federal and state awards, with the Fair Work Commission administering federal awards and state
industrial commissions such as NSW Industrial Relations administering state awards in NSW.
The Australian government has an important role in determining the legislation that underpins the
national industrial relations system. In terms of economic policy its influence over national industrial
relations is based on achieving the following objectives:
Controlling the wage demands and expectations of trade unions, in the hope of achieving wage
moderation or restraint, and low inflation outcomes. This also helps to contain labour costs for
employers in the private and public sectors and promotes efficiency and competitiveness.
Promoting comparative wage justice through regular adjustments to the National Minimum Wage
and the application of ten uniform National Employment Standards to protect the incomes and
working conditions of all employees in Australia.
As a mechanism for solving industrial disputes through the use of the conciliation and arbitration
powers of the Fair Work Commission.
Promoting reform of the labour market through the use of collective enterprise agreements and
Modern Awards to enhance workplace flexibility and achieve improvements in labour productivity.
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In Western Australia, those employees in state public sector and local government employment
and employees in non constitutional corporations in the private sector (e.g. sole traders and
partnerships).
In NSW, Queensland and South Australia, those employees in state public sector and local
government employment.
Examples of employees in the state industrial relations system include public sector teachers, nurses,
public servants, the police force, fire brigade, ambulance service and local council workers. However
national entitlements to matters such as unpaid parental leave, notice of termination and unlawful
termination of employment extend to employees who remain covered by a state industrial relations
system. In NSW from January 1st 2010 private sector employers and employees previously covered
by the NSW award system (mainly sole traders and partnerships) moved into the national workplace
relations system administered by the federal government.
NSW Industrial Relations is the main industrial relations body in NSW. The NSW government passed
the Industrial Relations Act 1996 which underpins the legal framework for industrial relations matters in
NSW, specifically the administration of state awards and the State Wage Case.
All existing state and federal awards were streamlined to around 120 Modern Awards under the Fair
Work Act 2009. If employees in the private sector (such as sole traders and partnerships) were covered
by a NSW state award on December 31st 2009, these awards were preserved as state reference awards
for a transitional period of 12 months to December 31st 2010. From January 1st 2011 state reference
awards ceased operating and the appropriate Modern Award must be used for employees in the private
sector in NSW. Common workplaces where this new system of Modern Awards applies include the
building industry, cafes, child care centres, farms, manufacturing, medical practices, nursing homes,
private hospitals, restaurants, retail shops, the transport industry and warehouses.
The simplification of the award system to cover only 20 allowable matters in the safety net system;
The introduction of new individual Australian Workplace Agreements (AWAs) as an alternative type
of workplace agreement to collective trade union and employer negotiated Certified Agreements;
The creation of the Office of Employment Advocate (OEA) to administer the operation of AWAs;
The promotion of freedom of choice in the use of bargaining agents, and prohibition of closed
shops in workplaces, and preference for unionists clauses in employment contracts;
Restriction of the role of the AIRC in the industrial relations system, to the certification of union
Certified Agreements and the administration of the award safety net system; and
Simplification of the Unfair Dismissals provisions of the previous Keating Labor governments
Industrial Relations Reform Act 1993.
The Workplace Relations Act 1996 (WRA) divided workers into three formal streams for the purpose of
wage adjustments and changes to working or employment conditions:
1. The industrial award system or Award Safety Net covered workers unable to negotiate a wage
increase under an individual or collective enterprise agreement. The award system provided direct
coverage for about one third or approximately three million employees in the Australian workforce.
2. Certified Agreements were usually in force for three years, and covered workers who were represented
by a trade union at the enterprise or industry level for wage increases. Certified Agreements
provided coverage for another third or three million employees in the Australian workforce.
3. Australian Workplace Agreements (AWAs) covered wage increases for workers who negotiated on
an individual basis, without trade union involvement, but who had the choice of bargaining agents
in negotiations. In 2007 there were about 300,000 workers covered by AWAs.
A fourth informal stream (of about three million workers) included employees, the self employed,
contractors, managers and executives on over award payments or common law contracts.
