Senior Economist for Per Capita, Margaret McKenzie, spoke at the launch of the AIER’s latest book, New Work Relations Architecture, in Melbourne (September 2023).
“I feel like a very privileged interloper as the economist amongst the lawyers – can’t say ugly duckling any more! – in contributing to the New Work Relations Architecture edited by James Fleming and published by Hardie Grant. It is truly an honour to contribute to this wonderful new book.
I’m delighted to see that many of the reforms proposed in this book are starting to be achieved. These include the multi enterprise bargaining measures at the end of 2022 and the ones that are in process at the moment relating to employment rights for gig and casual workers, labour hire, contractors, wage theft, union rights and sunsetting of EBAs.
This is where lawyers and economists come together in a wonderful symphony or a Faustian pact. It is clearly essential to investigate and present the economically beneficial aspects of the industrial relations reforms. The economic effects are frequently played down or assumed to be negative. It is important to counter the rhetoric that implementing these reforms will damage the economy.
We don’t observe in the many comparable countries that it is detrimental to have better worker protections than Australia has. Countries with high wages and better and more participatory working conditions are not worse off in terms of employment, income, productivity growth and so on, nor are they more unequal. Nor are businesses worse off! The beauty of regulatory frameworks is that they apply to everybody, and because of that, to economists they are cheap.
The benefits of the reforms proposed in the book are not just to workers but to the economy generally, and therefore to business. These benefits are not just at the macroeconomic level of total employment, income, output, consumption, and productivity, increase in output per unit input, and income distribution.
These benefits are also at the micro level including that a more just industrial relations system provides for a more contented and skilled workforce with higher morale and that is good for business and for service provision. That industrial environment makes for productivity increases, not through more intensive work but through skill and productivity improvements involving all aspects of production. And we need that in Australia, and in the global climate crisis.
Economists can evaluate the costs and benefits of any given action, and identify who bears those them, how they are distributed. Economists make use of any data that is available, understanding that data and recognising its limitations. The problem arises in evaluating inputs and outputs or informational aspects that are intangible or difficult to measure, such as the judicial system, or regulatory frameworks.
The value of regulatory regimes and changes may not necessarily be understood through markets and market price signals. This is known as the presence of market failure. Leaving something to be transacted through a market may not achieve a level of provision that reflects its social value. It can produce too little and price too high if good. It can produce too much and offer reward if bad. Nor will the market ensure a socially desirable distribution, with unintended consequences. Those values are left to be interpreted in terms of reflecting whose interests are being served.
This is the problem with evaluating the costs and benefits of regulatory measures, no pressure. Yet these actions must be considered as they flow from the existence of fundamental social institutions or are decided through the ballot box, the market will not do them.
The chapter makes a bold assessment of some of the proposed reforms. Most importantly these reforms will benefit the weakest, poorest and most powerless.
The reforms will benefit the lowest two thirds of people who receive a third of the country’s income (compared with the top 20 per cent who receive more than 40 per cent of total income). The people in the top fifth earn at least twice as much per person as those in the next fifth down, and more than 3 times as much as those at the top of the bottom 40 per cent.
A simple methodology is used which calculates the amount of the income increase from increases in pay resulting from the measures, taking account of the direct flow through into spending and employment. These figures are to be seen in the current context of 14 million employed and $1700 billion GDP.
- Moving 2.7 million casual employees (around a quarter of employees) and 1.1 million ‘independent contractors’ onto permanent rates of pay would increase total wages by 3.2%, or about $24.5 billion initially, and add 3% to GDP in first round effects alone.
- Collective agreement rates of pay for workers on award and ‘independent contractors’ would add $68 billion, adding 4 per cent to GDP.
- If the 5 million female employees (almost 50 per cent of the total) receive an increase of 16.0 percent, the full time GPG, the increase to total wages would be $48 billion, or 6.6% of GDP. Including an estimated half-million female ‘independent contractors’ would add another $4.6 billion. The total increase would be $53 billion.
- Improving participation with 18 months of PPL and free childcare would increase employment by up to 1 million and increase total income by up to $100 billion, adding 6 per cent of GDP, adding $5 billion in government funding costs to childcare.
- Addressing sexual harassment is reported to save an estimated $2.6 billion, and bullying was reported to cost as much as $36 billion per annum. ”
With the increasing digitalisation and ‘gigification’ of work, our ways of working are evolving faster than society can keep up and many workers are increasingly falling between the cracks. A New Work Relations Architecture provides a concise summary of innovative reforms from leaders in their fields on how to stay permanently ahead of these changes while promoting both fairness and efficiency in the laws and rules of work and addressing growing inequality and insecurity. Order A New Work Relations Architecture here: https://www.aierights.com.au/architecture/