Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2004 10
THE AUSTRALIAN LABOUR MARKET
IN 2003
JOHN BURGESS*, JULIE LEE* AND MARTIN O’BRIEN**
T
he labour market remained strong throughout 2003 with ongoing jobs growth and
a continuation of the trend towards a lower unemployment rate. Unlike previous
years, in 2003, additional jobs were mainly full-time jobs and the female labour force
participation rate declined. After 11 years of ongoing improvement in the condition of
the labour market, this boom is lacking the three developments associated with past
improvement in the labour market: strong wages growth, strong growth in labour force
participation rates, and increased industrial disputation. The review also considers the
ongoing growth in the employment services sector associated with the spread of temporary
agency employment. The topical issue of the ageing of the population is then considered
with a critical examination of the current policy direction of extending the working life
of Australian workers. Finally, a related issue is reviewed: the provision of child care
services in Australia.
INTRODUCTION
For 2003, the number of Australians in work continued to grow and the unemployment rate remained below six per cent. While the rate of economic growth
continued to be around three per cent, there was some signs of a slowing in the
economy. In the first half of 2003, farm sector output contracted considerably,
largely in response to extensive drought conditions across Australia. The Reserve
Bank of Australia on two occasions increased the cash rate by 0.25 per cent and
the Australian dollar appreciated against the US dollar and most of the other
major trading currencies. For 2004, the prospects for growth and jobs in the
Australian economy are not good given the possibility of a further interest rate
rise together with the declining competitiveness of Australian industries as
the Australian dollar continues to appreciate. One of the major policy issues
emerging in Australia and in many other OECD economies is the ageing of
the population with its implications for the financing of retirement incomes and
the provision of health services. Both the Federal Treasury and the Reserve Bank
have been vocal in warning the community of the looming fiscal crisis associated
with the ageing population. The funding of child care and family allowances
continues to be in the news following the extended public debate on paid
maternity leave in 2002 and 2003.
The review commences with a brief summary of developments in the
Australian labour market in 2003. It then discusses the Reserve Bank’s raising of
* Employment Studies Centre, University of Newcastle, Callaghan, New South Wales 2308,
Australia. Email: [email protected] ** School of Economic and Information Systems,
University of Wollongong, Wollongong, New South Wales 2522, Australia.
THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 46, NO. 2, JUNE 2004, 141–159
142
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
interest rates as a policy shift, and its consequent impact on the housing and construction sector. The appreciating Australian dollar and its impact on employment is then considered. This leads on to a brief overview of the booming
employment services sector with an emphasis on the employment arrangements
common to the sector. The review then moves on to a discussion and evaluation
of the looming fiscal crisis associated with the ageing of the Australian population. The Treasurer released a statement in February 2004 announcing policy
changes to end early retirement and to extend the working life of older workers
(Australian Broadcasting Commission[ABC] 2004). Finally, the discussion turns
to child care provision and potential policy prescriptions aimed at lifting labour
market activity rates of young parents to compensate for the possibility of a labour
shortage associated with the ageing of the population.
THE
LABOUR MARKET
2003
Despite the unemployment rate reaching a 20-year low, wages, participation rates and
industrial disputation are not behaving procyclically
Throughout 2003, the unemployment rate remained below six per cent, and by
the end of the year it had declined to 5.6 per cent (seasonally adjusted), a rate
not seen in Australia since the late 1970s. Not only has the unemployment rate
declined, but also the number of the long-term unemployed has diminished, as
has the share of the long-term unemployed in total unemployment (Table 1).
While this is good news, it needs to be remembered that around 570 000
people remain officially unemployed and another few hundred thousand are in
forms of underemployment and hidden unemployment (Burgess et al. 2003: 131).
Table 1 reveals some interesting developments in the labour market over the
past year. Unlike previous years (Burgess et al. 2003), the majority of additional
Table 1
Australian labour market, December 2002–December 2003
Indicator ‘000*
Full-time employment
Part-time employment
Total employment
Unemployment
Labour force
Unemployment rate
Male labour force participation rate (%)
Female labour force participation rate (%)
Labour force participation rate (%)
Long-term unemployment**
Long-term unemployment as % of
unemployment**
Dec 2002
Dec 2003
Change
6779
2697
9477
616
10 094
6.1%
72.2%
56.2%
64.1%
134
6927
2738
9666
574
10 240
5.6%
72.1%
55.8%
63.8%
124
+148
+41
+189
-42
+146
-0.5
-0.1
-0.4
-0.3
-10
23.3%
23.1%
-0.2
*Seasonally adjusted; **November 2002 to November 2003.
