My Blog

Tag: Economics

  • The Dimensions of Insecure Work in Australia

    Share of Workers in Full-Time Paid Employment with Leave Entitlements. Source: Centre for Future Work calculations from ABS Catalogues 6291.0.55.003, EQ04 (2017), and 6333.0 Tables 2.3 and 9.1 (2012).

    The report, The Dimensions of Insecure Work: A Factbook, reviews eleven statistical indicators of the growth in employment insecurity over the last five years: including part-time work, short hours, underemployment, casual jobs, marginal self-employment, and jobs paid minimum wages under modern awards.

    All these indicators of job stability have declined since 2012, thanks to a combination of weak labour market conditions, aggressive profit strategies by employers, and passivity by labour regulators. Together, these trends have produced a situation where over 50 per cent of Australian workers now experience one or more of these dimensions of insecurity in their jobs - and less than half have access to “standard,” more secure employment.

    “Australians are rightly worried about the growing insecurity of work, especially for young people,” said Dr. Jim Stanford, one of the co-authors of the report. “Many young people are giving up hope of finding a permanent full-time job, and if these trends continue, many of them never will.”

    The report also documents the low and falling earnings received by workers in insecure jobs. While real wages for those in permanent full-time positions (the best-paid category) have grown, wages for casual workers have declined. And part-time workers in marginal self-employed positions (including so-called “gig” workers) have fared the worst: with real wages falling 26 percent in the last five years.

    “Given current labour market conditions and lax labour standards, employers are able to hire workers on a ‘just-in-time’ basis,” Dr. Stanford said. “They employ workers only when and where they are most needed, and then toss them aside. This precariousness imposes enormous risks and costs on workers, their families, and the whole economy.”

    Dr. Stanford called on policy-makers to address growing precarity with stronger rules to protect workers in insecure jobs (such as provisions for more stable schedules, and options to transition to permanent from casual work). He also stressed the need for economic policies that target the creation of permanent full-time jobs.

    The post The Dimensions of Insecure Work in Australia appeared first on The Australia Institute's Centre for Future Work.

  • Insecure work: The New Normal

    In this commentary article published originally by Ten Daily, Our Director Dr. Jim Stanford summarises the findings of the Centre’s recent report on “The Dimensions of Insecure Work.”

    If You Have A Stable Full-Time Job You’re An Endangered Species

    Ask any young job-seeker about their prospects of finding a permanent full-time job, and they won’t know whether to laugh or cry. Sure, they might get a few hours of work here, a few hours there: piecing together disparate “gigs” in hopes of paying the rent.

    But landing a permanent full-time job with a regular salary and basic benefits (like paid holidays and superannuation)? Dream on.

    It’s no surprise that young workers experience the insecurity of modern work most brutally: they don’t have experience, seniority, or connections to help them in their hunt. But precarious work now affects Australians of any age, in all sectors of the economy, not just those trying to break in. What was once considered a “standard” job – the kind where you know where and when you will work, and how much you will earn – now feels like the exception, not the rule. And in fact, the hard numbers now confirm it: insecure work has indeed become the new normal.

    With co-author Dr. Tanya Carney, I recently assembled data on eleven different dimensions of job insecurity, based on official statistics from the Australian Bureau of Statistics and other government sources. We considered many aspects of the problem: including the rise of part-time work, casual jobs, people working very short hours, temporary foreign workers, and workers in nominally “self-employed” positions.

    In every case, there has been a marked increase in insecurity in recent years. A turning point was reached in 2012, as the mining investment boom (that underpinned several years of strong job conditions) turned down. That boom, and associated macroeconomic expansion, had masked longer-run structural shifts in the nature of employment – but only for a while. But now, since 2012, the sea-change in employment relationships is starkly visible.

    It was when we put all of these different indicators of insecurity together, that a startling conclusion became clear. The standard “job” has been whittled away on all sides – by part-time work, by casual and temporary jobs, by shifting more tasks to supposedly independent contractors and self-employed gig workers. And in 2017, for the first time since these statistics have been collected, the proportion of employed Australians filling a standard job fell below 50 percent. Less than half of employed Australians now work in a permanent full-time paid position with basic entitlements (like sick pay and paid holidays).

