THE CHANGING FACE OF THE LABOUR MARKET: WHERE TO FROM HERE?

 

 Inequality is not the price of economic progress; it is an impediment.

Inequality isn't about envy, it's about brutality- the brutality of being forced to choose between power bills and food on the table and medical treatment and children's education.

Labor is calling out inequality where we see it in the community and the economy - in education, in healthcare, for women and our first Australians, in housing, in wages and across our tax system.

The disconnect between the privileged and the rest is being felt throughout this great country of ours.

As Bill Shorten said a fortnight ago:

“Inequality kills hope. It feeds that sense, the resentment, that the deck is stacked against ordinary people, that the fix is in and the deal is done.”

In contrast, rather than being concerned that inequality is at a 75 year high, the Prime Minister and the Liberal party are obsessed with what the late Robert Menzies meant in a speech he gave 75 years ago.

Today I want to look at inequality through the prism of workplace relations and the changing labour market.

One of the biggest changes to our economy in the past 20 years, perhaps not widely discussed but keenly felt, is that workers feel increasingly insecure in their employment and they don’t believe that they have the power to bargain for something better.

The tilt of bargaining power away from workers and to employers has gone too far.  

There has been a severing of the link between hard work and fair reward, which goes to the very heart of our social contract.

We are a country that prides itself on the idea that people get up every day to work hard in the hope of sharing in the bounty of their efforts and the growth of their nation. 

When that link is broken, we get disillusionment and disaffection.

 We get widespread cynicism and distrust of our democracy and its institutions. 

And we damage our economy and our prosperity.

The conclusion and imperative I will leave you with today is that, in order to address systemic inequality and insecurity for working and middle class Australians we need to break down the protections of privilege which have been advocated and implemented by the Abbott-Turnbull governments.

We need to take the Labor approach of growing a broad based economy which shares the national dividends of our hard work on a fair basis.

And when it comes to workplace relations, we need to redress the tilt in bargaining power.

Now it’s true to say the last Labor Government righted one of the greatest wrongs done to workers in our history by repealing WorkChoices.

In doing so, there was an understandable focus on returning things to that what had been in place before Howard and Turnbull ripped away workers’ fundamental rights and conditions.

With the vantage point of hindsight it may now be said that we should have recognized that the labour market was changing, at a speed and in ways that would mean that simply restoring industrial relations laws would not be sufficient.

To be fair to the previous Labor Government, Governments around the world are now confronting the same or similar dilemma of how to address changes in the labour market.

And so, our task is not over. 

As we stand deep into the first quarter of the twenty first century;

as we contemplate the Australia that we were, that we are, and that we aspire to become;

as we are battered by the winds of turmoil sweeping across the globe;

Australia faces a stark choice.

We can choose to condemn a large portion of our population to a low-wage, low-skilled, low-opportunity future.

Or we can choose to build a nation rich in educational, training and employment opportunities, with a broad based engine of economic growth.

Federal Labor chooses the latter.

And so, what are the changes which have occurred in the labour market?

Often, people answer that question by talking about the impact of automation and the development of the gig economy.

 There is no doubt that these changes have produced a series of shocks to the labour market, which will only be compounded as artificial intelligence and robotics penetrate more widely into workplaces. 

I’ll make some brief comments on this point later in this speech.

But, we cannot talk about what is coming without first understanding what has already occurred, or without identifying the challenges which are confronting workplaces, communities and the economy right now.

L.P.Hartley began his heart-wrenching novel “The Go-Between” with the observation that “The past is a foreign country; they do things differently there”.

 So too the world of work.

In the last 25 years the Australian labour market, the nature of work and the economy have undergone seismic changes.

Not that long ago, a job for life was the norm – one occupation, one industry, one employer.

Learning then earning was typical.

In a recession, the main shock absorber was growth in unemployment, which impacted the unskilled and young workers in particular.

In the absence of adverse macroeconomic shocks, the national wage grew at the same rate as national productivity. 

In the Hawke and Keating years, workers and their union representatives, through the Conciliation & Arbitration Commission and the Accord, were part of the institutions which looked to ensure that the benefits and burdens of economic growth and economic adversity were shared.

Today the picture is very different. 

