In the current Australian Federal Election, Treasurer Peter Costello constantly warns that repealing the 'Workchoices' Industrial relations laws will lead to a 'wage breakout'.
What exactly is a 'wage breakout'? The phrase is used as if it has a specific definition. Economists out there, help me understand!
2007-11-09 13:17:35 · 1 answers · asked by theotherguy80 1 in Social Science ➔ Economics
"Wage breakout" happens when wages are allowed to increase without good reason. It causes inflation, leading to higher prices, higher interest rates and other economic problems.
Peter would be alluding to an era when Unions determined wage rates - they created "wage breakouts" by increasing wages irrespective of the ability of the economy to absorb the pressure, or the productivity of the industry.
The Labor govt of the 80s & 90s took away the power of the Unions to set wages. Labor created an independent body to determine wages and protect workers. Wages increased when productivity improved or minimum living standards needed to be met. In fact, wage growth was suppressed in order to contain inflation, with Union cooperation. Our economy has been fantastic ever since.
The Libs cancelled all that and created Workchoices. The Libs reckoned that bosses should determine the wages they pay, and that individuals should negotiate conditions in return for wage increases. It allows some people to increase wages substantially while most people are unable to protect their conditions, yet alone get a fair pay.
Repealing the IR laws can't lead to a "wages breakout." We would need to go backwards by 30 years and ignore Labor's own successful policies... oddly enough the last "wages breakout" we experienced was when Howard was treasurer in 1982.
2007-11-09 14:19:51 · answer #1 · answered by splurkles 3 · 0⤊ 0⤋