    In other words, most employed Australians experience one or more dimensions of insecurity in their jobs. Insecure work, once on the margins of the labour market, is now the norm. In fact, many workers experience multiple aspects of this insecurity.

    For example, part-time marginally self-employed workers are among the most insecure of all. They have no employees of their own; most aren’t even incorporated. They get a tax number, and then scrabble from gig to gig – accepting outsourced work from large firms who once hired actual employees to perform these tasks. Their incomes, low to start with, have declined a shocking 26 percent in real terms since 2012. They now make, on average, barely one-third as much as a typical paid full-time permanent employee.

    Surprisingly, some defenders of the status quo in Australia’s labour market deny any problem with job security. For example, Craig Laundy, Australia’s Minister for Small Business, claims insecure work is not actually more common, and defends casual work as “a completely appropriate way for many businesses and many employees to conduct their relationship.” Business lobbyists also deny work has become any less secure.

    But this flies in the face of both the official statistics, and the lived experience of millions of Australians struggling to find stable employment. And the increasing precarity of modern work in turn produces a spate of economic, social and political consequences. Households can’t predict their future income; they also can’t make long-run financial commitments (like buying a home, supporting children through higher education, or saving for retirement). Consumer spending and financial stability suffer, as does growth and job-creation.

    Politically, the frustration of millions of Australians about this chronic insecurity will inevitably bubble up at the polling booths. Job insecurity has reached a tipping point, now that less than half of all employed workers fill standard permanent full-time jobs. Sooner or later, a political tipping point will also be reached: as Australians react against the erosion of the ideal of a “fair go.”

    For this reason, hopeful politicians should be ready to present convincing ideas for restoring job stability and shared prosperity, in the lead-up to the next Commonwealth election. Denying that there is even a problem, will not likely do the trick.

    Jim Stanford is Economist and Director of the Centre for Future Work at the Australia Institute. With Tanya Carney he is co-author of The Dimensions of Insecure Work: A Factbook.

    The post Insecure work: The New Normal appeared first on The Australia Institute's Centre for Future Work.

  • For First Time, Less than Half of Workers Have a Standard Job

    A new report by the Centre for Future Work at the Australia Institute looks at the growing insecurity of work in Australia.

    The report reviews 11 statistical indicators of the growth in employment insecurity over the last five years, including: part-time work, short hours, underemployment, casual jobs, marginal self-employment, and jobs paid minimum wages under modern awards.

    All these indicators of job stability have declined since 2012, leading to a majority of Australian workers now experiencing one or more of these indicators of job – and less than half have access to what was once considered a ‘standard job’.

    “Australians are rightly worried about the growing insecurity of work. We are now seeing less than half of employed Australians holding a ‘standard job’, with dependable hours, pay, and benefits” said Dr. Jim Stanford, director of the Centre for Future Work.

    “In particular, many young people are giving up hope of finding a permanent full-time job – and if these trends continue, many of them never will.”

    The report also documents the low and falling earnings received by workers in insecure jobs:

    • While real wages for those in the best paid job category – permanent full-time jobs – have grown, wages for casual workers have declined.
    • Part-time workers in marginal self-employed positions (including so-called ‘gig economy’ workers) have fared the worst, with real wages falling 26 percent in the last five years.

    “Given current labour market conditions and lax labour standards, employers are able to hire workers on a ‘just-in-time’ basis, employing workers only when and where they are most needed and then tossing them aside afterwards,” said Dr Stanford.

    “This insecurity imposes enormous risks and costs on workers, their families, and the whole economy.”

    Dr. Stanford called on policy-makers to address growing job precarity with stronger rules to protect workers in insecure jobs, such as provisions for more stable schedules, and options to transition to from casual work to permanent positions. He also stressed the need for economic policies that target the creation of permanent full-time jobs.

    The post For First Time, Less than Half of Workers Have a ‘Standard Job’ appeared first on The Australia Institute's Centre for Future Work.

