My Blog

Tag: Employment & Unemployment

  • The Job Summit needs to produce a fairer labour market

    This has not happened by accident or some “invisible hand” of the free market. Decades of industrial relations legislation has purposefully reduced the ability for workers to organise and bargain for better wages.

    Labour market policy director, Greg Jericho writes in Guardian Australia that we are now also seeing for the first time a shift in the relationship between wages and underutilisation.

    These changes have meant that employees are receiving ever smaller slices of the national income pie.

    The past 24 years have also displayed that theory of increasing productivity resulting in better wages, works better in the economic textbook than reality. In just 7 of those 24 years, have real wages outgrown productivity – and 4 of those year were because of highly unusual cases of productivity actually declining.

    The Job Summit in September needs to be a time for a reset – a time to acknowledge that the labour market is not fairly weighted and that workers are not getting their fair share.

    The post The Job Summit needs to produce a fairer labour market appeared first on The Australia Institute's Centre for Future Work.

  • Will curing inflation cause a recession?

    Labour market and fiscal policy director, Greg Jericho writes in Guardian Australia that the rising level of inflation, which combined with low wages growth has led to massive falls in real wages, has many Australians wondering if increasing interest rates is going bring the economy to a halt.

    He writes that for now a recession is unlikely, but the risks remain. Previous periods of sharply increasing rates have been followed by rising unemployment, and the current market expectations for the cash rate rising above 3.5% within a year would certainly create a massive brake on the economy.

    The story from overseas is also worrying, with the United States battling even higher inflation than Australia and suggestions that the market is already pricing in a recession.

    It all highlights that while today’s labour force figures are on the surface very promising, they also show just how affected the economy continues to be by the pandemic. Nearly 300,000 employed in June worked zero hours because of sickness or injury – well over double the usual amount.

    The nearly 50-year low unemployment rates are also failing to lead to wages growth anywhere near what would have been expected in previous years, let alone at a level that is keeping up with inflation.

    While inflationary pressure do remain, the risk that the Reserve Bank will raise rates too high and too fast remains very much in place – especially given the lack of wages growth.

    The post Will “curing” inflation cause a recession? appeared first on The Australia Institute's Centre for Future Work.

  • Employer Arguments Against Minimum Wage Boost Don’t Hold Water

    Even with this new increase, however, real wages for the lowest-paid Australian workers are likely to go backwards this year, with inflation pegged to accelerate to as much as 7%. Nevertheless, Australia’s business lobby are repeating tired old complaints about minimum wages being too high, stoking further inflation, and undermining profits.

    In his latest commentary, published in The Guardian, Policy Director Greg Jericho reviews and debunks these predictable complaints. The evidence is clear that wages are not causing inflation. Profit margins have grown along with prices. Workers deserve to have their real incomes protected, as the true sources of the problem (arising mostly from after-effects of the pandemic and the global energy price shock) are addressed.

    Please see Greg’s full column, “Workers and their wages are the collateral damage of the war on inflation.”

    The post Employer Arguments Against Minimum Wage Boost Don’t Hold Water appeared first on The Australia Institute's Centre for Future Work.

  • The recovery needs to deliver for workers

    As we now enter a phase where the Reserve Bank is raising interest rates in an effort to reduce demand in the economy and keep down inflation and prices and wages, labour market policy director, Greg Jericho, notes in his Guardian Australia column that workers risk seeing their real wages continue to fall.

    It is clear that the major pressures for inflation have come not from labour costs but from the input costs of goods and material. While these costs have been passed on to consumers, there has been much less flow through to workers.

    While the Reserve Bank notes that there are some signs of rising wages, these will inevitably be reduced due to the impacts of rising interest rates.

    After a year in which real wages have plummeted, the recovery is very much looking like one where company profits have risen, but where workers will miss out on wage growth that would undo the damage of the past year.

    The post The recovery needs to deliver for workers appeared first on The Australia Institute's Centre for Future Work.

  • GDP figures show workers are losing out

    The national accounts released on Wednesday revealed that in the first 3 months of 2022 a record level of national income is going to corporate profits. At the same time real unit labour costs for non-farm workers fell 2.3%. Labour market and fiscal policy director, Greg Jericho, notes in his column in Guardian Australia that real (non-farm) unit labour costs are now 5.3% below where they were before the pandemic.

    This data provides a strong fact check to arguments that workers need to take a pay cut to prevent rising inflation. The increase in inflation is not coming from labour costs, indeed workers are feeling the pain while in the words of the Bureau of Statistics, “Australian businesses benefited from rising prices.”

