The Living Low Paid | BTalk Australia

(16min 48) There’s a concern that the unempoyment rate will rise this year, but what about those people working part-time for a low wage? It’s an increasing proportion of the Australian workforce yet it attracts little attention from policy makers.

On today’s BTalk Australia Phil Dobbie talks to Barbara Pocock, Director of the Cente for Work + Life at the University of South Australia. She has just co-authored “Living Low Paid: The Dark Side of Prosperous Australia”.

How big is the problem? What are the costs to the workers, for business and for the economy? Why doesn’t minimum wage protect these people? What can your business do to help?

Do you have thoughts about how to solve the problem? Add comments in the Talkback section at the end of this post.

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• Transcription

Phil Dobbie: Hello. I’m Phil Dobbie, and welcome to BTalk Australia where today we ask: have we forgotten about the working poor?

Now we all know that Australia is a prosperous society. We know that because almost every politician seems to have had a go at telling us we’ve never had it so good, until now perhaps. But not long ago 1 percent of the population accounted for 10 percent of the country’s income. And 20 percent of households with the lowest net worth accounted for only 1 percent of the total household net worth. So there’s a lot of people out there doing it tough. Professor Barbara Pocock is Director of the Centre for Work and Life at the University of South Australia. And she’s also coauthored a book called Living Low Paid — The Dark Side of Prosperous Australia. Now Barbara, your focus in the book wasn’t on the unemployed, was it? It was on people who are working, but working on low pay.

Barbara Pocock: That’s right. And this is a group which hasn’t had a lot of policy attention in Australia. We consider Australia as a country where, once you’ve got a job, then that is the route to security and a decent life. And what we find in this book is that more than one in ten Australians are by most definitions meeting the definition of the working poor. And a lot of them are coping with a lot of time and money stress in their lives.

Dobbie: You’re right. We keep on focusing on that unemployment statistic, don’t we? Rather than what’s the value of the jobs that do exist?

Pocock: Exactly. And what we think we’re identifying here is that working poverty, which is an issue that gets a lot of attention in the US, is increasingly a phenomenon in Australia that deserves more policy attention. The growth in part-time work in Australia is unique in the world — only a couple of countries approach the level of part time that we have here in Australia. That is one aspect of employment which is increasingly characterised by uncertainty about income and hours, for example. And it’s partly one of the reasons why the working poor are receiving increasing attention here.

Dobbie: So you think the situation’s worse here than it is in the United States, do you?

Pocock: Not at all. No. I wouldn’t say that. I’d say the working poverty has had a lot of attention in the US because there are so many working poor in the US. Australia has a much stronger, more meaningful minimum wage regime that’s very, very important to people who are poor. And that’s been really one of the important aspects that’s kept our level of working poor well above the US level. But what we have is conservatively around 12 to 14 percent of Australian workers who are earning below the OECD definition of working poverty. So it’s nowhere near as bad as the US, but it’s increasingly important. What we’ve found is, over the last 15 years of quite significant boom circumstances (the second big postwar boom), we didn’t see any decline in the proportion of people who are working poor in Australia. And there are probably a few signs that there have been increases.

Dobbie: Right. So why do you think there is that increase?

Pocock: I think what we’ve got in Australia over the last 20 years is quite significant growth in part-time and particularly part-time casual employment. And that means that a lot of people don’t have predictable incomes or predictable hours of work. A lot of them are women and some of them are students. And so it’s a transitional phase of their lives. But for a growing number of workers on part-time casual terms (we’ll probably see this increase in the current recession), are increasingly affecting people’s lives. And they mean a wage that, if you’re not backed up by a partner or someone else in your household is not earning a decent living, is a cause a lot of insecurity and certainly poverty. So that part-time story is part of it. But I think it’s more than that. We have a lot of jobs that are in the informal labour market, if you like, and have relatively low real rates of pay. Sometimes well below the minimum wage. And we have other areas of employment like services sector jobs, which are just basically in a low hourly rate of pay.

Dobbie: I have no idea of what minimum wage was, but it was a safety net. So how are people, and from what you’re saying quite a number by the sounds of it, falling through that safety net?

Pocock: That safety net in some ways is an hourly rate. And if you only get ten hours a week, or you’re employed on casual terms, and that’s one in four Australian workers now are employed on casual terms. It means this week you might have eight hours. Next week you’ve got three, and the week after you’ve got 40. So you’ve got no predictability of earnings for a weekly income or monthly or even annually. So that, it’s more than just a good hourly rate which is certainly protected in our minimum wage adjustments. It’s the total package of income that you have on a weekly or monthly basis that will mean the difference between able to eat well or not. Have good housing or not.

