Australias Wage Determination System

Australia has gone from a highly centralized wage determination system to a mainly decentralized one. There has been a move away from accords and awards to enterprise bargaining, through the 96 Workplace Relations Act. Recent policies include changes to unfair dismissal claims and the 2005 workplace reforms package.

Throughout the 20th century, Australia has maintained a system of tribunals to make decisions about wage and non wage outcomes and to help resolve industrial disputes. Institutional forces affect the operation of the free market in order to improve labour market outcomes, such as guaranteeing minimum wages and conditions. The four institutional forces that affect labour markets are Governments, Trade Unions, Employer associations and Industrial Relations tribunal.

Trade unions represent groups of workers on a collective basis. The most important trade union is the Australian Council of Trade Unions (ACTU), which is the peak union body to which most unions are affiliated. Trade unions membership has declined substantially from the 1970’s with an average membership of 55% to just 23% in 2003. This is caused by the increase in casual and part time employment, growth in industries with low union membership such as retail and the decentralization of wage determination.

Employer associations represent business groups in similar industries in industrial relations matters. They seek wage moderation to maintain profitability. The head employer association is the Australian Chamber of Commerce and Industry.

At the federal level is the independently run Australian Industrial Relations Commission (AIRC). They establish and maintain the fair minimum rates of pay and conditions (award safety net system) for all workers. Award wage increases are determined by the AIRC annually after hearing submissions from the government, ACTU and unions. They apply the no disadvantage test to CA’s and AWA’s to make sure workers are better off than the underpinning award. They also help settle industrial disputes through conciliation and arbitration.

Move Away from centralized

The Accords (1983-1995), were a social contract negotiated between the Federal Government and ACTU on minimum wages and specified working conditions for a number of occupations under Federal awards. This centralised wage system reduced the levels of inflation, industrial disputation and unemployment.

The Industrial Relations Reform Act (1993), was the first major step towards a decentralized system. It was a compromise between a decentralized system, based on enterprise bargaining and a centralized system. It moved away from the national wage case and introduced the award safety net - that awards underpin enterprise bargaining. It intended that the wages and conditions of employees would be increasingly determined through enterprise agreements, and awards would only be for those unable to make agreements.

1996 Workplace Relations Act

The election of the Liberal Coalition Government saw the end of the Accords, centralised wage determination, and a lessening of the role of institutions (IRC, ACTU) in the wage determination processes. This new system lessened the power of unions by making it easier for workers to form enterprise unions. It deregulated the labour market by reducing the awards on working conditions to 20 allowable matters. This made non-union contracts more attractive. It introduced AWA’s for the first time.

-Australian Workplace Agreements

AWA’s are individual employment contracts between an employer and an employee. The introductions of AWAs was intended to create maximum flexibility to adjust work and pay conditions. Once an AWA is negotiated it must be lodged with the Office of the employment advocate to pass a community standards test, which ensures the employee is better off.

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