  • The Dimensions of Insecure Work: A Factbook

    Share of Workers in Full-Time Paid Employment with Leave Entitlements. Source: Centre for Future Work calculations from ABS Catalogues 6291.0.55.003, EQ04 (2017), and 6333.0 Tables 2.3 and 9.1 (2012).

    The report, The Dimensions of Insecure Work: A Factbook, reviews eleven statistical indicators of the growth in employment insecurity over the last five years: including part-time work, short hours, underemployment, casual jobs, marginal self-employment, and jobs paid minimum wages under modern awards.

    All these indicators of job stability have declined since 2012, thanks to a combination of weak labour market conditions, aggressive profit strategies by employers, and passivity by labour regulators. Together, these trends have produced a situation where over 50 per cent of Australian workers now experience one or more of these dimensions of insecurity in their jobs - and less than half have access to “standard,” more secure employment.

    “Australians are rightly worried about the growing insecurity of work, especially for young people,” said Dr. Jim Stanford, one of the co-authors of the report. “Many young people are giving up hope of finding a permanent full-time job, and if these trends continue, many of them never will.”

    The report also documents the low and falling earnings received by workers in insecure jobs. While real wages for those in permanent full-time positions (the best-paid category) have grown, wages for casual workers have declined. And part-time workers in marginal self-employed positions (including so-called “gig” workers) have fared the worst: with real wages falling 26 percent in the last five years.

    “Given current labour market conditions and lax labour standards, employers are able to hire workers on a ‘just-in-time’ basis,” Dr. Stanford said. “They employ workers only when and where they are most needed, and then toss them aside. This precariousness imposes enormous risks and costs on workers, their families, and the whole economy.”

    Dr. Stanford called on policy-makers to address growing precarity with stronger rules to protect workers in insecure jobs (such as provisions for more stable schedules, and options to transition to permanent from casual work). He also stressed the need for economic policies that target the creation of permanent full-time jobs.

    The post The Dimensions of Insecure Work in Australia appeared first on The Australia Institute's Centre for Future Work.

  • A Comprehensive and Realistic Strategy for More and Better Jobs

    Dr. Jim Stanford, Director of the Centre for Future Work, reviewed the ACTU’s paper in detail, and prepared an evaluation of its proposals and likely effects. Stanford endorsed the policy’s complementary set of expansionary macroeconomic measures, which would strengthen every major component of aggregate demand in the national economy: including government programs, capital investment, net exports, and consumer spending. He also emphasised the importance of the paper’s vision for a stronger labour market information and planning system, which will be essential to effectively match workers with jobs as the labour market tightens.

    Stanford estimated that the ACTU’s plan, if implemented consistently over a five-year period, would be capable of achieving the following outcomes:

    • Unemployment rate falling to 4 percent or lower.
    • Share of full-time work rebounding toward 75 percent of employment (since employers will be pressured by falling unemployment to create full-time jobs).
    • Underemployment rate falling to fall to 5 percent or lower.
    • Incidence of casual work declining below 20 percent.
    • Labour force participation rising by at least 2 percentage points, especially among young workers.
    • Nominal wage growth accelerating to traditional rates of 4 percent per year.

    Read the complete ACTU paper, Jobs You Can Count On.

    The post A Comprehensive and Realistic Strategy for More and Better Jobs appeared first on The Australia Institute's Centre for Future Work.

  • Government Spending Power Could Support Stronger Wage Growth

    New research from the Centre for Future Work at The Australia Institute demonstrates a strong connection between government spending and working conditions across the economy.

    “Weak labour market conditions, including record-weak wage growth, could be improved by linking public spending in all forms to improved job quality and compensation,” said Dr. Jim Stanford, Director of the Centre for Future Work.

    The Centre for Future Work report finds three main avenues through which government spending could lift wages and working conditions:

    1. Direct work and production undertaken within government and its departments and agencies (the public sector).
    2. Arms-length service-producing organisations which depend on government funding (the non-profit sector).
    3. Private-sector firms which supply government and public agencies with goods and services (the private sector).

