In the period up until late 2008, Australia experienced strong employment growth and declining unemployment, to a significant extent attributable to the boom in the resources sector. The period of rapid growth faltered in late 2008 and early 2009. Following substantial monetary and fiscal stimulii, and as demand for resources picked up from the emerging economies, employment growth returned in mid-2009. Unlike many other OECD countries, the downturn had a relatively modest impact on unemployment, causing it to rise by less than two percentage points.
Macroeconomic factors have been the primary drivers of Australia’s performance in keeping unemployment rates from growing, but labor market policies have also played roles, both positive and negative, in affecting unemployment and employment. A long-standing concern of many analysts has been constraints on employment growth due to inflexibility and high minimum wages in the labor market, deriving from the industrial relations system. Such a concern has seen a series of reforms over the last two decades attempting to improve flexibility and in general remove encumberances to employment. However, the “Work Choices” reforms implemented in 2006 were regarded by many in the community as undermining employment conditions and wages to an intolerable extent. The incoming Labor government had promised to unwind the Work Choices reforms, and by January 2010 had largely completed implementation of its industrial relations policy. The measures taken by the Labor government retain many of the features of the Work Choices system, including the unified national system, the minimum wage setting function of an independent agency, and the commitment to simplifying the multitude of industrial and occupational “awards.” Major changes from the Work Choices system include the partial restoration of trade union powers, increased restraints on “unfair dismissal,” greater rights of employees to collective bargaining (as opposed to individual agreements), the elimination of “Australian Workplace Agreements” (a specific form of individual agreements that allowed wages to be set below the minimum specified in an award), and provisions for regular (4-yearly) review (including the updating of award pay and conditions). A set of 10 “national employment standards” has also been established. These apply to all employees and cover key conditions such as maximum weekly hours of work, sick and vacation leave entitlements and rights to redundancy pay. The changes in the review period have marginally reduced labor market flexibility and may have mild negative effects on the level of employment, but broadly speaking the industrial relations system remains conducive to employment growth.
Recent changes to labor market policies focused on the supply side of the market have included reforming the decentralized system of job search assistance, a step which has incorporated additional resources for disadvantaged job seekers; the introduction of a “Compact with Youth,” whereby young people are guaranteed a place in an education course; the introduction of employment incentives for persons on the Age Pension; and an increase in the child care subsidy from 30% to 50%. Tight welfare eligibility criteria and mandatory participation in active labor market programs by unemployment benefit recipients have also been preserved. However, high effective marginal tax rates for second earners in households and for many welfare recipients remain negative factors in increasing employment.
A recurring theme of commentary of the Australian labor market in recent years has been so-called skills shortages. One response to the perceived shortages in skilled labor has been to provide more employment incentives for groups of workers, such as is created for women with young children by the increase in the child care subsidy. In practice, however, immigration has remained the primary source of additional skilled labor.
Steve O’Neill. Chronology of Fair Work: Background, Events and Related Legislation. Canberra: Parliamentary Library Background Note. Available from http://www.aph.gov.au/library/pubs/BN/eco/Chron_FWAct.htm. Accessed 18 April 2010.
Economic Survey of Australia, 2008. Organisation for Economic Cooperation and Development. Available at http://www.oecd.org/document/35/0,3343,en_2649_33733_41441891_1_1_1_1,00.html. Accessed 18 April 2010.
Department of Immigration and Citizenship, Report on Migration Program 2008–09. Canberra: Department of Immigration and Citizenship. Available from http://www.immi.gov.au/media/statistics/
Temporary (Long Stay) Business Visas: Subclass 457. Canberra: Parliamentary Library Research Note no 15, 2007