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  • Porter IR Bill a Wish List for Business

    Porter IR Bill a Wish List for Business

    by Jim Stanford in The Conversation

    Jim Stanford

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    Originally published in The Conversation on December 9, 2020

    Industrial Relations Minister Christian Porter tabled an omnibus bill on 9 December containing multiple amendments to Australia’s labour laws, including the Fair Work Act. In theory, the bill is the outcome of a series of IR reform discussions the government launched during the early months of the COVID-19 pandemic. At the time it heralded a new spirt of cooperation between business, unions, and the government — but that spirit didn’t last long. The bill accepts numerous business demands that will further liberalise casual work, undermine genuine collective bargaining, and generally suppress wages even more than they already are.

    This commentary is a longer version of an assessment of the new legislation prepared by Jim Stanford (originally published in The Conversation).

    We Were In This Together… For a Very Short Time

    By Jim Stanford

    “We are all in this together,” Prime Minister Morrison solemnly intoned to Parliament in April. And during those first frightening weeks of the pandemic, there was a brief moment when it seemed like Australia’s industrial relations protagonists actually believed it. For a short time, businesses, unions, and government put aside their usual differences and worked together to get through this existential threat. For example, they negotiated quick agreements to alter dozens of Modern Awards and enterprise agreements, adjusting rules and rosters to help keep Australians on the job.

    Then, building on that spirit of cooperation, the government kicked off a new process to seek consensus around further improvements to workplace laws. The government abandoned its pre-COVID effort to impose harsh new restrictions on unions. Instead, five tables were established with business, union, and government leaders, debating reforms to improve the fairness and efficiency of the IR system. Some observes even smelled a new era of Accord-making in the wind.

    Well, the Kumbaya moment didn’t last long. Within weeks the parties retreated to their corners and their standard speaking points. No meaningful consensus emerged on any issue from any table. Even tentative proposals – like an idea, supported by unions and the Business Council, to combine fast-track approval of union-negotiated enterprise agreements with greater flexibility in determining their suitability – were shot down in partisan gunfire by the more strident business lobbyists.

    Now, in the absence of consensus, the government has picked up its traditional hymn book and is once again singing the praises of ‘flexibility’ and deunionisation. IR Minister Christian Porter tabled a series of changes in Parliament Wednesday that will further skew the already lopsided balance of power between employers and workers.

    The government didn’t just take business’s side in the debates at those 5 discussion tables: it went even further. One of the biggest changes in the new legislation (suspending rules that prevent enterprise agreements from undercutting the minimum standards of Modern Awards) wasn’t even discussed at the IR tables. This confirms that the IR gloves are off once again.

    If passed in the Senate, Porter’s omnibus bill will reset several aspects of current labour relations:

    Suspending the BOOT: At present, the Fair Work Commission (FWC) must ensure enterprise agreements (EAs) do not undercut minimum standards guaranteed in the Modern Awards. The new legislation instructs the FWC to approve EAs even if they fail this ‘Better Off Overall Test’ (BOOT), so long as the deal is nominally supported by affected workers (more on this below) and deemed to be in the ‘public interest.’ It is important to remember that Australia (unique among industrial countries) allows employers to implement EAs unilaterally, without any involvement by a union. The BOOT is thus necessary to prevent EAs (especially non-union EAs) from undermining workers’ minimum rights. Porter’s suspension of the BOOT is planned for two years. But even if it is restored after that (which is uncertain), EAs negotiated during that window will remain in effect for years afterward. Even after they expire, under Australian law they remain in effect until replaced with new EAs, or terminated by the FWC – neither of which is likely in non-union settings.

    EA Approval Process: Anticipating that non-BOOT-compliant EAs will be actively opposed by unions, Porter’s legislation includes complementary measures aimed at speeding those deals through the FWC. Unions will be restricted from intervening around EAs they were not involved in negotiating – even non-union EAs where no union was involved. And the process must normally be completed within 21 days, thus limiting opportunities for affected workers to learn about and resist sub-Award provisions.

