Chapter 4 - Unemployment and the changing labour market
...the lack of employment is the biggest single cause of
poverty in Australia at the moment. It is a key area that needs
to be looked at in any poverty inquiry.
Unemployment, particularly long-term unemployment, is the most
significant cause of poverty and disadvantage in the Australian community.
In the immediate post-war years through to the mid-1970s, Australia, like most
advanced Western countries, maintained very low levels of unemployment. Since
the mid-1970s the achievement of full employment has progressively lost ground
as a policy priority, with the consequence that large numbers of Australians
have been denied this basic right to work. As a consequence, unemployment and
underemployment have remained at unacceptably high levels for over two decades
and this has led to major social and economic costs for the community.
Unemployment has serious economic, social and emotional impacts.
Unemployment puts severe financial and emotional stresses on families and leads
to a loss of self esteem and social status. These can lead to family conflict
and separations; to psychological and physical health problem; to homelessness
and to a range of disadvantages for children growing up in these families. The
effects of unemployment, however, reverberate beyond the jobless – unemployment
reduces economic output and national income and the wider community is
adversely affected with further demands placed on governments via the social
security system and on the charitable sector.
This chapter looks at the changing labour market over recent decades,
the definitional issues around unemployment and underemployment, and the
relationship between joblessness and poverty. The chapter then reviews various
issues related to unemployment and the changing labour market and strategies to
address problems in relation to these issues. These include:
- the creation of more jobs;
- role and effectiveness of the Job Network;
the problem of the long-term unemployed;
- the problem of the 'working poor';
- increased casualisation of the workforce; and
the impact of recent industrial relations changes on wages and
The changing labour market
Over recent decades there have been significant changes in the nature of
employment in Australia. Evidence to the inquiry indicated the following
Employment in business services, retailing, hospitality and
health and community services has grown, while that in the manufacturing and
utilities sectors has declined.
- The proportion of jobs which are part-time or casual has
increased, as has the proportion of lower-paid jobs within the service sector.
Casual employment increased by 68 per cent in the 1990s. Permanent jobs
increased by only 5.3 per cent over the same period, but the number of full-time
permanent jobs actually fell by about one per cent. By August 2002, 27.3 per
cent of all wage and salary earner jobs were casual and 66 per cent of these
- Unemployment rates have increased markedly since the 1970s as has
the average duration of unemployment (see below).
- Significant changes in the skills mix of occupations occurred
with increases in both low and higher skilled jobs and decreases in
intermediate skill level jobs.
- Earnings inequality increased during the 1990s. In 1991, low paid
adults employed full-time (10th percentile) earned 71.6 per cent of
those in the middle of the earnings distribution (50th percentile)
of full-time adult non-managerial employees; by 2002 the ratio had declined 4.1
percentage points to 67.5 per cent. The pattern of rising wage inequality was
particularly pronounced in the male labour market.
Unemployment and underemployment
In January 2004, there were 574 100 unemployed people in Australia
(582 700 in seasonally adjusted terms), with an unemployment rate of 5.6
per cent (5.7 per cent in seasonally adjusted terms).
The ABS defines an unemployed person as a person aged 15 years and over who was
working less than one hour a week in the survey week, had been actively looking
for work and was currently available for work.
As noted above, since the early 1970s unemployment rates have increased
significantly – the August unemployment rate averaged 3.7 per cent during the
1970s, 7.3 per cent during the 1980s and 8.9 per cent during the 1990s. There
has also been a very substantial increase in the average time spent unemployed.
The average duration of unemployment increased from approximately 12 weeks in
the 1970s to 41 weeks during the 1980s. Subsequently it rose to around one year
during the 1990s. As a consequence of this trend, the rate of long-term
unemployment – an indicator of the number of persons unemployed for more than
one year – more than doubled between 1980 and 1998. In January 2004, the number
of long-term unemployed equalled 1.2 per cent of the labour force, the
number of long-term unemployed persons was equal to 21.4 per cent of all those
unemployed, and more than half (52 per cent) of these people had been seeking
work for over two years.
4.7 The growth in unpaid overtime also contributes to unemployment,
especially in the services sector. One submission noted that in 2001-02 unpaid
overtime had overtaken the amount of hours all people who were registered as
unemployed could have worked and as such if this overtime had been 'paid' it
would have removed all unemployment. The submission noted that 'if there is any
sign that industrial conditions have declined, then it is the amount of unpaid
overtime. The [human] cost of this unpaid overtime cannot be overestimated'.
The official unemployment rate alone, however, underestimates the total
number of people wishing to work. An element of unemployment is 'hidden' – that
is, individuals who have given up looking for work and/or jobs with suitable
hours (also known as discouraged job seekers) and others with marginal
attachment to the workforce (for example, students and care-givers). When
hidden unemployment is taken into account the adjusted unemployment rate is
significantly higher. In September 2002, while there were 628 500 people
officially unemployed, there were an additional 672 100 workers who
preferred to work more hours (of these, 244 800 had actively looked for
more hours and were available to work more hours) and 808 100 who were 'marginally
attached to the labour force'.
4.9 Official unemployment statistics thus significantly underestimate the
actual level of unemployment, particularly among females. Over the last decade,
hidden unemployment accounted for, on average, 16 per cent of total male
unemployment (official plus hidden unemployment). For females, the share of
hidden unemployment as a proportion of total unemployment was much higher,
equal to an average of 36 per cent.
4.10 ACOSS in a
recent study noted that if hidden unemployment was included in ABS statistics,
the unemployment rate would be double the official rate. In September 2002,
ACOSS estimated there were 1 344 000 unemployed, including the hidden
unemployed, corresponding to an unemployment rate of 12.9 per cent, compared to
the official unemployment rate of 6.3 per cent. Some groups, especially
mothers, mature age people, Indigenous Australians and people with disabilities
have much higher than average rates of hidden unemployment.
4.11 The Australia
Institute argued that the labour market statistics need to incorporate
information on how many hours people would prefer to work as well as how many
hours they do work. By collecting data on these items it would be possible to
measure the nature and extent of unemployment, underemployment and overwork
4.12 In addition to
hidden unemployment there is the issue of underemployment. Underemployment may
be defined as a situation where individuals are employed, but their skills and
productive ability are not being fully utilised. Examples include workers
employed in jobs not commensurate with their skills and persons employed
part-time but wishing to work more hours. Data for August 2003 indicate that
one third of all male part-time employed persons would like to work more hours;
the corresponding proportion for female part-time employed persons is 22.3 per
cent. The Centre of Full Employment and Equity at the University of Newcastle
(CofFEE) estimated that in August 2002, while the official unemployment rate
was 5.9 per cent, the addition of hidden and underemployment increased the rate
to 11.2 per cent.
Joblessness and poverty
4.13 Evidence to the
inquiry indicated that a strong relationship exists between poverty and employment
status. Smith Family data on poverty rates of all people aged 15 years and over
by their labour force status reveal that only 4.6 per cent of Australians who
hold a full time job live in a family that is in poverty, however, the poverty
risk increases to 11.7 per cent among Australians aged 15 and over who are
working part-time. More than half of all Australians who are unemployed live in
a family that is poor.
4.14 Professor Saunders
of the Social Policy Research Centre, using a different data set, stated that
the poverty rate for jobless families, that is, with no employed member, is
almost seven times higher than the poverty rate among families with one
employed person. Having two employed persons in the family causes a further
reduction in the poverty rate.
4.15 Professor Saunders
noted that there is a very large reduction in poverty associated with having
someone in full-time employment. The poverty rate is lower when there is
one full-time worker than when there are two workers in paid employment. This
highlights the fact that it is not so much access to any form of employment
that reduces the risk of poverty (although this does have a positive impact) –
but that access to full-time employment is the crucial factor.
4.16 Professor Saunders
emphasised the importance of increasing the number of full-time jobs and
Generating high employment growth should thus be a crucial
component of any poverty alleviation strategy, but generating a growing number
of full-time jobs is even more critical. These findings as to the significance
of full-time employment for poverty reduction cast a warning given Australia's
poor record of full-time job creation in recent decades. Although joblessness
is clearly a major contributing factor to poverty among working-age families,
it does not automatically follow that any form of employment growth will
produce substantial inroads into the poverty population. Job creation is
important, but creating full-time jobs is even more so.
4.17 One study noted
that employment trends over the last decade reflected a decline in full-time
- The growth of full-time employment continued to be low relative
to the growth of part-time employment. Over the decade 1990-2000, 25 per cent
of the employment growth occurred in full-time jobs while 75 per cent was in
- Within the small increase of full-time jobs there was a striking
movement away from permanent full-time employment towards casual employment.
Over the decade the number of permanent full-time jobs fell by 51 000 but
the number of full-time casual jobs increased by 333 000.
