Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

IR’s Kodak moment

John Slater

14 July 2017 | Ideas@TheCentre

JS robot worker 1The rise of automation will see a sizeable chunk of today’s workforce replaced by robots, global employment giant Seek has warned.  And a recent McKinsey report found 75% of hospitality jobs and 60% in the resources sector are vulnerable to being edged out by machines.

This presents a clear imperative that our industrial relations framework is equipped to maximise employment, and has the flexibility to adapt to rapidly changing economic circumstances. Yet on both these measures, our current workplace framework falls desperately short.

A root cause of Australia’s underwhelming labour market is the award system — a hangover from compulsory arbitration that continues to see the wages and conditions of almost a third of the workforce largely determined by a quasi-legal industrial tribunal.

The idea that a café in Townsville’s anaemic local economy and record unemployment should by law pay the same wages as one in Surry Hills — where the cost of living is at least a third higher — is a throwback to Soviet-style central planning. It has no place in a modern and competitive economy.

The problem is that while unions enjoy decisive influence over the bargaining process, they bear none of the commercial risk of negotiating pay and conditions — in total defiance of what a competitive market would tolerate.

Ensuring Australians continue to reap the benefits of a specialised, high wage and internationally competitive workforce will require a workplace relations framework that stimulates job creation, rather than hindering it.

In the scope of the biggest challenges facing Australia’s labour force, the brouhaha over Sunday penalty rates is really squabbling over loose change.

After all, whether someone is paid $29 or $25 an hour to work at a fast food outlet on Sunday is really an academic question if automation sees burger-flipping go the way of Blockbuster, Kodak and the dodo.

John Slater is the author of the Centre for Independent Studies paper: Industrial Relations in Australia: A Handbrake on Prosperity.

Blame GDP for ‘secular stagnation’?

Montana Clapton

14 July 2017 | Ideas@TheCentre

MC secular stagnation snail 1In an era of prolonged ultra-low interest rates, spending and investment has remained stubbornly sluggish across the developed world. Some have claimed this to be evidence of ‘secular stagnation’ — a long-term, or even permanent decline in economic growth.

The metric most commonly used by the public to approximate economic well-being — GDP — was dreamed up decades ago in an economy centred around the mass production of physical goods.

It is designed to measure the total consumption and investment of all goods and services in an economy based on their prices and quantity sold.

Despite its popularity, GDP has several limitations. GDP has historically struggled to be a good indicator of quality and the impact of new goods on the market. Further, thanks to a slew of recent technological disruptions, many goods can now be produced, replicated and distributed at close to zero cost — think Google, Facebook, and YouTube, whose services are provided to consumers for free.

Accordingly, the prices of these goods do not necessarily reflect the benefit provided to consumers, and their value is hence mis-measured under GDP statistics. Wikipedia, a free online encyclopaedia, is the fifth-most visited website in the world and boasts around 4.3 million entries in English alone.

Some studies have estimated Wikipedia’s consumer benefit to be in the hundreds of billions of dollars  — far in excess of the $81.9 million in revenue the company recorded in 2016.

GDP, with its focus on price and market value, fails to capture such significant gains in non-market consumption.

GDP remains the ‘least bad’ option, but in a world of increasing digitalisation, it cannot — and should not — be used as the singular metric upon which to measure the state of an economy.

It is crucial for decision-makers not to focus solely on GDP, but to take a variety of measures into account — such as real household income and net national income — to avoid misdiagnosis.

Montana Clapton is a student at the University of Sydney, and an intern in the Centre for Independent Studies Economics Program.

Minding the gap

Tony Peng

14 July 2017 | Ideas@TheCentre

TP gender pay gapThe ‘gender pay gap’ issue is perhaps the only issue which is more easily understood by a toddler than a supposed academic intellectual. It does not take Einstein to realise that women and men are as different as apples and pears.

Unfortunately, most reporting of the gender pay gap seems to use data averaged across the nation and several categories — effectively trying to make apples pear-shaped.

As of the February 2017 report from the federal government’s Workplace Gender Equality Agency, the gender pay gap lies at 16%.  But in 2016, recruitment firm Glassdoor conducted a study into the gender pay gap, discovering that when education and industry choice are factored with pay, the Australian gap was reduced by 13.4% — making it almost negligible due to market fluctuations.

Factor that further with working hours, age, marital status and the gender pay gap almost ceases to exist.

Despite equal access, women are still likely to pursue different career paths to men, which contributes to the differing pay and salaries between the two genders. Industries such as finance tend to be more male-dominated, and generally pay better in comparison to industries dominated by females, such as health.

Women also work fewer hours compared to men, often working part time to care for children. The ABS on 2016 working hours discovered that men represent 61% of all full-time employees and women represent 73% of all part-time employees.

Another crucial factor is that women often have fewer consecutive years of employment. Women who leave the workforce for extended periods of time to raise children often face problems keeping abreast, especially in rapidly changing sectors. So many employers don’t value them as highly as men in the recruitment process.

Those who cite overall ‘gender pay gap’ statistics are too often attempting to compare the incomparable.

Tony Peng is a Year 10 student at James Ruse High School, who undertook work experience at the Centre for Independent Studies.