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  • Jobs and a Living Wage

    Jobs and a Living Wage

    by Jim Stanford in Arena

    Jim Stanford

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    Originally published in Arena on April 1, 2019

    Australians tend to bring a fair bit of swagger to international comparisons of economic performance. After all, Australia has experienced twenty-eight consecutive years of economic growth without a recession—a record for industrial countries. We are the ‘lucky country’, with one of the highest material living standards in the world, a wealth of natural resources, and a ‘no worries’ ability to withstand global economic shocks.

    The Australian policy journal Arena has published a wide-ranging article by Centre for Future Work Director Jim Stanford on the labour market issues at play in the current federal election.

    Stanford argues that the sense of “superiority” which typically accompanies economic debates during Australian election campaigns is muted in the current contest, because of the poor performance of the labour market in recent years. Unemployment and especially underemployment remain high; the quality of work has deteriorated; and wages have experienced their weakest performance since the end of the Second World War.

    Visit Arena’s website to read the full article.


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  • Workplace Policy Reform in New Zealand

    Labour Standards & Workers’ Rights, Unions & Collective Bargaining

    Workplace Policy Reform in New Zealand

    What are the Lessons for Australia?
    by Alison Pennington

    Author

    Alison Pennington

    Senior Economist

    Australia can learn much from the policy leadership of the Ardern Government in New Zealand and its reforms to address stagnant wages and rebuild a more inclusive workplace relations framework, according to new research from the Centre for Future Work at the Australia Institute.

    As Australia’s debate over wages and workplace rights heats up ahead of this year’s federal election, important changes in labour policy are also being implemented right across the Tasman Sea. Under the Labour-Green-NZ First coalition government which came to office in New Zealand in 2017, several progressive changes in labour law have already been enacted. Others are in development.

    Economist Alison Pennington reviews the policy reforms underway in New Zealand, and considers their relevance for Australia, in a new paper published by the Centre for Future Work.

    Pennington provides a timetable and analysis of seven specific reforms in New Zealand, including:

    1. a landmark pay equity judgement and development of a bargaining principles approach to facilitate pay equity claims and settlements economy-wide;
    2. the introduction of industry bargaining agreements;
    3. restoration of employee and union rights to collectively bargain;
    4. legislation tabled to extend greater protections against unfair dismissal to labour hire and agency workers, and new collective bargaining rights;
    5. government commitments to significant annual increases to the minimum wage;
    6. the establishment of broad civil society alliances in a campaign for a “living wage”; and
    7. the passage of legislation for a universal employee entitlement to 10 days paid domestic violence leave.

    Together they represent an ambitious and multi-dimensional effort by the new government in New Zealand to address low wages, inequality, and poor job quality. In every case, Pennington notes, the reforms emphasise the importance of collective representation and unions: not just to lift standards directly through collective bargaining, but also to play a central role in implementing other reforms (such as pay equity and domestic violence leave).

    New Zealand’s experience with these reforms holds several lessons for the Australian debate over workplace policies. The ambition and scope of the New Zealand reforms certainly confirms that there is great potential for national governments to act forcefully to respond to growing public concern over work, wages, and job security.

    “Australians have been touched by the tragedy in Christchurch, and impressed by the compassionate and effective response from the Ardern Government. And it seems there are other areas where we could learn from our New Zealand neighbours, including their new workplace policies,” said Pennington.



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  • 124 Labour Policy Experts Call for Measures to Promote Stronger Wage Growth

    124 Labour Policy Experts Call for Measures to Promote Stronger Wage Growth

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    124 labour policy experts have today published an open letter calling for proactive measures to help accelerate the rate of wages growth in Australia’s economy. The legal experts, economists, and other policy analysts agreed that “stronger wages in the future would contribute to a stronger, more balanced and fairer Australian economy,” and they proposed several broad strategies to boost wages.

    The letter has generated substantial media coverage, including articles in the ABC, The Guardian, and The New Daily.

    A comprehensive story also appeared in Workplace Express, which we attached below with the journal’s permission. (To subscribe to Workplace Express for comprehensive coverage of labour policy issues, please visit their site.)

    Richard Denniss, Chief Economist at the Australia Institute, also tied the open letter into his powerful column on the causes of wage stagnation.

    The open letter was initiated and circulated by the 3 co-editors of a recent collection of research essays on the wages slowdown (The Wages Crisis in Australia: What it is and what to do about it, published by the University of Adelaide Press):

    • Prof. Andrew Stewart, John Bray Professor of Law, Adelaide Law School
    • Dr. Jim Stanford, Economist and Director, Centre for Future Work
    • Dr. Tess Hardy, Senior Lecturer and Co-Director, Centre for Employment and Labour Relations Law, University of Melbourne

    “There is a growing and legitimate concern in Australia over the erosion of real living standards. Boosting wage growth is the best way to reinvigorate the promise of shared prosperity that is essential to a healthy and productive society,” said Dr. Stanford.