    Defining Casual Work: The growing use of casual labour was a hot topic at the IR reform tables. Porter’s legislation clarifies the definition of casual work in the most expansive way possible: a casual job is any position deemed casual by the employer, and accepted by the worker, for which there is no promise of regular continuing employment. In other words, any job can be casual, so long as workers are desperate enough to accept it. This will foster the further spread of casual labour. Most important, it removes a big potential liability faced by employers as a result of recent court decisions, under which they might have owed back-pay for holidays and sick leave to casual staff who worked regular shifts.

    Casualising Part-Timers: Further casualisation will be attained through new rules regarding rosters and hours for permanent part-time workers. Porter’s bill would extend flexibility provisions originally implemented earlier this year – during that brief moment of pandemic-induced cooperation. The rules allow employers to alter hours for regular part-timers without incurring overtime penalties or other costs (currently required under some Modern Awards). This will allow employers to effectively use part-time workers as yet another form of casual, just-in-time labour.

    Long-Term Project Agreements: Finally, Porter has granted one more big wish from the business list: allowing super-long enterprise agreements at major new projects. Agreements would last for up to eight years, and can be signed, sealed and delivered before any workers start on the job (thus denying them any input into the process). Under the revised BOOT provisions, they could also undercut the minimum standards of the Awards.

    These changes are being advertised as a boost for post-pandemic job-creation, but this claim is hollow. In fact, the changes in part-time and casual rules will actually discourage new hiring: since existing workers can be costlessly flexed in line with employer needs, there is no need to hire anyone else. Weaker BOOT protections will spur a wave of new EAs: most union-free, and aimed at reducing (not raising) compensation and standards. This makes a mockery of the goals of collective bargaining, and grants Australian employers further opportunity to suppress labour costs (already tracking at their slowest pace in postwar history).

    So what do we make of that short-lived spirit of togetherness which purportedly sparked this whole process? In retrospect, it seems to have been just an opportunity for Coalition leaders to pose as visionary statesmen during a time of crisis. Now, mere months later, the government is back to its old script – and the pandemic is just another excuse to scapegoat unions, drive down wages, and fatten business profits.


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    IR Bill Will Cut Wages & Accelerate Precarity

    by Alison Pennington in Jacobin

    The Morrison government has proposed sweeping changes to labour laws that will expand unilateral employer power to cut wages and freely deploy casual labour. Together, the Coalition’s proposed changes will accelerate the incidence of insecure work, undermine genuine collective bargaining, and suppress wages growth. Impacts will be felt across the entire workforce – casual and permanent workers alike.

    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

  • Rebooting Australian Aluminium

    Industry & Sector Policies

    Rebooting Australian Aluminium

    The Economic, Social and Environmental Potential of the Portland Smelter
    by Jim Stanford

    Author

    Jim Stanford

    A new report from the Centre for Future Work highlights the continuing economic importance of Alcan’s aluminium smelter in Portland, VIC, and discusses the potential of new renewable energy technologies to underpin the facility’s rejuvenation and long-term viability.

    The report updates previous research by the Centre on the far-reaching impacts of the facility for employment, incomes, exports, and tax revenues. It also identifies the growing capability of renewable power sources to support heavy industrial activities like smelting.

    Main findings of the report include:

    • The closure of Portland would reduce Australian national GDP by $800 million, exports by $840 million, household incomes by $250 million, Commonwealth government revenues by $192 million, and Victoria state government revenues by $50 million. (All figures annual.)
    • A total of 3600 direct and indirect jobs would be lost as a result of the facility’s closure – with the economy of southwestern Victoria suffering the worst blow.
    • Rapid developments in renewable energy technology could significantly improve both the cost and the reliability of electricity supply to the Portland smelter. Already renewable energy enjoys a 30% saving in levelised costs compared to coal (which currently powers the majority of Portland’s consumption). That advantage will widen in future years, driven by falling costs for both renewable generation and storage.
    • Global businesses, including top-tier manufacturers which purchase aluminium and aluminium components, are increasingly demanding high sustainable production standards from all of their suppliers – including aluminium ingots and components. Australia’s endowment of renewable energy resources gives us a major head start in responding to this trend.
    • In addition to renewable power sources, new technologies can also allow aluminium smelters to operate with significantly lower power inputs for several hours at a time, on relatively frequent occasions, without damaging capital equipment. This ‘frequent demand response’ technology effectively allows the smelter to act as a huge battery for the electricity system, and could even generate significant incremental revenue for the smelter (supplementing sales from aluminium production).

