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Tag: Jim Stanford

  • Raising the Bar: How Government Can Use its Economic Leverage to Lift Labour Standards Throughout the Economy

    Labour Standards & Workers’ Rights, Public Sector, Procurement & Privatisation

    Raising the Bar: How Government Can Use its Economic Leverage to Lift Labour Standards Throughout the Economy

    by Jim Stanford

    Author

    Jim Stanford

    Media release



    Government Spending Power Could Support Stronger Wage Growth

    For at least five years now, Australia’s labour market has demonstrated signs of a structural shift that has undermined traditional patterns of wage determination, and eroded the quality and security of work. The economic and social consequences of this sea change in the world of work are severe and far-reaching: flat real wages (the worst labour income growth since the Great Depression), a severing of the traditional relationship between wage and productivity growth, a steady expansion of insecure work in various forms, growing inequality in income distribution (both between factors and across households), and a precipitous decline in collective representation and enterprise bargaining (especially in the private sector). Governments tell Australians to simply be patient, and let “market forces” do their work; wages will pick up and economic benefits will soon “trickle down.” But there is no reason to expect these concerning labour market challenges to resolve themselves. Instead, the whole history of Australia’s economy reminds us that pro-active policy efforts are always necessary to broadly distribute the fruits of economic growth to workers and their families.



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  • Wages, Taxes, and the Budget

    Tax, Spending & the Budget, Wages & Entitlements

    Wages, Taxes, and the Budget

    by Jim Stanford and Troy Henderson

    Authors

    Jim Stanford

    Troy Henderson

    The Coalition government’s 2018 budget features a plan to cut personal income taxes for many Australians over the next several years. The government claims it wants to reward lower- and middle-income wage-earners with tax savings.  However, the biggest personal tax reductions would not be experienced until 2022 and beyond (after at least two more federal elections).  And the biggest savings go to those with incomes over $200,000 per year (the richest 3 percent of tax-filers).

    Our Briefing Note on the 2018 Budget explores the relationships between wages and taxes, and shows that working to reverse the recent unprecedented wage stagnation is the key to achieving ongoing improvements in living standards – not pre-election tweaks in the tax code.

    Our budget analysis finds that:

    • The boost in disposable incomes for most Australians from these changes will be miniscule, not making any measurable difference to their standard of living.
    • The biggest cause of stagnating living standards in Australia has been the deceleration of wage increases since 2012. The budget assumes that wage growth will suddenly rebound in coming years to more traditional rates (of 3.5 percent per year). This assumption underpins the government’s revenue forecasts – but there is no plan for achieving faster wage growth.
    • To the contrary, the government’s continuing labour policies will suppress future wage increases. This includes its own 2 percent cap on wage increases for federal public sector workers; the government is restraining wage growth for its own employees to barely half of what it hopes for the whole economy.
    • Restoring normal wage patterns would boost disposable incomes for Australian workers many times more than tweaks to personal tax rates and thresholds.

    For example, for a worker earning $60,000 per year (higher than the median income of Australians), the Coalition tax plan will increase disposable income by $530 by the last year of the budget period (2021-22).  In contrast, annual normal wage increases (of 3.5 percent per year) would boost disposable income that same year by almost $6000 – 11 times as much.



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  • Rebuilding the NSW Workers Compensation System

    Wages & Entitlements

    Rebuilding the NSW Workers Compensation System

    by Ian Watson and Jim Stanford

    Authors

    Ian Watson

    Jim Stanford

    Workers compensation benefits in New South Wales were dramatically reduced in 2012 by a newly-elected state government, citing an alleged financial crisis in the system.  Benefit payments (adjusted for inflation) declined 25 percent in just five years – and some cuts are still being imposed on injured workers and their families (including some losing benefits entirely).  But even as injured workers suffered the consequences of these benefit cuts, the financial position of the workers compensation system suddenly transformed from “famine to feast”: the supposedly dire deficit which justified the cutbacks disappeared entirely within one year, and by mid-2013 the fund was already back in surplus.  The system’s total surplus now exceeds $4 billion.

    This report reveals the artificial nature of the supposed crisis which justified the 2012 cuts, and highlights the continuing positive financial trends that are generating ever larger surpluses.  It proposes a five-year timetable for restoring benefits to injured workers in NSW, without increasing average premium levels or incurring funding deficits.