    “It is ironic that Treasurers are always praying for stronger wage growth with every year’s budget in order to generate stronger growth and stronger revenues. Yet governments don’t pursue obvious opportunities to actually achieve that wage growth by linking labour standards to their own expenditure policies,” said Dr Stanford.

    “This is clearly a lost opportunity. Australia’s government sector is by far the single largest part of Australia’s economy.

    “This economic footprint, if wielded consistently to achieve higher wages and better jobs, could have a powerful impact on labour market outcomes.”

    Australian government economic footprint at a glance:

    • Total expenditures of over $660 billion per year, equal to 36 percent of Australia’s GDP.
    • Expenditures on current production of public goods and services of over $330 billion per year (18.5 percent of GDP), and further spending on capital investments of over $85 billion (another 5 percent of GDP).
    • Direct public sector employment of close to 2 million workers, with millions more jobs indirectly dependent on government injections of spending power.
    • Fiscal support for public and community services by arms-length non-profit agencies, worth at least another 4 percent of GDP.
    • Goods and services procured from private-sector suppliers equivalent to around 10 percent of GDP (or about $175 billion per year).

    The post Government Spending Power Could Support Stronger Wage Growth appeared first on The Australia Institute's Centre for Future Work.

  • Don’t blame it on the deficit: WA

    Contrary to calls for fiscal austerity and public sector downsizing, being made in response to the emergence of fiscal deficits in WA, the report showed that budget deficits played a useful role in stabilizing the economy during times of economic downturn, and will automatically recede as the economy recovers.

    “In reality there should be no alarm about the WA state deficit. Deficits are acceptable, and positive, during periods of weak economic growth.” says the Australia Institute’s Senior Economist, Dr. Cameron Murray.

    “In fact, that deficit merely confirms that state fiscal policy is doing what it is supposed to: providing essential public services and providing a solid base for private-sector economic activity.”

    “It is wrong to immediately conclude that the only response to a deficit must be some combination of cutting spending, reducing public sector employment, freezing or reducing public sector wages, and selling public assets.”

    The report found public sector payrolls grew modestly through the 2014-17 period. That modest growth, in contrast to the contraction in private payrolls, supported a cumulative total of $3 billion dollars in additional GDP; $1.3 billion in additional consumer spending; and $450 million in additional state revenues.

    “During WA’s recession we’ve seen compensation growth slow down in both the public and private sectors,” says Murray.

    “Importantly however, the modest, continuing wage growth we did see in the public sector acted as an automatic stabiliser, reducing the severity of WA’s downturn.”

    Total economic activity, including economic activity in the private sector, was also found to be higher as a result of the government slowly but steadily increasing its spending on public servants and the services they provide.

    “Those deficits arose in the wake of the slowdown in mining activity and corresponding deceleration of employment and economic growth, and over-zealous fiscal austerity is not the solution.”

    “Continuing growth in public sector wages and maintaining public spending during weak economic periods generates positive spillover effects for the rest of the economy,” says Murray.

    More recently, positive signs of recovery in the state economy are quickly and automatically producing a reduction in the size of the deficit. The report recommends the state government focus on supporting that continuing recovery, rather than reducing the government’s own contribution to it.

    The post Don’t blame it on the deficit: WA appeared first on The Australia Institute's Centre for Future Work.

  • Wages Crisis Has Obvious Solutions

    This recent commentary, by Centre for Future Work Director Jim Stanford, appears in the March 2018 issue of Australian Options magazine, and is reprinted with permission.

    Wage Crisis Has Obvious Solutions

    By Jim Stanford

    When the head of the central bank declares wages are too low, and urges workers to demand more money, you know you have a problem.

    After all, central bankers are traditionally the “party poopers” of the economy: they are the ones who march in and take away the punch bowl, as soon as the party gets rolling. Yet here was Governor Philip Lowe, Governor of the Reserve Bank of Australia, urging party-goers to turn up the volume. It’s like he was pouring bottles of straight tequila into the punchbowl, instead of taking it away – desperately trying to turn a boring flop into a wild shindig.

