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Tag: COVID-19

  • Post-COVID Manufacturing Renewal Represents Potential $50 Billion Boost to Economy

    Key Findings:

    • Australia ranks last in manufacturing self-sufficiency among all OECD countries. Australians use $565 billion worth of manufactures each year, however, we only produce $380 billion. Therefore, Australia produces only 68% (just over two-thirds) of what we use: less than any other OECD economy.
    • The COVID-19 pandemic has highlighted the strategic importance of domestic manufacturing capacity. Disruptions in global supply chains and protectionist trade policies by foreign governments have increased risks we might not be able to access essential products (like health equipment and supplies) when we need it.
    • Manufacturing is not just ‘another’ sector of the economy. For several concrete reasons, manufacturing carries strategic importance to broader national prosperity and security.
      • Australians purchase and use more manufactured goods over time; and manufacturing output is growing around the world. Allowing domestic manufacturing to decline, while our use of manufactured products grows, undermines national economic performance.
      • Manufacturing is the most innovation-intensive sector in the whole economy. No country can be an innovation leader without a strong manufacturing base.
      • Manufactured goods account for over two-thirds of world merchandise trade. A country that cannot successfully export manufactures will be shut out of most trade.
      • Manufacturing anchors hundreds of thousands of other jobs throughout the economy, thanks to its long and complex supply chain. Billions of dollars’ worth of supplies and inputs are purchased by manufacturing facilities, supporting many other sectors of the economy.
      • Manufacturing offers high-quality jobs, full-time hours and above-average incomes. And thanks to strong productivity growth and the capacity to apply modern technology, manufacturing offers the prospect of rising incomes in the future.

    “As Australian governments and business leaders realise the importance of manufacturing in rebuilding the national economy after COVID, this research shows that Australia now has the smallest manufacturing industry relative to domestic purchases of any OECD country,” said Dr. Jim Stanford, Director of the Australia Institute’s Centre for Future Work and author of the report.

    “These findings confirm the enormous task ahead of the country in rebuilding our domestic manufacturing capacity. However, it also highlights the enormous economic benefits that would be generated by getting manufacturing back to a proportional size: including $180 billion in new sales, $50 billion in new GDP, and over 400,000 new direct jobs.

    “While two-way international trade in manufactured products will always be essential, as a nation we should be manufacturing in aggregate as much as we are using. If we rebuilt a manufacturing sector that was broadly proportionate to our needs, our manufacturing industry would grow by almost 50% – generating enormous benefits in jobs, incomes, innovation and exports.”

    The post Post-COVID Manufacturing Renewal Represents Potential $50 Billion Boost to Economy appeared first on The Australia Institute's Centre for Future Work.

  • Repairing Universities & Skills Key to Meeting COVID-Era Challenges

    Our Senior Economist Alison Pennington was interviewed by UTS The Social Contract podcast on how COVID-19 is reshaping relations between universities, government and industry. 

    Alison explains how the pandemic economic crisis presents significant challenges to Australia’s fragmented, underfunded and unplanned skills system wounded from decades of failed marketisation policies, and why sustained public investments in skills and jobs pathways will be essential to solving our economic and social challenges. 

    Listen to the episode on Whooshkaa. She is joined by Megan Lilly, head of Workforce Development at the Australian Industry Group.

    The post Repairing Universities & Skills Key to Meeting COVID-Era Challenges appeared first on The Australia Institute's Centre for Future Work.

  • Australia Needs Universal Paid Sick Leave To Get Through the Pandemic

    In this commentary, which originally appeared in 10 Daily, Centre for Future Work Senior Economist Alison Pennington discusses the consequences of low paid sick leave coverage for worker safety and public health efforts during the pandemic, and reviews the merits of a universal paid sick leave scheme to address both COVID-19 and precarious work.

    ‘No More Heroics Going To Work Sick’ Sounds Fine Unless You Have No Paid Leave

    Remember the Codral ‘soldier on’ television commercial? “With Codral you can soldier on”.

