Labor Market in Australia - Case Study Example

Running head: Labor Market in Australia Student’s name Institution Course Professor Date Introduction In 2008, Australia’s population was 21 million while the GDP was greater than US$1 trillion. Out of 10 million civilians under employment, 75 per cent are working in the service industry while 20 per cent are working in the manufacturing and construction industry. Australia's economy, however, remains highly dependent on export earnings from mining and agriculture, which employs only 5 per cent of total labor force (Greg, Russell and Nick, 2011). Over the last two decades, Australian labor market has seen great improvements. There have been creation of over 3.2 million jobs; this has witnessed the reduction of the unemployment rate to the current4.8 percent (ABS,2008). However, the Global Financial crisis has not been very good to the good state of labor markets in the country. Financial crisis usually brings about economic depressions, which are difficult to manage in the short run. The unemployment rate rose by 0.7% over time while the number of unemployed citizens rising by about 17.4% between 2008 and 2009. (ABS Labour Force, Australia, 2009). Since 1970, the country’s economic base shifted to the service based industries from the primary industries. With the increasing level of output from the manufacturing sector, employment has not been in correlation with the sector growth. Within the period of November 1998 and the same month of 2008, employment rate declined by 1.7% (ABS, 2008). Since 19th century, Australian’s economic structure has shifted to a great extent and so have the guidelines that regulate it. The labor market has been changing with the dynamic environment. Several changes especially in the labor management, the pressures of labor unions and the requirements of what constitute an appropriate model of employee relations have evolved over time (ABS,2008). MAJOR CHANGES IN THE LABOUR MARKET Globalization has been the major catalyst in the Australian labor market changes. Australian government has amended its strategies by what means the economy ought to respond as a response to changes in the international economy. Various changes in the economy have necessitated changes in the labor market (Beardwell, 2010). To explain the changes in the labor market, the political and economic trends are of much help. The various governments which have come in place tries to bring different amendments in labor laws in order to achieve their promises to the electorates. PERIOD: 1970’s This is a period of turning point. Many changes were experienced during this period. The main employment change during this period is the increase in unemployment. With economic decline coupled with the change in policy from the old conservative approach, the labor market also had to change in line with the economy and political movements. The rate of unemployment during this period rose due to economic downturns (Lansbury, 2000). Economic slump had an implication that profits had to reduce to a level where employers lacked what to use in employees’ salaries. Therefore, downsizing was the only available option. Unemployment rate rose during this period to 6.3% (Bamber,2011). This period also saw the introduction of structural changes in the means of production. There was high introduction of use of machinery and computers in the production and service delivery to customers (Gardner,1997). The high reliance in technology during these times saw the further dismissal of unskilled workers who were unable to fully use the new technology in the working sector. Use of the new technology also reduced the labor force given the fact that technology is capital-intensive means of production and hence is faster and requires fewer personnel than the other labor-intensive means of production (Lansbury, 2000). In addition, the introduction of the report on Australia reconstruction materialized. This brought unions into decision making in the ‘Restructured Australia’ (Gardner,1997). Unions were formed to champion for the rights, salaries, and good working conditions among other issues concerning workers. This period also the full implementation of the minimum wage laws in Australia. However, this faced challenges from employers who were critical to the unions and Arbitration (Lansbury,2000). Employers were of the opinion that the theory of market mechanism should apply in the labor market. They saw unions as a constraint to the invisible hand of the free market system. Period: 1980’s Australian industrial relations was initiated during this period to take the place of previous arbitration commission together with three tribunals of experts to cover the marine industry, public segment and pilots. There was also the formation of Australian Industrial Registry to carry out administrative functions in the labor market (Gardner,1997). In the last part of 1980’s, change was noted in national wages which reflected the economic status at that juncture. The commissions initiated during that time were responsible for encouraging and providing an effective framework for promoting and encouraging a range of industrial relations stakeholders to enhance on productivity and efficiency (Torrington,2008). Wage fixing principles presented in the commissions’ policies offered this framework. The created policies meant that there should be improvement in wages awarding and working conditions. This was to be achieved through modernization and implementation of various laws on workplace reforms. This period also saw the removal of the minimum salary laws since it was seen by the government as the excuse as to the way as to why some employers stick to very low salaries despite the high work load and competence required in some working duties. This was a measure of encouraging employers to improve on their wage structures (Gardner,1997). PERIOD: 1990-2000 There was adoption of Neo-liberalism in Australia during this period; “these changes did not extend as deeply into