Not all of the changes I will discuss are negative, or not entirely so (indeed, there are opportunities too).  But, taken cumulatively, they amount to a reduction in worker security and in worker bargaining power.

Today, most people can expect to have several occupations, many employers, and many different types of employment over their working lives.

Life-long learning is required to keep up with technological changes.

Much more of the burden of any adverse economic shock is now borne by variations in hours worked and by variations in the terms and conditions of employment.

It is twenty five years since the Keating government introduced enterprise bargaining and gave awards the role of acting as a safety net to protect those without bargaining power.

The last half a decade or so, however, has seen collective bargaining and its impacts diminishing. 

Research conducted for the Fair Work Commission’s 2017 minimum wage review found that the percentage of employees covered by collective agreements fell from 43.4 percent in 2010 to 36.4 per cent in 2016, with 4.7 percentage points of the decrease occurring after 2014.

Between 2010 and 2014, the decline was mostly attributable to a decline in non-union agreements.  However, since 2014 there has been a decline in union agreement coverage, while non-union coverage has remained stable.

During a similar period, award reliance has increased - from 16.5 per cent of the workforce in 2008, to 22.7 per cent of the workforce in 2016. 

This is a significant negative change, as award reliant employees are concentrated at the bottom of the distribution of household disposable income (67 per cent of award-reliant employees are in the bottom half of the distribution of income and 44 per cent are in the bottom three deciles).

And of course, there are many people who are not even being paid at award rates.

The research attributes the drop in the number of workers covered by enterprise agreements to the fall in union density – an undeniable link.

Union membership has declined to 9.3% of the private workforce and 38% of the public sector workforce – 15% overall. 

In today’s labour market a significant portion of the workforce are stuck in temporary or casual jobs, where they work like full time employees but don’t get all of the benefits.

More and more of the workforce is employed via labour-hire companies and as so called independent contractors.

The part-time share of employment is 31.9 per cent, just 0.1 per cent below the historic high in November last year. This is one of the highest part-time employment rates in the developed world.  

We now have a vastly larger proportion of our labour market consisting of overseas temporary workers, currently at 800,000, who have little or no security.

We have a growing and chronic problem of underemployment.

Around one-third of part time workers – 1.1. million people – say they want more hours.

This Government would have you believe that insecure and part-time jobs lead to something better, but the experts disagree.  The OECD recently concluded that, and I quote, “non-regular contracts are rarely a stepping stone to better jobs”.

Precarious work catches Australians in a cycle of low-pay and no-pay, with few if any escape routes such as promotion and training.

Recent ABS data reveals that more than 700,000 Australians are working more than two jobs just to survive.  Growth in secondary jobs, up 9.2 per cent, has surpassed the growth in main jobs, up 6.8 per cent, for the past three years.

We can see the severing of the link between hard work and fair reward in the gap between productivity growth and wages growth. 

Not only is the gap among the widest in the world, over the past four years labour productivity  has risen nearly 6 per cent while real wages have actually fallen 0.6 per cent. 

We can see it in workers’ share of national income.

The latest GDP figures show 51.5 per cent of income went to employees – the lowest since September 1964.

We can see it in Australia’s level of wealth inequality.

In 2014, the top 20 per cent of households owned 62 per cent of the wealth, while the bottom 20 per cent owned less than 1 per cent.   And the wealth gap continues to widen.

We can see it in Australia’s level of income inequality.

My colleague Andrew Leigh’s work has shown that real wages for the top 10 per cent of income earners – those who have also captured the lion’s share of educational opportunities – have grown by 72 per cent over the last four decades.  This is more than three times the rate of increase in real wages for the bottom 10 per cent of income earners.

Twenty years ago the minimum wage was 63 per cent of the median wage; it is now just 53 per cent.  The minimum wage and award wages have grown by just 4.3 per cent in real terms over the last five years – less than half the rate of labour productivity growth.

That’s why Bill Shorten and I made the first ever submission by a Federal Opposition to the Minimum Wage Review, calling for a fair and economically responsible increase to the minimum wage.  

In contrast, the Turnbull Government’s submission put forward a slew of arguments against increasing the minimum wage.
 
