My Blog

Category: Research Reports

  • The Fiscal, Economic, and Public Health Dangers of Water Privatisation (NSW)

    But beyond the obvious importance of good water systems to life, health, and well-being, the water system also constitutes a valuable economic asset in the overall portfolio of public enterprise (see box). Investments in high-quality water and sewage systems represent enormous sums of fixed capital. The financial and operational dimensions of water systems are significant to the fiscal and macroeconomic functioning of the whole state economy.

    In this context, suggestions that the Sydney Water system might be sold to private investors raise a wide range of significant concerns: regarding the efficiency and safety of their continued operation, access to healthy and affordable water services for state residents, and the economic implications for customers, workers, and state government itself. A new research report from the Centre for Future Work reviews some of those concerns, and considers the likely consequences of Sydney Water’s potential privatisation.

    Main findings of the report include:

    • Sydney Water represents an essential public asset, important for both economic as well as public health reasons
    • Sydney Water boasts total assets of almost $24 billion, public equity of $8 billion, annual revenues of $2.8 billion, and dividend and tax payments to the people of NSW that averaged $870 million per year since 2018
    • The state earns far more from dividend payments arising from its equity in Sydney Water, than it would pay in interest on an equivalent amount of public debt
    • Selling the utility would impose a significant fiscal cost on the state through lost dividend and tax revenues
    • Experience with privately-owned water systems in other countries suggests water charges would rise significantly under private ownership, largely because of higher interest costs, higher debt, and higher dividend payouts
    • Based on UK and US studies, Sydney Water customers could see their annual water bills grow under private ownership by 39% to 59% (or by an average of between $174 and $264 per customer per year).

    The report was commissioned by the NSW & ACT Branch of the Australian Services Union.

    The post The Fiscal, Economic, and Public Health Dangers of Water Privatisation appeared first on The Australia Institute's Centre for Future Work.

  • The Times They Aren’t A-Changin (enough) — gender & work

    This report examines the barriers to closing the gender gap by reviewing Australia’s position within the industrial countries of the OECD. The report also uses data from the ABS and the ATO to highlight gender disparities across all levels of income, ranges of occupation and ages, as well as disparities regarding who undertakes the greater share of unpaid work.

    One clear concern is gender segregation, where either men or women dominate an occupation or industry. Men have higher average salaries than women in 95% of all occupations, including those where women dominate the workforce. For example, women account for 99% of all midwives, and yet are paid on average 19% less.

    We identify 80 occupations in which men make up 80% or more of the workforce; these occupations have an average salary above $100,000. In contrast, no occupation where women make up that share of the workforce has such a high average salary. This highlights how segregation has reinforced massive differences in pay.

    The report recommends policies to promote greater access to childcare and parental leave for both parents, family-friendly work practices, and the lifting of wages for industries dominated by women – most urgently in the care sector.

    The post The Times They Aren’t A-Changin (enough) appeared first on The Australia Institute's Centre for Future Work.

  • Profit-Price Spiral: The Truth Behind Australia’s Inflation

    Workers in Australia have suffered considerable economic losses as a result of accelerating inflation since the onset of the COVID pandemic. Reaching a year-over-year rate of 7.8% by end-2022, inflation has rapidly eroded the real purchasing power of workers’ incomes; average wages are currently growing at less than half the pace of prices. Now, severe monetary tightening by the Reserve Bank of Australia (through higher interest rates) is imposing additional pain on millions of workers. Tens of billions of dollars of household disposable income are being diverted away from consumer spending, into extra interest payments made to banks and other lenders. Most ominously, signs of macroeconomic slowdown from higher interest rates portend job losses and even greater income losses in the month ahead.

    The pain experienced by workers through this inflationary episode contrasts sharply with an unprecedented upsurge in business profitability at the same time. Additional profits resulted from businesses increasing prices for the goods and services they sell, above and beyond incremental expenses for their own purchases of inputs and supplies. This dramatic expansion of business profits (taking gross corporate profits to almost 30% of national GDP, the highest in history) has been mostly unremarked on by the RBA and other macroeconomic policy-makers. They have focused instead on the supposed risk of a ‘wage-price’ spiral. However, new empirical evidence confirms the dominant role of business profits in driving higher prices in Australia – not wages. This suggests the focus of monetary policy on wage restraint is misplaced and unfair.