    Reinvesting in the Portland facility, including in a secure and sustainable electricity supply, holds the potential to lead a broader revitalisation of aluminium manufacturing in Australia, and contribute to advances in sustainable manufacturing.

    The update was commissioned by the Australian Workers Union.



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  • Feature Interviews: Worker Voice in a Changing World of Work

    Feature Interviews: Worker Voice in a Changing World of Work

    by Jim Stanford and Alison Pennington

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    The Centre for Future Work’s Jim Stanford, and Alison Pennington feature in a collection of interviews on technology, work, climate, and the role of unions, for a new online course Power, Politics and Influence at Work delivered by the University of Manchester, UK.

    Video recordings of the interviews are available here:

    The videos were recorded for a 5-week on-line course Power, Politics and Influence at Work run by the University of Manchester. The Centre’s staff are featured alongside several leading scholars, trade union activists and international agencies such as the ILO/Oxfam.

    Academics and researchers Tony Dundon, Miguel Martinez Lucio, Emma Hughes and Roger Walden designed the course for labour and NGO activists and students interested in labour market equalities, work and employment. Registration is free.


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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

    IR Bill Will Cut Wages & Accelerate Precarity

    by Alison Pennington in Jacobin

    The Morrison government has proposed sweeping changes to labour laws that will expand unilateral employer power to cut wages and freely deploy casual labour. Together, the Coalition’s proposed changes will accelerate the incidence of insecure work, undermine genuine collective bargaining, and suppress wages growth. Impacts will be felt across the entire workforce – casual and permanent workers alike.

  • Budget’s Illusory Hope for Business-Led Recovery

    Budget’s Illusory Hope for Business-Led Recovery

    by Jim Stanford

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    The Commonwealth government tabled its 2020-21 budget on 6 October, six months later than the usual timing because of the dramatic events associated with the COVID-19 pandemic and resulting recession. There is no doubt it is a budget unlike any other in Australia’s postwar history. While the budget certainly unleashes unprecedented fiscal power, its underlying logic and specific policy design are unsatisfactory in many ways. We present here analysis and commentary on several aspects of the budget, drawing on input from all of the Centre’s research staff: Economist and Director Dr. Jim Stanford, Senior Economist Alison Pennington, and Economist Dan Nahum.

    Key conclusions of our analysis include:

    • This budget says explicitly that Australia’s economic reconstruction after COVID-19 is to be trusted almost entirely to private business – helped along with generous tax cuts and business subsidies.
    • The need to strengthen public services (like health care, child care, and higher and vocational education) is largely ignored, as is the need to preserve and strengthen income security programs (with the phase-out of JobKeeper and cuts to JobSeeker going ahead).
    • Tax cuts, whether targeted at businesses or high-income households, will have little impact on actual spending and job-creation.
    • The government needs a more forceful, hands-on, and sustained reconstruction plan to ensure that the economy does not get ‘stuck’ in its current state of partial recovery. That needs much more public sector leadership, vision, and funding.
    • The government admits that wage growth is going to get weaker before it gets stronger – but is doing nothing about that critical problem (which will undermine consumer spending far more than tax cuts will stimulate it).

    Download our full review of the 2020-21 budget below.


    Related documents



    2020-21 Budget Analysis

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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

    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

  • Pay Equity in Community Services

    Gender at Work, Public Sector, Procurement & Privatisation

    Pay Equity in Community Services

    The Consequences of Federal Budgetary Decisions
    by Jim Stanford

    Author

    Jim Stanford

    Media release



    New Analysis: 12,000 Community Service Jobs at Risk Due to Funding Uncertainty

    The failure of the Commonwealth to confirm that it will maintain funding for community service organisations could threaten up to 12,000 jobs in that sector, at a moment when those services are critical to Australia’s pandemic-damaged economy.

    That’s the conclusion of new research on the economic importance of Commonwealth pay equity funding, conducted by the Centre for Future Work at the Australia Institute.