    “This is not a problem that is going to fix itself”, added Professor Stewart. “We need to see a policy response from governments at all levels – and an acceptance that lifting wage growth can help the economy, not harm it.

    Dr. Hardy said, “The problem of stagnant wages is a complex one. While there is no singular or straightforward solution, it is increasingly clear that combatting the current wages crisis will require concrete and decisive action.”

    Included among 124 co-signers of the letter are numerous distinguished policy experts, including:

    Prof. Roy Green, Emeritus Professor, Innovation Adviser, and former Dean of Business School, University of Technology Sydney: “In current conditions, wage increases can be a significant driver of growth and productivity through the incentive effect on capital investment, and the demand effect on capacity expansion. Keeping wages depressed is not only disadvantageous for workers but it is bad for business and the wider economy.”

    Prof. Sara Charlesworth, Distinguished Professor of Gender, Work and Regulation in the School of Management at RMIT University: “Wages fully reflecting the value of the work women undertake are vital to their well-being and fundamental to gender equality.”

    Prof. John Quiggin, ARC Australian Laureate Fellow, School of Economics, University of Queensland: “For decades, government policy has been designed to weaken unions and push wages down. It’s time to put that process into reverse.”


    Related documents



    Open letter ad



    Full open letter



    Workplace Express Story

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    Dutton’s nuclear push will cost renewable jobs

    by Charlie Joyce

    Dutton’s nuclear push will cost renewable jobs As Australia’s federal election campaign has finally begun, opposition leader Peter Dutton’s proposal to spend hundreds of billions in public money to build seven nuclear power plants across the country has been carefully scrutinized. The technological unfeasibility, staggering cost, and scant detail of the Coalition’s nuclear proposal have

  • A Historic Opportunity to Change Direction

    A Historic Opportunity to Change Direction

    by Jim Stanford

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    A unique conjuncture of economic and political factors has created an opportunity for a historic change in the direction of Australia’s workplace and industrial policies. That’s the conclusion of Dr. Jim Stanford, Economist and Director of the Centre for Future Work, in a major review article published in Economic and Labour Relations Review, an Australian academic journal.

    In a broad overview of the current problems in Australia’s labour market, and the weaknesses of existing labour market policies, Stanford argues that the prospects are ripe for a fundamental shift in the emphasis of Australian industrial laws and labour standards.

    “A combination of political and macroeconomic factors has created a historic opportunity to turn away from the individualised, market-driven labour market policy that has prevailed since the 1980s, in favour of a more interventionist and egalitarian approach,” Stanford writes.

    He provides evidence on the dual failure of Australia’s job market: there is not enough work for those who want and need it, and the quality of work has deteriorated badly. Both of those problems have undermined wage growth in recent years. But longer-term structural changes in labour market and industrial policies are also to blame: “The deterioration in job quality and distributional outcomes is the long-term legacy of the post-1980s shift away from Australia’s earlier tradition of equality-seeking institutional structures and regulatory practice.”

    Stanford argues that deep political and economic changes are opening a once-in-a-generation possibility for a redirection of labour and workplace policies. The political shift reflects more than just the traditional “horse race” between leading parties, as an election approaches. Rather, they reveal growing public frustration over the evaporation of the “fair go” and the dimming prospects for inclusive prosperity. These political shifts have broken the traditional bipartisan endorsement of business-friendly labour policies which shaped Australia’s labour market over the last generation.

    At the same time, major macroeconomic challenges are reinforcing the need for a future Australian government to consider a different approach to supporting incomes and growth. The effects of restrictive labour policies on wages and inequality were moderated and disguised for some years by Australia’s vibrant investment and growth conditions. But now growth is slowing dramatically (due to the property price downturn, weak consumer finances, and weak business investment), and so the harsh effects of employer-oriented workplace policies are being felt undiluted by millions of working Australians.

    “There is growing sentiment among many researchers, industrial relations practitioners and worker advocates that Australia’s current industrial relations and labour policy regime (with its reliance on an eroding enterprise bargaining system, its severe constraints on union membership and activity and its network of fraying statutory protections) is in need of fundamental and multidimensional change,” Stanford concludes.

    Dr. Stanford’s review article, “A Turning Point for Labour Market Policy in Australia,” appears in Economic and Labour Relations Review, a peer-reviewed journal based at UNSW. Free public access to the article has been provided by the journal for a limited time: please visit this site to see the full article.

    Stanford’s review was also reported in a feature article by The Saturday Paper‘s Mike Seccombe on the important role that wages and workplace issues will play in the coming federal election campaign.


