The benefits of a freer labour market

Bob Hawke, then president of the ACTU, was quoted in The Australian in 1971 as saying:

The least likely way of maintaining harmonious relations in industry is going to be a system where some external parties impose their will on the two parties most affected …

(By “parties”, Mr Hawke meant unions and employers.)

Bill Kelty, secretary of the ACTU, said in evidence to the Australian Industrial Relations Commission in 1990:

… [We must] create a new wages system ... involving ... a diminution in the authority of bodies such as the ACTU; bodies such as the conciliation and arbitration systems of Australia, as more and more is done where more and more has to be done, and that is in the workplaces of this country …

Waterside Workers Union secretary, Charlie Fitzgibbon, said in 1986:

... the one thing that no ideologue or anybody else can ever overcome is a feeling of being part, of being fairly treated, and seeing the advantage of the enterprise also meaning an advantage to the individual ...

Businesses have to pay the market rate to their workers if they are to stay in business. A business is not likely to pay more than it needs to, but it is not likely to pay less either, because to do so means that it would not be able to employ the workers that it needs to operate successfully.

This market wage may be less than a wage posited to be “fair and just” by some outside third party, but the result of enforcing a wage that is higher than the market wage is that that job may no longer be available.

Further, because people compare the “net advantages” of different sorts of jobs, a sensible business will try to tailor its conditions of work, to suit the preferences of the people it wishes to employ. If it is able to do this inexpensively, it will be able to pay lower wages, while still attracting the people it wishes to employ.

By the same token, a sensible business will wish to remove conditions of work that are costly to it, but that the people it wishes to hire place little value on. By doing so, it will be able to pay higher wages, if warranted.

What about very young workers - schoolleavers? Consider young Bill, who is presently unemployed. As a result of the new system, Bill can expect to receive a job offer (which he accepts) at a lower rate of pay and offering fewer benefits, than the sort of job he would currently like to get, but is unable to find.