Source: Australian Economic Indicators, February 2004, Catalogue 1350.0.
THE AUSTRALIAN LABOUR MARKET
IN
2003
143
jobs have been full-time jobs. While the male participation rate continues to
decline, there was a considerable reduction in female participation rates, again
reversing the longer-term trend previously highlighted (Preston & Burgess
2003b). The two developments may be related because past experience demonstrates that strong part-time jobs growth has been associated with an increase in
female labour force participation rates.
This marks the 11th successive year in which the average unemployment rate
has declined. With such a sustained boom in jobs, nearly two million additional
jobs since 1992/93, there are some missing elements associated with past booms
in jobs in the Australian economy (see Indecs Economics 1995, Ch. 2–4):
(a) increasing nominal wage demands and rising real wages
(b) increasing inflation rate
(c) an increase in labour force participation rates
(d) increasing industrial disputation
Why have these elements been missing over the past decade? First, the institutional change to wage determination arrangements has removed coordinated
and centralised wage determination from the national agenda. Wage determination is more decentralised, less coordinated, and staggered through time. The
concurrent and solidaristic element associated with past wage determination
arrangements has diminished (Preston & Burgess 2003a). Many of the new jobs
are in sectors that are not traditionally union active, have high part-time employment densities, and are service sector related—in these, it is difficult to bargain
for wage increases on the basis of productivity gains (Sullivan et al. 2003). Second,
the trade union density has declined and non-union and individual bargaining
arrangements have developed and expanded (Burgess & Macdonald 2003). These
arrangements are not associated with industrial action. In turn, the ability
to legally undertake action and to access the workplace to organise has been
diminished within the Federal jurisdiction. Third, the Reserve Bank has a
clear mandate to keep inflation within its acceptable range (2-3 per cent on
average) and to act pre-emptively if there are any threats to the target. It
has already indicated that unacceptable nominal wages growth will result in
pre-emptive interest rate increases (Stegman 1997). Finally, the moderate
growth in nominal and real wages may have tempered any increase in labour
force participation. The gender convergence in participation rates continues: for
men, there continues (despite the jobs growth) to be a decline in participation
rates, and for women (despite the last 12 month’s experience), there has been a
longer-term increase in participation rates. Over the past decade, male rates
have declined around two per cent (absolute), while female rates have increased
by around four per cent in absolute terms. Previous reviews of the labour
market have highlighted the dramatic shift in the industrial composition of
jobs as well as the growing share of part-time employment (Burgess and
Mitchell 2001). Over the past decade, employment has contracted in agriculture,
mining, and utilities and has remained static in manufacturing—all areas of
traditional full-time male employment. Most additional jobs are found in three
sectors: retailing, property and business services, and health and community
services. Despite the modest increase in part-time jobs over the past 12 months,
144
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
in December 2003, the part-time employment share was still a considerable
28.3 per cent.
The Reserve Bank moves beyond its inflation watching brief and addresses the growth
in household debt: Disturbing implications for the building and construction sector
The Reserve Bank raised cash rates by 0.25 per cent in November and December
of 2003. In his November statement, Reserve Bank Governor Macfarlane stated
that there were no short-term inflationary pressures; indeed, the appreciation of
the Australian dollar had reduced inflationary pressure. Over 2003, the inflation
rate was around 2.5 per cent, well within the official target range. The main
justification for the interest rate increase was the rapid expansion in credit, up
20 per cent for households during the previous 12 months. This was regarded
as unsustainable and not consistent with economic stability over the longer
term (Macfarlane 2003a). The same statement was released in December, again
blaming the rate increase on the rapid expansion in domestic credit (Macfarlane
2003b). This represents a departure from past practice because now the containment of inflationary pressures is not the primary reason behind rates adjustment,
rather, the justification is related to the perceived non-sustainability of household debt. What the Reserve Bank Governor is saying is that there is too much
borrowing, which will only lead to an asset price bubble that will have major
destabilising implications for the economy, so lets slow down the borrowing before
it gets out of hand.
