1. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-1 Chapter 14 Aggregate supply and the labour market

2. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-2 Learning objectives Briefly review the role of market policies in the fight against inflation Examine wage–price (incomes) policies as a means of dealing with stagflation Survey the development of Australia’s unique industrial relations system Discuss changes in Australia’s industrial relations system in the 1990s and beyond

3. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-3 Market policies Employment and training policy –Aims to better match workers to jobs, thus reducing labour-market imbalances or bottlenecks Three programs: 1.Vocational training 2.Job information 3.Non-discrimination Pro-competition policy: reducing the monopoly or market power of : –Unions (affecting wages) –Large companies (affecting prices) In Australia: Trade Practices Act and later amendments

4. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-4 Wage–price (incomes) policies Government intervention in the labour and product markets, designed to constrain both nominal incomes and prices paid, in order to influence real income Wage–price guideposts Wage–price controls

5. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-5 Wage–price (incomes) policies (cont.) Wage–price guideposts Voluntary rules/constraints Wage guideposts: wages rise with productivity Price guideposts: prices change to compensate for changes in unit labour costs Implementation: moral suasion, and ad hoc measures such as government threats

6. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-6 Wage–price (incomes) policies (cont.) Wage–price controls –These are mandatory rules Wage–price policy debate –Workability and compliance –Allocative efficiency –Issue of freedom

7. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-7 Wage fixation in Australia Background Fair and reasonable wage Harvester judgment 1907 A reasonable wage is one that enabled the family to ‘live reasonably’ latter known as needs criterion Skilled workers should receive a margin above the basic wage

8. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-8 Wage fixation in Australia (cont.) Cost-of-living adjustments Basic wage an integral part of the Australian wage structure Annual cost of living adjustments to awards based on the price index since 1912 In 1931 the capacity to pay criterion was added to needs criterion in determining the basic wage case after demands from employer groups

9. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-9 Wage fixation in Australia (cont.) Total wage and metal trades cases Indexation and the economy –Indexation introduced to the total wage in the mid 1970s but ended in 1981 –Indexation revived — the Accord

10. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-10 Wage fixation in Australia (cont.) The two-tier system Settlement of industrial disputes –The Industrial Relations Commission –Arbitration process  Log of claims  Ambit of dispute  Award

11. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-11 Industrial disputes: causes Four categories of disputes –Claims for changes in wages, hours of work or leave entitlements –Working conditions and managerial policy on discipline and other workplace matters –Trade unionism –Other causes

12. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-12 Industrial disputes: 1957–2004

13. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-13 Industrial disputes: methods of settlement Private negotiation Intervention of federal and state conciliation and arbitration authorities Resumption of work without negotiations

14. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-14 Decentralisation in the 1990s The enterprise bargaining principle Accord Mark VII Industrial Relations Amendment Act 1992 Industrial Relations Reform Act 1993

15. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-15 Post-reform developments National Wages and the Accord Mark VIII MTIA Case Enterprise Flexibility: Agreement Test Case 1995 WEIPA Dispute 1996 Election

16. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-16 Workplace Relations Act 1996 Awards Certified Agreements Australian Workplace Agreements Employment Advocate Compulsory unionism Industrial action Other provisions Role of the AIRC

17. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics by Jackson and McIver Slides prepared by Muni Perumal 14-17 Work Choices Bill 2005 AIRC will not be required to have an involvement in every CA or AWA Further simplification of awards under a unified national system The Australian Fair Pay Commission (AFPC) to set minimum wage rates, and periodically adjusts these rates