Analysis of public sector wage caps and their economic impact.
Author: Greg Jericho
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The 9 to 5 is back! Time to put the phone on silent
If you’ve ever flicked off an email before bed, texted your boss out of hours, or received an ‘urgent’ work call after clocking off, you’ll be glad to hear some respite is just around the corner.
A new right to disconnect from work, for employees in businesses with 15 or more staff, comes into force across Australia from Monday 26th August. This is a welcome response to the growing problem of ‘availability creep’, where work demands spill over into workers’ leisure time.
The new right means most employees can now refuse to monitor and respond to unreasonable contact from their employers about work matters outside of paid work hours.
Many of us are now online and digitally connected to our workplaces 24/7. This constant connectedness can make it hard to escape work calls, texts, and emails when not actually at work.
As we are now so easily contacted anywhere and anytime, our leisure and family time has become very susceptible to interruptions from work, leading to unpaid overtime, an inability to ‘switch off’, and blurred boundaries between work and non-work time. Gone are the days of 8 hours work, 8 hours rest, and 8 hours play.
The consequences are stark. Research has shown these work practices lead to increased stress, health problems and a poor work-life balance.
The right to disconnect from work is one solution to the problems of availability creep and unpaid overtime. The Senate Select Committee on Work and Care proposed this reform to Australia’s workplace laws in early 2023 and the initiative was included in the Government’s Closing Loopholes package of workplace reforms passed by the federal parliament later that year. A similar right is in place in a number of other countries including France, Canada and the Philippines.
Australia’s new right to disconnect does not mean there is a blanket ban on contacting employees outside their scheduled work hours. Rather, it means that an employee cannot be penalised for refusing unreasonable contact.
There are many circumstances in which a manager’s attempts to contact an employee out of their work hours might be reasonable. For example, this could be where an employee is on-call and receiving an on-call allowance. Some jobs regularly require a certain amount of out of hours contact and employees’ remuneration may reflect this. However, for many workers, contact out of working hours arises from pressures that lead to overwork and unpaid overtime.
And unpaid overtime is a significant problem in Australia.
In 2023 employees responding to a Centre for Future Work survey reported working an average of 5.4 hours of unpaid overtime a week, with full-time employees reporting working an average of 6.2 hours a week of unpaid overtime. A conservative back-of-the-envelope calculation shows that’s an extra seven weeks’ work every year.
Workers should not have to monitor or respond to emails, text messages and phone calls after hours about concerns that could be raised and dealt with in their scheduled work time. Poor organisation, understaffing and reliance on overwork are not good reasons for requiring employees to be available out of hours. It is these practices that the right to disconnect is intended to challenge.
Fears that workplace flexibility will be undermined as workers exercise their rights to disconnect are largely misplaced. In organisations where flexibility is based on employees’ constant availability there may be some disruption. But this is exactly the practices that the right to disconnect should disrupt.
Flexibility can exist alongside respect for employees’ rights to switch off from work. Good flexible work practices and arrangements are those that benefit both employers and employees, and are designed through negotiation and consultation. The dissolution of boundaries between work and leisure time is not the answer.
Will individual employees be lining up to ask the Fair Work Commission to order their employers to stop contacting them? Probably not. The real potential in the right to disconnect is its ability to catalyse an evolution in workplace expectations that shifts norms away from a reliance on overwork and constant availability.
Time to put that phone on silent.The post The 9 to 5 is back! Time to put the phone on silent appeared first on The Australia Institute's Centre for Future Work.
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Minimum wage increase won’t cause inflation
Research showing minimum wage rises do not drive inflation.
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The gas industry is laughing at us as they make more money but not more tax
Australia produces more than six times the amount of gas needed to supply our manufacturing industry, power stations and homes. But more than 80% either heads overseas as LNG exports or is used to convert natural gas into LNG:
We export much more gas than we used to. In the 2000s we exported around 14m tonnes of LNG a year. Now, due to the opening of the Gladstone LNG terminal, we send 83mt overseas – the second most of any nation.
But more production and more revenue has not led to more tax, even though the petroleum resources rent tax (PRRT) is in place to supposedly raise revenue from windfall profits such as those generated by the gas industry after the Russian invasion of Ukraine.
When Australia exported 15.4mt of LNG in 2008-09, the government raised $2.2bn in PRRT. In 2022-23, exports had increased 437% to 83mt but PRRT revenue was up just 7% to $2.4bn.
Did gas suddenly become unprofitable?
No, the problem is that the PRRT is open to manipulation that enables companies to use costs to reduce their PRRT liability such that it appears they are never making “super profits”.
