The polarized workforce

In broad terms, we know what the outcome of industrial relations reform will be. Although we haven’t had radical shifts in formal institutions, we’ve experienced a decisive shift of power to employers, and seen the results. The most obvious is polarization in working hours. There’s been a big increase in the proportion of people working more than 50 hours a week, and also a big increase in the proportion of part-time and casual workers. I think it’s self-evident that this is a bad thing, but I’ll spell out my reasons (probably over several posts).

I’ll start by observing that long hours suit some people, and so do part-time jobs. I suppose I would be the paradigm case of someone for whom long hours are not a problem. I have almost complete flexibility over the hours that I work, and almost complete autonomy over what I do from day to day, and the job is what I love doing, to the extent that there isn’t really a clear divide for me between working and not working (is writing this post at 7am work, or free time – I don’t really know). Part of the problem is that bosses’ jobs are mostly like mine – not quite as autonomous and flexible as mine perhaps, but with plenty of on-the-job rewards. As a result, bosses have always been more likely to work long hours than others. One problem with IR reform is that bosses get to impose their preferences on others, and those preferences are almost always for more effort, regardless of whether this is economically efficient or even in the long-term interest of the enterprise.

16 thoughts on “The polarized workforce

  1. JQ,
    It seems to me that little was said aboout IR reform in the election beyond Howard’s ‘warning’ that electing the ALP would hand power back to the unions. However, a quick glance at the ALP’s programme will tell you that beyond easing some of the restrictions on union organisation, and granting more powers to the AIRC, it could hardly be called ‘radical'(i.e. they will keep enterprise bargaining and not re-institute industry-wide bargaining). Labor even refused to publicly support the ACTU test case for fear of offending business. What are your thoughts on this and recent IR reform?

  2. I think the true nastiness of casualisation is not well understood, probably because the worst effects float below the radar of most researchers, journalists, political staffers and others who would scream if they encountered the worst of it. Even though some academics experience casual work arrangements, those arrangements tend to be quite genteel.

    At its worst, it exposes and legitimises a dangerous brutality. In the old days, frustrated managers might scream at workers or have fits, but there was a certain balance in that the worker would still be there the next day and the next year.

    In the new world, there is nothing to stop pathological exercising of power. A manager who wants to get even, or even express his or her ideology about what constitutes correct level of deference, can just terminate a worker. Sometimes this can be brutal, and there are managers who derive pleasure from having this sort of power.

    Sometimes it’s just convenient, such as when a worker seems likely to complain about corruption or illegal dumping of waste or similar. The manager can make the problem disappear by making the worker disappear. This is in fact a significant social issue that we should be more concerned about, even if we don’t care for the worker’s plight in itself.

    Recruiters go to employers and actively market the fact that employers can terminate casual workers without any consequence. It is such an established part of the process that they often offer to provide a replacement at no additional cost.

    MB, in response to your post, IR was a strong part of the election campaign to those with an interest in the issue, from both sides. Both parties used coded messages to communicate with key constituencies, who understood exactly what was at stake. The reforms the Howard government are proposing are not minor. Labor’s response was that they would ensure those drastic reforms didn’t occur.

  3. “In broad terms, we know what the outcome of industrial relations reform will be.”
    One of the bones of contention is unfair dismissal legislation, as well as outsourcing via labour hire companies. John perhaps indicates that this along with bosses tendency to see workers as a reflection of themselves, has shifted the bargaining balance in favour of employers. The question is has it?

    I would suggest that outsourcing/labour hire companies have become a double edged sword for employers. I was reminded of this the other day when talking to an employer in the export freight industry. He had just lost 2 long term employees to a competitor because a staffing agency had poached them on the competitor’s behalf. Essentially there are skills shortages in this field and he had not recognised that pay rates had significantly moved upwards. The staffing company had in effect, taken up a union role in getting these staff better remuneration, albeit with another company. His lack of this market awareness has seen his business suffer a severe short term shock. Perhaps if the staff company had approached him with the market facts, he would have been prepared to bid to keep his staff. On the one hand he would have to pay his staff redundancy pay if he retrenched them, but they had no reverse obligation to him, other than to give 2 weeks notice.

    I have observed similar outcomes with a friend in the mechanical fitting trades. He is extremely experienced and by working for a labor hire company and moving about various employers, was able to gain the best industry reward with a top employer. Nursing agencies have done likewise for scarce nurses. Although their wages have been largely restricted by public Medicare funding, the best have been able to pick and choose from among the best shifts via the agencies.

    Perhaps there is a role here for the labor hire/recruitment companies to act as an honest broker in negotiating enterprise bargaining agreements for individual workers with their employers, rather than relying on one size fits all unions as in the past. Perhaps also, workers could agree or not, to be protected by redundancy provisions, in return for having to give the same notice to employers if they wish to leave. That may be fairer to both sides in their longer term planning.

