Another Roy Morgan job security survey is out today, and yet again they fail to find the job insecurity the unions would have us believe WorkChoices is causing.
According to the ACTU in March 2007:
Job security for Australian workers has been eroded – with 3,761,000 Australian workers employed in businesses with less than 100 staff having lost any protection from being unfairly dismissed.
That’s about 35% of all workers at increased risk of being ‘unfairly dismissed’. Yet by how much has the proportion of people feeling their jobs are safe gone down? One percentage point over the last year, and three percentage points since WorkChoices was introduced, to 80% of all workers believing that their present job is safe. Perhaps there is a very small WorkChoices effect there, but that 80% is higher than it was between 1999 and 2004.
Another question asks whether, if the respondent became unemployed, he or she could find another job fairly quickly. 72% of respondents thought they could find another job fairly quickly – the highest figure since Morgan started asking the question in 1975, when 57% of respondents thought that they could find a job fairly quickly. The lowest ever result was 38% in 1992.
The two questions highlight a difference between job security and employment security. All other things being equal, a highly-regulated labour market makes it less likely that someone will be dismissed from the particular job they have now. So it increases job security. But all other things being equal, a highly-regulated labour market will also make it less likely that employers will take on new staff. So this lessens employment security, the confidence workers have that they will have a job, even if not necessarily the job they have now.
But the job security statistics suggest that employment laws are not the major influence on either job or employment security. Commercial considerations are the biggest factor, and relationships within the workplace probably the next most important.
Andrew Norton 
I’m sure other people will point it out, but people also worry about job security if the economy slows, and also many have experienced times when they’re out of favour in the workplace (ie more likely to be fired). Getting a new job may have large transaction costs (ie further to travel, getting used to new co-workers, etc).
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Flexible labour markets don’t lead to economy slow-downs and inflexible labour markets don’t protect job losses that occur in a recession. Indeed — quite the opposite!
The reality of the modern labour market is that many people want flexibility and they want to change jobs and perhaps even careers in their life.
Unemployed people benefit from a more flexible labour market because it leads to more jobs.
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While you make some fair points John, to focus solely on the positives is a little disingenuous. There is also the issue of work/life balance. An overly ‘flexible’ labour market can be one that fosters an environment of ‘one-upmanship’ where employees are forced to agree to work long/irregular hours in order to remain competitive as a prospective employee. Those with families are at a distinct disadvantage compared to younger, more ambitious, workers who may not have the quality or experience, but are willing to do whatever it takes to climb the corporate ladder.
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Graham, what’s the problem with that? As if families do not get enough handouts! Why should employers be forced to provide working conditions that reduce their profitability when cheaper/better/keener workers are available? The underlying problem I have with your view is the implicit assumption that a particular job is that employee’s entitlement, like his car or his dog. It’s not – it’s a contract between him and his employer. Both parties (ie not just the employee) should be free to pursue modifications or alternatives if that relationship no longer works for either or both of them.
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Rajat:
Society recognises that the work/life balance is important for its overall health – and we have laws and regulations that serve that ideal. A social democratic society recognises that there needs to be a balance between liberty and equality, that it is not always easy to achieve, but that we should seek it nonetheless.
It seems to me that an under-regulated Labour market – when followed to its ultimate conclusion – will encourage a global system that competes itself into a situation where the primary function of an individual is as a worker, forced to continually diminish their standards and quality of life in order to remain a competitive choice for employment. It can escalate to the detriment of society in general, which should encourage a balance between work and other avenues of personal/communal development.
Individual contracts (liberty) is important. So is the social contract (equality).
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Graham, I challenge you to name any country that has embraced free markets where workers’ living standards and quality of life have degraded over time. That is a Marxist-textbook view that is wholly unfounded in reality. Compare the life quality of modern Asian workers with their grandparents. You sound like you think competition is a bad thing – do you also oppose tariff cuts and Sunday trading for the same reasons?
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Rajat, an argument I hear from time to time is that once the rights of workers are reduced too much, it causes people to drop out of the workforce to a greater extent, and thus reduces overall workplace productivity. I don’t think it makes much difference whether that is real or perceived, as long as it happens. In the case of Workchoices, for example, the extra gain from further liberalization from an already fairly liberal system may have been countered by higher non-participation rates. I haven’t seen any real evidence for this one way or the other, but I’d be interested to know of it.
Graham: I think you mean “equity” not “equality”.
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Rajat:
Ok, let’s take the best example and one that Libertarians like to hold up themselves shall we? Hong Kong.
