‘Fair Work’ and the Modernization of Australian Labour Standards: A Case of Institutional Plasticity Entrenching Deepening Wage Inequality
| Published date | 01 December 2016 |
| DOI | http://doi.org/10.1111/bjir.12215 |
| Date | 01 December 2016 |
| Author | John Buchanan,Damian Oliver |
British Journal of Industrial Relations doi: 10.1111/bjir.12215
54:4 December 2016 0007–1080 pp. 790–814
‘Fair Work’ and the Modernization
of Australian Labour Standards: A Case
of Institutional Plasticity Entrenching
Deepening Wage Inequality
John Buchanan and Damian Oliver
Abstract
Australia waslong recognized for its relatively compressed wagestructure. From
the 1940s to the 1970s this was associated with a comprehensive regime of
‘award-based’ minimum wages. Since the 1980s, this has been subjected to
comprehensive ‘modernization’. After three decades of reform and in the most
supportive economic environment in the OECD, Australian wage inequality has
deepened. Although multiple political-economic forces have been at play, the
evolution of Australia’s labour standards regime is an example of ‘institutional
plasticity’ whereby the purpose and operations of wage-setting institutions not
only evolves but can actually be inverted over time.
1. Introduction
Concern about deepening labour market inequality has shifted from the
margins to the mainstream of public policy in recent years. In their combined
briefing for the G20 Labour Ministers meeting of September 2014, the
International Labor Organization (ILO), OECD and World Bank urged
world leaders to confront the problem of inequality (ILO, OECD and
World Bank 2014). The connection between wages and productivity was of
particular concern: wage growth had lagged productivity improvements for
too long (ILO, OECD and World Bank 2014: 1, 6). The three international
organizations argued thatunless dramatic change occurred, inequality would
choke o growth strong enough to reduce unemployment. This shift is yet
to be embraced by political leaders. The Declaration of the G20 Labour and
Employment Ministers (2014) issued after this briefing endorsed many of its
John Buchanan is at Business Analytics, University of SydneyBusiness School, The University
of Sydney.Damian Oliver is at UTS Business School, University of Technology Sydney
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2016 John Wiley & Sons Ltd.
‘Fair Work’ and the Modernization of Australian Labour Standards 791
specific policy proposals concerning matters like gender discrimination and
youth unemployment, but ignored the over-riding problem of inequality.
This distance between international agencies’ growing distributional
concerns and governments’ reluctance to embrace them is significant.
Political leaders, it seems, are at best committed to persisting with a narrow
‘labour market modernization’ agenda: ameliorating specific ‘equity issues’
but sticking with the core features of what is essentially a neoliberal-
inspired ‘labour market flexibility’ policy regime. The underlying vision is to
help individuals achieve self-reliance through bargaining at workplace and
enterprise level. Without a decisive change in direction the current trajectory
of economic development based on deepening inequality is likely to deliver
more of the same. What will this mean in practice? In particular, to what
extent, if any, can ‘modernized’ labour law redress rising wage inequality?
This article addresses these questions by drawing on the renewed research
interest in the role of industrial relations institutions in addressing wage
inequality to contribute an analysis of recent Australian developments.
Wage inequality has been increasing in many developed countries, including
Australia. Comparative research shows that minimum wage setting and
collective bargaining procedures play a determining role in moderating or
accelerating inequality (Bosch et al. 2010; Grimshaw et al. 2014; Hayter and
Weinberg 2011).
Institutional frameworks vary across countries and across time. Cross-
country comparisons show that wage inequality is largest in countries with
no or low minimum wages and restricted collective bargaining coverage while
wage dispersion is lowestin countries with high collective bargaining coverage.
Within countries, institutions may decline over time and be supplanted by
new ones. More commonly, institutions adapt (Baccaro and Howell 2011;
Streeck and Thelen 2005; Thelen 2014) and may even inverttheir functions as
the underlying political coalitions that create them shift (Thelen 2004). Two
countries that illustrate this latterprocess in the industrial relations arena well
are Germany and Australia.Ger many’s transformation— through the steady
decline of collective bargaining and the adoption of a national minimum
wage in 2014 — has been well documented (Bosch 2015a; Bosch et al. 2010;
Grimshaw et al. 2014; Schulten and Bispinck 2015). The changing interplay
of Australia’s minimum wage setting mechanisms and collective bargaining
institutions and their association with deepening wage inequality has received
less attention.
The remainder of this article is structured as follows. First, the evidence
of growing wage inequality internationally and in Australia is reviewed.
Following that, the relationship between wage inequality and industrial
relations institutions is explored. Having established the connection between
wage inequality and collective bargaining and minimum wage setting
institutions, the article considers dierent approaches to understanding
institutional change.Next the article provides a case study of recent Australian
experiences of how ‘modernization’ of labour standards has coincided with
deepening wage inequality despite ostensible continuity of institutional
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2016 John Wiley& Sons Ltd.
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