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We can't ignore the side-effects forever - it's time to question markets at work

By John Buchanan - posted Thursday, 4 September 2003

What has been achieved after a decade of free market inspired "reform" in the workplace? Hours of work are more flexible. More women have jobs. Part-timers are increasing. And average weekly earnings are up.

But these have not been unambiguous achievements. Over 40 per cent of male part-timers want more hours. Over two-thirds of women working overtime want shorter hours. And while real wages surged by 90 per cent for the top 10 percent of males, they were stagnant for the bottom third.

Is it too early to judge? Evidence from the US, with it highly deregulated labour market, suggests not. Despite a decade of strong growth there more than 20 per cent of full-time male and female wage earners remained below the poverty line - a situation worse than that which prevailed in the 1970s.


Some countries with more interventionist approaches fared much better. The average Norwegian works 500 hours a year less than the average Australian or American. Swedes' rights to a year's paid maternity leave and universal child care gives them real choices in balancing work and family.

The key issue is competition. In the 1990s we were told by extending its reach life would improve. But as Beveridge observed over 50 year ago, markets make good servants but poor masters. They work best where social priorities are democratically determined. They provide a poor basis for determining such priorities.

This insight is especially important for the labour market. It functions on the basis of social as well as economic realities. Notions of comparative fairness underpin earnings for everyone from CEOs to construction workers. Skills are social goods, not just individuals' "human capital." Hours of work reflect norms of consumption as well as occupational and workplace cultures, not just financial imperatives.

Social realities such as these mean no workplace or worker is an island. We need to go with the grain of social and economic life, not deny it. It is because of this that collectivist structures like awards and pattern bargaining provide rational bases for assisting with the organisation of work in the future. They have the potential to deliver fairer and more efficient outcomes than would ever be possible with enterprise bargaining and individual contracts.

The market has produced increasing fragmentation. Government action is not the only possible counter. In many instances we see new forms of coordination among employers emerging to ensure better outcomes than either markets or governments can achieve.

Australia's unique network of group training companies provide a good example of this. Employers are increasingly reluctant to engage apprentices because of deepening uncertainty about the future. The best group training organisations pool the risks of apprenticeships by employing apprentices and taking responsibility for keeping them in continuous work, among a network of host employers. When one employer runs out of work, the group training company finds another host employer who will provide employment-based training. By pooling risks employers take on more apprentices, apprentices have a wider range of options and the stock of skills for particular sectors grows rather than shrinks over time.


The challenge is to devise new forms of coordination that nurture choice and enhance survival in a competitive world. This can only be achieved if we break with the greatest intellectual rigidities of our time: the fiction that free markets are desirable, attainable and the only effective bases for organising economic and social life.

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Article edited by Merrindahl Andrew.
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This article was first published in The Australian Financial Review on 25 August 2003.

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About the Author

Dr John Buchanan is Deputy Director (Research) at acirrt, University of Sydney. He is one of the co-authors of Fragmented Futures: New Challenges in Working Life, Federation Press, Sydney, 2003.

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