the regulation of employment relations as it did in other areas of public policy” (Pittard, 2007). New and modern leanings of the Labor Government were clearly indicated by putting of micro-economic changes and competition policies into private hands. Increased flexibility was initiated in workplaces and subsequently, labor market through non –union contracts by labor party. This was contrary to 1980’s where trade unions were too powerful (Torrington,2008). In 1996 the Conservative party advocated for employers autonomous actions to drive workplace change as opposed to union cooperation while at the same time supporting individual growth as opposed to shared bargains regarding change in the workplace. These saw breakdown of various trade unions which was operating before (Gardner,1997). The changes above were because of the introduction of the Industrial Relations Act of 1993 that made several changes to the industrial relations arrangements. Changes resulting from Industrial Relations Act included: • Workplace and business bargaining and agreements were both encouraged and expedited. • Employment conditions and wage protection were made possible through rewards; • Ensured labor standards met Australia’s international commitments; • Structure of privileges and obligations for stakeholders involved in industrial relations in line with a universal system was provided; • provided a less discriminatory system. • It gathered for secondary boycotts through the amendment of former Trade Practices Act. • Industrial Relations Court of Australia was established to take charge of roles that were initially assumed by Federal Court’s industrial division. It was also responsible for taking the delivery of applications of alleged termination under unlawful ways outside the stipulated provisions on employment termination. The act was designed to increase the bargaining power of employees at workplace in terms of wages, employment and working conditions. This Act was further amended in 1996 by Workplace Act of 1996, which introduced the following five changes (Richard Sappey, John Burgess, Michael Lyona and Jeremy Buultjens, 2009): • maintaining the award system to provide a safety net of fair and Enforceable minimum wages and conditions; • It provided a flexible system for making effective choices in arriving at both collective and personal agreements. • It confined the role of AIRC, thus evading unsuitable agreement and awards’ interactions. • Employees were provided with choices in terms of their representation and eliminated unsought unions’ participation in agreements. • A fairer system was introduced where provisions for unwarranted dismissals were replaced. These amendments further saw the improvement in the working conditions and wages by employers since there were tough measures in place for non-compliance with employment laws and rules. The government believed in contingency theory that advocates for the various companies or manufacturers to link their human resource management policies to their overall short term and long-term strategies (Gardner,1997). This hence gave power to the employers to align their corporate, business strategies, and their labor laws. By so doing there was unitary in goal achievement in different business units and different kind of labor relations in them. PERIOD: 2000s With unemployment under 5%, the economic crisis of 2008 caused the rate to go up. Full time employment/permanent work has declined with various non-standard employment forms coming up. “The majority of all new jobs created during the 1990s were casual while part-time jobs represented the fastest growing area of employment” (Burgess and Campbell 1998). The use of labour market intermediaries and agencies in employment as well as outsourcing of labour has caused this phenomenon. The inflationary pressure, financial crisis, and changes in interest rate have also influenced the movement in the labour market. Employment in the local government went up during this period. In the year 2006, 26.2% of the total number of people under employment was under government administration and security. In the same year, 129 100 people were employed by state administration. A smaller percentage of individuals employed by state Administration sector were in higher skilled jobs (46.0%), as opposed to those in other industries combined (53.2%) Source: ABS The Workers Choices Act 2005 introduced fundamental changes to the Australian industrial relations systems. This Act had several objectives. “Key objectives were to create a single national system of labor market regulation, expansion of Australian workplace agreements (AWAs) that could replace awards, increased restrictions on union activities and a reduced role for the Australian Industrial Relations Commission” (Rogers,2010). Australian Fair Play Commission was established by the Work Choices Act 2005. The commission was responsible for establishment and adjustment of least rates of wages, exception from unwarranted dismissal laws for SME’s with employees below 100, brought in five minimum conditions for employment. There was also an introduction of the Fair Works Act 2009. The act had the following features among others; Fair Work Australia (FWA) was established to regulate employment and substituted the six prevailing bodies such as Australian Industrial Relations Commission. It allowed personal common law contracts while bringing to end individual statutory pacts. It included provisions for protecting workers through the establishment of ten National Employment Standards (NES). It was responsible for setting minimum work conditions for all national system workers. Additionally, NES provided for annual leaves, flexible working schedules for parents, contract termination notices, redundancy pay and individual vacation. Unwarranted job dismissal protection was extended to all employees in organizations with less than fifteen full time comparable positions. Even though it was stipulated for interest groups not to reach a verdict, umions