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Adjusting the federal minimum adult wage according to inflation and economic conditions;
Adjusting award rates of pay and simplifying the award system; and
The Workplace Authority could also consider the personal circumstances of the employee(s), including
their family responsibilities. In exceptional circumstances the Workplace Authority could also consider
other factors, such as the industry, location and economic circumstances of the employee(s).
In addition to enforcing these minimum conditions, the Workplace Ombudsman could investigate
complaints about breaches of other workplace rights such as the coercion of employees by employers to
sign AWAs, unlawful termination of employment (e.g. on the basis of race, colour, sex or marital status),
or the freedom of association of employees at work to join a trade union or an employer association.
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8. Public holidays
4. Annual leave
(ii) New Modern Awards which contain the NES, and may include terms that are specific to certain
industries or occupations. These terms included minimum wages, types of employment, work
arrangements, overtime and penalty rates of pay, allowances, leave, superannuation, ordinary hours
of work and dispute settlement procedures. It was envisaged that Modern Awards would streamline
and simplify thousands of awards that existed in the federal award system.
(iii) Revised enterprise bargaining arrangements included single enterprise, multi-enterprise and
greenfields agreements, approved by Fair Work Australia and must pass a No Disadvantage Test.
(iv) Streamlined protections dealt with workplace and industrial rights, including protection against
discrimination and unfair dismissal in the workplace.
(v) Two new organisations known as Fair Work Australia and the Fair Work Ombudsman replaced
previous agencies (the AIRC, AFPC, the Workplace Authority and the Workplace Ombudsman)
to regulate the industrial relations system. Fair Work Australia has powers over the safety net of
minimum wages and employment conditions, enterprise bargaining and dispute resolution. The
Fair Work Ombudsman ensures compliance with the Fair Work Act 2009 (FWA).
Australian Government
- Workplace Relations Act 1996
- Workplace Relations Amendment Act 2006
- Workplace Relations Amendment (A Stronger Safety Net) Act 2007
- Workplace Relations Amendment (Transition to Fairness) Act 2008
- Fair Work Act 2009 (FWA) and Fair Work Amendment Act 2012
- Enterprise bargaining
- Industrial action
- Dispute resolution
- Termination of employment
- Unfair dismissals and workplace matters
REVIEW QUESTIONS
THE ROLE OF THE NATIONAL AND STATE
INDUSTRIAL RELATIONS SYSTEMS
1. What is meant by industrial relations? What are the economic objectives of the Australian
government in determining the legal framework for the national industrial relations system?
2. Discuss the main features of the national industrial relations system under the Fair Work Act
2009.
3. Discuss the main features of the state industrial relations system.
4. Explain how the Workplace Relations Act 1996 altered the Australian industrial relations system.
5. List the main changes to Australian industrial relations under the WorkChoices legislation in 2006
and the Workplace Relations Amendment Act 2007.
6. List the main changes to Australian industrial relations under the Transition Act 2008.
7. List the main changes to Australian industrial relations under the Fair Work Act 2009.
How did these changes alter the WorkChoices legislation?
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Table 17.3: Annual Wage Review Decisions by Fair Work Australia - 2010 to 2013
Date of Decision
Weekly Wage Increase
Percentage Wage Increase
NMW
June 2010
$26.12 per week
June 2011
$19.40 per week
June 2012
$17.10 per week
June 2013
$15.80 per week
Source: Fair Work Commission (2013), www.fairwork.gov.au
4.8%
3.4%
2.9%
2.6%
$569.90
$589.30
$606.40
$622.20
$15 per hour), and was equivalent to a 4.8% increase in Modern Awards. The Minimum Wage Panel
argued that low paid employees were entitled to a large wage increase since no increase was given in
2009 by the AFPC due to the Global Financial Crisis. In addition, inflation had risen by 5.4% between
2008 and 2010, leading to a higher cost of living and a reduction in real minimum wages.