    Mr. Lowe made his surprising call at a conference last year on Australia’s economic outlook at Australian National University. He said weak wage growth was holding back national purchasing power and economic growth, and contributing to too-low inflation (which has languished below his bank’s official 2.5 percent target for several years running).

    But while his acknowledgement of the consequences of wage stagnation was refreshing, his diagnosis of the causes was incomplete and unconvincing. In fact, Governor Lowe almost seemed to blame the victims of wage stagnation – namely, Australia’s workers – for the problem. They were unduly worried about losing their jobs to robots or imports, he suggested; they should feel more “confident” in asking for higher wages. He has clearly not experienced the reality of Australia’s dog-eat-dog labour market in recent years, or felt the desperation that drives workers, especially young workers, to accept any job on offer.

    (Incidentally, the RBA’s own enterprise agreement signed last year will raise base wages by just 2 percent per year over the next 3 years … below the bank’s own inflation target!)

    While mainstream economists and policy-makers belatedly recognise the economic and social damage resulting from weak wages (even Treasurer Scott Morrison frets about the negative effect of slow wage growth on his budget balance), they’ve been distinctly reticent to connect the dots about the causes of the problem – and its obvious solutions. Lowe, Morrison, and their colleagues pretend wages will pick up automatically as the economy grows and the labour market tightens. But with official unemployment only a tick above 5 percent (still the RBA /Treasury estimate of “full employment,” according to their discredited but still operational NAIRU model), yet wages still decelerating, this faith in a market solution is increasingly far-fetched.

    Measuring the Slowdown

    The stagnation of Australian wages is visible by many indicators. The most common “headline” source is the ABS’s quarterly Wage Price Index, which reports an index of wages calculated from a representative sample of jobs (the methodology is similar to the Consumer Price Index). The WPI therefore measures changes in average hourly compensation holding constant the bundle of jobs which make up the overall labour market.

    However, one important factor in weak wages has been the changing composition of work. In particular, the growth of part-time, casual, and irregular jobs has undermined the overall level (and stability) of labour incomes. These changes are not captured in the WPI. Similarly, changes in average hours worked per week (due to growing part-time work) are also excluded from the WPI. So the WPI data understates the true extent of the wage slowdown.

    Other ways of measuring the wage slowdown show an even bigger drop-off in wage growth. These include average weekly earnings, the pay increases specified in enterprise agreements, and estimates of average labour compensation generated through GDP statistics. Trends in all these indicators are summarised in the accompanying table. Whatever measure is chosen, it is clear that there has been a dramatic slowdown in wage growth – especially visible since 2013.

    Annual wage growth fluctuated around 4 to 5 percent during the first decade of the century. Wage growth fell sharply but temporarily during the GFC – but then quickly regained pre-crisis norms from 2011 through 2013. After 2013, however, wage growth has decelerated dramatically: to 2 percent or even lower. In fact, by the broadest measure of labour compensation (wages, salaries, and superannuation contributions paid per hour of work), there has been virtually no nominal wage growth in the past year. Consumer prices, meanwhile, continue to grow at around 2 percent per year (and even faster, if escalating housing prices are taken into account). Real earnings, therefore, are flat or falling.

    What is “Normal” Wage Growth?

    Any shortfall in wage growth below the pace of consumer price increases (corresponding to a decline in the real purchasing power of workers’ incomes) is a clear sign of labour market dysfunction. But even flat real wages (ie. nominal wages that just keep pace with inflation) are problematic. After all, wages are supposed to reflect ongoing growth in real labour productivity (or at least that’s what the economics textbooks tell us). So wages should actually consistently grow faster than consumer price inflation, to fairly reflect the enhanced real output of each hour of labour.

    Therefore, a “normal” benchmark for wage growth might be the sum of long-run consumer price inflation (the RBA’s 2.5 percent target) plus average productivity growth (running around 1.5 percent per year over the past three decades). That suggests a “normal” benchmark for annual nominal wage growth should be 4 percent per year. Australian wage growth in the pre-GFC period generally fit that definition of “normal.” But since 2013 wages shifted to a significantly lower trajectory.

