The consequences of insecure work and some solutions
Address by Brian Howe, AO
Chair of the Independent Inquiry into Insecure work in Australia
to the National Press Club, Canberra
Wednesday, 18 April 2012
In October last year, I was approached with an intriguing offer from the Australian Council of Trade Unions. Would I be interested in chairing an inquiry into insecure work in Australia?
While the offer was unexpected, it provided an opportunity to explore further the issues that I had been working on with colleagues at Melbourne University since leaving Parliament and Government in 1996.
In my 2007 book Weighing Up Australian Values, I reflected on a changing Australia and the challenges people faced in their daily lives, and which would ultimately confront decision makers.
Our economy has changed drastically over the last 30 years – we are more open, less regulated and more focused on trade with Asia.
Our society is also changing. Ageing is one factor, along with greater ethnic diversity and, of course, social roles at home and at work are changing as women seek to be more active in every facet of modern economy and society.
Households are now juggling several jobs and caring responsibilities in an array of combinations.
If there is one story that cuts right across our economy and its changes in the last 20-30 years, it is the story of the growth of insecure work, and of risk and uncertainty being shifted from employers to workers, from employers to taxpayers.
To an extent, the spread of insecure work has taken place under the radar of the political class.
There has been increasing interest among academics. But there has been no thorough public inquiry into the effects of a trend which sees 40 per cent of the workforce in some kind of casual, contract, labour hire or other insecure arrangement, and sees a quarter of workers with no sick leave or paid leave.
This was an issue crying out for a deep, far-reaching investigation.
The other reason why I did not hesitate in accepting this role was that the union movement was taking a leading role in putting the spotlight on an issue that impacts on the lives of millions of Australians every day.
Rather than try to turn back the clock on the reforms of the past quarter of century, the ACTU is intent on providing a vision for the future of work in the post-industrial economy. I was impressed that the ACTU was prepared to make this commitment of resources to finding genuine solutions to the issues related to the casualisation of the workforce and to ask some hard questions of itself.
I want to use today to sketch out what we have learnt about the changes in our workplaces caused by insecure work, the often unseen effects they have on people’s lives and the community, and the possibility of doing things differently.
This inquiry has been a very large undertaking. It is true that we seriously underestimated the response from the public when we received more than 500 written submissions including some powerful submissions from academics, community organisations as well as from trade unions.
We recently concluded 25 days of hearings at 23 towns and cities in every state and territory from Hobart to Mackay, Darwin to Perth, Ballarat to Lismore, during which we heard from dozens of witnesses.
We are in the final stages of writing our report and recommendations, which the ACTU intends to publicly release at its triennial Congress in Sydney next month.
This is an issue whose time has come, but with the diversity of the modern work contracts, and the entrenchment of casual work in Australia, there are no easy answers.
I am not in a position today to go into specific details of our recommendations, but what I can say is our approach has been holistic and extends far beyond labour market regulation. Those critics expecting us to simply recommend some further rewriting of the Fair Work Act will be disappointed.
We have become convinced through this inquiry that insecure work is not an issue that can be confined to the workplace; it is societal concern – and the responses must reflect that. So, while some of our proposed solutions will be industrial or legislative, our thinking includes housing policy, the skills agenda, and the tax and transfer and welfare systems.
I hope that our report stimulates an ongoing discussion in the trade union movement, which has historically been so important in raising issues of fairness and justice in Australian society.
The new divide: core and periphery jobs
There is a new divide in the Australian economy.
It is not between the blue-collar and white-collar worker, but between those in the “core” of the workforce and those on the “periphery”.
Those in the core are likely to be in full-time employment, either permanently within organisations, in management positions, or possessing skills for which there is steady demand and for which they can charge a premium.
They are likely to have sick leave, paid holidays and in many cases parental leave above the government’s minimum standard.
For them, flexibility means the chance to work in a variety of industries, to work overseas, to earn good money free-lancing or in a secure part-time arrangement. Periods of unemployment are likely to be short or voluntary.
Below and around this group are those on the periphery. They are employed on various insecure arrangements, casual, contract or through labour hire companies, on low wages and with no benefits.
Many do not know what hours they will work from week to week, and often juggle multiple jobs to attempt to earn what they need.
Their skills are low, or outdated, and they are not offered training through work. They shift between periods of unemployment and underemployment that destroy their ability to save money.
Their work is not a “career” it is a series of unrelated temporary positions that they need to pay rent, bills and food.
For them flexibility is not knowing when and where they will work, facing the risk being laid off with no warning, and being required to fit family responsibilities around unpredictable periods of work.
For many, life on the periphery is not a temporary situation; there is no pathway in to the core.
