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  • The Future of Work is What We Make It

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    The Future of Work is What We Make It

    There has been an outbreak of public concern recently about the impacts of technological change on employment. Some research suggests that 40 percent or more of all jobs are highly vulnerable to automation and computerisation in coming decades (Frey and Osborne, 2013). Some observers even suggest that work can no longer be the primary means for people to support themselves – leading to all sorts of radical policy responses ranging from taxing robots (Delaney, 2017) to the provision of universal basic income to all people, working or not (Arthur, 2016).

    Of course, this general fear of technological unemployment isn’t new. Since the industrial revolution, workers have quite understandably worried about what will happen to their jobs when machines can do their work faster, cheaper, or better. Previous periods of accelerating technological change were also associated with other waves of concern; even relatively recently, futurists were predicting that technology would make work largely obsolete (for example, Rifkin, 1995).

    Conventional market-oriented economists downplay these concerns: the magical workings of supply and demand forces should ensure that any labour displaced by technology is automatically redeployed in other, more appropriate endeavours, and people will be better off in the long run. The focus of policy should be to facilitate that transition through retraining and mobility assistance, allowing displaced workers to move more easily into better, alternative occupations.

    There are many reasons to question this optimistic theoretical perspective. But actual historical experience gives more cause to doubt ultra-pessimistic forecasts of technological unemployment. In practice, previous waves of technological change have not been associated with mass unemployment, for a range of reasons. The labour-displacing effects of new technology can be offset, in whole or in part, by other factors: including new work associated with the development, production, and operation of the new technology itself; new tasks that become conceivable only as a result of the new technology; historic reductions in average working hours (a trend which has unfortunately stalled under neoliberalism); and the capacity of active macroeconomic policy to boost aggregate labour demand when needed.

    So even from a critical economic perspective, there is little reason to conclude that “work will disappear”. This does not mean we should be complacent about the problems and risks posed to workers by accelerating technological change. But it does mean our response to those challenges should be grounded in a more balanced and complete assessment of what technology actually does to work – and where technology comes from in the first place.

    Remember, technology is not some exogenous, uncontrollable force. What we call “technology” is actually the composite of human knowledge about how to produce a broader range of goods and services, using better tools and techniques. Humans put their minds to solving certain problems (so-called “mission-based innovation”, as termed by Mazzucato, 2011), based on their particular concerns and interests. And therefore, technology is never neutral: the problems we turn our creative attention to, reflect the interests and influence of the constituencies which get to decide and fund innovation activity.

    For example, one nefarious use of modern technology in workplaces is the ubiquitous and largely uncontrolled application of surveillance and performance-tracking technology by employers, to more immediately and completely monitor the work effort of their employees. Increasingly intrusive systems now give bosses minute-by-minute data on the whereabouts, productivity, and even attitudes of their workers. This has wide-ranging impacts not only on privacy and the quality of work. It even affects compensation: when it is so easy and cheap to monitor employees (and sack them if their performance is unsatisfactory), employers have less reason to offer workers positive incentives (or “carrots”) for performance and retention – and are more likely to use a disciplinary “stick” instead. It is no accident that surveillance and monitoring technology has advanced in leaps and bounds: employers have a strong vested interest in using these techniques to intensify work and enhance profit margins. Yet at the same time, easily-solvable monitoring problems – like ensuring that franchise businesses actually pay their employees minimum wages, for example, or are making their legally mandated superannuation contributions – are not addressed with technological solutions. Why not?

    This non-neutrality of technology reflects the increasingly lopsided power imbalances in the modern labour market: those with power can influence the direction of technology in ways that reinforce their power. Another example is the one-sided application of digital platforms for assigning work and collecting payment used by “gig”-economy businesses like Uber and Deliveroo. Their technology has not (so far) actually changed the core nature of the work involved in these businesses: passengers are still driven about in a car, and take-away food is still delivered on a bicycle. What technology has facilitated, rather, are big changes in how work is hired, supervised, and compensated. By using digital applications (which they developed and own), platform businesses try to distance themselves from traditional employer functions and responsibilities (like paying minimum wages, or offering any stability or continuity of work). Technology thus allows businesses to shift risk to those performing the work, and minimise their labour costs. These changes in the social relations of work are by no means inevitable – as is being proven as workers around the world fight back against the most exploitive practices of these businesses. (Singapore’s approach was fairly effective in this regard: simply banning Uber from operating altogether). Resisting the mis-use of technology to cheapen and degrade work, is very different from a Luddite-like effort to try to stop technology itself.