Click to access WLB07.pdf
http://www.cuhk.edu.hk/cpr/pressrelease/051104e.htm
What’s interesting about that first survey is the amount of people who feel like they HAVE to stay back and work long hours to keep the boss happy. Not WANT to. The average working week is up over 50 hours.
Unfounded in reality? I don’t know what reality you live in Rajat, but I’ve worked in several offices and have found it to be wholly founded IN reality. It’s already ocurring within the regulated system we currently have.
You’re rather quick to accuse me of being a Marxist and being anti-competition. I’m neither. In fact I would argue that tariffs shouldn’t exist at all, and of course Sunday trading should be allowed.
Not everyone who disagrees with your extreme Laissez-faire ideology is a Marxist Rajat.
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Conrad:
Both 😛 But yes, equity would have been a more accurate term and was what I meant.
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Graham, pointing to results from HK is like pointing to results from Mars. The reality of the situation is completely different. If Australians had cheap Chinese labor breathing down their necks and thought work was good in the way people there do, I’m sure they’d be working a lot harder too. In addition, because workplace laws are so liberal in HK, it is much simpler for people to change jobs. Not surprisingly, many people think thats a great thing, and that’s a benefit that isn’t mentioned there.
I might also point out that the average hours worked in Australia (around 43 for males in FT employment) is not a whole lot different, especially if you exclude public service jobs, since you get to work Saturday in HK, and this artificially increases hours work compared to Australia (just private industry jobs would be a better comparision), which shows that the diffence in laws doesn’t make for much of a difference in hours worked (public service exlcuded). The type of work people do is also different, as HK is basically a financial/infrastructure centre, so equating for type of job would be neccesary before a meaningful comparison could be made.
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Conrad these types of comparisons are always difficult because of the number of variables associated with them. That’s what makes economics in particular a field prone to differing interpretations.
What that survey does show, and similar surveys have shown in Australia too, is that in general people feel like they need to work longer hours than they are comfortable with in order to keep their jobs and to be competitive. It happens already. Removing regulations that attempt to provide a ‘norm’ will only lead to that norm increasing as competition demands. As the survey showed, people don’t want it to. There have also been studies on the undesirable effects that this has on both the individual and as a result, society in general. Here’s one of them:
Click to access Overwork.pdf
I would disagree that 42 hours in Australia (which is what I’ve read) and 49 hours a week isn’t a significant difference. It’s almost a full standard day.
Suggesting ‘competition will sort it all out’ is just as dangerous as suggesting ‘the state will sort it all out’ in my opinion. We have sufficient evidence at present to suggest neither work as an ideal. I think the Labour market is an area that requires some regulation.
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Graham,
I don’t think competition is increasing in many areas — I think its decreasing and sure to do so in the future as the population ages further. In addition, if people have to work harder than they want (generally to get what they want — big houses, big cars etc.) — then so what — the world is a competitive place and its likely to become more so in the future. In case you’re interested, here are the results from 2005 about whether people are overworked or not (of course, simply asking people doesn’t seem like a great question to me — I’d prefer to do no work if possible):
http://abs.gov.au/ausstats/abs@.nsf/7d12b0f6763c78caca257061001cc588/0f152d0eab2c88bdca2571b000153da2!OpenDocument
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Graham, economists generally subscribe to revealed preference – ie we care what people do rather than what they say. As a generalisation for the purposes of this format, I would suggest that people who work more than they say they would like are either: (1) doing it for money – which is their decision; (2) doing it for some longer-term purpose such as promotion – also their choice; or (3) doing it because they are so low-skilled they have no other choice – in which case I would argue that such people would be unemployed in a more regulated labour market. That is not a better outcome in my book.
Conrad, if by “participation”, you mean “in the labour force” – ie willing to work – then I would agree that to the extent less regulation means lower wages, less regulation will tend to reduce participation. A high wage will encourage high participation, but will reduce job creation, thereby creating unemployment. Surely what is most important is the number of jobs created. As for productivity, low-wage jobs almost by definition involve less productive workers than high-wage jobs. So if less regulation=lower wages=more jobs, then labour productivity would be expected to fall. Superficially that seems bad, until you remember that the low-skilled employees dragging down productivity would probably be at the pub or watching TV in a more regulated labour market.
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“Graham, I challenge you to name any country that has embraced free markets where workers’ living standards and quality of life have degraded over time.”
Rajat I challenge you to name any country, anywhere, where there are no labour market regulations at all. .
