As of now. It’s really interesting to see prominent conservative labour economist Mark Wooden come out on the side of truth rather than politics:
A past supporter of the Howard Government’s workplace law changes has attacked them, saying they would not deliver more jobs but could generate greater employment insecurity.Melbourne University Professor Mark Wooden rated the proposed changes “a C minus” because they did not promote real choice for workers.
He told a conference yesterday that plans to exempt businesses employing up to 100 workers from unfair dismissal laws could cut jobs rather than generate them.
“Among larger businesses the employment gains are likely to be small and could even be negative,” he said. “The cost, on the other hand, is great uncertainty and insecurity for some Australian families, directly contrary to the aims of the reform agenda.”
Professor Wooden told the Australian Conference of Economists that the plans were full of “political speak” about choice and appeared “unable to deliver any proposal that will fundamentally help the unemployed to secure employment”.
He said the changes sought to cut award standards and undermine protection for collective wage deals by removing the “no disadvantage” test.
“If a group of workers decide that they would like to bargain collectively, there is nothing in the current legislation, or in the proposed reforms, that will require employers to bargain in good faith. Instead the fear is that many employers will offer their workers individual agreements on a ‘take it or leave it’ basis,” he said.
“If the aim of the IR reforms is to provide employees with real choices, then I am on (ACTU secretary) Greg Combet’s side ‚Äî the right to bargain collectively needs to be protected.”
We’re waiting now for anyone with intellectual credibility to defend this package.
This is the most worrying comment I have seen.
Essentially what Mark is saying is that if there is choice he would support it however there is no choice under the proposed legislation because empolyees wil be ‘encouraged’ to sign an AWA. Guess the results.
He is also quite positive about the productivity resu;ts of EBAS.
Couldn’t sleep. Don’t get takeout from the Thai restaurant on Brunswick St. Too much mylanta wasn’t enough to stop the heartburn. So only had about 2 and a half hours’ kip. This afternoon will be one long nap!
More on the Oslington study here.
Not good!
I’d like to see the study itself, but as far as I know, it hasn’t been published yet.
Of course, the only thing the proposed laws do is increase short-term employment or “churn” as they say which wont effect those that have been employed for a great period of time drastically but it will effect the yet to be employed. Which in turn will increase as the man said “job insecurity”.
As for the Fair Pay Commission, why have it at all, just remodel the powers given to the AIRC
At risk of being summarily thrown into the RWDB vault, Justin Wolfers and I did point out in the SMH in June that the flipside of strict employment protection is longer unemployment durations. Presumably we want to put this on the scales as well.
I’d be interested to see the research on unemployment duration, Andrew. How easy is it to hold the variables constant?
As to churning, I can’t agree with you this will make unemployment “more pleasant”. Practices such as employing people through labour hire companies on a very short term basis, for which there are already incentives present in the Job Network, will increase, and the current legislative protections under state legislation will go. And the low skilled unemployed are those workers who will be most vulnerable to being employed on bare (and progressively lower in real terms) minima if awards largely go.
From the social-psychological angle, one should also consider the demoralising effect felt by many long-term unemployed people whose entry or re-entry into the labour market proves exploitative or fleeting.
And add to it the cutout rates for losing benefit when people get casual work and all the tax/welfare traps.
Thanks, Naomi.
Found Paul’s page at UNSW. A draft of the paper appears to be online here.
Thanks Shaun, much appreciated. I’ll look forward to reading it when I’m feeling more alive.
“Melbourne University Professor Mark Wooden rated the proposed changes “a C minus” because they did not promote real choice for workers”.
Quick, get Mark sedated and call the paramedics. He obviously escaped the Parkville asylum again. If he begins to froth at the mouth, tell him quietly the government promises not to introduce the legislation. That along with sedation should stop him frothing.
In Mark Wooden world and the other “0% economists” Latham could have legislated we all become millionaires.
