New research shows active strategies to directly link university degrees to a job are needed, to better support university graduates as they negotiate a rapidly changing labour market.

The report, by the Australia Institute’s Centre for Future Work, shows that employment outcomes for university graduates have deteriorated significantly since the Global Financial Crisis, with only 73% of recent university graduates finding full-time employment within 4 months of graduating – down from 85% in 2008.

Key Findings:

• At the individual level, a university degree is still very valuable: people who hold a university degree are more likely to be employed, more likely to be employed in a stable job, and earn higher average wages and salaries. Half of new jobs created in the coming 5 years will require a degree.
• However, many recent graduates report being underemployed or in insecure jobs that do not utilise their specific skills—including graduates who studied technical skills or STEM subjects.
• The report makes 9 recommendations to improve university-to-work transitions for future graduates, including establishing a national higher education planning capacity, and creating a timely and high-quality labour force information system.

Alison Pennington, Senior Economist, Centre for Future Work:
“Employment outcomes for university graduates have deteriorated significantly since the GFC,” says Alison Pennington, Senior Economist at the Centre for Future Work and co-author of the report.

“Finishing tertiary education and finding a job in your field is a difficult and haphazard experience, which is leaving many graduates in jobs that do not fully, or even partially, use their hard-won and expensively acquired skills.

“Vocational degrees, which are tied to specific occupations like health care, engineering or teaching, have the best employment placement rates. As seen in these professions, directly linking degrees to jobs through paid placements, occupational licensing and accreditation would greatly improve the situation of graduates.

“A hands-on and direct approach that channels graduates directly into relevant career opportunities is needed. Australia could learn a lot from other countries, especially in Europe, where this is already being achieved through forecasting future skill requirements and planning higher education offerings accordingly.”

Noel Edge, Executive Director of Graduate Careers Australia:
“The overwhelming message from this report by the Centre for Future Work is the need for further research in graduate employment,” says Noel Edge, Executive Director of Graduate Careers Australia.

“Research to explore the emerging work environment for tertiary education students in Australia, beyond basic government labour-market forecasting and graduate outcomes reporting, simply does not exist.”

The report was commissioned by Graduate Careers Australia.

New analysis of labour market performance released today by The Australia Institute’s Centre for Future Work, shows Australia’s job creation performance over the past five years has been weak relative to population growth and compared to past periods of history.

“A million jobs in five years sounds like an impressive figure, but there are now over 20 million Australians of working age, and our population is growing very rapidly. A million new jobs every five years, isn’t even enough to keep up,” says Dr. Jim Stanford, Director of the Australia Institute’s Centre for Future Work.

“A closer look at the evidence shows that both the quantity and the quality of work being created in Australia’s labour market is inadequate to the needs of our growing population, and highlights the role part-time work has played in inflating the apparent total number of jobs created.

“Part-time employment has accounted for almost half of all new work created since 2013. Without the this rapid expansion of part-time work, which converts a given amount of hours of work into more jobs, the growth in employment would have fallen well below one million.

“Due to soaring part-time employment, the number of hours worked by each worker has fallen to the lowest on record. Part-time workers also experience lower hourly wages, higher casualisation, and are more dependent on the minimum conditions of modern awards.

“Along with the declining quality of jobs, our research shows an unprecedented stagnation of wages since 2013. With nominal pay lagging behind inflation, the real purchasing power of Australian works has declined for the first time since the recession-wracked 1990s.

“This deterioration occurred in a time when the economy was growing steadily.  Instead of constituting some kind of economic triumph, the last five years really represents a lost economic opportunity.”

The Centre for Future Work has proposed to the Commission that a system of sector-wide collective bargaining in the financial industry could establish clear and ethical benchmarks for compensation, avoiding the problem of ‘conflicted remuneration’, which is behind much of the misconduct the Royal Commission has exposed.

The Centre for Future Work’s submission to the Royal Commission proposes a uniform compensation system, to apply across the whole industry, consistent with the principles of ethical banking:

• Uniform compensation can be achieved via a sector-wide collective bargaining system, in which employer and union representatives negotiate standard compensation patterns to apply to all participants across the industry.
• Compensation in each job to be tied to qualifications and experience; separate pay grids could be specified in various branches of finance (including major banks, insurance, superannuation, and financial advice).
• Clear and enforceable limits on sales- or revenue-based incentives would be specified – eliminating what the Royal Commission has confirmed is a key motivation for misconduct.
• Instead of depending solely on government regulators to stop misconduct, enforcement of compensation standards would become part of the regular administration of the collective agreement.

“At present, flawed pay systems create perverse incentives for banks and brokers to push debt, insurance, and financial services to Australians,” says Dr. Jim Stanford, Director of the Centre for Future Work.

“Financial professionals can reap tens or hundreds of thousands of dollars in commissions, bonuses and so-called ‘introducing’ fees; top executives pocket millions.

“It is inevitable that these incentives lead sales staff and executives to sidestep or ignore basic rules and standards such as ‘know your client’ rules, fee transparency and responsible lending.

“Consumers, many of them vulnerable, end up with expensive commitments they don’t need or – in many cases – even understand.