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages

  • 8 Things to Know About the Living Wage

    8 Things to Know About the Living Wage

    by Jim Stanford

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    There has been a lot of discussion about “living wages” in recent years – in Australia, and internationally. And now the idea has become a hot election topic. The ACTU wants the government to boost the federal minimum wage so it’s a true living wage. Opposition leader Bill Shorten has hinted he’s open to the idea. Business leaders predict economic catastrophe if the minimum wage is increased.

    As the debate heats up, here’s a quick guide to 8 things you need to know about the living wage:

    #1. The debate is new. But the idea is old. And it was invented in Australia!

    In 1907 a conciliation and arbitration judge named H.B. Higgins decreed (in the famous “Sunshine Harvester” case) that wages should be sufficient to meet the “normal needs of an average employee, regarded as a human being in a civilized community.”  He actually calculated the wage that would be required for a full-time worker (then assumed male) to adequately support himself, his wife, and three children. At the time, the living wage was 7 shillings (or around 70 cents) per day.

    Of course, our idea of a standard “family” has changed a lot since then. We have fewer kids, and most women now work for pay outside of the home. But the idea of linking the minimum wage, to the actual costs associated with a minimum decent standard of living, is still valid.

    #2. Working for minimum wage is a recipe for poverty.

    From that humble beginning in 1907, Australia’s minimum wage evolved over time. It’s now adjusted annually by the Fair Work Commission. But the link to the concrete costs of running a household has been abandoned. These days the Commission looks at various factors (including profits, inflation, employment trends, and inequality) in setting the minimum. But it does not explicitly consider whether a minimum wage is sufficient to pay for basic living costs. And in reality, it is not.

    A full-time worker on the national minimum wage today ($18.93 per hour) makes $719 per week – and that assumes they work a full 38-hour schedule.  (In reality, most low-wage workers can’t get enough hours of work, on top of their low hourly rate.)  That’s only about 45% of average weekly earnings for all Australian workers.  And it’s certainly not enough to run a household, and pay for a decent standard of living. So Australia’s minimum wage is certainly well below a true “living wage.” Minimum wage workers, especially those with any dependents, are likely to live in poverty.

    #3: How do you measure the living wage?

    A common international threshold for defining low income is at 60% of the median earnings of full-time workers. (The median is the point exactly half-way between the top and the bottom of the income distribution; it differs from the average, which is unduly pulled up by a few very high-earners at the top.) Median earnings for full-time employees in Australia are presently close to $1500 per week. The minimum wage would thus have to increase to $23 per hour or more, to ensure that a full-time worker reached 60% of the median.

    Another method of calculating a living wage is to gather data on the actual costs of operating a basic household for a specific family type (often assumed to be two adults and two children, but other configurations are possible). In addition to the necessities of life (food, clothing, and shelter), a living wage must also allow for other expenses associated with full and healthy participation in society: such as internet, transportation, school supplies, a minimal level of entertainment expenses, insurance, and more. There are no luxuries in this budget – just a basic, decent standard of living consistent with modern social expectations.

    After adjusting for income taxes and transfers (like the family tax benefit and the child care subsidy), we then calculate the pre-tax income required to meet that basic standard of living. That in turn can be converted into an hourly living wage, by assuming a certain amount of paid work by the adults in the household (perhaps one working full-time and one working part-time).

    This “bottom-up” methodology has been utilised by living wage campaigns in several countries – but not yet Australia. The research confirms that current minimum wages are not compatible with healthy families and communities. The estimated living wage benchmark can then be used to lobby for increases in the legal minimum – or even to push individual employers to voluntarily pay a living wage.

    #4. For a generation, Australia’s minimum wage has lagged behind a living wage.

    In 1985 Australia’s minimum wage equaled 65% of median earnings (above that 60% threshold discussed above). It declined steadily relative to overall wages over the next two decades. Successive governments were focused on reducing wages, and fostering more dog-eat-dog competition in labour markets. (Last week Finance Minister Mathias Cormann actually admitted his government was trying to keep wages low as a matter of policy.)

    Over time, the minimum wage declined to a low of 52% of median wages in 2008. It bounced back slightly since then, helped along by a decent minimum wage hike (of 3.5%) last year. But the minimum wage still falls well short of any conception of a true living wage.

    #5. Isn’t Australia’s minimum wage higher than in other countries?

    It’s certainly higher than in America: where the minimum wage has been frozen at $7.25 for the last decade. It’s now equal to just 33% of median wages there – by far the lowest of any industrial country. No wonder many millions of full-time workers there still live in poverty. Not exactly a role model for Australia.

    In dollar terms, Australia’s minimum wage is higher than many countries. Some business lobbyists even complain Australia already has one of the “highest minimum wage in the world.”  But that claim is not true in any meaningful sense. Living costs are also very high in Australia compared to elsewhere. And international wage comparisons must consider deviations in exchange rates and other factors. It’s better to compare minimum wages across countries using the ratio of minimum to median wages discussed above.  By that standard, Australia’s minimum wage ratio is below several other countries, including France (the highest), Israel, Portugal, New Zealand, and even Turkey.