    The federal government has been stalling on 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.

    The special funding was part of the Commonwealth government’s legislated 9-year timetable to phase in pay equity wage adjustments in community services.

    If that 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.

    Alternatively, if the brunt of the funding cut is experienced through effective wage reductions (achieved through a range of potential channels described in the paper), it will reduce annual incomes for federally-funded community service workers by as much as $15,000 for full-time staff.

    The implementation of pay equity in community services has made a measurable difference to Australia’s (slow and uneven) progress toward closing the gender pay gap.

    The Centre for Future Work report found that the health and social services industry (which includes 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



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  • Technology, Standards and Democracy

    Gig Economy, Future of Work

    Technology, Standards and Democracy

    Submission to Select Committee on the Impact of Technological Change on the Future of Work and Workers in New South Wales
    by Dan Nahum and Jim Stanford

    Authors

    Dan Nahum

    Economist

    Jim Stanford

    Workers in most industries and occupations worry about the effects of accelerating technological change on their employment security and prospects. New digital technologies are being applied to an increasingly diverse and complex array of tasks and jobs – including artificial intelligence and machine learning technologies which can exercise judgment and decision-making powers. Some studies suggest that as many as half of all jobs may be highly vulnerable to automation and computerisation in coming decades. The NSW Legislative Council has established a Select Committee to examine the impact of technological and other change on the future of work in NSW. The Centre for Future Work has lodged a submission.

    Concerns about technological unemployment are not new. Workers have long worried what will happen to their jobs when machines can do the work faster, cheaper, or better. But the historical record shows that technology has not produced mass unemployment or impoverishment – although dislocation and adjustment to technological change can be severe for some groups of workers, and some regions. The impacts of technology are always filtered through social and political processes; competing sectors of society naturally endeavour to protect and advance their own respective interests, as technology evolves. Will technology be used to enhance mass living standards and make work more efficient and pleasant? Or will it be used to enrich a small elite, while undermining the economic well-being and political rights of the majority? The answer depends on how technology is implemented, managed, and controlled, and whose interests prevail as the process unfolds.

    Employers tend to implement particular kinds of technology, in specific ways, to enhance their power and profits: not just to boost output, but also to intensify work effort, monitor and discipline workers, and restructure the terms of employment. These negative trends are not inherent outcomes of technology itself. Rather, they are the result of power imbalances in employment relationships, in the context of an economy that is shaped and directed by the profit-maximising actions of private firms.

    In our submission, we discuss several reasons why the impact of technology on both the quantity and quality of future employment is indeterminate, and highly dependent on the policy choices that are made as the process of labour market evolution unfolds.  While some workers will face heightened risk of job loss due to new technology, we nevertheless firmly reject the notion that work in general can somehow ‘disappear’ – even in sectors which seem ripe for the application of labour-saving or labour-replacing technologies. And we reject the implication that workers will somehow be ‘disposable’ in a brave new automated world. The reality is that productive human labour, broadly defined, is still the driving force behind all production and value-add. This is true even in an economy utilising automation and other technology-intensive methods of production. We must be aware of the risks and challenges posed to workers by accelerating technological change, but without resigning ourselves to a dystopic high-tech future in which workers have no power, no agency, and no security. Instead, our response to the challenges posed by technology can be grounded in a complete and balanced assessment of the threats and opportunities associated with new technology.

    The submission is organised as follows:

    • ‘Technology and Work: What changes are at play?’ identifies changes – and continuities – in the world of work in which technology plays a role.
      • This includes a subsection, ‘Electronic Surveillance in the Workplace’ on the incidence of this type of surveillance by employers in – and beyond – the workplace, using results from the Centre for Future Work’s 2018 survey on the incidence and impacts of such surveillance.
    • ‘The Macroeconomic and Social Context for Technological Change’ considers the broader political-economic factors contributing to how we use and regard technology in the workplace. Many of the changes often ascribed to technology are better identified as social or political matters, mediated through or exacerbated by technology.
    • ‘Technology and the Quantity of Work’ discusses technology’s impacts on the quantity of work available. We note that the uptake of technology by employers is in fact surprisingly lower than what many analysts have predicted – further evidence that technology’s effects on the work of work are mediated by social and political factors.
    • ‘The Technology of Production and the Organisation of Work’ further teases apart the distinction between technology as a discrete set of tools, and the social organisation of work, such as precarious employment. There is an interaction and overlap between the two but consideration of the set of challenges under this Select Committee’s Terms of Reference is lent more rigour by identifying the distinctions, too.
    • We present recommendations seeking to support the goal of maximising the benefits of technology, while reducing and ameliorating its social costs.
    • The submission concludes by reiterating that it is not technology specifically, but rather our systems of laws, institutions and social expectations overall that will determine the future of work.

