Should the state intervene in the employment relationship? Give reasons for your answer.

State intervention is necessary in assuring the nature and quality of employment conditions, establishing and regulating procedural rules that preside over employment relationships, and resolving disputes, (Bray, Waring & Cooper, 2011). It should protect and empower those workers disadvantaged by the imbalance in economic power characteristic of a market economy (Howe, 1997). The state plays a predominantly protectionist role that upholds the notion of equal opportunity and there is historical evidence supporting the importance of state intervention. International competitiveness, often associated with the benefits of a deregulated labour market can also be achieved through state regulations and so, intervention not only helps to promote equity, but also economic efficiency. State intervention procedures need to be flexible and adaptable to the constantly changing economic and labour market conditions and should be integrated with free market ideals in order to maximise efficiency, effectiveness and fairness simultaneously, whilst minimising workforce disparity. For the reasons above, this paper will argue that the state should intervene in the employment relationship. One way to look at the necessity of state intervention is to consider the benefits of its protectionist nature. However, we must first identify what parties constitute the state before we can critically assess the consequences of the states intervention in the employment relationship. Bell and Head (1994, pg. 3) define the state as essentially the entire apparatus of formal roles and public institutions that exercise political authority within a given territory, consisting of three components the legislature, the executive and the judiciary. Each of these components plays an integral part in state intervention. Furthermore, there are three major roles that the state undertakes which have an impact on the employment relationship; it is a legislator, regulator and a major employer (NTPS, 2010). As a legislator and a regulator, the state is responsible for the creation and enforcement of laws such as the Fair Work Act 2009 (Cth), OHS legislation, anti-discrimination laws and workers compensation. Of significance here is the fact that the state does not simply develop the rules that govern the employment relationship, but also has the power and authority to make laws that can bind the other parties (Bray, Waring & Cooper, 2011). Therefore, laws such as these aid in the promotion of equal opportunity in the workplace, and as Hancock (2008) argues, state intervention and regulation aids in three key areas the

development and maintenance of a safety net for wages and working conditions, the enhancement of employee dignity, and public protection against industrial disruption. In relation to Hancocks (2008) proposal of three major objectives for the state in its interference with the employment relationship, we look first at the provision of a safety net that sets a minimum standard for employment conditions. Legislation created and enforced by the state in relation to National Employment Standards, equal opportunity and unfair dismissal (Howe, 1997) are an invaluable measure in providing a base line of protection for employee rights that might not otherwise exist in a free market economy. Similarly, the notion of upholding employee dignity is strongly related to the protective aspect of state intervention. Anti-discrimination laws such as the Racial Discrimination Act 1975, Sex Discrimination Act 1984, Disability Discrimination Act 1992 and the Age Discrimination Act 2004, assist the state in preventing and punishing harassment in the workplace and protecting employee rights and dignity. With respect to industrial disruption, Hancock (2008) also suggests that policy may be effective in mitigating the effects of industrial action to the community through means of regulating industrial action. Legal sanctions such as Section 418 of the Fair Work Act 2009 (Cth) and injunctions can be utilised to prevent action if the balance of convenience (to the wider community) favours a return to work (Stewart, 2011). Hence, not only does the state perform highly important protectionist duties to employees through the creation and enforcement of legislation, it also provides sanctions against disruptive industrial action that may have a detrimental socioeconomic impact on the community. Furthermore, the state extended beyond its role as a legislator and regulator and took on the function of arbitration and conciliation for the purpose of dispute resolution. Under Section 51 of the Conciliation and Arbitration Act 1904, The parliament shall have power to make laws for the peace, order and good government of the Commonwealth with respect to Conciliation and Arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state. For the purpose of peacekeeping and promotion of equality, Australian unions were, through arbitration, able to gain central, legitimated roles in industrial relations as formal parties to hearings and awards on behalf of employees, (Sheldon& Thornthwaite, 2011 pp. 84).