    #6: New Zealand is increasing its minimum wage – and fast.

    In fact, our neighbours across the ditch are quickly putting Australia’s minimum wage to shame. The minimum wage there (presently $16.50 per hour) is already higher as a share of median wages (above 60%) than in Australia. But the new Labour-Greens-NZ First government has been increasing it substantially, as one of its first policies. The minimum wage will grow 25% over the government’s four-year term – by which time it will equal approximately 68% of median wages.

    #7: Economists have changed their mind on minimum wages.

    Business leaders and market-friendly economists used to argue that increasing the minimum wage will inevitably cause unemployment. After all, they believed, if something is more expensive, people will buy less of it (the “buyers,” in this case, being employers). But this simplistic logic has been thoroughly discredited by a whole new generation of economic research on the effects of minimum wages on employment. Starting with a path-breaking study of minimum wages and fast food employment in New Jersey in the 1990s (by economists David Card and Alan Krueger), economists now realise the traditional supply-and-demand story is wrong.

    In fact, they have discovered several reasons why higher minimum wages do not have any significant negative impact on employment – and in some cases can actually lead to higher employment. These reasons include:

    • Improving labour force participation and retention among low-wage workers.
    • Reducing job turnover and the costs of searching for new jobs and new workers.
    • Offsetting the uncompetitive “monopsony” power of very large employers, which otherwise restrict their own hiring in order to help suppress wages.
    • Boosting consumer spending by putting more money in workers’ pockets – an effect which is especially beneficial for small business.

    Hundreds of studies of minimum wages in various countries have found little impact on employment in either direction. Even Australia’s Reserve Bank confirmed that recent increases in the minimum wage had no visible negative effect on employment.

    Further counter-evidence that higher minimum wages do not destroy jobs – and lower minimum wages do not create them – is provided by the experience of Australia’s recent cut in penalty rates for retail and hospitality workers on Sundays and holidays. Employers said this reduction in wages would lead to more jobs and longer hours. However, research by the Centre for Future Work showed those two sectors have been among the worst job-creators in Australia’s economy since penalty rates were cut. In fact, the retail sector eliminated 50,000 full-time jobs in the year under lower penalty rates.

    #8: A living wage would reduce poverty and boost incomes.

    In sum, higher minimum wages have little impact on employment one way or the other. Job-creation depends mostly on macroeconomic conditions and aggregate purchasing power. Higher minimum wages are proven to lift incomes for low-wage workers and reduce inequality. Committing to a true living wage in Australia, would ensure that people who work full-time, year-round are lifted out of poverty, and provide a badly-needed boost to Australia’s stagnant wages. It would be a powerful step in creating a fairer labour market.

    Median wage data from ABS catalogue 6306.0, “Employee Earnings and Hours.” Average wage data from ABS catalogue 6302.0, “Average Weekly Earnings.” Both refer to 2018.


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  • Turning ‘Gigs’ Into Decent Jobs

    Gig Economy

    Turning ‘Gigs’ Into Decent Jobs

    Submission to Inquiry into the Victorian On-Demand Workforce
    by Jim Stanford and Alison Pennington

    Authors

    Jim Stanford

    Alison Pennington

    Senior Economist

    What’s a ‘gig’ job, anyway? There’s lots of media hype about how people won’t have jobs in the future (they’re so old-fashioned). Instead they’ll work a never-ending series of gigs. Will they love the supposed ‘freedom’ and ‘flexibility’? Or will they yearn for the good old days when a job provided regular hours … and a regular paycheque?

    The government of Victoria is holding an important inquiry into the conditions and challenges of working in the ‘on-demand’ economy: a polite euphemism for gigs. The Centre for Future Work has made a submission.

    Our submission notes that digitally-mediated on-demand production typically incorporates five broad characteristics:

    • Work is performed on an on-demand or as-needed basis. Producers only work when their services are immediately required, and there is no guarantee of ongoing engagement.
    • Work is compensated on a piece-work basis. Producers are paid for each discrete task or unit of output, not for their time.
    • Producers are required to supply their own capital equipment. This typically includes providing the place where work occurs (their home, their car, etc.), as well as any tools, equipment and materials utilised directly in production. Because individual workers’ financial capacity to provide these up-front investments is limited, the capital requirements of platform work (at least that used directly by workers) are small.
    • The entity organising the work is distinct from the end-user or final consumer of the output, implying a triangular relationship between the producer, the end-user, and the intermediary.
    • Finally, some form of digital intermediation is utilised to commission the work, engage the producer, supervise it, deliver it to the final customer, and facilitate payment. In the modern economy, this last criteria is hardly exrtaordinary: virtually any job imaginable today relies on some form of digital task allocation or management.