For people in their late 20s, with children and mortgages and no time to retrain, or older men in their 50s who have lost full-time work, this is their permanent position.
Increasing numbers of workers are engaged in work that is unpredictable, uncertain and that undermines what ordinary Australians need to feel secure in their lives and communities.
Others fear that the loss of a good secure job will push them into the world of insecure work they see around them.
Just look at the redundancies this week of 350 long-term, permanent employees at Toyota’s factory in Altona in Victoria. In the blink of an eye, those workers have gone from secure jobs to a precarious, uncertain future.
As the Monash University researcher and academic Veronica Sheen – who was a witness for our inquiry – has written:
“Losing a long-term, full-time permanent job is especially risky for workers over the age of 40 as many of the Toyota workers are. Laid-off workers may find themselves long-term unemployed (and are especially at risk with the stigma of “low productivity”) and ultimately pushed into jobs at much lower levels of security and pay than they held previously. They remain entrapped in these jobs, often cycling between spells of unemployment, including long-term unemployment.”
This uncertainty makes people more sensitive to rises in interest rates, of power bills and petrol prices.
It is probably difficult for some seated in this room to believe the scale of what I am saying, although I suspect it is nothing new for many of those preparing and serving the meals.
What I have heard in the course of this Inquiry has convinced me that we have allowed a major divide to emerge in Australian society.
We have a growing group of people in a succession of low-paid and insecure jobs, with no pathway out, priced out of housing, being churned through the tax and welfare system.
For decades, decent working conditions and wages underpinned a fair and equitable distribution of income which meant that employment was the pathway out of poverty.
But today, we are on the verge on developing a “working poor”, to go with the increasingly entrenched poverty in jobless households.
As long as we can retain our relatively high minimum wages and public health system, we will not see the extremes of poverty seen in the USA.
But we will see a society with families where one or both parents work, but who are unable to save or own a home, and remain vulnerable to the slightest financial crisis.
What this means for social mobility and social cohesion is the great unknown, and a subject that is only obliquely referred to in political debate.
This is particularly the case when combined with a growing number of inter-generational jobless households.
The rise in insecure work flows from the shift from standard full-time contracts to increasingly non-standard arrangements: whether casual work, irregular hours, short-term contracts or the use of labour hire
Any move to regulate this workforce will face the challenge of balancing the demands of efficiency or productivity on the one hand with the standard of fairness.
We cannot separate workplace fairness from our views on fairness in the broader society.
For a young woman shop assistant in Newcastle with a disabled partner, agreeing on set hours was crucial
There are more jobs than ever before – but they are not the secure, full-time jobs that existed a generation ago.
Casual contracts were once conceived of as being used for essentially temporary or seasonal employment but their use has spread to what was once regular, long-term employment.
Insecure work is present in every industry. It is part of the business models of many organisations and has spread beyond industries that traditionally used casual work.
Every day at the Royal Perth Hospital – a public hospital in which every single patient bed is full – a group of cleaners are employed on a casual basis as an ‘on-tap’ reserve army.
They never know when they might be scheduled to work and must be available, essentially 24/7 for a call by the hospital, often with as little as an hour’s notice.
If they do not attend when called, they will not be offered hours for the next week.
In the construction industry there are now several classes of employment with increasing numbers of people employed by labour hire firms, required to have ABN numbers and to indentify themselves as individual contractors.
In Victoria, 58 per cent of teachers in the first five years of teaching in State schools are on short-term contracts, mostly for 12 months or less.
What was once seen as a life-long vocation at the end of years of tertiary study is now treated by the Government as a temporary job.
As the steel industry in Wollongong is closed “Fly in Fly out” workers travel to the coal fields in the Bowen basis in Queensland leaving their home and families where there jobs used to be.
Insecure work manifests itself in other ways that shift risks formerly borne by the employer onto workers. It is inherent in the business model of the boom industry of labour hire, where workers must be available on call, but can often go weeks without a job.
Insecure work is not just about the number of hours, or the legal status of the worker. It is not about not having a job for life.
It is about the control an employee has over when and where they work, and about what conditions – sick leave, holiday pay, – come with those hours.
Often insecure workers are the first to be laid off or have their hours are cut, and are not in line for promotions or training.
At bottom it is about the degree of control the worker has over their circumstances, and how this affects the rest of their life.
If a worker must choose between earning a day’s pay, and taking care of a sick child – they are probably in insecure work.
Our Inquiry was presented with evidence that Australia ranks behind only Spain in the OECD for the prevalence of non-permanent employment of these kinds.
Yet this was not always the case: Australia was once a model of fair workplace laws and conditions that underwrote a world-leading, equitable society.