    Joining the Dots

    Contrary to the assumptions of free-market economics, there is no guarantee that wages will automatically grow in line with labour productivity, as a result of automatic market mechanisms. Power is always a key factor in income distribution. And labour markets never “clear,” so that labour supply (the number of workers) equals labour demand (the number of jobs). In fact, inflation-targeting policy deliberately aims to maintain a certain level of unemployment (5 percent is the target in Australia) to suppress wage demands and protect profits.

    The systematic and structural disempowerment of workers and their unions over the neoliberal era is therefore the most relevant factor in the deceleration of wage growth, and the erosion of labour’s share of total GDP. Some obvious indicators of that dramatic shift in economic and political power include:

    • A steady erosion in the real “bite” of minimum wages, which have fallen from 60 percent of median wages in 1990 to around 45 percent today.
    • The collapse of trade union membership in the face of legal restrictions, harassment, and full-protection for “free riders.” Today just 9 percent of private sector workers, and less than 5 percent of young workers, are union members.
    • A corresponding collapse in collective industrial action. Adjusted for the size of the workforce, the frequency of strikes and other industrial disputes has declined by 97 percent from the 1970s to the present decade.
    • The relegation of industry awards to a baseline “safety net,” instead of a system for supporting ongoing progress in wages and working conditions.
    • The generally pro-business shifts in economic policy, including tax cuts, deregulation, privatisation, and globalisation, which have also shifted economic power in favour of employers and hence indirectly suppressed wage growth.

    To begin to rebuild wage growth, restore labour’s share of GDP, and achieve greater equality in labour incomes will require a comprehensive, multidimensional effort to restore the power of all these wage-supporting institutions. The ACTU is tackling this challenge with gusto, with its ambitious “Change the Rules” campaign. The goal is to propose a consistent, holistic vision for repairing the institutions that support workers and their wages – and then building a strong grass roots campaign to push politicians of all stripes to adopt that vision.

    On the other hand, if we follow the advice of Scott Morrison and Philip Lowe, and simply wait for supply and demand forces to rescue wages from their current doldrums, we are going to be waiting a very long time.

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

  • The Difference Between Trade and Free Trade

    U.S. President Donald Trump’s recent trade policies (including tariffs on steel and aluminium that could affect Australian exports) have raised fears of a worldwide slide into protectionism and trade conflict. Trump’s approach has been widely and legitimately criticised. But his argument that many U.S. workers have been hurt by the operation of current free trade agreements is legitimate; conventional economic claims that free trade benefits everyone who participates in it, have been discredited by the reality of large trade imbalances, deindustrialization, and displacement.

    Can progressives respond to the real harm being done by current trade rules, without endorsing Trump-like actions – which will almost certainly hurt U.S. workers more than they will help? Centre for Future Work Director Jim Stanford has proposed several key principles to guide a progressive vision of international trade: one that would capture the potential benefits of greater trade in goods and services, while managing the downsides (instead of denying that there are any downsides).

    Dr. Stanford’s commentary was recently published in the Australian Guardian. The column generated follow-up coverage and commentary in Australia and internationally. For example, here is an interview with Phillip Adams on ABC Radio National’s Late Night Live.

    Here is an edited version of Dr. Stanford’s commentary:

    Progressives Alternatives to So-Called Free Trade Deals

    U.S. President Donald Trump’s bellicose policies, including new tariffs on steel and aluminium, have raised fears of a worldwide slide into protectionism and trade conflict. Trump’s unilateral and xenophobic approach to trade policy is reprehensible and dangerous from any perspective. But many progressives feel conflicted about Trump’s actions. After all, he is challenging business-friendly trade deals (including the TPP and NAFTA) which labour, social and environmental advocates opposed for years. And while his policies will clearly make life worse for working and poor people in the U.S., he is nevertheless speaking to their actual experience: unlike free trade defenders, who continue to pretend that the tide of globalisation has lifted all boats.

    But many progressives feel conflicted about Trump’s actions. After all, he is challenging business-friendly trade deals (including the TPP and NAFTA) which labour, social and environmental advocates opposed for years. And while his policies will clearly make life worse for working and poor people in the U.S., he is nevertheless speaking to their actual experience: unlike free trade defenders, who continue to pretend that the tide of globalisation has lifted all boats.