    Despite the media hype which on-demand platforms have generated, the scale of employment engaged in on-demand work so far is rather modest. The number of people engaged in actual productive work organised through a digital platform is small (less than 1% of the labour force), and a large (likely majority) proportion of those rely on on-demand work for only a minority of their total income. Many people have signed up to perform work through one or more of these platforms, but do not stay with the platform long, and/or do not work many hours in the role.

    Another stereotype that needs to be challenged in considering on-demand work is the common claim that these employment practices are novel and innovative. Here it is crucial to distinguish between the technical innovations which these businesses utilise, and the changes in work organisation which those models also introduce. In fact, the major organisational features of digital platform work are not new at all. These practices have been used regularly in labour markets for hundreds of years; what is novel is the use of digital technologies for organising, supervising, and compensating work in that manner. And the growth of insecure or precarious work practices is not an essentially technology-driven phenomenon. Rather, the growing precarity of work, including in digitally-mediated on-demand jobs, reflects the evolution of social relationships and power balances, more than technological innovation in its own right. Appreciating the social and regulatory dimensions of technology and work organisation contributes to a more holistic and balanced understanding of the rise of on-demand work, its consequences, and its potential remedies.

    All the core features associated with on-demand work are long-standing. The practice of on-call or contingent labour – whereby workers are employed only when directly needed – has been common for hundreds of years. In an Australian context, a famous example is the former practice of dockworkers lining up each morning (for example, along Sydney’s ‘Hungry Mile’) in hopes of attaining employment that day; other examples are common in other sectors (including minerals, forestry, manufacturing, and agriculture).

    Home-based work, and other systems in which workers supply their own capital equipment, have also been common in many applications and contexts – from the ‘putting out’ system for manufacturing textile products and housewares in the early years of the industrial revolution, to the important role played by owner-operators in many modern industries (including transportation, resources, fisheries, and personal services).

    Piece-work compensation systems also have a long if uneven history. Employers have long aimed to tie compensation directly to output (as a way of shifting responsibility for managing work effort and productivity onto workers). Yet at the same time, the use of piece-work is constrained by numerous well-known problems, including difficulties in applying them in situations which require an emphasis on quality, not just quantity of output (like most service sector activities), and where work is performed jointly by teams or larger groups of workers.

    Finally, the triangular relationship that is evident in the on-demand economy between the worker/producer, the ultimate end-user of their labour (whether a business or a consumer), and an intermediary/‘middleman’ business is also very familiar from economic history. Past examples include labour hire services, “gang-masters,” and other forms of labour supply intermediation. Under this triangulated model of employment, it can be unclear who is the actual ‘employer’; this ambiguity opens the possibility for various negative practices and outcomes, which have been recognised for years in legislation, regulation, and jurisprudence.  An example is Australia’s long-standing rules regarding ‘sham contracting’, and more recent initiatives to regulate labour hire businesses in Queensland and Victoria.

    In short, the core features of on-demand work are not novel; and claims that this way of organising work is ‘new’ are not valid. Rather, on-demand businesses reflect a resurgence of very old business practices, that date back hundreds of years. So ‘gig’ employers cannot be allowed to invoke claims of technological advancement, to justify work practices that are hundreds of years old – and in many cases violate community standards and traditional labour laws.



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  • What’s a Million, Anyway?

    Employment & Unemployment, Macroeconomics

    What’s a Million, Anyway?

    Australia’s 2013-18 Job Creation in Historical Perspective
    by Jim Stanford, Troy Henderson and Matt Grudnoff

    Authors

    Jim Stanford

    Troy Henderson

    Matt Grudnoff

    Senior Economist

    Media release



    Million jobs not what it used to be: new report

    In the lead-up to the 2013 federal election, then-Opposition Leader Tony Abbott made a high-profile pledge that a Coalition government, if elected, would create 1 million new jobs over the next five years. Abbott was elected (although later ousted by his own party), and total employment in Australia did indeed grow by over 1 million positions between 2013 and 2018.  Current Prime Minister Scott Morrison hopes that this success can resuscitate his party’s flagging fortunes: he has pledged, if elected, to create even more jobs (1.25 million) over the next five years.

    But a new report from the Centre for Future Work takes a closer look at the government’s claims, and finds that Australia’s job-creation record since 2013 has actually been unimpressive.

    Australia’s working age population is over 20 million, and growing rapidly.  The labour market must create well over 1 million new jobs every five years, just to keep up with population growth.  Moreover, it was only due to a surge in part-time jobs (most of them casual, low-wage positions) that Mr. Abbott’s million-job target was met.  If full-time work had retained its previous share of all work, the number of new jobs would have fallen well below the 1 million benchmark.