What is driving these changes?
The changes to the Australian workplace have been driven by a range of forces, but the chief among them are rapid technological change, the internationalisation of our economy and above all else the increasing power of global financial institutions.
The massive impact of these interlinked forces is transforming everyone’s life and changing the rhythm of life away from traditional working hours, and career structures.
Compared to 20 or 30 years ago, the Australian economy is more open and the structures of social life are much less settled.
There is an increasing sense of our society being driven by market forces as opposed to some overall sense of social purpose.
I was part of the Hawke and Keating Governments when we opened Australia up to the global economy,
and I must take my share of responsibility for the consequences.
Australia had no choice but to modernise, to create a more open economy and also to take more responsibility for international development and economic growth especially in the Pacific and in South East Asia.
Internationalisation was not a choice; it was a necessity.
Journalist Paul Kelly wrote of this period as “The End of Certainty”. I think it just as accurate to describe it as also being the onset of increased risk and insecurity for many Australians.
The Labor Governments of the 1980s did not abandon their principles, but sought to adapt them to the great challenges we faced and the need to be less isolationist.
However, we did not anticipate that those reforms would begin a long-term shift of the risks from the broad shoulders of employers to those of individual workers and families.
Of course we should seriously consider the social ramifications of economic change.
We must deal with the effects of the policies of the 1980s in a way that is consistent with our values and our history.
The country that pioneered aged and disability pensions, the concept of a “living wage” and compulsory superannuation has a proud history in mitigating the harshest results of the labour market.
Just as it is impossible to separate work from life, it is impossible to separate the structure of the workforce from the broader society.
How we structure work, and what we demand of workers will shape the nature of our society in the 21st century.
We cannot and should not go back to the 1960s, and the era of one male breadwinner as the norm. We cannot expect lifetime employment in the same organisation, or even the same industry, as the norm.
But we can ask is the new workplace fair? Are we creating a starker split between winners and losers?
Australia was one of the first nations to grasp that the arbitrary outcomes of the labour market do not lead to fairness, and damage society in the long-term.
The Harvester judgment and Henry Bourne Higgins established the concept of a living wage that was enough for a worker to keep his family in frugal comfort.
In the post war period most households were one income, and male breadwinners were offered the security of permanent employment generally at a living wage, including a mortgage.
We now see a society where inequalities in wealth between households are larger, and social stratification is greater.
One of the first signs of change to our society is in the declining/stagnating rates of home ownership.
Insecure work makes it hard to get a bank-loan, and to keep up mortgage payments.
Locking casual workers out of the housing market increases their insecurity and lack of connection to society. It makes it harder for these workers to build up intergenerational wealth.
Current Government policies on negative gearing, capital gains tax, and homebuyers grants, are all propping up a housing market we know is unsustainable, and is causing huge hardship to many people.
These need to be shifted to encourage home ownership, rather than property investment.
Increasingly our cities are becoming more polarised between affluent and superbly serviced inner areas and far flung suburbs remote from the key services that make for a good life.
We must also build more social housing. Subsidised housing aids those who use it, and takes pressure off rental markets for others. Increasing our stock of housing is the best long-term way to keep prices affordable.
The links between training, productivity and insecure work
Our outdated ways of measuring unemployment allow us to believe the fiction that unemployment is low in Australia.
We still hear the complacent view that work is out there if people really want it. We hear less about the nature of that work.
The standard unemployment measure is currently at 5 per cent or 630,000 people – twice the population of Canberra. This ignores the underemployed 7 per cent who are employed at some level but want to work more hours (an average of 15 per week).
It ignores the hundreds of thousands who have dropped out of the workforce altogether, many trapped in the limbo of the Disability Support Pension until they turn 65 and move onto the Aged Pension.
The Australia Institute points out that there is a close link between unemployment and casualisation. Industries that have low levels of unemployment have little casualisation.
We are so obsessed with the movement of people from unemployment to employment that we have limited interest in those moving from different kinds of employment, and how people are combining work and caring and work and education.
Unemployment has a corrosive effect on the morale of a person and their skills. We need to ask what the effects are of prolonged periods of under-employment or insecure work.
To me the greatest cost of insecure work is the impact it is having on the productivity and skills of the Australian workforce, at a time when the world is moving into a globalised, information-based economy.
We are currently in the middle of a shallow national debate around productivity, in which business groups and the right-wing media are attempting to convince us that the only way to increase productivity is to cut wages and conditions.
This ignores the fact that the main long-term drivers of productivity are investment in industry, infrastructure and in the skills of workers.
