Work, Working Life and Risk Shifting

Presentation to

Mike Rafferty

Serena Yu

Dick Bryan

Brotherhood of St LaurenceSeptember 2011

Presentation Outline

1. Work, working life and risk shift

2. Changing nature of risk at work

3. Changing nature of risk in working life3. Changing nature of risk in working life

3. Risk and the financialisation of everyday life

4. Discussion

1. Work, Working life and risk

• Economic growth in last few decades has come with significant economic and social change.

• Organising thesis of presentation is that a range life course risks at work and in people’s working lives are being systematically transferred from employers to workers and from states to households.

• Specifically, we can identify risks shifts• Specifically, we can identify risks shifts– from capital to labour– from the state to households

• At least three dimensions of change (and risk shift):– The nature of work, and– The nature of working lives beyond the workplace– The nature of relationships between groups of workers

•

1. Changing nature of risk in work

• Well known story about increase risk at work (casualisation, de-unionisation and precariousness). Recognition that:

– work, especially low-paid work, has become more precarious, and precarious, and

– via the growing activism of capital market intermediaries the discipline of financial calculation is central to this development.

Formerly standard employment patterns of permanent, full time employment have become fragmented, increasing labour market inequality and transferring risk onto workers

Revolution in our time Women at work

Year Women as % of employed workforce

1911

1961

1989

2010

20

25

39

45

We are doing more paid work

Weekly hours per household, head aged 25-39

Source: RBA

Growth of Contingent EmploymentIncrease in casual and part-time employment

Work and Work Life Balance

• 2007 AWALI survey:

– less than half of respondents had a good fit between actual and preferred hours.

– Just over two-thirds (40 per cent) of those workers surveyed worked more hours than they want to, while a smaller proportion (16 per cent) work less than they want to

– Working time preferences seem to be related to income (Pocock et al 2007).

Rising income volatility

Changes in the IR landscape

Workplaces with … 1990/95 2005/06

… no unions

… delegates

57

20

82

8… delegates

… industrial action in the last year

… management strongly prefer dealing directly with employees

20

12

58

8

3

83

Risk shift in the world of workmore productive but not reflected

in real wages

Growth in Profit Share

More paid labour to keep households afloat

1907 2006/08 2006/08

Budget Standard

‘Frugal comfort’

[$4.20 pw?]

‘Low cost’

$779.00

‘Modest but adequate’

$1,112.00

Weekly wage $4.20 $543.78 $543.78Weekly wage $4.20 $543.78 $543.78

Standard hours

48 38 38

Hours need for budget standard

48 57 76

Risk Shift in Life Beyond Paid Work

• Labour’s interaction with business and finance has extended beyond work.

• Workers are now exposed to greater financial risk via higher debt, mortgage stress and fixed costs (utilities, child care etc) and reliance on superannuation.

• Households have been encouraged to think of themselves as small businesses – managing their assets and debts, and their risk exposures through financial (and labour) markets (the ownership society)ownership society)

• Capital markets have expanded to take on labour’s risk dimensions of:– consumer– investor, and – creditor

Growing Use of Debt to Fund Households

Risk and rising financial stress

Volatility of Wealth

Financial risk and the household

Rate of Divorce in Australia:

about 50,000 per year

Rate of Personal Insolvency in Australia (in 2009/10) 36,513

Risk Shift and the New Finance

• Within the ‘logic’ of risk shifting, different sorts of risks are being priced (by financial markets) and products based on these risks traded in financial markets.

• Inside finance companies, these risks are all being cast as new investment opportunities. investment opportunities.

“Far more important to the world’s economies than the stock markets are wage and salary incomes and other non-financial sources of livelihood such as the economic value of our homes and apartments. That is where the bulk of our wealth is found.”Robert Shiller, 2003: 9, cited in Thrift and Leyshon 2008)

Labour and Financialisation

“Overall, there has been a transfer of financial risk over a number of years, away from the banking sector to non-banking sectors…This dispersion of risk has made the financial system more resilient, not the least because the household sector is acting more as a ‘shock absorber of last resort’. (IMF 2005: 89)IMF picked the change, but over estimated labour’s risk IMF picked the change, but over estimated labour’s risk absorption capacity

As the World Bank’s leading pension expert notes, there has been an:

“…increased outsourcing of risk management from government to individuals with financial sector instruments” (Holzmann 2006).

Financialisation and The Two-income Trap

Source: Warren and Tyagi 2003

Discretionary

and

Subsistence

Shares

‘Discretionary’

spending ‘Surplus’

Wages, Subsistence and Discretionary Income

Low wage =

no discretionWage

+ Savings

Food

Housing

Health care

Insurance

Childcare

Subsistence

Food

Housing

Health care

Insurance

Childcare

TaxNet Cash &

Non-cash

Benefits

Wage

Risk Shifting and Financialisation

a) Above subsistence consumption.

b) Mortgage and other interest payments.

Demands on

discretionary share

Zone of irreconcilable

demands

Risk Shifting

interest payments.c) Superannuation and

other savings.Demands on

Subsistence

share

Increasing costs

of:

• Health

• Education

• Childcare

• Utilities

Financialisation - the global policy momentum

“Our recent economic crisis was the result of both irresponsible actions on Wall Street, and everyday choices on Main Street. Large banks speculated recklessly... At the same time, many Americans took out loans they could not afford or signed contracts without fully

understanding the terms...

While our Government has a critical role to play in protecting consumers and promoting financial literacy, we are each responsible for understanding basic concepts: how to balance a checkbook, save

for a child’s education, steer clear of deceptive financial products

and practices, plan for retirement, and avoid accumulating excessive

debts…

President Obama Proclamation for National Financial Literacy Month

April 2010

Three Frontiers of the Household

1. 1900-1950: Household as supplier of labour

2. 1950- 1985: Household as supplier of labour and consumer

3. 1985 - Household as supplier of labour, consumer and financial subject

1. Household as supplier of labour

2. Household - labour and consumer

3. Households - labour, consumer and asset class

References

• Beck, U 1992 Risk Society: Towards New Modernity, Sage, London

• Bryan D, Rafferty M and MacWilliam S 2010 'The Global Financial Crisis: Foreclosing or Leveraging Labour’s Future?' in M. Konings, ed The Great Credit Crash, Verso, London, pp. 353-369

• Bryan, D and Rafferty, M2009 'Homemade financial crisis', Ephemera: theory and politics in organization, vol 9, No 4, pp. 357-62

• Dunnin, A 2010 Super funds and their failing investment diversification strategies Rainmaker • Dunnin, A 2010 Super funds and their failing investment diversification strategies Rainmaker Roundup, June.

• Hacker, J 2008 The Great Risk Shift - The Assault on American Jobs, Families, Health Care, and Retirement Oxford University Press, Oxford.

• Martin R, 2002, The financialization of everyday life, Temple University Press, Philadelphia

• Pocock, B, Skinner, N and Williams, P, (2007), ‘Work. Life and Time’, the Australian Work and Life Index 2007, Centre for Work + Life, University of South Australia

• Rafferty M and Yu 2010 ‘Shifting Risk: Work and working life in Australia’ Workplace Research Centre, University of Sydney available at www.actu.org.au

• Warren, E and Tyagi A 2003 The Two-Income Trap: Why Middle-Class Mothers and Fathers are Going Broke, Basic Books, New York.