In June 2011 the National Minimum Wage was increased by $19.40, from $569.90 to $589.30 per
week. This was equivalent to 3.4% annual wage increase, taking the minimum hourly rate of pay from
$15 to $15.51. In June 2012, Fair Work Australia increased award wages by 2.9% with the National
Minimum Wage rising to $15.96 per hour or $17.10 per week, taking it from $589.30 to $606.40. The
increase in award wages in 2012 was lower than in 2011 because of weaker labour market conditions in
2012. At its June 2013 hearing the Fair Work Commission increased award wages by 2.6% (in line with
inflation) and the National Minimum Wage by $15.80 per week, taking its from $606.40 to $622.20.
Modern Awards
Industrial awards provide a set of minimum wages and working conditions for employees specific
to their industry, job classification, occupation or the type of work they perform. A task force was
established by the federal government to rationalise and restructure existing awards in 2006-07. Under
the Transition to Fairness Act 2008 the AIRC was given the task of Awards Modernisation. This led to a
reduction in the number of federal awards from the 4,000 that existed in 2006, to about 122 in 2010.
Modern Awards contain around 20 terms, ten of which are also covered in the NES. The main
terms contained in Modern Awards are listed in Table 17.4. They include minimum wages, types of
employment, overtime and penalty rates of pay, leave entitlements, allowances and superannuation.
There are also some other important features of Modern Awards:
1. Modern Awards cover employees who are already covered by awards but will not cover employees
earning over $100,00 per year.
2. Awards can also contain a flexibility clause which means that employers and employees can
negotiate changes in workplace arrangements to meet their individual needs.
Table 17.4: The Contents of Modern Awards
1. Minimum wages, minimum award classification rates of pay and casual loadings
2. Types of employment such as full time, part time, casual and shift time
3. Arrangements for when work is performed
4. Overtime rates of pay
5. Penalty rates of pay
6. Annual wage or salary arrangements
7. Allowances and leave related matters such as leave loadings and entitlements
8. Superannuation entitlements and conditions
9. Procedures for consultation, representation and dispute settlement
10. Outworker terms, certain industry specific redundancy schemes, calculation of ordinary hours,
pieceworker provisions and variations of allowances
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Employment conditions such as hours of work, timing of meal breaks and overtime;
Deductions from wages for any purpose authorised by the employee (such as superannuation).
They cannot include unlawful content such as discriminatory or objectionable terms. As with Modern
Awards, enterprise agreements must provide a flexibility term that allows for the inclusion of flexibility
arrangements so that variations in the provisions of the enterprise agreement can be made.
Multi-Enterprise Agreements
Two or more employers that are not all single interest employers may make an enterprise agreement
known as a multi-enterprise agreement with a group of employees or a trade union representing a group
of employees. The multi-enterprise agreement is made when a majority of the employees of at least one
of the employers votes to endorse the agreement. The agreement may run for no longer than four years.
The agreement must be submitted to the Fair Work Commission for approval and if the agreement
passes the Better Off Overall Test it will be approved by the Fair Work Commission.
Greenfields Agreements
A greenfields agreement involves a genuinely new enterprise that one or more employers are establishing
or propose to establish and who have not yet employed persons necessary for the normal conduct
of the enterprise. Such agreements may be either a single enterprise agreement or a multi-enterprise
agreement. The greenfields agreement is made when it has been signed by each employer and each
relevant employee organisation or trade union that the agreement covers. The agreement may run for
up to four years. The agreement must be submitted to the Fair Work Commission for approval and the
agreement must pass the Better Off Overall Test applied by the Fair Work Commission.
Individual Agreements
From January 1st 2010 there is no legislative provision for making individual workplace agreements.
The negotiation of new Australian Workplace Agreements (AWAs) was prohibited from March 28th
2008 under the Transition Act, with existing AWAs to continue to operate until terminated by an
Individual Transitional Employment Agreement (ITEA) or when they reach their expiry date.
