The elephant in the room is that it is business that has the biggest influence on productivity. Certainly, it has a much bigger impact than workers, who typically get the blame when things go wrong.

The factor that most shapes how productive workers are, we must remember, is the technology they work with. It is management that is responsible for the decisions about what technology a business introduces, and how. Workers often do not have much of a say.

It is not workers who make the decisions about how much money is available for investment. It is not workers who make the decision about which particular technologies to buy, install and use. It is not workers who decide how much money should be allocated to the training of workers to use the new technology, or how those workers should be deployed. It is management.

Sure, there is lots of evidence that, when workers have a say at work, productivity is higher. But managers often don’t give them a chance to have more than a token say, if they have any say at all. Any attempts by governments to legislate that workers decide or influence decisions on those matters are opposed by business bodies in Australia.

How much effort workers put in to their job also shapes productivity. But lazy workers don’t last long in jobs these days, and most restrictive work practices went out the window in the 1980s. If a business continued to use workers who do not put effort into their job, the finger would very quickly be pointed at the managers who decided to do that and to not have the performance management systems that would overcome that problem.

Some characteristics of workers do make a difference, but they are often still matters in the hands of management to control.

Output will be better with an educated and skilled workforce. If people can do more things with their brains, they will be more productive. Yet management decides on the qualifications demanded of successful applicants for jobs. Management decides how much pay to offer to attract qualified workers to apply for and fill skilled vacancies. Management decides on the training provided to workers.

Management decides on job quality which, studies show, is positively related to performance.

Management decides on how much a business pursues diversity, equity and inclusion practices, which (despite shenanigans in the US) have also been shown to benefit innovation and firm performance.

So it’s no surprise that a couple of years ago the Productivity Commission, after looking at OECD evidence, said that the “productivity gains from upskilling managers could be three times higher than for upskilling workers”.

The problem for Australia is that, overall, the quality of Australian management is not that good. One survey showed that Australia “ranks low in almost all the people management dimensions”.

The Productivity Commission commented in its 2023 five-yearly review that “managerial capability varies, but generally lags other countries” and observed that “limited management capability may be holding back Australia’s productivity growth”. It added that its consultations had “provided insights into some of the consequences for innovation of poor management capability”.

The main response by top management seems to be to pay itself more. But a study as far back as 2004 found that the average pay gap between CEO pay and average earnings was “at least three times higher than that required to maximise organisational performance”. Leaders might say they’re tied to performance bonuses, but somehow when profits go down, the formula or the base get changed, and the CEO’s pay packet is saved.

When that doesn’t increase productivity, it’s blame the unions. But that wears a bit thin when only one in eight workers is unionised these days. Or cut penalty rates, or some other aspect of workers’ pay! But lower wages just reduce the incentive to introduce new technology.

What the studies do show about the impact of workplace relations on productivity is that it’s not whether a workforce is unionised that matters, it’s the quality of relations between workers and management that counts — and that is very much in the hands of management.

After all, research shows that workers do want a co-operative relationship with management — which, despite management wishes, is not the same as acquiescing to every management whim. If their union didn’t want co-operation, the workers would quit the union. The trouble is, if management didn’t want genuine co-operation, it will just blame the workers, and up its own pay because it’s dealing with a difficult situation.

There are no prizes for expecting business to blame others for Australia’s productivity problems. But an honest debate would look at what management can do better.

It’s that employer advocates are getting so excited about them, despite the small number of people they will affect and the small impact they will have.

That’s not to say the changes aren’t needed. Rather, true reform of the “casual” employment system, of which this is just a first but important step, has a lot further to go to resolve the “casual problem”.

What is the ‘casual problem’?

This problem is that most “casual” workers aren’t really casual at all — as shown by analysis that I and colleague Robyn May did, using unpublished data from the Australian Bureau of Statistics (ABS).

The premise for hiring them is that the work is intermittent, short-term and unpredictable. But, as you can see from the chart, the last time the ABS collected these data, a majority of “casuals” worked regular hours.

Almost 60% of “casuals” had been in the job for more than a year. About 80% expected to still be there in a year’s time.

