Wage Stagnation in Australia

Wage Determination 1
Wage Stagnation in Australia
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Wage Determination 2
Introduction
Years of making legislation changes have dwarfed the union movement’s power to seek for
or rather demand for increase in wages for workers. Several accords with the Australian
Council of Trade Unions led to Labour Unions agreeing to moderate the wages of workers
for many years and in return the social wages were to be improved (Abbott, Mackinnon, and
Fallon 2016). The developments were to be done on the health services (quality Medicare),
introducing a superannuation pension, and family allowances as a supplement for poor
workers ((Fenna, 2013). The Keating Labour Government embraced a formal “enterprise
bargaining” in the Industrial Reform Act; a move that was supported by the unions (Industrial
Reform Act 1988). The enterprise bargaining’s main role was to usurp the awards systems
that were instrumental in the massive wage gain flow of unions across the economy. That was
the reflective shift in fairness at work. This paper seeks to address how issues such as
legislation have impacted wage growth in depth; how the Fair Work Act adopted by the Rudd
government has curtailed labour strike actions and affected the wages of workers. The diverse
forms of age determination will also be addressed.
Question 1
Centralised Wage Determination
The major contributors to wage stagnation are contract-based works and casualization.
Strikes were prevalent in the 1970s and ‘80s due to low wages (Taylor and Tyers, 2017). The
economy was overwhelmed with rising inflation, soaring prices of commodities, and the
rising wages which was plagued by the increased cost of living (Aph.gov.au., 2019). During
that time, workers were organized in unions; strong unions and those who worked in the
military accrued huge wages. Industrial tribunals disseminated the lump-sum pay rises and

Wage Determination 3
gains through a wage fixing system that was centralised (Stanford, 2017). The outstripping of
the development of productivity by wages was commonly referred to as “the real wage
overhang.” It was an ordinary principle taught in economics classes in the past years. The
portion of national income allocated to wages was greater than the share spent on profits. The
high growth of wages was an economic problem; the current Australian government faces a
totally opposite situation (Abbott, Mackinnon, and Fallon, 2016).
The Reserve Bank in Australia was once intent in curtailing the rise in wage payments; the
same entity is today advocating for an increase in wages. It was established during a meeting
between the Reserve Bank and the House of Representatives Economics Committee that the
unavailability of income growth is the underlying obstacle to the country’s economic
development. Several workers borrowed loans with the notion that there will be consistent
wage increase using the old rates. However, there has been difficulty in the wage progression
thus putting in a financial crisis; people have little cash left to spend on other things. As a
matter of fact, they cannot spend on anything at all (Fenna, 2013). Double-digit inflation has
disappeared over the years; the progression of wages has almost halved due to contained
levels. The income price index in 2018 was cited as 2.3%. That is a significant increase from
the 1.9% wage growth index in 2017. Between 2000 and 2013, the wage price index was
3.5% plus; a higher percentile figure compared to current prices.
The income index has risen from its low records in recent years, but is still not equivalent to
the soaring cost of living. The average earnings of workers per week are getting worse. The
wage growth’s average is determined at the place where it sits comfortably above 4%.
However, the annual increase in workers’ earning over the last five years has been below 2%
majorly. It is said to have been the lowest wage growth from the time the Second World War
and the great depression occurred. The low wage development is a sign of businesses trying

Wage Determination 4
to cut labour costs (Murphy, 2010). Deliberate wage policies such as the Fair Work Act 2009
are also responsible for curtailing the bargaining power of employees and eliminating the
wage inflation that was prevalent in the past. The rules, terms, and conditions of employment
seem to be negotiated at the expense of employees; the policies are not employee-friendly.
That is why unions are seeking to renegotiate the terms.
This system of fixing wages was adopted in the 1970s. The system was used by trade unions
back in the years to secure higher wages. It was more like a bargaining wage determination
mechanism between trade unions. The big trade unions were able to accrue huge wage
earnings compared to smaller unions. A centralised system could be instrumental in
controlling wages in the modern economies. Socialists’ movements of the working class can
seize the opportunity to ensure that their wage demands are met. However, trade unions
cannot welcome this wage fixing system because of the fact that it will be managed by the
centralised Labor government (Stanford, 2017). Labor stand to face problems in the exercise
of their political power in achieving socialist changes, monetary and non-monetary benefits
to the members of the movement, increased levels of employment, industrial reorganisation,
and progressive strategies of social changes.
Benefits of a Centralised Wage Fixing System
Greater distributional equity is achieved between groups. Without centralisation the
differentials such as industry, full & part-time categorisations, and sex between workers in
the economy will increase. A lot of money will go into stranger sectors of the industry; the
sectors of the economy that are immune to the recession. A good example is the wage
movement in 1981; some workers (agricultural workers) have not received the $25 and $14
that was promised. Workers received CPI adjustments in the 1970s during economic
recessions with the centralised wage fixing system; this means that the current economic