    Some jobs will certainly disappear as technology replaces some tasks (and employers use it to enhance their ability to control and parcel out work most profitably). Some new jobs will be created: including good ones (like the creative, knowledge-intensive ones developing and managing new technologies), and some less good ones (like the menial digital work associated with many technologies). Many jobs, perhaps counterintuitively, will hardly be affected at all: including a range of caring services, cleaning, hospitality, and other functions which seem to inherently require hands-on human labour.

    To be sure, the quantity of work available is always a concern, all the more so given the stagnation (globally and in Australia) which continues to dominate the global economy since the GFC. Governments should put top priority on stimulating job-creation, wielding the whole array of policy tools (fiscal, monetary, industry, trade, skills, and more) at their disposal. Spurring stronger demand for labour will automatically ease adjustment to new technologies and their labour-displacing effects.

    But the quality of jobs is an equal concern, and it is in this realm that the impacts of new technology may be most severe. The quality of new jobs created as technology advances, and the quality of existing jobs that are largely untouched by technology, must be targeted for forceful, ambitious policy attention, to arrest and reverse the widespread degradation of work which is being permitted by weak labour market conditions, technology, and the enhanced and largely unchallenged power of employers.

    After all, a sustained structural shift in bargaining power in the labour market, in favour of employers, has been a central goal of neoliberal economic and social policy. There has been an expansion of non-standard employment in all its forms: irregular hours, casual work, labour hire positions, precarious forms of contracting and self-employment, and more. This precarity has been facilitated by a combination of persistently weak labour market conditions (compelling desperate workers to take any job no matter how insecure); technologies which make it easier for firms to orient staffing around precarious and on-call work; and regulatory inattention and complacency. On this last point, regulatory levers for protecting workers have not kept up with employers’ efforts to sidestep traditional minimum standards. Even the simplest of standards (like the minimum wage) are widely unenforced.

    In short, to address the impacts of technology – and, more importantly, the one-sided application of technology within workplaces – we must modernise and revitalise the concept of a social contract. We need a social contract for the digital age, that re-establishes mutual responsibilities and expectations, that commits to improving both the quantity and quality of work as a central goal of policy, and that actively supports the countervailing forces (like unions, employment standards, and cultural expectations of fairness) that are essential to achieving more security and fairness in the world of work.

    The values of NSW Labor provide a solid foundation from which to embark on such a revitalisation. The party’s vision emphasises that ‘prosperity starts with good jobs’ and commits that the ‘benefits of rising prosperity are shared fairly’; working towards such collective prosperity is a stated goal (NSW Labor, 2017). Key to this prosperity from a Labor viewpoint is support for more equal opportunities in the labour market and an effective system for regulating work. These values are constant and are not altered by technology or innovation: they apply whether citizens are engaged to work in full-time, “old economy” jobs or precarious “gigging” in the digital economy. A challenge is posed, though, by the rhetoric of innovation that leads the launch of a shiny new app to distract from the business models that underpin it – often based on underpaid, insecure, or invisible labour. What is needed then is clarity and purpose to create a system for regulating work that is modern, but fair.

    Australian governments at all levels have been creative regulators of the labour market since Federation: think of the tax provisions implemented in the early years following federation. The Commonwealth government was constrained by the Labour power [Section 51 (xxxv)] of the Constitution, meaning that it could not intervene directly to set wages and conditions of work. However, it could impose taxes. The Excise Tariff Act 1906 passed by the Deakin government included a provision for manufacturers of agricultural machinery to be exempt from the excise if the workers in that company were paid a ‘fair and reasonable’ wage (Hamilton, 2011). The Harvester judgement that ensued is embedded in industrial relations folklore and has become synonymous with the establishment of minimum wages in Australia. However, what is often overlooked is that the mechanism used to establish this landmark was not a mechanism of traditional labour law – it was, after all, triggered by tax law.