    We are hopeful that this Select Committee can contribute to developing a strategic understanding of, and leading legal framework for, changes in the nature of work and the labour market. These issues have increased in importance in the context of the economic crisis, and the resulting weakness in the labour market, associated with the COVID-19 pandemic.



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  • The Robots are NOT Coming

    Future of Work, Science & Technology

    The Robots are NOT Coming

    (And why that’s a bad thing…)
    by Jim Stanford

    Author

    Jim Stanford

    Media release



    Failure to Invest in New Tech Damaging Economy, Incomes & Jobs

    Selected media impact

    Startling new research from the Centre for Future Work has shown that Australia’s economy is now regressing in its use of new technology, with negative implications for productivity, incomes, and job quality.

    The report compiles 8 statistical indicators confirming that the pace of innovation and automation in Australia’s economy has slowed down dramatically in the last decade.

    Major findings of the report include:

    • Business investment in new machinery (including robots) is weaker than at any point in Australia’s postwar 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 postwar history.

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

    “In fact, the biggest problem is that Australian businesses are not investing nearly enough in new technology, not that they are investing too much,” said Dr. Jim Stanford, author of the report and Economist and Director of the Centre for Future Work.

    “The decline in average capital intensity and average productivity in the Australian economy is very unusual, and very concerning, because it suggests a structural regression in our overall economic development.”

    “The unprecedented weakness 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. In fact, 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.”



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  • A Fair Share for Australian Manufacturing

    COVID-19, Industry & Sector Policies

    A Fair Share for Australian Manufacturing

    Manufacturing Renewal for the Post-COVID Economy
    by Jim Stanford

    Author

    Jim Stanford

    Media release



    Post-COVID Manufacturing Renewal Represents Potential $50 Billion Boost to Economy

    New research from the Centre for Future Work reveals that Australia ranks last among all OECD countries for manufacturing self-sufficiency. The COVID-19 pandemic has reminded Australians of the importance of being able to manufacture a full range of essential equipment and supplies; and the COVID recession has created a large economic void that a revitalised manufacturing sector could help to fill in coming years.

    This report, A Fair Share for Australian Manufacturing, describes the strategic importance of the manufacturing sector to Australia’s future prosperity, and provides an inventory of policy tools that could help rebuild the sector to a size proportional to our domestic needs for manufactured products.

    While the report documents the decline of domestic manufacturing in recent years, it also reveals the enormous potential benefits that would be generated by rebuilding manufacturing back to a size  proportional to our national needs: including $180 billion in new sales, $50 billion in additional GDP, and over 400,000 new jobs.

    Key Findings:

    • Australia ranks last in manufacturing self-sufficiency among all OECD countries. Australians use $565 billion worth of manufactures each year, however, we only produce $380 billion. Therefore, Australia produces only 68% (just over two-thirds) of what we use: less than any other OECD economy.
    • The COVID-19 pandemic has highlighted the strategic importance of domestic manufacturing capacity. Disruptions in global supply chains and protectionist trade policies by foreign governments have increased risks we might not be able to access essential products (like health equipment and supplies) when we need them.
    • Manufacturing is not just ‘another’ sector of the economy. For several concrete reasons, manufacturing carries a strategic importance to broader national prosperity and security.
      • Australians purchase and use more manufactured goods over time; and manufacturing output is growing around the world. Allowing domestic manufacturing to decline, while our use of manufactured products grows, undermines national economic performance.
      • Manufacturing is the most innovation-intensive sector in the whole economy. No country can be an innovation leader without a strong manufacturing base.
      • Manufactured goods account for over two-thirds of world merchandise trade. A country that cannot successfully export manufactures will be shut out of most trade.
      • Manufacturing anchors hundreds of thousands of other jobs throughout the economy, thanks to its long and complex supply chain. Billions of dollars’ worth of supplies and inputs are purchased by manufacturing facilities, supporting many other sectors of the economy.
      • Manufacturing offers high-quality jobs, full-time hours and above-average incomes. And thanks to strong productivity growth and the capacity to apply modern technology, manufacturing offers the prospect of rising incomes in the future.