    There is no fiscal or moral justification for injured workers to continue to suffer reduced benefits, while the workers compensation system carries a multi-billion dollar surplus – poised to get even bigger in the years ahead.  Unions NSW commissioned the Centre for Future Work to conduct an independent review of the system’s financial position.  Our full 95-page report, Restoring Dignity and Respect: Rebuilding NSW’s Workers Compensation System, reviews the system’s roller-coaster ride over the past decade, and highlights the artificial and temporary nature of the financial circumstances which were invoked to justify cuts in 2012.  It documents and explains the improvements in injury rates, premium revenue, and financial markets that underpin the continued surplus-generating capacity of the system. 

    The report confirms that ample resources are available to fund a gradual but ambitious repair in benefit entitlements for injured workers in the years ahead, centred around Unions NSW’s 12-point vision for a fair, effective, and sustainable workers compensation system. The report makes 10 core recommendations to the state government and icare directors, including:

    1. Maintain overall effective average premium rates at current level.
    2. Simplify and make more transparent the formulae for calculating premiums for specific employers.
    3. Undertake an independent actuarial review of the cost of reversing specific components of the 2012 policy changes, and otherwise improving benefits (including the twelve reform principles outlined by Unions NSW).
    4. Develop a staged timetable for restoring and enhancing benefits, with liabilities increased by $1 billion annually over the next five years.
    5. Impose a moratorium on the cessation of monthly benefits under Section 39, and restore benefits for injured workers who have been cut off.
    6. Revise capital funding policy to target full funding (100 percent) of adjusted present value liabilities (including a cushion to reflect an 80-percent probability risk margin).
    7. Monitor financial balances of the system, and adjust the timing of benefit improvements accordingly.
    8. Release terms of the contract with EML (now monopoly private provider of core insurance and clams management services to the system), and investigate the potential for in-sourcing its services.
    9. Detailed evaluation of the performance of icare’s investment program to explain fully the recent underperformance of its investment income.
    10. Implement a meaningful tripartite system of consultation and governance.

    Under the five-year timetable, benefits for injured workers would be repaired in several stages, with no increase in average effective premium rates, and still exceeding full funding of obligations (including a $2 billion cushion for risk margin).  There is no fiscal excuse for treating injured workers with the callous disrespect they have endured since 2012.  That legacy cannot be reversed overnight, but it can be reversed with a significant and responsible commitment to rebuild the integrity of the program over the coming years.

    Relative to total labour costs and to NSW’s economy, workers compensation premiums have never been lower: down 60 percent since 2009.  When workplace injuries occur, society has an obligation to provide workers with compensation they can count on.  This report confirms that NSW is fully capable of meeting this responsibility.  It is simply a matter of political and fiscal priority on the part of the state government, to ensure it happens.



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  • A Portable Training Entitlement System for the Disability Support Services Sector

    Education & Training, Health, Industry & Sector Policies, Public Sector, Procurement & Privatisation

    A Portable Training Entitlement System for the Disability Support Services Sector

    by Rose Ryan and Jim Stanford

    Authors

    Rose Ryan

    Jim Stanford

    A new proposal for a portable training system for disability support workers under the NDIS would help to ensure the program achieves its goal of delivering high-quality, individualised services to people with disabilities. The proposal is developed in a new report from the Centre for Future Work.

    Under the plan, disability support workers would receive credit for one hour of paid training, for every 50 hours worked in NDIS-funded service delivery.  Those credits would be vested with each individual worker, allowing them to accumulate credits even if they work for multiple employers or directly (as sole traders) for NDIS participants.  The training system thus takes account of the very flexible and mobile nature of work in this growing sector. 

    The system would allow a typical disability support worker to access one three-day upgrading course per year. A corresponding system of advanced recognised qualifications (and matching job classifications) would provide specialised pathways allowing disability support workers to develop their careers over time, thus reducing the very high staff turnover that has bedevilled the roll-out of NDIS services.

    The proposal is detailed in a new 70-page report, A Portable Training Entitlement System for the Disability Support Services Sector, co-authored by Dr. Rose Ryan and Dr. Jim Stanford.

    The NDIS has the potential to enrich the lives of people with disabilities through customised individual packages of services. But to achieve that goal, the system must facilitate ongoing investments in specialised skills and qualifications, rather than relying on short-term ‘gigs’ performed by high-turnover, casualised workers.

    Most disability support workers are employed in part-time or casual jobs, and spending on staff training by established service providers has shrunk as the NDIS has been rolled out.  The NDIS is expected to spur massive job-creation in coming years, adding as many as 70,000 full-time-equivalent positions, but evidence is accumulating that the quality of many jobs is very poor, undermining stability of the workforce and the quality of delivered services.