    Labor Governments have not been alone in this regulatory innovation to address labour policy concerns. The Howard Government was just as inventive and driven in its determination to use the Corporations power [Section 51 (xx)] of the Constitution to create a national regulatory framework that downgraded collective bargaining and instituted statutory individual contracts. A further legacy of that re-orientation was the whittling away of State industrial relations jurisdictions. This might lead to the conclusion that a State Labor government has little capacity to influence the wages and conditions of workers beyond the public sector. However, this conclusion is too narrow, and underestimates the extent to which creative, ambitious interventions at the state level could contribute to the restoration of a progressive social contract.

    Consider, for example, the current Victorian government’s attempts to eradicate the exploitation of workers in industries like horticulture, through the introduction of a legislated licensing scheme for labour hire companies. This is illustrative of the potential for action by a State government to curb the exploitation of vulnerable workers. But legislation is not the only choice; there is a vast array of options on the regulatory spectrum.

    Another means of regulating for better outcomes outside the confines of labour law is to support industry-specific multi-stakeholder collaboration. A developing example of this is the Cleaning Accountability Framework. CAF is an independent, multi-stakeholder initiative comprising representatives from across the cleaning supply chain – including institutional property investors, building owners, facility managers, cleaning companies, cleaners (through United Voice) and industry associations. CAF seeks to improve labour standards by encouraging transparency throughout the cleaning supply chain. CAF will recognise stakeholders who adopt better practice in the cleaning industry through a building certification scheme. In doing so, CAF will work to improve the employment conditions of cleaners, support sustainable business models and responsible contracting practices, help building owners and investors manage risk, and assist tenants in ensuring that they are benefiting from quality cleaning services. Multi-stakeholder initiatives have been criticised for lacking enforceability, but CAF overcomes this by using the structure of the supply chain, specifically the power of building owners and managers to drive compliance.

    None of these examples are centred in the “gig economy,” nor do they address sectors immediately threatened by automation. But they nevertheless provide an insight into “‘outside the box” efforts to improve the quality and fairness of jobs. Similar ambition and creativity could provide a better regulatory environment for the conduct of all types of work – not least in the digitally enabled economy. This could begin with a comprehensive mapping of State-based regulation to identify potential opportunities to leverage existing laws, regulations, procurement policies and industry codes.

    This would be an ambitious project, but given the extent of State influence in major areas of the economy (health, education, transport), it would provide a plethora of policy options.

    Alternatively, if changes to work (whether wrought by technology or ‘innovation’ in business models) are left unquestioned, and if we assign the determination of working conditions to algorithms, then the aspirations encapsulated in “Labor values” will remain unrealised and, a chance to re-imagine a social contract based on decent work will be squandered.

    References

    Arthur, Don 2016, “Basic Income: A Radical Idea Enters the Mainstream,” Parliament of Australia, Research Paper Series 2016-17, November 18.

    Delaney, Kevin J 2017, “The robot that takes your job should pay taxes, says Bill Gates,” Quartz, February 17.

    Frey, Carl Benedikt, and Michael A. Osborne 2013, The Future of Employment: How Susceptible are Jobs to Computerisation? (Oxford: Oxford Martin School).

    Hamilton, R. S. 2011, Waltzing Matilda and the Sunshine Harvester Factory: The early history of the Arbitration Court, the Australian minimum wage, working hours and paid leave (Melbourne: Fair Work Australia).

    Mazzucato, Mariana 2011, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London: Anthem).

    NSW Labor 2017, “Our Values,”.

    Rifkin, Jeremy 1995, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era (New York: Putnam & Sons).

    Sarah Kaine is an Associate Professor at the UTS Business School, and a member of the Advisory Committee of the Centre for Future Work. Jim Stanford is Economist and Director of the Centre for Future Work, part of the Australia Institute.

    The post The Future of Work is What We Make It appeared first on The Australia Institute's Centre for Future Work.