    Major findings:

    • As of the September quarter of 2022 (most recent data available), Australian businesses had increased prices by a total of $160 billion per year over and above their higher
      expenses for labour, taxes, and other inputs, and over and above new profits generated by growth in real economic output.
    • Without the inclusion of those excess profits in final prices for Australian-made goods and services, inflation since the pandemic would have been much slower than was experienced in practice: an annual average of 2.7% per year, barely half of the 5.2% annual average actually recorded since end-2019.
    • That pace of inflation would have fallen within the RBA’s target inflation band (equal to its 2.5% target plus-or-minus 0.5%). Even within the RBA’s own policy rule, therefore, current painful interest rate hikes would be unnecessary.
    • A second scenario considered below allows for modest nominal inflation in unit profit margins, consistent with the RBA’s 2.5% target – once again, above and beyond the costs of other inputs (including labour and taxes) and the growth of profits due to expanded real output. Even in this scenario, inflation would have averaged just 3.3% since the pandemic, only slightly above the target band, and current harsh interest rate changes would again have been unnecessary.
    • Analysis of the income flows associated with excess inflation since end-2019 confirm the dominance of corporate profits in the acceleration of inflation since the pandemic. Excess corporate profits account for 69% of additional inflation beyond the RBA’s target. Rising unit labour costs account for just 18% of that inflation.
    • The distributional dimensions of post-COVID inflation (falling real wages, falling labour share of GDP, and record corporate profits) are completely opposite from the experience of the 1970s (when real wages rose, the labour share of GDP increased, and corporate profit margins fell). This historical comparison confirms that fears of a 1970s-style ‘wage price spiral’ are not justified. Instead, inflation in Australia since the pandemic clearly reflects a profit-price dynamic.

    The post Profit-Price Spiral: The Truth Behind Australia’s Inflation appeared first on The Australia Institute's Centre for Future Work.

  • Lost at Sea: Productivity Commission’s Container Port Report

    By several indicators, Australian container ports have demonstrated superior and globally competitive productivity performance, including:

    • 7.8% annual compound growth in number of containers handled.
    • 3.6% annual compound growth in containers handled per hour of work (more than twice average productivity growth in the broader economy).
    • 5.9% annual compound growth in equivalent container units handled per crane.

    The Productivity Commission’s claims that Australian ports are not ‘technically efficient’ rests on a faulty methodology which assumes that ports should minimise use of productive inputs (including land, capital, and labour) to meet any given volume of traffic. But in the real maritime logistics industry, other criteria – including ship turnaround time, and ability to respond to fluctuations in demand – are more essential for shippers.

    “Even the Commission’s own abstract modeling confirms that Australian ports can be as efficient, or more efficient, than global benchmarks,” said Dr Toner. “By more practical measures such as turnaround time, flexibility to accept fluctuations in volume, and safety, Australian ports are both efficient and productive.”

    The report was especially critical of the Productivity Commission’s blanket assertion that unspecified industrial relations practices in Australian ports are the source of purported ‘technical inefficiency.’’

    “The Productivity Commission report provides no hard evidence that workplace practices are reducing productivity in our ports,” Dr Toner added. “Its assertions are unbalanced, and reflect an ideological predisposition to blame unions rather than being based on careful empirical analysis.”

    Dr Toner’s 50-page report highlights numerous methodological problems and inconsistencies in the Productivity Commission’s analysis of port productivity. It concludes by urging the current Commonwealth government to reject the Commission’s draft recommendation to revise the Fair Work Act in order to restrict collective bargaining and industrial activity in ports and related activities.

    The Commission’s inquiry into port productivity was commissioned before the 2022 federal election by the former Coalition federal government. Its draft report was released in September.

    The post Lost at Sea appeared first on The Australia Institute's Centre for Future Work.

  • Theft By Any Other Name: GHOTD 2022

    Go Home on Time Day 2022 — Australians working 6 weeks unpaid overtime.

    Authors: Littleton, Raynes

    Download the full report.

  • Call Me Maybe (Not): Working Overtime & Right to Disconnect

    The survey results presented in this report show that overtime is a prevalent and systemic issue in Australia, primarily driven by working conditions within the control of employers.