- The same movement towards casual employment among full-time employees
was evident among part-time employees. Part-time permanent employment increased
by 355 000 but part-time casual employment increased by 492 000. The
labour market has overwhelmingly moved away from permanent to casual jobs.
Creating more jobs
4.18 Evidence to the
Committee indicated the importance of stimulating adequate employment growth to
address the problem of unemployment. The Brotherhood of St Laurence (BSL)
There are not enough jobs. There is currently only one job
available in the economy for every six job seekers. No matter how good your
labour market programs, if you are not addressing the lack of jobs, then you
are never going to get huge results.
4.19 In the period
from the immediate post-war years to the mid 1970s Australia, like most
advanced Western countries, maintained very low levels of unemployment. The era
was marked by the willingness of governments to maintain levels of aggregate
demand that would create enough jobs to meet the preferences of the labour
force. Unemployment rates during this period were usually below 2 per cent.
indicated that the post-war commitment to full employment has now been replaced
by a government commitment to 'full employability' only, that is, that
unemployed people should be able to be employed, not that they are
CofFEE argued that this policy is aimed at making people work-ready assisted
through a range of government programs that vary in their effectiveness – 'but
we are focusing on a diminished goal of full employability and we are
forgetting that the major aim is to create a macroeconomic environment in which
you have enough jobs and hours of work for those who want them'.
proposals were advanced to increase the number of jobs. These included:
- making the achievement and maintenance of full employment a
- developing targets for unemployment reduction, with an emphasis
on the quality of new jobs generated;
- expanding employment in the public and community sectors in the
areas of health, community services, education and environmental programs;
formulating an industry development policy that links education
and training, skill development, high productivity, and high quality, high wage
- developing an incomes policy to moderate wages growth, including
4.22 Many submissions
argued that full employment should be a major goal of government. Unemployment
represents a significant underutilisation of valuable human resources. In
addition, high and persistent unemployment acts as a form of social exclusion.
The costs of unemployment are significant and include not only income and
output loss, but the deleterious effects on individual self-confidence and
skill levels. Many unemployed people feel demoralised and socially isolated.
The wider community is also adversely affected and there are increased burdens
on the welfare sector and social security budgets.
4.23 The Australian
National Organisation of the Unemployed (ANOU) stated that full employment
should be the centrepiece of national policy:
...[this] is founded upon our belief that every adult who wishes
to engage in paid work should have the right to do so. This right cannot be
fulfilled unless the work available meets the human need to obtain an income,
to contribute to society and to gain a status in the community through this
4.24 The BSL also
stated that 'there needs to be a commitment to full employment, which seems to
have completely dropped off the agenda over the last 15 to 20 years. That comes
a lot from an overly narrow economic focus and the desire to control inflation
at all costs.
4.25 Some groups,
however, cautioned that a definition of full employment needs to be relevant to
contemporary circumstances. The Centre for Public Policy noted that:
...we would need to think about what we actually mean by full
employment. Many people working part-time chose to work part-time – they are
not working part-time in the sense that the Brotherhood suggested. They are not
necessarily looking for additional hours; they are looking for that part-time
Job creation schemes
submissions argued for the implementation of various job creation schemes to
increase the total quantum of jobs available. The CofFEE has developed a
comprehensive public sector job creation proposal. The proposal calls for the
introduction of a Job Guarantee for all long-term unemployed people and a Youth
Guarantee, which would provide opportunities for education, technical training
and/or a place in the Job Guarantee program for all 15-19 year old unemployed
people. Details of the proposal are provided below.
Public sector job
creation – A path to full employment
proposal for a Community Development Job Guarantee (CD-JG) has been developed
by the Centre of Full Employment and Equity (CofFEE) and requires that two new
employment initiatives be introduced. These are a Job Guarantee for all
long-term unemployed (people who have been unemployed longer than 12 months)
and a Youth Guarantee, comprising opportunities for education, technical training,
and/or a place in the Job Guarantee program for all 15-19 year olds who are
These initiatives would significantly augment the
current labour market policies of the Federal Government.
Under this proposal, the Federal Government would maintain
a 'buffer stock' of jobs that would be available to the targeted groups. The
CD-JG would be funded by the Commonwealth but organised on the basis of local
partnerships between a range of government and non-government organisations.
Local governments would act as employers, and CD-JG workers would be paid the
Federal minimum award. Any unemployed teenager (15-19 year old) who was not
participating in education or training would receive a full-time or part-time
job. Equally, all longterm unemployed persons would be entitled to immediate
employment under this scheme. CD-JG positions could be taken on a part-time
basis in combination with structured training.
The aim of the CD-JG proposal is to create a new order
of public sector jobs that support community development and advance
environmental sustainability. CDJG workers could participate in many
community-based, socially beneficial activities that have intergenerational
payoffs, including urban renewal projects, community and personal care, and
environmental schemes such as reforestation, sand dune stabilisation, and river
valley and erosion control. The work is worthwhile; much of it is labour
intensive requiring little in the way of capital equipment and training; and
will be of benefit to communities experiencing chronic unemployment. It is in
this sense that the proposal represents a new paradigm in employment policy.
To implement the CD-JG Proposal at a national level
would require an estimated net investment by the Commonwealth of $3.27 billion
per annum. The net investment required to employ all unemployed 15-19 year olds
under the Youth Guarantee component of the proposal would be $1.19 billion. On
the other hand, $1.96 billion is required to employ all long-term unemployed
persons aged 20 and over. Clearly, the stronger is the private sector activity
the lower this public investment becomes.
The creation of 265 300 CD-JG jobs would be
required to eliminate youth unemployment and to provide jobs for people aged 20
years and over who are long-term unemployed. As a result, national output would
rise by $7.71 billion; private sector consumption would rise by $2.38 billion;
and an additional 68 900 jobs would be created in the private sector. The
full implementation of the CD-JG proposal would thus yield an additional
334 200 jobs. The unemployment rate would fall to 4.0 per cent, after
taking account of the labour market participation effects.
201, pp.7-11 (CofFEE).
4.27 CofFEE indicated
to the Committee that its proposal had widespread local support in Newcastle
from the business community, unions and community and welfare organisations.
The Newcastle City Council also indicated its support for the proposal to be
piloted in the local Hunter region. CofFEE stated that to implement the
proposal in the Hunter would require net investment by the Commonwealth
Government of $120.4 million per annum.
indicates that public sector job creation initiatives are an important element
in labour market policies in many OECD countries. One submission noted that an
OECD examination of the effectiveness of labour market programs concluded that
direct creation of jobs through public service employment programs may be the
only way to help many of the unskilled long-term unemployed. These job creation
programs have become more effective over time as they have become more
flexible, more targeted to local needs, and better linked to other labour
An OECD study, however, concluded that direct job creation in the public sector
shows that this approach has been of little success in helping unemployed
people get permanent jobs in the open labour market. The study noted that as a
result there has been a trend away from this type of intervention in the recent
past, but it appears to be making a comeback now in some OECD countries,
especially in Europe, usually as part of a 'reciprocal obligation' on the
unemployed in return for continued receipt of benefits. However, OECD countries
continue to spend large amounts on public sector job creation programs and the
policy debate about the utility of this type of intervention continues.
4.29 Other job
creation proposals were also discussed during the inquiry. Australia @
Work informed the Committee of its co-operative venture that combines low cost
housing initiatives and related job creation activities. The group pointed to
its Bulahdelah Working Village project which seeks to support a small community
of 30 families in the rural town of Bulahdelah. The project will facilitate 45
new jobs for co-op members.
4.30 The Committee
believes that the Commonwealth Government needs to be more pro-active in
creating employment opportunities for Australians, especially in the creation
of full-time jobs. Meaningful employment for the country's citizens is
fundamental to their economic and social well-being, and also that of the
4.31 Breaking down
the barriers to employment must be a national priority. This requires a
concerted effort on two fronts – increasing the total quantum of jobs by
building on the foundations of strong economic growth, and improving the
opportunities for disadvantaged people to get their fair share of secure and
decent jobs (which is discussed later in this chapter).
4.32 That the
Commonwealth Government develop a national jobs strategy to:
- promote employment opportunities, particularly permanent
full-time and permanent part-time jobs;
- set long-term targets for increased labour force participation;
- develop better targeted employment programs and job creation
- ensure a substantial investment is made in education, training
and skill development; and
- bring a particular focus on improving assistance to young people
making the transition from school to work, training or further education to
prevent life-long disadvantage.
4.33 That the
Commonwealth conduct a review into the dynamics of the labour force, especially
in relation to skill shortages.
