But that is very much an argument at the margin and revolves around a judgement as to whether such a move would be sustainable. An accord is needed between the social partners in order to agree on the increase in wages that is compatible with keeping inflation low and, hence, keeping interest rates low. In particular, there are considerable differences between the composition of the US and Australian labour markets, with the US almost certainly having a proportion of less skilled. If the US had a more regulated market that kept wages for the less skilled higher there is little doubt that it would have much higher unemployment, i.e., non-working poor. Notice that the Davidson types have stopped saying bad things about the workings of the New Zealand labour market where total unemployment is below 6 per cent and unemployment among whites is about 4 per cent.
Wages seem to have held up also.
Thus, the Australian industrial relations system works as well as the US system except that we have and continue to have higher unemployment. In fact, it has been somewhat faster here. However, the fall in employment in the recessions of the early 1980s was much less in the US less than 1 per cent in each recession compared with 1.8 per cent and 2.8 per cent respectively in Australia's case. Similarly, the increase in unemployment from peak to trough has been greater in Australia only slightly greater in the early 1980s recession but twice as great as in the early 1990s one. Indeed, the principle test for any labour market is whether is absorbing the growth in the working age population.