Compact with Retrenched Workers – not a job in sight!

Current problem: jet lag. I keep saying to myself – 1 day for every time-zone. I have a week to go! Today I have been in Brisbane discussing the Functional Economic Regions geography which I have created to improve spatial analysis in Australia. The new geography is now being used by other social scientists because it represents an improvement on the standard geographical boundaries that ABS uses to disseminate regional data. I might write a blog about this one day although it is very technical and rather dry. But life as a researcher is “10 per cent inspiration and 90 per cent perspiration” although for me the 10 might be a little lower! After all I am a stupid modern monetary theorist! But today’s blog is about the Compact with Retrenched Workers – the latest policy joke emanating from Canberra.

With the new fiscal year upon us, it is time for some of the Budget promises to be activated and/or extended as circumstances change. One of the worst of these extensions so far is the so-called Compact with Retrenched Workers, which the Federal Government is claiming will a centrepiece policy initiative in protecting workers who lose their jobs as a result of the current economic crisis.

In reality, with some changes in names and terminology, the scheme is nothing much more than a continuation of the supply-side emphasis that has dominated labour market policy since the early 1990s. Need I add the approach has been a categorical failure during good times. This failure will be compounded during these bad times.

When you read the policy documents you realise – there isn’t a job in sight! The policy reflects the failure of the Government to break out of the ideologically-obsessed neo-liberal mould. In keeping faith with the neo-liberals, the Government is continuing to perpetuate a failed understanding of why unemployment occurs and who becomes unemployed.

In the 2009-10 Budget – Statement 1: Budget Overview – Supporting the economy and jobs now – the Government outlined its approach to dealing with the labour market consequences of the global economic downturn.

It recognised that output growth would decline dramatically and this would impact on the labour market. Its response is outlined in the following section from the Budget Statement 1:

The Government will assist Australians whose job prospects have been adversely affected by the global recession by investing $1.5 billion over five years through the comprehensive Jobs and Training Compact. The demand for education and training will rise in response to the deteriorating labour market, as young people choose to stay in school or undertake further training. Redundant workers will also seek to maintain, update or learn new skills to improve their future job prospects. The Government’s Jobs and Training Compact aims to support young Australians, retrenched workers and local communities to get back to work, add to their skills, or learn the new skills required to obtain jobs as the labour market recovers.

So a 100 per cent supply-side response to a demand-side problem. That is not good economics.

Further, the research evidence overwhelmingly supports the view that skill-specific training in isolation from a paid-work context is not very effective. Workers learn more quickly and retain durable skills if they are taught while working in the job that the skills are relevant.

General skills can be developed in locations not associated with work – so schooling in literacy and numeracy etc. But specific vocational skills are poorly developed in locations divorced from the work context, which is exactly what the Government is planning to inflict on the hundreds of thousands of workers who are displaced from employment during this recession or who never got a foothold into the labour market in the first place.

Taking a step backwards first, we recognise that the compacts are all part of the Fair Work Act 2009 which is the current Government’s answer to Work Choices. It is an improvement on the pernicious Work Choices but that is not saying much given how bad that regime was.

According to the Ministerial statement that accompanied the May budget, the Fair Work Act 2009:

… will put in place a new workplace relations system built on:

* a fair and comprehensive safety net of minimum employment conditions
* a system that has at its heart collective bargaining in good faith at the enterprise level driven by productivity gains
* protections from unfair dismissal for all employees
* protection for the low paid
* a balance between work and family life, and
* the right to be represented in the workplace.

So we read these “building principles” as saying:

1. If you have a job then there will be marginally better working conditions than under Work Choices.

2. If you have a job and don’t mind joining a union or being subject to the judgement of a union, then you will receive pay and conditions that are collectively determined. But what they haven’t outlawed are common law contracts which for all intents and purposes are similar to the hated Australian Workplace Agreements and leave disadvantaged workers with virtually no protection at all.

3. If you have a job and you manage to work for more than 12 months with a given employer excluding small employers then you cannot be capriciously dismissed. Bad luck if you have only been working 1 day less than the “qualifying threshold” and the boss takes a set on you. So the protection has been improved on the regime it replaced but only marginally so. Certainly, a significant proportion of workers are still vulnerable to unfair dismissals and can do little about it if it happens.

4. If you have a job and happen to be low paid you will have your pay determined by the new Fair Pay Commission whose current CEO is on the public record as saying that wage rises for low paid workers causes unemployment. Further, the award restructuring process will not reinstate essential working conditions that were stolen of workers by Work Choices. So the Act just stops the rot that Work Choices created rather than provides a framework for restoring the conditions that were lost when the previous government launched its “final” attack on the workers.

5. If you have a job then you will get some holiday and other entitlements back but the reality will be a far-cry from the days when we honoured the concept of non-standard working hours and forced employers to pay extra for using labour during those times. It is interesting that in many countries (European) there is still a concept of a “weekend” to provide family space for workers. I don’t get the impression that employers do it tougher there than here!

