Industrial Relations Australia - Essay Example

Industrial Relations Australia Presented By Author name Grade course Lecturer name University name Date Introduction In any given economy, the labour market is a key determinant of the overall economic performance of the country. This is not different in Australia where the labour market is regarded as one of the influential factors in the general ability of the country to generate wealth and prosper economically in order to maintain the quality of life Australians are accustomed. The past decade has heralded a lot of changes in the makeup and types of employment in (Australia Department of Education, Employment and Workplace relations 2011, p.4). This is a result of employers changing and evolving in accordance with the changing times and technology. With the projections of a volatile universal market and an economy undergoing structural changes, Australia’s labour market must adapt too if the country is to benefit from the emerging markets and flourish at the same time. The purpose of this paper is to review the advantages and disadvantages of the Fair Work Act to the Australian labour market. Discussion The Fair Work Act 2009 is a key component in determining how the labour market works. Even though, policies and regulations alone cannot influence good labour market results, they still play a very key role in managing all types of interactions and any eventuality that may arise because of interactions in the work place. Introduced in 2009, the Fair Work Act (FWA) aims at reinstating the rights of workers that were diminished by the Work Choices Act (Fair Work Ombudsman’s Targeted Campaigns Unit 2009). This meant a new beginning for all workers defined by a return to the era when an independent body resolved disputes, offered a sturdy safety net and good faith bargaining. In order to test whether a piece of legislation is achieving its mandate, one looks at whether it promoting growth, lifting the standards of living or if they are impeding growth. This paper explores the changes in Australia’s labour market brought about by the Fair Work Act of 2009 its advantages and disadvantages to employers and employees alike. A general evaluation of the rates of productivity growth before and after the Fair Work Act (FWA) seems to have modest positive effects on productivity growth rates (Fair Work Ombudsman’s Targeted Campaigns Unit 2009). The evidence on Total Factor of Productivity (TFP) suggests that the Act has had negative effects of the growth rate of TFP. Real unit labour costs loosely defined is the average costs of labour that is needed to produce a single unit of output. According to the Productivity Commission (2009) rising real unit labour costs are the flip side declining productivity growth, higher real unit labour costs discourage employers from hiring more workers since it costs much more to produce one unit of output (Bryce & Gillard 2009). According to the Australian Bureau of Statistics, productivity has been falling in many Australian industries; more inputs are needed to produce a single unit of output (Ebrahim, Ahmed & Taha 2009, p.2657. In the recent months labour productivity growth has been falling behind real wage growth leading to a rise in cost of wages. Real unit labour costs have increased since the introduction of FWA meaning that there has been a decline of jobs as a result of rise in real unit labour cost. Before the introduction of FWA, real unit labour costs were in a downward trend. In general, increases in salaries automatically leads to an increase in the standards of living, but as talked about above, for it to be sustainable, increases in wages have to go along with productivity gains in order to decrease the price of productions hence the price of goods. Examining the average weekly ordinary time earnings (AWOTE) while keeping in mind the changes for the Consumer Price Index is perhaps the surest way of examining real wages growth (Ebrahim, Ahmed & Taha 2009, p.2659). According to the Australian Bureau of Statistics, between June 1996-June 2009 real wages rose by 24.17 percent which translates to an annual average rate of 1.87 percent (Lambropoulos 2009, p.190). In the same period real wages increased in every sector in Australia. In stark contrast, since the inception of FWA, there has been a decline in the growth rate of average real wages. In other words, real wages were growing at a better rate before the introduction of FWA as compared to the period of its introduction. On the other hand, it is the employees in the public sector who seem to have benefited from the introduction of the FWA as their real wages have increased both pre and post FWA (Lambropoulos 2009, p.191). The remuneration safety net set out by the FWA ensures that all employees are treated fairly across the board in the Australian labour market and that there is a basic minimum amount entitled to a worker depending on the sector of the labour they are employed. This has gone a long way in ensuring that