    The Centre for Future Work has prepared a comprehensive review of Australia’s labour market performance since 2013, on the basis of year-end employment data for 2018 just released by the Australian Bureau of Statistics.

    The report is based on a detailed analysis of official labour market statistics, going back as far as 1958.  Major findings include:

    • 2013-18 was the tenth time Australia created at least 1 million jobs in 5 years.  The first time was 30 years ago.
    • But Australia’s population is much larger now, so 1 million jobs is no longer such an “achievement.” The rate of employment growth since 2013 has been slower than the long-term historical average.
    • Part-time jobs accounted for almost half of all jobs created since 2013.  Most of them are casual jobs, and average wages are much lower.
    • Hours of employment grew more slowly since 2013 than Australia’s population.  That means the amount of work available, on average, to each potential worker declined compared to the previous 5 year-period.
    • Because new work was not keeping up with population growth, total underutilisation of workers (including unemployment, underemployment, and discouraged non-participation) got worse over the last 5 years.
    • In addition to an inadequate quantity of work, the quality of work has also deteriorated by several measures: including more casual jobs, precarious self-employment, and reduced coverage by collective agreements.
    • Since 2013, wage growth has slowed to the slowest sustained rate since the 1930s.  And since nominal wages are not keeping up with inflation, real wages have declined.

    In this broader statistical perspective, Australia’s recent labour market performance has not been stellar. It’s been mediocre, at best.  That explains the growing anger expressed by millions of Australians concerned about stagnant wages, insecure work, and falling living standards.



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  • Job Creation Record Contradicts Tax-Cut Ideology

    Job Creation Record Contradicts Tax-Cut Ideology

    by Jim Stanford

    Jim Stanford

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    The Australian Bureau of Statistics released its detailed biennial survey of employment arrangements this week (Catalogue 6306.0, “Employee Earnings and Hours“). Once every two years, it takes a deeper dive into various aspects of work life.

    Buried deep in the dozens of statistical tables was a very surprising breakdown of employment by size of workplace.  It turns out, surprisingly, that Australia’s biggest workplaces (both private firms and public-sector agencies) have been the leaders of job-creation over the last two years.

    This runs against the common refrain that small business is the “engine of growth.”  In fact, workplaces with less than 50 employees actually shed employees (14,000 in total) since 2016.  Curiously, it was only smaller businesses that received the much-vaunted reduction in company tax (from 30 to 27.5 per cent), also beginning in 2016.

    Firm Size and Job Creation

    The tax rate for small and medium-sized businesses began to fall in 2016, first for the smallest firms (with turnover under $2 million), and then for firms with up to $50 million revenue.  The tax is not tied to the number of employees in a business, but the vast majority of firms which have received the tax cut have less than 50 employees.  Yet that is the group that has reduced its workforce since the tax cuts began to be phased in.

    In contrast, very large workplaces (with over 1000 employees) added 182,000 new jobs over the two years.  Workplaces with between 100 and 1000 employees added 187,000.  Very few of those workplaces would have received the reduction in company taxes (since most would exceed the $50 million annual revenue threshold).

    Workplaces between 50 and 100 employees created a net total of 103,000 new jobs between 2016 and 2018.  Some of those firms would have received the tax cut, and some not — depending on the nature of the business and the amount of total turnover generated per employee.

    The data on job-creation by firm size is detailed on Table 13 of Data Cube 1, in the “Downloads” section of the ABS report. The data refers to waged employees, not including owner-managers of businesses.

    The share of small businesses (under 50 employees) in total employment declined by two percentage points — since they were reducing their workforces, while larger companies were growing.  Small businesses (under 50 employees) now account for 34 per cent of all employees, compared to 36 percent in 2016.

    Why would large companies that didn’t get a tax cut create new jobs faster than companies which did benefit from the Coalition tax cuts? (The small business tax cuts are estimated to reduce federal revenues by $29.8 billion over the first decade.) Simple: there are dozens of different factors which determine whether a company is profitable or not, and whether it chooses to grow.  Tax rates are just one of those variables.  Others include:

    • Growth in consumer demand.
    • The company’s investments in product quality, innovation, and design.
    • Production costs.
    • Interest rates and financing costs.
    • Business confidence and expectations.
    • Management capacity.
    • International competition.

    Trends in all these other factors can easily overwhelm the marginal impact of lower tax rates.  Small business sales in particular have been held back by stagnant wages among Australian workers.  Even companies which experience higher profits due to lower tax rates may choose to simply accumulate those profits, or pay them out to shareholders in dividends and share buy-backs (instead of expanding payrolls).  Empirical evidence shows this has been the dominant impact of U.S. business tax cuts implemented by Donald Trump.