Western Europe is constantly told that it should grow faster… It has comparatively high levels of unemployment and high levels social expenditure. It has been this way for some time. Yet Europe has not collapsed. Living Standards in Western Europe are amongst the highest in the world. There are some negative social consequences of high unemployment for sure, but no country is perfect. Social democratic countries like Finland have led the world in technology and innovation… They also have extensive laws to regulate their labour market… I think there’s no evidence to suggest that sensible labour market regulation is bad for the economy. I mean most ppl on this blog couldn’t even contemplate most of the labour market regulations in Western Europe – yet they are not down in the doldrums.
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Simmo, the issue is not whether a country can have lots of labour market regulation and muddle through or even prosper. The issue is understanding if and how labour market regulation contributes positively to society? What is the chain of causation from regulation to positive outcomes? I would argue that its contribution is to keep lower-skilled people out of work for the benefit of the higher-skilled. Surely that’s neither ‘sensible’ nor equitable?
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Simmo
Hong kong.
It was a backwater in 1960 and now has a GDP per head about = to ours.
Almsot no labor market regulation to speak of. Experienced one of the quickest jumps into prosperity we have ever known.
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CIA fact book: Hong kong.
Median eearnings $US38,000
explanation
Hong Kong has the very antithesis of an over-regulated inflexible labor market. Nonetheless in the last 10 years a considerable amount of labor legislation aimed at improving the working conditions and welfare of the workers has been passed. The main labor ordinance is the Employment Ordinance which sets out the conditions of service in general employment and which includes provisions for paid holiday leave, sickness allowances and severance pay.
There is no legal minimum wage in Hong Kong. Wages can be calculated by the hour, day or month, or by piece rate.
The Employment Ordinance sets minimum entitlements for employees, such as statutory holidays, sick and maternity leave, severance and long-service payments.
It is up to employers whether to provide additional benefits, such as a Lunar New Year bonus (normally equivalent to one month’s extra pay), medical allowances, subsidised meals, good-attendance bonus, paid holidays over and above statutory public holidays, subsidised transport to and from work, free or subsidised accommodation.
The Factories & Industrial Undertakings Ordinance aims to strictly regulate the employment practices of the “sweat shop economy” with which the territory has long been associated. Under the provisions of the Employees Compensation Ordinance injured workers can claim compensation for work related injuries. Most employment disputes come before the labor tribunal whose proceedings are conducted in Cantonese and are generally very informal.
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Simmo,
I work in France now and then, so I certainly can contemplate it, and I can also tell you that the labor laws are ridiculous, and sure to be negative in the long term. We can’t even hire people (and offer free training in the process), since if something goes wrong there is nothing you can do about it. This clearly affects young people, since getting part time jobs/training etc. is much harder. The fact that France has got to where it has now is surprising, and even they know they have to do something. So I agree with Rajat as to what is important completely on this. Alternatively, I think in places like Australia, the amount of benefit you could get from liberalizing the labor market more is presumably much more limited, so its worth considering other effects that come with it to a greater extent.
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Jc, you’re very welcome to work in Hong Kong… where the possibility of having weekends to yourself are slim to none, an early work day concludes at 9-10pm… that sounds appealing doesn’t it… Also HK is (or used to be) a city state with mainly white collar employment… professional employment is hardly ever regulated… as opposed to an economy with manufacturing etc… as for their rapid rise… how can you compare a city state country with more orthodox countries?? they’ve done well but so have comparable countries like singapore, luxembourg etc… HK’s rise has absolutely nothing to do with their labour market regulation or lack thereof… Why don’t you mention South Korea, whose rapid rise was equally as impressive, and who have traditionally had very strong labour unions – not to mention well directed industrial policy…. same with Japan
As for France they have gone too far for sure, but there’s no way they will liberalise completely…. What about Nordic countries? you can’t possibly say that their economies are not successful, yet they maintain labour market regulation at levels that would not even be considered in Oz….
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“Graham, I challenge you to name any country that has embraced free markets where workers’ living standards and quality of life have degraded over time.”
Wikipedia has this:
“The opening of the economy and the deregulation of the labour market also fostered unemployment, which went from less than 7% in 1991 to over 12% in 1994, then increased sharply propelled by the Mexican shock, and remained afterwards always over 12%.”
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Sorry, the country is Argentina
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I guess we can judge the value of the HK workplace by seeing whether people are trying to get to HK or whether people are trying to leave HK.
In a free labour market there would be no real unemployment. In that scenario, if an employer valued the contribution of an employee they would have to accomodate the work preferences of that employee.
Cultures change and we are still in the process of having a “downshifting” revolution… but my prediction for the future is that employers will increasingly be offering more and more flexible arrangements to be able to keep the employees they want.
