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The Changing Nature of the Labour Market in Australia in 2014

Dr Tony Stokes and Dr Sarah Wright Australian Catholic University

In the last decade the Australian Labour Market has gone through a period of

unprecedented change. These changes have come about for a number of reasons both

domestic and international in nature. This article will consider some of the forces

bringing about these changes and it will discuss the impact of those changes on the

Australian labour market and the industrial relations system.

Structural Change

There has been considerable structural change in the economy in recent decades.

Much of this has been due to:

• changes in the pattern of domestic and international demand

• growth in China and other Asian economies spurring commodity prices and

the value of the Australian dollar

• economic uncertainty due to the GFC and sovereign debt issues in many

industrial economies

• industry restructuring to lower costs

• government policies, such as cuts to protection, privatisation

• new technology, eg. automated production processes, computer banking, on-

line retail sales and

• changes to industrial relations policies that have created a more flexible labour

market.

The impact of these changes has seen major shifts in sectoral employment. As the

share of total GDP produced by different industries change so does the employment in

these industries. Historically, the manufacturing industry has been the dominant

producer and employing industry, but its contribution to GDP and subsequently the

number of employed persons has been declining (See Figure 1). In the 1990s, the

manufacturing industry was the largest employer. However, it is now fourth to other

business services, retail and wholesale trade, and construction, which have 14.5, 13.8

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and 8.9 percent of employed persons respectively. Manufacturing has fallen from 15.9

percent of all employed persons in 1990 to only 8.2 percent in 2014 (see Figure 2).

Figure 1: Industry Share of Output in Australia

Source: ABS and RBA, 2014 Figure 2: Employment by Industry

Source: ABS and RBA, 2014

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Growth in employment in industries generally follows changes in trends in output. While the mining industry has the greatest percentage increase in employment in the last decade, it is still a very capital intensive industry and only employs 2.4 percent of Australia’s workforce. The largest increase in employment in the last 12 months has been in health care and social assistance, followed by public administration and safety (Figure 3). The industry that shed the most jobs in the year was wholesale trade. One positive aspect is that after many years of decline, there was employment growth in manufacturing in the last year.

Figure 3: Annual Employment Growth as of February 2014

Source: ABS and RBA, 2014

Overall trends in Unemployment and Participation Australia’s unemployment rate has been largely influenced by overseas factors. The economic downturns in 2001 and the GFC led to rises in Australia’s unemployment rate (Figure 4). Australia has performed better in these periods of downturn than most other industrial nations due to growth in trade, especially with China, and economic policies designed to boost spending and employment at those times. Australia’s unemployment rate has begun to creep up in recent times as a result of continued global uncertainty and the high value of the Australian dollar reducing the competitiveness of many of Australia’s export industries and lowering the prices of imported goods into the domestic market. In the period April 2013 to April 2014, unemployment rose from 5.6 percent to 5.8 percent (seasonally adjusted), despite an increase in employment of 0.9 percent (seasonally adjusted).

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Figure 4: Australia’s Unemployment Rate

Source: ABS and RBA, 2014 The participation rate rose considerable after 2005 (Figure 5). This was partly caused

by higher growth rates and as a result more job opportunities but also as a result on

industrial relations policy changes, such as WorkChoices, that created increased

labour market flexibility and more part-time and casual employment opportunities.

Since 2010 the participation rate has fallen as global and domestic growth has slowed.

In April 2014 the participation rate stood at 64.7 percent. At the same time, the

employment to working age population has also declined, showing that a smaller

percentage of the working age population are being employed.

Figure 5: Australia’s Employment and Participation Rates

Source: ABS and RBA, 2014

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The Growth of Part-time Employment Over the last 30 years part-time employment has increased at a greater rate than full-time employment (Figure 6). As a result the proportion of part-time employed persons has risen over the period, increasing from 17 percent in 1983-84 to 30 percent in 2013-14. Between 2003 and 2008 full-time employment grew at a faster rate than part-time employment. This was a reflection of the tightening of the labour market. During the Global Financial Crisis the opposite occurred and full-time jobs were replaced by part-time jobs. However, since 2010 full-time positions have begun to rise again although this growth has been slow. In April 2014 full-time employment rose 14,200 and part-time employment was unchanged.