    • Seven in ten (71%) workers reported having performed work outside of scheduled working hours. While only 29% of workers indicated that they have not done overtime.
    • Of those who completed overtime, the largest share performed overtime often, as opposed to sometimes, rarely, or never.
      • Almost half (44%) reported often performing overtime to meet employer expectations, and another 31% performed overtime sometimes.
      • Overtime was fairly evenly spread across industries and occupations, suggesting it is not an isolated issue that can be resolved with a targeted solution.
    • The incidence and frequency of overtime are more common among men, young people, those with full-time jobs, and those in goods producing sectors or working as managers.
    • The most common reasons workers perform overtime were having too much work (36%), followed by staff shortages (28%), less interruptions working outside normal hours (26%), and managers’ or supervisors’ expectations (23%).
    • Over a third of workers (38%) reported that overtime was an expectation in their workplaces.

    Overtime doesn’t come without cost: it has significant consequences for workers, their families, and for society more broadly.

    • The most commonly experienced negative consequences of overtime work were physical tiredness (35%), followed by stress and anxiety (32%), and being mentally drained (31%), each affecting around a third of workers.
    • Over a quarter of workers reported that overtime interfered with their personal life and relationships (27%), and 17% responded that it led to disrupted or unfulfilling non-work time.
    • One in five workers identified that working outside scheduled hours negatively affected their relationship with work; 22% reported reduced motivation to work, and 19% experienced poor job satisfaction.

    Australia has enterprise agreements, modern awards, and national employment standards that are intended to set out limitations on working times. However, the prevalence of overtime suggests that Australia’s industrial relations systems are not properly protecting the boundaries between work and non-work time for many workers. In particular, existing laws have done little to prevent the creep of work into private time, aided by technology. This is why workers, employers, unions, and governments around the world have been looking at how to implement a ‘right to disconnect’.

    Our survey found considerable support amongst Australia workers for a right to disconnect.

    • Six in seven (84%) workers expressed support for the Federal Government to nationally legislate a right to disconnect that directs employers to avoid contacting workers outside of work hours, unless in an emergency.
      • Only 8% opposed the idea of a right to disconnect.

    A right to disconnect could take several forms, and be implemented via different avenues in Australia. Based on international examples and the attitudes of workers in Australia, this report finds that implementing the right within the national employment standards would be the most effective.

    • Four in five (80%) workers thought that a right to disconnect would be effective if legislated in national employment standards, making it the avenue viewed as effective by the most workers.

    This report provides strong evidence for the government to pursue a right to disconnect as a way of limiting the creep of work into non-work time.

    The post Call Me Maybe (Not) appeared first on The Australia Institute's Centre for Future Work.

  • Public Services in the Hunter (NSW)

    State-funded programs account for the lion’s share of public service jobs in the Hunter region: over 80% in total (in health care, education, state government, transport, first responders, social services, and more). That means a strong and stable commitment by state government to funding these services will be essential for the Hunter to continue reaping these economic and social benefits.

    Major findings of the report include:

    • Four sectors in which public provision is especially important (including health care, education, public administration and safety, and transportation) account for 35% of total Hunter region employment, and 85% of net job growth, in the last 5 years.
    • State-funded services alone account for almost 30,000 direct full-time equivalent (FTE) positions in the Hunter region, making this sector the largest single employer in the region. Those services add over $3 billion per year to regional GDP.
    • Combined wages and salaries for state public sector workers in the Hunter total $2.65 billion per year – constituting an enormous injection of household income and spending power into the regional economy.
    • State-funded service providers in the Hunter (including hospitals and schools) purchase some $1.3 billion worth of “upstream” inputs, materials, supplies, and services from private businesses in the public sector supply chain.
    • Consumer spending by state public service workers in the Hunter (and those in the supply chain) adds $1.75 billion to the sales of consumer goods and services businesses, most of them located right in this region.
    • For every 10 direct jobs in state-funded public services, there are another 5 indirect jobs in upstream supply chain and downstream consumer industries. In total, 45,000 regional jobs (public and private) depend on continued provision of high-quality state public services.
    • Public sector jobs are an especially important source of work and income for women. Women account for 64% of jobs in major Hunter public sector industries. The gender wage gap in public services is much smaller (12% for full-time ordinary earnings) than in the private sector.
    • Public services are especially important in regional areas, due to dispersed and older populations; greater distances between communities; and limited alternative employment opportunities. State service jobs (FTEs) make up 11.4% of all employment in the Hunter, 2 percentage points more than in Sydney.

    There is an unfortunate tendency in politics to view public services as merely a cost item on a government budget. But in fact they are a vital driver of economic growth and job-creation.