and employers were supposed to make a deal in good faith. Despite this, FWA was allowed to intervene in case of failure to follow good faith in agreement. FWA was allowed to intervene as a result of any disagreement coming up and leading to industrial action causing damage to employees or economy. The proposals of the act greatly benefited the employment sector given the drastic changes it brought to the sector. CHANGES IN LABOUR MARKET AND EMPLOYMENT RELATIONS This is the body of work responsible for upholding good relationships between employers and employee thus contributing to satisfactory productivity, motivation, and morale. Labor markets occupy a particularly ambiguous position in explaining employment relations trends (Pittard,2007). According to Dunlop, labor market trends are external to employment relationship. There are three crucial factors that need to be considered during the management-labor relationship analysis and they include; 1. Environmental or external economic, technological, political, legal and social forces that affect employment relationships. 2. Individual attributes of the three parties of employment relationship; labour, management and government and how they interact. 3. Rules governing this employment relationship and obtained from their interactions. In essence, Industrial relations system helps in defining workplace rules. These rules are generated from the interaction of the three stakeholders; workers/unions, employers and related organizations and state. Labor market has had a remarkable trend. Industrial labor force has also seen remarkable changes. Despite this, changes have been unequal for various industries. Decline has been experienced in the agricultural and manufacturing sectors. Contrary to this, service industries have experienced a surge. “In fact, the number of people employed in some industries comprising of property and business services, cultural and recreational services, and health and community services” (ABS, 2010). These labour market trends have since affected the employee relations in Australia. For instance, the introduction of the Fair Works Act 2009 helped reduce the challenges that existed between the players. Good faith bargaining provided by the Act assisted in solving the problem of wage control. Additionally, it helped in minimizing the conflict of unnecessary and unwarranted dismissal of workers (Rogers,2010). This gave an assurance of fair treatment in workplace to employees. Changes in the economic and political environment have resulted to considerable amendments in employee relations. Gender was not an issue earlier in the 20th century. Most of the workers were men. Currently, women employees form a large percentage of the workforce (Gardner,1997). The universalism theory, which takes into consideration the needs of the various stakeholders in the market, is effectively developed in the current Australian labor market. Companies in both the primary sectors of Manufacturing as well as the service sector have since aligned their HRM strategies in line with the interests of the stakeholders. Despite the wage cuts experience every now and then, the labor market has always operated in line of fulfilling the needs of the players (Rogers,2010). CONCLUSION The labor market in Australia has evolved over time. Developing from the earlier era of Unions and arbitration, the market has transpired through challenges in the political and economic environment to where it is now. Each government, which comes in place, tries to bring various changes and policies to this sector. This brings either setbacks or advantages to the sector. . Despite the financial difficulties brought about by the economic crises 1970s, 2008), the country has been able to manage its employment. Having faced hardship from the employer’s critics who preferred the unions, the labor government managed to take the sector to the restructured era. Broadly speaking, the extent and nature of improvement in the Australian employee relations have been due to the dynamism in the labor market. The various changes have greatly benefitted the parties involved either directly or indirectly but it is the workers who have largely benefitted. Despite the fact that many changes have occurred in the employment sector, there have been minimal partnership between the workers and employers in coming up with the changes. As the time goes by the challenge will be to see the sector having good collaboration between the government, workers and employers. Government of Australia can play a crucial role in offering structures of bringing the two stakeholders together and providing funds to independent agencies that can help in management of the bargaining and settlement of disputes. Reference ABS. (2008). Labour force survey in Australia of november 2008. Coventry: Australia Bureau of Statistics. Beardwell, J. (2010). Human resource management approach.6th edition, New York: Financial times management. Beverley Rogers, C. (2010). Australian Fair Work Act 2009: With Regulations and Rules,1st edition, New South Wales : CCH Australia Limited. Derek Torrington. (2008). Human resource management. Jakarta: Financial times. Gardner, G. P. (1997). The Employment Relationship. 2nd edition,london: Macmillan Education AU. Greg J.Bamber, R. D. (2011). International and comparative employment relations.5th edition London: Sage puplications ltd. Lansbury, R. D. (2000). Workplace change and employment relations reform in Australia.4th edition,Sydney: university of Sydney. Marilyn Jane Pittard, P. W. (2007). Public Sector Employment in the Twenty-first Century. Canberra: ANU E Press. Peter Ackers, A. W. (2003). Understanding work and employment: industrial relations in transition, illustrated edition. oxford: Oxford University Press. Statistics, A. B. (2007). Year Book, Australia, Issue 89. canberra: Aust. Bureau of Statistics. Australian Industrial Relations Commission. (2006). Historical Overview. The Australian Industrial Relations Commission. Retrieved from Read More