Figure 6: Full-time and Part-time Employment Figures for Australia.

Source: ABS, 2014

Growth in Casual Employment

There has been strong growth in the number of casual employees compared to other

employees. There appears to be a strong link between part-time work and casual

work, as two thirds of all casual employees worked part-time hours. In 1996, 16

percent of all employees were casual workers. The proportion of casuals reached a

peak of 21 percent in 2007, and in 2011 was 19 percent (Figure 7). In 2012, 20

percent of male workers and 26 percent of female workers were casuals (Figure 8).

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Figure 7: Proportions of Males and Females in Casual Employment in Australia

Source: ABS, 2012

Figure 8: Proportions of Males and Females in Employment by Classifications in

Australia

Source: Professor Gabrielle Meagher and ABS, 2013

It is interesting to note that the proportion of female casual workers has been falling at

the same time that the proportion of male casual workers has been rising. This may be

due to the increased flexibility of hours in part-time employment.

Casual workers tend to work in lower skilled occupations. In 2013, Casual employees

made up a large component of sales workers, labourers and community and personal

service workers (Figure 9). Generally, the proportion of casuals decreased as the skill

level of the occupation group increased.

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Figure 9: Casual Employees by Occupation of Main Job

Source: ABS and RBA 2014

The Issue of Underemployment

While the level of unemployment in Australia has been relatively good compared to

most other industrial nations in recent years, the issue of underemployment with the

growing casualisation and part-time nature of employment has become an

increasingly important consideration. The underemployment rate is the number of

underemployed workers as a proportion of the labour force. Underemployed persons

include part-time workers who want and are available to work more hours, and full-

time workers who worked part-time hours in the reference week for economic reasons

(i.e. involuntarily) (ABS, 2014). In February 2014, there were 915,300

underemployed people. The underemployment rate was higher for women (9.6

percent) than men (5.7 percent) (Figure 10). This is related to the higher proportion of

women who are in part-time employment.

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Figure 10: Underutilisation, Underemployment and Unemployment Rates in Australia

Source: ABS, 2014

The sum of the unemployment rate and the underemployment rate determines the

labour force underutilisation rate. In February 2014, the labour force underutilisation

rate was 14.3 percent, far higher than the unemployment rate of 6.0 percent. Women

have a higher labour force underutilisation rate (16.9 percent) than men (12.2

percent), reflecting their higher rate of underemployment. Despite a decline in the

overall unemployment rate since 2001, the underemployment rate has shown little

improvement.

The Industrial Relations System

On the 1st January 2013 Fair Work Australia was replaced by a new workplace

relations tribunal, known as the Fair Work Commission. The renaming of Fair Work

Australia together with the appointment of two vice-presidents were two of the many

recommendations set out under the Fair Work Act Review and enacted under the Fair

Work Amendment Act 2012 (Cth). In June 2013, the Fair Work Act Amendment Bill

2013 was passed and further changes were made to the Fair Work Act 2009. The most

significant changes resulting from these two forms of legislation include amendments

to unfair dismissal and general protection, the introduction of anti-bullying orders and

changes to enterprise bargaining.

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(i)Unfair dismissal, general protection and anti-bullying orders

The time frame for lodging an unfair dismissal application has been increased to 21

days from 14 days, whereas the timeframe for lodging a general protections dismissal

application has been reduced to 21 days from 60 days. This is so that the time frame

for both applications is aligned. The FWC will also have the power to dismiss unfair

applications if for example, a party fails to attend a hearing or if they fail to comply

with a FWC order. The FWC also has the power to deliver a costs order against a

party in unfair dismissal cases, if it feels the first party caused the other party to incur

costs because of an unreasonable act. From 1st January 2014 the FWC introduced new

anti-bullying measures aimed at reducing oppressive behaviours and increasing the

protection of workers. Employees who are being bullied at work are able to apply to

the Fair Work Commission for an order to stop the bullying. The Fair Work

Commission will have to start dealing with the matter within 14 days. It is hoped that

the FWC acting as an independent umpire will encourage swift conflict resolution and

reduce the time lost allied to the cost of lower labour productivity resulting from

bullying.