“Under a sectoral agreement, hundreds of managers, union officials and delegates throughout the financial industry would be responsible for enforcing the ethical pay practices spelled out in the agreement.

“Unfortunately, Australia’s current restrictive industrial relations laws generally prohibit collective bargaining on a multi-firm or sector-wide basis.

“These restrictions are unusual. Most industrial countries permit, and even encourage, multi-firm, pattern, or industry-wide bargaining as an efficient way to determine consistent benchmarks for pay and conditions, and ensure that ongoing economic and productivity growth translates into rising living standards.”

The Centre’s submission argues these restrictions on sector-wide bargaining should be reconsidered in light of the pervasive pattern of financial misconduct – and the key role of perverse compensation systems in motivating that misconduct.

“Sectoral collective bargaining could help reform compensation and reduce financial misconduct on a uniform, industry-wide basis,” Stanford said.

“The Royal Commission should explore standardised sector-wide collective agreements as a promising response to the problems it has documented, and the Commonwealth Government should eliminate its unusual restrictions on collective bargaining to allow this important reform.”

The Australia Institute’s Centre for Future Work has today published a new research symposium documenting how workers’ slice of the national economic pie continues to get smaller.

Key findings:

• From peak levels of 58 per cent of GDP in the mid-1970s labour compensation — including wages, salaries, and superannuation contributions — declined to just 47 percent in 2017, their lowest level since 1960.
• Real wages have consistently lagged behind the ongoing growth in labour productivity, meaning workers are not getting paid enough to buy back the goods and services they produce.
• The loss of labour’s share of GDP translates into the redirection of over $200 billion in income per year from workers to other groups in society (mostly corporations).

“In recent years, wages have barely kept up with consumer price inflation – and for many workers, they have fallen behind,” said Dr. Jim Stanford, Director of the Centre for Future Work.

“The fact that the workers’ slice of the economic pie continues to get smaller speaks volumes about the lopsided power imbalance in today’s labour market.

“The decline in Australia’s labour share from the 1970s peak to the present, ranks among the worst of all OECD countries, even worse than the United States.

“Almost the entire decline in the labour share has been reflected in a corresponding increase in the share of GDP going to corporate profits – especially the financial sector.

“In short, while the workers’ share has continued to get smaller, the share of corporate profits has continued to get larger.

“By comparison, in some countries the labour share has been stable or rose during the same period, disproving the claim that this trend is somehow ‘universal’ or ‘inevitable’.

“Without urgent measures to strengthen labour standards and protections, including stronger minimum wages and a restoration of meaningful collective bargaining, this decline will almost certainly continue.

“The company tax cuts for big business now being proposed by the federal government are just the icing on top of an already-rich cake.”

This research resulted from a special panel of experts convened by the Centre for Future Work, at the Society for Heterodox Economists conference at UNSW in Sydney last December. The papers from that panel have been peer-reviewed, and are published this week in the Journal of Australian Political Economy.

Authors contributing to the symposium include Dr.David Peetz (Griffith University), Dr. Shaun Wilson (Macquarie University), Dr. Margaret Mackenzie (Economist, Australian Council of Trade Unions), and Dr. Jim Stanford (Economist and Director of the Centre for Future Work).

The new report from the Centre for Future Work identifies key factors behind the rapid emergence of skills shortages in manufacturing, including:

• The sector’s ageing workforce, creating a looming demographic transition for skilled worker
• The highly specific nature of manufacturing skills (across sectors and occupations), creating difficulty for workers moving from between shrinking sectors to growing sectors
• The need for new skills and ongoing training as companies adopt advanced manufacturing techniques and new digital technologies.

“Manufacturing is again making a positive contribution to Australia’s economic progress after over a decade of decline. We don’t want to squander this potential,” said Dr. Jim Stanford, Director of the Centre for Future Work.

“If Australia doesn’t get its act together on vocational training, this will be a wasted opportunity for manufacturing.

“Recent experiments with market-based vocational training have been a waste, they have damaged confidence in the skills system among both potential students and employers.

“Stable, well-funded, high-quality public institutions must be the anchors of any successful VET system.

“Public institutions are the only ones with the resources, the connections, and the stability to provide manufacturers with a steady supply of world-class skilled workers.

“No sector feels the pain of the failure of vocational training more than manufacturing, precisely because advanced skills are so essential for the success of advanced manufacturing techniques.

“Manufacturing stakeholders need to work together to strengthen vocational education and training.”

Key principles for rebuilding vocational education in manufacturing, discussed in the report, include:

• A greater reliance on courses and apprenticeships through public-sector TAFE (rather than private providers)
• Phased-in retirement programs to allow senior workers to pass on their skills to new apprentices
• Inclusion of provisions guaranteeing access to further training in industry awards and enterprise agreements.

The report was co-authored by Dr. Jim Stanford and Dr. Tanya Carney and prepared for the Second Annual National Manufacturing Summit at Parliament House on 26 June 2018.

The National Manufacturing Summit engages leading representatives from all parts of Australian manufacturing: businesses, peak bodies, unions, universities, the financial sector, suppliers and government. The growing problem of skills shortages is a priority focus for this year’s Summit.