Whatever, Joe. In the real world, Wooden is known as a conservative, has been appointed to board positions by the Howard government, and it’s most rare for him to take a position symmetrical with that of unions. Thus, although others have made the same points before, you can be sure that recognising the flaws in the proposals on his part is something that goes against his personal and political grain.
Mark:
Along with Hewson, throw Wooden in the Latham trash can. Sometimes our mad uncles get out.
Couldn’t we deport this Wooden fellow? He’s obviously mad, and still dangerous despite losing his marbles.
Mark, our point wasn’t about the whole package - just the unfair dismissal reforms. While I have a job, I benefit from strong employment protection. Once I lose my job, I’m hurt by strong employment protection.
Justin has done the empirical work on this.
I’m aware of that, Andrew, and I’ll look forward to reading the paper when I get a chance.
But if it’s true, it would be true only as a generalisation to the degree that reputational effects and skill levels aren’t segmented across the labour market.
Most people are actually operating in distinct labour markets with very different patterns in terms of termination - for instance it’s very high in hospitality (also a very casualised market) but at the same time not a particular barrier to gaining new employment - for a host of reasons.
Incidentally, on unfair dismissal, it sounds like Howard may announce next week that he has things in mind for larger organisations as well - possibly procedural changes, putting costs barriers in the way of action and extending probation to 12 months.
This will add to Wooden’s point about employment insecurity.
Mark:
On a more positive post. Can’t we see how restrictive labor laws constipate the entire labor market. It’s ok if you have a job, but hirer’s are going to be mighty scared of adding labor if they can’t fire a bad employee.
These type of restrictions all add to the cost of hiring because, as you would understand it makes it costly to fire.
It’s fine for those people who have a job. They get protection. It certainly isn’t fine for those that can’t get one.
Moreover, if these “labor economists” were in fact honest and thoughtful about the advice they are giving they ought to come out say that those people who are employed under these job protection laws owe a financial duty to those who can’t get a job.
In other words if the hired want to continue with laws that are rigged to support them, they should also compensate those people who can’t get jobs as a result of restrictive laws. After all that’s only fair. I am not talking about the dole here. I am talking about compensation far greater than the dole for the unemployed that ought to come out of the pockets of those who want to continue with a rigged market. I am waiting for the unions and the “labor economists’ to come out and support this humble suggestion.
The unemployed can’t get jobs because there aren’t enough jobs to go around. However, they get hounded on most days by bureacrats to see if they are not cheating the system. They made to feel like lepers because of greedy actions by those that have jobs under a rigged market. They should not be treated this way, because it is not their fault there aren’t enough jobs to go round.
This mode of operation ought to be turned right round in the face of all those who support rigged markets. Rather than throwing a bone at the unemployed, Combet and the “labor economists” ought to come out and say to they support compensation payments to the unemployed by those people who are working in rigged markets. This would mean payments the go far above the dole and also that they would not be hounded. Isn’t this fair? I work for myself, and don’t need the dole or any support like that so I am not speaking for myself.
But I do speak for what I believe to be the rights of the unemployed who simply don’t derserve to be treated like this. They deserve compensation for riggged markets and Combet nad his brigade ough to be made to pay.
Mark wooden was one of dick blandy’s disciples at the National Institute of Labour studies.
Anyone who was interested in labour economics got the Bulletin of Labour.
It was mainly based at Flinders Uni.
judith sloan and Barry Hughes weere others there.
They acttually went quite radical re flexilibity of labour market near the end of Fraser’s Government.
Mark Wooden was always interestd in this area and is why he is Professor of Economics specialising in this area.
Any person disputing wooden’s credentials in this area is a complete cretan as CS would say!!
Homer:
Mark W may have all the credentials in the world. He may even call himself a conservative, however he is on the wrong track if he believes restrictive labour laws ought to be maintained. This area of economics is an old one. The theory he supports- labour market regulations- was demolished over the last 200 years of economic thought and theory. I am serious here: if Wooden believes he can prove himself, I can assure you he would be a candidate for a Nobel Prize.