The major factor behind the growth in household debt is the increase in
housing loans. This has been driven by low interest rates, competition in
housing loans market and an inexorable rise in housing prices across Australia
(Macfarlane 2003c). It is largely the demand for investment housing that is
driving the growth in borrowings. This is also linked to the above factors, together
with the incentive to borrow provided through the personal taxation system
(negative gearing).
As a consequence of the housing boom the housing and construction sector
recorded the largest increase in both output and employment of any sector
during 2002/2003—employment grew by 11 per cent in the year to September
2003 (Reserve Bank of Australia 2003). This is one of the factors driving the
expansion in full-time employment (see Table 1). The November review of
economic conditions by the Reserve Bank reported a decline in building
activity in the first half of 2003, followed by a slight pick-up in the second half
of the year (Reserve Bank of Australia 2003: 21). Towards the end of 2003 there
was a decline in building commencements and building approvals (Australian
Bureau of Statistics [ABS] Cat. No. 1350.0), although the outlook for the construction sector appeared stronger than that of the housing sector (Australian
Industry Group 2003). In the media, the reports suggested a more drastic
fall-off in building activity with warnings from industry spokespersons of a
looming slump in the sector (Gottliebson 2003; Wade 2004).
Building and construction are the sectors where the interest rate increases will
be felt and there is no doubt that the industry has boomed over the last decade,
recording a total jobs increase of nearly 200 000 since 1992/93. Also, unusually,
THE AUSTRALIAN LABOUR MARKET
IN
145
2003
employment in the sector is predominantly male and full-time, and it is an important source of apprenticeships (Toner et al. 2003). The danger is that such an
interest rate-prone industry can shed jobs and apprenticeships very quickly, and
in turn, this will have a flow-on effect to building material supply industries such
as timber, steel, concrete, bricks, transport, cabling, and plumbing supplies. While
there is the expectation of a further interest rate rise in the next few months (Uren
et al. 2004), it could be compounding an already downward adjustment in
the building and construction sectors, and in associated sectors (especially
manufacturing and transport) that support the industry. A central policy
question is whether interest rate increases are the appropriate means of
cooling off the industry when the taxation system may be a contributing
structural factor behind the industry boom. Further interest rate increases
have implications for the value of the Australian dollar (see below).
THE
RISE AND RISE OF THE
AUSTRALIAN
DOLLAR
There was a strong appreciation of the Australian dollar throughout 2003, nearly
one-third against the US dollar and over 20 per cent against the trade weighted
index (the basket of currencies that covers Australian trade) (see Table 2). In
general terms,Australian goods and services are more expensive in international
markets and internationally produced goods and services are cheaper in Australia.
This is favourable for Australian consumers (cheaper cars, French champagne,
overseas holidays, computers, software, petrol, and electronics) and for Australian
businesses that rely on imported inputs (e.g. the transport industry should have
lower operating costs). However, it makes it difficult for traded Australian goods
and services that are exported or compete against imports. There is also an
increased cost advantage to sourcing production offshore to take advantage of
the lower operating costs—this could lead to a growing exodus of service jobs
offshore such as aircrew and call centre operations (Burgess & Connell 2003).
What is driving the appreciation of the Australian dollar? First, there is the
inherent weakness of the US dollar that has declined against most currencies
largely in response to sluggish US growth and a growing US trade deficit (The
Economist 2004). Second, there has been an increase in commodity prices and in
general, those countries that are commodity traders (Australia, New Zealand,
Table 2
Currency movements, foreign currency per Australian dollar
Currency
Dec 2002
Dec 2003
Change (%)
56.620
35.320
54.030
67.140
1.0792
52.200
75.270
42.250
59.900
80.490
1.1497
63.500
32.9
19.6
11.1
19.9
6.5
21.6
US dollar
UK sterling
Euro
Japanese yen
New Zealand dollar
Trade weighted index
Source: Australian Economic Indicators, February 2004, Catalogue 1350.0.
146
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
South Africa) have experienced an appreciation of their currency against other
trading currencies (Sender 2004). Third, the increase in Australian interest rates
draws investors into the Australian bond market that has very attractive yields
relative to other bond markets. Further interest rate increases (Uren et al. 2004)
will encourage further holdings of Australian bonds.
Australian companies with offshore operations will suffer a decline in their
earnings in Australian dollar terms (Ubels 2004). The Australian Industry Group
(2004) reported that a survey of 800 manufacturing companies revealed estimated
sales losses of A$7 billion in 2003 from reduced export sales and increased imports.