6. If you have a job then you can now more easily enjoy the advantages of being a union member. The previous regime attempted to eliminate unions from the industrial relations scene but, thankfully, in their zealousness, failed.

So what happens if you don’t have a job? None of these “building principles” apply. There is no commitment on behalf of the federal government to ensure that there are enough jobs available to meet the preferences of those who desire them. In other words, the Fair Work Act 2009 is not a model of full employment.

If you don’t have a job then you become subject to the full employability provisions that the government has inherited from the previous regime. That is, you become part of their compact.

In a substantial way these supply-side mechanisms were among the worst facets of that government’s policy array. These were the policy areas where the government aspired to humiliate and punish the most disadvantaged workers among us. This was the area of public life where we allowed our government to directly attack the victims of that governments own policy failures – the failure to ensure there was enough aggregate demand to underpin enough employment creation.

By not making a clean break from this regime, the current Government has succumbed to the worst facets of neo-liberalism.

The Government is claiming that it is introducing “reformed employment services to better assist those in need”. In terms of the privatised labour market services embodied in the Job Network, the Government says it will “… introduce new, simpler, more effective and equitable services nationally”. The reality is that the new national employment services system which began life yesterday – Job Services Australia – retains the privatised service-delivery model that its predecessors introduced.

I note that if the Keating government had have been returned in 1996, it would have done the same thing. There are documents available that show that they were planning to privatise the CES and outsource service delivery.

What the current Government has done is modify the Job Network service delivery model but not fundamentally alter it. Further they are retaining the myth that the individuals who will be shoe-horned into the system – the most disadvantaged among us – are unemployed as a result of their personal characteristics – lack of skills, poor work history, poor work attitudes, etc. All supply-side characteristics.

The fact is that if there are not enough jobs to go round, these supply-side characteristics merely “shuffle” the jobless queue. It is clear that if there is an overall macroeconomic spending constraint on the economy, then all the training schemes in the world will not relax that constraint.

All that happens is that the programs might re-shuffle the jobless queue, which is a futile, soul-destroying approach to the problem.

I repeat – mass unemployment is a demand-side problem (lack of jobs) and requires a demand-side solution. You may like to read or re-read the The parable of 100 dogs and 95 bones blog (which is fast becoming the parable of 100 dogs and 92 bones!

So the range of services that the Government plans to offer under Job Services Australia misses the most important – the creation of enough work.

In that context, the commitment announcement by the Government yesterday of its “Compact with Retrenched Workers” is lamentable. This Compact extends the plan announced in the May Budget where the Government guaranteed a training place to all under 25 year olds. The Australian article today – All retrenched workers to be retrained at TAFE – reports that under the Compact with Retrenched Workers the Government will:

… approve a $100 million plan to create a subsidised TAFE training place for all workers retrenched during the recession.

The Compact with Retrenched Workers will be designed to retrain employees sacked during the global financial crisis to help them rejoin the workforce as soon as possible and maintain productivity.

The training places will be provided for up to 124,000 workers aged 25 or over and complements the Compact with Young Australians agreed at the previous Council of Australian Governments, which offers all young Australians an education or training place.

So if you are unlucky and lose your job start the training treadmill up and start walking!

The official media release from the Government said that the Compact with Retrenched Workers will

… reduce the impact … [of the recession] … by taking local action to support training and jobs … [it] … will help create a highly skilled workforce which provides individuals with greater job opportunities in the future.

Note the slip of the language … “it will support training and jobs”. It will not support jobs at all and it will not provide training in a paid-work context, where it is most effective. It is all supply-side. The workers may increase their skills via TAFE courses but it will not reduce unemployment overall if aggregate demand is not increased.

The best way that the Government can protect workers who lose their jobs during the recession is to guarantee them minimum wage employment in the public sector and within that paid-work environment develop work skills. That is the most effective form of income support. It is also likely to be an effective skills development framework.

But then that would require the Government to admit that the supply-side obsession that has ruled labour market policy since the mid 1980s was fatally flawed and that they alone were finally responsible for ensuring there are enough jobs in the economy to go around.

At present, despite all their rhetoric, they still formulate policy as if the private market will provide enough jobs. It never has and it never will! It just a cruel myth that they and their predecessors perpetuate to avoid taking responsibility for the achievement of full employment.

This Post Has 2 Comments

  1. Dear Bill,

    I recently received one of those propoganda documents form a local politician (Robert Coombes) explaining how the ALP were spending some $4.5 billion on schools. The document then went on to say that the spending would also create a massive [sic] 9000 jobs.

    Now I’m no econometrician but I wouldn’t exactly class spending $4.5billion to create 9000 jobs good value for money. Certainly, every job created helps but it appears to me that the ALP much like the Coalition has a top down approach whereby they feather the nests of the elite and most of us, if we are lucky are forced to live off the crumbs.

    Cheers, Alan

  2. Dear bill,

    Grretings from Bangkok. The other point might be that by putting retrenched people into training at TAFE the governemnt will also be able to hide the real rate of underutilisation (again) by not counting these people as unemployed but rather in training.


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