The simple fact is that no matter what anyone says, you cannot legislate economic well-being. Only markets can determine prosperity. When you tamper with the market process by making wages too high, market clearing will eventually lead to unemployment. If anyone can refute that I would be interested to hear how this is so, maybe even from Professor W.
Prof. W along with Belchamber from the ACTU ought to tell us why the unemployed should not be compensated by people who are unfairly taking advantage of rigged labor markets (and I don’t mean just the dole).
Joe, this government doesnt support deregulation. Its an anti-union ideological jihad, and they’ll regulate workplaces to the hilt to ensure that outcome.
“hirers are going to be mighty scared of adding labor if they can‚Äôt fire a bad employee.”
Get real, Joe. They can fire anyone they want, if they have a reason to (ie, they’re a “bad employee”. They can fire them without reason, if they don’t mind risking going to the tribunal and losing.
LE
LE, do you agree with what I said then. That those suffering from the racket ought to get compensation? Could you also explain how they will regulate the process as I thought they were atempting to remove obstacles, albeit little anyway.
Fatfingers:
Isn’t that the point though, that it will invariably go to arbitration, which adds the the incremental cost of hiring. Add more costs, you create less jobs. You cannot escape this rule.
Think of it this way. 1% addition in labor costs for a firm turning over $100 million is $1 million. At say $35,000 a job, the effect is close on to 30 jobs disappear down the drain. The costs are add on costs which don’t go to a person’s paypacket, however they have to be provided for.
More to the point, if as you say, bad employees can be fired anyway, why on earth would you wantr to saddle a company with the costs of dis-association?
joe, one word choice
If you do not believe in that you aint no conservative
Actually, I’m not a conservative, in the sense you approach it, no.
When you get to the real nuts and bolts of it, Combet, and his buddies don’t give a toss about the unemployed and neither do both sides of politics. However I do, because I don’t see it is their fault they are unemployed. Consequently they deserve to be compensated against legalized which keeps them out of jobs.
Here is a good example of what I am saying that Combet won’t publicise as support may very well dry up. It is a well-known fact that the Melbourne building industry is a racket, pure and simple, that is run by both firms and the unions as a closed shop.
At first light one may say who ought to give a toss about this because both parties are happy with the way things run, dispute the fact that building sites with a union ticket are 30-40% higher than other cities, right?
Well this is the racket:
The firms don‚Äôt really give a shake because all they have to do is ensure they build on time and meet their contract. Along the way they pick up their 10% or whatever fees were they bid for the contract. So whether the building cost 70 mill or 100 mill they don‚Äôt care as they simply pick up a margin along the way. The unions of course will maintain good behaviour at a price. The price, of course is that the lollipop guy directing traffic outside walks away with a 9 day fortnight, 35 hours a week, smoko every hour or so. He happens to be the shop steward‚Äôs wife‚Äôs cousin and therefore gets $80,000 a year with “over-time”. The site is a closed shop meaning an unemployed plumber can‚Äôt get on the site without a union ticket. As I said, at first glance, you could say this is a very happy existence as everyone makes off like bandits and happy campers right? Wrong! There is a cost to this. It is the fact that the cost of constructing the building was 30% over the “vig”. So much for efficient capital allocation, right?
Rent in that building will have to be higher than it ought to be and therefore less firms will be able to afford the cost. If you take it all down the line the simple fact is that the public is being cheated out of jobs as a result of this racket. So maybe next time Combet is interviewed someone ought to ask him if he supports higher taxes on the building trades (for running a closed shop) that ought to be paid to those people who are unemployed as a result of these rackets. I would also tax the firms engaging in these practices as well.
Ever given it some thought why the labour wants to get the top marginal tax down? It’s not because they suddenly found economic religion or at least not in the way we would think. It’s because many of the union jobs are starting to hit the top of the bracket. Funny that ain’t it?