Dobbie: Now, employers obviously are going to say, well, we need that flexibility of casual work to survive. You know, we don’t want to be stuck with immovable costs. Isn’t the alternative (and we often hear this argument) that if we don’t have that flexibility as employers, then a lot of these jobs are just going to go overseas.

Pocock: That’s an interesting argument, because an enormous amount of casual employment is in the nontradable goods sector. It’s in the services sector. It’s in our health and our education systems, so it’s not vulnerable to the threat of jobs going offshore. These jobs won’t go offshore. And I know plenty of economies that run their services sector on a much, much lower rate of precarious or casual employment. Only Spain is close to Australia in terms of that level of precarious employment. Lots of European countries have much lower proportions. And many, the UK and so on, have lower levels of precarious employment. You can’t run an economy effectively if you want to have a skilled workforce with very, very high levels of unpredictable earnings. People won’t invest in their skills. And we know that casual workers in Australia, for example, really do miss out on the development of career paths and promotion and training and so on. So there are real hidden costs of having such a high level of casual work in Australia.

Dobbie: That was going to be my next question. And I guess you’re qualified to answer this because you studied as an economist early on in your career, so you can look at it from the, I guess, from the microeconomic perspective. The short-term advantage for a business could be a broader disadvantage for the economy. So does that mean that there needs to be more government intervention? More government rules put in place to try and protect these low-income salary earners?

Pocock: I think there are a number of things that make a difference. I think having a meaningful minimum wage is important, and Australia has got a good tradition on that, and we need to stick with it. I think sometimes what an individual employer looks at is, as you say, very micro level and doesn’t take account of the wider economic effects. So the burden on our skill system of such a high level of casual employment I think is really underestimated. And there are other studies which tell us that precarious employment has a cost on the health system. People who are insecure in their jobs worry more and sometimes have more stress. Not all insecure workers are stressed. But some who genuinely have uncertainty in their earnings. Our book tells the story, for example, of living low with pay not just on the worker, but on the costs for the household, for kids, for the broader community. Our community fabric is affected by high levels of working poverty or insecurity at work. So as an economist yes, I think there is a real externality issue here that perhaps we should be looking at more closely.

Dobbie: But how do we balance that protection for people on low salaries without being too protective and discouraging them from work? Or discouraging them from working more?

Pocock: That’s the perennial public policy challenge for labour law in every country. We want to keep generating employment, and we want to do it on terms that are fair. Australia has had a good tradition on that. I think what we need to do it look at the changing labour market and make sure that a regulatory regime keeps up with the changing nature of employment. For example, the growth in casual work in Australia is really a product of some holes in our regulatory system, which allow employers willy nilly to use casual work even in ongoing employment situations.

Dobbie: Right.

Pocock: You know, the average period of tenure for a casual worker in Australia in their current job is 2.8 years. So we’ve got lots of casuals where they’re there for much longer than two, three, or four years. And really casual terms in employment. Well, that’s a silly thing. They’re permanent casuals. That’s the odd term we use here. And we can do better with our regulatory regime. And it is a constant balancing exercise. That’s for sure.

Dobbie: So is that an example of something you’d like to see changed? That if you’re a casual worker and you’re employed more than a certain period of time, you’re no longer casual.

Pocock: Yes.

Dobbie: I guess the danger is that the employer might just turn around and say well, okay, don’t worry. We’ll get rid of that person and get someone else on the casual basis.

Pocock: That is always a risk, and there are plenty of casual workers in the current recession who will be losing shifts or hours of work, or their jobs entirely. And they won’t show up as people who’ve been made redundant they will simply not get a call in for their shift. And that’s a really big change relative to the last recession when we probably had a better grip on underemployment than we do now with this changing structure of our employment base. So, yes, I would like to see people to have the right to request to become permanent after a qualifying period of six to 12 months. And some industrial awards had provisions like that until a few years ago. And I think that makes sense. Many employers actually do that. They take a look at people, who have been casual for a while, and they see benefits in having people identified with and aligned with the goals of a company and training and, you know, investing in themselves and their workplace. But not all employers do that. There are rogues out there who want to keep turning people over and hey’re in a low wage kind of business. That’s how they make their profit. And I think that does require regulation.

Dobbie: I wonder if those businesses ultimately are successful though. I guess they are in the short term. I wonder if they are in the long term, particularly when there’s a healthier employment market.