Role and effectiveness of the Job Network
4.34 The Job Network
provides subsidised employment services to Australia's unemployed, especially
targeted at the more disadvantaged jobseekers. The Job Network replaced the
Commonwealth Employment Service in 1998. Most publicly subsidised employment
services were contracted out to for-profit and not-for-profit agencies under
purchaser-provider contracts determined by the Department of Employment and
Workplace Relations (DEWR). The first contract (JN1) with these providers came
into operation in May 1998, the second (JN2) in early 2000 and the latest
three-year contract on 1 July 2003 (JN3). Centrelink was established as a
Government operated gatekeeper to the system and as the single benefit payments
4.35 The Job Network
has three major functions:
- Job placement (or 'Job Matching' in the first and second
contracts) – providers match and refer eligible jobseekers to suitable
vacancies, notified by employers. Under JN3, the job placement function is not
directly part of the Job Network as general recruitment agencies and others
outside the existing Job Network will fulfil this role.
- Job Search Support – Job Network providers offer a job search
training program to jobseekers unemployed for at least 3 months.
- Intensive Support ('Intensive Assistance' in the first and second
contract) – this is the most personalised and intensive form of assistance
offered by the Job Network. The types of assistance provided includes work
experience, vocational training, job search techniques and language and
4.36 The major change
in the new arrangements from July 2003 is that jobseekers will be allocated to
a single Job Network provider for the life of their unemployment episode. They
will automatically go through cycles of assistance of varying intensity as
their unemployment spell increases. Where jobseekers are referred to
complementary programs, such as Work for the Dole, Job Network providers will
retain contact with them and ensure continuing job search activities.
Jobseekers unemployed for 12 months, or those at very high risk of enduring
unemployment, will receive more extensive assistance for a period of 6 months
through the customised assistance component of Intensive Support. This can
include job matching, training, job search assistance, work experience and
post-placement support. Job Network providers will get access to a funding pool
(the Job Seeker Account) to subsidise particular forms of assistance to
jobseekers – these services include fares, counselling, wage assistance and
training. Of the various functions, the intensive phase of assistance
(customised assistance) is the most important as it is targeted at the most
4.37 JN3 implements
an Active Participation Model of employment placement and jobsearch. Under this
new system there is an emphasis on guaranteeing access to a 'continuum of
service', with the nature of that service increasing over time if the
individual is at high risk of unemployment. It aims to provide assistance that
is better targeted and timelier.
4.38 In addition to
paying commencement fees when job seekers start in the intensive phase of
assistance (which has been changed to fee-for-service payments in JN3), the
Government also rewards providers for outcomes. For example, under JN3, a
provider will receive outcome payments of over $6600 if it successfully gets a
job that lasts at least 26 weeks for a job seeker who has been unemployed for 3
years or more. This will be supplemented by fee-for-service and Job Seeker
Account payments for that job seeker of around $4500 over the three years.
4.39 With continued
long-term unemployment, the role of labour market programs has become even more
important, especially in enabling disadvantaged job seekers to become more
competitive in the labour market and to get a foothold in paid work. Current
programs are performing poorly in this respect.
argued that the long term unemployed and highly disadvantaged jobseekers have
not been well served in terms of quality of assistance delivered and employment
outcomes by the Job Network to date.
Some submissions noted, however, that the reforms under JN3 may go some way to
addressing these problems. Catholic Welfare Australia noted that the intensive
support initiatives under JN3 recognises that providing more active support
earlier in a person's experience of unemployment will have greater potential to
reduce the person moving into long term unemployment.
4.41 Studies indicate
that the employment impact of Job Network programs for job seekers has been
negligible. A DEWR evaluation concluded that Intensive Assistance provided only
negligible benefits for job seekers, and the likelihood of being in employment
three months after completion was increased by only 0.6 per cent.
The Productivity Commission review of the Job Network also found that, using a
variety of assessment methods, the Job Network programs have to date had only a
modest effect on job seekers' chances of gaining employment – 'this finding is
consistent with evaluations of previous Australian and overseas labour market
programs, and is in line with realistic expectations about their capacity to
reduce aggregate unemployment'.
While under the Job Network, intensive services are supposedly targeted to more
disadvantaged jobseekers, some groups have consistently lower employment
outcomes, including older job seekers (aged 55-64 years), those on unemployment
benefits for more than two years, job seekers with less than year 10 education,
Indigenous job seekers and those with a disability.
4.42 A major
objective of the Job Network is to reduce the numbers of long-term unemployed.
Several reports have highlighted the ineffectiveness of Job Network programs on
outcomes for the long-term unemployed. One study noted that long-term
unemployment statistics 'tracked the reduction in unemployment during the
Working Nation period, but there is evidence of persistence in the period
following the introduction of the Job Network, despite strong employment
The failure of this system to assist disadvantaged clients is clearly reflected
in the increases in long-term unemployment.
4.43 Several studies
have compared the Job Network with previous labour market programs. ACOSS
stated that employment outcomes for long-term unemployed people under the Job
Network are less favourable compared with the former Working Nation programs.
Another study examined ABS data on unemployment levels for males, females and
long-term unemployed youth and concluded that 'it appeared that these groups
had not benefited as much as under Working Nation'.
While DEWR argued that the Job Network has produced outcomes which are broadly
similar to those achieved under previous labour market programs, the
Productivity Commission noted that labour market conditions at the time of Job
Network have been more buoyant than during Working Nation.
4.44 The BSL stated
that the Job Network's previous funding model provided strong incentives to
focus resources on people who are easy to place rather than those with greater
barriers to employment. By focusing on immediate outcomes, it discouraged
investment in quality services with the potential to address causes of labour
Under the recent reforms Job Network services are more outcome focused and the
payment system provides the greatest rewards to those providers who achieve
long-term employment outcomes for their hardest to place clients.
4.45 Evidence to the
Committee suggested a decline in the quality of support provided, a move away
from holistic assistance, and a reduced focus on the broader welfare and
personal needs of jobseekers. The Productivity Commission's review found that
many jobseekers under JN2 received little or no assistance while in Intensive
Assistance – the highest assistance category in the Job Network. The
Commission noted that 'when all the evidence is reviewed, including anecdotal
information provided by job seekers and providers, it still appears that a
significant number of job seekers do not get substantial assistance'.
This led to large numbers of jobseekers being 'parked' – registered with the
provider but provided with no assistance – because the cost of removing
barriers is too high relative to the outcome payment. The Commission noted that
many providers often direct their services to jobseekers that are likely to be
responsive and 'park' those with either insurmountable or high barriers to work.
The former funding arrangements provided weaker financial incentives to provide
assistance to those limited job prospects. The Commission argued that the
Active Participation Model in JN3 is likely to reduce parking problems.
4.46 The Productivity
Commission noted that although Intensive Support under JN3 offers a higher
level of interaction with job seekers, some job seekers with large barriers to
employment may not get much direct assistance from the Job Network. The
Commission suggested that there may be grounds for providing more tailored and
very intensive assistance outside the Job Network to a selective group of job
4.47 A further
concern raised in evidence, which may directly affect poverty levels of
disadvantaged jobseekers, is the removal of any notion of job quality from the
achievement of employment outcomes. For example, Job Network providers in the
past received the same payment for placing a job seeker in a low skilled, low
paying job with no prospects for development as for placing someone in a job
offering good training, reasonable pay, and possibilities for career
The new funding arrangements under JN3 do address this problem to some extent
with, for example, higher outcome payments payable to Job Network providers
placing highly disadvantaged jobseekers.
4.48 Active labour
market programs, which aim to improve the 'employability' of young people and
long-term unemployed are only one part of an employment strategy – the other
aspect of this strategy is the need to provide effective links between the
unemployed and sustainable jobs.
4.49 The Committee
notes the concerns expressed relating to the inadequacies of the Job Network in
terms of quality of assistance delivered and employment outcomes for the long
term unemployed and highly disadvantaged jobseekers. The Committee notes that
changes introduced to Job Network arrangements in July 2003 may go some way to
addressing the concerns expressed, especially in providing greater flexibility
and individualised support services to jobseekers, but believes that further
substantial changes to the Job Network are required.
4.50 The Committee
also considers that further measures to address the structural failure of the
labour market to create sufficient employment opportunities need to be implemented
to complement the employment services provided through the Job Network.
4.51 That the
a training guarantee for long term unemployed or at risk jobseekers under the
quality controls in the form of case management provided to jobseekers;
automatic entitlement to case management for long-term unemployed people and
caps on the number of unemployed persons a case manager can assist within a job
service environment to reduce the incentive to churn; and
the feasibility of introducing a 'training and hiring' model (referred to in
4.52 That the
Commonwealth Government introduce a range of measures, in addition to
subsidised employment services, to address structural problems in the labour
4.53 One of the most
disadvantaged groups in Australia is the long-term unemployed. Evidence to the
Committee emphasised that effective employment assistance policies are vital in
order to identify the barriers that are preventing their access to the labour
market and to improve the job prospects of this particularly vulnerable group.