    In 2008 a concerned citizen on a WA hospital pandemic influenza committee complained to the Advertising Standards Bureau (ASB), worried the ‘soldier on’ message would ingrain community habits that could undermine emergency efforts during a national/international pandemic.

    The ASB dismissed the complaint, agreeing that Codral was designed to self-medicate for “sniffles”, not for more serious influenza symptoms.

    Now fast-forward to the present day. The world is facing a global pandemic. It’s clear the decision has not aged well.

    Outlining plans to get people back to work, Chief Medical Officer Brendan Murphy announced last week “no more heroics”. Going to work with a sniffle is now “off the agenda for every Australian for the foreseeable future”.

    I welcome Murphy’s sentiment. Changing social attitudes and behaviours is key to infection control.

    But sentiment isn’t policy.

    Murphy’s public health directive is out of touch with the reality for working Australians who, Codral or not, continue to soldier on in a labour market marred by precarity, low wages, and jobs without basic sick leave protections.

    In fact, more than 3.3 million workers have no access to sick leave – almost one in three workers. This includes almost one-quarter of the workforce employed on a casual basis. One million more are independent contractors, including many so-called ‘gig workers’ — better described as misclassified employees like food delivery drivers.

    Casuals without sick leave are often the most vulnerable workers in the economy. As unemployment surges they will feel increasingly pressured to work every shift they can. There are real financial consequences of taking unpaid leave from the workplace. The bills don’t stop rolling in. Rent needs to be paid.

    Even before the pandemic, going to work sick is not some benign workplace habit. Taking sick leave is perceived by many bosses as a lack of commitment to the job. Workers are often punished for absences with diminished opportunities and disciplinary performance management akin to bullying. This fuels high levels of presenteeism — even for those with sick leave entitlements.

    The new COVID-19 work regime is exposing society-wide risks of unequal sick leave coverage. About 30 percent of the workforce have the potential to work from home — predominantly professionals, managers and administrative workers. Insulated from contagion, remote workers are paid almost 25 percent more than those working outside the home. They’re more likely to be permanent, full-time workers with sick leave.

    Meanwhile millions of essential workers across supermarkets, transport, cleaning and community and social services go to work each day exposed to both income precarity and higher viral loads, all without the ‘safety’ of sick leave and secure work.

    The common factor in the two major workplace COVID-19 outbreaks at Cedar Meats and Newmarch House aged-care facility is labour hire: on-call work with no guarantee of future shifts. And no sick leave.

    To put it bluntly: in a pandemic, insecure jobs with no sick leave will literally kill people.

    The Fair Work Commission introduced two weeks unpaid sick leave for half the private sector workforce in April. Unpaid sick leave is, however, useless in preventing workers coming to work unwell if the outcome of sickness is still financial punishment.

    This is why Australia needs universal paid sick leave: a system that allows for up to four weeks of leave to account for the full incubation, treatment and recovery lifecycle of COVID-19.

    It’s easy to do this. The New Zealand Ardern Government introduced a sick leave scheme for all NZ businesses, organisations and self-employed people under hardship due to COVID-19 from day dot. Australian policymakers have been slow to act on sick leave reform, but it can act now.

    A universal sick leave scheme can be publicly funded and transferred to employers at a future date when they’re in better shape. To signal the transfer of obligations, the entitlement should be entered into the National Employment Standards (NES) — the set of minimum employment conditions covering all employees — with an additional scheme for independent contractors not covered by the NES.

    The elephant in the room is that government intends to plough on with a ‘bosses knows best’ industrial relations agenda that would expand casual jobs (without sick leave), cut wages, and undermine workplace coordination needed to contain the disease.

    But it will be impossible to resume economic activity without universal paid sick leave — lest we risk dangerous and costly outbreaks.

    Trust, discipline and sacrifice has been demonstrated by Australians to flatten the curve and ensure community safety. It’s time government reflected this good will in people’s working lives.

    The virus doesn’t care about the employment status of its host. We must combine principles of public health with safe, secure jobs.

