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Category: Research Reports

  • The Wages Crisis Revisited

    A comprehensive review of Australian wage trends indicates that wage growth is likely to remain stuck at historically weak levels despite the dramatic disruptions experienced by the Australian labour market through the COVID-19 pandemic. The report finds that targeted policies to deliberately lift wages are needed to break free of the low-wage trajectory that has become locked in over the past nine years.

    The report, The Wages Crisis: Revisited, authored by three of Australia’s leading labour policy experts: Professor Andrew Stewart from Adelaide Law School, Dr Jim Stanford from the Centre for Future Work, and Associate Professor Tess Hardy from Melbourne Law School, updates analysis and recommendations from their 2018 edited book, The Wages Crisis in Australia.

    The report shows that annual nominal wage growth recovered after initial lockdowns during the pandemic – but rebounded only to the same slow pace (just above 2% per year) recorded for several years prior to COVID. Unprecedented fluctuations in employment and labour supply, including a significant decline in the official unemployment rate, do not seem to have altered wage growth, which is still tracking at the slowest sustained pace in post-war history.

    The research found little correlation between the lasting slowdown in wage growth after 2013, and changes in supply-and-demand balances in the labour market. Traditional market forces did not cause the wages crisis, and market forces are unlikely to be able to fix it – even with a relatively low unemployment rate.

    Instead, the authors identified nine policy and institutional factors which were more important in explaining the deceleration of wages, including: the erosion of collective bargaining coverage; inadequate minimum wages; pay restraint imposed on public sector workers; and widespread wage theft.

    The problem of restrained compensation in public and human services reaches further than just the pay caps imposed directly on public servants. Wages in publicly funded services (like aged care, the NDIS, and early child education) are also held back by inadequate funding and weak labour standards in those programs. The report makes special mention of the need to improve wages in aged care, in the wake of the recent Royal Commission’s finding that wages in the sector must be improved as a top priority in improving care standards and attracting the new workers the sector needs.

    The authors suggest that nominal wages should grow faster than 4% per year in coming years, to restore healthy relationships with productivity growth, inflation, and national income distribution. But a resuscitation of wage growth will not occur without proactive wage-boosting policies.

    The authors list five broad measures to quickly support wage growth. One is a proposal for a new statutory definition of employment. This would prevent businesses from drafting contracts that present workers as being self-employed, even if in reality they have no business of their own. The authors predict that such arrangements will become far more widespread, including in the growing gig economy, in the wake of two recent decisions by the High Court.

    The post The Wages Crisis Revisited appeared first on The Australia Institute's Centre for Future Work.

  • Educating for Care: ECEC Skills Shortages

    Building a stronger, more accessible, and high-quality ECEC system is not just a top-ranking social priority for several reasons:

    • The ECEC sector supports hundreds of thousands of jobs.
    • It directly creates billions of dollars of value-added in the Australian economy.
    • It generates further demand for other sectors – both upstream, in its own supply chain, and downstream in consumer goods and services industries that depend on the buying power of ECEC workers.
    • It facilitates work and production throughout the rest of Australia’s economy, by allowing parents to work – although that goal would be much better achieved if Australia had a more comprehensive, universal, and public ECEC system.
    • ECEC enhances the long-term potential of Australia’s economy, and all of society, by providing young children with high-quality education opportunities – that are proven to expand their lifetime learning, employment, and income outcomes, and enrich their families and communities.

    Australia’s current market-based system for ECEC funding and service provision is incapable of meeting the needs of parents, families, and the broader economy. A drift to the market-based provision of ECEC services has undermined public provision in Australia and diminished the quality of service and the conditions under which it is delivered.

    From this crisis-ridden starting point, the staff recruitment and retention challenge in ECEC will become much worse, if in fact Australia were to make a long-term commitment to expand ECEC provision to adequately meet the needs of working parents (and the entire economy).

    Much public debate over the viability of expanded ECEC, putting Australia on a par with other leading industrial nations, has focused on the fiscal dimensions of that undertaking: how would we pay for it?