Only 6% of “casuals” (1.5% of employees) worked varying hours (or were on standby), had been with their employer for a short time, and expected to be there for a short time.

Even now, some “casuals” have been doing the same “casual” work for over 20 years.

Permanent ‘casuals’

All this has led to a class of “permanent casuals” – a nonsense term. They should more accurately be called “permanently insecure”.

The one thing “casuals” have in common is they’re not entitled to sick leave or annual leave, and they are in a precarious employment situation. Their contract of employment only lasts till the end of their work day.

That means they have much less power than other workers. So little power, in fact, that barely half of them even get the casual loading they are meant to be paid in compensation for not receiving other entitlements.

On average, low-paid “casuals” get less pay than equivalent permanent workers, despite the loading.

Changing legal definitions

Not many “casuals” have been brave enough to challenge this exploitative relationship. But when they did a few years ago, Australia’s courts agreed permanent casual work was nonsensical.

To be a “casual worker”, there had to be no promise of ongoing employment. A court would judge this not just by what was in the formal contract of employment but also by what the employer actually did. If they kept hiring you, week after week, on a predictable roster, you weren’t casual.

In 2018, mine worker Paul Skene challenged his classification as a casual worker, arguing he had done pretty much the same work, with a few changes along the way, for five years.

The Federal Court agreed he wasn’t a casual employee and should be back-paid annual leave. Another mine worker, Robert Rossato, had a similar victory in 2020.

Employer organisations were “outraged” by the “billions” in back pay they could be forced to pay for having misclassified ongoing workers as casuals. They lobbied the Morrison government to amend the law, and challenged the rulings in the High Court.

The Morrison government changed the law in early 2021, to give primacy to the written contract, ignore employer behaviour, and protect employers from back-pay claims.

Later that year the High Court overturned the Federal Court decisions, ruling it was the written employment contract that mattered. If that was worded a certain way, you couldn’t test whether a worker was “casual” by whether the employer treated them that way afterwards.

Labor promised to overturn these interpretations, and that’s what this proposal does.

What will the legislation change?

The details of the government’s plan is still not clear, but it is likely it will seek to amend the Fair Work Act to revert to something close to the pre-2020 definition of casual work, with a procedural twist.

It will again be possible to judge whether an employee is “casual” based on employer behaviour. And an employee who repeatedly works a similar roster can, after six months, demand “permanency” – meaning rights to sick leave, annual leave, and better protection against arbitrary sacking.

The twist: until they demanded “permanency” they won’t be entitled to any leave. So employers will be protected against claims for back pay.

Theoretically this could affect hundreds of thousands of “casual” workers. In reality, it will likely help far fewer.

Suppose you’re a “casual” labour hire worker in mining. You can tell what time you’ll start work on the first Friday next June. You go to your employer — the labour hire company — and say: “Make me permanent.” The labour hire company says: “We can’t. You might not have a job tomorrow.”

And indeed, now that you’ve asked, maybe you won’t have a job. So would you really ask?

It will depend critically on the protections offered to workers who ask to convert, and how credible they are to workers.

Most people only expect a few people to make the demand. Workplace relations minister Tony Burke says he believes only a “very small proportion” of “casuals” working regular shifts will do so.

Part of that reluctance will be fear of the consequences, and part of it will be that many casuals rely on their casual loading. About half of “casuals” are on the award minimum rate, compared with 15% of “permanent” full-time workers. Most cannot afford to “choose” to trade the money for holidays and other entitlements.

If you’re not getting the casual loading, you’ve got nothing to lose — except your job. If the power imbalance means you don’t get the loading, you won’t fancy your chances.

So, it will just work for a small number or workers – though it’s likely to be very important to them.

More needs to be done

In short, this is a good step but more needs to be done.

In most other wealthy countries all workers – including temporary workers – are entitled to annual leave. That’s not the case in Australia, because of the “casual” ruse. These laws will not change that.

There should be universal leave entitlements. Sure, there needs to be a loading where work is unpredictable, and hence so short-term that leave entitlements would not be practical.

But everyone else should get annual and sick leave, and minimum award wages should be high enough that low-wage workers don’t have to rely on the casual loading to get by.

The challenge should be about how we transition to that situation.