  • The Paradox of Rising Underemployment and Growing Hours

    Paradoxically, underemployment and number of hours actually worked are both on the rise in Australia.

    Since 1978 from when the ABS started publishing data on the number of hours worked per month, the hours increased continuously. For example, in July 1978 slightly less than a billion hours was worked; the figure was 1.7 billion in June 2017 – a rise of 781.9 million hours worked a month. Compared with June 2008, 151.3 million more hours were worked in June 2017. The recently released Labour Account Australia, Experimental Estimates, July 2017 (by ABS) shows that between 2010/11 and 2015/16, hours actually worked increased by 5.7% from 19.15 billion hours to 20.23 billion hours.

    The rising number of hours worked should be a good news, provided it meant more income. But for the most part during this period real wages either stagnated or fell. Recent ABS data show that quarterly real wage growth stuck below 0.6% for three years, translating into an annual wage growth of just 1.9%, the lowest figure since the late 1990s, and probably the slowest rate of pay rises since the last recession.

    Hence the majority of workers are forced to work more hours in their struggle to maintain a decent living. Labour Account Australia, Experimental Estimates (July 2017) records that a good number of people work more than one job. Interestingly, increasing by 64,100 (9.2%), the growth in secondary jobs outstripped the growth in main jobs which increased by 791,700 (6.8%) over the six years to June 2016.

    It is also not surprising that people are wanting to work more hours, raising the incidence of involuntary underemployment. The most recent ABS estimate, for May 2017, shows 1.129 million Australians working fewer hours than they would like. This translates into an underemployment rate of 9.3%. When added to the current headline unemployment rate of 5.6%, we have a whopping “underutilisation” rate of around 14.9%!

    Labour exploitation is also on the rise as the unpaid overtime work gets longer. The Australia Institute’s 2016 survey (Excessive Hours and Unpaid Overtime: An Update) found that full-time workers were on average performing more than 5.1 hours a week in unpaid overtime. Part-time and casual employees work an average of 3.74 hours unpaid overtime per week. For full-time workers, average unpaid overtime is worth over $10,000 per year – or 13% of actual earnings. For part-time workers, lost income from unpaid overtime exceeds $7500 per year, and represents an even larger share (nearly 25%) of actual earnings. The lost income due to unpaid overtime represents a significant loss to workers and their families.

    Australians are putting in some of the longest hours (more than 50 hours) in the developed world, coming in 9th in a survey of OECD countries. Full-time employees are on average putting in extra 4.28 hours and part-time staff are working an hour over their contracted hours every week. ABS data show that around 30% of employed men and 11% of employed women report usual working 45 hours or more each week.

    Thus, Australian workers are over-worked and underpaid. They are both time and income poor.

    These paradoxes are not statistical quirks. They are the results of heightened job insecurity; but it is deliberate! It is caused by changes in the labour market institutions governing wage and employment conditions, designed to increase the share of profit and strengthen corporate power.

    Alan Greenspan, the former Chairman of the US Federal Reserve, made this very clear in his testimony to the Congress two decades ago (26 February, 1997). He elevated job insecurity to major status in central bank policy when he said, “Certainly other factors have contributed to ‘the softness in compensation growth” despite a low unemployment rate, but ”I would be surprised if they were nearly as important as job insecurity”.

    Workers have been too worried about keeping their jobs to push for higher wages, and this has been sufficient to hold down inflation without the added restraint of higher interest rates. He also acknowledged, “Owing in part to this subdued behavior of unit [labour] costs, profits and rates of return on capital have risen to high levels”.

    Most interestingly, according to Greenspan, widely regarded as the “guru” of present day monetary policy-makers, workers’ fear of losing jobs is not in itself sufficient; the sense of job insecurity has to be rising or getting worse to prevent any push for significant wage increases. This is because, once it levels off, and workers become accustomed to their new level of uncertainty, their confidence may revive and the upward pressure on wages resume, especially when more people find jobs and the unemployment rate drops.

    Right now, millions of Australians are feeling some level of job insecurity because of increased casualisation of employment and insufficient availability of full-time regular jobs. The increase in casual and non-permanent work is putting pressure on people to work harder for longer, and to work more hours unpaid.