    State-funded public services also support tens of thousands of private sector jobs in the Hunter, both upstream in the supply chain and downstream through consumer goods and service sectors. It is vital to the prosperity of the whole region that these services are supported and well-funded.

    International evidence indicates that quality of life considerations (including community safety, housing, transportation, and culture and recreation) are increasingly vital in attracting new business investment to a region. This requires continued public fiscal support for top-quality public services.

    Please see the full set of fact sheets, Public Services in the Hunter: An Engine of Economics and Social Prosperity, prepared by Jim Stanford below. The fact sheets were commissioned by Hunter Workers.

    The post Public Services in the Hunter appeared first on The Australia Institute's Centre for Future Work.

  • Going Nuclear: Costs of Mid-Bargaining EA Termination

    Research on the ‘nuclear option’ of enterprise agreement termination.

    Authors: Raynes, Stanford

    Download the full report.

  • Collective Bargaining and Wage Growth in Australia

    The measures provided here will not suddenly transform Australia in the image of leading OECD countries, where centralised and coordinated collective bargaining covers most workers, and wage outcomes are much more equal as a result. But they would support a gradual restoration of collective bargaining coverage, consistent with practices in other countries where bargaining still occurs mostly at the enterprise level – but where some broader bargaining and coordination is possible. On that basis, and over several years, this should result in a partial restoration of bargaining coverage lost over the past decade, and a corresponding (but still incomplete) recovery in wage growth.

    The post Collective Bargaining and Wage Growth in Australia appeared first on The Australia Institute's Centre for Future Work.

  • The Cumulative Costs of Wage Caps for NSW Essential Service Workers

    In this new report, Centre for Future Work Economist and Director Jim Stanford adds up the enormous and growing cost of this decade-long wage suppression for nurses, midwives, and other public sector workers in NSW.

    In any given year, the state’s wage cap reduces compensation below what would have been determined under normal free collective bargaining processes. When sustained over many years, however, the wage caps have an exponential effect in suppressing compensation levels. That’s because each year’s continued wage cap is applied against a lower starting wage base. Over time, the gap between capped and negotiated pay widens dramatically.

    The report estimates that compared to long-run pre-cap compensation trends, experienced nurses and midwives made $335 less per week in 2021-22 (or $17,500 less for the year) compared to pre-cap trends. On a cumulative basis, they have already lost $80,000 in compensation since the caps were introduced.

    But that pay suppression will continue to get worse if the caps are maintained. By 2023-24, on the basis of the government’s stated plan to suppress compensation growth to 3% and 3.5% (and restrain wages even lower, after adjusting for superannuation), the loss in wages will grow to $390 per week (or over $20,000 for the year), and the cumulative loss for someone who has worked throughout the wage cap period will reach $120,000.

    Worse yet, for three consecutive years, the NSW pay caps have reduced wage growth well below inflation, resulting in a significant erosion of real wages for nurses, midwives and other public sector workers. Public sector workers will see real purchasing power decline by 7.5% by end 2023-24 (on the basis of RBA inflation forecasts and the NSW government’s stated cap). That is equivalent to a loss of $6750 for a full-time experienced nurse or midwife.

    The economic pain experienced by public sector workers will not even stop when they retire. Because superannuation contributions are tied automatically to wages, nurses, midwives, and other public sector workers have lost thousands of dollars in superannuation contributions from their employers — and thousands more in foregone investment income on those contributions. That will translate into reduced superannuation balances and pension income after retirement. Already, an experienced nurse or midwife has had their pension income reduced by $1000 per year, and those losses will get larger the longer the pay caps are maintained. And because of the sustained suppression of their wages (and hence their superannuation savings), the goal of a decent stable retirement is increasingly out of reach for many NSW workers — especially for women, and especially for those who do not own their home. The report indicates that under existing capped wages, a nurse or midwife who is single, female, and rents their accommodation will accumulate less than half of the superannuation savings required for them to meet the ASFA comfortable retirement income threshold.

    In summary, the NSW’s ongoing suppression of pay for public sector workers, whose commitment has been essential to helping NSW residents through the pandemic, is arbitrary, anti-democratic, and economically damaging. The report recommends that the government abandon this policy, and instead engage in normal pay negotiations with public sector workers and their unions, on the basis of normal wage determinants.

    The post The Cumulative Costs of Wage Caps for Essential Service Workers in NSW appeared first on The Australia Institute's Centre for Future Work.