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Minimum Wages, Unions, the Economy and Society

Published online by Cambridge University Press:  01 January 2023

John Nevile  and
Peter Kriesler
John Nevile
Affiliation:
School of Economics, The University of New South Wales
Peter Kriesler
Affiliation:
School of Economics, The University of New South Wales
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Abstract

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One of the characteristics of the WorkChoices legislation introduced by the Howard government was the anti-union bias that permeated it. Some argue that this is appropriate because unions increase minimum wages, and economic theory shows that this will decrease employment and hence output. The Rudd government has signalled that it intends changing this anti-union bias, while at the same time restoring the role and coverage of minimum wages. This paper examines the arguments around these issues and concludes that neither side of the economic theory debate has delivered a knockout blow. The theoretical analysis is followed by a section looking at empirical evidence on the effects of deregulating labour markets. Again there is not complete consensus among the economics profession. However, both sides of the debate on the effects of labour market deregulation agree that strong minimum wage legislation does significantly reduce earnings inequality by increasing earnings at the bottom end of the distribution. The paper concludes that the increase in inequality consequent on labour market deregulation has adverse effects on the economy in the short run and disturbing longer run effects on society.

Type
Research Article
Information
The Economic and Labour Relations Review , Volume 19 , Issue 1 , November 2008 , pp. 25 - 37
Copyright
Copyright © The Author(s) 2008

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