To understand the transformation, it is useful to briefly dismiss two common explanations for union decline. The first is that unions declined because workers' became more skeptical about them. In fact, attitudes tend to be a mirror image of union strength. When union membership swelled during the 1970s, Australians became more likely to tell pollsters that they thought unions had "too much power", and less likely to agree that unions had been "a good thing for Australia". Correspondingly, as unions waned during the 1990s, the fraction of people who thought that unions had "too much power" or that "Australian would be better off without unions" steadily decreased. Another argument that is sometimes made is that deunionisation was a result of the decline in real wages that took place under the Accord. Yet as David Peetz points out in his book Unions in a Contrary World, this explanation implies that unionization should have declined more during the 1980s (when real wages fell) than the 1990s (when real wages rose). In fact, the reverse is true - the biggest fall in unionization occurred during the 1990s.
The most significant factor in Australian deunionisation has been changes to the legal regime governing unions. Peetz points out that between 1990 and 1995, conservative governments in five out of six states introduced legislation aimed at prohibiting compulsory unionization (banning "closed shops"), encouraging individual bargaining, and making the transition to non-award coverage easier. In the late-1980s, more than half of all union members were required to be a union member as a condition of their employment. In the 1990s, freed from the requirement to belong, large numbers chose to opt out. Unsurprisingly, the unions hit hardest were the ones that were most reliant on compulsory unionism laws. The new regime was locked in place in 1996, when the newly-elected Howard Government virtually abolished compulsory unionism nationwide, and made it more difficult for unions to recruit and strike.
The next most important driver of deunionisation has been raising competition. Spurred by microeconomic reforms, tariff cuts, and a revitalized Australian Competition and Consumer Commission, the markets for buying most products and services are now substantially more competitive than they were in the 1970s. When firms enjoy a monopoly or oligopoly position, it is easier for them to pay higher wages to their employees. Prices are higher in non-competitive markets, and in the jargon of economics, this generates "rents". These rents are then shared between employers (who enjoy higher profits than they would in a competitive market) and workers (who earn more than in a competitive market). When monopolies are broken down, and markets become more competitive, management has to start cutting costs. This places pressure on management to adopt stronger anti-union tactics in order to reduce the wage bill.
The third explanation for falling union density is the growth in