ITEAs were a new type of instrument which were available for limited use during the transition to the
governments new workplace relations system beginning on January 1st 2010. ITEAs had a nominal
expiry date of 31st December 2009. It is a written agreement between an employer and an individual
employee setting out the terms and conditions of the employees employment. This includes the rate
of pay, hours of work and leave entitlements. An ITEA is assessed against the No Disadvantage Test to
ensure that it does not disadvantage the employee against an applicable enterprise agreement or award.
Outside of the formal system of Modern Awards, the National Employment Standards and enterprise
agreements, around 38.7% of Australias employees work under common law employment contracts.
These common law contracts provide significant flexibility for employers and employees to vary wages
and working conditions to suit their individual needs and circumstances. They are most commonly
used for the remuneration of executives, managers, professionals and business owners in the workplace
whose incomes may well exceed average weekly earnings. However these common law contracts must
still comply with the minimum conditions set out in the National Employment Standards.
Tim Riley Publications Pty Ltd
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Unfair Dismissal
One change implemented to Australian industrial relations under the Fair Work Act 2009 is the
reinstatement of unfair dismissal provisions for small businesses with over 15 employees. This is known
as the Small Business Fair Dismissal Code. Employees in such businesses cannot make an application for
unfair dismissal if they have not completed six months employment. For employees in small businesses
with less than 15 employees they must complete 12 months employment before they can make an
application for unfair dismissal. Unfair dismissal is defined as when an employee is dismissed and the
dismissal is judged to be harsh, unjust or unreasonable, or the dismissal was not a case of redundancy.
Table 17.5 summarises the key features of the minimum safety net and the types of enterprise
agreements in the national industrial relations systems under the Fair Work Act 2009. Overall the Act
strengthens the safety net system with the National Employment Standards, the annual Wage Review of
the National Minimum Wage and the system of Modern Awards. In the area of enterprise bargaining
emphasis is placed on good faith bargaining in enterprise agreements and the application of the Better
Off Overall Test to all enterprise agreements in protecting employees entitlements.
Table 17.5: The Current Industrial Relations System under the Fair Work Act 2009
The Minimum Safety Net
The ten National Employment Standards apply to all employees in the workplace
Modern Awards contain terms specific to an industry or occupation
Annual review of the National Minimum Wage (NMW) by the Fair Work Commission
Enterprise Agreements
Single enterprise agreements are negotiated by trade unions or employees with a single interest
employer
Multi-enterprise agreements are negotiated by trade unions or employees with more than one
employer
Greenfields agreements are negotiated by employees or a trade union with one or more
employers for a new enterprise
All enterprise agreements are subject to approval by the Fair Work Commission through a No
Disadvantage Test and a Better Off Overall Test to protect employees entitlements
Collective bargaining is where the conflicting parties attempt to reach an agreement through direct
negotiation by their representatives. There is no third party or umpire in this situation, but if no
agreement is reached, a conciliator or mediator may be used to solve the dispute. A disadvantage
of collective bargaining is more protracted industrial disputes if an agreement cannot be reached.
Conciliation is where a third party or conciliator or mediator (usually an industrial tribunal) tries
to get conflicting parties in a dispute to agree to a settlement. If this is achieved, the agreement
becomes legally binding on the parties and part of an enterprise agreement or Modern Award.
Arbitration is where a third party or arbitrator makes a binding decision on the parties to a dispute.
The arbitrated settlement alters the Modern Award or enterprise agreement and is legally binding
on both parties (i.e. the employees and employer).
Under the Fair Work Act 2009, the Fair Work Commission has a major role in ensuring the bargaining
process and any industrial action occurs according to the law. Bargaining representatives wishing to take
industrial action to support their claims must first seek an order from the Fair Work Commission for a
protected ballot authorising the industrial action. The Fair Work Commission has the power to suspend
or terminate both protected and unprotected industrial action, with legally enforceable orders.
Protected industrial action can only be taken if an existing enterprise agreement has finished its term
of three, four or five years; there is an intention to negotiate a new enterprise agreement; and there is a
genuine attempt to reach an agreement based on the principle of good faith bargaining.