The survey revealed that 17 per cent of the survey respondents are considering
locating some production operations offshore. The sector leading the way in its
intention to relocate was clothing and textiles.
The currency markets remain volatile with the US dollar being supported
by Japan and China—major trading partners of the USA who are reluctant to
allow the US dollar to continue to depreciate and thus erode their competitive
advantage (The Economist 2004). At this stage, some sectors will be shedding jobs
if the appreciation of the Australian dollar continues. Further interest rate
increases in Australia will only exacerbate these problems.
THE EMPLOYMENT SERVICES INDUSTRY: LABOUR OUTSOURCING AND
SHORT-TERM EMPLOYMENT ARRANGEMENTS
The Australian Bureau of Statistics has published its second survey of the
Employment Services industry, covering 2001/2002. The first survey was
conducted in 1998/99. The constituent businesses of the industry generate
their income through employment placement, which covers both labour hire
and the direct placement of staff into employing organisations. What is
interesting about the industry, in the context of the Australian labour market,
is its growth and the extent of its activity. While to some extent the expansion
in the employment services industry is related to the outsourcing of labour
services for the unemployed through the Jobs Network (Eardley 2003), these
activities only represent a small component of the business activities of the
sector.
The two surveys demonstrate a rapid expansion in the sector with an approximate 30 per cent increase in the number of organisations operating in the
sector and a 36 per cent increase in the number of job placements being
undertaken. Around 10 per cent of total placements are linked to the Jobs
Network. Around five per cent of placements are for permanent positions and
the balance consists of temporary and contract placements. Over one half of the
temporary placements are in health care/medical and trade/labour occupations.
The number of on-hired workers (or temps) associated with the sector increased
from 307 000 in 1998/99 to 322 000 in 2001/02. While this suggests that the
number of workers employed as temps at any one time is around three per cent
of the workforce, the impact of the employment services sector in reshaping and
restructuring employment should not be understated.
As Peck and Theodore (2002) demonstrate, the employment services sector
is a global business that covers the professions and unskilled labourers, includes
THE AUSTRALIAN LABOUR MARKET
IN
147
2003
hires of a few hours and contracts covering several years, and supplies a range of
labour and human resource services to client organisations. It is expanding across
all sectors and all occupations, and has benefited from the rationalisation of the
public sector in many countries (Hall 2002). In Australia, the main concerns with
the sector are its functioning outside of labour regulations (Campbell et al. 2002),
its ability to recontractualise employment, and the potential problems for skills
and occupational health and safety associated with a transient and irregular
employment (Hall 2002; Labour Hire Taskforce 2001).
What is interesting from Table 3 is the growth in the number of operators in
the industry (around 80 per cent have less than 10 direct employees) and the
growth in the number of placements. On both counts, the sector exceeds the
growth of jobs in the economy. Permanent placements and government-related
training and employment placements both increased, but short-term placements
increased by around 900 000 in a 3-year period. The number of temps or
on-hired workers grew slightly higher than the growth in jobs, but the growth
in short-term placements is extraordinary. The reasons for this are unclear. It
could represent skills shortages, the restructuring and funding of public services,
a shift towards external recruitment and the associated provision of human
resource services, or the re-contractualisation of the workforce and associated
labour and flexibility advantages (lower on-costs, reduced protection, lower
unionisation rates). However, there does appear to be a discernable shift towards
outsourcing employment placement and short-term job placements. At the
moment, the total placements of the industry represent around one-third of
the total jobs in the economy. At the margins, extensive job churning is taking
place with many jobs of short-duration being filled through temp agencies.
IS
THERE A LOOMING AGEING CRISIS IN
AUSTRALIA?
Over the past year there have been several official statements on the looming
ageing crisis and the negative implications associated with it in terms of increasing
dependency ratios (population/workforce) and a deteriorating fiscal position
associated with the growing demand for State-provided retirement incomes and
Table 3
Employed services sector in Australia 1998/99 to 2001/02
Organisations
Locations
Direct employees ‘000
On-hired workers ‘000
Permanent placements ‘000
Temporary placements ‘000
Government supported placement ‘000
Total placements ‘000
1998/99
2001/02
2093
5013
28
307
157
2302
285
2746
2704
5574
32
322
189
3214
335
3738
Source: Australian Bureau of Statistics, Employment Services. Catalogue 8558.0.