The third major role of state is its position as an employer. This is an important function of the state as it is privy to action including making a public sector labour market; public sector employment and work; individual rights of public sector employees; recognition of public sector unions and regulation of their activities; and collective bargaining and dispute resolution in the public sector, (Sheldon & Thornthwaite, 2011 pp. 97). Governments have introduced new practices in public sector organisations using organisation in the public sector as a pacesetter, or rather, a cultural change agent, (Balnave et al., 2007) with the intention of influencing the private sector to imitate its practices. Thus, public sector organisations have modeled various joint consultative mechanisms, welfare schemes, equal opportunity measures, unpaid maternity leave provisions and institutionalised roles for unions in grievance resolution systems, (Sheldon & Thornthwaite, 2011 pp. 98). If we look at historical instances of state intervention, it is reasonably evident that the maintenance and protection of the integrity of employment relations has fallen primarily to the credit of state intervention procedures that have been flexible and adaptive to the changing economic, political and social environments. Patmore (2009) maintains that both federal and state/provincial legislation in Australia, have been appropriate and effective in different circumstances - federal policy is relevant to response in critical incidents such as the Great Depression whilst states were innovative in employment relationship regulation. Also, according to Turner (2006), in the 1970s and 1980s when inflation was rising rapidly, strongly corporatist countries, who utilised strong state regulation and intervention, performed on par with, if not better than liberal market economies and weaker corporatist economies. This was because the arbitration system gave unions the capacity to restrain demands for wage increases in order to seek a way to resolve the inflation-employment tradeoff. Additionally, Bamber & Rosss (2009) article on employment relations in the telecommunications sector showed that state intervention and policy making can benefit organisations at a strategic level as well as in the form of protective laws in this case, crucial labour law changes facilitated Telstras implementation of unitarist strategies. Thus, these examples from labour history testify to the legitimacy and benefits of state intervention in the employment relationship. Although state intervention is commonly viewed as protective regulation, it is also perceived to hinder the profit maximising opportunities of companies and employers who believe that terms of employee engagement should be determined by market forces of supply and demand. From the perspective of capitalists, the effects of protective laws and trade unions

are considered as a distortion of the natural means of determining employment conditions, (Stewart, 2011). Furthermore, deregulation is widely viewed as a means to allow the labour market to be more productive, competitive and create more effective and efficient outcomes by removing the constraints and terms that employers are bound by in their relationship to the employee (Buchanan & Callus, 1993). There are two opposing views on deregulation versus regulation/state intervention 1) the idea that human beings are entitled to decent working conditions as a right and thus, regulation is necessary to protect those rights, and 2) the view that freedom and choice can be achieved through the introduction of radical reforms in state regulation. The latter does not actually however, refer to a reduction in levels of regulation (deregulation), but rather different regulation that has, in the past, in fact led to a large increase in employment relations legislation, (Stewart, 2011). They seek to move towards internal regulation under management and shift away from external state regulation

Despite the objective validity of both arguments, it is clear that without state intervention and regulation, the gap between the haves and have-nots or rather, employees with bargaining power, or desirable skills and abilities and employees without, will widen. However, a shift towards a deregulated labour market would in fact, be likely to increase both inequality and inefficiency in the workplace since state intervention can be effective in supporting international competitiveness (different regulation), as well as fairness and equal opportunity (protective regulation) (Buchanan and Callus, 1993).

Buchanan & Callus (1993) argue that consistency in wage standards across industries for employees in similar occupation is crucial to efficiency and equity in the employment relationship. Supporters of deregulation have argued that wages should be linked exclusively to internal factors, including performance and the companys ability to pay wages. Brown & Rowe (1986) place particular emphasis on the wage fixing systems insensitivity to the needs of individual enterprises. However, if wages were dependent solely on internal factors such as productivity, there would be high levels of wage inequality between industries with slow productivity growth and those with high growth. In the long run, this would create an excess of supply in high growth sectors and a shortage of demand for jobs in low productivity growth industries, and any potential profits related to growth in productivity for the latter sector would be foregone (Buchanan & Callus, 1993). Therefore, the state should intervene in the employment relationship by assisting in maintaining stability of the labour market in a measure to prevent inefficiency in wage determination and labour market supply.

