Wage determination in Australia: The impact of qualifications, awards and enterprise agreements

Abstract

A prevailing assumption in labour market policy is that workers have a powerful incentive to acquire new skills and qualifications, as this should lead to higher wages. However, the process of rewarding qualifications with higher wages is not automatic, determined solely by market principles, or consistent across all qualification types and fields. Whereas human capital theory struggles to explain why greater human capital (in the form of higher qualifications) may not always lead to higher wages, institutional approaches can better accommodate a more nuanced relationship between education and training institutions, industrial relations institutions and wage outcomes. This article examines the role that awards and enterprise agreements play in the recognition of workers’ qualifications and in so doing demonstrates the ongoing relevance of industrial relations to skills policy. Using data from the longitudinal Australia at Work survey, this article reveals that workers with vocational and university qualifications who were employed on awards report higher wages over and above the qualification premium received by workers on other wage-setting arrangements. This finding did not extend to workers on enterprise (collective) agreements. The article confirms the positive role of awards in promoting skill acquisition, especially among the low-paid, award-reliant workforce.