    Cost estimates suggest the overall scheme would require $192 million per year in additional funding, which the authors suggest should be delivered through a separate state-Commonwealth funding stream (to avoid undermining the revenue base for delivered services). Compared to the $22 billion annual pricetag for the NDIS, the authors suggest this cost is modest: less than one cent on the dollar to support the development of a workforce with state-of-the-art knowledge and training.



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  • Wages Crisis Has Obvious Solutions

    Wages Crisis Has Obvious Solutions

    by Jim Stanford

    Jim Stanford

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    Mainstream economists and conservative political leaders profess “surprise” at the historically slow pace of wage growth in Australia’s labour market. They claim that wages will start growing faster soon, in response to the normal “laws of supply and demand.”  This view ignores the importance of institutional and regulatory factors in determining wages and income distribution.  In fact, given the systematic efforts in recent decades to weaken wage-setting institutions (including minimum wages, the awards system, and collective bargaining), it is no surprise at all that wages have slowed to a crawl.  And the solutions to the problem are equally obvious: rebuild the power of those institutions, to support workers in winning a better share of the economic pie they produce.

    This recent commentary, by Centre for Future Work Director Jim Stanford, appears in the March 2018 issue of Australian Options magazine, and is reprinted with permission.

    Wage Crisis Has Obvious Solutions

    By Jim Stanford

    When the head of the central bank declares wages are too low, and urges workers to demand more money, you know you have a problem.

    After all, central bankers are traditionally the “party poopers” of the economy: they are the ones who march in and take away the punch bowl, as soon as the party gets rolling.  Yet here was Governor Philip Lowe, Governor of the Reserve Bank of Australia, urging party-goers to turn up the volume.  It’s like he was pouring bottles of straight tequila into the punchbowl, instead of taking it away – desperately trying to turn a boring flop into a wild shindig.

    Mr. Lowe made his surprising call at a conference last year on Australia’s economic outlook at Australian National University.  He said weak wage growth was holding back national purchasing power and economic growth, and contributing to too-low inflation (which has languished below his bank’s official 2.5 percent target for several years running).

    But while his acknowledgement of the consequences of wage stagnation was refreshing, his diagnosis of the causes was incomplete and unconvincing.  In fact, Governor Lowe almost seemed to blame the victims of wage stagnation – namely, Australia’s workers – for the problem.  They were unduly worried about losing their jobs to robots or imports, he suggested; they should feel more “confident” in asking for higher wages.  He has clearly not experienced the reality of Australia’s dog-eat-dog labour market in recent years, or felt the desperation that drives workers, especially young workers, to accept any job on offer.

    (Incidentally, the RBA’s own enterprise agreement signed last year will raise base wages by just 2 percent per year over the next 3 years … below the bank’s own inflation target!)

    While mainstream economists and policy-makers belatedly recognise the economic and social damage resulting from weak wages (even Treasurer Scott Morrison frets about the negative effect of slow wage growth on his budget balance), they’ve been distinctly reticent to connect the dots about the causes of the problem – and its obvious solutions.  Lowe, Morrison, and their colleagues pretend wages will pick up automatically as the economy grows and the labour market tightens.  But with official unemployment only a tick above 5 percent (still the RBA /Treasury estimate of “full employment,” according to their discredited but still operational NAIRU model), yet wages still decelerating, this faith in a market solution is increasingly far-fetched.

    Measuring the Slowdown

    The stagnation of Australian wages is visible by many indicators.  The most common “headline” source is the ABS’s quarterly Wage Price Index, which reports an index of wages calculated from a representative sample of jobs (the methodology is similar to the Consumer Price Index).  The WPI therefore measures changes in average hourly compensation holding constant the bundle of jobs which make up the overall labour market.

    However, one important factor in weak wages has been the changing composition of work.  In particular, the growth of part-time, casual, and irregular jobs has undermined the overall level (and stability) of labour incomes.  These changes are not captured in the WPI.  Similarly, changes in average hours worked per week (due to growing part-time work) are also excluded from the WPI.  So the WPI data understates the true extent of the wage slowdown.

    Other ways of measuring the wage slowdown show an even bigger drop-off in wage growth.  These include average weekly earnings, the pay increases specified in enterprise agreements, and estimates of average labour compensation generated through GDP statistics.  Trends in all these indicators are summarised in the accompanying table.  Whatever measure is chosen, it is clear that there has been a dramatic slowdown in wage growth – especially visible since 2013.