    There are many reasons, from automation to slower growth of the economy, for increased job insecurity. But one factor contributed the most – the deregulation of the labour market in the name of increased flexibility. This not only involved moves from centralised to enterprise bargaining and to individual contracts, but also restrictions on union activities – both intended to weaken worker’s bargaining power and strengthen business’s hiring and firing power.

    One can easily blame successive Liberal-National Coalition Governments, starting from John Howard for this. But the Hawke-Keating Labor Government started the process, arguing that it was necessary to respond to changing global economic conditions and to remain competitive. The Hawke-Keating Government argued that linking wage bargaining to the enterprise performance would provide flexibility and hence boost productivity.

    The succeeding Howard-Costello Government increased so-called flexibility by introducing “work choices” (individual contracts) arguing the same. In 2007, Peter Costello said that the greatest risk to Australia’s prosperity is a return to centralised wage fixing: “Nothing could be a bigger threat to the Australian economy at the moment than moving away from decentralised wage fixation and going back to the past.”

    But alas; there has been no sustained boost in productivity growth. Instead, successive labour market reforms have allowed inefficient enterprises to survive. Employers  felt no pressure to upgrade technology, improve management practices or train workers to boost productivity, as both Labor and Coalition Governments, held hostage by the business group threatening to leave Australia for cheaper destinations, vied with each other to make Australia more hospitable – more “competitive” – for businesses by making labour cheaper and regulations looser.

    During 2016, Australia’s labour productivity growth was nil whereas it grew by 1.9% in OECD. Only 4 other OECD countries experienced lower productivity growth than Australia. Using the internationally comparable US Conference Board data, the Productivity Commission reported that Australia’s multi-factor productivity (MFP) growth in 2014 was negative (-0.9%) – and lower than China, India and Korea. MFP reflects the overall efficiency with which labour and capital inputs are used together in the production process. MFP growth in Australia continued to decline since the mid-1990s reaching a negative figure, i.e., declining during 2005-2010.

    The problem is well exemplified by Australia’s auto industry which survived only due to the life-line of government subsidies and some industry protection – recall the Rudd Labor Government’s $6.2 billion over the next 13 years and Abbott Government’s $900 million budget backdown. Despite all the flexibilities afforded by diluting the employment and pay conditions, one of just 13 countries in the world capable of building a car from the ground up, Australia’s 90-year history of assembling and building automobiles is coming to an end with the pulling off of the plug of government assistance.

    Therefore, the only way Australia can now compete internationally is by racing to the bottom; by lowering labour cost – cutting the penalty rates, lowering the minimum wage and diluting working conditions; in short, by underpaying the workers and forcing them to work longer hours. And this only can succeed by ensuring continued rise in job insecurity though underemployment, more spells of unemployment, more volatility in the hours the workers are expected to work and continued weakening of labour’s bargaining power.

    The post The Paradox of Rising Underemployment and Growing Hours appeared first on The Australia Institute's Centre for Future Work.

  • Budget Wrap-Up

    Wage Growth and Deficit Reduction

    Several commentators have highlighted the budget’s highly optimistic assumptions regarding future job-creation and wage growth incorporated into the budget forecast. The government is anticipating an immediate and sustained acceleration of all of the factors that contribute to the wage base for tax revenue: faster job-creation, significantly faster growth in hourly pay, and dramatically faster growth in total wages and salaries.

    Back in the real world, the labour market has been underperforming on ALL THREE of those components: slow job-growth, record slow growth in hourly wages, and falling weekly hours of work (due to the dramatic expansion of part-time and irregular work). For all of these reasons, total wages and salaries paid out in the economy (which forms the major basis for personal tax collections, both income and GST) actually declined in the latest quarter of GDP (Dec 2016).

    This table summarises the main wage assumptions in Mr. Morrison’s budget, contrasting them to the latest actual figures on each of the three criteria. The last budget (2016-17) missed the mark badly on all three criteria — but the likely undershooting error will be huge by the end of this budget’s forward estimates, unless there is a dramatic and sustained acceleration of employment and wages growth.

