My understanding of production costs in many manufacturing companies, is that labour costs are often not much more than 20% of total costs. Most costs are normally tied up in the cost of supplies, the cost of equipment, the cost of packaging and transportation etc, but even if such companies reduced the wages of their employees by 50%, they would only be reducing their overall costs by 10%.

However, saving 10% of overall costs or more could also be readily done by using more advanced management systems (see "10 Ways to Improve your Manufacturing Productivity" http://www.productionprocess.com/improve-productivity.html).

I also think that reducing the wages of employees does not necessarily get the best out of those employees. If an employer pays people to be "arms and legs", then that is what the employer will mostly get, (ie. "arms and legs" and not brains or thinking ability also).

Labour costs may be proportionally higher within service industries, where the costs of supplies, cost of equipment etc are less, but I think that reducing the rights and wages of employees within service industries would not produce the best from those employees either.

I had experience of an overseas company that had very little regard for its workforce. The workforce had very few rights, they were paid the most minimum of wages, their working conditions were extremely poor, and the company's safety standards were almost non-existent.

There was very little automation or mechanisation, and much manual labour, and the company referred to its workers as "units". A task was described as requiring so many hours and units, so a 1 hr / 5 unit task, would take 1 hr and involve 5 workers. If one worker didn't come out alive, they would just take the body away and hire someone else. Needless to say that company was not very productive overall, and the quality of its product was such that it could only be sold nationally, but not internationally. Continuously reducing the rights and wages of workers in Australia, then Australia is heading down that track I would think

Excellent post Timkins - well reasoned and no scathing tirade towards other posters at the beginning - nice change.

I agree that holding employees wages to ransom over production costs is a false economy. No one can be inspired to work harder for less and in poorer conditions - a downhill spiral indeed. If an organisation cannot afford to pay its workers a fair living wage then it should not be in business.

Most if not all of the comments on this article and even the article itself would have us believe that these changes are motivated by a desire to reduce wages and in some way push down living standards of Auatralians. These beliefs defy the simplest of logic.

Having worked hard to strengthen the Australian economy and increase average wages by nearly 15% with the nation pushing along nicely why on earth would the Government want to create a situation that is designed to hurt people? It would seem that those who have posted comments somehow believe that The Government wants to punish the very people it has helped, the very people that have re-elected it on 4 occasions. And in doing so encourage them to vote Labor or for minor parties at the next election.

A little bit of common sense, common logic and the bitter experience of being in opposition indicates otherwise. Rather, in seeking to make these changes the Government sincerely believes that they will have a positive impact on the economy, levels of employment and wages. In other words they believe that the changes are in the best interests of the nation and will actually prove to be just that.

Having experienced an IR system that was similar to the one proposed in WA before the election of the current Labor Government, I have no doubt that the new IR changes will have very positive effects indeed. In WA we have gone from the best IR State system to the very worst in the Nation.

Bring on the changes, I say, with all speed and let's see the good that comes with them.

John Howard says the minimum wage won't fall but he guarantees that prices will rise when he won't take action over petrol prices.
Inflation is rising because of petrol prices. The petrol price rise is stops interest rates from rising so the petrolo price rise is politiaclly sound. What about the people on minimum wages? They will have a job and still be poor. They are the working poor and they have been written about long before this.
We are going back to slavery times, working but still not have enough to live or drive a car.
The result will be an increase in marriage breakdowns and social problems.
Sorry those two are not economically related are they in a materialistic world.
I will back what I say here with a staement about $3.60. The $3.60 is what Sydneysiders won't pay to go into the Cross-City tunnel because they are so cross that they should pay when they are the ones who have a job. Most can't afford the $3.60 or it would be paid.

Sniggid,

I am sorry but the rationale behind the introduction of these amendments has always been that Australia has among the highest minimum wages in the OECD. Therefore if this is the reason for the introduction of the IR changes, what could they possibly be aimed at acheiving, if not an overall reduction of the minimum wage?

Interestingly, very little attention has been drawn to the fact that Australia has among the highest hours per week, and productivity of OECD countries. It is probable that this additional work is performed by people predominantly because of the same financial incentives, that cause us to have the some of the highest wages in this community. Therefore any move to remove the incentives could operate to lower Australia's productivity, not raise it.

Also, with the record levels of personal debt, the corresponding difficulties in home equity (caused by defating house prices), and the possibility of interest rate rises in the foreseeable future, this is neither the time nor place for this sort of wholescale devaluation of teh minimum wage, nor for disassociating the same from the CPI.

At the present time inflation, imports etc. are all beginning to rise, the average minimum wage worker's confidence in the future is falling, and now is the wrong time to make changes to their ability to service their increasing debt. Particularly from a government that made no mention of these proposals prior to the last election, which may have prevented them ever gaining control of the senate, and thus have no mandate to introduce these reforms.

Sorry Aaron but you have failed to take into account the logic of what was reflected in my posting. Remember that most members of parliament (Government and Opposition) are actually quite sincere people, even John Howard and his ministers. Having precided over record growth in the economy, in employment and in real wages over nearly 10 years, why would the government seek to implement IR reforms designed to harm the economy and working Australians and risk being thrown out at the next election? That is an illogical position to take.

I'm not sure whether you have worked under a workplace aggreement. I did in WA until the Gallop Government did away with them over here. They were great. We negotiated them ourselves, and the employer and us benefited from the agreements.

I guess you will have to wait and see. But don't be surprised if it turns out that the benefits the Government is claiming will eventuate actually do eventuate. That is, a stronger economy, higher employment and higher real wages growth.