    Annual wage growth fluctuated around 4 to 5 percent during the first decade of the century.  Wage growth fell sharply but temporarily during the GFC – but then quickly regained pre-crisis norms from 2011 through 2013.  After 2013, however, wage growth has decelerated dramatically: to 2 percent or even lower.  In fact, by the broadest measure of labour compensation (wages, salaries, and superannuation contributions paid per hour of work), there has been virtually no nominal wage growth in the past year.  Consumer prices, meanwhile, continue to grow at around 2 percent per year (and even faster, if escalating housing prices are taken into account).  Real earnings, therefore, are flat or falling.

    What is “Normal” Wage Growth?

    Any shortfall in wage growth below the pace of consumer price increases (corresponding to a decline in the real purchasing power of workers’ incomes) is a clear sign of labour market dysfunction.  But even flat real wages (ie. nominal wages that just keep pace with inflation) are problematic.  After all, wages are supposed to reflect ongoing growth in real labour productivity (or at least that’s what the economics textbooks tell us).  So wages should actually consistently grow faster than consumer price inflation, to fairly reflect the enhanced real output of each hour of labour.

    Therefore, a “normal” benchmark for wage growth might be the sum of long-run consumer price inflation (the RBA’s 2.5 percent target) plus average productivity growth (running around 1.5 percent per year over the past three decades).  That suggests a “normal” benchmark for annual nominal wage growth should be 4 percent per year.  Australian wage growth in the pre-GFC period generally fit that definition of “normal.”  But since 2013 wages shifted to a significantly lower trajectory.

    Joining the Dots

    Contrary to the assumptions of free-market economics, there is no guarantee that wages will automatically grow in line with labour productivity, as a result of automatic market mechanisms.  Power is always a key factor in income distribution.  And labour markets never “clear,” so that labour supply (the number of workers) equals labour demand (the number of jobs).  In fact, inflation-targeting policy deliberately aims to maintain a certain level of unemployment (5 percent is the target in Australia) to suppress wage demands and protect profits.

    The systematic and structural disempowerment of workers and their unions over the neoliberal era is therefore the most relevant factor in the deceleration of wage growth, and the erosion of labour’s share of total GDP.  Some obvious indicators of that dramatic shift in economic and political power include:

    • A steady erosion in the real “bite” of minimum wages, which have fallen from 60 percent of median wages in 1990 to around 45 percent today.
    • The collapse of trade union membership in the face of legal restrictions, harassment, and full-protection for “free riders.” Today just 9 percent of private sector workers, and less than 5 percent of young workers, are union members.
    • A corresponding collapse in collective industrial action.  Adjusted for the size of the workforce, the frequency of strikes and other industrial disputes has declined by 97 percent from the 1970s to the present decade.
    • The relegation of industry awards to a baseline “safety net,” instead of a system for supporting ongoing progress in wages and working conditions.
    • The generally pro-business shifts in economic policy, including tax cuts, deregulation, privatisation, and globalisation, which have also shifted economic power in favour of employers and hence indirectly suppressed wage growth.

    To begin to rebuild wage growth, restore labour’s share of GDP, and achieve greater equality in labour incomes will require a comprehensive, multidimensional effort to restore the power of all these wage-supporting institutions.  The ACTU is tackling this challenge with gusto, with its ambitious “Change the Rules” campaign.  The goal is to propose a consistent, holistic vision for repairing the institutions that support workers and their wages – and then building a strong grass roots campaign to push politicians of all stripes to adopt that vision.

    On the other hand, if we follow the advice of Scott Morrison and Philip Lowe, and simply wait for supply and demand forces to rescue wages from their current doldrums, we are going to be waiting a very long time.


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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

  • Inquiry into the BCA Commitment to the Senate

    Wages & Entitlements

    Inquiry into the BCA Commitment to the Senate

    by Jim Stanford, Bill Browne and David Richardson

    Authors

    Jim Stanford

    Bill Browne

    Director, Democracy & Accountability Program

    David Richardson

    Senior Research Fellow

    The present submission questions the Business Council of Australia’s (BCA) Commitment to increasing investment, employment and wages in the event that the outstanding tax cuts are legislated. We looked specifically at the 10 corporate CEOs who made the commitment on behalf of their companies and found some half of those paid no tax. One wonders what their commitment could possibly mean.