    Changes in tax rates can even have offsetting effects which undermine business conditions and hence reduce job-creation: if the revenue lost to tax cuts results in corresponding reductions in government program spending or infrastructure investments (as seems likely), then overall business conditions might be weakened, not strengthened.

    The reduction in employment by the businesses which most benefited from the expensive business tax cuts over the past two years should lead policy-makers of all persuasions to reconsider the argument that this is an effective way to stimulate growth and job-creation. However, in October the government announced it wanted to accelerate the next stages of the small business tax cuts — taking the rate down to 25 per cent five years faster than originally planned.

    So far, the policy is akin to shooting oneself in the foot.  Instead of reloading the gun to do it again even sooner, perhaps this is a good time to reconsider whether the strategy makes any sense at all.


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    Commonwealth Budget 2025-2026: Our analysis

    by Fiona Macdonald

    The Centre for Future Work’s research team has analysed the Commonwealth Government’s budget, focusing on key areas for workers, working lives, and labour markets. As expected with a Federal election looming, the budget is not a horror one of austerity. However, the 2025-2026 budget is characterised by the absence of any significant initiatives. There is

    Dutton’s nuclear push will cost renewable jobs

    by Charlie Joyce

    Dutton’s nuclear push will cost renewable jobs As Australia’s federal election campaign has finally begun, opposition leader Peter Dutton’s proposal to spend hundreds of billions in public money to build seven nuclear power plants across the country has been carefully scrutinized. The technological unfeasibility, staggering cost, and scant detail of the Coalition’s nuclear proposal have

  • The REAL Diary of an Uber Driver

    The REAL Diary of an Uber Driver

    by Jim Stanford

    Jim Stanford

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    ABC recently announced plans for a new 6-part television drama called “Diary of an Uber Driver.”  The Centre for Future Work’s Director Jim Stanford wonders if this drama will truly constitute insightful drama – or whether it will serve to whitewash the labour practices of a controversial, exploitive industry.

    A version of this commentary originally appeared on the 10 Daily website.

    The REAL Diary of an Uber Driver

    by Jim Stanford

    ABC recently announced plans for a new 6-part television drama called “Diary of an Uber Driver.”  It’s hard to imagine that an Uber driver’s actual life would make for riveting TV viewing.  Here’s an illustrative account I have constructed, based on observations and real conversations with ride-share drivers:

    5:25 am. Shower and quick breakfast. Uber says I can “work when I want.” So why am I up at 5? Because that’s when there’s customers.

    6:10 am. Got one ride to the City, now deadheading back to suburb where the app says they need cars. 20 minutes of my time, plus petrol, down the tube.

    7:38 am. Been waiting 7 minutes for fare to come out of her house; I can charge her extra – but she’ll likely give me 2 stars out of 5 on the customer rating.

    8:12 am. Asshole office guy demands to get out at a traffic island. Totally illegal. If I refuse, I’ll lose stars.

    8:35 am. Driving obnoxious kid and dad to school. Kid waving a stuffed animal out the window, dangerous and illegal. If I tell the dad to stop it, I’ll lose more stars.

    9:20 am. Buy petrol.  Price up another 3 cents.  Apparently I operate an “independent” business, but I can’t raise my price when costs rise. In fact, I never even touch the money – it all goes through the app.

    9:28 am. Next door at Aldi’s buying bottled water, candies, and gum. $16. Customers expect the perks – and I gotta buy them, or lose my stars.

    10:35 am. Been waiting 15 minutes without a fare. Waits that long cut my effective hourly wage by a third. Think I’ll go home and go back to sleep.

    3:20 pm. Back on the app. Deadhead back to the City for rush hour.

    5:17 pm.  Waiting 3 minutes in no-stopping zone for guy who said he’d be right there.  Risking big ticket.  Could move, would lose stars.

    6:20 pm. Cop eyes me at traffic light as I accept next fare on the app. I know it’s illegal, but it’s the only way to work it.  If he fines me ($484 and 4 demerits), that’s 3 days’ net pay. I’m lucky.

    7:18 pm. Arrogant stockbroker gives me 2 stars, even though nothing went wrong. Why? Maybe it was my skin colour, not my service.

    8:25 pm. Drunken kids demand I go through McDonald’s. If I refuse, 2 stars for sure. Car now smells like French fries. And they spilled Coke on my carpet; another cleaning. They give me 2 stars anyway. I could give them 2 stars (as their rating), but it doesn’t matter. The customer is always right, and they’ll always get a driver. I might not find another job.

    9:38 pm. Another 15 minute wait for next fare. I suspect I’m being punished by the algorithm: it sends more jobs to preferred drivers.

    10:33 pm. More drunks, demanding to play Spotify through my sound system. Cranking it to the max. Stars at risk if I complain.