  4. Some observations. The government is fond of citing the decline in award coverage as evidence of a radically changed workforce. This is misleading; a lot of workers supposedly on individual contracts are I think actually just being paid slightly over the award on an informal basis. The government is not interested in encouraging enterprise bargaining to get people off the award because that requires unions. The further winding back of the award system will impact on many more workers than the current award-only %. It is clear that much of the government’s small business constituency is resentful of the regular review of the living wage, and I wonder if the government is disappointed in the current AIRC President, despite his employer background. How does this push to reduce wages and conditions for the low-paid fit with the current welfare to work obsession? It must imply a winding back of welfare payments. The light on the hill for the government is a hire and fire system with a very low minimum wage.

  5. If employees are being bullied into working long hours, then a progressive payroll tax might be an effective countermeasure. But I guess this would backfire badly if employers responded by making people do more unpaid overtime.

  6. Taking up Observa’s point about the labour hire firms who act as agents for workers to get better deals, that is a role that the unions could play also.

  7. observa, you must be joking. Labour hire firms generally work to minimise the pay of casual workers, not maximise it. It is a popular myth, promoted by the labour hire industry, that recruiters try to obtain the highest rate of pay for workers.

    They don’t. Labour hire firms derive their income from the difference between what employers pay and workers receive. They try to maximise the amount the employer has to pay, while minimising the amount the worker receives. Their margins can be 70 percent and more. Apart from that, instantaneous rates of pay take no account of losses from work being irregular. Casual workers can go months without work.

    Labour hire firms compete on their ability to provide cheap workers, and this works to discriminate against the better workers. Also, by offering a block hiring function, they provide the mechanism for large employers like Telstra to bargain pay rates down with a third party. The workers have no say in this and it represents a breakdown in market feedback.

    Then, because the labour hire firms have captured the jobs, the workers have little choice but to accept those reduced pay rates.

    Nurses were getting higher rates but, in Victoria at least, the government became so sick of being screwed by the labour hire firms that it stopped hospitals hiring nurses through labour hire firms. If the nurses were getting more, you can be sure the labour hire firms were getting even more. I accept the point about the fitter, but would not consider it typical, or worth respecting the role of labour hire firms.

    Labour hire has a significant distorting effect on the market by restricting workers’ access to jobs, and employers’ access to workers. John Buchanan and others have also done work showing how it reduces training and thus leads to the type of skill shortages we’re now seeing in trades.

  8. “Labour hire firms compete on their ability to provide cheap workers, and this works to discriminate against the better workers.”

    I disagree that they discriminate against better workers. They place their better workers first and foremost in an effort to retain them on their books. Also they place their best with the best(ie highest payers/conditions)employers and often see them recruited permanenently by those companies. For these companies, on the job ability is the cheapest way of assessing a potential permanent employee. However there are quite a number of employees who, faced with a glass ceiling for their skillset, prefer to move about in industry, in order to enjoy a ‘fresh’ work environment. Also it enhances their skillset and employability. I know several tradesmen and a payroll officer who do this. In fact the payroll officer was recently offered permanency with a Quango and turned it down. Also the public hospitals are trying to gang up on the nursing agencies, because they don’t want nurses telling them(via the agencies)what shifts they will work. They want to use their industrial muscle to break this type of private union.

    The cream floats to the top in labour hire and is often siphoned off into permanency, but it is true that low skilled workers will always suffer from oversupply. Call centre workers must compete with India, whereas nurses and tradesmen don’t. That is a fact of life which no union can ameliorate. Labor hire has been around for ages in its most pure form- the self employed sub-contractor. No middleman when you deal direct as many consumers do. Still there are always those who want to squash freedom of choice. In SA the HIA among others, is locking horns with the Rann govt over their draconian work legislation bill. Some of the planners utopian ideals in that legislation have to be seen to be believed. I haven’t seen the human rights lawyers marching in the streets, to protest against the powers of unions and govt proposed under that bill. The ALP is still living in the 50s, much to Howard’s amusement.

  9. Labour hire has a significant distorting effect on the market by restricting workers’ access to jobs, and employers’ access to workers
    Que? How do you figure that? The employees are there by choice – either because the alternative is unemployment or because they prefer the higher wages (Tony, that line about them minimising their employee client’s pay is just crap – if you’d ever had to use one of these body shops you would know that the going rates to the employee are well above the pay rates for permanents, sometimes extraordinarily so. You have to really need the advantages they provide to consider using them; both employee and agency costs are very high). And of course employers generally use them precisely to get people they otherwise couldn’t.

    At the risk of boring people, I once again ask what are the alternative to increases in casual and part time work. I think it is much more likely to be greater, not less labour market mismatch (ie higher unemployment, more bidding up of skilled wages and hence higher wage rate dispersion and declining LF participation by groups such as mothers with small children). And please don’t get me onto the employment effects of Australia having the highest minimum wages in the world – I think small business and the unemployed are absolutely right to be ‘resentful’ about this.

  10. observa,

    So glad your friend had a happy experience. Let’s swap anecdotes.