(ii) Enterprise bargaining

No longer can enterprise agreements be made with only one employee, nor can a

union official represent an employee outside the union’s coverage. Recent

amendments also include prohibiting ‘opt out’ clauses in enterprise agreements. That

is, neither an employer and/or employee can ‘opt out’ of an enterprise agreement. It is

still possible, however, for an employer to bargain with individuals via Individual

Flexibility Arrangements (IFAs). More groups of employees now have the right to

request flexible working arrangements, including:

employees with caring responsibilities

parents or guardians of children that are school age or younger

employees with a disability

employees who are 55 years or older

employees who are experiencing family violence or who are caring or

supporting a family or household member who is experiencing family

violence.

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Methods of Wage Determination

There has been considerable change in the way wages and salaries are determined in

Australia in the last decade. The Fair Work Act 2009 placed an emphasis on

'enterprise level collective bargaining agreements' as the preferred method of setting

pay over (registered) individual agreements. As can be seen in Figure 11, the

proportion of employees paid under collective agreements has increased since its

introduction.

Figure 11: Methods of Setting Pay, 2000-2010

Figure 12: Methods of Setting Pay, Based on Gender, May 2012

Source: ABS, Employee Earnings and Hours, cat no. 6306.0

Award only

Collective Agreement

Individual Agreement

Owner/manager

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In May 2012, the most common method of setting pay for all employees was

collective agreements (42 percent), while a further 39 percent of employees had their

pay set through an individual arrangement. The proportion of employees whose pay

was set by award only has decreased 7 percentage points from 23 percent in May

2000 to 16 percent in May 2012.

There was a considerable difference in the way males and females had their wages

determined and the level of wages that they received. For all male employees, the

most common method of setting pay was individual arrangement (43 percent), while

the most common method of setting pay for all female employees was collective

agreement (46 percent) (Figure 12). Average weekly total cash earnings for

employees who had their pay set by individual arrangement were higher for males

than females ($1,494.40 and $1,001.00 respectively). Similarly, earnings for

employees who had their pay set by collective agreement were higher for males

($1,388.50) than females ($954.60). The difference in earnings, however, was

significantly less for employees whose pay was set by award only ($690.10 for males

and $592.70 for females). The industrial relations system also tends to disadvantage

the least able in the workforce; the lowly skilled casual/temporary employed

individuals.

There has also been a difference in wages growth between the private and public

sectors of the workforce (Figure 13). Private sector wage growth remained below

public sector growth for much of the last decade. Private sector wage growth was

strongly impacted by the GFC, with it having a much smaller impact on public sector

wages.

According to the ABS (2014) the Wage Price Index (WPI) has increased 2.6% from

March 2013 to March 2014. The WPI for the public sector increased 2.9% compared

to 2.6% for the private sector (ABS cat no. 6345.0). While private sector wages have

tended to rise more than public sector wages, as governments attempted to wind back

their spending to achieve fiscal consolidation, these findings suggest that since the

GFC wages have continued to rise more slowly for the private sector.

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Figure 13: Private and Public Sector Wage Growth in Australia

Source: ABS and RBA, 2013

The 2014 National Annual Wage Review

The ACTU lodged an official pay claim in the Annual Wage Review suggesting that

the National Minimum Wage (NMW) be increased by $27 to $649.20. In response,

the peak employer body, the Australian Chamber of Commerce and Industry (ACCI),

submitted that the NMW be raised by $8.50 a week. The NMW has fallen from 59.8

percent to 55.8 percent of average weekly earnings (AWE) over the last five year.

The Annual Wage Review decided on an $18.70 (3%) increase per week, roughly in

line with inflation. The NMW will increase to $640.90 per week, or $16.87 per hour.