    If we rebuilt a manufacturing sector that was broadly proportionate to our needs, our manufacturing industry would grow by almost 50% – generating enormous benefits in jobs, incomes, innovation and exports.



    Report summary



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  • Pandemic Shows Australia Needs Domestic Manufacturing

    Pandemic Shows Australia Needs Domestic Manufacturing

    by Jim Stanford

    Jim Stanford

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    Disruptions in global supplies of essential medical equipment have served as a wake-up call to Australians that it is always vital for a country to retain the capacity to domestically produce manufactured products that may be crucial to national security and well-being.

    In this commentary, Centre for Future Work Economist Dan Nahum reviews the qualitative reasons why manufacturing retains a special strategic importance to the overall economy, and discusses the potential synergies between the development of sustainable energy resources and a revitalisation of manufacturing.

    Rebooting the Australian Manufacturing Sector in the Era of Coronavirus and Climate Change

    Since the COVID-19 crisis emerged, Australians have been starkly reminded of the importance of being able to manufacture goods domestically. International shortages of, and restrictions on, the export of medical equipment and personal protective equipment have given us all a fright. While thankfully critical shortages have not yet emerged, the crisis has confirmed that being able to domestically produce a full range of essential manufactures is a matter of national wellbeing.

    For many years the conventional economic wisdom was that as a high-wage, resource-rich economy, Australia was unable to competitively manufacture — nor did it need to. Between digging up raw materials and shipping them to Asian trading partners (subsequently paying a premium for reimported manufactures made from those resources) and our pivot to a ‘service economy’, we could somehow sidestep the need to produce what we materially use. Even Treasurer Josh Frydenberg has now conceded that unbalanced strategy is not viable.

    It’s true the extraction of our extraordinary mineral endowment made some Australians wealthy, but in a lopsided way: unbalanced reliance on resource extraction, combined with the long decline of manufacturing, has made Australia far more unequal — indeed, we are now more unequal than most OECD nations. Additionally, this myopic economic focus has put us at the mercy of boom-and-bust cycles in global demand for our resources.

    There are many core reasons why Australia needs a healthy, proportionate manufacturing sector:

    • Australians are buying more manufactured goods over time; and manufacturing output is growing around the world. The absolute decline of manufacturing in Australia is an exception to the experience of other industrialised countries.
    • Manufacturing is the most innovation-intensive sector in the whole economy. No country can be an innovation leader without manufacturing.
    • Manufactured goods account for over two-thirds of world merchandise trade. A country that cannot successfully export manufactures will be shut out of most trade.
    • Production costs in Australia are not expensive relative to other industrial countries (now that the Australian dollar is once again trading in normal range).
    • Even small remote countries (like Korea, Ireland, New Zealand and Israel) are increasing their manufacturing output, and preserving and creating manufacturing jobs. Their experience demonstrates that we cannot blame geographic isolation for our deindustrialisation.
    • Manufacturing anchors hundreds of thousands of other jobs throughout the economy, thanks to its long and complex supply chain. A myriad of supplies and inputs are purchased by manufacturing facilities.

    There’s another key reason to be optimistic about Australian manufacturing — if we create an appropriate policy environment for it. Australia is poised to take advantage of our bountiful renewable energy endowment to reinvigorate manufacturing, on the foundation of plentiful, competitive, and reliable power.

    Read The Centre for Future Work’s report Powering Onwards: Australia’s Opportunity to Reinvigorate Manufacturing through Renewable Energy, which considers the potential and actual connections between renewables and manufacturing in detail.