148
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
health services (Henry 2003; Macfarlane 2003d). Treasurer Costello announced
that the government intended to extend the working lives of Australians as a way
of addressing the crisis (ABC 2004). This approach assumes that there are jobs
available for older Australians—an assumption that is challengeable.
An ageing society is typified by an absolute and relative increase in the number
of older people (generally aged 65 years and over) among the population.
Coexisting with this situation is a smaller proportion of the population in the
traditional working ages of between 15 and 64 years of age. Therefore, while the
proportion of the population ‘dependent’ on social expenditure spending is
expected to increase, the proportion of persons ‘active’ and working, and thereby
forming the traditional income tax base, is expected to shrink. At the very least,
this situation is anticipated to place strain on the Commonwealth government’s
budget to finance its social security and health obligations (Treasury 2002). At
the extreme, this situation could lead to intergenerational conflict from a younger
minority financially supporting an ageing majority (Johnson et al. 1989). Of
course, this situation becomes further complicated by a declining older male
worker (aged 55–64 years) labour force participation rate.
Is there an ageing crisis in Australia? The proportion of the Australian population aged over 65 years is projected to increase from the current 12 per cent
of the population to 18 per cent in the year 2021 and 26 per cent by the year
2051 (Bishop 1999). Figure 1 shows that the proportion of the population in older
male age groups is clearly increasing over time. Of particular importance are the
steeper sections in the age distribution at regular intervals in time, representing
the large proportion of the population comprising the baby boomer generation
(individuals born after 1946 and before 1960). This generation started reaching
Figure 1
Male population distribution by age, 1971—2051.
Source: Australian Bureau of Statistics. LFS Datasets. Catalogue 6291.0.40.001 Australian Bureau of
Statistics, Population Projections. Catalogue 3222-0.
THE AUSTRALIAN LABOUR MARKET
IN
2003
149
the 35 to 44-year-old age group in the early 1980s, and the 45 to 54-year-old
age group in the early 1990s. At present, Australia is experiencing a large increase
in the number of males aged 55–64 years.
As well as encouraging individuals to finance their own retirement income and
health, an alternative policy to allay future budget pressures identified by the
Commonwealth government in the 1980s was to encourage longer labour force
participation of older workers (Economic Policy Advisory Committee 1988).
Research has shown that projections of government social security expenditure
in the future are reduced if early retirement trends are reversed and/or a later
age of retirement is established (e.g. Guest & McDonald 1999, 2000; Access
Economics Pty Ltd 2001). Thus, legislation was introduced at the federal
level and in all states throughout the 1990s to prevent age discrimination in
employment and retirement practices. More recently, a number of policy reforms
have been initiated as part of the ‘National Strategy for an Ageing Australia’ to
encourage greater older worker labour force participation. These initiatives are
contained in welfare reform proposals (Department of Family and Community
Services [DFaCS] 2000), the House of Representatives inquiry into older age
unemployment (House of Representatives 2000), the 2001–02 and 2002–03
Commonwealth Budgets (DFaCS 2001, 2002a), and the ‘Australians Working
Together’ policy (DFaCS 2002b). Proposed policy is supply-side-based, with
the potential role of labour demand constraints to older worker labour force
participation generally considered to be minor. For example, policy initiatives
include restrictions to social security pensions traditionally used by the older
population before the age of 65 years, such and the Disability Support Pension
(DSP) and Mature Age Allowance (MAA), and increased access to training for
the older unemployed, rather than any job creation or subsidies. It has been
stated that these policies will increase the labour force participation of welfare
recipients and lower unemployment (DFaCS 2000).
Australia is not alone in experiencing the demographic effects of an ageing
society. Therefore, a number of international institutions have researched the
demographic and fiscal effects of an ageing society and recommend different
policy reforms. The World Bank recommends a gradual shift away from publicly
managed pay-as-you-go (PAYG) pension schemes. Instead, a multiple pillar retirement income system is advocated, consisting of a mandatory and publicly
managed unfunded scheme supported by a privately managed funded scheme,
and supplemented by voluntary savings schemes (World Bank 1994, Holzmann
1998). The Organisation for Economic Co-operation and Development (OECD)
has also conducted research on ageing society issues and older workers within
their ‘Maintaining a Prosperous Society—Ageing Research Project’ (OECD
2003). Their research could be interpreted as involving a three-part process
(O’Brien 2001c). First, it identifies the future budget exposure posed by an
ageing society, especially for publicly funded pensions. Second, it establishes
the role of these pensions in explaining the decline in older labour force
participation (Blöndal & Scarpetta 1998). Finally, it justifies pension reform as
a means of reversing early retirement trends via restrictions to eligibility and
lower pension value, thereby justifying a diminishing role for public pension
150
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
financing. In contrast, the International Labour Office (ILO) suggests a full
employment policy, anti-age discrimination action, and publicly funded pensions
(ILO 1995). The ILO questions the move from public to private funded retirement income schemes suggested by other institutions (Gillion 1998). However,
it is clear that the Commonwealth government has largely endorsed the OECD
and World Bank models.