 So, what is behind the inequality that we see in today’s labour market – the flat wage growth, the proliferation of insecure work, the falling share of GDP accruing to employees, and the relative impoverishment of low skilled workers?

Without a doubt, the dwindling bargaining power of workers and their representatives has played a central role. 

I am not suggesting it is the only factor: substantial technological change, the growth of the services economy and, particularly in recent years, the loss of jobs to lower cost global competition have all contributed.

And, of course, the deliberate regressive tax and spending policies of Liberal governments have directly increased inequality.

But the shift in bargaining power away from workers to employers, and the undermining of their ability to be represented by their unions, have had a profound and damaging effect. 

A robust and effective union movement is an indispensable element of civil society. 

Indisputably, Australian unions have been key partners with business and government in social and economic changes that have made Australia a fairer society and a stronger economy.

Since Federation, the Australian union movement has fought for and won worker rights that have reached well beyond their own membership. 

Collective bargaining generates productivity outcomes for the business and benefits for the workers – even those that are not in the union. Every time a union negotiates an enterprise agreement, everyone in that workplace benefits, whether or not they are union members. 

In the absence of unions, the labor market is more brutal, workplaces are more dangerous, workers suffer more exploitation and society is impoverished.

And, importantly, the economic consequences of the shift in bargaining power from worker to employer are undeniably damaging. 

You don’t have to have come from the labour movement to understand that this is true.  

You just need to read the 2017 OECD Employment Outlook, which makes it very clear that declining union membership and reduced worker bargaining power are key factors behind rising inequality.  

This Turnbull led government clings to their ideological belief that an economy grows more effectively on a narrow base of the highly skilled and the privileged class, whose increased wealth somehow automatically and magically trickles down to everyone else.

This is patently wrong.  According to the OECD, economies with more equal distributions of income and wealth experience stronger and more stable economic growth.

Our economy is strongest when it is powered by a skilled, capable and confident working and middle class – our economy is strongest when our society is more equal.

Even the International Monetary Fund, hardly a left wing think tank, has concluded that:

“increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth…when the rich get richer, benefits do not trickle down”.

And, as former Chief Economist of the World Bank and Nobel Laureate and author of the acclaimed work “The Price of Inequality”, Joseph Stiglitz said,

“The only true and sustainable prosperity is shared prosperity.”

Stiglitz described the US in this way:

“For too long, the hardworking and rule-abiding had seen their paychecks shrink or stay the same, while the rule-breakers raked in huge profits and wealth….It made our economy sick, and our politics sick, too.”

He could very well be talking about Turnbull’s Australia.

In the last month, the Governor of the Reserve Bank Dr Phillip Lowe – someone who is well respected across the political divide – has made two speeches, in which he acknowledged that inequality is getting worse. 

He also discussed the problem of the decline in real wages, and suggested that low-income workers should ask for a wage rise.

The Governor’s intervention in the discussion about the wage crisis in this country is welcome and shows just how serious an issue it is.

Of course what wasn’t mentioned by the Governor was the tilt in bargaining power and the effect of the decline of union density. 

It is really important to acknowledge how hard it is for the average worker – whose livelihood depends on their job -  to simply ask for a wage rise. 

Particularly for those workers in industries and workplaces where unionism is almost negligible.   Or where there is no collective agreement.

Who can they turn to for help to enforce their rights or to get their fair reward for their labour?

In today’s institutional environment, it is absurd to assume low-wage workers, in insecure jobs, can just go to their boss and ask for a pay rise.

For the past four years, we’ve seen this Government launch a relentless attack on working people and their representatives.

We’ve seen wage growth stall and penalty rates slashed.

We've seen tax relief for those on the highest incomes and for big business, and tax increases for the remaining 80 per cent of the workforce.

We’ve seen the Government reject Budget savings measures that would remove special privileges – Labor’s policies on negative gearing, family trusts, and removing the tax deductibility of tax advice (just to name a few).

We’ve seen unions and workplace rights attacked by politically motivated royal commissions, by the establishment of the ABBC, the Registered Organisations Commission.

And we’ve seen this Government actively foster a shifting balance of power in industrial relations, which has emboldened too many employers to avoid their workplace obligations. 

The appointment of all 14 Fair Work Commissioners from the employer side only is a prime example of this Government’s bias.