In January 2004, there were 124 500 Australians who had been unemployed
for 52 weeks or more, comprising 21.4 per cent of the total unemployed.
4.54 In Australia,
unemployment rose substantially with recessions in each of the last three
decades. Jobs growth was too weak to reduce it to previous levels in the
ensuing recoveries. This and other factors led to a sharp increase in long-term
unemployment as shown in Figure 4.1.
Figure 4.1: Unemployment and long-term unemployment
Submission No.163, p.105
4.55 The length of
time people are unemployed directly correlates with their likelihood of living
in poverty. Some 79 per cent of people who have been unemployed for over a year
live in poverty.
4.56 ACOSS stated
that in February 2003, out of 663,600 people registered for unemployment
benefits with Centrelink, 394,500 people, or 59 per cent, had been registered
for 12 months or longer. This compares with July 1991 when only 23 per cent of
people were registered for over 12 months, indicating a large rise in the
proportion of long-term unemployed over the last decade. Further, of those who
have been out of work for at least a year, the majority have been unemployed
for over two years.
4.57 The long-term
unemployed are much more likely than employed people or short-term unemployed
people to have low education and skill levels, a chronic illness or disability,
to live in a region of high unemployment, and to have an unstable employment
history. Reducing long-term joblessness therefore requires a combination of
strong jobs growth and labour market assistance and training policies to help
these disadvantaged job-seekers to secure a reasonable share of the jobs
long-term unemployment is critical to achieving economic outcomes that are both
efficient and equitable. In general, the longer a person is unemployed the
greater the costs of each additional period of unemployment, both to the person
and to society. Material hardship, and the physiological and psychological
damage resulting from unemployment, are all likely to increase as the duration
of unemployment grows.
long-term unemployment has caused a large group of Australians to live under
extended economic hardship. A high proportion of long-term unemployment among
the unemployed indicates that the burden of unemployment is concentrated on a
relatively small number of people, who often are at risk of permanent
detachment from the labour market.
Skill development and work
4.60 Many submissions
indicated that insufficient attention has been paid to education, training, and
skill development for unemployed people. They argued that more training
assistance should be provided for the long-term unemployed including the
upgrading of numeracy and literacy skills, as well as general communication
skills to enhance their employability. Catholic Welfare Australia proposed that
cash payments should be provided (of $1000 per year of study completed) for
long-term unemployed jobseekers who undertake and complete a recognised course
which will provide relevant skills.
emphasised that effective employment assistance is critical to enabling people
who are unemployed to move into work as early as possible. ACOSS and other
groups argued that there is only limited assistance available to overcome
barriers to work. As noted above, a revised model of employment assistance was
introduced through the Job Network from July 2003. This provides, inter alia,
for the provision of higher level assistance for people who have been
unemployed for one to two years or who are identified as at very high risk of
long-term unemployment. This includes provision of a Job Seeker Account whereby
Job Network providers will be able to purchase or provide assistance for job
seekers to address their barriers to employment.
4.62 Groups argued
that in order to combat the labour market disadvantage facing the majority of
long-term unemployed jobseekers, substantially more assistance is required. The
BSL argued that while the Job Seeker Accounts may improve the situation, the
amount provided for each jobseeker (up to $1200) is still modest.
4.63 Of particular
concern to many is the lack of assistance for those who are the very long-term
unemployed and who fail to get an outcome through customised assistance. After
two attempts at Customised Assistance there is no further substantial
assistance provided. A person who is unemployed for a very long time is so
disadvantaged within the labour market that moving into sustained employment is
unlikely without substantial intervention.
ACOSS argued that an Employment Assistance Guarantee should be introduced
targeting long term unemployed or at risk jobseekers who have not got an
outcome within three months of undertaking Customised Assistance. The Guarantee
would provide incentives for Job Network providers to spend more on appropriate
training and on wage subsidies, and provide job seekers with appropriate help
that they need. The cost would be met in equal part by the provider and the
4.64 Another gap
identified during the inquiry is the lack of effective programs to provide work
experience for the long-term unemployed. Employers often prefer to appoint
jobseekers with recent work history, and the longer someone is out of work, the
more uncompetitive they become. Work experience can overcome this in part, and
provide on-the-job training in work practices and expectations of employers. A
serious strategy to reduce long-term unemployment must provide for greater
opportunities for paid work experience.
4.65 ACOSS suggested
that a transitional jobs scheme could be introduced, whereby people who have
been unemployed for over two years would be provided with six months employment
at a training wage, and with significant wage subsidies, in the not-for-profit
and public sectors. Wage subsidies would be primarily funded through direct
savings on income support.
The BSL suggested another option could be based on the Swedish 'training and
hiring' model which provides public subsidies to employers who temporarily
release low-skilled workers to upgrade their qualifications as long as they are
replaced by an unemployed person.
4.66 That a
transitional jobs scheme for the very long term unemployed be introduced,
whereby people who have been unemployed for over two years would be provided
with six months employment at a training wage in the not-for-profit and public
4.67 Submissions also
argued that targeted policies to reduce the cost to employers of employing long-term
unemployed and disadvantaged jobseekers, for example, by way of direct subsidies,
tax exemptions or rebates need to be developed. These need to operate over a
reasonably long timeframe, as employers tend not to respond to short-term
The working poor
4.68 Until relatively
recently to be in paid work but poor used to be a contradiction in Australia.
In the 1970s, the Henderson poverty inquiry found that less than two per cent
of families with an adult in full-time employment could be described as poor.
Rather, poverty was mainly a problem for those who could not get waged work. Since
the 1990s, however, having employment is no longer a guarantee of staying out
of poverty. The phenomenon of the 'working poor' refers to the situation where
households fall below a defined poverty line even when family members are in
4.69 ACOSS stated
that some 365,000 Australians were living in 'working poor' households in 2000.
These are families and single people whose main source of income is wages and
salaries but whose incomes are below the poverty line, using the before-housing
half average income poverty line. Although this represented just 3.2 per
cent of people living in such wage-earning households, it represented 15 per
cent of all people living in poor households.
4.70 Worsening wage
inequality is a major contributor to the widening social divisions in society.
This problem has been exacerbated by the increasing numbers of people unable to
secure full time permanent work and forced to take casual and part time jobs. 
A Smith Family study showed that the risk of poverty for those working either
full-time or part-time increased slightly over the decade 1990-2000. While 10.7
per cent of all Australians working part-time were in poverty in 1990, by 2000
this had increased to 11.7 per cent. For wage and salary earning families there
was a marginal increase in the risk of being in poverty in all four earnings
category (namely, one part-time earner, one full-time earner, two earners – at
least one part time – and two full-time or three earners) over the
Another study commissioned by the Smith Family found that one in five poor
Australians live in a family where wages and salaries are the main source of
4.71 The demographic
characteristics of low-paid workers show that women, workers with no
post-secondary educational qualifications and younger workers are
overrepresented in this group. One study found that whereas 45 per cent of all
wage and salary earners are women, they make up 54 percent of low paid workers.
Almost half (46 per cent) of low paid employees are persons who had left school
before completing secondary school. Also, younger adults, those aged under 30
years, have a higher representation in the low paid group than older workers.
As to geographical location, workers living in rural areas and small urban centres
were more likely to be in low paid jobs. Persons born in a non-English speaking
country also have a slightly higher likelihood of being in low paid employment.
4.72 Severely limited
opportunities are often part of the life experiences of low wage working poor
individuals and their families. A lack of financial resources often has adverse
flow-on effects for workers and their families. A lack of money can led to
reduced access to preventive health and other services; reduced educational
opportunities for their children and a disincentive for them to participate in
post-secondary education; and a reduced ability to participate in social
activities and in the wider society generally. Lack of financial resources also
reduces a worker's asset base with more likelihood that their financial
difficulties will persist into old age.
4.73 A study by
Eardley examined the growth of the 'working poverty' in Australia from the
1980s to the mid 1990s using ABS survey data.
Although there are many different measures of low pay in the literature, the
most widely used approach is to define an hourly earnings threshold level which
reflects the level of remuneration for work undertaken in a job. A person
earning under this cut off is deemed to be working for low pay. The study defines
'low pay' as two-thirds of the median hourly rate for all waged workers. The
measure included both men and women, and full-and part-time employees.