    Given Trump’s domination of the debate, progressives need to work quickly to distinguish our critique of globalisation from his. In particular, we must flesh out a vision of trade policy reforms that would genuinely help those harmed by globalisation, while rejecting the nationalism and racism that underlies Trump’s appeal.

    Established policy elites still ridicule Trump’s belief that trade deals have contributed to the misery and inequality afflicting working class communities in America (and, for that matter, Australia). For them, globalisation must produce winners but no losers. And they trot out theoretical economic models (premised on assumptions of full employment and costless adjustment) to buttress their case. They concede the gains from trade may not have been evenly shared. But they deny that globalisation has anything to do with the erosion of living standards experienced in so many once-prosperous working communities.

    This patronising denial is precisely what got Trump elected in the first place. It’s not that depressed industrial towns in Pennsylvania, Ohio, and Wisconsin (the states that put Trump over the top) didn’t “share in the benefits” of free trade. It’s that their economic viability was destroyed by it.

    Acknowledging that globalisation produces losers as well as winners, allows us to imagine policies to moderate the downsides of trade – and purposefully share the upsides. The next step is to make a crucial distinction between trade and ‘free trade.’ The former is the pragmatic day-to-day flow of goods and services between countries. The latter is the set of specific, lopsided rules embodied in the plethora of trade and investment agreements enacted over the last generation.

    These ‘free trade’ rules often have very little to do with actual trade: describing tariff elimination, for example, usually takes up just a tiny part of the text of each trade deal. The rest is devoted to a raft of provisions securing and protecting the rights of private companies to do business anywhere they want, on predictable and favourable terms.

    Proof of the dissonance between trade and ‘free trade’ is provided by Australia’s lacklustre trade performance over the last two decades. Exports of actual goods and services constitute a smaller share of total GDP today, than at the turn of the century. Sure, the volume of resource exports has surged – not surprisingly, since that’s what our trading partners wanted. But resource prices have been shaky, and meanwhile our other value-added exports flagged badly. If the goal of all the free trade agreements signed since then (a dozen) was to boost Australia’s exports, they failed miserably. But of course, that wasn’t the goal: the deals were actually intended to cement a business-friendly policy environment, even in sectors that have nothing to do with international trade.

    Progressives can endorse mutually beneficial international trade, and even international flows of direct investment, without accepting the lopsided, business-dominated vision of ‘free trade’ agreements. In fact, a progressive approach to managing globalisation would actually boost real trade more effectively: by supporting purchasing power on all sides, and avoiding the contractionary race-to-the-bottom unleashed by current free trade rules.

    Here are several key principles central to a more hopeful and inclusive vision of globalisation:

    Preserve the power to regulate: Free trade deals assume government intervention in markets (regulating prices, service standards, investment, and more) is inherently illegitimate and wasteful; they establish “ratchet” rules to limit regulation and public ownership, and lock-in deregulation over time. The failure of market competition in so many areas – in Australia’s case, including electricity, vocational education, and employment services – reaffirms that trade deals must not inhibit governments from regulating businesses, no matter where they are owned.

    Eliminate investment preferences: ‘Free trade’ deals proffer all kinds of preferences and rights for businesses and investors that have no necessary connection at all to actual trade. Chief among these are the unique quasi-judicial rights and powers granted to corporations (such as investor-state dispute settlement panels); these are an affront to democracy. Progressive trade policy would abolish these preferences, and subject corporations and their owners to the same laws and processes the rest of us face. Similarly, progressive trade deals would aim to relax monopoly patent rights (for drug companies and others), rather than strengthening them.

    Manage capital and currencies: Foreign direct investments in real businesses that produce actual goods and services can certainly benefit host communities, but only so long as those operations are subject to normal public interest and regulatory oversight. Retaining the capacity to regulate foreign investment is essential to capturing maximum benefits from foreign investment. On the other hand, volatile, speculative flows of financial capital and foreign exchange have less upside, and more downside. In particular, rules should prevent the common practice of suppressing exchange rates to gain artificial advantage in international competition.