    We then examine the logic of the tax cuts, issues to do with dividend imputation, problems with the theory, and problems in the modelling exercises as well as the evidence from cross-country data and the evidence from Australia’s own history. Much of this has been covered in earlier Australia Institute papers but there is a new treatment of the modelling problems. However, we were able to add a new section that examines the early indicators following the Trump tax cuts.

    Many of the same arguments were used by the US promoters of corporate tax cuts as were used in the Australian context. The main difference of course was that the US does not have the complications of dividend imputation. Nevertheless the early indicators are that very little is going to the workers with the bulk of the gains being spent in unproductive activities such as share buybacks and mergers and acquisitions.



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  • The Difference Between Trade and ‘Free Trade’

    The Difference Between Trade and ‘Free Trade’

    by Jim Stanford in The Guardian

    Jim Stanford

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    Originally published in The Guardian on March 19, 2018

    U.S. President Donald Trump’s recent trade policies (including tariffs on steel and aluminium that could affect Australian exports) have raised fears of a worldwide slide into protectionism and trade conflict.  Trump’s approach has been widely and legitimately criticised.  But his argument that many U.S. workers have been hurt by the operation of current free trade agreements is legitimate; conventional economic claims that free trade benefits everyone who participates in it, have been discredited by the reality of large trade imbalances, deindustrialization, and displacement.

    Can progressives respond to the real harm being done by current trade rules, without endorsing Trump-like actions – which will almost certainly hurt U.S. workers more than they will help?  Centre for Future Work Director Jim Stanford has proposed several key principles to guide a progressive vision of international trade: one that would capture the potential benefits of greater trade in goods and services, while managing the downsides (instead of denying that there are any downsides).

    Dr. Stanford’s commentary was recently published in the Australian Guardian.  The column generated follow-up coverage and commentary in Australia and internationally.  For example, here is an interview with Phillip Adams on ABC Radio National’s Late Night Live.

    Here is an edited version of Dr. Stanford’s commentary:

    Progressives Alternatives to So-Called Free Trade Deals

    U.S. President Donald Trump’s bellicose policies, including new tariffs on steel and aluminium, have raised fears of a worldwide slide into protectionism and trade conflict.  Trump’s unilateral and xenophobic approach to trade policy is reprehensible and dangerous from any perspective.  But many progressives feel conflicted about Trump’s actions.  After all, he is challenging business-friendly trade deals (including the TPP and NAFTA) which labour, social and environmental advocates opposed for years.  And while his policies will clearly make life worse for working and poor people in the U.S., he is nevertheless speaking to their actual experience: unlike free trade defenders, who continue to pretend that the tide of globalisation has lifted all boats.

    But many progressives feel conflicted about Trump’s actions.  After all, he is challenging business-friendly trade deals (including the TPP and NAFTA) which labour, social and environmental advocates opposed for years.  And while his policies will clearly make life worse for working and poor people in the U.S., he is nevertheless speaking to their actual experience: unlike free trade defenders, who continue to pretend that the tide of globalisation has lifted all boats.

    Given Trump’s domination of the debate, progressives need to work quickly to distinguish our critique of globalisation from his.  In particular, we must flesh out a vision of trade policy reforms that would genuinely help those harmed by globalisation, while rejecting the nationalism and racism that underlies Trump’s appeal.

    Established policy elites still ridicule Trump’s belief that trade deals have contributed to the misery and inequality afflicting working class communities in America (and, for that matter, Australia).  For them, globalisation must produce winners but no losers.  And they trot out theoretical economic models (premised on assumptions of full employment and costless adjustment) to buttress their case.  They concede the gains from trade may not have been evenly shared.  But they deny that globalisation has anything to do with the erosion of living standards experienced in so many once-prosperous working communities.

    This patronising denial is precisely what got Trump elected in the first place.  It’s not that depressed industrial towns in Pennsylvania, Ohio, and Wisconsin (the states that put Trump over the top) didn’t “share in the benefits” of free trade.  It’s that their economic viability was destroyed by it.

    Acknowledging that globalisation produces losers as well as winners, allows us to imagine policies to moderate the downsides of trade – and purposefully share the upsides.  The next step is to make a crucial distinction between trade and ‘free trade.’  The former is the pragmatic day-to-day flow of goods and services between countries.  The latter is the set of specific, lopsided rules embodied in the plethora of trade and investment agreements enacted over the last generation.