4.74 The study found
that the phenomenon of working poverty in Australia is an increasing problem
with the proportion of low-paid workers who are also in poor families
increasing to about one in five in 1995-96. Only part of this is due to the
increasing prevalence of involuntary part-time and casual work. In 1981-82, one
in ten low-paid adult employees lived in poverty, as defined by the Henderson
poverty line – this had increased to one in five by the mid-1990s. The growth
in poverty among those in full-year, full-time work appears to have risen
significantly, with a particular increase among single person households. While
the unemployed as a group are still more likely to live in poor families than
even low paid employees, employment seems to be becoming a much less effective
safeguard against poverty than in the past.
4.75 The current
system of enterprise bargaining severely disadvantages low-paid workers. The
Australian Liquor, Hospitality and Miscellaneous Workers Union (LHMU) stated
that bargaining at the enterprise level is most suited where workers are
employed in large enterprises providing long-term employment in fixed
locations. This does not exist in many service establishments which are
characterised by indirect employment relations, the dispersal of workers in the
same industry across many establishments, and high rates of casualisation and
turnover. In addition, subcontracting makes enterprise bargaining difficult
because the employer for whom workers perform their labour is not the direct
employer with whom workers are legally able to bargain.
Life for the low paid
4.76 The Committee
received a substantial amount of evidence during the inquiry from many
individuals in low wage employment. The personal experiences of these people
provided a very valuable insight for the Committee about the difficulties faced
in making ends meet and providing for themselves and their families. Some of
these individual case studies are provided in the box below.
4.77 This evidence of
these people indicated that for low paid employees:
- finances are always tight;
- expenditure is modest and overwhelmingly on necessities (food,
clothing, housing and utilities); and
there is an ever present financial stress, which requires the low
paid to carry a level of debt in order to make ends meet and to go without
things and activities associated with full and active participation in society.
The working poor – doing
Ms McScheffrey – I
am 31 years of age. I am in a de facto relationship, with three children
under 10. I currently work at the Flinders Medical Centre Community Child Care
Centre as a child-care worker and I have been there for 10 years. I am
also an LHMU member. I work on a casual rate because I choose to, as I will get
more money per hour, $15.35 an hour doing 24 hours a week, and I forgo my sick
leave and holiday pay as I am better off getting the extra hourly rate.
We used to get a health care card. We no longer do,
because my partner's and my combined income is $50 over the limit. Due to not
having a health care card, we get no help with school fees and have to pay the
full doctors fees, as there is no bulk-billing in my area. The family payment
system does not seem to support families where both parents are part-time or
casual. We have inadvertently incurred family allowance debts because we have
to estimate our future incomes, and quite often have had to pay back. A number
of times we could have been eligible for parenting payment but have not
bothered to fill out the forms because it is too much hassle to fill them out
and it is only for one or two fortnights. The next fortnight you are not
eligible for it. You get knocked off. You have to go back and fill the forms
could be worse, but when I see people like CEOs and managers earning so much
money, obviously the money is there for us to be paid better so that I could
afford to take my children on holidays, to go to the movies et cetera and
to do household repairs, and maybe to run two cars. I would like the committee
to look into the reasons why, if the money is there to pay CEOs and managers
such large amounts of money, low-wage earners cannot have a better lot.
Committee Hansard 29.4.03, p.5 (Ms McScheffrey).
Ms Parajo – I work at the Sheraton on the Park, and I am a LHMU delegate there. I have
worked at the hotel for almost nine years. My job is in the uniform and/or
valet attendant area. I receive approximately $306 per week after tax. I work
approximately 21 hours a week. I have five dependent children between the ages
of two and 13. I am a single parent, unfortunately. I would like to work more
hours a week, but I cannot manage due to my parenting responsibilities. In any
case, I try to work every second weekend just to get extra money from the
penalty rates to help pay the bills. I am sorry, but I am a bit upset. I cannot
remember the last time I was able to take a break or to have a holiday.
I find it very difficult to manage my basic costs such
as clothes, health, transport and education. The living wage pay rise I receive
is so small. It is a bit of help, but it needs to be bigger to make any real
difference. What can the committee do to make sure that in any future pay
increase I receive real help? I have been forced to take unpaid leave for the
birth of my children. This has forced our family into financial hardship. What
can the committee do to make sure that working families do not continue to suffer
when children arrive? Can you ensure that paid maternity leave becomes a right
for all workers, especially the low paid, especially us? We are working for
Hansard 26.5.03, p.318 (Ms Parajo).
Mrs Dewar – I
work in the bar and in food preparation at the Queensland Turf Club and the
Brisbane Lions Club at the Gabba. I enjoy the customers and the social
interaction in hospitality. I am a casual worker. I used to work two shifts at
the Queensland Turf Club, a mid-week shift and a Saturday shift. I had worked
at the turf club for seven years and I had had these shifts for two years when
the manager took me off the mid-week shift. This left me with only one shift at
the turf club and one shift at the Brisbane Lions Club. I now take home $160 a
week. I also receive some money from Centrelink. Losing a shift is a lot to
someone who is on their own and relying on this money. You do not have any
choices when you are casual. You do not want to cause trouble. Managers can
make decisions based on personality instead of on work ethic, and they do this
all the time. I am an honest and hard worker. It is not because of my work that
I lost this shift; it is because of favouritism and personalities.
I am on my own...I am 54 years of age, and I would like
to retire by the time I am 60. It is difficult to be on your feet all day. I
feel like I have done the hard work in life, but I have no option but to stick
I manage on the income that I get. I put away anything
extra that I can. I am currently paying off my house, but it is getting hard
because everything is going up. It is getting harder to manage day to day. I
cannot afford a car, and it takes me 1½ hours to get from Green Meadows to Ascot because I
need to get a few buses. I also cannot afford to go on holidays. Casuals in
hospitality have no security. We want to be treated fairly. I would like to
ask: what can the government do to make sure that we can keep our shifts and
that we have as much security as other people?
Hansard 4.8.03, p.1143 (Mrs Dewar).
4.78 The ACTU
commissioned a study, based on HES data, on the financial stress experienced by
households whose principal source of income is employee income. The study
provides empirical evidence of the financial struggle experienced by 'working
poor' households. The data for the first quintile households is provided below.
The working poor – survey
of financial stress
- When asked about the management of
household income the majority of households – 58.5 per cent or 477,477
households – responded that they just managed to break even most weeks while a
further 17.9 per cent (146,100 households) said they spend more money than they
get. That is, more than three quarters of the first quintile households are
just breaking even or are spending in excess of their income.
When asked to compare their
standard of living with two years ago, 69.2 per cent or 564,810 households said
it was worse (27 per cent) or the same (42.2 per cent). Only 27.3 per cent felt
their present standard of living better than 2 years ago.
- 34.9 per cent or 284,854
households said the reason they had not had a holiday away from home for at
least one week per year was that they could not afford to.
- 29.9 per cent or 244,044
households indicated that they had experienced cash flow problems in the past
- When asked if they could raise
$2,000 in an emergency 26.0 per cent or 212,212 households reported that they
- 22.0 per cent or 179,564
households said they could not afford to have a night out once a fortnight.
20.4 per cent or 166,505
households reported having not paid utilities bills due to shortage of money,
and 10.3 per cent responded that they had not paid registration or insurance
bills on time due to shortage of money.
- 14.6 per cent or 119,165
households said they could not afford a special meal once a week.
- 14.2 per cent or 115,900
households said the reason some members of the household bought second hand
clothes is that they couldn't afford to buy new ones. The same proportion –
14.1 per cent said they had sought financial help from friends or family due to
shortage of money.
- 11.5 per cent or 93,863 households
said that the reason members didn't spend time on leisure or a hobby activity
is that they couldn't afford to.
- When asked about the main source
of emergency money 17.7 per cent or 144,467 households responded that they
would need to rely on a loan from family or friends. A further 15.6 per cent
would need to rely on a loan from a bank/building society/credit union, and 9.2
per cent a loan on a credit card.
94, pp.12-14 (ACTU).
The evidence indicates that for low paid, low income working families
life is a struggle involving significant levels of financial stress and
disadvantage. It also shows a lack of capacity to participate socially in
activities enjoyed by others.
Addressing the problem of low pay
4.80 The Australian
Liquor, Hospitality and Miscellaneous Workers Union (LHMU) argued that the
low-wage labour market has emerged through the intersection of two processes,
the precarious organisation of much service work, with short and
inadequate hours, casual work, 'casualised' part-time work, short job tenure,
contracting and undervalued, insecure employment; and
- the restructuring of the industrial framework to benefit
enterprise and 'individual' bargaining over industry standards, with a
diminished 'safety net' of low wages.
4.81 The LHMU added
that the low-paid labour market is characterised by the interlocking dynamics
of low pay – low hourly rates of pay and fragmented work experiences that
provide inadequate, insecure levels of employment. In the low-paid labour
market, many workers who may receive reasonable hourly rates of pay are
nonetheless unable to secure adequate weekly or yearly work to constitute a
liveable wage. The union noted that the consequences of an entrenched low-paid
labour market 'go beyond employment. These consequences include poverty,
inequality and disadvantage'.
