Work Sharing In Australia 1990S Essay, Research Paper

The Federal Government has nominated reducing unemployment and helping people balance their work and family responsibilities as policy priorities. The Union Movement wants all workers to be guaranteed a `living wage’. Why doesn’t the Government kill these three birds with one stone?

Our unemployment problem is due to both a scarcity of jobs and a mismatch between the skills in demand and the skills on offer. Improved training opportunities have been used to address the latter problem, while faster growth has been the politically preferred method of creating jobs, as it requires the least sacrifice from the employed majority. However with a `growth at all costs’ strategy come environmental compromises and the risk of recession if the Government tries to rush the business cycle. Increased prosperity will only come through the intelligent use of our natural assets, and the creation and diligent application of know-how (research, development, investment, marketing, training, and productivity). This takes time. Cuts in minimum wages coupled with government income top-ups for the low paid have been proposed as a quicker solution to unemployment. Indeed the previous Government went down this path with the subsidised training wage and wage-tax tradeoffs under the Accord. While this may be a way to make viable a range of service industries, huge wage cuts and tax transfers would be required to increase exports of price-sensitive manufactured goods. Our taxpayers would be subsidising our foreign customers as well as the workers. Unemployment would be reduced, but not abolished. It would still leap during economic downturns when demand for labour is weak. An additional strategy is needed: Sharing the available work amongst more people. The Right has always been wary of work-sharing proposals because of the perceived efficiency and administrative costs of more employees doing the same work. The Left worries about an expansion in the ranks of the `working poor’. Here is a work-sharing proposal that takes these concerns into account.

Everyone would be entitled to $2 500 of employment per month ($30 000 p.a.) at a subsidised rate say 90% of what the employer is offering. That is, a 10% wage subsidy is paid to employers for each of their employees, up to $250 per month per employee.

Disadvantaged groups such as the long-term unemployed would be entitled to a higher rate of subsidy. The subsidy provides an incentive for employers to offer additional work to those who are getting less than $30 000 for the work they currently do: the unemployed and underemployed. Work is shared, but those on low incomes are protected. There is no incentive for an employer to put someone earning less than $30 000 on reduced hours.

There is a disincentive for employers do to what the Carr Government is planning: Increasing teachers’ salaries by cutting teacher numbers and working the remainder for longer hours. Would this be an unconscionable restriction on our freedom? No more than that imposed by progressive income taxes. Freedom from poverty and freedom to recreate sure beats freedom to work for the Taxation Department. No arbitrary limit is imposed on a person’s ability to work. There is merely an incentive for an employer to take on an underemployed person in preference to either working his or her existing workers longer or employing a moonlighter. Nothing stops an employer from allocating a large amount of work (and hence income) to one or more employees if the work is available, or if the employees are particularly productive. Couples would have an annual income entitlement of $60 000, with increments for each child. The couple would be able to allocate this amount of subsidised work between themselves as they saw fit. This would complement the Howard Government’s Family Tax Package which will subsidise the cost of raising children by reducing the tax paid by working parents. The scheme discussed here helps families earn enough income in the first place. It is a Guaranteed Minimum Income scheme in which the income comes through work rather than as government handouts.

Employers would have an incentive to create permanent-part-time positions, and to take such workers seriously. Shared parenting would become easier. Unlike the current JobStart scheme there would be no incentive for an employer to sack an existing worker to take on a subsidised worker. And the subsidies don’t run out after a number of weeks.

The scheme would be paid for by a payroll tax and eventual reductions in outlays on the direct and indirect costs of unemployment. It can be simultaneously revenue-neutral and deliver net payments to most businesses because money has been diverted from unproductive spending on unemployment to the productive economy. Businesses can use the payments to compensate for any increased training, administration, uniform, or office space costs that come with work-sharing. Australia is lucky in that only a small fraction of non-wage costs are calculated per employee rather than per hour worked. Costs such as employer-funded health insurance are a major disincentive for work-sharing. The jury is still out on whether work-sharing increases the overall productivity of the workforce. The savings stemming from reduced stress and lower overtime payments should not be underestimated. Unemployment is rarely a productive or happy use of one’s time.

In fact there is a greater incentive to do one’s job well in order to be chosen to work an increased number of hours. Work-sharing is feasible for a large proportion of the workforce, either through a shorter working shift, part or full days off, or longer holidays. Time off can profitably be spent learning in-demand skills to qualify for jobs with higher rates of pay or longer hours of work. This is not a proposal for a shorter work week at the same wage. That would reduce efficiency by increasing both rates of pay and the idle time of machinery. The $30 000 income threshold is too high to have an immediate effect on unemployment. A $15 000 threshold would share the work much more quickly, but would result in some currently employed on modest wages taking cuts in their income. However if the higher threshold remained un-indexed, or only inflation indexed rather than tied to average wage movements, the scheme would take effect gradually, and no one would suffer a cut in their nominal income. Even if the income threshold were to be set very high it would be difficult to encourage work-sharing for those on very high rates of pay. A tax surcharge for such people would be one way of extracting a comparable sacrifice, with the extra tax revenue helping to fund the subsidies. The best time to introduce such a scheme would be during periods of growth, so there is a incentive for employers to prefer reductions in hours-of-work over layoffs when a downturn strikes. No longer would recessions create an army of retrenched workers with steadily eroding skills and motivation, resulting in artificial labour shortages (and consequent inflation) when growth returned. We often hear the mantra that there are no easy solutions to the problem of unemployment. Perhaps solutions are easy to cook up, just hard to swallow. Unemployment is still over 8% after a record stretch of economic growth. Can we continue to bear the costs of such a high `natural’ rate of joblessness? Work-sharing gives everyone a stake in sustainable economic growth. This is the sort of thing for which an explicit mandate should be sought.