    These ‘free trade’ rules often have very little to do with actual trade: describing tariff elimination, for example, usually takes up just a tiny part of the text of each trade deal.  The rest is devoted to a raft of provisions securing and protecting the rights of private companies to do business anywhere they want, on predictable and favourable terms.

    Proof of the dissonance between trade and ‘free trade’ is provided by Australia’s lacklustre trade performance over the last two decades.  Exports of actual goods and services constitute a smaller share of total GDP today, than at the turn of the century.  Sure, the volume of resource exports has surged – not surprisingly, since that’s what our trading partners wanted.  But resource prices have been shaky, and meanwhile our other value-added exports flagged badly. If the goal of all the free trade agreements signed since then (a dozen) was to boost Australia’s exports, they failed miserably.  But of course, that wasn’t the goal: the deals were actually intended to cement a business-friendly policy environment, even in sectors that have nothing to do with international trade.

    Progressives can endorse mutually beneficial international trade, and even international flows of direct investment, without accepting the lopsided, business-dominated vision of ‘free trade’ agreements.  In fact, a progressive approach to managing globalisation would actually boost real trade more effectively: by supporting purchasing power on all sides, and avoiding the contractionary race-to-the-bottom unleashed by current free trade rules.

    Here are several key principles central to a more hopeful and inclusive vision of globalisation:

    Preserve the power to regulate:  Free trade deals assume government intervention in markets (regulating prices, service standards, investment, and more) is inherently illegitimate and wasteful; they establish “ratchet” rules to limit regulation and public ownership, and lock-in deregulation over time.  The failure of market competition in so many areas – in Australia’s case, including electricity, vocational education, and employment services – reaffirms that trade deals must not inhibit governments from regulating businesses, no matter where they are owned.

    Eliminate investment preferences:  ‘Free trade’ deals proffer all kinds of preferences and rights for businesses and investors that have no necessary connection at all to actual trade.  Chief among these are the unique quasi-judicial rights and powers granted to corporations (such as investor-state dispute settlement panels); these are an affront to democracy.  Progressive trade policy would abolish these preferences, and subject corporations and their owners to the same laws and processes the rest of us face.  Similarly, progressive trade deals would aim to relax monopoly patent rights (for drug companies and others), rather than strengthening them.

    Manage capital and currencies:  Foreign direct investments in real businesses that produce actual goods and services can certainly benefit host communities, but only so long as those operations are subject to normal public interest and regulatory oversight.  Retaining the capacity to regulate foreign investment is essential to capturing maximum benefits from foreign investment.  On the other hand, volatile, speculative flows of financial capital and foreign exchange have less upside, and more downside.  In particular, rules should prevent the common practice of suppressing exchange rates to gain artificial advantage in international competition.

    Social clauses that mean something:  Most ‘free trade’ deals, the TPP included, feature token language about protecting labour and environmental standards.  These provisions are window-dressing: responding to fears that global competition will spark a downward spiral in social standards.  Typically these clauses simply commit signatories to follow their own laws – with no requirement that those laws are decent to start with.  Progressive trade deals would have safeguards that are enforceable, including requiring participating jurisdictions to respect universal standards or lose preferential trade rights.  Where trade partners have different standards (such as, for example, levying varying degrees of carbon pricing), border adjustments must be permitted so that trade competition does not undermine environmental and social progress.

    Balanced adjustment:  Trade and investment flows never automatically settle at a balanced position – even if a “level playing field” in labour and environmental standards was actually achieved.  That’s because competition always has uneven effects, producing both winners and losers.  Countries that experience loss of employment and production through global competition (a possibility denied by free trade theory, but commonplace in practice) must be supported with measures to safeguard domestic employment, facilitate adjustment, and boost exports.  Chronic surplus countries (like China and Germany) must recycle excess earnings into expanding their own imports, thus bearing a fair share of adjustment – rather than forcing deficit countries to do all the heavy lifting.

    Active, inclusive domestic policies:  Opposition to trade liberalisation is relatively mild in the highly trade-exposed social-democratic countries of Europe: like the Nordic countries, Germany, and Netherlands.  Their extensive networks of social protections provide average workers with reasonable confidence they won’t be economically tossed aside for any reason: whether trade competition, or some other disruption.  That’s why a key component of progressive trade policy must be a general commitment to social protection, inclusion, and job-creation. A general context of security and equity better facilitates adjustments of any kind, in response to any source of change.  Indeed, collecting healthy taxes from successful industries, and reinvesting them in priorities like infrastructure, training, and communities, is precisely how to harvest the much-trumpeted gains from trade – and pro-actively share them throughout society.  That’s much more feasible than hoping those benefits will somehow trickle down of their own accord.