However, it may be argued that Australia occupies a unique position among
developed countries and that reforms suggested by the OECD are not applicable to Australia. First, demographically, Australia only occupies an intermediate
position between the relatively young Asian and African countries, and the
older Northern European countries (Borowski & Hugo 1997). Therefore, the
demographic ageing effects anticipated in Australia are considered mild compared
to other nations such as Japan and many European countries (OECD 1995). In
comparison to Australia’s 18 per cent in 2021, the percentage of the population
aged over 65 in 2020 will be 26 per cent in Japan, 23 per cent in Germany
and 24 per cent in Italy (Leibfritz 1995: 57). Second, social security pensions available to older workers are not as generous as those in other nations, meaning that
Australia’s government does not inherit the same future budget commitments as
other countries. Table 4 displays information for pensions traditionally used by
those younger than 65 years such as the invalid pension (in Australian known as
the Disability Support Pension [DSP]), as well as for those aged over 65 such as
the old age pension. Replacement rates are presented as the pension rate expressed
Table 4
Country
Older males and social security pensions, OECD Countries, 1995
Old age pension
replacement rate
Australia
Austria
Finland
Norway
The Netherlands
Sweden
Germany
Italy
Spain
UK
Denmark
Belgium
USA
Ireland
Canada
40.9
79.5
60.0
60.0
45.8
74.4
55.0
80.0
100.0
49.8
56.2
67.5
56.0
39.7
51.6
Invalid Pension (DSP)
Males 55-64
Replacement Labour market
(%)
rate
criteria
20.1
57.7
40.2
33.5
27.4
24.9
16.9
16.8
16.7
15.5
15.3
10.5
9.4
8.9
7.1
Source: Blöndal and Scarpetta (1998b); O’Brien (2000).
0.273
0.681
0.600
0.570
0.700
0.696
0.441
0.360
0.715
0.275
0.388
0.583
0.448
0.322
0.331
Yes
Yes
Yes
No
No
Yes
Yes
No
No
No
No
No
No
No
No
THE AUSTRALIAN LABOUR MARKET
IN
2003
151
as a percentage of average earnings. In this respect, Australia’s old age pension
is the least financially attractive of the OECD countries presented. It is also shown
that the invalid pension plays a significant role for older males’ labour force exit
in other countries apart from Australia. Invalid Pension receipt is generally higher
in countries that have labour market-related eligibility criteria. Also, the Invalid
Pension take-up is generally greater in countries with higher replacement rates.
Notably, Australia’s Invalid Pension is not financially attractive compared to overseas replacement rates, and thus, its high rate of take-up is more likely related
to the design of its (labour market) eligibility, rather than its relative financial
value.
Roseveare et al. (1996) projected pension and health outlays to the year 2030
for OECD countries under various assumptions. If present pension policies were
to continue, pension payments as a percentage of Gross Domestic Product (GDP)
would be over 10 per cent of GDP for most European nations, including up
to 20 per cent for Germany and Italy. In comparison, in the US, Canada, and
Iceland, less than 10 per cent of GDP would have been committed. In contrast,
commitments for Australia, Ireland and the UK amount to less than five per cent
of GDP. These were also projected under various pension reform scenarios such
as increasing retirement age to 70 years, reducing pension value, and targeting
eligibility to fewer potential recipients. Up to a ten percentage point saving on
GDP was evident for some European countries under these reforms. However,
only minimal effects were evident for Australia from the proposed reforms.
Therefore, it may be argued that Australia does not face an ‘ageing society
crisis’ in terms of demographic effects on fiscal commitments.