In last year’s budget, the government finally proposed limiting the deductions to the PRRT in any year to 90% of LNG project revenues. Alas that proposal also had a punchline. The government announced the changes would raise an extra $2.4bn in PRRT over the next four years. That was roughly a 30% increase in tax.
Thirty per cent!
You would think the gas industry would launch the mother of all campaigns against it. But no. They loved it.
The day it was announced the gas industry peak body recommended bipartisan support as the changes “would see more revenue collected earlier”. The key word was “earlier”. It won’t raise more tax; it just moves some tax from later to earlier.
But it won’t even do that.
In December’s midyear economic and fiscal outlook, the government announced it was revising down its estimate of how much PRRT would be raised over the next four years.
How much did it reduce its estimate by?
You guessed it: $2.4bn.
We need to change the way the PRRT operates, we need to tax our gas more and we need to do it now.
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Higher exports prices improve the budget, but the Stage 3 tax cuts remain the wrong tax at the wrong time
Yesterday’s mid-year economic and fiscal outlook (MYEFO) provided some pleasing news for the Treasurer, Jim Chalmers. But higher revenue does not mean a stronger economy nor that households are better off.
While the Treasurer was releasing the latest budget numbers the annual figures for median earnings were released by the Bureau of Statistics.
These figures showed that the median weekly earnings in August this year were $1,300 – a rise of 4.2% from last year, which was less than the 5.4% increase in inflation.
That weekly amount translates to $67,600 in annual earnings.
People earning that amount will get just $565 from the Stage 3 tax cuts (0.8%) while someone on $200,000 – well in the top 10% of earners will get a 4.5% cut worth $9,075.
The Treasurer told ABC 730 on Wednesday night that the government has not changed its position on Stage 3 and that “We think there is an important role for returning bracket creep where governments can afford to do that.”
The problem is the Stage 3 cuts are mostly focused at rewarding those on high incomes, who are least affected by bracket creep.
If the Government was truly worried about using the bonus revenue from higher export prices to assist low and middle-income earners it would care more about those on the median income of $66,700 than those in the top tax bracket and top 10% of income.
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After two years of profit-led inflation, workers deserve the pay rises they are getting
The latest wage growth figures showed that workers’ wages for the past six months have grown faster than inflation. As Labour Market Policy Director, Greg Jericho writes in his Guardian Australia column, this should be celebrated. We need to shed our fear of wage rises. For too long any sign of increasing wage growth has been viewed as something to be stomped on while ever-increasing corporate profits have been cheered.
Since the start of the pandemic, workers’ purchasing power has crashed, and the only way to recover the lost real wages is through wages increasing faster than inflation.
The 1.4% growth of private-sector wages in the September quarter was driven largely off the back of the Fair Work Commission’s decision to increase Award wages by 5.75% and the decision to give aged-care workers a 15% pay rise.
As a result around 40% of those who gained a pay rise in the September quarter received one greater than 4%.
One other pleasing sign has been the relaxation of public sector wage caps has allowed those workers around the country to get a fairer pay rise, but their increases remain well below that of the private-sector.
The profit-led inflation since 2021 hurt workers, and it now is only fair that they receive some recompense. After a decade of ever falling wage growth and a pandemic and recover that smashed real wages, it is very good news that workers are finally getting their fair reward.
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The Government needs to act on Stage 3 as the RBA warns about wealthy households spending
The Reserve Bank’s decision to raise interest rates on Tuesday lacked any clear reasoning.
When compared with other periods such as during the mining boom, when household spending was growing fast and real wages were surging, we can see that the economy at the moment is much weaker. Households are now cutting back on luxuries as their real wages fall.
But the RBA pointed out that one group of Australians are doing OK – those with high income and wealth. Those with large savings buffers and who are also enjoying the increased wealth from rising house prices are still spending.
This is also the group who are about to be handed the biggest income tax cut in history. The Reserve Bank has made it clear that allowing Stage 3 to go forward in its current form will only fuel inflation and likely result in higher interest rates for all.
With a Reserve Bank desperate to use any excused to raise rates and slow the economy even as it already slows, the Government needs to amend the Stage 3 cuts to deliver greater benefit to low-middle income households who have suffered the most from the rising cost of living and interest rates, and less to those who are already doing well and for whom a potential $9,075 tax cut would just put more fuel on the inflation fire.
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When the prices of necessities are rising fast, the RBA does not need to hit households with another rate rise
In the past week, the likelihood of the Reserve Bank raising the cash rate to 4.35% has gone from about 20% prior to last week’s inflation figures coming out, to now an even-money bet.