    If Australia is going to expand its ECEC system in line with the needs of working parents and employers, increasing funding to the Nordic-level average for ECEC must be considered, and ramping up high-quality vocational education for ECEC workers must be an immediate and highest-order priority to meet the workforce needs of expanded ECEC coverage.

    A long-term commitment to improved funding and service delivery, ideally aimed at matching Nordic-level coverage and quality benchmarks, would require a larger, better-trained, better-supported, and better-compensated workforce. A pro-active strategy for sustainable workforce development should be developed and implemented with input from all stakeholders, including ECEC providers, unions, VET institutions (particularly TAFEs), and government.

    The best possible education and care to Australian preschool-aged children should also be provided by the most highly trained and experienced workers – employed in delivering a public or not-for-profit service, and well-trained in public vocational education delivered through the TAFEs.

    In this sense, developing a universal public ECEC system is a natural analogue to developing a universal public VET system: building a world-class public ECEC system, staffed with top-notch graduates from public TAFEs, provides a dual source of economic and social benefit.

    Meeting the goals of high-quality ECEC services thus means recognising that the full and proper funding of Australia’s state- and territory-based TAFE systems must be an essential component of post-pandemic economic reconstruction.

    An active industry policy for ECEC will set the direction for the de-marketisation of ECEC services, with higher levels of government funding facilitating a vastly expanded system of ECEC in Australia.

    A vital prerequisite in this effort is establishing a stable, professional, well-supported ECEC workforce, by providing extensive education and training of ECEC workers, and their entry to secure, well-paid career pathways. This can only be achieved by fully funding the training and development of a regular pipeline of trained ECEC workers, led first and foremost by greater investment in publicly funded, TAFE-delivered education and skills, new mandates for workforce qualifications and staffing levels, and health and wellbeing quality frameworks that neutralise cost-competitive approaches to delivering ECEC services.

    The post Educating for Care appeared first on The Australia Institute's Centre for Future Work.

  • At the Crossroads: Post-COVID future of Australian universities

    The report analyses the current worrying state of Australia’s higher education sector based on current funding and policy trends, and provides an ambitious national vision for higher education that re-aligns the sector with its public service mission.

    At the Crossroads, authored by Eliza Littleton, identifies seven key policy initiatives including free higher education for domestic students, that if implemented, would put Australia’s public universities on a path toward full revitalisation.

    Key Findings:

    • Delivering free undergraduate education for domestic students, an expanded public research program, thousands of secure jobs, and a new national governance body for the sector would cost an estimated $6.9 billion per year in additional higher education funding. This funding would generate almost 27,000 additional jobs (FTE) in higher education through easing workload pressures, additional researching funding and staffing a new independent higher education agency.
    • Since 2013, Federal Government funding for higher education has declined in real terms by 2.6%, despite a 23% increase in student enrolments.
    • Federal Government funding as a percentage of university revenue has more than halved since the 1980s, declining from 80% in 1989 to only 33% in 2019. In Budget 2022-23, the government forecasts a cut to real university funding of 3.4% over the forward estimates.
    • Universities responded to the pandemic shock with dramatic job cuts. In the 12 months to May 2021, 40,000 jobs in public tertiary education were lost, with 88% of these losses estimated within public universities.
    • The Federal Government’s Job-Ready Graduates reforms result in a reduction in government spending on student learning of $1 billion per year, while student contributions increase $414 million per year.
    • In the face of COVID shocks, sustained international student fee intake combined with reduced teaching costs through online distance education and job cuts have primed universities for healthy surpluses this financial year. Despite that, universities are continuing with measures that further downsize and casualise their workforces,
    • Reduced government spending and university deregulation has led to teaching and learning crisis. Rampant casualisation, short-term contract use, excessive workloads, and wage theft characterise employment arrangements in Australia’s universities.

