New economic research shows up to 12,000 community service jobs are at risk due to the Federal Government’s failure to confirm whether federal funding for community service organisations will be maintained.

The new report released today by the Australia Institute’s Centre for Future Work demonstrates the economic importance of Commonwealth pay-equity funding at a time when these community services are critical to Australia’s pandemic-damaged economy.

Key Findings:

• The Federal Government is yet to confirm whether it will continue $576.5 million in supplemental funding for federally-supported community services, currently set to expire in the current (2020-21) financial year.
• This special funding was part of the Commonwealth government’s legislated 9-year timetable to phase in pay equity wage adjustments in community services.
• If this funding is not renewed (either by incorporation into a higher level of core funding for affected organisations, or through the extension of explicit pay equity supplements), the resulting funding shortfall will undermine and reverse the progress that has been made toward pay equity since the 2012 pay equity order.
• The loss of federal pay equity supplements would inevitably produce some combination of staffing cuts and wage cuts, as organisations respond to such a significant loss of funding.

“If experienced fully through staff cuts, the end of federal supplements would result in the loss of close to 12,000 jobs in federally-supported community organisations,” said Dr. Jim Stanford, director of the Australia Institute’s Centre for Future Work.

“Alternatively, if the brunt of the funding cut is experienced through effective wage reductions it would reduce annual incomes for federally-funded community service workers by as much as $15,000 for full-time staff.

“To put up to 12,000 community service jobs at risk, or force community service workers to take a $15,000 a year pay cut in the middle of global pandemic and an economic recession is both heartless and economically self-destructive,” Dr. Stanford said.

The Centre for Future Work report also found that the broad health and social services sector (which includes most of these community service organisations) has reduced the gender pay gap by more than any other industry in the years since the pay equity reform was announced.

Those past gains will be undermined and reversed unless federal funding consistent with new pay equity norms is quickly confirmed.

The report findings contrast sharply with the common concern that robots and other forms of automation will threaten future job security for Australian workers.

Major findings include:

• Business investment in new machinery (including robots) is weaker than at any point in Australia’s post-war history.
• Business spending on new research and technology has also been falling in Australia, and now ranks well behind the average of other industrial countries (and even some emerging economies, like China).
• The average amount of machinery and equipment used by the typical Australian worker has been declining since 2014, and has since fallen by 6%.
• Because of less automation and innovation, average productivity in Australia’s economy has also been declining for three straight years – also the weakest performance in Australia’s post-war history.

“Australian businesses are not investing nearly enough in new technology,” said Dr Jim Stanford, Economist and Director of the Centre for Future Work.

“This lack of business investment in new technology does not mean that Australian jobs are somehow safer. To the contrary, the failure of business investment means that even more jobs will be located in low-productivity, low-tech, low-wage industries – with terrible implications for wages and job quality.

“Business leaders love to complain that Australia’s productivity problems are due to red tape, taxes, and unions. The evidence is clear that their own failure to invest in new capital and new technology explains the stagnation in productivity. Instead of blaming others for this outcome, business leaders need to look in the mirror.”

The report adopts a multidimensional approach to measuring the wide economic and social benefits of the TAFE system resulting from Australia’s historic investments in public vocational education. Over $6 billion in economic activity and 48,000 jobs are supported by the direct operation of TAFE institutes and the TAFE supply-chain. Through its accumulated contribution to the employability and skills of Australians, the TAFE system generates another flow of benefits worth $84.9 billion per year in higher incomes and productivity. Those benefits are shared by workers in higher incomes, firms in higher profits, and federal and state governments – which receive $25 billion per year in extra tax revenues. Finally, another $1.5 billion in fiscal savings are enjoyed by governments through reduced costs for health and welfare benefits for TAFE graduates. Altogether, the TAFE system drives $92.5 billion in benefits per year – equal to almost 5% of Australia’s GDP.

The report finds despite chronic underfunding, Australia’s historic investment in the TAFE system continues to generate an enormous and ongoing dividend to the Australian economy. Increased public investment in the skills and earning capabilities of Australians will be critical to our post-pandemic recovery.

Key Findings:

• Australia’s historic investments in quality TAFE education supports a combined and ongoing flow of total economic benefits worth $92.5 billion to the Australian economy in 2019 — 16 times greater than the annual ‘maintenance’ costs Australia currently reinvests in the TAFE system.
• The presence and activity of TAFE institutes ‘anchors’ over $6 billion per year in economic activity and 48,000 jobs from the direct operation of the TAFE system and its supply chain, and ‘downstream’ consumer spending impacts.
• The TAFE-trained workforce generates $84.9 billion per year in higher incomes and business productivity. $49.3 billion is paid in additional earnings to TAFE-credentialed workers (relative to earnings of workers without post-school training); businesses receive $35.6 billion in increased profits from a more productive TAFE-trained workforce.
• The costs of delivering TAFE are modest – only $5.7 billion per year, or 0.3% GDP. Extra tax revenues received by governments thanks to the superior productivity and incomes of TAFE-trained workers alone are worth $25 billion per year: 4.4 times more than the total costs of running the TAFE system.
• The TAFE system increases employability and lowers unemployment. TAFE graduates enter the labour force with better employment prospects and skills. The increased labour force participation and employability of TAFE graduates corresponds to additional employment of 486,000.
• The TAFE system promotes wider social benefits critical to addressing inequality. TAFE helps ‘bridge’ access to further education and jobs pathways in regional areas and for special and at-risk youth groups. TAFE students are more likely to come from low-income households and identify as Aboriginal compared with private VET providers.

“Australia will squander the demonstrated economic benefits generated by our investments in the TAFE system, and unnecessarily limit our post-COVID recovery if we don’t act quickly to reinstate the critical role that TAFE plays in the VET system,” said Alison Pennington, senior economist at the Australia Institute’s Centre for Future Work.  

“The Australian economy is reaping an enormous flow of economic benefits from a VET ‘house’ built by the TAFE system. But the ‘house’ that TAFE institutes built is crumbling. If Australia wants to secure the benefits of a superior, productive TAFE-trained workforce as we prepare for post-COVID reconstruction, the damage must be repaired quickly.

“Major public skills investments will be best coordinated by TAFE institutes as the longest-standing and most reliable ‘anchors’ of vocational training and must be at the centre of an economic reconstruction process.

“By providing bridges to further education and jobs for regional, low-income and at-risk youth groups, the TAFE system is critically important to addressing systemic inequality in Australia’s economy and society.”