Kennett’s Industrial Relations Legacy: Impact of Deregulation on Minimum Pay Rates in Victoria

Abstract

What is the connection between labour market deregulation and earnings inequality? Using Victoria as an example, this paper explores this question making use of a recent workplace survey. The results of this analysis show that a low wage sector emerged in Victoria during the late 1990s and that it was concentrated around ‘Schedule 1A’ employees, those workers who failed to gain protection under Federal jurisdiction and had their wages and conditions determined by a combination of minimalist legislation and internal workplace regulation. A much greater dispersion of minimum pay rates was evident in Schedule 1A work-places compared to those under Federal coverage. More seriously, workers under Schedule 1A coverage were more concentrated in low wage workplaces with inferior employment benefits. The association between low minimum pay rates and Schedule 1A coverage was examined in a multivariate analysis and was found to persist after controlling for a range of other factors. These empirical findings suggest that labour market deregulation does indeed contribute to earnings inequality and that it also weakens the situation of those workers who are already structurally disadvantaged in the labour market.