    Director Jim Stanford pointed out in this Huffington Post column that the current weakness in Australian wages is not an accident, nor is it likely to reverse automatically. Chronically weak aggregate labour market conditions, combined with structural attacks on the institutions that support wages (including unions, minimum wages, penalty rates, and others), have caused the unprecedented stagnation of wage incomes in Australia. The macroeconomic consequences of this state of affairs have been widely acknowledged — even by the government itself. (Mr. Morrison himself spoke recently of his concern with the impact of wage stagnation on his own budget targets.)

    As Stanford put it in his Huffington Post commentary, the contradiction between the government’s wage-suppressing economic and regulatory policies, and its hope that wage growth will nevertheless power the way to a balanced budget, is both glaring and unsustainable:

    “[Morrison’s] rose-coloured labour market assumptions will be sabotaged by his own government’s continuing war on workers and wages. And that’s one important reason why his hopeful deficit targets will not be realised.”

    General Optimism Regarding Revenue

    The budget’s optimistic wage growth assumptions are just one factor behind an overall revenue forecast that is downright ebullient. The main force behind the projected return to a balanced budget is an enormous assumed increase in tax revenues — very ironic coming from a government that regularly derides the alleged “tax-and-spend” procilivities of its opponents. Over the four years of the forward projection, annual revenues are expected to expand $120 billion by 2020-21 (or 30 percent). As a share of GDP, revenues are expected to swell by 2.2 percentage points, reaching the highest share (25.4% of GDP) since the peak of the mining boom (in 2005-06).

    There is no clear explanation of where these huge new revenues come from – especially given the revenue-reducing effect of other budget measures, including company tax cuts, the elimination of the deficit repair levy for high-income earners, last year’s bracket adjustments, and others. There are some modest revenue measures in the budget: including the 0.5% Medicare levy increase (after 2019), the levy on bank liabilities, and a new levy on employers who hire migrant labour. But those policy decisions account for just 6.5% of all new revenues assumed to be received over the coming 4 years — and they will be more than offset by the revenue losses from the other measures (especially the company tax cuts).

    If revenues stay constant as a share of GDP (instead of magically growing), the budget will be $45 billion short in 2020-21 – and the forecast small surplus will evaporate into a large continuing deficit. Indeed, as our colleagues at the Australia Institute have pointed out, this budget marks the fourth consecutive four-year LNP timetable for balancing the budget. The government’s tough talk on the dangers of deficit-financing, and stated intention to quickly achieve balance, have proven hollow. Many of its proposed spending cutbacks have been successfully resisted by community campaigning. And its rosy revenue forecasts have been consistently unfounded. There is no reason to believe this year’s four-year deficit elimination timetable is any more realistic than the last three.

    Robbing Peter to Pay Paul

    On the spending side, the government is announcing some modest new spending initiatives, totaling $9 billion over 4 years.

    But at the same time, they are announcing spending cuts to a wide range of programs (including higher education, welfare, and civil servants) – totaling $10 billion over the same period.

    The net impact of new policy decisions on spending is therefore $1 billion in the negative. Despite the promise of “better times” in the future, the government’s discretionary actions will reduce aggregate funding for the programs that Australians depend on.

    A Target Everyone Can Love: The Big Banks

    The government’s new 6 basis point “levy” on bank liabilities (ie. on outstanding loans) is forecast to raise $6.2 billion over 4 years.

    Many analysts believe this tax will be passed on to borrowers (since it is defined as a proportion of lending), and the government has not provided a convincing refutation of this concern. The levy is equivalent to a slight increase in the cost of capital for new lending. (In fact, this new “levy” is smaller than recent increases in interest rates which the banks have already passed on to their borrowers.)

    The government’s claim that the ACCC, with increased funding, will ensure the banks do not pass on the costs of the levy is laughable — as is its claims that competition from smaller banks will keep the big banks in line. Unless there is outright collusion and price-setting between the banks (something that is rare and unnecessary anyway), there is nothing illegal about passing on higher costs to consumers. Indeed, the ability to do this is precisely what explains the banks’ consistent above-normal profits (earning return on equity of 15 percent or more each and every year).