no employee is taken advantage off because of desperation to gain meaningful employment. The basic minimum salary is calculated against the prevailing economic times factoring in Consumer Price Index (CPI) adjustments (Belinda 2011, p.452). For the employers, this means that if pre FWA remuneration scheme does not match that stipulated in FWA, then they loosen strings to the purse in order to comply with the regulations. Availability of jobs and growth in employment along with real wage growth is a key indicator of how well labour market is doing. Suitability of its policies and regulations also greatly influences the employment growth. There is little evidence to suggest that FWA has improved employment growth as compared to pre FWA. Data from the Australian Bureau of Statistics shows that the annual growth rate has been lower since the inception of FWA in June 2009 relative to pre FWA (Ebrahim, Ahmed & Taha 2009, p.2650). Employment to population ratio is another key indicator of labour markets. This goes hand in hand with the participation rate i.e. the readiness of people to enter the labour force. Statistics show that the employment to population ratio has slowed after the introduction of FWA. The notable poor employment record from June 2009 is as a result of the decreasing rate in employing female workers and part time employees who incidentally happen to be women. However, the employment of the teenagers aged 15-19 years has not gone down since the introduction of the FWA in June 2009 but instead has been on a steady rise since its inception (Belinda 2011, p.453). In addition to the aforementioned indicators of a healthy market, there are other factors too that indicate a healthy market (Lambropoulos 2009, p.192). These have been influenced by the introduction of the FWA in one way or the other. The amount of industrial disputes is also a key indicator of a healthy labour market. Presently there is no significant substantiation to imply that the introduction of the FWA has reduced the incidences of disputes. This is calculated by looking at the number of working hours in a particular year lost due to industrial action. The number of working days lost out of a 1000 has been on the decline at the rate of about 15 percent per annum between 1996 and 2009. As of the second half of 2009 to date, the number of hours lost due to industrial actions has been low but still there has been a notable though slight increase in the number of lost days (Ebrahim, Ahmed & Taha 2009, p.2653). In general the numbers of disputes post FWA have been increasing at the rate of 10 percent per annum. This goes on to show that the Act has been a bit detrimental to employers in that the amount of industrial actions has seen a marked increase. For employees, the Act has been fair to them, giving them greater voice and a greater bargaining power. Most significant stipulation of FWA is protection from unfair dismissal to award-covered workers who have been in continuous service with an employer for more than six months. The FWA also extended the protection from unfair dismissal to those businesses that are employing fewer than 15 full-time employees, with a qualifying period of 12 months continuous service (Lambropoulos 2009, p.193). Unfair dismissal provisions are effectively a tax on dismissing workers. The additional costs that are incurred means that employers are hesitant to hire workers, and as a result, the need for dismissing workers also falls. In such a case, it is the workers who are missing out on potential employments. It is somewhat unmistakable that the costs that come along with a probable dismissal prevent employers from hiring. Freyens and Oslington (2007) conducted a survey of small and medium sized firms in Australia with the aim to find out the costs of unfair dismissal proceedings; in 2011, 13,568 unfair dismissal applications were lodged with Fair Work Australia (Gollan p.263). Most of these applications for unfair dismissal were either finalised prior to conciliation or settled at conciliation. If we apply the Freyens and Oslington average cost of A $15,880.86 for each dismissal, the total costs come to a total of A $213.57 million – employers are not willing to risk this (Gollan p.264). As noted above, these costs will lessen employment and create other economic burdens, even when they are not really incurred as firms react to the enticement created by the policies in place. The costs associated with unfair dismissal act as big hindrance and barrier that prevent employers from hiring workers for fear of future unfair dismissal application lodged against them (Fair Work Ombudsman’s Targeted Campaigns Unit 2009). As for the employees, this Act has benefitted only those that are currently employed; it will be harder for the jobless to get employed as noted above. There have been perceptions that after the enactment of the Fair Work Act, employees would experience a level of security in their occupations. However, statistical analysis of data from the