Increased Earnings Inequality

Despite the abolition of AWAs and the introduction of good faith bargaining, the

gender wage gap between males and females has widened with females now earning

82% of a male income. In 2013, full-time average weekly total cash earnings was

$1,558.10 for males compared to $1,278.40, for females. A recent study by McGraw

and Mackisack (2008) found that in Australia women occupy 7% of all top earning

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positions and Female Chief Financial Officers earn only half the wage of their male

counterparts.

In an attempt to reduce the gender wage gap between males and females, the Fair

Work Commission has taken a stand by acknowledging the gender based

undervaluation of female workers in the Social and Community Sector (SACS). The

Government has allocated $2.8 billion over the next eight years to increasing the pay

of SACS workers. The wage rate increases over the next eight years are between 19

and 41 percent.

Industrial Disputes

The numbers of industrial disputes occurring in Australia have fluctuated

considerably in recent years (Figure 14).

Figure 14: Industrial Disputes, Working Days Lost in Australia

Source: ABS, Industrial Disputes, Australia, Cat. no. 6321.0.55.001

While the number of working days lost has risen in the last two years this is not a

result of the Federal industrial relations policies but rather disputes with State

Governments over cut backs in employment, wages and working conditions. The

combined Education and Training and Health Care and Social Assistance Industry

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(17,800) accounted for 49 percent of the total number of working days lost in the

December quarter 2013. Meanwhile, New South Wales (18,400) accounted for 51

percent of all working days lost in the December quarter 2013.

Proposed changes outlined under the Fair Work Amendment Bill 2014

The recently elected coalition government has set out a number of amendments to the

Fair Work Act 2009, with the introduction of the Fair Work Amendment Bill 2014.

While these changes support the Coalition's Policy to Improve the Fair Work Laws,

the ACTU and Labor Party argue that these changes will undermine the rights and the

level of protection of employees. Some of the proposed changes include:

(i) Individual Flexible Arrangements (IFA's)

Employers will be able to negotiate using non-monetary payments when determining

if an employee is better off overall. Without safeguards these IFA's have the potential

to allow a real cut in wages and a loss of conditions for employees.

(ii) Changes to National Employment Standards

Restrictions will be introduced on the payment of accrued annual leave entitlements

for an employee who has been terminated.

(iii) Annual leave and workers compensation

Employees will not be able to accrue or take annual leave while receiving workers

compensation.

(iv) Transfer of business and employee protection

There will be a reduction in entitlements for employees who retain their job when a

business is sold or transferred to a new employer, e.g. Qantas.

(v) The right to strike

Employees will not be able to strike (protected action ballot) unless bargaining has

commenced. This means that employees cannot use protected industrial action as a

tool to compel their employer into commencing bargaining.

(vi) Greenfield Agreements

New faith bargaining rules will include that an employer is able to choose which trade

union organisation they negotiate with and the employer will initiate the three month

time frame for negotiation. At the end of the three month period the employer can

apply to the FWC for approval of agreement (arbitration) even if an agreement was

not reached. There are no provisions in the bill for any consequences if the employer

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fails to give a three month negotiating period. Employers could also potentially delay

bargaining beyond the three month negotiation period and then apply to the FWC for

arbitration. There are no provisions allowing a union to compel the employer to

bargaining. If the agreement is not approved by the FWC any good faith bargaining

orders or rights to enforce good faith bargaining are terminated.

(vii) The power of unions and the right of entry

There will be tighter eligibility criteria for granting permits for unions to enter work

premises. In addition the FWC will not be required to conduct a hearing before

dismissing an unfair dismissal application. This will make it more difficult for a

worker to fight an unfair dismissal case.

Reference List Australian Bureau of Statistics (2013). Industrial Disputes, Australia, Cat. No. 6321.0.55.001. Canberra. Australian Bureau of Statistics (various). Employee Earnings and Hours. Cat.No. 6306.0. Canberra. Australian Bureau of Statistics (various). The Labour Force. Cat.No. 6203.0. Canberra. Websites Australian Bureau of Statistics. http://www.abs.gov.au Fair Work. http://www.fairwork.gov.au/Pages/default.aspx Greenacre Educational Publications. http://homepages.ihug.com.au/~gep/ Reserve Bank of Australia. http://www.rba.gov.au/