Furthermore, the forces of supply and demand in a market economy are not what ultimately determine wage levels. Instead, it is the perception of acceptable standards of living that primarily influence pay rates, changing demographics and social paradigms that determine labour supply and expected demand for goods and services that impacts labour demand (Buchanan & Callus, 1993). Therefore, when comparing regulation against deregulation, it is clear that state intervention should occur in the best interests of both equity, which is lacking under capitalist ideals, and efficiency. Furthermore, just as the economic environment is changing, so should the manner in which the sate intervenes in the employment relationship. Fairbrother & McDonald (1999, pp. 343) argue that, at the federal level, state restructuring policies have been diverse, varied and contradictory due to the contextual changes that are an inevitable aspect of a continually evolving economy and the various approaches to legislative change by successive governments. It is this attribute of adaptability which will allow state intervention to continue to be beneficial and effective. However, problems arising from equity and efficiency concerns require strategies involving both state intervention to promote consistent standards and internal regulation (Buchanan & Callus, 1993). Without external regulation from state intervention, there will be an imbalance of power between different parties during workplace bargaining, compromising fairness. The state should intervene in the employment relationship on the basis that it provides protection in the form of equal opportunity, employment standards, protective laws and systems vital factors for the welfare of employees. Also, intervention by the state can be formulated to maintain or improve upon efficiency and productivity in the workplace and thus, increase competitiveness and profitability as opposed to the effects of market deregulation. State intervention should be flexible and adapt to the requirements generated by the economic climate at any given point in time. Lastly, although state intervention in the employment relationship should be coupled with internal regulation at managerial levels, without it, there is a strong risk that workplace will be compromised for the sake of profit and efficiency. Therefore, the state should intervene in the employment relationship.

References: Balnave, N., Brown, J., Maconachi, G., & Stone, R., Employment relationsin Australia, John Wiley and Sons, Brisbance, 2007, Chapter 2 Bamber, G.J., Ross, P., 2009, 'Strategic Choices in Pluralist and Unitarist Employment Relations Regimes: A Study of Australian Telecommunications', Industrial and Labor Relations Review, Vol. 63, No. 1 Bell, S. And Head, B., 1994, Australias political economy: Critical Themes and Issues, in in S. Bell and B. Head (eds), State, Economy, and Public Policy in Australia, Oxford university Press, Melbourne Bray, M., Waring, P., Cooper, R., 2011, Employment Relations: Theory and Practice 2E, McGraw Hill Australia Pty Ltd, Chapters 5 & 9 Brown, W. and Rowe, L. , 1986, Employers and the Push for Decentralised Wage Setting, in J. Niland (ed.) Wage Fixation in Australia, North Sydney, Allen & Unwin Buchanan, J., Callus, R., 1993 Efficiency and Equity at Work: The Need for Labour Market Regulation in Australia, Journal of Industrial Relations, vol. 35 no. 4 515-537 Fairbrother, P. & McDonald, D., 1999, 'The role of the State and Australian public sector industrial relations: Depoliticisation and direct intervention', New Zealand Journal of Industrial Relations, Vol. 24, no. 3, pp. 343-363 Hancock, K., 2008, 'The future of industrial relations in Australia', Economic and Labour Relations Review, Vol. 18, no. 2, pp. 7-14 Howe, J., 1997, The Role of Industrial Relations in Achieving Social Equity: A Comparison of Labor Laws in Australia and the United States, Labor Law Journal, Vol. 48 Issue 6 p. 336 Patmore, G., 2009, 'The Origins of Federal Industrial Relations Systems: Australia, Canada and the USA', Journal of Industrial Relations, Vol. 52, no. 2 Sheldon, P., Thornthwaite, P., 2011, The State, Labour and the Writing of Australian Labour History, Labour History, No. 100, pp. 83-104

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