Figure 17.2 shows the general decline in the number of industrial disputes and the number of working
days lost from disputes between 1988 and 2012. This generally reflected strong economic growth,
declining unemployment and improved labour-management relations in the 1990s and 2000s. However
there was increased disputation in the coal industry in 2010-11 due to a dispute in the Bowen Basin,
and a protracted dispute in aviation due to the Qantas industrial dispute at the end of 2011.
Figure 17.2: Industrial Disputes in Australia (quarterly)
Source: Reserve Bank of Australia (2013), Statement on Monetary Policy, August, page 50.
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Streamlined protections dealing with workplace and industrial rights, including protection against
discrimination and unfair dismissal in the workplace; and
Two new organisations that regulate the industrial relations system: the Fair Work Commission
(created under the Fair Work Amendment Act 2012) and the Fair Work Ombudsman.
Under the Fair Work Amendment Act 2012, Fair Work Australia was renamed the Fair Work Commission,
the national workplace relations tribunal. It is an independent body under the Fair Work Amendment
Act 2012 responsible for carrying out a range of functions relating to national industrial relations:
Administering and setting the safety net of minimum wages and employment conditions;
Administration of rules regarding the termination of employment and unfair dismissal; and
Other workplace matters including discrimination in the workplace, freedom of association and
the right of entry of trade unions into workplaces.
Ensuring compliance with the Fair Work Act 2009 and investigating possible breaches of the law;
Taking court action regarding serious contraventions of the Fair Work Act 2009;
Auditing workplaces for their compliance with the Fair Work Act 2009;
Appointing Fair Work inspectors to monitor and investigate breaches of the Fair Work Act 2009;
Specialist Fair Work Divisions were created under the Fair Work Act 2009 in the Federal Court and the
Federal Magistrates Court to hear new workplace law matters. In addition, a Fair Work Infoline was
established together with the Fair Work Ombudsman website to help inform employees and employers
of their rights resulting from changes to Australian industrial relations under the Fair Work Act 2009.
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incidence of non union part time and casual employment. However the widespread opposition to the
WorkChoices legislation which led to the erosion of some workers wages and conditions, resulted in
a major ACTU campaign (Your Rights at Work) in 2006-07 to defeat the Howard government and
overturn the WorkChoices legislation. Trade unions and the ACTU conducted widespread education
campaigns to inform employees of their rights under the new Transition Act 2008 and lobbied the Rudd
Labour government to accelerate the introduction of its Forward with Fairness policy in 2010. Under
the Fair Work Act 2009 trade union activity is regulated through the following measures:
Restrictions on the right of entry of unions into workplaces to organise workers or to hear grievances.
Trade unions must have enterprise agreements approved by the Fair Work Commission.
For industrial action by trade unions to be lawful it must be protected industrial action. This
means that industrial action can only be taken when an existing enterprise agreement has passed its
nominal expiry date or the industrial action is in support of a new enterprise agreement.
Industrial action cannot involve pattern bargaining (i.e. similar wage claims by unions across
various industries).
The Fair Work Commission: Administration of the safety net of the NES, Modern Awards and
National Minimum Wage; approval of enterprise agreements through
the Better Off Overall Test; and dispute resolution powers.
The Fair Work Ombudsman: Assistance to employees and employers; ensuring compliance with
the Fair Work Act 2009; court action against breaches of the Act.
Employer organisations:
Trade Unions:
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Source: ABS (2013), Employee Earnings and Hours, Catalogue 6306.0, January.
The average weekly total cash earnings for employees in May 2012 according to the main methods of
setting pay are shown in Figure 17.4:
1. The average weekly total cash earnings for males under an award or pay scale was $690.10 and
$592.70 for females. Award coverage was highest in community and personal services (28.8%).
2. The average weekly total cash earnings for males under a collective agreement was $1,388.50 and
$954.60 for females, with coverage of collective agreements highest in the public sector (85.9%).
3. The average weekly total cash earnings for employees under an unregistered individual arrangement
(such as a common law contract or an over award payment) was $1,494.40 for males and $1,001.00
for females. Coverage of individual arrangements was highest for managers and other professionals
(62.1%) in the private sector.