It also ignores the long-term effects of casualisation on the skills base of Australia, in particular of workers on the periphery of the economy.
In the long-term the insecurity of workers should be a concern for business, due to the loss of skills and motivation which it represents for many members of our workforce.
I mention industry – technologically sophisticated advanced manufacturing, for example – because I do not agree with Finance/Treasury driven mantras that oppose a sense of strategic purpose, or a strategic industry policy.
The question is: has the more competitive labour market produced greater efficiency, and productivity in the economy as a whole? And if not, what can we do about it?
Labour market economist Mike Keating answered these questions this way in 2006:
‘‘The critical problem facing Australia is that there is a structural mismatch between labour supply and the demand for labour. There is a shortage of skilled labour and an excess supply of people with low education and skill levels. Potentially the numbers of hours worked in a fully employed economy could be expanded by 10-11%. But any attempt to expand aggregate demand faster without remedying the present structural imbalance in the labour market is doomed to failure.”
In short reducing pay and conditions will not lead to greater employment or productivity employment.
Properly training workers will.
Casualisation represents a commoditisation of workers that uses people in an instrumental and short-term manner as opposed to investing in their capabilities.
It represents a use and throw away mentality that does not help to build a productive economy or a sustainable society in the longer term.
As The Australia Institute notes: “Almost by definition a casual worker has little vested interest in the job in question and employers have little interest in the casual employee.”
I do not see how we can develop a culture of training and development without permanent employment arrangements – or a radical change in how the government funds education throughout a person’s life.
Conclusion: time to consider employment insurance
Any skills shortage should be viewed as a training failure.
The economic need to import skilled migrants on temporary 457 visas should be seen as an alarm bell warning us of the emergence of an under-skilled workforce in Australia.
Australian Governments have struggled with the difficult task of changing an education system that attempts to teach us everything we’ll ever need to know by the time we turn 25. We must shift our thinking to a system where training is available to all members of the workforce throughout their lives.
It will be increasingly important throughout our working lives to have the space and the resources to maintain or build skills.
By skills, I do not mean narrow competencies that will be superseded by advancing technology, rather a focus on building problem solving or developmental skills that give the worker much greater autonomy.
I would push for a system that is not so much unemployment insurance as employment insurance, focused on life-long education and training, including support from government for learning accounts, or for employers that provide genuine broad-based training.
This is a radical change, I know. But the issues of insecure work require a major change in the way we think, not a blind acceptance of economic rationalism or nostalgia for a world that can not be brought back.
Our final report, and the response of the union movement and the Government, needs to strike a balance between regulating to give security to workers, and the need to invest more in our workforce, especially the most disadvantaged to ensure that we are able to meet the challenges of labour and skill shortages.
Business groups need to recognise that they must bear some responsibility for the social effects of insecure work, and for the responsibility of ensuring that Australia builds a skilled and educated workforce.
Of course, building efficient and competitive industries are important objectives, but it is important for people to feel that there is a balance between their paid work and the other important parts of their lives at home and in their local community.
Australians will not accept a situation where businesses put the short-term dividends of overseas shareholders ahead of the long-term health of the Australian economy.
A system that commodifies workers and encourages transient employment breeds a sense of insecurity that flows into all aspects of life.
It is easier to measure an economic gain than quantify a social loss. But this does not mean we should not consider the broader and more subtle effects of economic change.
I believe that although the creativity and ingenuity of Australian business has a role to play, there is no escaping the need for greater regulation to reduce insecure work.
Laws must recognise that workers who want secure work have a right to it, with the entitlements that involves, if it is possible for employers to offer it.
Arrangements which keep workers in casual contracts for years, solely for the convenience of employers, need to be discouraged.
There must be a point where a worker in a de facto permanent position earns the entitlements associated with permanent work.
Labour hire arrangements and sham contracting should not be used solely to minimise tax or an employer’s responsibility to protect workers from injury.
As well as regulating, governments should take the lead as a major employer by reducing the amount of contracting and insecure work that they create.
Australians are becoming increasingly aware of the depth of the challenges that face us in the future in our region.
We cannot compete with China and India on price, only on the quality of what we produce and the ability of our workforce.
Education and skill creation must be at the core of how we shape our economy and our workforce over the next 40-50 years to meet these challenges.
However in facing those challenges it is important to build on egalitarian values by ensuring that work contracts are governed by principles of fairness as well as of efficiency.
Secure jobs are likely to be productive jobs and the ones that will be essential to Australia’s future in an increasingly competitive environment in the Asia-Pacific region.
They are also the jobs that will preserve the Australian social contract that has provided a decent welfare safety net, and a chance at social mobility, for generations of citizens and migrants.