    Taking a codral won’t help us soldier on through this pandemic. Legislating universal paid sick leave will.

    The post Australia Needs Universal Paid Sick Leave To Get Through the Pandemic appeared first on The Australia Institute's Centre for Future Work.

  • Pandemic Shows Australia Needs Domestic Manufacturing

    In this commentary, Centre for Future Work Economist Dan Nahum reviews the qualitative reasons why manufacturing retains a special strategic importance to the overall economy, and discusses the potential synergies between the development of sustainable energy resources and a revitalisation of manufacturing.

    Rebooting the Australian Manufacturing Sector in the Era of Coronavirus and Climate Change

    Since the COVID-19 crisis emerged, Australians have been starkly reminded of the importance of being able to manufacture goods domestically. International shortages of, and restrictions on, the export of medical equipment and personal protective equipment have given us all a fright. While thankfully critical shortages have not yet emerged, the crisis has confirmed that being able to domestically produce a full range of essential manufactures is a matter of national wellbeing.

    For many years the conventional economic wisdom was that as a high-wage, resource-rich economy, Australia was unable to competitively manufacture — nor did it need to. Between digging up raw materials and shipping them to Asian trading partners (subsequently paying a premium for reimported manufactures made from those resources) and our pivot to a ‘service economy’, we could somehow sidestep the need to produce what we materially use. Even Treasurer Josh Frydenberg has now conceded that unbalanced strategy is not viable.

    It’s true the extraction of our extraordinary mineral endowment made some Australians wealthy, but in a lopsided way: unbalanced reliance on resource extraction, combined with the long decline of manufacturing, has made Australia far more unequal — indeed, we are now more unequal than most OECD nations. Additionally, this myopic economic focus has put us at the mercy of boom-and-bust cycles in global demand for our resources.

    There are many core reasons why Australia needs a healthy, proportionate manufacturing sector:

    • Australians are buying more manufactured goods over time; and manufacturing output is growing around the world. The absolute decline of manufacturing in Australia is an exception to the experience of other industrialised countries.
    • Manufacturing is the most innovation-intensive sector in the whole economy. No country can be an innovation leader without manufacturing.
    • Manufactured goods account for over two-thirds of world merchandise trade. A country that cannot successfully export manufactures will be shut out of most trade.
    • Production costs in Australia are not expensive relative to other industrial countries (now that the Australian dollar is once again trading in normal range).
    • Even small remote countries (like Korea, Ireland, New Zealand and Israel) are increasing their manufacturing output, and preserving and creating manufacturing jobs. Their experience demonstrates that we cannot blame geographic isolation for our deindustrialisation.
    • Manufacturing anchors hundreds of thousands of other jobs throughout the economy, thanks to its long and complex supply chain. A myriad of supplies and inputs are purchased by manufacturing facilities.

    There’s another key reason to be optimistic about Australian manufacturing — if we create an appropriate policy environment for it. Australia is poised to take advantage of our bountiful renewable energy endowment to reinvigorate manufacturing, on the foundation of plentiful, competitive, and reliable power.

    Read The Centre for Future Work’s report Powering Onwards: Australia’s Opportunity to Reinvigorate Manufacturing through Renewable Energy, which considers the potential and actual connections between renewables and manufacturing in detail.

    The following core policy levers would help to ensure that Australia’s manufacturing sector thrives in decades to come, enhancing our prosperity and our national security:

    Targeted Tax Incentives: No-strings-attached tax cuts for corporations do not stimulate investment, innovation, or employment. Rather, fiscal incentives are more effective when they are linked directly to investment. Examples include accelerated depreciation provisions (allowing companies to write off the cost of new investments faster), investment tax credits, and public co-investments in specific strategic projects.