Figure 17.4: Average Weekly Total Cash Earnings in 2012 by Method of Setting Pay
Males
Females
Persons
Award Only
Collective agreement
Individual arrangement
Owner manager of
incorporated enterprises
All methods of setting pay
400
600
800
Source: ABS (2013), Employee Earnings and Hours, Catalogue 6306.0, January.
Figure 17.5: Wage Increases for Awards and Federal Enterprise Agreements 2000-13
% per annum
5
4
3
2
1
0
00-1 01-2 02-3 03-4 04-5 05-6 06-7 07-8 08-9 09-10 10-11 11-12 12-13
Sources: Reserve Bank of Australia (2013), www.rba.gov.au and the Fair Work Commission www.fwc.gov.au
The labour market has become more competitive and flexible, and this has led to an improvement
in the efficiency with which labour is allocated in the economy.
Labour productivity has increased, because many employees have increased their levels of education,
training and skill in order to earn higher wages. This is evident by the average 3% to 4% annual
wage increases achieved by workers under federal enterprise agreements between 2000 and 2013,
compared to an average 2% to 3% annual wage increase of workers under awards (see Figure 17.5).
Business enterprises have improved their efficiency and profitability by reforming restrictive work
practices and increasing labour and capital productivity.
The Australian economy has achieved lower inflation and unemployment outcomes, higher rates of
sustainable economic growth and generally lower levels of industrial disputation.
However there have been costs associated with greater labour market decentralisation and deregulation:
Minimum standards of employment have been reduced over time, providing less protection for
workers reliant on adjustments to Modern Awards for wage increases and better working conditions.
Labour market segmentation has risen as workers with higher levels of skill, training and bargaining
power under enterprise agreements have been able to increase their real wages, relative to workers
with lower levels of skill, training and bargaining power reliant on adjustments to Modern awards.
Wage inequality has risen due to increased wage dispersion between highly skilled and highly paid
employees on enterprise agreements and individual arrangements, compared to low skilled and
low paid employees on Modern Awards. Increased wage inequality in the labour market is a major
reason for inequality in the distribution of income in Australia.
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Comparative wage justice, based on the maintenance of real wages and living standards, and the
wage relativities between various award classifications for different occupations and types of work;
The general state of the economy, in terms of economic growth, inflation and unemployment; and
Between 1983 and 1995 the Accord evolved as a flexible mechanism for determining wage increases and
changes to the system of wage determination (refer to Table 17.7). A major change in 1987 was the
introduction of a productivity based bargaining component for wage increases, known as the Two Tier
Wage System. Between 1987 and 1991 the Structural Efficiency and Award Restructuring Principles
were introduced to increase the flexibility of awards, by encouraging higher labour productivity through
the reform of work practices. In 1991 the principle of Enterprise Bargaining (EB) was introduced, and
led to a major decentralisation of wage determination processes away from the reliance on national wage
cases held by the AIRC, to direct negotiations between employers and employees over wages. These
negotiations were largely based on productivity improvements at the enterprise or workplace level.
However a number of disadvantages were evident with the reliance on centralised wage determination
under the Accord. The use of comparative wage justice and wage indexation principles institutionalised
inflation by largely ignoring the importance of productivity as a wage fixing principle. Regular wage
indexation decisions under the Accord contributed to higher inflation outcomes because of rising
wage costs. Wage increases unrelated to productivity improvements, tended to flow on from one
occupation or industry to another, and led to a permanent real wage overhang, where wages growth
outstripped productivity growth and led to poor macroeconomic outcomes in Australia.
Many trade unions also made ambit claims for wage increases which were unrealistic and this pushed
up wage expectations. If a trade union was successful in gaining a wage increase, this could lead to
leap frogging where other trade unions increased their wage claims, and wage demands started to
accelerate, leading to a wage spiral in certain industries and even in the economy as a whole.
