Today’s GDP is a sideshow. The real game kicks off in the first week of September. That’s when the full devastation of the coronavirus will be revealed (June quarter GDP). That’s when JobKeeper comes off, when Sally McManus wraps up her negotiations with Christian Porter, when millions of Australians hit the JobSeeker queue. Michael West reports on the new buzzword “productivity”.
John Howard is fond of recalling his early days in Sydney’s Inner West and his father’s displeasure at the fact that the workers at the family’s petrol stations in Dulwich Hill used to get too many pay rises.
For the young John, it just didn’t add up. Same workers, same work, but more money. It fashioned his approach to productivity.
The fourth son of Mona and Lyall Howard would go on to become Prime Minister for four terms, his political fate sealed in the election defeat of 2007, a defeat many put down to the union-busting policy of WorkChoices.
The release of today’s National Accounts passed with little fanfare. The impact of the coronavirus lockdown will be borne out in the June quarter figures which are released in September. Also today, in an office tower in Sydney’s CBD, negotiations kicked off between the Government and the head of Australia’s union movement, ACTU Secretary Sally MacManus, over reform to Australia’s industrial relations system.
They also conclude in September, as does the JobKeeper stimulus. We are now in the JobMaker phase, the term coined to frame the Government’s economic strategy to create jobs and restore growth. It’s all about productivity and the talks between the unions and the Government are about who gets what post-Covid-19.
The Government has given businesses six months to think about what they want their post-covid businesses to look like. JobKeeper was designed to buy them time. That’s plenty of time to think, plenty of time to design something different. No-one is suggesting that things will go back to the way they were before. JobKeeper started in March and ends in September. We are more than halfway there.
Sally McManus said last week that workers had missed out on a fair share of productivity gains and a fair share of profits for years before the virus hit. Attorney-General Christian Porter, who was tasked by Scott Morrison to work with McManus, replied that businesses had closed and the post-Covid world was all about restoring growth and re-starting businesses. Dividing the cake could wait. Though there has to be an agreement on IR reform by September.
The buzzword is productivity. Yet productivity means different things to different people. And it means something different again to the Australian Bureau of Statistics (ABS).
For the employer, productivity is how much they get out of their employees.
For the employee, it’s how much effort goes into the work.
And for the ABS and the National Accounts, productivity is GDP divided by hours actually worked.
These are clearly very different things. Reducing salaries (the wage bill) improves the productivity of a business immediately, as long as the employee carries out the same work, at the same quality, for less money. Putting up the prices for the products which the business sells also increases productivity, as long as the demand for those products does not go down.
If one employee takes 40 hours to complete his or her tasks while another takes 45 to do the same thing and the employer pays them the same wage, then they are equally productive from the employer’s perspective, as long as neither disrupts the other and no overtime is paid.
Automation increases productivity too, but its benefits belong to the business owner not to labour. In the parlance of Treasurer Josh Frydenberg, this “capital deepening”.
Thanks to technology and the deregulation of the work-force, productivity has risen for many years. Unfortunately for workers, the benefits of productivity have gone mostly to shareholders and business owners rather than workers.
So far productivity has been all about the gig economy, contractors, casual work, flexible work, zero-hours contracts, labour hire companies and fixed-term contracts. If an employee is not entitled to sick leave or holiday pay, that employee is more productive, as far as the employer is concerned; more productive that is than the employee who gets those benefits, but otherwise costs the same and does the same work.
John Howard understood this, because he had seen wages rise when he worked, as a lad, in his father’s service stations, even though the employees did no extra work. It was this that drove Howard to WorkChoices, 40 years after he’d seen what happened to his father.
So what is it that Scott Morrison wants out of productivity? His minimum acceptable outcome is that his voter base, small business owners, get more for less. Productivity will have risen in this event. A good “win-win” will mean that business wins more than employees win. If big business can benefit from union concessions, then feeder small businesses will benefit too. Major projects (“Greenfields Sites”) is where he wants Sally McManus’ buy in.
When that is achieved, trickle-down is possible – if the business owner wants to pay higher wages, it’s the owner’s choice whether or not to share the gain, how much to share and when to start sharing it.
The key constant is that employees are bound to look to their employer for income. That was the stated objective of JobKeeper.
The unstated objective of JobKeeper was to allow employers time; time to decide the shape of their post-Covid workforce. None know what it will be. All know it will be different. In March, they did not know which workers they wanted to terminate; who they wanted to retain. The government allowed eligible businesses to defer the decision, at no cost, and at a $1500 fortnightly subsidy. And there are no super-payments for zero hours workers. Further, for each retained employee of the eligible business, the employer keeps their PAYG tax, up to $100,000 all up. This subsidy too ends in September.
JobKeeper was designed to postpone the time that reductions in the workforce could occur. This meant that the business owners’ largest grievance was addressed, the costs of forking out for holiday pay, redundancy and other entitlements – then of course having to rehire the same staff. Why pay them out, and then rehire them? Someone had to pay; it was the taxpayer.
So JobKeeker only covered employees who were entitled to be paid out their annual leave and retrenchment. There was no point in covering casuals and gig workers for the obvious reason that these workers cost nothing to terminate. There was no point in covering university staff or local government employees because they cost private employers nothing. They were someone else’s expense, and many probably were not Liberal voters in any case. It did not matter so much politically that they received nothing from JobKeeper.
Then there was the political icing on the cake. JobKeepers would not show up as unemployed. They are not counted, they make the monthly jobs figures look better.
When will JobKeeper end? It will end when the Government declares: “Now is the time to decide who you want to keep.” It will end when the Government decides that a business can see its own future. At the moment, that’s in September. The government is saying that it may continue JobKeeper for those sectors where the future is unclear, where it is not clear enough who to keep employed.
So the next step is to work out how to get more out of the employees who the business owners want to retain – this is the productivity question. It has to be sorted by September too in the negotiations between Porter and McManus.
It is hard to predict the outcome of all this; how many JobKeepers will end up on JobSeeker, and whether the Government can afford politically to cut JobSeeker back to pre-Covid levels.
For business, employees will have to be paid out their accrued leave and redundancy. The Federal Court has told Qantas that it’s legal to require employees to use up their holiday leave now, so the decision about who goes onto JobSeeker may be cheaper than some thought.
No-one knows what JobSeeker will pay. The Government has announced that JobSeekers have to start looking for work next week. The problem is, there aren’t many jobs around.