The report highlights the dramatic erosion of Australian workers’ power over the past half-century, with union membership collapsing from 50% in the 1970s to just 14% today. While real wages in late 2024 finally recovered to 2011 levels, workers still lost out on 15.1% in productivity gains that instead boosted profits. Capital has won so much ground over the past few decades, thanks to the passing of anti-union and anti-worker laws, rampant casualisation, and employer monopsony. Workers’ collective bargaining power has taken a huge hit—so much so that even with unemployment at historic lows, workers lack the leverage to secure fair wage growth against increased inflation. 

Peetz compares the current situation with that of the pre-Accord days of the 1970s, where union strength and industrial militancy was prevalent enough for workers to put up a substantial fight for increased wages in the face of high inflation. For example, it is noted that in 1974, 6.3 million working days were lost through industrial action, while in 2021, just 0.1 million working days were lost. In 1974-75, real wages grew by 10%. Real wages fell by more than 3% over 2021-22. 

Though recent ALP reforms and tight labour markets have helped wages rebound slightly without sparking inflation, the recovery remains incomplete (see for example, the table of pre- and post-2022 public policy reforms on pages 35-37). The report’s findings underscore how these modest gains are important but fragile without organised worker power. We know that only militant class struggle can reverse decades of entrenched inequality, as tinkering within capitalism's limits cannot restore what workers have lost—let alone deliver genuine economic justice and to establish proletarian power.

Economic Rationalism – an erroneous theory and a bourgeois tool

The report challenges economic rationalism’s interpretation of labour markets by exposing its neglect of power dynamics and structural inequalities, which fundamentally shape wage outcomes. Economic rationalism is said to assume that labour markets function under "perfect competition," while the report demonstrates how this does not conform to the real world. 

Flaws in Economic Rationalism’s Labor Market Assumptions  

 

 

Economic rationalism assumes labor markets are competitive, with wages adjusting to balance supply and demand. However, the report highlights monopsony power, where few employers dominate markets, leading to reduced job mobility and enabling wage suppression. Factors like non-compete clauses, limited job opportunities, and employer collusion contradict the neoclassical ideal of perfect competition. For instance, post-pandemic labour shortages did not trigger significant wage increases, disproving the market-clearing wage theory.  

 

 

Wages are not solely market-driven but influenced by employer wage norms—informal standards of "appropriate" pay enforced through institutional power. Declining unionisation (from 50% to 14% since the 1970s) and the rise of casualised labour have eroded worker bargaining power, allowing employers to resist wage hikes despite productivity gains. The report argues that economic rationalism ignores these power dynamics, falsely portraying wages as neutral market outcomes.  

 

 

The Reserve Bank of Australia (RBA) repeatedly misapplied the NAIRU (non-accelerating inflation rate of unemployment) framework, assuming inflation was driven by wage pressures. Many workers have surely heard the bourgeois groan about the cost of living crisis supposedly being intensified because labour is too expensive. Peetz report shows that, in reality, post-2020 inflation was profit-led, with corporations raising prices without corresponding wage increases—a phenomenon unexplained by neoclassical, economic rationalist models. Economic rationalism’s focus on "market-clearing" wages led to policies (e.g., interest rate hikes) that harmed workers while ignoring corporate profiteering.  

 

 

 

Marxism rejects the idea that wages are neutral market outcomes, instead framing them as a social relation where capitalists extract surplus value (profits) by paying workers less than their labour’s worth. The report supports this view, noting that none of Australia’s 15.1% productivity gains (2011–2024) translated into wage growth, highlighting systemic wage suppression.  

 

 

Marxism emphasizes that employer dominance (e.g., monopsony, gig economy expansion) is inherent to capitalism. The report’s findings on declining union power and employer concentration align with this analysis, showing how capital’s structural dominance perpetuates low wages. Policies like multi-employer bargaining (post-2022) are not mere market corrections but concessions won through class struggle.  

 

 

While economic rationalism blamed inflation on labour market tightness, the report identifies employer profit-seeking as the real driver. Interest rate hikes, justified by economic rationalist models, protected profits at workers’ expense, reinforcing class-based inequalities.  

 

 

Marxism contextualizes wage stagnation as a result of decades of neoliberal policies (e.g., anti-union laws, privatization). The report traces legislative changes (e.g., WorkChoices laws) that dismantled worker protections, illustrating how policy shifts systematically weakened labour’s bargaining power.  

 

The report dismantles economic rationalism’s labor market assumptions, proving that wages in Australia are shaped by power imbalances (and struggles) between employers and employees, not just supply and demand. We shouldn’t be surprised by the finding that in reality “employers have discretion in wage offers, and employees can influence accepted wage rates through collective bargaining or political influence”. The report’s findings demonstrate that wages continue to be determined on the battleground of class conflict, where capital’s dominance ensures worker exploitation. Bourgeois policymaking that ignores these class dynamics—such as the RBA’s flawed inflation responses—reinforces inequality and perpetuate capitalism. The report ultimately validates the need for structural reforms that address employer power and restore worker collective bargaining strength.

 

While not a Marxist analysis, the report clearly exposes the class struggle shaping Australia's economy. It shows how Labor's workplace policies—though still operating within capitalism—have modestly boosted workers' power compared to the Coalition's attacks. Recent reforms have helped restart wage growth, but as the report notes: 

 

“On average, provisions to increase workers’ power have been far more common under Labor governments than under Coalition governments, and provisions to reduce workers’ power have been more common under Coalition governments. In the end, the one countervailing force in recent times has been public policy which, since 2022, has sought to increase workers’ power. Compared to the impact of the underlying economic and labour market forces that have reduced workers’ power, these legislative changes are small. Wider changes to the socio-economic order would be necessary to alter that. However, the changes that have been made have been enough to significantly increase the rate of nominal wages growth for both unionists and non-union workers, and sufficient to at least see a return to real wage growth in recent years.”