    The report recommends several measures to revitalise Australia’s public universities:

    • Free undergraduate education for domestic students
    • Adequate public funding for universities
    • Fully-funded research
    • Measures to provide secure employment
    • Improved higher education governance
    • Caps on vice-chancellor salaries; and
    • Transparency in data collection.

    The post At the Crossroads appeared first on The Australia Institute's Centre for Future Work.

  • The Economic Benefits of High-Quality Universal Early Child Education

    A universal ECEC system should be viewed as a fundamental goal for the future Australian economy. Achieving the superior quality and economic benefits of the Nordic systems cannot be done instantly, of course. But our ECEC policies should be reoriented and expanded, with a universal, publicly-delivered, high-quality, and affordable system akin to the Nordic benchmark as its end goal. That will require more substantial investments in ECEC funding, and its reallocation toward the not-for-profit and public facilities which deliver the best quality, and the largest economic benefits.

    The post The Economic Benefits of High-Quality Universal Early Child Education appeared first on The Australia Institute's Centre for Future Work.

  • Budget Analysis 2022-23: A Budget to Get to the Election

    This failure is all the more regrettable given the enormous discretionary fiscal resources which the government has at its disposal: the budget projects $133 billion in extra tax revenues over the next five years, compared to its MYEFO projections just three months ago, thanks to strong economic growth and rising nominal GDP. But instead of ploughing those revenues into reforming human services (like health, aged care, early child education, or disability services), undertaking a genuine policy to revitalise domestic manufacturing, or accelerating the energy transition, the government has prioritised one-time cash handouts to entice voters in the upcoming election.

    In this comprehensive budget overview, the Centre for Future Work’s team of economists unpacks the budget, considers its effects, and suggests alternatives.

    Our report reviews all aspects of the budget’s impacts on work and workers, including: wages, employment forecasts, vocational education and higher education, women workers and caring labour, labour standards enforcement, and manufacturing and energy jobs.

    Please also check out these rapid-response budget commentaries from two of our economists:

    “Six graphs that reveal the sugar-hit election strategy,” by Policy Director Greg Jericho in the Guardian Australia.

    “Budget billions wasted as real wages go backwards,” by Senior Economist Alison Pennington in The New Daily.

    The post Budget Analysis 2022-23 appeared first on The Australia Institute's Centre for Future Work.

  • Fragmentation & Photo-Ops: Australian Skills Policy Through COVID

    Analysis of VET system fragmentation and policy failures during COVID.

    Authors: Alison Pennington

    Download the full report.

  • Sustainable Industrial Jobs in the Hunter (aluminium)

    The report, by Jim Stanford (the Centre’s Director) and Alia Armistead, looks in detail at the Tomago aluminium smelter in the Hunter region of NSW. It is Australia’s largest smelter, and is currently powered through electricity mostly sourced from coal-fired generation. The facility has pledged to move to renewable power sources by 2030 – and the new report confirms that this would underpin long-term industrial and economic benefits felt in all parts of the country.

    The report reviews the worrisome deindustrailisation of Australia’s foothold in the global aluminium industry. Australia’s exports of raw bauxite have grown rapidly, but value-added aluminium manufacturing (including smelting) has declined. This undermines employment, exports, and spin-off jobs.

    The study also reports results of macroeconomic simulations of the overall impacts of the Tomago facility on the national economy (including employment, incomes, GDP, and government revenue). These effects, because of the economic linkages between the smelter, its supply chain, and the consumer goods and services industries which depend on its continued existence, are very large. Our results indicate the Tomago facility ultimately supports:

    • Over $1.2 billion in national GDP per year, with production benefits experienced in all states (70% in NSW).
    • Household disposable incomes of almost $500 million.
    • Direct and indirect employment of over 6000 jobs: in the smelter, in its various suppliers, and in downstream consumer industries.
    • Incremental government revenues worth $465 million per year: two-thirds of which is captured by the Commonwealth, and $120 million by the NSW state government.