    At any rate, once the banks start to benefit from the full 5% reduction in their own corporate taxes (by 2026-27), they will still be saving billions each year on a net basis.

    The eminent economist Prof. Geoffrey Harcourt, a good friend of our Centre, put it this way in a blog comment:

    “The discussions on the levy/tax on the big four banks in the 2017 budget are often hysterical and beside the point. Because banks play an essential role in the running of the economy, they need protection through a guarantee from the government. Because of their oligopolistic market structure, they are in a privileged position to make large profits, a portion of which reflects their necessary privileged position, rather than any merit of their own. Common sense suggests that it would be both efficient and equitable that the banks be allowed to receive, say, the average rate of profits ruling in the economy as a whole without being taxed differently than any other form of enterprise in Australia. If their overall rates of profit are greater than the average – which they certainly are – the differences between the two sets of rates should be subject to a higher rate of tax so that the community at large receives a return on the privileged position the banks have been necessarily granted. The proposed levy is roughly akin to this proposal, which is tackling an equitable puzzle. It should not, in principle, be related to what is happening to the budget overall and especially to the sizes of any deficits or surpluses. These should reflect the outcome of attempting to meet the real aims of good government starting with achieving and sustaining full employment and sustainable growth.”

    Infrastructure Spending: Show Us the Money

    The government is boasting of $75 billion in infrastructure funding and financing over the next ten years. It is impossible to know how much of this represents new funds, nor when the funds would be delivered. Keep in mind that at present the government already spends over $18 billion per year on capital (or $200 billion over the next decade): both on new projects, and offsetting the wear and tear of existing assets. So the $75 billion “plan” ($7.5 billion per year) may or may not represent a substantial ramp-up in new capital spending by Canberra.

    In fact, the details of the budget do not seem to indicate any enormous expansion in capital spending. Net capital spending (after depreciation) is projected to decline in 2017-18: to just $0.5 billion, the smallest since 2002-03. (See Budget Table 3, reprinted below.) In essence, in the first year of the budget, the government will spend barely enough to offset depreciation of existing assets.

    Net investment grows in later years, but not dramatically. And as a share of GDP, net capital spending by the Commonwealth is projected to average just 0.2% of GDP over the forward projections. Over the last ten years, in contrast, it averaged 0.25% of GDP. In other words, under this budget, net Commonwealth capital spending will actually shrink relative to the economy.

    It is easy to come up with “big numbers” when talking about infrastructure programs (especially by summing totals over many years), and associated ribbon-cutting ceremonies will attract much attention. But there is no concrete evidence that this budget will accomplish the real and sustained increase in Commonwealth government capital spending that is needed. Commonwealth capital spending has declined in recent years compared to earlier decades, and there is no evidence that this budget will change that trend.

    Migrant Labour and Apprentices

    The government is imposing a new “head tax” on employers who hire foreign migrants: $1200 to $1800 per year per head for temporary migrants, and $3000 to $5000 for each permanent migrant (on a one-time basis). The revenues from this levy will be used to fund support for apprenticeships in conjunction with the states, to a total of $1.2 billion over the next 4 years.

    Funding skill programs through a tax on migrant labour is not an effective way to rebuild Australia’s battered vocational education system – nor is it an effective way to regulate employers’ over-reliance on temporary foreign migrants (rather than recruiting and training Australian workers). Indeed, the scale of revenues anticipated by the government suggests that incoming migrant labour will continue to constitute a major force in Australia’s labour market.

    Effectively regulating and reforming Australia’s migrant labour system – limiting its use to classifications where skilled workers are truly unavailable, and ensuring that migrant workers are entitled to the same protections as all other workers – would in fact undermine the head tax revenues that the government is now counting on.

    Check Out The Australia Institute’s Budget Analysis

    Our colleagues at the Australia Institute have also generated some useful and punchy commentary on the budget: see it all (including a hilarious podcast with economists Richard Denniss and Matt Grudnoff) on the Institute’s Budget Wrap page.

    The post Budget Wrap-Up appeared first on The Australia Institute's Centre for Future Work.