I think you’ll find, Joe, that Wooden has long advocated deregulation as a spur to job creation. It’s just that firstly he is aware of the structural peculiarities of the labour market as a market - ie stickiness, discrimination, skills disparities, segmentation and fragmentation and power imbalances. Secondly, he’s had a look at the empirical evidence and it doesn’t stack up for the Howard changes.
If you follow the link to the paper on unfair dismissal, from memory I think the average costs of a contested dismissal are less than 10k.
In any case, recruitment and selection of a new employee and training would normally absorb around 35% of yearly labour cost. Therefore it stands to reason that the most elegant and cost efficient solution is good performance management practices and genuinely cooperative workplace relations. Which are usually fostered - along with higher productivity - through collective bargaining, as Wooden and other labour economists have found from empirical studies.
My point about Wooden is that with his ideological position, it’s really impossible to suspect him of bias in designing and conducting his studies.
Joe - I can only speak about my sector of higher ed, as im not an IR head like Mark, but the dead hand of government aka DEST are overturning agreements freshly made between management and employees at workplace level to include new regulations about AWAs; to lower our superannuation to ‘community standards’ of 9% (what is this? central planning of the economy?); and other nasties designed to prevent us exercising rights to collectively bargain (eg barring union presence on campus, and thus, access to its own members).
It has nothing to do with efficiency - managing loads of seprately negotiated AWAs will be an expensive nightmare for uni management. Its about union bashing, and (like the looming international student income disaster called VSU) hang the consequences for the sector.
Mark:
You are quite correct in saying this and it is more than likely he behaved honestly in his findings. However that doesn’t mean he was correct.
Most people see look at the labor market incorrectly. They see it….well ….as a labor market when it is in fact a market for labor. It would be best described as a market requiring services it you will. If Wooden saw stickiness it is because there is stickiness. Many economists look at the labor market in aggregate when in fact it is not an aggregate at all. This makes looking at say the median wage or average wage folly and a waste of time. Why? Because labor services are not necessarily fungible. In other words what is the point of adding the salary of a neurosurgeon to that of a plumber and then getting an average. In my book it is totally meaningless. Each can‚Äôt do or have no desire to do the other‚Äôs job. So if Wooden sees stickiness, it is because there is stickiness in the market for labor. Labor service is not always transferable.
More importantly workers can only be paid for the marginal product of their labor service. Whenever, there exists a rigged process in play and workers obtain a rate higher than the marginal product, the market will eventually clear through unemployment. Similarly firms cannot for long pay below market wages because they won’t be in business for long. They will invariably bleed their employees to high paying jobs at other firms.
If firms practice discrimination the only thing that can result from that is that other firms will end up with a pool of better employees. Maybe it used to happen there was discrimination, but in this day and age losing good hires because of silly employment practices will only mean a firm’s lifespan is shortened, especially now with all the pressures that go with the need to make good returns. Don‚Äôt forget that the most dangerous job in Australia these days is that of a CEO. Life for most, even if well paid, is very short if you don‚Äôt produce.
The example you gave:
If you follow the link to the paper on unfair dismissal, from memory I think the average costs of a contested dismissal are less than 10k.
Shows that the add on cost of letting someone go is not insignificant at close tp 30% on a job paying $35,000 per annum. I did the math for a firm with a hundred employees and assuming the potential of two forced attritions per year it works out to 60% of a new hire. This is not insignificant to firms nor is it unimportant for the job market.
In can’t aggre more with this comment:
1. In any case, recruitment and selection of a new employee and training would normally absorb around 35% of yearly labour cost. Therefore it stands to reason that the most elegant and cost efficient solution is good performance management practices and genuinely cooperative workplace relations. Which are usually fostered - along with higher productivity - through collective bargaining, as Wooden and other labour economists have found from empirical studies.
It is the only way firms can prosper.