    The study makes several recommendations for supporting Tomago’s transition to renewable energy, and enhancing Australia’s value-added aluminium presence. These include:

    • A clear and sustained commitment to rapid roll-out of renewable energy sources: Government should assist and accelerate Tomago’s transition to renewable power with clear, powerful measures to support expanded renewable energy developments, appropriate capacities (including batteries and pumped hydro) for backing up variable renewable power supplies, and fiscal measures that acknowledge the contribution Tomago could make (through the scale of its renewable energy purchases, as well as its potential role in demand-response measures that stabilise the regional electricity grid) to support NSW’s transition to renewable energy.
    • Full-cycle financial support and public equity: Our simulations confirm a large fiscal payback to state and Commonwealth governments arising from the operation of the Tomago smelter, its supply chain, and the downstream consumer industries which depend on its continued operation. This gives both levels of government a major fiscal stake in Tomago’s continuing operation. For that reason, in addition to supporting the roll-out of renewable energy, both governments should negotiate other forms of fiscal support for future capital improvements (including those tied to developments of renewable energy supply for the smelter).
    • Leveraging public infrastructure and procurement: Considerable demand for aluminium products will be forthcoming in future years as a result of the unprecedented investments being made by governments at all levels in new physical infrastructure: ranging from transportation to utilities to public buildings. The business case for continued aluminium manufacturing in Australia can be incrementally strengthened with pro-active efforts on the part of government to ensure that these investments (which are ultimately paid for by Australian taxpayers) embody maximum Australian-made content in all building materials and inputs, including aluminium.
    • A value-added trade policy: Australia’s laissez faire approach to international trade has concentrated Australia’s exports in the extraction and export of unprocessed or barely processed non-renewable resources; this has been coincident with a severe decline in domestic manufacturing and value-added activity, and a precarious dependence on imports to meet most domestic manufacturing needs. A rethinking of Australian trade policy could help reverse this damaging deindustrialisation. This must include active interventions to limit the inflow (often at prices below cost of production) of aluminium products from other countries which are not making reciprocal purchases of value-added merchandise from us. Trade policy should actively discourage exports of unprocessed bauxite, and instead require at least preliminary processing (and better yet, smelting) of Australian bauxite in Australian facilities.

    The post Sustainable Industrial Jobs in the Hunter appeared first on The Australia Institute's Centre for Future Work.

  • Rebuilding Vehicle Manufacturing in Australia (EVs)

    Global automotive manufacturing is rapidly transitioning to the production of Electric Vehicles (EVs) in line with technological advancements and the global community’s commitment to addressing climate change. This transition presents an enormous opportunity for Australia to rebuild its vehicle manufacturing industry, taking advantage of our competitive strengths in renewable energy, extractive industries, manufacturing capabilities, and skilled workers.

    Australia possesses many of the crucial elements for an EV manufacturing industry: rich mineral reserves, an advanced industrial base, a highly skilled workforce, and consumer interest. But what it lacks is an overarching, coordinating and strategic national industry policy. Global experience shows that this is central to EV-oriented industrial transformation. Australia can play an important role in global EV manufacturing industries but developing a strategy to realise this will require active government policy responses to both the challenges and opportunities at hand.

    Australia’s natural resource endowments and industrial capabilities make EV industry development a viable economic and social strategy. Our moral obligations to create a sustainable future make it essential public policy. This report illustrates how Australia can rebuild a vehicle manufacturing industry, on a sustainable ecological foundation, and meet our international environmental obligations. The report covers several important related dimensions of the issue:

    • How an EV manufacturing strategy can add value to Australia’s existing exports of primary resources – connecting them to innovative, sustainable manufacturing industries;
    • Developing supply and value chain linkages to the global EV industry by increasing the capability for innovation and advanced manufacturing amongst small and medium-sized enterprises;
    • The central role of Australia’s education systems in delivering sustainable industry-focused training and skills development, to provide workers with career pathways shaped by lifelong access to education and learning;
    • How active government intervention can coordinate economic sectors in an innovative and strategically oriented industry policy driving sustainable economic and technological transformation; and
    • Understanding the importance of automotive manufacturing to our industrial future, its role in redesigning transport systems, investing in new technology and gearing production systems to meet social and environmental requirements.