Year 12 Economics 2014
Table 17.7: The Evolution of Australias Wage Determination System 1983 to 2012
Policy or Legislation
Year
Degree of Intervention
Accord Mark I
1983
Centralised
Accord Mark II
1984
Centralised
1987
Centralised/Decentralised
Accord Mark IV
1988
Centralised/Decentralised
Accord Mark V
1989
Accord Mark VI
1991
1993
1995
Decentralised
Decentralised and
Partial Deregulation
Workplace Relations
2006
Amendment Act
(WorkChoices)
Workplace Relations
2007
Amendment
(A Stronger Safety Net) Act
Workplace Relations
2008
Amendment
(Transition to Fairness) Act
Collective productivity
bargaining and a stronger
Safety Net
Collective enterprise
agreements based on
productivity bargaining
With a lack of competition in many Australian product markets, employers simply absorbed these wage
increases by passing on the extra cost in the form of a price increase. This led to the development of a
wage-price spiral situation depicted in Figure 17.6. This not only led to poor inflation outcomes, but
reduced Australias international competitiveness. Higher wage costs also impacted on employment,
as employers substituted capital for labour, leading to higher unemployment in the labour market.
The centralised system was also very legalistic and became very adversarial with high levels of industrial
disputation. Critics also argued that an industrial relations club of the federal government, the ACTU
and AIRC controlled a highly regulated labour market that was not conducive to structural change.
Figure 17.6: The Wage-Price Spiral
Wage increases not linked to
improvements
in labour productivity
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REVIEW QUESTIONS
THE CURRENT INDUSTRIAL RELATIONS FRAMEWORK
1. List the three elements of the safety net system under the Fair Work Act 2009.
2. Discuss the main items contained in the National Employment Standards in Table 17.2.
3. Explain how the Fair Work Commission adjusts minimum wages under the Fair Work Act 2009.
4. Discuss the main contents of Modern Awards in Table 17.4. Why were awards modernised
under the Fair Work Act and how do they protect employees as part of the safety net system?
5. Discuss the main features of enterprise agreements under the Fair Work Act 2009.
Explain what is meant by good faith bargaining in enterprise agreements.
6. Make a list of the main features of Single Enterprise, Multi-enterprise and Greenfields Agreements
under the Fair Work Act 2009.
7. Discuss the role of the Fair Work Commission in approving enterprise agreements by applying
the Better Off Overall Test.
8. Discuss the changed role of individual workplace agreements under the Fair Work Act 2009.
9. Discuss the methods available for high income earners to enter into employment contracts.
10. What methods of dispute resolution are available in the Australian industrial relations system?
11. Discuss the roles of the Australian government, the Fair Work Commission and the Fair Work
Ombudsman in the Australian industrial relations system.
12. Contrast the roles of trade unions and employers in the Australian industrial relations system.
13. Evaluate the changes made to Australian industrial relations under the Fair Work Act 2009.
14. Discuss the main types of employment contracts in the Australian workforce from Figure 17.3.
Why do average total cash earnings differ between the various types of employment contracts?
15. Discuss the advantages and disadvantages of centralised, decentralised and individual methods
of wage determination.
16. Briefly discuss recent federal government education, training and employment programmes
designed to support industrial relations and labour market reform.
17. Define the following terms and add them to a glossary:
arbitration
Australian Workplace Agreement
Better Off Overall Test
collective bargaining
conciliation
enterprise agreements
Fair Work Act 2009
Fair Work Commission
Fair Work Ombudsman
greenfields agreement
industrial dispute
labour productivity
Modern Awards
multi-enterprise agreement
National Employment Standards
National Minimum Wage
No Disadvantage Test
single enterprise agreement
wage indexation
wage-price spiral
WorkChoices
Workplace Relations Act 1996
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Annual %r in the
National Minimum
Wage
Annual %r in
the CPI
2008-09
0.0
4.2
1.7
2009-10
4.8
4.0
3.1
2010-11
3.4
3.8
3.6
2011-12
2.9
3.7
1.2
2012-13
2.6
3.5
2.5
Sources: Reserve Bank (2013), Bulletin and Statement on Monetary Policy, August.