Finally, O’Brien (2001a) argues that the decline in older male labour force
participation rates experienced over recent decades was more caused by a lack
of aggregate labour demand rather than inspired by labour supply financial
incentives. The relative lack of financial incentives within Australia’s social
security system compared to those overseas indicates that pensions have not
been used as a tool to entice workers aged 55–64 years from the labour market
through their financial attractiveness. Rather, social security pensions, through
their eligibility rules, have played a role of accommodation and have allowed an
avenue out of the labour force for those otherwise suffering unemployment and
facing poor labour market prospects. Findings from econometric modelling of
older male labour force participation rates and social security usage confirm a
large role for labour force discouragement, challenging the previous consensus
in the Australian literature emphasising the role for financial (supply) variables
(O’Brien 2001a, 2001b). It is clear that the current reform policy, addressing an
ageing society, is aimed at getting the pool of hidden unemployed back into labour
force participation, primarily to address future budget concerns. However, the
policy ignores the aggregate labour demand cause of declining older male labour
force participation rates, and that social security use had accommodated
such trends rather than caused it. Therefore, without future labour shortages,
which has not been clearly established in the research literature, the pension
restrictions suggested may simply reveal hidden unemployment and lead to an
increase in official unemployment toward those estimates revealed by O’Brien
152
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
(2001a, 2001b, 2003). Therefore, this policy, which is driven by budget concerns,
may ultimately backfire through a process of benefit substitution, with an increase
in official unemployment and payment of unemployment related benefits to
those populations who would have otherwise previously been on various social
security pensions and not in the labour force.
In summary, because of milder ageing intensity and lower pension generosity,
it may be argued that Australia does not face the same ageing society crisis of
other OECD countries. Furthermore, supply-side reform policy inspired by the
OECD is ill directed when the cause of declining older male labour force
participation appears to be caused by lack of aggregate labour demand. A policy
more attune with ILO recommendations would seem more applicable to
Australia’s circumstances to avert any form of crisis associated with an ageing
society.
LIFTING
ACTIVITY RATES THROUGH CHILD CARE PROVISION?
At the other end of the age spectrum, extending the funded provision and access
to child care is one way of increasing labour force participation rates of women
and alleviating the longer term decline in participation rates associated with an
ageing population. With the run-up to the next federal election, child care
policy has been attracting more political interest and media commentary.
Various proposals have been floated. For instance, McDonald (2002) has argued
for an early child education and care policy for Australia that would provide
universal access to 20 hours of care per week to every 3 and 4-year-old child.
The Australian Council of Trade Unions (ACTU) Childcare Affordability
Guarantee 2010 Proposal (2003a) proposes a choice to families earning less than
$100 000 per annum of 15 hours free child care per week for every child or a
cap on child care contributions at 15 per cent of the household income. While
a policy that would allow 10 hours of free care a week for all children below
pre-school age and guaranteed access to a free year at pre-school has been
canvassed in some ALP circles (Sydney Morning Herald 2/2/04). These proposals
have implications for maternal decisions about the timing of re-entry to the labour
force after childbirth and the extent of participation. This review aims to explore
these implications.
It is a truism that the resolution of the conflicting time demands of work and
family requires, among other things, appropriate care arrangements for children
in an era when both parents are active in the labour force, and this circumstance
is increasingly common. The proportion of couple families with dependent
children that have both parents in the workforce has increased from 44 per cent
in 1981 to 62 per cent in 2000 (ACTU 2003b: 4). Moreover, mothers of quite
young children are increasingly seeking paid employment. ‘The proportion of
mothers who work with children aged less than 12 months more than doubled
from 17 per cent in 1976 to 36 per cent in 2001’ (ACTU 2003b: 4). ‘By the time
a child is in its second year, 57 per cent of mothers are working. By the time
their children have turned 3 years old, 68 per cent of mothers are back in the
workforce’ (Crean 2002: 7). However, the choice of appropriate child care is
complex. The child care solutions vary with the age of the child, have different
THE AUSTRALIAN LABOUR MARKET
IN
2003
153
financial implications for the family, will invariably confer other benefits apart
from releasing the parents from full-time care, may attract government subsidy
and may need to be synchronised with other care arrangements where there are
multiple children in the family or multiple care types used. For the sake of
easy exposition, this review will primarily be concerned with the care options
available to children aged 0–4 years as this age range corresponds to the ages
implied in the recent media pronouncements.
