Surprise: Newstart Doesn't Cause Unemployment!

Australia's Newstart benefit hasn't been increased in real terms in a generation, and pressure is growing on the Commonwealth government to address this inequity and raise the rate. Even RBA Governor Philip Lowe has indicated that better Newstart benefits would stimulate consumer spending and support the economy.

But the government continues to reject the idea, and instead has fostered lamentable and divisive rhetoric about "dole bludgers" and the supposed lack of "aspiration" among unemployed Australians. Old stereotypes about unemployed people choosing to subsist on poverty-level benefits, instead of looking for work, have been invoked.

In this guest commentary, Prof. Raja Junankar of UNSW University shows that keeping the Newstart Allowance constant in real terms at a poverty level does not help the unemployed find jobs more rapidly. Despite rock-bottom benefits that have declined notably relative to average wages, long-term unemployment has increased -- including among vulnerable groups of workers (like younger and older workers).

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'Stick-in-the-Mud' Workers Not to Blame for Wage Stagnation

The Commonwealth Treasury raised eyebrows recently with a new research report that seemed to pin the blame for record-weak wage increases on workers' reluctance to quit their jobs in search of better-paying alternatives. The report was presented to the recent conference of the Economic Society of Australia, and elicited gleeful headlines in conservative newspapers blaming "stubborn" workers for their own poor wage results.

In this commentary, which originally appeared in 10 Daily, Dr Jim Stanford argues that Treasury has mis-identified the true source of the problem. With so few decent job opportunities available, it's rational that many workers would choose to stick with their current jobs - despite stagnant wages and poor conditions.

Here is the full commentary:

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Two Years Later, No Sign of Jobs Payoff from Penalty Rate Cuts

July 1 marked the implementation of the next stage of reduced penalty rates in the retail and hospitality industries in Australia. It is now two full years since the first reductions were imposed for Sunday and holiday work in several segments of retail and hospitality. Once fully phased in, these reductions will reduce wage payments in the two broad industries by an estimated $1.25 billion per year -- at a time when concerns over weak wages and their impacts on the Australian economy are growing.

Employers argued before the Fair Work Commission that if their Sunday and holiday labour costs were reduced, they would hire more workers, and the Commission cited this logic in accepting employer demands for lower penalties. Now, with two full years of experience since the first reductions, there is growing evidence that the penalty rate reductions have not spurred job creation in retail and hospitality. To the contrary, our new report shows that employment growth in retail and hospitality has been far slower than in other parts of the economy (where penalty rates remained constant) -- and job-growth in the two sectors actually slowed by more than half after penalty rates began to fall.

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Kick-Starting Wage Growth: 3 Things the Commonwealth Government Could Do NOW

Australia’s economy continues to endure historically slow growth in wages and salaries, that is undermining household incomes, consumer spending, and economic growth. The Commonwealth government continues to predict an imminent rebound in wages – like in its most recent budget, where it yet again forecast wage growth accelerating quickly to 3.5% per year. But is the government willing to actually do anything to support wages?

The Centre for Future Work has released new research showing that just 3 specific actions by the Commonwealth government would lead to a significant rise in national wage growth, adding over $10 billion per year to aggregate wage income within three years. That doesn’t single-handedly solve the whole wages crisis, but it would be a big improvement.

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Union Organising and Changing the Rules: Two Sides of the Same Coin

International evidence is clear that there is a strong, positive correlation between a country’s protection of labour freedoms, and the organising success and economic influence of unions. Improvements in basic labour rights and freedoms tend to be associated with increases in union membership (as a share of total employment). And stronger union membership, in turn, is associated with broader collective bargaining coverage, less poverty among working people, and less inequality.

Australia has a poor record of protecting basic worker and labour rights and freedoms: including rights to assembly, rights to organise, rights to due process, and rights to strike. According to the World Economic Forum (a generally business-friendly international policy organisation), Australia ranks 5th last among OECD countries in protecting worker rights.

A new study from the Centre for Future Work documents the correlation between workers' rights and union organising - and shows they are two sides of the same coin. And that correlation between workers' rights and the success of unions suggests that unions in Australia will need to continue their campaign to "Change the Rules" of Australia's labour market (including improving basic rights for workers to organise, bargain collectively, and take industrial action). Winning better legal and regulatory protections for workers seems essential to workers' ability to build stable, influential unions, and use those unions to improve their lives.

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Where To Now for Union Campaign? Workplace Express

The unexpected results of the 2019 Commonwealth election have sparked many commentaries regarding what happened, and why. This article, reprinted with permission from Workplace Express, considers the role of the major #ChangeTheRules campaign mobilised by Australian unions in the lead-up to the election - and ponders the movement's next steps in the continuing debate over labour market policies and industrial relations. It cites both our Economist Alison Pennington, and our Director Jim Stanford, as well as our previous research on the erosion of collective bargaining in Australia.

Workplace Express is Australia's leading labour policy and industrial relations newsletter. Please visit its website to subscribe.

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Minimum Wage to Rise 3% for 2019-20

The Fair Work Commission has announced a 3% hike in Australia’s national Minimum Wage, effective July 1, taking it to $19.49 per hour. That increase is lower than the 3.5% increase implemented last year.

In our judgment, this is inadequate to meet the needs of low-wage workers -- and the needs of Australia's macroeconomy.

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'Scourge Pricing': Understanding and Challenging Uber's Business Model

Centre for Future Work Economist Alison Pennington recently gave a keynote address to hundreds of delegates at the ATIA International Taxi Conference, held this year in Gold Coast, QLD.

Her presentation discussed the historical, economic, and moral context for the rise of "gig-economy" businesses, such as Uber. She reviewed Uber's business model, and the company's recent IPO, in detail, arguing that it depends on underpayment of its drivers -- who for all practical purposes are "employees," even if current labour laws do not always explicitly recognise them as such.

Growing competition, regulatory and legal problems, and growing resistance to the ultra-precarious and low-wage incomes offered in this type of work suggest that the future success of digital platform businesses like Uber is very much in doubt.

Pennington also referenced findings of our previous paper estimating the net incomes of Uber-X drivers in 6 Australian cities.

Please view Alison Pennington's full presentation here.


Real Wage Cuts Hit Marginal Electorates Hard

New analysis of income tax data confirms a dramatic slowdown in Australian wages in recent years – and the slowdown is worse than previous statistics indicated.

The research is contained in a new report from the Centre for Future Work at the Australia Institute.  It shows that average nominal wages in Australia grew just 1.7% per year between 2012-13 (when the wage slowdown took hold) and 2016-17 (most recent tax data available). That's below the average national rate of inflation over that period (1.9%), resulting in a decline in the average real wage.

While the wage slowdown was experienced across the country, some regions were particularly hard-hit. Real wage losses were especially large in Queensland and Western Australia. Moreover, the impact was disproportionate in regional communities in both states -- located in some of the most fiercely contested electorates in the current federal election campaign. This suggests that public anger over falling real wages could be politically pivotal to the result on May 18.

View the full report here.

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The Impact of Minimum Wages on Recent Wage Trends

Tomorrow the Australian Bureau of Statistics will release its quarterly Wage Price Index: the most commonly-reported measure of wage growth in Australia’s labour market. Given the importance of public debates about wages and wage policy in the current federal election campaign, this release is timely and politically important.

This briefing note reviews some methodological issues related to the WPI. It also considers recent data confirming the visible impact on the WPI of last year’s strong increase in the national minimum wage.

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