Pocock: Exactly. When shortages of labour are there, people look for an employer that commits to them in terms of good conditions of employment. And I think that the answer to that question really depends on the nature of the business. In some cases you can get away with churning lower skilled workers because you’ve got low front-end costs in getting up to speed on the job. But there are lots of jobs where having an experienced person who is attached to the firm and feels looked after really pays long-term dividends.

Dobbie: Now, you grew up on a wheat farm. Gee, we’ve been doing a lot of research for this interview. I tell you.

Pocock: Yes, you have.

Dobbie: You grew up on a wheat farm, and I guess that means that you know all about hard work. You’ve got that whole Protestant work ethic thing going on. Do you think we’re losing a bit of that work ethic in Australia? Or do you think it’s still strong? Is it really a case that the workers are being taken advantage of? Or is there a bit of laziness creeping in as well?

Pocock: I think there have always been diverse sets of workers in this country as much as in any other. There are lazy workers, you know, in certain places and areas. And some of them can get away with it and some of them can’t. But I think Australians as a whole are very hard working. If you look at the stats, for example, on hours of work in Australia we’ve increased the average hours of full time as about between two and three hours in the last 20 years. We’ve got a very significant number of Australians, mostly men, doing very long hours of work. Twenty percent of all Australians at the last census were doing more than 48 hours a week in the week of the census. So, and we know that one in two of them aren’t being paid for their extra of hours of work. They’re doing it because they feel very committed to what they’re trying to do, and they think they might be at risk if they don’t do overtime. So like the UK, we have a lot of people doing long hours of work. I mean it’s very questionable how productive that is for some people at the end of that long hours week. But you know, I don’t think you can argue that Australians are a nation of slackers. And if you look at who takes their annual leave in Australia, we’ve got a lot of people with a lot of accumulated leave who aren’t taking their holidays, for example.

Dobbie: Yeah. Well, it used to be because you were worried about losing your job when you got back. Now I think it’s because we can’t afford to. Maybe it’s a bit of both.

Pocock: Yes.

Dobbie: Do you think the phenomenon you’re talking about here — I mean it’s not uncommon in the Western world, is it really? And do you think that part of that might be a reflection of changing households? You know, we’ve moved from that one primary breadwinner. We now might have households where you’ve got two breadwinners. And sometimes they might be earning quite a decent wage between them. And so we get that increased rich poor gap in the country where some households are raking in high income and taking all the good jobs I guess.

Pocock: I think that’s really one of the big changes of the last two decades is the massive growth in dual earner households. Some of whom are leveraged right up to the limit and need to suck up that income. And this makes that household quite vulnerable to reasonably modest changes in wages, for example. Now I think the level of indebtedness really doesn’t create vulnerability. But the other piece of vulnerability is in the growth in sole-earner household. Very significant growth in a sole-earner sple-parent households in Australia. And when we look at the data on who’s stressed, those households, most of which are led by mothers, are really very stressed households. Lots of people who have relatively low income, of course, are beneficiaries in those households and aren’t in the labour market. But there is a gap between those who are struggling with time and income poverty in those sole earner households with children as well — compared to the breadwinner household where the man is earning a relatively high rate of income.

Dobbie: Now the problem could get worse as well, of course. I mean if you look at the ABS statistics, a lot of the low-income households, of those who actually also own their own houses because they’re older, they’re asset rich, but income poor.

Pocock: Yes.

Dobbie: Now I guess there’s a concern that in the future we’re going to have those old age pensioners who are going to be poor in terms of income. But also asset poor because of not being able to afford to buy their own house. So the situation could be compounded in the future, couldn’t it?

Pocock: Very interesting. I think there is a real gap opening up between those who own housing and those who don’t. So that generations who are coming up who have got parents who own assets are going to be well placed to borrow and inherit and create their own asset base. But for those who don’t get that leg up who haven’t got relatively secure parents who can leave them something and approach the housing market without a lot of backing (in some cases in securing earnings of their own), then I think we could see quite a big gap in terms of housing, as the next generation and the one after it take their place in the labour market and the housing market. I mean the price of housing in Australia really has been a big change in the last 20 years. It’s certainly driving labour market participation and inequality.

Dobbie: It might even itself out of course, because we’re going to live so long that we’re going to need to reverse-mortgage our houses as we grow old. There’ll be nothing left when we’re on our deathbeds.

Pocock: Well, I think a lot of middle-income earners are certainly going to be thinking about doing that. Yes. Especially given changes in the superannuation values of the last 12 months.

Dobbie: It’s all food for thought. And if you’re one of those employers whose working casual workers for some immediate cost benefit, hopefully a few consciences might have been prodded and people might start thinking about the broader economy. Thanks so much for your time today.

Pocock: Thank you, Phil.