    The following core policy levers would help to ensure that Australia’s manufacturing sector thrives in decades to come, enhancing our prosperity and our national security:

    Targeted Tax Incentives: No-strings-attached tax cuts for corporations do not stimulate investment, innovation, or employment. Rather, fiscal incentives are more effective when they are linked directly to investment. Examples include accelerated depreciation provisions (allowing companies to write off the cost of new investments faster), investment tax credits, and public co-investments in specific strategic projects.

    Investing Public Funds in Key Industries: International experience confirms that public financial assets can effectively lever greater capital investment in key industries. These include state-owned development banks (as in Japan and Korea) or other forms of sovereign wealth (as in Singapore, the UAE, and Norway). Public investment vehicles have been used successfully — indeed profitably — in numerous applications in Australia (for example, the CEFC to finance sustainable energy projects). The same principles can apply in manufacturing investment. Additionally, industry super funds could play a larger role in financing the development of strategic products and sectors.

    Innovation: Empirical evidence shows successful innovation must be embodied in the hands-on process of ‘learning by doing’. And there is no other sector more directly connected to the innovation process than manufacturing. Government needs to provide tangible, direct support to innovation in manufacturing. We need better systems for linking public innovation activity with commercial applications. And we can emulate successful public equity investments in innovation-intensive businesses in other countries (like the effective methods for financing innovative firms used in Israel, Finland, and Ireland).

    Sector Strategies: Government needs to identify manufacturing sub-sectors with the right criteria for success, and then co-ordinate investment and growth. These sector strategies must engage all relevant sector stakeholders (business, unions, educational institutions, research organisations, state and local governments). Even businesses which compete with each other can benefit when the whole sector succeeds. Criteria for identifying high-potential sectors include innovation, export orientation, productivity, and strong supply chain linkages.

    Networks, Eco-Systems, and Clusters: Successful modern industrial policy relies centrally on connections and collaboration among players from different firms, agencies, and stakeholders. Research shows that spillovers among these diverse sector participants, and the sharing of knowledge between them, are crucial to the development of ‘critical mass’ in any high-tech industry. Often, these networks and clusters are geographically concentrated. Government cannot simply ‘create’ clusters, but it can facilitate their emergence.

    Industrial Infrastructure: Government investments in public capital assets of all kinds will play a crucial role in fostering manufacturing growth. Infrastructure investments help to offset the sustained weakness of private investment, and improve weak macroeconomic conditions. One key focus of infrastructure investment should include facilities and services which support manufacturing: ranging from transportation infrastructure, to utility connections (especially renewable energy), to modern training facilities (to help better integrate TAFE and university training with industry). We should maximise the use of Australian-made manufacturing content in those (and all other) infrastructure projects.

    Connecting Renewable Energy Investment to Manufacturing: Given Australia’s superabundance of renewable resources, Australia should position itself as the world’s renewable energy superpower. Renewable energy is appropriate for most industrial applications, including heavy industry, and now offers lower costs than fossil fuel sources (including gas). To expedite the transition to renewable energy, the manufacturing sector requires stability in energy policy, industrial strategies to take advantage of Australia’s renewable energy endowment, and government partnerships with firms that can benefit from and add value to Australia’s renewable energy endowment.

    Skills and Capacities: Enhancing the future skills and capacities of workers must be a vital component of future sector strategies. Consistent funding for skills training at all levels is essential, as are efforts to more closely link training programs with future workforce needs in strategic sectors. Germany’s apprenticeship system is perhaps the most outstanding international role model in this area.

    Leveraging Procurement: Australian governments are massive purchasers of manufactured goods. An obvious way to support domestic manufacturing is to ensure those expenditures generate the maximum possible boost to domestic industry. This also helps to reduce the final net cost of the program: since the government collects additional revenues through the new work spurred by domestic procurement decisions, offsetting the public expenditure. Other countries regularly utilise domestic content targets in procurement to support domestic producers. Australia can do the same.

    Trade that Goes Both Ways: International trade is essential to the viability of most manufacturing due to the importance of economies of scale in production. Australian trade negotiators need to do far more than mutual tariff reduction to stimulate Australian manufactured exports. And Australian agencies (like Austrade) can be much more proactive in promoting Australia’s exports, through initiatives like expanded credit financing, initiatives to leverage Australian participation in global supply chains, and government support for international marketing.

