Urgent labor market reform needed to raise wages and facilitate recruitment

Low wages and labor insecurity are major issues for the Australian labor market affecting not only workers, but also employers.

Despite an unemployment rate at its lowest in 14 years, wage growth remains weak. This is one of the main reasons why employers face such a challenge in attracting and retaining workers. This is particularly true for essential, but poorly paid and precarious jobs in the care sector.

Despite an unemployment rate at its lowest in 14 years, wage growth remains weak.Credit:Phil Carrick

The faulty labor market policies, developed by the previous Labor government and maintained by the coalition government, are at the root of these problems. Our labor market policies are stuck in an outdated paradigm focused on fixing problems that have diminished or no longer exist, like excessive union power and inflationary wage pressures.

The origins of today’s labor market policies can be traced to the stagflation crisis of the 1970s, which governments struggled to control due to powerful unions demanding higher wages.

While the Hawke government’s Price and Incomes Agreement resolved this crisis, subsequent governments remained determined to ensure that union power would not derail the economy.

The Howard government’s WorkChoices reforms, aimed at crippling unions, illustrate this fixation. The current Fair Work Act, introduced by the Rudd government, continues to impose restrictions on union activity and multi-employer bargaining.

Record low levels of unionization and soaring corporate profits show that union power is no longer an issue. Instead, weak unions and the constraints that current policies place on workers’ ability to negotiate fairer wages and better working conditions are crippling the Australian labor market.

These are the main reasons why wage growth is so slow, why so many workers have precarious contracts, why the gender pay gap still remains large, and why many workers – especially migrants on temporary visas – are underpaid.

To meet these challenges, a new labor market policy framework that empowers workers is needed. Findings from a large body of research indicate the need for greater emphasis on the creation of quality jobs, fairer redistribution in bargaining and wage setting, more effective measures to combat gender-based inequalities in the workplace, fairer labor immigration policies and enhanced job security. .