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The Australian Labo(u)r Market
An interesting (and emphatic) broadside from Richard Freeman. And this is no Country Doctor making it up on the fly: Richard has long understood the Australian labour market better than just about any other economist, and certainly better anyone outside Australia. (Dan Hamermesh is a close runner-up.)
My $0.02: This is what happens when conservative governments confuse decentralization and deregulation.
Posted by Justin Wolfers on October 4, 2007 at 05:08 AM | Permalink
Comments
One thing I don't really understand is that a lot of people say that most of the changes here are cosmetic, and don't make much difference. It has some effect on the lower end (which I believe a recent report found), but the changes brought in by the former Labour government had a much larger effect. Keating himself said so recently on the 7:30 Report. He certainly painted this stuff as fiddling on the edges.
Also, Freeman suggests that the changes won't lead to a healthy, productive workforce. Why then did employers support it? Surely it is in their interests to have a workforce like that. What's the model here? Anyone who can clear up this confusion for me?
Posted by: a student at Oct 4, 2007 8:53:02 AM
Freeman says the law interferes with Coasian bargaining thus preventing mutually profitable exchanges and also that it is biased in favor of employers. Sorry, you can't have it both ways.
Posted by: Alex Tabarrok at Oct 4, 2007 9:45:10 AM
Oh, I think I see. He thinks the size of the pie is reduced, but the absolute size that employers get is now larger.
Posted by: a student at Oct 4, 2007 9:48:49 AM
"This is what happens when conservative governments confuse decentralization and deregulation."
I dunno about deregulation, but the Howard government loves centralisation, mainly because it moves power from Labor parties that are in power in the states, to the Liberal party that is in power at the federal level.
Ironically enough, this steak of rather blatant ideological union bashing is most likely going to lead to the downfall of the Howard government. Which will mean that the Labour party will control so much of the policy landscape that we'll prolly see a big shift to the left.
Posted by: Factory at Oct 4, 2007 10:03:56 AM
Alex:
The law is 1000+ pages when it is said and done. It seems reasonable that some provisions interfere with mutually beneficial bargaining while others bias relations in favor of the employer.
Posted by: adamess at Oct 4, 2007 10:46:29 AM
The snark to substance ratio of Freeman's piece was so lopsided I got the impression he would rather not have to discuss specifics. Usually a good sign a writer doesn't have much to support his argument.
When he does produce examples, say:
WorkChoices....privileges individual contracts through “Australian Workplace Agreements” that have precedent over any collective contracts.
they seem to empower individuals who might not agree that their unions are acting in their best interests. And:
Employers do not bargain individually with workers. They write out minimal “Australian Workplace Agreements” and tell the workers to take it or leave it.
Which is silly. What happens to the employers if they, 'leave it'?
Posted by: Patrick R. Sullivan at Oct 4, 2007 2:50:51 PM
I would hazard a guess WorkChoices is chiefly a response to Australia’s emerging labour force profile.
Many Australian labour markets are already characterised by shortages, and employers in more and more industries will be drawn into costly bidding wars as baby boomers retire over the next decade or so.
The Howard Government has a comfortable relationship with the business community (evidenced by the drafting arrangements for WorkChoices that Freeman notes). It seems to me that WorkChoices is little more than attempt to protect (or even improve) capital’s share of future economic gains by curbing labour’s bargaining power through a set of crude restraints.
My interpretation fits with the Howard Government’s other industrial relations policies, such as generous tax breaks for employees on certain working visas (I certainly have no objections to business importing labour, but it is unreasonable of the Government to give an unfair cost advantage to those imports).
Most notable has been the Government’s unprincipled attempts to “sell” WorkChoices. In contrast to its principled arguments for reform in other areas like waterfront industrial relations, the Government has merely said it is about “creating more jobs”, supported by unconvincing econometric studies.
The Government has not tried to suggest WorkChoices will improve production significantly, presumably because there is little evidence supporting that conclusion.
A lack of jobs isn’t likely to be an issue for Australian workers any time soon, so it is easy to see why most Australians are sceptical about the merits of a policy that seems to offer them little other a redistribution of economic gains away from them.
Posted by: Brendan at Oct 5, 2007 3:34:24 AM
That's funny, I'm sure I've seen some economists saying positive things about parts of the reforms.
Posted by: Andrew Leigh at Oct 9, 2007 3:46:08 PM
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