4.82 As discussed in
chapter 3, poverty is increasingly associated with low pay. The LHMU stated
that, in fact, the low-paid and the jobless poor are often the same people at
different stages in their lives, 'churning' through a series of poorly paid
jobs and spells of unemployment. In addition, thousands of poor individuals,
including children, rely on the precarious incomes of low-paid workers.
4.83 During the
inquiry a number of options were suggested to address the problem of low paid
workers. These issues are discussed below.
Raising minimum wages
4.84 A number of
organisations, including the LHMU, argued that there was a need to raise
minimum wages for low paid workers. The union argued that:
Achieving fair wages in our society in part depends on our
ability to raise wages at the bottom of the labour market. We must ensure that
low-paid workers enjoy the gains of the labour market as a whole.
4.85 In order to
raise minimum wages the LHMU argued that it would be necessary to establish an
adequate income benchmark. The LHMU pointed to research conducted by the Social
Policy Research Centre which calculated a 'modest but adequate' benchmark for a
range of household types to achieve an adequate standard of living relative to
contemporary community standards. Australia has not had a minimum wage
calculated on an analysis of household budgets since the Basic Wage, derived
from the original Harvester judgement, was abandoned in 1967.
4.86 ACOSS argued
that the Australian Industrial Relations Commission should establish a new
minimum wage benchmark based on a wage level that enables a single full-time
worker to live in 'modest comfort' and to participate in contemporary society.
This should be set well above the poverty income level for a single adult.
full-time wages have fallen well behind average wages over the last 20 years,
especially in the early years of the shift towards enterprise bargaining,
before the present round of 'Living wage' cases was instituted in 1996. The
minimum wage has now fallen to just 50 per cent of average earnings, a
reduction of 15 per cent since 1983.
Figure 4.2: Real average and minimum wages – 1983-1999
163, p.117 (ACOSS).
4.88 The ACTU also
stated that there has been an ongoing decline in the relative value of the
Federal minimum wage over the course of the last decade, and particularly since
1996. The ACTU added that:
...the minimum rates adjustment process...concluded some time round
the early nineties, depending on which awards and classifications you are
talking about. Since that time, there has been an ongoing decline. An indicator
of that is that the federal minimum wage is now, for the first time, worth less
than half of average earnings. It has dropped to 49.9 per cent of average
4.89 There is
continuing debate over whether higher minimum wages lead to higher
unemployment. The empirical evidence as to whether low paid workers are priced
out of the labour market due to higher minimum wages is equivocal. An OECD
study concluded that higher minimum wages are not a major cost on jobs, at
least in the case of adults but they do seem to have more of an impact on youth
employment. Other studies have reported that there is no clear evidence either
way that higher minimum wages affect employment levels.
4.90 That the
Australian Industrial Relations Commission establish a new minimum wage
benchmark based on a wage level that enables a single full-time worker to
achieve an adequate standard of living relative to contemporary community
4.91 The Committee
believes that the establishment of a new minimum wage benchmark is the
foundation of a strong award system. It is essential that a new benchmark be
established on top of which relativities/margins are calculated.
4.92 The LHMU also
argued that once a fair benchmark for minimum wages is established, the wages
of the lowest paid workers should be linked with wages growth in the rest of
the labour market. In addition, the LHMU argued that there should be a new
commitment to restrain the excessive wages of the highest paid executives and
managers – 'it is unjust that only the wages of the lowest-paid workers are
subject to community scrutiny and wage restraint'.
4.93 Some submissions
argued for the introduction of tax credits to address the issue of low wage
work. Catholic Welfare Australia pointed to the UK Working Families Tax Credit
Scheme (WFTC) and the US Earned Income Tax Credit (EITC) Scheme as possible
models that could be adapted to Australian conditions. The EITC and WFTC
provide tax refunds to low income families that derive their income primarily
from wages, rather than welfare. As household income increases from employment,
the tax credit is reduced. Catholic Welfare Australia argued that tax credit
schemes would reduce the effect of high effective marginal tax rates on low
4.94 The BSL noted
that while tax credit schemes have some merit, they have significant
limitations. The BSL submitted that:
An EITC would effectively mean that government replaced
regulation with business welfare as a means of protecting low-paid workers. It
would also provide a subsidy regardless of employers' capacity to pay better
wages, and possibly result in a longer term effect on employer expectations,
with government seen to have primary responsibility for the adequacy of
4.95 The LHMU was
opposed to the use of targeted tax credits to raise the incomes of low-paid
workers, arguing that 'such measures respond to the failure of the industrial
system to produce adequate incomes by shifting the responsibility for pay from
firms to the government'.
The union argued that tax credits contribute to the expansion and entrenchment
of the low-wage labour market – 'the answer is not to ask the social security
system to accommodate the failure of the industrial framework to deliver fair
pay, but rather to reimagine how we can provide decent work with fair wages and
adequate, secure employment'.
The LHMU argued that a system of tax credits entrenches low-paid work by
artificially suppressing wages – employers no longer have to provide a liveable
wage to attract potential employees, because the government makes up the
difference in the pay rates.
4.96 The Committee
does not favour the introduction of tax credits to address the issue of low
paid employment. Such measures provide a subsidy to low-wage employers and are
likely to expand the pool of low-wage jobs. It is essential that low paid
workers not become entrenched in a low-wage labour market. The Committee
considers that it is the role of the industrial relations system to ensure an
adequate wage for employees and not shift the responsibility to government. As
noted above, the Committee favours an approach that will raise minimum wages.
Pay rates are, however, only one of the dynamics driving low pay. Issues
surrounding the precariousness of work that many low-paid employees face also
need to be addressed.
Precariousness of work
4.97 The LHMU and
other unions argued that mechanisms need to be developed to address the
precariousness of work for those in low paid occupations to ensure adequate,
secure employment conditions. Concerns raised included:
- the increase in short hour jobs;
- wages and conditions in the personal services sector; and
- the problems of contract labour.
4.98 The LHMU argued
that action needed to be taken to address the problem of the proliferation of
short hour jobs. The union stated that thousands of its members and other
low-paid service employees work short hours due to the organisational structure
of particular industries. The LHMU stated that:
At present, employers can offer workers short and variable hours
without redress. They can choose to employ any proportion of their staff as
casuals and without any job security, without certainty of hours and therefore
pay, and without leave entitlements.
4.99 The LHMU told
the Committee that it is addressing the issue of short hour jobs by seeking to
increase minimum starts. The union added that:
One of the ways we can do that in the area of award regulation
is minimum starts. At the moment in the cleaning industry, for example, most of
the awards provide for a two-hour minimum start; that is to say the shortest
period that you can actually work is two hours. In our view that is
inadequate...So we are campaigning around increasing those minimum starts.
4.100 The LHMU argued
that working conditions in these industries must include a workable floor on
the minimum hours which workers are offered by employers.
4.101 Submissions also
argued that there needs to be greater employment security through reduced
casualisation. The LHMU noted that at present employers can transform secure,
permanent employment into casual work with almost no redress. Some 30 per cent
of working Australians are casuals and in some industries, such as the
hospitality sector, the proportion is double this figure – 'limiting
casualisation must be a priority within any effort to provide decent work in
This issue is discussed later in the chapter.
4.102 In addition, the
LHMU argued that it was important to ensure that employers who receive
Government funding to deliver personal services, such as in the aged care
sector, pay adequate wages in order to reduce staff turnover and provide for
continuity of care. The union argued that at present, both public and
non-profit providers can use Government funds to employ care workers in
sub-standard conditions. The union suggested that there was a need to attach
wage and condition standards to public funds used for care and support work.
4.103 The evidence
received during the inquiry has raised a number of important and complex issues
relating to low paid employment. The Committee believes that the issues raised
warrant an inquiry by the Commonwealth Government to fully address the concerns
raised. The Committee notes that the LHMU argued that there was a need for an
inquiry into the question of low pay – 'and that is something that we intend to
address over the next couple of months in the lead up to the ACTU congress and
the next [national wage] case'.
Catholic Welfare Australia also called for an inquiry into low-paid employment.
4.104 That the
Commonwealth Government conduct an inquiry into low-paid employment and that
this inquiry examine:
- the nature and extent of low-paid employment in Australia;
- the introduction of a workable floor in relation to the minimum
hours of work offered by employers;
- the problem of casualisation and employment security;
- the feasibility of attaching standards in relation to wages and
conditions to Government funding of services; and
- the wages and conditions pertaining to contract labour.
