Productivity-Geared Wages Policies: Some Problems Arising from Growth in the Financial Enterprise Sector

Abstract

The gearing of wage increases to recorded productivity improvements has become a centralfeature of Australian wage-fixing arrangements. Any well-defined policy rule for such purposes requires an operational definition of wages, an operational definition of labour productivity and a stipulated policy on timing. This paper argues that the operational definition of average labour productivity underlying much of the recent debate on wages policy in Australia embodies a treatment of the activities of financial enterprises which displays a number of unsatisfactory characteristics when examined in the light of developments in the Australian economy over the past decade. The paper then goes on to examine alternative means of treating the activities of financial enterprises, paying particular attention to the suitability, for wage policy purposes, of the average labour productivity series they give rise to.