    The GDP figures reveal that far from needing workers to be the ones who need to shoulder the burden of rising inflation, they clearly already have been the ones who have hurt the most. Asking them to continue to take real wage cuts will not help the economy, it will only exacerbate the shift of income going to profits and not to employees.

    The post GDP figures show workers are losing out appeared first on The Australia Institute's Centre for Future Work.

  • Unemployment Rate Does Not Tell the Whole Story

    In this commentary, CFW Associate Dr Anis Chowdhury explains why a lower unemployment rate, on its own, is not a solution to Australia’s labour market and social challenges.

    Don’t Be Fooled: A Lower Unemployment Rate is Not a Magic Bullet

    Two days before the federal election, comes news that Australia’s unemployment rate had slipped below 4% in March, to 3.9% – the lowest rate in 48 years.

    But this aggregate number hides some hard realities for struggling vulnerable people. For example, the youth unemployment rate increased to 8.8%. About 3 million Australian workers lack basic job security. That includes some 2.4 million workers in casual positions, with no paid leave entitlements. A further 500,000 are on fixed-term contracts. A survey by PwC found that anxiety about the economic future intensified due to the pandemic. Some 56% of Australians now believe few people will have stable, long-term employment in the future (more than two years).

    Meanwhile, the labour force participation rate decreased to 66.3% in March as workers continue to suffer from the pandemic’s scars – including mental health challenges and long COVID’s debilitating health issues. So this apparent labour market tightening is misleading: it is mainly due to this decline in the participation rate, as well as pandemic restrictions on migrant workers (including students and seasonal travellers) which have sharply constrained the size of Australia’s labour force.

    Most telling, Australia’s recent falling unemployment rate is having little effect on wages growth; wages grew 2.4% in the year to March, up only marginally on the 2.3% from the previous reading; and less than half the 5.1% rate of inflation.

    Rising interest rates will now deliver a further blow to the living conditions of ordinary citizens as they struggle to service their debts. With household debt equal to about 120% of annual GDP, Australian households are among the most indebted in the world. As the Reserve Bank is poised to raise interest rates further, Andrew McKellar of the Australian Chamber of Commerce has warned that Australians “have to be very careful”; interest rate hikes are “set to affect Australian businesses nationwide across a number of sectors”.

    So it’s not being alarmist to warn that a recession could be just around the corner: one that would see unemployment rising alongside inflation. The Reserve Bank has little control over the factors (mainly global supply chain disruptions, and rising food and fuel prices) that have led the current cost-of-living inflation. Past history suggests that central banks’ efforts to disinflate the economy produce slower growth, higher unemployment, and often recessions.

    Address the deeper malaises

    No matter who wins the current federal election, the incoming government will have to tackle deeper malaises in the Australian economy. They include stagnating productivity growth and the falling labour income share in GDP.

    Australia’s aggregate labour productivity growth (real output per hour) has stayed mainly in a band between 1.2 and 2.5% per year during the last 50 years; it fell to 0.2% during 2018-2019, but has rebounded since the pandemic (averaging 2% per year from end-2019 through end-2021). Productivity growth is a key source of long term economic and income growth, and as such, is an important determinant of a country’s average living standards. Productivity gains also drive down the cost of goods and services and enhance international competitiveness.

    The impact of productivity growth on standards of living has been undermined, however, by capital’s capture of productivity gains. Real wages have grown much more slowly than real labour productivity (and now, with surging inflation, real wages are falling rapidly). Thus, labour income’s share in Australia steadily declined from the peak of around 58.5% in the mid-1970s to a record low of 46% of GDP at end-2021, as the gap between productivity growth and real wage growth widened.

    Among many factors, wage-suppressing policies and increased job insecurity have contributed to this dismal outcome. More than half of Australian participants in the PwC survey (61%) felt the government should act to protect jobs, with that opinion more acute among 18-34 year-olds (63%) than those over 65 (50%).

    Both the Reserve Bank of Australia and Treasury have made clear, Australia’s low wage growth is a major drag on the economy. But low wage growth was not accidental; the former Coalition Finance Minister, Matthias Cormann, now OECD Secretary-General, described (downward) flexibility in the rate of wage growth as “a deliberate design feature of our economic architecture”.

    Looking after workers is good economic policy

    Coalition leaders attacked Labor leader Albanese’s support for raising the minimum wage, claiming without evidence that a big increase in the minimum wage might force some workplaces to close. The business lobbies also joined the chorus.

    But is this opposition to higher wages grounded in good economics? The available historical evidence, as well as theoretical considerations, say: “no”.

