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The Political Economy of the Symbiosis between Labour Market Regulation and the Social Welfare System

Author

Listed:
  • Peter L. Swan

    (Australian Graduate School of Management, University of New South Wales.)

  • Mikhail S. Bernstam

    (Hoover Institute, Stanford University.)

Abstract

Labour market regulation and social welfare policies live in a symbiotic relationship. The growing social welfare safety net has made acceptable, at least for a time, the centralised system of wage fixation in Australia which appears to have contributed to a high level of unemployment. By subsidising those denied access to the labour market due to minimum wages, the social welfare system puts a politically acceptable face on otherwise unsustainable policies. The cost is not confined to groups receiving benefits. The higher taxation levels needed to sustain the social welfare system have depressed the after-tax earnings of those workers remaining in employment to the point where wage restraint in exchange for increased numbers of jobs and lower taxes becomes worthwhile.

Suggested Citation

  • Peter L. Swan & Mikhail S. Bernstam, 1988. "The Political Economy of the Symbiosis between Labour Market Regulation and the Social Welfare System," Australian Journal of Management, Australian School of Business, vol. 13(2), pages 177-201, December.
    • Handle: RePEc:sae:ausman:v:13:y:1988:i:2:p:177-201
    DOI: 10.1177/031289628801300204
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    References listed on IDEAS

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    1. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    2. McDonald, John & Spindler, Zane A, 1988. "Benefit-Induced Female Sole Parenthood in Australia, 1973-85," Australian Economic Papers, Wiley Blackwell, vol. 27(50), pages 1-19, June.
    3. Swan, Peter L, 1990. "Inflation Drag or Taxation in Drag: Responsible for the Rising Share of Government in Australian GDP?," Public Choice, Springer, vol. 65(2), pages 143-156, May.
    4. Stiglitz, J.E., 1985. "Economics of information and the theory of economic development," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 5(1), April.
    5. Frank Steindl, 1973. "The appeal of minimum wage laws and the invisible hand in government," Public Choice, Springer, vol. 14(1), pages 133-136, March.
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