Update on Job Insecurity in Australia

By Alison Pennington

Image: Creative Commons.

Declining job quality

One of the clearest indicators of rising job insecurity in Australia is the decline of full-time, permanent, “good” jobs: available year-round, with paid leave entitlements and superannuation.

The standard employment relationship has been eroded on several sides: by the rising share of casual jobs, growing part-time work, and growing self-employment (often marginal). In 2017, the share of total employment accounted for by full-time paid jobs with normal leave entitlements fell to just below 50%, for the first time in recorded statistics. It’s still low, with around half (50.5%) of all jobs full-time with paid entitlements at end-2020. This means, around half of employed Australians now confront one or more key dimensions of insecurity in their work (casual, part-time, marginal self-employment).

Where did full-time “good” jobs even come from? The standard employment relationship was forged in Australia’s post-war era and presupposed both strong labour market demand and strong unions that won protections for improved wages and conditions through collective bargaining. This is the basis for persistent cultural norms that employment be available year-round, on a permanent basis, and that employers share the costs of workers’ social reproduction through payment of entitlements like sick pay and superannuation.

Even though Australians are less likely to be members of unions than in decades prior, the institution of standard, good jobs is enduring. It’s why 88% of Australians said job insecurity is a major problem in the 2021 Australia Talks survey.

Why is the standard employment relationship being chipped away? Put simply, it’s more costly than insecure work. If business can deploy labour on a “just-in-time” basis, it allows business to both reduce labour costs from non-payment of entitlements, and dramatically reduce worker bargaining power. The benefits of lower bargaining power for business in lower wages can be harnessed within the enterprise, across a sector, and the across the entire workforce. Casual workers unsure if they have shifts and income next week don’t ask for pay rises! It’s why 92% of all union members are permanent workers, and only 8% are casuals.

Insecure work is a battering ram for cost reductions (and profit maximisation). It’s not a natural consequence of economic forces like technological innovation or globalisation, but a conscious project. Since the late-1980s, all the major instruments of egalitarian labour market intervention that once carved “good jobs” into economic activity have been weakened: including higher minimum wages, wage-setting through Awards, collective bargaining, and unions.

Growth in gig work

Insecure work is being recreated in the COVID employment rebound with a vengeance! Our recent submission to the Senate Inquiry into Job Security shows insecure work arrangements have dominated the post-pandemic employment rebound, including a worrying rise in precarious self-employment (“gig” work). From May 2020 through February 2021, almost 60% of all new waged jobs were casual (defined as lacking predictability in rosters and tenure, and denied normal entitlements, such as sick pay, annual leave, and redundancy protections).

The number of owner-managers of unincorporated enterprises without employees — the most precarious business structure, and which includes gig workers — has grown to record-high levels, and in February 2021 accounted for well over one million Australian workers. Between May 2020 and February 2021, self-employment increased by over 145,000 positions; Of new self-employed positions, 116,300 (a massive 80%) were owner-managers without incorporated status or any other employees — or both.

What’s behind worsening jobs outcomes?

Some key drivers of worsening job quality include: negative impacts of decades of economic policy aimed at constructing unemployment “buffers”, insufficient paid work available for all who need it, reductions in the level of unemployment benefits to below-poverty levels (with huge disciplinary impacts, especially forthose in low-paid, low-hours jobs), and regulatory failures. Our industrial relations laws are facilitating the expansion of casual and insecure work rather than keeping a lid on it. The consequence of these combined policies has been a collapse in worker bargaining power.

RBA’s Philip Lowe said the wages crisis required workers to go and ask their bosses for higher wages, but there’s no mechanism to coordinate this request. To achieve this, you need workplace-level bargaining infrastructure. Since 2013, the proportion of private sector workers covered by an enterprise agreement has dramatically declined from 19% to only 11% at December 2020. With far fewer private sector workers covered by a collective agreement, their ability to use collective action to press for better wage increases has all but disappeared. This means more workers are at it alone on the job than ever before.

Changing business organisation and composition

Another structural force behind rising job insecurity is that Australian firms are increasingly smaller, and more fissured through increased use of contracting, franchising, and labour hire (among others).

Business growth statistics are routinely cited as evidence of a healthy economy, but non-employing businesses are often incorrectly included in business counts to improve the picture. There are almost double the amount of non-employing firms to employing firms. Table 1 below presents the total number of firms by number of employees at June 2004 and June 2020. In the past 16 years, the number of non-employing firms (which captures gig workers holding ABNs in roles like Uber drivers & cleaners, who should be employees) rose by around 335,000. Growth in “micro” firms with 1–4 employees exploded by over 190,000. Meanwhile, we’ve lost many medium and large firms, with around 1,100 less businesses employing over 200 people, and over 20,000 less medium-sized firms employing 20–199 people since 2004. Small firms with less than 20 employees now comprise 93% of all employing enterprises in Australia, and around 44% of total employment.

Here is the firm size data from ABS Cat. № 8165.0.

How does an explosion in small firms impact on job quality? Smaller firms operate closer to the margins, are low-productivity low capital-intensity firms concentrated predominantly in services. Since labour is their largest cost, small firms face the greatest pressures to reduce these costs. And workers in small firms are least likely to be covered by a collective agreement to bargain against this downward wage pressure.

ABS Employee Earnings and Hours data on pay-setting methods confirms that the small business sector in has become virtually EA-free: only 3% of workers in firms with less than 20 workers were covered by an EA in 2018. More small firms in the economy means less bargaining power. Our report On The Brink confirms firm size is a strong indicator of the decline in enterprise agreement coverage. The increasing dominance of small firms in Australian business composition demonstrates clear need for collective bargaining reform to the sectoral, industry or multi-employer level. A revitalised labour regime with improved minimum standards (through NES and Awards reform) and sectoral bargaining could markedly improve job quality, restore wages growth, and employee voice.

Please see the full Centre for Future Work submission to the Senate Select Committee into Job Security by Dan Nahum for more on insecure work.

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