Pushing workers into sham contracts and using dodgy labour hire companies to avoid Fair Work Act obligations; using the termination of enterprise agreements as a bargaining weapon; the overuse and misuse of temporary work visas and the people employed under them; widespread and systematic underpayment and exploitation of the workforce. 

It’s not all business who engage in these practices.  In fact, most do the right thing – but it is too many, and too often. 

In contrast to the Government, Labor has been canvassing these issues for quite some time.

We took a number of policies to the 2016 election and have continued to develop policies since, including:

[if !supportLists]·         [endif]Reforming the definition of “casual” work, so that it is used for the purposes for which it was originally intended.

[if !supportLists]·         [endif]Increasing penalties for employers who deliberately and systemically avoid paying their employees properly and making companies responsible for business practices and models which rely on rampant underpayment of workers.

[if !supportLists]·         [endif]Making it harder for employers to push their workers into sham contracting arrangements to avoid direct employment of workers, which denies  workers employer contributions to superannuation, sick leave, holiday pay and all the other entitlements while making them pay for their own workers compensation insurance.

[if !supportLists]·         [endif]Requiring all company directors to obtain a unique Director Identification Number and increasing penalties associated with phoenix activity, where employers liquidate their companies in order to avoid paying the money they owe their workers.

[if !supportLists]·         [endif]Introducing reforms to ensure that temporary overseas workers are not being exploited and underpaid and that there is a level playing field for all workers in Australia.

[if !supportLists]·         [endif]Introducing a national licensing scheme to regulate the use of labour hire companies, where labour hire companies which consistently undermine award or agreed terms and conditions would be de-registered, and employers no longer able to use them.

[if !supportLists]·         [endif]Restoring penalty rates in awards and legislating so that they can never be cut again.

[if !supportLists]·         [endif]Removing the ability of employers to simply terminate enterprise agreements with ease in the Fair Work Commission (like what happened with Aurizon), thereby preventing the nuclear option of the loss of all the provisions of the existing enterprise agreements and bargaining power to employees.   
 Putting an end to all remaining zombie WorkChoices agreements.

Labor is up for addressing the challenges presented by changes to the labour market. 

The common theme to each of Labor’s policies is clear – enhancing the lives and opportunities for working people, and making sure that the labour market delivers for the economy and for society. 

This is an essential part of Australia’s inequality story and Labor’s agenda to tackle it.

In order to succeed in this task, we must bring all parties together – workers, employers and unions – to consider how we might reform workplace laws to deliver better outcomes in this ever changing labour market.

[if !supportLists]·         [endif]Is enterprise bargaining working for low paid workers? 

[if !supportLists]·         [endif]In what ways can we strengthen the bargaining power of workers in precarious jobs?

[if !supportLists]·         [endif]How do we make the Fair Work Act more user friendly for small business?

[if !supportLists]·         [endif]Is the Fair Work Act adequately providing for the rights of workers, including sufficient rights to be represented?

[if !supportLists]·         [endif]Are the awards an adequate safety net?

[if !supportLists]·         [endif]Does the Fair Work Commission have sufficient powers to step in when parties are not bargaining in good faith? 

[if !supportLists]·         [endif]Is it too hard for the average person to have a dispute about their pay and conditions resolved by fair work institutions?

 

We must put serious thought into how we achieve both flexibility and security in a way which works for our economy and for our people. 

There is no one answer, or one solution.  But, whatever the solution or solutions might be, two things are clear – it must be collective, and it must redress the imbalance in bargaining power. 

And it has to be shared - an approach that businesses and workers and their representatives sign up to.

Only a Labor government is capable of undertaking this task.
 
 The Coalition government can’t do it, because its members have never accepted that the labour market is more than just a market.

And we know that they love to let the market rip.

There is no better expression of this view than the Prime Minister‘s own words to the Federal Parliament, when he spoke in support of Work Choices:

“You have to let the free market do its work and let the cost of setting the clearing price – be it for labour, shares, home units or loaves of bread – be as low as possible.”

There is a deep moral flaw in the perspective that wages need to be as low as possible. 

That moral flaw stems from the conservative’s ideological view that the labour market is just a market.