    Investing Public Funds in Key Industries: International experience confirms that public financial assets can effectively lever greater capital investment in key industries. These include state-owned development banks (as in Japan and Korea) or other forms of sovereign wealth (as in Singapore, the UAE, and Norway). Public investment vehicles have been used successfully — indeed profitably — in numerous applications in Australia (for example, the CEFC to finance sustainable energy projects). The same principles can apply in manufacturing investment. Additionally, industry super funds could play a larger role in financing the development of strategic products and sectors.

    Innovation: Empirical evidence shows successful innovation must be embodied in the hands-on process of ‘learning by doing’. And there is no other sector more directly connected to the innovation process than manufacturing. Government needs to provide tangible, direct support to innovation in manufacturing. We need better systems for linking public innovation activity with commercial applications. And we can emulate successful public equity investments in innovation-intensive businesses in other countries (like the effective methods for financing innovative firms used in Israel, Finland, and Ireland).

    Sector Strategies: Government needs to identify manufacturing sub-sectors with the right criteria for success, and then co-ordinate investment and growth. These sector strategies must engage all relevant sector stakeholders (business, unions, educational institutions, research organisations, state and local governments). Even businesses which compete with each other can benefit when the whole sector succeeds. Criteria for identifying high-potential sectors include innovation, export orientation, productivity, and strong supply chain linkages.

    Networks, Eco-Systems, and Clusters: Successful modern industrial policy relies centrally on connections and collaboration among players from different firms, agencies, and stakeholders. Research shows that spillovers among these diverse sector participants, and the sharing of knowledge between them, are crucial to the development of ‘critical mass’ in any high-tech industry. Often, these networks and clusters are geographically concentrated. Government cannot simply ‘create’ clusters, but it can facilitate their emergence.

    Industrial Infrastructure: Government investments in public capital assets of all kinds will play a crucial role in fostering manufacturing growth. Infrastructure investments help to offset the sustained weakness of private investment, and improve weak macroeconomic conditions. One key focus of infrastructure investment should include facilities and services which support manufacturing: ranging from transportation infrastructure, to utility connections (especially renewable energy), to modern training facilities (to help better integrate TAFE and university training with industry). We should maximise the use of Australian-made manufacturing content in those (and all other) infrastructure projects.

    Connecting Renewable Energy Investment to Manufacturing: Given Australia’s superabundance of renewable resources, Australia should position itself as the world’s renewable energy superpower. Renewable energy is appropriate for most industrial applications, including heavy industry, and now offers lower costs than fossil fuel sources (including gas). To expedite the transition to renewable energy, the manufacturing sector requires stability in energy policy, industrial strategies to take advantage of Australia’s renewable energy endowment, and government partnerships with firms that can benefit from and add value to Australia’s renewable energy endowment.

    Skills and Capacities: Enhancing the future skills and capacities of workers must be a vital component of future sector strategies. Consistent funding for skills training at all levels is essential, as are efforts to more closely link training programs with future workforce needs in strategic sectors. Germany’s apprenticeship system is perhaps the most outstanding international role model in this area.

    Leveraging Procurement: Australian governments are massive purchasers of manufactured goods. An obvious way to support domestic manufacturing is to ensure those expenditures generate the maximum possible boost to domestic industry. This also helps to reduce the final net cost of the program: since the government collects additional revenues through the new work spurred by domestic procurement decisions, offsetting the public expenditure. Other countries regularly utilise domestic content targets in procurement to support domestic producers. Australia can do the same.

    Trade that Goes Both Ways: International trade is essential to the viability of most manufacturing due to the importance of economies of scale in production. Australian trade negotiators need to do far more than mutual tariff reduction to stimulate Australian manufactured exports. And Australian agencies (like Austrade) can be much more proactive in promoting Australia’s exports, through initiatives like expanded credit financing, initiatives to leverage Australian participation in global supply chains, and government support for international marketing.

    A thriving manufacturing sector confers important benefits across the whole economy. Even more importantly, a large and adaptable manufacturing sector offers resilience against periodic crises such as COVID-19. If Australia does not add value through the expansion of our manufacturing sectors, we can anticipate that our relative standard of living will decline, and our vulnerability to future supply disruptions and health crises will only increase. We can and must build a manufacturing sector that is economically and ecologically sustainable, and that adds complexity and resilience to Australia’s economy.