  • Economists Debunk Job-Creation Claims of Penalty Rate Cut

    A 3-person drafting committee wrote the letter and circulated it among the economics community. The committee included Stephen Koukoulas (Managing Director of Market Economics), John Quiggin (Dept. of Economics, University of Queensland), and our own Jim Stanford (Economist and Director of the Centre for Future Work). See the full letter, and list of signatories, below.

    The post Economists Debunk Job-Creation Claims of Penalty Rate Cut appeared first on The Australia Institute's Centre for Future Work.

  • Go Home on Time: Wednesday 23 November

    This year’s Go Home on Time Day is Wednesday, November 23. Visit our special Go Home on Time Day website for more information, to download posters and other materials, and use our online calculator to estimate the value of YOUR unpaid overtime.

    The focus of this year’s Go Home on Time Day is the threat to the “Great Aussie Holiday.” Thanks to the rise of precarious work in all its forms, a growing share of Australian workers (about one-third, according to our research) have no access to something we once took for granted: a paid annual holiday. Moreover, about half of those who ARE entitled to paid annual leave, don’t use all of their weeks – in many cases because of work-related pressures. And recent decisions by the Fair Work Commission allowing for the “cash out” of annual leave, mean that this great cultural institution – the Aussie holiday – is very much in jeopardy.

    Check out our special in-depth report, Hard to Get Away: Is the paid holiday under threat in Australia?, prepared by Troy Henderson of the University of Sydney, documenting these multiple threats to the Aussie holiday, and cataloguing the many economic, social, and health consequences that occur when we don’t get a break from work.

    We have also updated our regular calculations of the value of workers’ time that is effectively “stolen” each year by employers through massive amounts of unpaid overtime regularly worked in all industries and occupations: Excessive Hours and Unpaid Overtime: An Update.

    The post Go Home on Time: Wednesday 23 November appeared first on The Australia Institute's Centre for Future Work.

  • What’s Wrong With Privatization?

    Our Director Jim Stanford recently spoke with Unions NSW about this surprising development, and the general flaws in the argument for privatization.

    The post What’s Wrong With Privatization? appeared first on The Australia Institute's Centre for Future Work.

  • Looking for Jobs and Growth: Six Infographics

    The infographics summarize several of the specific economic variables considered in the full report, dating back to 1950 (and Prime Minister Menzies) in most cases.

    Average Annual Growth, Real Wages
    Average Employment Rate
    Growth in Personal Debt
    Average Annual Growth, Business Investment
    Public Sector Investment
    4 Signs of Turbulence Ahead

    The post Looking for “Jobs and Growth”: Six Infographics appeared first on The Australia Institute's Centre for Future Work.

  • Jobs and Growth… and a Few Hard Numbers

    However, the economy consists of more than just private businesses – and certainly more than the large businesses which attract the main attention from politicians and reporters.  Other stakeholders are at least as crucial for powering real economic progress: including workers, households, governments at all levels, small businesses, public and non-profit institutions, NGOs and the voluntary sector, and more.  So being “business-friendly” is no guarantee that the real economy (measured by employment, output, and incomes) will automatically improve.  Having a more complete understanding of all of the different ingredients required for economic progress is necessary, in order to properly analyze the likely impact of specific measures.

    To demonstrate the lack of correlation between a government’s stated economic orientation, and the actual performance of the real economy, this briefing paper compiles historical data on twelve standard indicators of economic performance: including employment, unemployment, real output, investment (of various forms), foreign trade, incomes, and debt burdens.  Consistent annual data is gathered going back to the 1950s, allowing for a statistical comparison of Australia’s economic record under the various post-war Prime Ministers.  We compare Australia’s economic performance under each Prime Minister, on the basis of these twelve selected indicators.

    There is no obvious correlation between these respective swings in Australia’s economic history, and the policy orientation of the government that oversaw them. And the statistical review indicates that the present government, regardless of its business-friendly credentials, has in fact presided over one of the weakest economic periods in Australia’s entire postwar history.

    The post Jobs and Growth… and a Few Hard Numbers appeared first on The Australia Institute's Centre for Future Work.