    Robert Bosch, the German industrialist, engineer and inventor, founder of Robert Bosch GmbH (electrical co), introduced 8-hour working days in 1906, free Saturdays in 1910, and other benefits for his workers. He said: “I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages.”

    Henry Ford, the American industrialist, the founder of the Ford Motor Company, and developer of the assembly line, doubled the pay of his workers to $5 a day in 1914. In justifying his decision he said: “Of course the higher wage drew a more productive worker. But that wasn’t the real reason. The fact was, it was no good mass-producing a cheap automobile if there weren’t masses of workers and farmers who could afford to buy it.”

    Both Bosch and Ford realised that better pay and working conditions attract better workers and raise their productivity. They also knew that better pay and working conditions also lead to higher sales and revenues. Therefore, overall profit rises despite a higher labour cost. It is no wonder that both their companies not only survived but also became leading global companies.

    Singapore, which began its industrialisation by initially taking advantage of cheap labour, has used a deliberate high-wage policy since the early 1980s to move toward high value-added activities. It thus maintained its dynamism not by cutting wages and working conditions, but by incentivising companies (in part through higher wages) to upgrade skills and technology, and hence improve productivity.

    In other words, regular upward adjustment of wages can be an effective industry policy tool for accelerating innovation, upgrading, and productivity. Hence, higher wages and better working conditions do not necessarily cause loss of competitiveness in the international market.

    Industry-wide bargaining can boost productivity and real wages

    More than half a century ago two leading Australian academics – WEG Salter and Eric Russel – argued for tying wage increases in any industry to productivity trends across the whole industry, through a system of industry-wide bargaining. By adhering to industry-wide average productivity-based wage increases, they argued, industry bargaining raises relative unit labour costs of firms with below-industry-average productivity, thereby forcing them to improve their productivity or else exit the industry. At the same time, firms with above-industry-average productivity enjoy lower unit labour costs, hence higher profit rates for reinvestment – favouring the growth of more efficient firms. As mentioned earlier, Singapore used this approach to restructure its industry in the 1980s towards higher value-added activities, with great success.

    In contrast, trying to compete on the basis of low wages is a recipe for failure. Low-wage countries typically demonstrate lower productivity; and research by a leading French economist, Edmond Malinvaud, showed that a reduction in wage rates has a depressing effect on capital intensity.

    Salter’s research implies that the availability of a growing pool of low paid workers makes firms complacent with regard to innovation and technological or skill upgrading. Under-paid labour provides a way for inefficient producers and obsolete technologies to survive. Firms become caught in a low-level productivity trap from which they have little incentive to escape – a form of ‘Gresham’s Law,’ whereby bad labour standards drive out good. The discipline imposed on all firms as a result of negotiated industry-wide wage increases forces all of them to innovate and become more efficient.

    Need wide-ranging policy shifts

    Of course, industry-wide bargaining alone cannot solve all the problems of wage inequity or wage stagnation. It must be part of a broader suite of policy measures, to provide all-round support for greater equality and inclusive prosperity.

    For example, the next government should also address the system that produces sky-rocketing executive pay at the expense of workers. The annual CEO pay survey shows a drastic jump of an average of 24% during the pandemic, with annual bonuses soaring by 67% – the highest increase in recent record, while workers are suffering real income losses.

    A lower marginal tax rate is one of the incentives for the executives to pay themselves heftily, but tax cuts are not found to boost growth or employment. Share options for CEOs, which encourage job cuts and discourage re-investment, also must be reined in.

    If anything is making the Australian economy vulnerable, it is the growing economic disparity between self-serving executive compensation and stagnant wages for the rest of the population.

    The post Unemployment Rate Does Not Tell the Whole Story appeared first on The Australia Institute's Centre for Future Work.

  • Webinar: Changes to the SCHADS Award and Next Steps to Improve Job Quality

    We recently hosted a special webinar to discuss the Commission’s changes, their significance, and what comes next in the struggle to improve and properly value work in human services.

    The webinar featured two representatives from the Australian Services Union, which was centrally involved in the campaign for these changes: Emeline Gaske, Assistant National Secretary for the ASU, and Michael Robson, National Industrial Coordinator. They reviewed the economic and policy context for the review, the specific changes that have been announced, how they will be implemented, and the next steps in lifting the quality of work in these vital sectors. The conversation was chaired by our Policy Director for Industrial and Social issues, Dr. Fiona Macdonald.

    The post Webinar: Changes to the SCHADS Award and Next Steps to Improve Job Quality in Human Services appeared first on The Australia Institute's Centre for Future Work.