    See the Centre for Future Work’s previous research on the Australian manufacturing sector:

    Manufacturing Still Matters (2016) shows that manufacturing, far from being inherently doomed in Australia, is quite viable. Similar countries manufacture successfully. It provides an agenda of policy recommendations for support of the sector.

    Manufacturing: A Moment of Opportunity (2017) demonstrates that while the Australian public underestimate the size and therefore strategic economic importance of the sector, it enjoys strong popular support. Furthermore, the report identifies some promising signs of future growth in the sector.

    From Consensus to Action: Report from the First National Manufacturing Summit (2018) summarises the key findings of the first National Manufacturing Summit, including areas of strong policy consensus reached among the business, industry peak bodies, trade unions, government departments, academic institutions and vocational training providers and other summit delegates. The report also identifies several priorities for further policy research.

    Advanced Skills for Advanced Manufacturing (2018) argues that Australia’s present vocational education and training system, damaged by years of underfunding and failed policy experimentation, is a weak link in meeting the needs of the industry. High-skilled, high-paid jobs rely on a strong VET sector, and this report identifies twelve key reforms to achieve that.

    Auto Shutdown Another Economic Blow (2016) analyses the causes and impacts of the closure of the Australian car manufacturing industry. It notes that secondary job losses will be several times larger than the direct jobs eliminated at the car plants.

    Penny Wise and Pound Foolish (2016) analyses the impact of the NSW government’s decision to source railroad rolling stock manufacturing work to Korea rather than taking advantage of the opportunity to procure domestically. Governments need to account for the full range of potential costs and benefits of their procurement decisions (job creation, industry development, government revenues, and so on), not simply minimise the up-front purchase cost.

    The post Pandemic Shows Australia Needs Domestic Manufacturing appeared first on The Australia Institute's Centre for Future Work.

  • 81% of Australians support JobKeeper for all Casual Workers

    More than eight in ten Australians support extending JobKeeper to all casual workers.

  • Webinar: Protecting Jobs and Incomes During the Pandemic

    Jim titled his presentation “Off the Cliff”, highlighting that the immediate shutdown of so much of Australia’s work and production is producing an economic contraction unlike anything experienced in history.

    Comparing Recessions

    Watch a video recording of the webinar:

    And/or download Jim’s slides below.

    This webinar was part of the Australia Institute’s weekly pandemic webinar series.

    The post Webinar: Protecting Jobs and Incomes During the Pandemic appeared first on The Australia Institute's Centre for Future Work.

  • Open Letter From Economists and Policy Experts: Wage Subsidy to Protect Jobs During Pandemic

    The letter and the full list of signatories is reprinted below. It has been forwarded to Prime Minister Morrison.

    Public Statement from Economists and Public Policy Experts:

    A Wage Subsidy to Protect Jobs During the Coronavirus Shutdown

    The unprecedented public health measures required to deal with the COVID-19 pandemic are causing a dramatic shutdown of work and production in several key sectors of Australia’s economy. Immediate full or partial closures of activity are occurring in several consumer-facing industries (such as hospitality, retail, airlines, recreation and personal services). But before long, spillover losses will be experienced in other sectors, too: including wholesale trade and logistics, manufacturing, business services, education, and others. Consumer and business confidence has been deeply shocked, and that will magnify the negative economic effects of the pandemic.

    The coming recession will be unprecedented in Australian history – in both its speed and its depth. Without immediate action, we expect that 1-2 million workers, or even more, could lose their jobs in coming weeks. That would drive unemployment to 15% or higher, overwhelm income support programs, and leave hundreds of thousands of businesses unable to function – even after the immediate health danger passes.