    My friend Hayley is capable, hard working, and willing to try her hand at almost anything. Despite this, she has been in and out of jobs for the past three years, spending about 60% of her time employed, and the rest of it looking for work. She doesn’t get sick leave or holiday pay, she doesn’t choose her work hours and on neither of the two occasions that her employers found it convenient to sack her was any attention paid to dismissal laws.

    Hayley’s not giving up, and having her husband in work makes a big difference, but you can see that life isn’t actually a bowl of cherries for her.

    I can see how loosening the current IR laws will be good for the economy, but I don’t think that good will be balanced bad effects of the casual/temp/permy-for-a-bit treadmill.

  11. One problem with IR reform is that bosses get to impose their preferences on others, and those preferences are almost always for more effort, regardless of whether this is economically efficient or even in the long-term interest of the enterprise.

    If this is true then isn’t the issue just as much to do with how owners incent management to consider the long-term interests of the enterprise as it is to do with bosses imposing a preference for more effort?

  12. observa, better workers want higher pay. That’s why it’s not in the interests of the labour hire industry to place them if there are cheaper workers available, given a more or less fixed price that the employer is willing to pay. This is one of the inadvertent deleterious consequences of labour hire. The employer rings the labour hire company and specifies what he wants to pay. The labour hire firm, and particularly the consultant that does the placement, maximise their income by placing the lowest paid worker the employer will accept. Labour hire sees itself as a sales business, not a human resources business.

    Also, they actually don’t prefer that workers become permanent. They prefer that workers remain casual, to provide an ongoing revenue stream. This is in fact why the labour hire industry is screaming about South Australian efforts to give casual workers the choice of becoming staffers after six months.

    derrida, I agree it seems confusing. Labour hire firms gain access to jobs and then control access to them by controlling information and also by restrictive arrangements with employers. For example, several government departments and large companies now force casual workers including professional “contractors” to work through labour hire firms that take an undisclosed cut out of the pay. Those jobs are not available except through these third parties.

    The hourly rates received by the worker can be higher than those for staff, but they will still be lower than the market rate for providing that service. The labour hire firm creams off the difference. That’s what it’s all about. The casual worker pays the price of the uncertain work while the labour hire firm takes the premium.

    Most people agree there is a place for casual work. The issue that it is being systematically used by employers to escape conventional responsibilities. This is having longer term deleterious effects on society.

  13. “My friend Hayley is capable, hard working, and willing to try her hand at almost anything.”

    Alan, I would accept that Hayley’s case is not an isolated one, but probably does reflect an oversupply of her skillset. Many generalist clerical workers are in this boat, but barriers to workforce entry won’t help their plight. In the payroll case, the skills are clearly not in oversupply and in any case the payroll officer is always the last out the door.

    Labor hire companies do have some economies of scale to offer business. Mainly they can spread the Workcover risk premium across a whole sector, whereas a large individual claim can be a huge impost for a small business. (In this regard many consumers are also happy to use self employed subcontractors who don’t have workcover). Also you are outsourcing payroll admin costs with large economies of scale.

    As far as training goes, it has been problematic for some time now and the shortages are showing. A problem with apprentices has been the typical one of the trainee walking for high returns(often self-employed) as soon as qualified. This discourages an individual or small firm from doing the hard yards, thereby leaving it to others. Schemes like bonding of teachers and uni grads have long gone. Group training apprenticeship schemes(basically trainee labor hire) have become the norm to overcome this problem, as well as using govt subsidy to ameliorate the high early stage training costs. As well there has been an educational/parental bias against technical trades which has dried up suitable entry numbers.

    In general, no union or labor hire company can overcome a market oversupply of skills. Labor hire can be a way of more marginal workers getting a crack at employment, as well as those more in demand realising true market rates for their services.

  14. Not all, of course, but many of the problems facing Australian workers have arisen in part at least, from the innane behaviour of union leaders. Their actions have helped create an atmosphere in which negative changes were more likely to occur. Two examples are:
    1] In Government enterprises, maintaining feather bedding, and using technical loopholes and/or strikes to defend workers who should have been dismissed for gross derilection of duty. They may have “saved” that union member, but they unintentionally often succeeded also in fueling resentment which makes it easier to come down harder on genuine workers, or sell off enterprises to the private sector.
    2] The abuse of unfair dismisal legislation by workers who deserved to be dismissed, together with Labor’s seeming intention to open up this area to even greater abuse, caused many voters to decide the demise of Howard would be the beginning of anarchy. They may have been wrong in this, but tha’s irrelevant. It’s the perception which counts, and the action of some union leaders gave them little reason to revise this opinion.

    The future doesn’t look bright; but can we really blame Howard for OUR incompetence?

  15. Norman, the most effective tactic of highly paid anti-union consultants is to demonise the union as a self-interested third party rather than the representative of staff.

    What you call feather-bedding, someone else might call finishing work at a reasonable time or not putting in 90 hour weeks just because management tried to cut training costs.

    Labor didn’t intend expanding existing legislation at all. It just wanted to retain it.

    Stay tuned to the stories you will hear from your relatives over BBQ’s over the next two or three years. I just hope you’re not affected yourself.

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