Labour Market Deregulation and the Orientation of Macroeconomic Policy

Abstract

Labour market deregulation in Australia can be traced back to the secondtier decision of 1987 and was massively confirmed by the Coalition's WorkplaceRelations Act of 1996. The emphasis is upon agreement-making with a view toachieving flexible working arrangements. Among the outcomes are dispersion inhours worked and in pay. This transformation of the labour market has taken place ina predominant regime of macroeconomic stringency. This is true of LaborGovernments since 1987 but is especially true of the Coalition since 1996. Theorientation of budget policy has been to the achievement of a surplus and residualunemployment has been explained by structural features of the labour market. Thereis debate about the workings of the macroeconomy. But there are also differentinterests represented by the different priorities on the containment of inflation asagainst the pursuit of full employment. In this paper the discussion of incomespolicies is revisited, with a view to finding some extra degrees of freedom formacroeconomic expansion. The early Accord (1983-86) was a particular kind ofincomes policy, focused on the national wage-productivity relation. The share ofwages vis-8-vis profits was diminished by the Accord arrangements with importantimplications. Subsequent deregulated arrangements have confirmed the diminishedwage share in national income. There are issues here for any incomes policy thatmight be thought of. As well as movements in the functional distribution of income,the size distribution of income (across households) has become more dispersed. Thepaper addresses issues to do with relativities in pay and looks for ways of finding aconsensus that might lessen the prospect of competitive pay pressure in the face ofmacroeconomic expansion. The overall share of wages vis-8-vis profits could also besubject to assessment as a follow on from discussion of pay relativities. For theworkforce this would be a potentially empowering exercise, as opposed to beingkept on the back foot in decentralised bargaining settings by the application ofstringent macroeconomic policies.