    This is a dangerous and dramatic moment in Australia’s economic history. It is imperative that the federal and state governments act immediately and powerfully to protect Australian workers and businesses from the worst of the coming downturn. Important steps have been taken to expand access and benefit levels for income support payments to Australian workers (including casuals, contractors, and gig workers) losing work because of the pandemic. This is a helpful, but on its own inadequate, response. Government must also act forcefully to prevent mass job losses in coming weeks – not just provide support to those who do lose work.

    In this regard, we recommend that the Commonwealth government immediately implement a large-scale wage subsidy scheme, similar to those already enacted in several other industrial countries (including, variously, the UK, Denmark, New Zealand, the Netherlands, South Korea, and Ireland). Under these programs, government directly pays to employers (for a limited period of time) a majority portion of wages (between 70 and 90%) to cover the wages of workers who would otherwise be stood down from their positions. The measure can apply to non-standard workers (including contractors and self-employed). It can also be integrated with measures to support short time working as an alternative to complete redundancy. The wage subsidy is paid to firms experiencing severe losses of revenue and business (beyond a specified threshold). It would cover most of the wage bills for workers who can no longer work for economic reasons, up to a specified ceiling (perhaps the level of full-time median earnings). This program will be expensive – but governments everywhere have recognised that this unprecedented crisis requires them to do everything in their power to protect people, jobs, communities and the economy.

    To date, Australia’s response to the pandemic has been uncertain, inconsistent and inadequate. Immediate, powerful action to keep millions of Australians in their jobs, instead of pushing them into an overloaded and complex Centrelink system, would significantly ease the pandemic’s painful economic effects. It would underpin financial stability for millions of households through the coming terrible weeks or months. And it would preserve the viability of hundreds of thousands of Australian businesses, allowing them to resume work and production as soon as the health restrictions are eased.

    We the undersigned support the proposal for a strong wage subsidy program to keep workers in employment through the coming downturn, and we urge the Commonwealth government to implement such a policy quickly.

    Download full list of signatories below.

    The post Open Letter From Economists and Policy Experts: Wage Subsidy to Protect Jobs During Pandemic appeared first on The Australia Institute's Centre for Future Work.

  • Responding to the Economic Emergency

    That’s the core message of new analysis by Centre for Future Work Director Dr. Jim Stanford, published today by the Australian journal New Matilda.

    Stanford’s article outlines the immediate economic measures needed to both confront the health emergency and prevent households and firms from collapsing:

    • Immediate mobilization of resources to protect health: including more staff at health facilities, quick deployment of off-site and mobile testing capacities, home support for people quarantined or recovering, and quick expansion of equipment and facilities where possible.
    • Income protection for workers: including for casuals, self-employed, gig-workers, and many part-timers who don’t have effective access to sick pay. Incomes must be protected for all workers (regardless of employment status), through mandated special payments (as proposed by the ACTU).
    • Other direct income supplements: similar to the one-time payments distributed in 2009, as well as more targeted aid (like higher Newstart).
    • Debt relief and business assistance: emergency financing will be needed to keep firms viable in many industries (including airlines, other transportation, tourism, and hospitality). Other parts of society also need protection from creditors; foreclosures and evictions should be prohibited, and other personal and credit card debts deferred.

    But Stanford also discusses the longer-run challenge that will face the Australian economy: the pandemic is imposing a shock that is far too powerful and all-encompassing for private market players to autonomously recover from. The economy will need unprecedented and lasting investments by government to repair and expand public infrastructure and services, and directly put Australians back to work:

    “There is enormous need for urgent rebuilding required in our economy and our communities. Repairing and strengthening health care infrastructure comes first, but other priorities, too, are urgent: like sustainable transit, green energy, non-market housing, aged care and early child education. The case for mobilising resources under the leadership of governments and public institutions, and employing millions of Australians to do that work, is compelling. We can repair the damage of this crisis (and better prepare for the next one), deliver valuable services, and create millions of jobs. All we need is the willingness to imagine a different model of organizing and leading economic activity.”

    Please read the full article, We Need Wage Guarantees And Radical Restructure, Not More ‘Stimulus’, published by New Matilda.

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