The conservative view is that if there is excess capacity in the labour market, whether it is unemployment or underemployment, wages should fall until the excess vanishes. 

The conservative view is that unions and minimum wages and penalty rates and collective wage bargaining are all just market failures.  

The conservative view is that tilting bargaining power away from workers and their representatives and towards employers is somehow, paradoxically, good for workers. 

And so, Malcolm Turnbull is just part of a long history of the Liberal Party’s opposition to wage increases, minimum wages, a generous social safety net for those who fall on hardship, and any role for trade unions or any other collective bargaining over wages and conditions. 
 
 The Labor view is starkly different.

Yes, of course, the labour market is a market, but it is also a social institution. 

There is no better articulation of this view of the labour market than that put forward by one of the great economic thinkers of the 20th Century, Robert Solow, the 1987 Nobel Memorial Laureate in Economics.

The labour market is central to the arc which society follows.

It is the mechanism by which the benefits of economic growth are shared, or not.

It is the place where the vast majority of citizens and voters sell the only thing they have to sell, their time and endeavour and skill.

It is the mechanism which dictates whether the path of the economy is high skilled and high wage or low skilled and low wage.

It is a market in which much more subtle and complex human motivation and institutions naturally and inevitably operate than in the market for home units or loaves of bread.

When you’ve spent your whole life protecting the privileged and helping the rich get richer, when you get more than your fair share of the benefits of economic change, then globalisation, technological disruption and the free market must look pretty good.

But labour market changes look very different to those Australians who have to work hard to put food on the table, who juggle work with raising their families, who struggle to hold down a good, reliable job, and who cannot see a place for their aspirations in today’s Australia.

The future looks hard for the people who are feeling the brunt of changes to the labour market, and who the Turnbull government is leaving behind:

These are just some of the hard human realities for working people that sit one layer below the headlines of inequality and insecurity.

These are the real people who are part of the labour market.

The priority of the labour movement and of the ALP starts with jobs and wages and labour markets. 

That’s why we need to reverse the disastrous tilt in bargaining power and rising inequality. 

But it does not and cannot end there.

Any sensible attempt to address the yawning chasms opening in our society has to extend to access to education and to training, to affordability of housing, to Medicare and the NDIS and to a fairer taxation system.

It has to apply to towns and regions, to cities and communities, to the bush and to Canberra.

What about the future of work

I mentioned at the start that we have to look both at the labour market as it is now and how it is changing. 

The future of work is a longer conversation than we have time left for tonight, so I will make some basic points and then leave you with on a positive note.

Work is being transformed by digitalisation, globalisation, ageing populations and urbanisation.

Automation, robots and artificial intelligence, as well as the development of a sharing and platform economy are at the core of the transformation.

Unlike the innovations of the various stages of the industrial revolution, which separately impacted particular sub-sets of the population, today’s technological changes pose threats to the future of work to people and industries across the economy.

Not just to manual workers, but skilled workers.

Not just to blue collar workers but professionals.

But , with political will and the right policy and institutional choices, we can shape the future for the benefit of all.

The evidence is very strong that the race between skills and technology is not pre-set.

Technologies benefit our economy most when our workforce has the skills needed to integrate them and enable their uptake. 

If a population has the skills to utilise them, new technologies can augment work. 

But, if they don’t, and new technologies race ahead of skills, then those technologies can replace labour.

I believe that the widespread challenge of the future of work might provide the political conditions to develop a consensus approach, based on the fact that changes to the labour market from technology is a shared challenge. 

It is a challenge which demands a more collective and inclusive redress.  Along with Ed Husic, the Shadow Minister for the Future of Work, I am up for the challenge.

We must ensure that there continue to be good, well paid jobs with a career path and job security.  And we must ensure that all workers are part of our growth story.

It is a challenge for everyone  – businesses, unions and government – to see beyond their own interests and identify threats to a strong national economy and to a thriving business sector.

Managing economic and social change for the benefit of the many, not just the privileged few, must be seen as a shared responsibility.

In an age of hostility, anger and taking sides, it is time for all groups – governments, unions, employers and civil society – to accept that tackling inequality in this country is a shared responsibility.

It is time for a different approach, and that is what Labor offers.