    A thriving manufacturing sector confers important benefits across the whole economy. Even more importantly, a large and adaptable manufacturing sector offers resilience against periodic crises such as COVID-19. If Australia does not add value through the expansion of our manufacturing sectors, we can anticipate that our relative standard of living will decline, and our vulnerability to future supply disruptions and health crises will only increase. We can and must build a manufacturing sector that is economically and ecologically sustainable, and that adds complexity and resilience to Australia’s economy.

    See the Centre for Future Work’s previous research on the Australian manufacturing sector:

    Manufacturing Still Matters (2016) shows that manufacturing, far from being inherently doomed in Australia, is quite viable. Similar countries manufacture successfully. It provides an agenda of policy recommendations for support of the sector.

    Manufacturing: A Moment of Opportunity (2017) demonstrates that while the Australian public underestimate the size and therefore strategic economic importance of the sector, it enjoys strong popular support. Furthermore, the report identifies some promising signs of future growth in the sector.

    From Consensus to Action: Report from the First National Manufacturing Summit (2018) summarises the key findings of the first National Manufacturing Summit, including areas of strong policy consensus reached among the business, industry peak bodies, trade unions, government departments, academic institutions and vocational training providers and other summit delegates. The report also identifies several priorities for further policy research.

    Advanced Skills for Advanced Manufacturing (2018) argues that Australia’s present vocational education and training system, damaged by years of underfunding and failed policy experimentation, is a weak link in meeting the needs of the industry. High-skilled, high-paid jobs rely on a strong VET sector, and this report identifies twelve key reforms to achieve that.

    Auto Shutdown Another Economic Blow (2016) analyses the causes and impacts of the closure of the Australian car manufacturing industry. It notes that secondary job losses will be several times larger than the direct jobs eliminated at the car plants.

    Penny Wise and Pound Foolish (2016) analyses the impact of the NSW government’s decision to source railroad rolling stock manufacturing work to Korea rather than taking advantage of the opportunity to procure domestically. Governments need to account for the full range of potential costs and benefits of their procurement decisions (job creation, industry development, government revenues, and so on), not simply minimise the up-front purchase cost.


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  • Working From Home: Opportunities and Risks

    COVID-19, Future of Work

    Working From Home: Opportunities and Risks

    by Alison Pennington and Jim Stanford

    Authors

    Alison Pennington

    Senior Economist

    Jim Stanford

    With many regular workplaces shut down to ‘flatten the curve’ of COVID-19, millions of Australians are now shifting their work to home. Home work has great potential to cushion the economic blow of the pandemic: allowing many to keep working and earning an income, and many firms and industries to continue at least partial production. But there are also many challenges and risks associated with this major shift in work patterns. Much of the increase in home work will likely become permanent, even after the immediate health emergency passes. That makes it crucial to ‘get home work right’: providing home workers with appropriate support and protections, and preventing abuse and exploitation as home work becomes more common.

    This new Briefing Paper from the Centre for Future Work, written by Alison Pennington and Jim Stanford, surveys the scope of home work, considers its impacts on economic and gender inequality, and proposes several policy recommendations to make home work safer and fairer.

    Main findings of the Briefing Paper include:

    • About 30% of Australian jobs could conceivably be performed from home – but it will take time for workplaces to make necessary organisational and technological adjustments to reach that potential.
    • Occupations which can work from home were already paid about 25% more than occupations which cannot be shifted to remote locations. The shift to home work could therefore exacerbate income inequality; this reinforces the need for comprehensive income protections for those who cannot work from home.
    • The expansion of work-from-home arrangements raises several concerns regarding the conditions of home work, and protecting those who perform it. These include fair compensation for extra expenses associated with home work; applying normal rules regarding working hours and pay; ensuring a safe home work environment (including its social and familial context, with challenges like domestic violence); and protecting the privacy of home workers from undue monitoring and surveillance by employers.

    The paper concludes by urging researchers, unions, regulators and policy-makers to pay top-priority attention to ensuring the safety and fairness of home work – because this shift is clearly here to stay.



    Full report

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