But when you look at the cost of living figures out this week it is clear that households are already having to reduce their spending on non-discretionary items.
Out of the 14 biggest contributors to inflation, 10 were non-discretionary items.
At this point we should note the comments of the secretary of the Treasury, Steven Kennedy, last week in Senate estimates. He was asked about the pathway to a “soft landing” – ie where inflation falls without us going into a recession.
He noted that chances of a soft landing were made harder by recent rises in oil prices because “on the one hand, it will increase headline inflation by raising petrol prices. On the other hand, it may well reduce growth and see other prices fall because people have less to spend. At least in the short term, expenditure on petrol is not very discretionary.”
When the prices of things you can’t avoid paying for rise faster than others, then that obviously reduces your ability to spend elsewhere. In this way petrol, electricity and rental price rises have the same impact as do interest rate rises.
The most recent figures of the volume of retail spending will come out tomorrow, but we know that the volume has been falling, and is now back to pre-pandemic trend levels:
This of course is what you would expect – when the cost of non-retail items such as petrol, mortgages, rents, electricity, property rates, medical services and insurance are rising, you are going to buy less in the shops.
Since March last year the cost of mortgages has gone up 114%. Does the Reserve Bank think households haven’t really noticed that?
Even you if discount the record low rates during the pandemic, the cost of mortgages is now about 70% higher than it was at the end of 2019. Since then, wages have risen only about 10.5%.
Another rate rise is not going to do anything other than add to the cost of necessities. It would not so much reduce inflation as increase the cost of living and hit households whose wages and incomes continue to be worth less than they were a year ago.
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The Reserve Bank should not raise rates on Melbourne Cup Day
The latest CPI figures showed inflation grew 5.4%, down from 6% in the June quarter and almost a third below the peak of 7.8% at the end of last year. And yet commentators seem desperate for the Reserve Bank of Australia to raise interest rates next month to show it is tough on inflation. But raising rates now would not be tough, it would just be cruel.
The annual growth of inflation is falling quite quickly – down from 7.8% at the end of last year. But because the quarterly growth of inflation rose in the September quarter, a numbe rof commentators and economists have been suggesting that the Reserve Bank should raise interest rates in two months.
But when you examine the drivers of inflation in the September quarter, there is little that would have an impact from higher interest rates.
Automotive fuel prices accounted for 20% of the growth in inflation in September – that is completely unaffected by rate rises given that it was all due to higher world oil prices due to OPECD restricting supply. Similarly rental prices, electricity, property rates and charges, insurance, tobacco and beer prices have nothing to do with interest rates. Even the cost of building a new home is driven mostly by the increased cost of construction materials from overseas.
Crucially in the September quarter the cost of “non-discretionary item” rose 1.4% while the cost of “discretionary” item rose just 0.7%. Non-discretionary items are things which you cannot avoid paying (at least in the short-term). In effect those price rises have the same impact on consumer spending as do rate rises – they reduce the ability of people to spend money on things in shops and on discretionary services.
Had the RBA raised interest rates more in the September quarter there would have been negligible impact on the main drivers of inflation, raising them in November due to these latest figures would just be cruel and hurting people whose real wages continue to fall.
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Australia is an energy super power, we need to use that power for good
As the Australian Government continues to pursue policies notionally designed to reduce our greenhouse gas emissions, a great store has been placed in Australia becoming a “renewable energy superpower”. However as Labour Market and Fiscal Policy Director, Greg Jericho, notes in his Guardian Australia column, Australia already is an energy superpower. But we fail to use that power for good.
Australia is either the world’s largest or second-largest exporter of metallurgical coal, thermal coal and LNG. And yet we have not sought to use this power to pursue policies that would reduce demand for fossil fuels and transition the world towards renewable energy. Instead, we placate mining companies and give no timeline to end coal and gas use. We continue to approve new coal mines and fail to insert a climate-change trigger into environment protection legislation that determines whether new mines can be approved.
Given September this year was the hottest September on record, after August this year being the hottest August on record, July this year being the hottest July on record and June this year being the hottest June on record, the time for action that reduces Australia’s and the world’s emissions is urgent and critical.
Climate change is one area where Australia can legitimately take a leading role in global affairs, our power as an energy producer and supplier of fossil fuels which continue to exacerbate climate change demands we show this leadership.
For too long Australian governments have cowered before mining companies, now it’s the time to realise we have the minerals they want now and in the future when renewable energy becomes the dominant power and thus we can dictate terms.
Leadership requires the grasping of power and using it for good.
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