The cost of living debate took a serious turn
lately with the Labor Opposition Party declaring its intent to deliver a living
wage for working people in Australia if it gains the 2019
election. Just what that means is not yet clear.
This is how this developing news is
covered by some of the media such as the Sydney Morning Herald, the the ABC, and the Conversation. Also take a peek at the Guardian article. We are told Labor will ‘increase minimum
wage’, reinstate ‘penalty rates’, deliver pay equity for women, tackle
sub-standard labour hire and independent contracting practices.
Broadly Labor has made a strong case for wage enhancement for months, but has not put forward persuasive policy strategic measures to deliver a living wage for all working people.
Many of us support higher wages. But it is equally true that the nature of Australian economy has been significantly transformed from the days when the nation had a centralised wage-fixing system. To make a policy difference you have to grapple with the structural change that has taken place.
We have witnessed massive changes in the way goods and services are produced; government business operations and service delivery have been long hollowed out. The technological revolution and globalisation has transformed some of the spaces within which work takes place. Innovation
Quite rightly some commentators are now asking Labor to spell out exact measures it will use to deliver aliving wage for all Australians if its pronouncements are to be taken seriously.
My article tries to highlight through use of some examples the workings of a modern economy that must be understood and taken into account if all the talk about a living wage is to be meaningful.
For readers new to social policy you may first be interested in a quick glimpse on the history of the living wage and centralised-wage fixing in the below, or if familiar you can skip and go to the next heading.
A Historical Context
The concept of living wage was established well
over a century when Justice Higgins President of the Commonwealth Conciliation and Arbitration
Court made a momentous decision known as the 1907 Harvester Judgement. The
thinking to this decision is reflected in key judgement phrases such as:
‘…The normal needs of an average employee, regarded as a human
being living in a civilised community’
‘…framers of
agreement would have to take, as a dominant factor, the cost of living as a
civilised being’
Resource
Link
You can find
informative historical details from these links:
As the global neo-liberal economic project took hold in many parts of the world during the 1980s and 1990s, gradually the idea of a living wage waned. By 1991 Australia was shifting from centralised fixed wages to enterprise bargaining. To be fair, the Labor Government at this time integrated neoliberal ways of running a modern economy with a strong safety net and industrial welfare (ala introduction of superannuation for all working people).
A Transformed Economy
In its heyday it appears the living
wage was not just consolidated through centralised
wage-fixing measures. Once upon a time the Federal and State Governments
were huge public sector employers. And they run many Government Business
enterprises. These spaces played part into securing professionals and trades
people into salaried jobs paying a living wage and above.
Remember when the Federal Government used to own the likes of Telstra (then Telecom), the Commonwealth Bank, Medibank, just to name some? It sounds like a very different lifetime (as they say, laugh out loud!)
Likewise State Governments have contracted out, commercialised and privatised a substantial part of their own public sector operations and Government Business Enterprises since the mid-1990s. Electricity, gas generation and distribution are case in point.
The Telstras and their kind are still around but with less monopoly power due to new market competitors. Businesses make profits for their shareholders and their executives, that’s what they do. Off course when you sell off assets you have less control over employment objectives over any privatised entity. We see Telcos running product shops perhaps with substantial sales people and maybe franchisees.
Reluctantly we have now accepted that if we ring Telstra about most operational matters we will be attended by overseas staff that takes care of issues digitally – you can get a new or revised plan connection, you can sort out your account and so on. Telcos may maintain some local staff, contractors, and franchisees, but also it can be safely presumed a good chunk of their jobs are globalised, right?
My question is - if Governments have long flogged off many public-owned businesses, what methods or strategies Labor will use to influence higher wages and job security?
Whether your politics are of economic Centre, Left or Right is not the point here. If we are talking about living wage we have to factor in structural changes to the economy and employment patterns amidst this globalised world. To me, it doesn’t make sense to debate wage adequacy in a vacuum. I keep coming to this point.
Government Contracting-Out &
Living Wage?
For over two decades Federal and
State Governments have contracted out massive levels of service operations to
the Not-for-Profit sector and private operators. Examples include Job Active
(formerly Job Networks), disability services, aged care services, Migrant
Settlement Services, etc. We are talking billions and billions of dollars.
Use of contracted Third Parties by Government is believed to bring about greater efficiency. Government require Third Parties to carry out specific contracted deliverables. Governments have long moved away from funding salaried positions to funding specific deliverable tasks and outcomes.
So Governments say the get to deliver more efficiently with less. But also in offloading operations to Third Parties that’s how the size of Government agencies is kept in check. It is not practical for cash strapped Not-for-Profit Organisations to make substantial wage increases for services they deliver on behalf of Governments. Where is that money coming from?
