Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Definition: Skilled = Bachelor degree or higher; Unskilled = no post-school qualifications. 1981 and 2001 from Gregory (2005). 2011 calculated from Census data provided through TableBuilder Pro.

Gregory illustrated this point with a comparison of full-time employment to population ratios for the two extremes in the skill level spectrum for males aged between 25 and 59 (thereby removing the confounding influences of the education and retirement phases). Gregory used two Census periods—1981 and 2001—and we have supplemented this with data from the 2011 Census. Gregory observed that in 1981 these ratios were marginally higher for the skilled 25–34 years of age cohorts (about 4 percentage points) and considerably higher for those in the 50-59 years of age cohort (about 16 percentage points). However, by 2001 these ratios had changed dramatically. Across all skill groups, and all age cohorts, there had been drops in their employment to population ratios. But where these drops had been mild for the skilled groups—for example, 3.3 percentage points for the 25–34 years of age cohort—for the unskilled men they had been massive: 15.8 percentage points. And this for an age cohort in the prime of their working life. Among the 35–49 years of age cohort the ratio for the unskilled men dropped by 16.8 percentage points and for the 50–59 cohort the drop was 16.7 percentage points. By way of comparison, among skilled men the figures were 6.6 and 12.1 percentage points respectively.

Turning now to the last decade, the results are most sobering. Among all age groups except the youngest, the full-time employment population ratio improved for skilled men. Amongst the lowest age group it dropped by a mere 0.9 percentage points. By contrast, the ratio dropped for all age groups among the unskilled men, and it dropped by considerable amounts. Overall, it dropped by 7.9 percentage points and amongst the youngest age group it dropped by 11.9 percentage points to just 48.2 per cent. To put this in perspective, at the time of their lives when young men should be settling down and building their futures, less than half of those without qualifications are in full-time employment.¹¹¹

Other studies in Gregory’s large body of work have answered the question: ‘Where did the unskilled jobs go?¹¹²’ They showed that the loss of manufacturing jobs from the economy, beginning in the 1970s and continuing to this day, has particularly struck hard at this group of workers. The other factors in this scenario have been the repeated waves of retrenchments of blue-collar jobs from public sector employment at state and local government levels, as privatisation or corporatisation has swept through sectors like the railways, electricity, water and sewerage, road construction and public works.

When it comes to new employment opportunities, the conventional wisdom eulogises the growth of high skilled jobs. This is sometimes expressed in terms of a new economy dominated by Robert Reich’s ‘symbolic analysts’¹¹³, though more sober assessments point to a polarised labour market in which large numbers of low-skilled routine jobs are still part of the occupational mix.¹¹⁴ The key point here, however, is that a great many of these new low-skilled jobs are part-time, and often casual.¹¹⁵ Their emergence has not, therefore, overcome the dilemma posed by Gregory’s analysis.

5	Measuring the Economic Impacts of Industrial Relations Regulation: (1) Macroeconomic effects.

It is not possible to say that changes in the industrial relations framework over recent decades have been the cause of the upswing, downswing and recovery in productivity growth seen over that period¹¹⁶. It may be the case that industrial relations policies affect the productivity of individual workplaces, but their effect on net economic performance is minimal.¹¹⁷ The most important economic solutions lie elsewhere and concern questions of sustainable investment, the regulation of financial systems—highlighted by the ‘near miss’ of the GFC—effective taxation regimes, and the overarching macro-economic task of fostering employment. Our analysis of the labour market during the 21st century in Chapter 4 shows that the GFC marked a watershed, the dividing line between a period of rapid growth and the current period of slow decay. Current economic policy debates, and particularly industrial relations debates, seem quaintly old fashioned in the current climate. Indeed, Governments often seem like generals who persist in fighting the last war, preoccupied with inflation when the world economy is rapidly deflating. On the other hand, multinational corporations are already preparing for the next round. International financial capital has wasted no time exploiting the opportunities for mergers and acquisitions thrown up by the GFC, leaving Australian domestic control over capital weaker than before the crisis. Moreover, around the world governments responded to the GFC with stimulus measures in varying degrees, but they all failed to put in place effective regulatory frameworks to prevent the next GFC.¹¹⁸

The assumptions behind some questions posed by the PC imply that Australia must adjust to international competition on the terms which suit employers, particularly large multinational companies. Yet it is very hard to pinpoint where such adjustments should take place. Wages growth has been flat in recent years, while unit labour costs have declined in secular terms over many years. When it comes to the labour market, the PC appears to maintain a set of stereotypes drawn from neoliberal textbooks in which perfectly competitive labour markets are the nirvana to which policy markers should aspire. They studiously ignore the growing body of evidence which shows that labour markets can never approximate these idealised markets. Real world labour markets are at best characterised as dynamic monopsonies in which many of the ‘frictions’ which prevent adjustment are not perverse incentives or dysfunctional institutions but important parts of the social fabric. Take ‘labour immobility’, for example. People are tied to particular locations not simply because selling their house may be difficult, but because they are tied to family, schooling and community networks which are vital to their social well being. In a similar vein, many households are now dependent on two breadwinners and both need to find new employment opportunities if they seek to move. Other factors which cause reality to deviate from an idealised labour market include but are not limited to; time inconsistent decision making (especially with regard to education and skills), hysteresis, information asymmetries between employers and employees and of course asymmetric bargaining power. These, and other scenarios, make the notion of mobile workers in a self-adjusting labour market that quickly and automatically moves to a welfare maximising equilibrium an unrealistic benchmark for understanding modern labour markets and an unrealistic ideal to aspire to.¹¹⁹

Ultimately, an economy is an historical and social construct, not a natural system, and any understanding of the interconnections between industrial relations and the economy must encompass these institutional arrangements. The neoliberal mindset regards institutions as impediments to the ‘natural’ outcomes which would otherwise occur under the influence of market forces. What this fails to consider is the Polanyian dimension: that any historical momentum towards self-adjusting markets induces its own counter-movement, and this in turn become embodied in social institutions and, at times, legislative outcomes.¹²⁰ While some of the questions raised by the PC may be the wrong ones to pose, drawn as they are from a neoliberal textbook, they do nevertheless provide a useful opportunity for reflection. They encourage an assessment of the relationship between industrial relations and economic outcomes, a useful exercise at any time but particularly relevant at this current moment of global economic uncertainty.