4.105 Evidence to the
inquiry, as noted previously, commented on the trend towards increasing 'casualisation'
of the workforce and the use of 'labour-hire' employees and the adverse
implications these developments are having on the pay and working conditions of
4.106 There has been a
marked increase in casual employment, especially over the last decade. Between
August 1988 and 2002 total employment of casual workers in Australia increased
by 87.4 per cent (141.6 per cent for men and 56.8 per cent for women). By
August 2002 casual workers comprised 27.3 per cent of all employees, an
increase of 7 percentage points since August 1991.
4.107 This form of
employment has been most often associated with teenage and female labour
markets, however, the increase in casual employment during the 1990s was due to
the rapid growth in this form of employment among all types of workers,
especially among males and young adults. While levels of casualisation
increased for all age groups they have been most pronounced for younger workers
aged 15 to 24 years.
4.108 There is no
standard number of working hours that defines a casual worker. Consequently,
casual workers can be employed on either a full-time or part-time basis. Casual
employment is most prevalent in the part-time labour market, accounting for
73.6 per cent of all male part-time jobs and 55.3 per cent of all female
part-time jobs. By August 2002, casual part-time employment as a proportion of
total employment was equal to 18 per cent. Permanent full-time employment
accounted for 61 per cent of total employment – 6.9 percentage points lower
than the corresponding share in 1994.
4.109 The main
difference, at common law, between a permanent and a casual worker is that a
permanent employee has an ongoing contract of employment of unspecified
duration while a casual employee does not. The main characteristics of casual
employment that flow from this are:
limited entitlements to benefits generally associated with
continuity of employment such as annual leave and sick leave; and
- no entitlement to prior notification of retrenchment (no security
of employment) and only a limited case for compensation or reinstatement.
4.110 Most casual
workers are concentrated in a few occupations, and these tend to be relatively
low skilled – the retail trade, hospitality, property and business services,
and health and community services. Other industries, such as manufacturing,
construction and education also have sizeable concentrations of casual workers.
4.111 Casual employees
do not necessarily have only a short term employment relationship with their
employer – many remain with their employer for a considerable length of time.
ABS data for 2001 indicate that 54.4 per cent of casual employees had been in
their jobs for a year or more.
commented on the insecure and irregular nature of this type of employment and
its lack of 'job quality'. Submissions and other evidence indicated that, in
comparison with permanent workers, casual workers:
- have less job security;
- are less likely to have set hours on a weekly, fortnightly or
- have less say in start and finishing times;
- work less hours per week;
- are more likely to be on-call or stand-by;
- are less likely to be covered by workers compensation insurance;
- have very low rates of union membership;
- are less likely to receive training, particularly formal
- are more likely to be paid by a labour hire firm;
- earn considerably less than permanent employees;
- contain a large proportion of workers wanting more hours or set
- are likely to have no guarantee for the number of hours they work;
are more likely to have variable earnings.
highlighted the 'poverty dimension' of casual employment, noting that these
jobs are most often low paid. The ACTU noted that 'most casual jobs are part
time. Most part-time jobs are casual. There is obviously a proportion in either
case that are not... [however]...most casual jobs are low paid...It is unlikely that
there are many people out there who really want to work in a low-paid job with
a low number of hours'.
The ACTU further submitted that:
You cannot think it [casualisation] is a good thing if you are a
student and have to work three or four casual jobs to survive through TAFE or
university. You cannot think it is a good thing if the only jobs you can get
are casual and do not pay enough to feed your family and pay the rent.
4.114 The LHMU stated
that 'workers want real jobs with some certainty of hours to provide an income
they can live on without the need to rely on the welfare system'.
The BSL noted that while casual work may enable some unemployed people to gain
work experience and gain full-time work, the reality for many casual workers is
a series of short-term casual jobs interspersed with periods of unemployment –
a trend that appears to be growing.
4.115 The growth in
the casual workforce is due to a number of factors. Some workers are attracted
because of the loading that is sometimes offered in lieu of paid leave and
other entitlements. For other employees it allows flexibility by, for example,
allowing people to combine paid work with family responsibilities, study or
other interests. Alternatively, it offers a means to 'ease out' of the labour
force if nearing retirement; or to supplement family income. One study noted,
however, that it is the preference of employers, not workers, which has driven
the trend towards increasing casualisation.
The growth of casual employment has had little to do with
increased turbulence in the labour market, or rising worker preferences for
this form of employment. The driving force has been the changing employer
strategies for utilising labour. Under the impact of increased competition in
their product markets, employers have increasingly sought greater flexibility
in hiring and deploying labour than prevailed in the era of labour
"hoarding". In some cases, engaging workers through non-standard
forms of employment has allowed employers to minimise their obligations to
their workers, but more often it has been the pursuit of cost savings which has
shaped their decisions.
4.116 The Australian
Manufacturing Workers' Union (AMWU) also argued that casual work is less likely
to be regulated than continuous employment thus making it more attractive for
employers to hire staff on a temporary basis. Temporary contracts are less
costly (non-wage benefits do not always apply and dismissal can be achieved
without severance payments) and they allow firms to exercise much greater
flexibility in hiring and firing staff.
The union emphasised that the:
Increase in casualisation and labour hire arrangements are not
about peaks and troughs, they are not about quality management: they are about
cheap labour and exploitation, and it is becoming the norm.
indicates that casual work is not the preferred work outcome for many
workers. ABS data for 2000 on the preferred working patterns of 'self-identified'
casual workers revealed that only one in five (22.8 per cent) want to work on a
casual basis. Some 67.8 per cent indicated a preference for 'predictable
patterns of work'.
Other ABS data for 2001 found that just over one-third (35 per cent) of
part-time employees preferred to work more hours. The preference to work more
hours increased to 43 per cent for part-time self-identified casuals.
While for some people, such as young people in education and women with family
responsibilities, casual work may be preferred, for others, such as the
previously unemployed, older males seeking full-time work and those with
limited training and work experience, casual work is often the only alternative
available to unemployment when no permanent jobs are available.
Even for younger workers a perceived 'preference' for casual work is often
argued mainly on the basis that a casual job is better than no job at all.
4.118 A number of
developments since 2000 have seen some improvement in the employment conditions
of casual workers. These include:
- a number of unions have won an award right for casual workers to
convert to permanent employment after a specified period of employment, subject
to various conditions. The qualifying periods vary and include 6 months in the
case of the Metal Industry Award and 12 months in the Hotels Award.
- the ACTU achieved unpaid parental leave for regular casuals with
12 months employment.
- the AMWU achieved three hour minimum engagement for part time
workers and a four hour minimum engagement for casuals in the Metal Industry
Award, and an increase in the casual loading from 20 to 25 per cent.
indicated the need for further improvements in the employment conditions of
casual workers. The ACTU argued that, in relation to casual and part-time
workers, a maximum engagement period should apply and a right to convert to
permanent employment. These workers should also have access to leave
entitlements; minimum and maximum hours of work; and improved loadings.
4.120 The BSL also
argued that legislation should be introduced to ensure equal rights to standard
entitlements, such as annual leave, sick leave, maternity leave, long service
leave and superannuation, regardless of employment status; and the portability
of entitlements should be improved.
4.121 The Committee
believes that the employment conditions for casual workers need to be
substantially improved. To this end the Committee considers that the Workplace
Relations Act 1996 should be amended to provide definitions of 'full-time'
and 'permanent part-time' work. This would enable casual workers to convert to
permanent part-time work and ensure that they have access to entitlements such
as holiday leave and sick leave. Evidence to the Committee indicated that many
casual workers would like to convert to permanent part-time work but are
currently prevented from doing so. The amendment to the Workplace Relations Act
would allow the Industrial Relations Commission to make awards which would
allow casuals to do that. The Committee envisages that these changes would not
affect genuine seasonal casual workers but is intended to apply only to those
casual workers who have regular patterns of part-time work. It is also
envisaged that while casuals converting to permanent part-time work would be
eligible for sick leave and holiday pay they would not be entitled to the
casual wage loading.
4.122 That the Workplace
Relations Act 1996 be amended to provide definitions of 'full-time' and
'permanent part-time' work.
4.123 That the
Commonwealth legislate to guarantee the right to standard entitlements, such as
annual leave and sick leave, for casual workers converting to permanent
4.124 The increase in
casualisation of the workforce has been mirrored by the increase of 'labour-hire'
employees, especially over the last decade. The ABS estimated that in November
2001 (the latest statistics available) there were 161 800 who were 'paid
by an employment agency/labour-hire firm'.
Only a small minority of these workers have any entitlement to paid sick leave
or paid annual leave. Over three quarters of these workers are casuals. About 6
per cent of all casual workers are organised through labour hire arrangements.
The AMWU noted that labour hire workers now represent 19 per cent of the
manufacturing industry workforce – 'that is nearly one in five manufacturing
workers having no employment relationship with the person directing their work'.