Needless to say the sectors mentioned above are female dominated, receiving minimum wage and possibly some a bit more. But even the OECD acknowledges that ‘Across countries, including Australia, women are much more highly concentrated in service jobs, which tend to pay less.’ OECD Source
It is not clear if Labor will
increase funding to its contracted Third Parties to fund salary improvements
(NGOs & private operators). Centralised wage-fixing makes sense in this
instance if Feds recognise the part they play in this dynamic. It is also not
clear what financial capacity exists for the Feds and State Government to
increase funding levels so that the contracted parties mentioned benefit from
salary increases.
So it makes sense to puzzle about what measures Labor intends to use to boost wages for the services it contracts out to Third Parties?
Digital & Automation
The growing digital and automated
economy is transforming the way a range of goods and services are produced, as
seen in the transformation of major ‘old’ industries that can now operate
digitally from local, global and virtual sites, and save some wage costs.
This also includes new industries such as rideshare and food delivery. A young person could be working in a food outlet serving hamburgers or latte – another could be classified an independent contractor facilitating food delivery across the city through the new digital food delivery platforms.
I presume the flexible mode of production (i.e. ways goods/services are produced and accessed) is what is making possible for this economy to gain ground. It is fascinating to see the rising popularity of services such as UberEats across geographical areas.
The way I think about this is that when you think less young and not-so young people in the at present and in the future are likely to be employed at Coles, Woolworths or McDonalds because of automation, then it is sensible for them to engage in emerging digital economic platform.
Basically the architecture of capitalism is evolving. As reported in the Australian Financial Review, redundancies have been in the making as Coles automates.
This SMH story also explains how major supermarkets have succeeded using automation to significantly reduce wages costs as per link.
Now it seems to me for any future Government pursuing a minimum or living wage, it is important to recognise that not all measures around these objectives are achieved through centralised wage-fixing. Where people are employed of course centralised wage-fixing, collective bargaining or enterprise bargaining can be the way to go.
But if people work as independent contractors, in some cases different policy instruments can be helpful in enhancing incomes by taking account of the contractor’s costs of production and that their earnings enable them to maintain a ‘cost of living as a civilised being’ (to use Justice Higgins' expression from a century ago). I suppose that means their earnings as contractors capture basic costs such as super and holiday pay.
These days you keep hearing from some media and political commentators that people must be classified as employees and not independent contractors. Instead of being too preoccupied about classification in the case of rideshare, why not simply work on policies that ensure regardless of classification business cost operation models capture basic standards of living?
It is hard not to recall the genius of the Hawke-Keating era when Labor thought big and managed to take account of the workings of the global economy, while balancing this with a sophisticated social wage and superannuation system.
I was watching a program the other day which indicated 60,000 independent working people (driver-partners) in Australia have joined one of the major rideshare platform, and four million service-users are utilising this particular platform. The practical me was thinking this means less people on the Centrelink queues. Some will say “What are you saying? ‘Why don’t they eat cake?’”(follow my drift?)
It’s not like Australia is about to unscramble the project of neo-liberalism in a hurry, if that. I mean the public sector has shrank; the Government Business Enterprises are far less than what we used to have; the contracted Third Party Not-for Profit and private operators are no longer funded salaries per head, but on deliverables. Private businesses are globalised with local and offshore digital operations – and this is all part of what makes a flexible capitalist economy.
Before anyone gets me wrong, I support improved incomes. The point I have laboured to make is that grasping the workings of a modern economy is a step towards thinking how to address ideas about income improvements without undermining the existence of new economic activities.
One Dollar Litre Milk!!
As I am about to complete this
article I hear news on Tele that Aldi is joining Coles and Woolworths in
abolishing the $1 per litre milk supplies. I don’t know anyone who will
complain about paying ten or even twenty cents extra per litre to ensure
farmers are paid to cover the cost of production.
There is a lesson here about Governments working with business stakeholder and relevant parties. Obviously such progress cannot be achieved through centralised wage-fixing which works for some groups. The challenge for Labor is to think about policy instruments that fit particular contexts.
Franchisees
Recent stories about the plight of some franchisees are a reminder that notions of a living wage no longer make sense if only understood in terms of employee-employer relationships.
A few decades ago policy-making took account of the working poor and Labor led in generating policy instruments around social wage and beyond to ensure wage adequacy and ‘civilised living’. Alas, how things shift. Increasingly we are hearing some franchisees joining the ranks of the working poor due to asymmetrical franchising arrangements.
It turns out we are talking pizza chains, petrol stations, cafes, you name it. The SMH coverage on these issues is an eye opener. See this article and further info here.
To me this reinforces the point that any notion of a living wage can only be achieved if policy instruments are not reduced to a single solution.
Of further interest is the fact that perhaps more than before growing numbers of people are engaging in income generating activities in areas where industrial laws regulating employment practices are not applicable. The economy has been transformed and very much subject to further changes. The political and policy elite can support the country better if they grapple with the architecture of the modern economy in in-depth way.
Much More
There is much more that can be said
about the transformation in Australia’s economy and patterns of employment and
unemployment. For the purposes of this article, the examples used to illustrate
the change simply serves to indicate the need for nuanced thinking in terms of
how the political elite may approach issues about a living wage.
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