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wsimmo
Hong kong has a very big problem with illegal immigration. Perhaps these people never realized they didn’t have holiday loading in HK?
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Simmo,
I worked in HK for a number of years, and you are completely over-exagerating. The main difference is that Saturday is a half day for most people, which gets the average hours up. If its 49 hours per week, then that all that shows is that people are working about the same hours as Australia plus a few on Satuderday. Big deal. I might point out that South Korean workers do some of the longest hours in the world (the longest in the OECD if I remember correctly), thus labor market regulations don’t save you from working ridiculous hours.
In addition, since there is no minimum wage etc. the training system works better, because if you’re poor and want to get a job and training, its much easier than Australia (and the difference between France is ridiculously so). Its also more worthwhile, because no-one is going to pay you 30K a year to dig holes. Hence the training system works, unlike the apprenticeship system in Australia (no doubt its also partially cultural.). THe place is also much more convenenient because there is essentially no tax for poor people and there is no minimum wage. This means most services are fast and cheap, so even if you happen to work more, the amount of time you spent on crap is less, since you just get someone else to do it for you.
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Great point Russell! Argentina has been a constant source of embarrasment for the IMF. The IMF basically partnered and endorsed Argentina’s economic reforms of the early 90s. Argentina adopted a no holds barred approach to economic liberalisation and privatisation… Corruption was never touted as a reason for the collapse… in fact during the 90s Argentina was the toast of Washington and Wall Street. It was the model to be followed for developing countries… until it spectacularly crashed in 2001…. It sent a clear message to the developing world – follow the IMF and this is what happens… they liberalised far to quickly and were left wide open to volatile capital markets. They had a rigid exchange rate regime, tying the peso to the dollar on a one-to-one basis… which was a big problem, but no one was complaining about this when the good times were rolling, because it eliminated inflation and exchange rate risk for foreign investors… Its the perfect example why free markets shouldn’t be taken too far… especially in a developing country context….. In fact, I challenge anyone to name a country that has developed (i’m talking from a very low base) on the back of a free market economic structure, Washington Concensus style… I don’t think that you can name one… not even the US did, recall that they had an entrenched isolationist policy up until the second world war…
Coincidentally, since their crisis in 2001, Argentina have rejeted the Washington Concensus and have grown rapidly. The IMF is now struggling to find clients and is downsizing rapidly (this was reported in the Wall Street Journal Asia). Free market ideology is truly waning… Markets are good, don’t get me wrong… but free and unfettered markets almost never lead to the best outcomes. There’s got to be a sensible balance.
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Conrad in the first sentence of your post you tell me that competition isn’t increasing and then you go on to say that the world is a competitive place and it’s likely to get more so…
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(1) doing it for money – which is their decision; (2) doing it for some longer-term purpose such as promotion – also their choice; or (3) doing it because they are so low-skilled they have no other choice – in which case I would argue that such people would be unemployed in a more regulated labour market.
Rajat: It’s convenient to define all your variables and pretend they’re the only ones you need to work with. Way to easy though.
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Graham,
Sorry for not being clear, but I think that competition at the individual level within countries like Australia is decreasing, but that we’re likely to see competition increasing across countries. You should therefore be happy that people are willing to work harder even if money is easier to find, since in the long term places like Australia will need these people.
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So it’s a race to the bottom then? Whoever is willing to give up the most to remain competitive, gets the job?
You mentioned before that Hong Kong is competing with cheap labour from China. So are we. And increasingly we will have to compete with developing countries that can offer employees who are desperate for work and will do what it takes to present themselves as a viable option for employment. Longer hours and less benefits.
For my money the answer shouldn’t be a race to the bottom, where individuals are forced to give up more and more in order to remain competitive on a global market. Australia is a country rich in technology and skills. That’s where our future lies. We can compete and still maintain a reasonable standard of living.
I don’t buy the argument that people are happy working 50+ hours a week. And even if they were, is it really healthy for the overall good of society? I would think a strong case could be made to suggest otherwise.
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Graham, if people want to work 50+ hours a week, its fine by me. You can see the ABS data to get a good idea of the real figures, but you should exclude people like me who want to work less until the number zero is reached. I don’t see this as a race to the bottom.
I don’t disagree with you on where Australia’s future lies. Alternativaley, with an aging population if you want to have doctors, teachers, scientists and so on, then some one is going to have to do the work. If people want to do it, thats better than them not wanting to do it, and I don’t see why you would want to restrict people. In this respect, I’m sure thats good for society — unless you don’t want these sorts of services/investments.
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