    Claims by policy elites that international trade is the engine of all progress are vastly overblown.  Our well-being mostly depends on what we do with our skills, energies and innovation right here at home.  But real international trade and investment, properly managed, can certainly make a contribution to prosperity.  And progressives can advance a vision of a more balanced, inclusive globalisation that has nothing in common with Donald Trump.


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  • Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia

    Gig Economy

    Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia

    by Jim Stanford

    Author

    Jim Stanford

    Uber’s rapid growth in point-to-point transportation services has become the most potent symbol of the growth of the so-called “gig economy”: where people perform work on an irregular, on-demand basis, paid by the task, and without the stability or security of traditional paid employment. The expansion of this model has raised concerns regarding the erosion of labour standards and entitlements (including minimum wages, paid leave, and superannuation). This report simulates the net hourly incomes received by UberX drivers in six Australian cities, and finds that they almost certainly earn much less than would be required under relevant minimum wage standards.

    The report considers gross revenues generated by a typical urban fare (traveling 10 km, and taking 22 minutes to complete), according to UberX’s published rate schedule. After deducting Uber’s various fees, net taxes, and the costs of providing and maintaining the vehicle, the driver is left with an average of just $8.29 from that fare (barely one-third of the gross revenue they collect).  Accounting for unpaid time spent waiting for the next fare and collecting the passenger from their pick-up point, this translates into a net hourly wage (before personal income tax) of $14.62 per hour.  This is well below the national statutory minimum wage, and less than half the level of the weighted-average minimum wage (including casual loading and penalty rates for evening and weekend work) that would apply to waged employees under Australia’s Passenger Vehicle Transportation Award.  The underpayment of UberX drivers in Australia constitutes a subsidy paid by them to the company amounting to hundreds of millions of dollars per year; and this underpayment of drivers (in Australia and elsewhere) has been essential to the dramatic expansion of Uber’s market value (most recently estimated at almost $50 billion U.S.).

    These findings confirm that the use of digital platforms to organise and compensate irregular work, and the ability of businesses (including large global firms like Uber) to classify their workers as independent businesses in their own right, are undermining the effectiveness of traditional labour market protections (such as the minimum wage, superannuation entitlements, paid leave, and others).  The report calls on Australian lawmakers and regulators to urgently address the gaps in existing labour laws, to ensure that traditional labour protections are available to workers in the “gig economy.”



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  • The future of transportation work: Technology, work organization, and the quality of jobs

    Future of Work, Industry & Sector Policies, Transport

    The future of transportation work: Technology, work organization, and the quality of jobs

    by Jim Stanford and Matt Grudnoff

    Authors

    Jim Stanford

    Matt Grudnoff

    Senior Economist

    Workers in all parts of the economy are confronting twin threats from accelerating changes in technology and automation, and the ongoing shift toward more precarious and irregular forms of work — including “gigs” on digital platforms.  The transportation sector is widely acknowledged to be one of the most susceptible to both of these trends.  The Centre for Future Work has published a major new research report on these trends, and how sector stakeholders can best prepare for the coming changes.

    The report was commissioned by TWUSUPER (the main industry superannuation fund in Australia’s transportation sector).  It describes the current size and economic importance of the transportation industry, and provides a detailed profile of its existing workforce.  In then considers twin drivers of change buffeting the industry: changes in technology, and changes in work organisation and employment relationships.  The report stresses the importance of distinguishing between these factors, lest observers accept a misplaced sense of “technological determinism” regarding the evolution of work and jobs.  The report concludes that the erosion of job quality and stability associated with the growth of non-standard work poses a greater challenge to quality transportation jobs, than the much-hyped advent of driverless vehicles and other technological breakthroughs.