    To make the case for a national EV manufacturing policy, this paper reviews existing literature and presents relevant data to show that an EV industry in Australia is not just desirable – but it can also lead the sustainable transformation of Australia’s economy.

    The paper is arranged as follows. The next section provides an overview of the Australian national EV policy landscape and the international context, to identify trends and opportunities in EV manufacturing.

    The bulk of the paper is then dedicated to reviewing four key ‘Building Blocks’ of an industry policy: the resources sector, skilled labour, supply chain capabilities and capital assets, and the capacity of government to develop a policy response that assembles these key elements as the foundation for rebuilding Australian manufacturing with EVs at the centre.

    In mapping this foundation of an EV manufacturing policy, the subsequent section cautions that an EV industry is not a panacea for addressing the broader climate crisis and creating a sustainable economy. It argues, however, that a sustainable EV industry should be considered as a major driver of industrial transformation alongside other positive cultural and environmental changes within Australian society.

    The conclusion summarises the paper’s overarching theme that Australia can build a strong EV manufacturing industry with the right policy settings and government actions. It makes several specific recommendations to get the ball rolling on developing these settings – including recommendations touching on industry planning, energy requirements, consumer demand, resource use, supply chain developments, skills and training, and government support.

    The post Rebuilding Vehicle Manufacturing in Australia appeared first on The Australia Institute's Centre for Future Work.

  • New International Research: Australia’s Missed Wage-boosting Opportunities

    International comparison of wage-boosting policies Australia has not adopted.

    Authors: Stanford et al.

    Download the full report.

  • Putting a Cap on Community: Victoria’s Rate Caps (VIC)

    The Victorian Government’s policy of capping of local government rates revenue in Victoria is a regressive move on economic, social and democratic grounds. By arbitrarily tying the growth in total rates revenue in each local government area to price indexes, the state government restricts the ability of local governments to respond to the COVID-19 crisis with expanded, secure employment and service offerings.

    Rates on property are the largest single source of revenue to local governments in Victoria. Of total Victorian local government revenue in 2019-20 ($11.7 billion), rates accounted for $5.6 billion or almost half. Since 2016-17, the Victorian state government has capped the amounts local governments can collect from their ratepayers.

    New research by the Centre for Future Work, commissioned by the Australian Services Union, finds that the imposition of rate caps has cost up to 7425 jobs in 2021-22, counting both direct local government employment and indirect private sector jobs. They have also reduced GDP by up to $890 million in 2021-22. The costs of suppressed local government revenues, and corresponding austerity in the delivery of local government services, will continue to grow with each passing year if the policy is maintained.

    The rate cap policy becomes more restrictive as the overall economy slows, since the rate cap is tied to inflation indexes which tend to slow when the economy is weak.

    The local government sector in Victoria employs about 50,000 people in a wide range of services and occupations, including road planning and maintenance, home and aged care, waste disposal, libraries, childcare, school crossing supervision, maternal and child health, the State Emergency Service, and environmental management.

    The rate caps act as a brake on recovery and growth by embedding a dynamic of self-fulfilling fiscal restraint and austerity. Additionally, there has been a shift to other forms of local government revenue-raising that are less progressive and socially equitable, such as fees and fines.

    Rates bills are calculated based on relative property valuations – so even if local governments are collecting less from rates overall than they would in the absence of the cap, growth in a particular ratepayer’s payments may well exceed the overall cap.

    The rate cap policy inhibits a normal trend of expanding and improving local government services in line with population growth, rising living standards, and economic expansion – as well as interfering with the democratically-expressed preferences of local government voters.

    The post Putting a Cap on Community appeared first on The Australia Institute's Centre for Future Work.