    1:18 am. Slow night, too many drivers out there. Getting very tired. Uber limits me to 18 hours work in any 24 (gosh); gotta sign off soon. I could always switch to Lyft and drive a few more hours. App sends rah-rah message that I could get to $250 for the day with a couple more fares.

    1:52 am. Deadhead home. App tells me I made $276, 15 hours on-line. That’s before petrol ($60 today), vehicle costs, data costs, and the damn gum. I’ll be lucky to keep half that. Didn’t make the minimum wage today… what else is new?

    This doesn’t make for feel-good viewing, by any definition. So what is ABC thinking?

    The mini-series is a spin-off from a blog and subsequent book by Ben Phillips, who began driving for Uber in Sydney after his own small business went belly-up. His writing describes many strange encounters with weird customers and other characters. The series will also draw in his own personal angst – including fears about becoming a father.

    In short, it’s like Taxi Driver for the gig-economy: a chronicle of mini-dramas compiled by a neurotic driver, ferrying colourful passengers around the big, lonely city. There will surely be entertainment value in some scenarios. But it’s hardly an accurate portrayal of the mind-numbing, exploitive reality of ride-share driving. And the whole concept raises questions that the broadcaster and its viewers should ponder carefully.

    For starters, why is the ABC naming a TV series after a corporation? Uber is the best-known ride-share company, sure, but there are many competitors. Moreover, conventional taxis are still a mainstay of urban transportation – and taxi drivers surely have as many interesting stories as Phillips. Taxis, however, are old-fashioned, while Uber is “cool.” ABC is riding the coattails of Uber’s brand by naming the whole show after it. Unfortunately, this also provides profile and endorsement to a troubled and controversial American corporation – one gearing up for a potential $120 billion (U.S.) stock offering.

    Let’s set that ethical issue aside.  An even bigger concern is that the series will whitewash, even glamorise, a highly exploitative employment practice whose legitimacy and even legality is under siege in courtrooms and parliaments around the world. Uber has recently lost precedent-setting legal cases in France, Italy, the U.K., the U.S., and Canada. More challenges are underway, including in Australia.

    Uber has been avoiding the risks, costs, and responsibilities that come with directly employing drivers – inconveniences like minimum wages, workers’ compensation, paid holidays, and more. Drivers pay all vehicle costs (including depreciation, maintenance, tires, petrol, phone and insurance). Uber controls all payments (through the app), deducting booking fees and a fat 27.5% commission; the driver is stuck with all other costs (including GST), hoping there’s enough left at the end to buy groceries. They can be fired for inadequate consumer ratings (logged through the app’s 5-star system). Uber claims its drivers are “entrepreneurs,” not employees – but that fiction is crumbling in the face of myriad legal challenges.

    In practice, many Uber drivers make well under the minimum wage: my 2018 research indicated average pay (after vehicle expenses) of $14.62 per hour across 6 Australian cities; other surveys suggest even less. Other issues faced by drivers include dismissal without severance or recourse; traffic fines (including for operating the Uber app while driving); unlimited competition (there’s no cap on how many drivers can sign on); and deadening, dangerous hours. Little wonder 90% or more of Uber drivers quit within a year.

    It’s hard to believe this series will portray the ugly side of ride-share driving. Instead, working for Uber will come off as a humble but meaningful vocation: one where human interaction (rather than earning the minimum wage) is the main remuneration. At a moment when the exploitive practices of Uber and other gig employers are finally receiving critical attention around the world, this smells like corporate propaganda, not high-quality drama.


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages

  • Australia’s Upside-Down Labour Market

    Australia’s Upside-Down Labour Market

    by Jim Stanford in Western Teacher

    Jim Stanford

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    Originally published in Western Teacher on January 16, 2019

    Workers produce more, but get paid less. Business invests less in real capital, but their profits grow. Technology advances at breakneck pace, but so many jobs are degraded and menial (not to mention horribly paid). What gives? Australia’s labour market truly seems “upside down.”

    In this article reprinted from Western Teacher magazine (published by the State School Teachers’ Union of WA), our Director Jim Stanford tries to explain these contradictory trends.

    The article is based on a presentation to a recent SSTUWA delegates meeting in Perth.

    Cover

    Stanford provides a dual diagnosis for Australia’s labour market problems: an inadequate quantity of work, and the deteriorating quality of work.  Egged on by government policies which have deliberately suppressed wages in so many workplaces, wage growth has fallen to postwar lows.  This is now undermining Australia’s continued economic progress.

    In addition to diagnosing what’s gone wrong in Australia’s labour market, Stanford also explains the numerous economic benefits of stronger collective bargaining systems so that workers can receive a fairer share of the economic pie: stronger consumer spending, more stable financial conditions, stronger government revenues, and less inequality.

    To see the full issue of Western Teacher, or sign up for future editions, please visit the magazine’s website. We are grateful to Western Teacher for permission to reprint the article here!


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages