Real wages and unemployment in Australia

Abstract

This paper estimates a three-equation model of the Australian labour market, for employment, real wages and the participation rate. It uses the model to study the role of incomes policies in containing real wage growth and the reasons behind the changes in unemployment since 1970. It finds that incomes policies have not been important in controlling real wages

the rise in unemployment in the 1970s was due to the rise in tax rates and unemployment benefits

the changes in unemployment in the 1980s were connected with changes in investment and aggregate demand. -Author