The Fair Work Act circles the present report with a case study on implementation of policies regarding the wage determination. In this report, an attempt has taken to define the term Fair Work and the aim of the same regarding the wage determination (James and Ombudsman 2015). It has been observed that certain theoretical approaches adopted to critically evaluate the minimum wage determination and the role of the Australian Council of Trade Union and other employers’ organisation in this matter. In Australia, certain policies have been taken to facilitate the process of wage giving policies and Fair Work Act has been enacted in the year 2009 to regulate the necessary provision (Regan and Lee 2015). The workers who are working in the different factories of Australia has certain basic rights and wage is one of them. It is therefore, important to determine the wage based on the job validity and position. It is important to regularise the waging policies systematically. The theories are verifying this waging system (Power 2017).
Theories of wages:
Theories are propounded to systematically analyse the level of wage. The theories can be divided into six main parts and all these theories should be analysed critically (Kaufman 2016). The theories can be categorised as follows:
- Subsistence theory of wage;
- Standard of living theory;
- Wage fund theory;
- Residual claimant theory;
- Marginal productivity theory and
- Discounted marginal productivity theory.
According to the first theory, the wage of the workers should be determined as their working demand and the waging amount should be based on the subsistence policies. Lessale argued that the level of wage should be depending on the cost of production and the determined wage should be fixed in nature (Offer 2017). This theory concentrate on the supply of labour force and it has been mentioned that if the flow of labour force increased, the level of wages will fall and it will reach at the level of subsistence.
However, the theory opposed the concept of marriage and the supporter of the theory believed that if the wage exceeds the subsistence level, the worker will married and enlarges their family. Therefore, wage should be determined as to subsistence level. However, this theory has been criticised, as there is no validity regarding the marriage concept (Regan and Lee 2015). Rather, if the wages are being increased, the standard of life of the workers can be developed. The theory has a leaning mentality over the supply source and not on the demand source. Another failure of this theory is that it fails to point out the reason for the differentiation of the wage level (Kerr 2017).
The second theory is based on the improved section of the subsistent wage theory. It concentrates on the living standard of the workers (Mill 2015). According to the supporter of this theory, education is necessary to maintain a healthy standard of life and it has to be stated that the workers should have to emphasise on the productivity level. This theory reveals the fact that once the workers are accustomed with the high standard, they will try to stick at that level (Walker 2015).
According to C.E. Hurst, this theory is not relevant and it should be kept in mind that not every individual are leading the same living standard (Hurst 2015). The theory has been criticised on the fact that the wage and standard of life is reciprocal in nature. It is not true that wage is depending on the standard of living only.
The wage fund theory is the idea generated by John Stuart Mill. John had observed that wage fund is divided within the labourers and the whole theory of wage is based on the profit expenses (Mill 2015). The critiques of the theory have argued that the main weak point of this theory is to neglect the quality and efficiency of the workers. This theory failed to determine the wage and emphasise the wage fund. The different rating of wages are also could not be proved by this theory.
In the words of Walker, certain shares should be fixed and the workers are residual claimant (Walker 2015). Residual claimant theory does not explain the impacts of the trade union and the provision regarding the supply methods have been denied. The critiques of the theory have argued that this theory is based on wrong presumption, as the residual claimant is the entrepreneur and not the workers.
According to the marginal productivity theory, wages are directly proportional to the productivity. It is based on the theory of distribution. It has been mentioned that the wages should be depend on the demand and not on the supply. Marginal productivity means additional unit of labour. A critical evaluation of this theory exposes the fact that not every units of the work is homogenous in nature. It has been stated that there are different factors that can directed the working measures and it fails to point out the imperfect marginal market policies. This theory is also failed to provide the reasons regarding the different character of wages.
The last theory is based on the modified version of the marginal productivity theory and this theory has concentrated on the discounted marginal product. Though the theory has failed to provide the necessary standard discounted product and has similar loopholes as the marginal productivity theory.
The function of the unions:
This case is deals with certain association regarding the waging determination and it has been observed that the institutions are playing certain important role in this case. The foremost name in this case is Australian Council of Trade Union that was established in 1927and fought for the wage increment, safety in the workplace, equality among the workers and employment conditions (Cooney and Stuart 2013). The main objective of this union was to protect the interest of both the employer and the employees. The commission had implemented certain schemes for the benefit of the workers and in 2013; the Union had introduced the parental leave scheme. the wage of the workers are being increased for the efforts of these unions and it has been proved by the report made by Fair Work Commission in 2016-17 that the aim and objective regarding the waging problems and the workers has been resolved.
(b) Stakeholders approach to reward management
The second part of the question is based on the reward management and the approaches of the stakeholder’s approach regarding the contemporary reward management. The term reward management is based on certain formulation and implementation with the purpose to provide fair and equitable rewards to the people. There are two main aspect of the theory such as the remuneration and the compensation. The operating methods of the reward structure has been prolonged and the structure of the theory has been included the minimum waging system. Therefore, it can be stated that the reward management is contemporary to the waging theories.
The main aim of the reward management and waging theories are to be chalked out. The theory of reward management was intended to research on the behaviour of the workers and all the processes and policies are to be managed in such way, which support the value of the individuals. It motivates the employees so that they can engage them for the benefit of the company and on the other hand, the company will be taken care for the employees to certain extent. It has been mentioned by Kerr that the nature of the reward management is changeable and hence it is important to maintain a standard form (Kerr 2017). The main theme of the reward system is to motivate the employees and there are two parts of the system- intrinsic and extrinsic motivations. Bonus, salary increment, gifts, promotions are the example of the extrinsic reward, whereas feedback, recognitions are the instances of the intrinsic motivations.
Therefore, it can be observed that all the policies regarding the reward management are intend to motivate the stakeholders or the employers and the employees. These reward management techniques, to certain extent help the stakeholders to motivate and they engaged them for the beneficial interest of the company.
The report can be concluded with the facts that the waging theories regarding the wage determination help to understand the mentality of the social researchers and their thinking over the wage system and the critical analysis of these theories help to identify the loopholes of the system regarding the wage process (Card and Krueger 2015). It has to be taken into consideration that stakeholders are the main subject of these theories and the motto of the theories as well as the waging system is to promote the standard of the stakeholders. Certain reward system have been implemented for the interest of the stakeholders and therefore, it can be stated that the report of 2016-17 on the benefit of interest of the stakeholders.
Card, D. and Krueger, A.B., 2015. Myth and measurement: The new economics of the minimum wage. Princeton University Press.
Cooney, R. and Stuart, M. eds., 2013. Trade unions and workplace training: Issues and international perspectives. Routledge.
Dunlop, J. and Segrave, M., 2016. The theory of wage determination. Springer.
Hurst, C.E., 2015. Living theory: The application of classical social theory to contemporary life. Routledge.
James, N., & Ombudsman, F. W. (2015). Commonwealth of Australia.
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Kerr, C., 2017. The effect of amenities on local wage distributions. Letters in Spatial and Resource Sciences, 10(2), pp.215-228.
Mill, J.S., 2015. POST-GROWTH ECONOMICS. Prosperous Descent, p.29.
Offer, A., 2017. The market turn: from social democracy to market liberalism. The Economic History Review.
Power, C., 2017. The Fair Work Commission's new approach. Governance Directions, 69(9), p.540.
Regan, L. and Lee, C., 2015. Workplace law: Review of the fair work act: What will change?. Proctor, The, 35(4), p.38.
Walker, P., 2015. Contracts, entrepreneurs, market creation and judgement: The contemporary mainstream theory of the firm in perspective. Journal of Economic Surveys, 29(2), pp.317-338.