We’re possibly not as far apart as we may have thought, Joe, as - although I haven’t had a chance to look at the Leigh paper yet - one of my chief criticisms of much work in labour economics (as I alluded to above) is that it treats the labour market as an aggregate.
However, this is where we disagree:
This is not true where the firms are competing with each other, or colluding with each other, to drive down the cost of labour for a particular occupation or within a particular product market - which happens too often in Oz.
On the point about CEOs - I was reading today a new paper by McKeown in the Journal of Industrial Relations looking at job insecurity among professional contractors. We often overlook the degree to which those with highly marketable skills also suffer retrenchment, sackings and sometimes move in and out of secure employment. Interestingly again, the findings suggest attitudinal and cultural factors within a particular industry and workforce are important variables - for instance in engineering and IT where contracting is an accepted way of working compared (say) to law and many types of management.
LE
I do appreciate what you are saying and can say I have never had experience in the public sector. Maybe I am wrong but, just because an entity is a unversity, ie. there is a lot of brain power doesn’t mean it is well managed. That is my guess, but you can correct me if I wrong on that.
My experience is this.
I worked and managed area of a trading floor on Wall Street for 16 years before I came back home. Every year ,non fail, no matter if it was a bang up year or a bad year I/ we (the firm) lived in fear of losing our good employees. Seriously, when bonus time came, I didn’t sleep well at night because of all the pressures associated with paying traders what we thought they were worth on the street. That doesn’t mean we paid them over the vig etc. It meant we had to try and guess the minumum bonus ( wall street lives on small salary structure and large end of year bonuses depending on performance)it would take to keep the critters from jumping. And they did look and they did jump if they wewre offered more at other firms. The nightmare for a manager was then to try and replace the good trader. That’s a nightmmare because you simply don’t know how ggod a person is until you try them out. Reputation don’t always count. On top of that you also have the monthly budget to meet and if you don’t meet it.. well it then it is your job on the line after a few months. So life is tough, hey, in terms of stress, and you can only take so much body wise. That’s why I eventually bailed.
One year a particular area of the trading floor lost money, which meant that there was pressure on the bonus pool. Wall Street people live for their bonus. This happened during a great year around the rest of the street. The effect was that we lost 30% of our staff. Hell even I bailed that year and went to another firm because you were then on a hiding to nothing. The point of all this is that there is no subsitute for good managment.
I gotta go and work now as I trade markets. seeyas.
What insight! No, wait, what a load of tedious drivel.
You don’t have any experience in or knowledge of the Australian labour market, nor indeed any obvious understanding of anything much.
But we know who to come to when we want advice on how to create sockpuppets, don’t we, x-anon.
SJ, if you want to take issue with another commenters’ arguments, please do so. Dismissing them isn’t particularly convincing.
Yes, people should leave their ancient hatreds behind when they migrate here from other blogs. It’s the LP way of life. Just sayin…
“but the dead hand of government aka DEST are overturning agreements freshly made between management and employees at workplace level to include new regulations about AWAs; to lower our superannuation to ‘community standards‚Äô of 9% ”
Much as I hate to defend DEST, they are not mandating anything to do with superannuation.
Having read Wooden’s full paper now, the main criticism is really the lack of protection of rights of collective bargaining.
No, it’s the general super changes.
Do you have a link to Wooden’s paper, Andrew?
Andrew - more your area than mine, from what Ive read of you work, but can you explain to me what the whole “community standards” thing re: super is then? They’ve certainly made a bunch of noises about it.
Anyone familiar with gross flows data will know that the hiring rate, the number of hires over total employment has fallen to a record low as has the separation rate over the past year. This is likely due to labour hording in response to the tight labour market. So will removing unfair dismissal laws help the unemployed? No because firms have dramatically reduced their staff turnover because they are afraid they will not be able to replace them. And will the changes increase productivity and hence real wages. Not while firms are hording labour and preventing it from being allocated most efficiently.