    Social clauses that mean something: Most ‘free trade’ deals, the TPP included, feature token language about protecting labour and environmental standards. These provisions are window-dressing: responding to fears that global competition will spark a downward spiral in social standards. Typically these clauses simply commit signatories to follow their own laws – with no requirement that those laws are decent to start with. Progressive trade deals would have safeguards that are enforceable, including requiring participating jurisdictions to respect universal standards or lose preferential trade rights. Where trade partners have different standards (such as, for example, levying varying degrees of carbon pricing), border adjustments must be permitted so that trade competition does not undermine environmental and social progress.

    Balanced adjustment: Trade and investment flows never automatically settle at a balanced position – even if a “level playing field” in labour and environmental standards was actually achieved. That’s because competition always has uneven effects, producing both winners and losers. Countries that experience loss of employment and production through global competition (a possibility denied by free trade theory, but commonplace in practice) must be supported with measures to safeguard domestic employment, facilitate adjustment, and boost exports. Chronic surplus countries (like China and Germany) must recycle excess earnings into expanding their own imports, thus bearing a fair share of adjustment – rather than forcing deficit countries to do all the heavy lifting.

    Active, inclusive domestic policies: Opposition to trade liberalisation is relatively mild in the highly trade-exposed social-democratic countries of Europe: like the Nordic countries, Germany, and Netherlands. Their extensive networks of social protections provide average workers with reasonable confidence they won’t be economically tossed aside for any reason: whether trade competition, or some other disruption. That’s why a key component of progressive trade policy must be a general commitment to social protection, inclusion, and job-creation. A general context of security and equity better facilitates adjustments of any kind, in response to any source of change. Indeed, collecting healthy taxes from successful industries, and reinvesting them in priorities like infrastructure, training, and communities, is precisely how to harvest the much-trumpeted gains from trade – and pro-actively share them throughout society. That’s much more feasible than hoping those benefits will somehow trickle down of their own accord.

    Claims by policy elites that international trade is the engine of all progress are vastly overblown. Our well-being mostly depends on what we do with our skills, energies and innovation right here at home. But real international trade and investment, properly managed, can certainly make a contribution to prosperity. And progressives can advance a vision of a more balanced, inclusive globalisation that has nothing in common with Donald Trump.

    The post The Difference Between Trade and ‘Free Trade’ appeared first on The Australia Institute's Centre for Future Work.

  • Subsidising Billionaires: Net Incomes of UberX Drivers in Australia

    The report considers gross revenues generated by a typical urban fare (traveling 10 km, and taking 22 minutes to complete), according to UberX’s published rate schedule. After deducting Uber’s various fees, net taxes, and the costs of providing and maintaining the vehicle, the driver is left with an average of just $8.29 from that fare (barely one-third of the gross revenue they collect). Accounting for unpaid time spent waiting for the next fare and collecting the passenger from their pick-up point, this translates into a net hourly wage (before personal income tax) of $14.62 per hour. This is well below the national statutory minimum wage, and less than half the level of the weighted-average minimum wage (including casual loading and penalty rates for evening and weekend work) that would apply to waged employees under Australia’s Passenger Vehicle Transportation Award. The underpayment of UberX drivers in Australia constitutes a subsidy paid by them to the company amounting to hundreds of millions of dollars per year; and this underpayment of drivers (in Australia and elsewhere) has been essential to the dramatic expansion of Uber’s market value (most recently estimated at almost $50 billion U.S.).

    These findings confirm that the use of digital platforms to organise and compensate irregular work, and the ability of businesses (including large global firms like Uber) to classify their workers as independent businesses in their own right, are undermining the effectiveness of traditional labour market protections (such as the minimum wage, superannuation entitlements, paid leave, and others). The report calls on Australian lawmakers and regulators to urgently address the gaps in existing labour laws, to ensure that traditional labour protections are available to workers in the “gig economy.”

    The post Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia appeared first on The Australia Institute's Centre for Future Work.