Labour market efficiency and fairness
Labour market efficiency and fairness: agreements and the independent resolution of difference
John Buchanan, WRC Director
It is now settled that we need to get beyond Work Choices by Moving Forward with Fairness. But what does this mean? In particular, what does it mean if we are interested in improving efficiency, effectiveness and equity in the Australian labour market? As an election manifesto the ALP's policy on labour law was, understandably, strong on rhetoric and light on detail. The key issue of institutional design that should guide the impending legislative changes is facilitating dynamic agreement making supported by a strong system of independent resolution where agreement cannot be reached and which also sets national labour market standards.
The argument is straight forward. Any effective system of labour law must engage with the two asymmetries at the heart of the employment relationship: inequality of bargaining power before a worker is hired and uncertainty of performance once they are engaged. The former favours the employer, the latter the worker. These inequalities change over time. Differences arising from these asymmetries underpin the need for ongoing agreement making. Not infrequently, however, agreement cannot be reached. While each of the plenary papers differed, all four agreed that over the last century Australia has devised a dynamic system for independently resolving such 'deadlock' situations. These tribunals have succeeded because they have kept most industrial or workplace relations issues out of parliament and the courts.
This argument is developed by answering the following connected questions:
- What are the fundamental problems any system of labour law must deal with?
- What does the latest research on labour market arrangements and economic performance tell about institutional design?
- What guidance do the plenary papers offer in moving the debate on labour law reform forward?
- What do recent experiences with enterprise bargaining reveal about problems to avoid in the future?
To be published in Economics and Labour Relations Review