  • Working With COVID: Insecure Jobs, Sick Pay, and Public Health

    Almost one in five Australians (and a higher proportion of young workers) acknowledge working with potential COVID symptoms over the course of the pandemic, according to new opinion research published by the Centre for Future Work.

    The research confirms the public health dangers of Australia’s existing patchwork system of sick leave and related entitlements.

    The main findings of the report, based on a poll of 1000 Australians, include:

    • More than one in three (37%) employed Australians have no access to statutory paid sick leave entitlements (including workers hired under casual employment arrangements, and self-employed workers). Another 12% had access only to pro-rated part-time entitlements.
    • When the pandemic hit Australia, barely half (51%) of employed workers could count on regular full-time income if they had to stay home from work.
    • Almost one in five respondents (19%), and a higher proportion of young workers (29%), acknowledged working with potential COVID symptoms at some point during the pandemic. This confirms the public health dangers of Australia’s patchwork system of sick leave and related entitlements.
    • Polling results also confirm that a significant proportion of workers (17%) also attended work after exposure to someone possibly infected with COVID.
    • Given inadequate sick pay entitlements and the surprising share of workers attending work in violation of public health advice, it is not surprising that 18% of workers did not feel safe attending their normal workplaces during the pandemic.

    This research indicates that Australia’s sick pay entitlements are clearly inadequate to protect workers’ health and safety at work and allow them to stay home from work when health advice requires it. The expansion of non-standard and insecure forms of work (including part-time work, casual jobs, contractor positions, and ‘gigs’) has heightened concern that many workers do not have the effective ability to stay home from work for health reasons.

    Government should expand sick pay entitlements to cover all workers, and also implement strategies to limit and reduce the incidence of insecure work: including by constraining employers’ use of ‘permanent casual’ arrangements, sham contracting, and on-demand gigs, none of which provide normal and healthy paid leave entitlements.

    Unfortunately, the current federal Government has done the opposite by reinforcing this shift toward insecure working arrangements – including through its 2021 amendments to the Fair Work Act, which cemented and expanded employers’ rights to hire workers on a casual basis (with no sick pay) in virtually any job they wish.

    The post Working With COVID: Insecure Jobs, Sick Pay, and Public Health appeared first on The Australia Institute's Centre for Future Work.

  • Submission to Productivity Commission: Aged Care Employment

    Submission on aged care workforce conditions to the Productivity Commission.

    Authors: Fiona Macdonald

    Download the full report.

  • Pandemic Workforce Crisis Requires TAFE Investment in Early Childhood Education: Report

    The research report launched today, ‘Educating for Care: Meeting Skills Shortages in an Expanding ECEC Industry’ has called for the sector to be treated as an ‘industry of national strategic importance’ with greater investment in TAFE to train staff.

    Key Findings:

    • The number of job vacancies in Early Childhood Education and Care sector have doubled since the pandemic with providers reporting 6000 job vacancies per month
    • Australia is failing to train & retain its ECEC workforce, problem is set to worsen as 41,500 new graduates will be required per year by 2030
    • Beyond direct benefits, ECEC expansion boosts productivity across the economy by unlocking labour market participation of parents
    • Early childhood education enhances the long-term potential of Australia’s economy by providing children with education opportunities to expand lifetime learning, employment, & incomes
    • Among the 10 key recommendations, is that ECEC should be viewed as an ‘industry of national strategic importance’, similar to the manufacturing industry

    “Workforce shortages have been a problematic reality of the pandemic, both within the Early Childhood Education sector and across the broader economy,” said Dr. Mark Dean, Distinguished Research Fellow at the Carmichael Centre, and report author.

    “The early childhood education and care workforce crisis is set to get worse. This represents a huge opportunity: greater investment in TAFE training and secure jobs can unlock economic growth and deliver better outcomes for our children and the Australian economy.

    “It would be foolish to overlook the full and proper funding of Australia’s state- and territory-based TAFE systems in our post-pandemic economic reconstruction, rather than seeing it as an essential component.

    “To tackle the problem, education and care for preschool-aged children should be provided by well-trained and experienced workers. Like any industry, attracting and retaining quality early childhood education staff will require quality, secure jobs.

    “To meet the workforce needs of expanded ECEC coverage, ramping up high-quality vocational education for ECEC workers must be an immediate and highest-order priority.

    “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.”

    The post Pandemic Workforce Crisis Requires TAFE Investment in Early Childhood Education to Boost Economy: Report appeared first on The Australia Institute's Centre for Future Work.