An economic analysis of industrial disputation in Australia

Australia may present a special case in the analysis of strikes because, for most of the Twentieth Century, the Australian Industrial Relations Commission has acted as an industrial "umpire" charged with keeping the industrial peace. We begin with a review of major contributions to the theory of strikes, and reestimations and evaluations of the time-series models of previous Australian researchers. We then develop theoretical models of strikes and non-strike industrial action, stemming from Marshall's (1920) contribution to the theory of wages. If higher real wages lead to lower levels of employment, union demands are likely to be greater, and industrial action more frequent, when the duration of unemployment of retrenched workers is shorter. Important determinants of the opportunity costs of wage demands to employees, are wage losses of retrenched employees during unemployment and in subsequent re-employment. Critical in the union's decision to threaten a strike or a non-strike action, is a permanent loss of market share directly associated with strikes. The model of strikes is tested, along with variables suggested by other theories, using time-series data from the period 3:1959 to 4:1992. We show that the model is robust and out-performs modified versions of other Australian models. We find that the Prices and Incomes Accord is associated with a reduction in strike activity, but that other researchers have over-estimated its impact. Australian Workplace Industrial Relations Survey data is used to produce cross-sectional models of strikes and non-strike actions in unionised workplaces. We test the importance of the opportunity costs of wage demands and strikes, using variables describing the firm's competitive environment and local labour market conditions. Because the objectives of workplaces differ, we estimate separate models for privately owned workplaces, government non-commercial establishments and government business enterprises. All empirical models are broadly consistent with the predictions of our theoretical model