4.125 An increasing
number of firms are using labour-hire workers. In 1990 the proportion of
workplaces making use of these workers was 14 per cent – by 1995 this had
increased to 21 per cent. The use of labour-hire employment is growing most
rapidly in large workplaces. In workplaces with 500 or more employees, the
proportion of agency workers grew from 16 per cent to 55 per cent between 1990
and 1995, an increase of 39 per percentage points. In smaller workplaces, of
under 500 employees, the numbers increased from 14 per cent to 42 per
cent, an increase of 28 per percentage points. The labour-hire approach is
also becoming more widespread across many sectors of the economy.
Traditionally, temporary employment agencies have been concentrated in the
clerical labour market, whereas today they are found in sectors as diverse as
metal and engineering, fruit picking, nursing and routine clerical work (not
simply overflow clerical work).
4.126 The growth of
labour-hire is posing increasing problems in the areas of labour law and
industrial relations, especially arising out of the nature of labour-hire
arrangements – particularly the fact that workers are paid by one employer but
work for another – 'confusion over lines of responsibility in exercising the
employer role are evident, with serious consequences for worker conditions and
These workers lack any effective bargaining power over wages and conditions.
4.127 The growth of
labour-hire arrangements has also led to a decline in wages and working
conditions. The AMWU noted that labour-hire workers engaged as casuals by a
labour hire agency or providing 'contract services' to the agency have
employment conditions characterised by 'insecurity, precariousness, no career
path, low or below award pay and substandard conditions'.
The union noted that:
Labour hire is proliferating, not as a short-term solution to
meet seasonal demands and flexibility of requirements, but as an alternative to
the employer/employee relationship, around which our award safety net of
minimum wages and conditions is structured...As the level of precariousness
attached to a job increases, there is a proportional decline in job quality and
reward. Research and experiences of casual labour hire workers have identified
the features attached to casual work. These traits, combined with employer
practice, combine to drive down wages and conditions.
4.128 The union argued
that examples of the exploitation of labour-hire workers abound. The union
cited the case of a large optical lens manufacturer in NSW.
This company employs more than 70 staff, of whom just 11 were
permanent employees...most of the labour hire employees had worked for the
company for at least 12 months. Many had worked there for more than 2 years.
These workers are highly skilled yet as labour hire employees, they were forced
to forgo holidays, sick leave and other normal arrangements that apply to
workers... [the workers] were paid substantially less than the permanent workers
and worked longer hours.
4.129 The AMWU argued
that labour-hire workers should be entitled to the same rights and conditions
enjoyed by other workers – 'the families of labour hire workers have the same
rights to financial security as the families of other workers'.
The ACTU also argued that labour-hire workers should have the right to receive
the same pay and conditions as directly employed workers in an enterprise and
there is a need for legislative change to protect the employment conditions and
job security of these workers.
4.130 The LHMU argued
that there was a need to compel employers who contract out labour services to
be legally responsible for the wages, conditions, and entitlements of contract
workers. At present, employers can contract out responsibility for the wages
and conditions of workers such as cleaners and security guards who perform work
at their establishments.
4.131 The LHMU stated
...in recent times there has been more of a tendency of those
companies [in cleaning, security etc.] to try to use variations on employment
structures to avoid awards, whether they be subcontracting arrangements, franchising
or whatever...it is part of the general problem of the more precarious employment
and there have not been the mechanisms, particularly within the commission, to
regulate those changes in employment relationships.
4.132 The AMWU stated
that casual workers, and in particular casuals sourced through labour hire, are
more likely than permanent workers:
- to be paid at the minimum award rate rather than the enterprise
rate paid to permanent workers;
- to be paid at the lowest classification or skill level even though
they are equally qualified and perform work of equal value alongside permanent
employees paid at the appropriate higher paid classification;
- are denied access to training and advancement through skill based
award classification structures;
- are denied opportunities to increase their earnings through
overtime as permanent workers are given preference; and
- are less likely to receive appropriate allowances.
4.133 That the
Commonwealth legislate to guarantee the right to standard entitlements, such as
annual leave and sick leave, for labour hire workers.
Changing industrial relations environment
4.134 Evidence to the
inquiry commented on the impact of changing industrial conditions on the
availability, quality and reward for work in Australia.
labour market and industrial relations policy is shaped predominantly at the
federal level. The centrepiece of the Government's industrial relations policy
is the Workplace Relations Act 1996, which was intended to reduce the
role of tribunals and unions in the bargaining process, and subject labour to
market forces in determining wages and conditions.
4.136 Submissions and
other evidence to the inquiry noted the negative impact of the Workplace
Relations Act, including:
- growing inequality between those covered by enterprise or
individual bargaining versus those reliant on awards;
- narrowed award coverage, with a failure to provide adequate basic
protection for casual and award-free employees, dependent contractors and other
workers in non-standard employment;
failure to legislate for minimum conditions of employment for all
- an award system that is becoming increasingly irrelevant and
outdated as a consequence of the AIRC being limited to awarding minimum safety
net adjustments targeted at the low paid;
- an inadequate range of collective bargaining arrangements
available to employers and employees to meet specific circumstances;
- a bargaining process that is unnecessarily adversarial and where
parties are unable to receive assistance from the AIRC when negotiations break
- a severely restricted AIRC, with limited powers to set fair and
reasonable wages and conditions.
4.137 The BSL stated
that deregulation within the context of decentralised bargaining has focused
not so much on reducing the level of regulation, as on changing the way in
which the labour market is regulated. The aim has been to remove regulations
that provide external protection for employees, in favour of systems of
internal regulation which promote bargaining between employer and employee
directly, leading to a shift in the balance of power to management. There has
been a continuing decline in the numbers covered by the award system, which now
includes less than 25 per cent of employees, compared with 68 per cent ten
4.138 The LHMU stated
The current industrial framework limits the gains in wages and
conditions that can be made through the award system, and instead encourages
workers to engage in enterprise or "individual" bargaining. The
framework encourages bargaining irrespective of the specificity of work and the
levels of bargaining power that accompany different forms of work organisation.
4.139 Similarly, the
AMWU argued that:
The Government's response to increasing precariousness and
insecurity amongst Australian workers has been to minimise the effectiveness of
Industrial Awards, promote enterprise and individual agreement making and seek
to limit union activities. The promotion of enterprise bargaining occurs in a
policy vacuum devoid of recognition of the issues faced by precarious workers.
4.140 The major effect
of this changed industrial relations environment has been the redistribution of
the benefits of work. Submissions noted that the main beneficiaries have been
business, through increasing profit margins from improvements in productivity,
and upper income earners with the market power to negotiate favourable
conditions. Low skilled, part-time and casual employees have become
increasingly vulnerable to low wages and inferior employment-related conditions,
such as lack of access to leave entitlements. A study of minimum pay rates in Victoria
during the Kennett era highlighted the adverse effects of deregulating the
industrial relations system. The findings showed that, compared to workplaces
under federal jurisdiction those workplaces which were subject to the old State
industrial relations system had more unequal minimum pay rates and lower
employment benefits. The study suggested that labour market deregulation
contributes to earnings inequality and that it also weakens the situation of
workers who are already structurally disadvantaged in the labour market.
4.141 There is
evidence that wage dispersion has increased significantly since the take-up of
enterprise bargaining. The ACTU noted that over the period from 1990 to 2000,
while there were dramatic real increases in weekly earnings for managers and
administrators (41.5 per cent over the period), a range of occupational
categories, including clerical, sales and service workers suffered real
earnings declines over the same period.
One study noted that earnings inequality is particularly marked within the male
labour market. By 1998, low paid male adults earned 62 per cent of male adult
median earnings, a fall of 5 percentage points since 1991.
noted that for workers who are already in vulnerable labour market
circumstances, the impact of labour market deregulation is likely to compound
One study noted that:
For those groups in the labour force whom market forces have
always treated favourably, the impact of "deregulation" was
minimal....On the other hand, in those industries which have traditionally
exposed workers to more adverse conditions and paid lower wages – such as
agriculture and hospitality – [these] workplaces paid very low minimum rates
and provided very little in the way of benefits...The critics of labour market
"deregulation" have always contended that those who are industrially
weak will be the main victims of any changes which weaken external regulation
and this study...appears to confirm those fears.
4.143 The picture that
emerges is of an economy leaving behind the low-skilled and less talented
jobseekers, resulting in greater polarisation of income and employment
outcomes. Australia is moving towards a core/periphery labour market model with
a large group of the workforce permanently excluded from, or only marginally
attached, to the labour force and at high risk of experiencing financial
hardship. The legislative changes that have occurred since the early 1990s
appear to have directly contributed to this situation.
Navigation: Previous Page | Contents | Next Page