Refer to the table above of changes in the National Minimum Wage, average wage
increases for employees under federal enterprise agreements, and changes in the CPI
between 2008-09 and 2012-13, and answer the questions below.
1. What is meant by an enterprise agreement?
Marks
(1)
2. Suggest TWO reasons for generally larger average wage increases under federal enterprise
agreements than increases in the National Minimum Wage between 2008 and 2013.
(2)
(3)
4. Explain TWO features of Modern Awards and TWO features of enterprise agreements.
(4)
Annual review of the National Minimum Wage by the Fair Work Commission
Collective enterprise agreements must be approved by the Fair Work Commission and are
subject to a Better Off Overall Test
Describe the main streams of wage adjustments in the current Australian industrial relations
system and the economic benefits of a greater emphasis on collective enterprise bargaining.
Explain the role of the safety net and enterprise agreements in determining wages in the current
Australian industrial relations system.
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CHAPTER SUMMARY
LABOUR MARKET POLICY
1. Key features of the national industrial relations systems under the Fair Work Act 2009 are:
A set of ten National Employment Standards (NES)
Modern Awards that apply nationally to specific industries, occupations and types of work
A National Minimum Wage administered by the Fair Work Commission
Enterprise bargaining arrangements for making enterprise agreements
Protection of employees from unfair dismissal
2. The state industrial system administers state awards mainly for employees in the public sector
such as those employed in state government authorities and local governments.
3. Australias industrial relations system has become more decentralised since the principle of enterprise
bargaining was introduced in 1991. This principle linked wage increases to improvements in
productivity at the workplace or enterprise level. Further decentralisation occurred in 1996 with
the Workplace Relations Act 1996, which simplified the award system and introduced Australian
Workplace Agreements (AWAs) as individual employment contracts.
4. The Workplace Relations Amendment Act (WorkChoices) came into force in 2006. It sought to
create a unified national industrial relations system.
5. The Fair Work Act 2009 prohibited the making of new AWAs and strengthened the safety net
system by introducing ten National Employment Standards and Modern Awards. The Fair Work
Commission has responsibility for making annual adjustments to the National Minimum Wage.
6. The safety net under the Fair Work Act 2009 consists of the ten National Employment Standards,
Modern Awards and adjustments to the National Minimum Wage by the Fair Work Commission.
7. Under the Fair Work Act 2009 there is an emphasis on collective enterprise agreements (single
enterprise, multi-enterprise and greenfields agreements) negotiated by trade unions or employees
with employers to reflect industry and enterprise conditions. The negotiation of enterprise
agreements involves good faith bargaining, with agreements subject to approval by the Fair
Work Commission through the application of a Better Off Overall Test.
8. Employment contracts for high income earners include common law contracts and individual
contracts negotiated by independent contractors for specific projects or work tasks.
9. The main methods of dispute resolution in the Australian industrial relations system include collective
bargaining, conciliation and arbitration. The Fair Work Commission has powers over protected
industrial action and encourages parties to bargain in good faith.
10. The main institutions in the current system of Australian industrial relations include the federal
government, the Fair Work Commission, the Fair Work Ombudsman, state industrial tribunals, the
ACTU and trade unions, and employer organisations like the ACCI, AIG, BCA and CAI.
11. Historically Australia has used a centralised system of wage determination based on industrial
awards, with annual adjustments made by the AIRC through a policy of wage indexation. The
disadvantage of the centralised wages system was that wage increases did not reflect productivity
improvements and led to higher labour costs, inflation and a wage-price spiral.
12. The current industrial relations system is more flexible than the previous centralised system. It has
led to the spread of enterprise agreements as one of the main forms of wage adjustment, with less
emphasis on awards. The benefit of this system has been a reform of work practices resulting in
increased labour productivity and efficiency of enterprises. Another benefit has been increased
flexibility in the labour market. However some of the disadvantages of industrial relations reform
are increased wage and income inequality and greater segmentation in the labour market.