Roy Morgan employment survey indicates otherwise. The survey actually points out that sense of job security is currently lower than expected had Australia’s industrial relations system not changed in 2009 (Department of Education, Employment and Workplace relations 2011, p.5). As noted above, one key effect of unfair dismissal laws is that they are likely to make companies reluctant to hire workers. The Roy Morgan survey data appears to suggest that in essence, this is exactly what has occurred under the Fair Work Act. From the survey, workers feel and think it will actually be quite hard to get another job in the event they are dismissed from current employment. This has worsened markedly in 2009 after a steady increase between 1996 and 2009 (Belinda 2011, p.262). The Act only gives a sense of security to those currently employed since it is a bit hard for them to be dismissed unfairly. As long as they have been doing their work properly then they are safe for the time being. As for the employers, they now have to tread carefully when handling dismissals lest they trigger the Fair Work Act or the wrath of the unions leading to industrial actions and loss of working days hence losses in revenue (Bryce & Gillard 2009). The Fair Work Bill reinstated a number of universal rights for employers that had been removed or rendered ineffective under the previous Work Choices legislation, therefore, creating a more balanced approach to industrial policies and regulation (Ebrahim, Ahmed & Taha 2009, p.2657). However, the failure to articulate through the piece of legislation a guiding set of principles and values is of concern. The Fair Work Act has no guiding philosophy or a foundational principle. Rather, it works its way through the regulatory scheme around a mixed-pot assemblage borrowed from the reassertion of hybrid even-handedness values, and in part from the values mirrored in the scheme it replaced, (Work Choices) and in part from approaches related with an embedded supposition that the justification for regulating the employment relationship comes from an antagonist character. The legislation’s elemental foundation upon the hypothesis of an employment relationship causes it to encourage observance to legislative standards that emphasize an adversarial approach to the relationship (Belinda 2011, p.263). It also fosters an atmosphere of allegorical public dialogue that keeps workplace associations on main pages of daily publications but does just enough to help employers and workers understand their fundamental rights and responsibilities and how they could legitimately go about working towards fairer workplaces and courteous relationships (Ebrahim, Ahmed & Taha 2009, p.2659). Conclusion From the above analysis, it is evident that the legislation has been advantageous and disadvantageous to both the employer and employee to varying degrees. In most cases, it has been favouring the employees with the biggest bargaining point being the protection from unfair dismissal. This has protected the workers that are already employed but has also made it harder for the unemployed to be gainfully employed due to the costs associated with potential unfair dismissal conciliation. Arguably, two years down the line it is quite early to conclusively look at the merits and demerits of a piece of legislation of such massive proportions. For a fair review of the Fair Work Act, it should be in operation for quite a while in order to understand both the advantages and disadvantages of the Act to both the employer and employees alike. Reference List Belinda, S, 2011 ‘What kind of equality can we expect from the Fair Work Act?’ Melbourne University Law Review, vol 35, no 2, 545-577. Bryce, Q, & Gillard, L, 2009, ‘Fair Work Regulations 2009’ select Legislative Instrument 2009 No. 112 accessible at http://www.fwa.gov.au/legislation/fw_regs/fwa_regs.pdf Department of Education, Employment and Workplace relations, 2011. Australian jobs: how can I use Australian jobs 2011? Australian Government. Accessible at http://www.deewr.gov.au/Employment/ResearchStatistics/Documents/AustralianJobs. pdf Ebrahim, N, Ahmed, S, & Taha, Z, 2009, ‘Virtual Teams: a Literature Review, Australian’ Journal of Basic and Applied Sciences, vol 3, no 3, 2653-2666, access at http://cogprints.org/7814/1/2653-2669.pdf Fair Work Ombudsman’s Targeted Campaigns Unit, 2009, Fair Work: Reports and Recommendations. National Security Industry Campaign 2009. Accessible at http://www.fairwork.gov.au/campaignresults/National/National-Security-Industry- Campaign-2009.pdf Gollan, P, 2009, ‘Australian industrial relations reform in perspective: Beyond Work Choices and future prospects under the Fair Work Act 2009’ Asia Pacific Journal of Human Resources, vol 47, no 3, pp 260-266. Lambropoulos, V, 2009 ‘Greening Australian workplaces: workers and the environment’ Alternative law journal, vol. 34, no. 3, pp. 189-192. Accessible at http://dro.deakin.edu.au/eserv/DU:30021075/lambropoulos-greeningaustralia-post- 2009.pdf Read More