    The report concludes with several key recommendations for transportation stakeholders to assist in preparing for these changes, and managing them so as to maximise their benefits and minimise their costs.  These include:

    1. Facilitating Mobility: There will be significant new work associated with the advent of new transportation technologies. An obvious response is to assist existing workers to fill new positions by providing notice, support, and access to training and adjustment programs. Financial support from employers and governments will be necessary. Training and adjustment programs need to take account of the advanced age of many transportation workers, and tailor offerings to fit needs of older workers with less formal qualifications.
    2. Establishing Benchmarks for Skills and Qualifications: New technology-intensive jobs will require a wide-ranging suite of new skills – including design, programming, operation, data management, and more. Specific requirements and qualifications for those skills must be formalized and regulated. Sector stakeholders should work closely with existing bodies (such as Australian Industry Standards, TAFEs, and others) to specify and catalogue requirements for new jobs. Transferable certifications will assist workers and employers to identify and acquire needed skill sets, and develop a ready supply of qualified, flexible workers. Strengthening high-quality apprenticeships is also critical.
    3. Facilitating Decent Retirement: The advanced age of many transportation workers is an advantage in a time of transition. Downsizing or restructuring can be managed in part by facilitating exit by workers not interested or able to undertake retraining and adjustment. Bridging benefits and early retirement incentives, with government support, ease the transition, and avoid involuntary job losses that would otherwise occur.
    4. Negotiating Technological Change: Adaptation is more successful when all parties have a genuine say in how it is implemented and managed. Transportation stakeholders must commit to information sharing, consultation, and negotiation over technological change. Workers and their unions should be notified of plans for new technologies. Discussions should occur regarding timing, scope, and effects of new investments. Opportunities should be provided for early input from workers regarding how change will be managed; collective bargaining should include the terms of technology and its application.
    5. Building Consensus: Sector needs a multi-partite, sector-wide approach to analysing challenges and developing inclusive sector-wide responses. Undertake social dialogue among industry participants to maximise benefits of change, reduce costs – and share both costs and benefits fairly. Multi-partite forums (engaging business, workers and their unions, government, regulators, training institutions, financial institutions, and others) will help build relationships among stakeholders, identify future needs, and imagine and implement initiatives to facilitate necessary investments and adjustments.
    6. Protecting Standards and Benefits: Changes in work organisation and employment relationships are changing transportation jobs and challenging traditional standards of security, entitlements, and compensation. The use of non-standard employment forms (like contractors and labour hire) imposes unsustainable consequences on workers who are denied stable, decent opportunity. Traditional standards and entitlements should apply to all transportation workers, including in non-standard, independent, or “gig” situations. Regulatory benchmarks and corporate accountability should apply across the supply chain.



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  • The Future of Work Is What We Make It

    Future of Work

    The Future of Work Is What We Make It

    by Jim Stanford

    Author

    Jim Stanford

    In October the Senate of Australia launched an important new inquiry into the Future of Work and the Future of Workers.  The terms of reference for the inquiry include:

    1. “The future earnings, job security, employment status and working patterns of Australians;
    2. The different impact of that change on Australians, particularly on regional Australians, depending on their demographic and geographic characteristics;
    3. The wider effects of that change on inequality, the economy, government and society;
    4. The adequacy of Australia’s laws, including industrial relations laws and regulations, policies and institutions to prepare Australians for that change;
    5. International efforts to address that change.”

    Given the close correspondence between this mandate, and the research focus of the Centre for Future Work, we were very glad to make a submission to this inquiry.

    Our full 35-page submission is available here. It synthesizes much of our previous research on wages, job quality, the effects of automation, precarious work, the “gig” economy, and other dimensions of the future of work.  As we state in our introduction to the submission,

    “Australians have expressed growing concern about their future ability, and that of their children and grandchildren, to support themselves and their families through paid work.  After all, for the vast majority of society, paid work is the dominant method to earn income to pay for the necessities of life.  A few are able to live off the proceeds of their financial wealth, business investments, or other capital assets; but most of us have to work for a living.  So the availability, stability, and earning potential of paid work is a crucial determinant of individual and collective well-being.  There is no more important factor in the economic and social success of any society, than being able to provide its members with decent, secure employment.”

    One important but under-reported issue tackled by our submission is the negative impact of now-ubiquitous electronic surveillance and discipline systems in Australian workplaces. We argue that this practice has contributed to the severe stagnation of wages in Australia’s economy in recent years, by altering the trade-off in staffing strategy between offering positive inducements for performance (“carrots,” such as higher wages and greater job security), versus reliance on negative sanctions (“sticks,” including discipline and discharge).  Unconstrained electronic surveillance reduces the cost of the “stick,” hence reducing the compulsion on employers to reward good performance with rising wages.

    Among the recommendations contained in our submission, therefore, we suggest that the use of electronic monitoring and surveillance should be limited through stronger privacy rights.  The power of employers to discharge workers solely on the basis of electronic ratings should also be curtailed — ensuring instead that normal progressive discipline procedures are followed in any discharge.



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