The child care options open to parents range from adjustments to working
hours to enable the parents to care for children themselves through to the use
of market-based paid child care service providers. The period 1990 to 2002, has
seen the proportion of 0 to 4-year-olds that use only parental care decline from
40 per cent to 36 per cent, while the share using some formal care has consistently
risen from 28 to 44 per cent (ABS 2003, Child Care). Thus, not withstanding
significant changes in the funding arrangements for the various care providers,
there has been a marked shift toward formal care. It is these care arrangements
that have been the subject of the debate. For 0 to 4-year-old children, long day
care, family day care and preschools are the major suppliers of formal care.
However, as McDonald points out (2002) these services embody different philosophies. Preschools have developed under the auspices of State and Territory
governments to provide low or zero-cost early childhood education in the years
immediately before school age, while federal government funding of long day
care and family day care has been aimed at providing child care for working
parents. These federally subsidised services are work-tested and means-tested,
and require a co-payment from parents. The child care proposals above cut across
these differences, but for now, these practical issues of implementation will be
put to one side. It is also acknowledged that there is no firm political commitment
to any of these scenarios at present, so they should be taken as indicative of
possible policy developments. Nevertheless, they serve to raise three issues of
importance: the ages of eligible children; the hours of care to be subject to
subsidy; and the conditions attached to eligibility.
The McDonald proposal specifically mentions ages 3 and 4 years, while the
other proposals appear to have children before school age as the target. The
broader the age range, the higher the fiscal impost of subsidised care. In 2002,
83 per cent of 4-year-old children participated in formal care, with this age
cohort accounting for 62 per cent of all preschool attendees. For 3-year-olds,
63 per cent experienced some formal care with over a half in long day care and
a quarter attending preschool (ABS 2003, Child Care). However, the proportion
of 2-year-olds in some formal care was only 41 per cent and the proportions for
younger children are even lower. Thus, a proposal targeting 3 and 4-year olds
could expect to draw more children into early childhood education, but the
greatest effect will be for families with 3-year-olds. Some mothers not presently
in the workforce might be induced by these changes to consider employment.
For all children using preschools, the median weekly hours of care was 10 hours
in 2002. The comparable figures for long day care and family day care were 16
hours and 12 hours, respectively (ABS 2003, Child Care). Current provisions
under the federal government’s Child Care Benefit allow up to 50 hours of
154
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
subsidised care per child per week for work related care in approved care (as per
formal care above but excluding preschools) but only three per cent of children
attended long day care centres for this long (DFACS 2003) with 59 per cent
attending for less than 20 hours per week (the system also allows for up to
20 hours of subsidised care for non-work-related purposes). On existing usage
patterns, 20 hours of universal care would seem generous, with 15 and 10 hours
less so. However, the free care provision would effectively lower the average
price of any care purchased by a family provoking a rise in demand from both
existing and new users of the system. This would be consistent with the rise in
service usage following the introduction of the more generous benefits available
to families with the Child Care Benefit available from 2000 (DFaCS 2003). So
working parents might be expected to combine the universal care provision with
some ‘top-up’ care hours, making it easier to accommodate work and family
pressures, provided the family could secure a child care place. It is not possible
to link child care hours for children aged 0–4 years to maternal working hours,
though for children aged 0–11 years in couple families, 77 per cent of mothers
worked part-time with 37 per cent working less than 16 hours per week (ABS
2003, Child Care), so there is potential to increase the effective labour force by
extending maternal working hours.
The median weekly net cost to parents (after the Child Care Benefit has been
paid) per child for preschool, long day care and family day care was $13, $38 and
$21, respectively, in 2002 (ABS 2003, Child Care).But the weekly cost of formal
care is sensitive to the hours of care, which in turn is linked to parental work
hours and parental weekly income. For instance, the median weekly out-of-pocket
cost to parents of all types of formal care for all children aged 0–11 years was
$21 but for 30 to 39 hours of weekly care the median cost was $100. The
proposals under discussion offer families a quantum of child care that is free and
not subject to other eligibility criteria. Hence, the effect would be to reduce the
effective price of all care hours used for all family income groups as noted above.
For some mothers this may provoke a substitution from domestic duties to
paid employment, but for others already in the labour force it may result in a
reduction in the patchwork of care arrangements for more formal care arrangements and a reduction in the ‘juggling act’ that accommodating work and
family can impose.
The current Child Care Benefit invokes family income as the basis to determine
eligibility. It is debatable whether family income is an appropriate benchmark,
given disincentive effects, if the objective is to encourage maternal labour force
retention in the face of an aging population, but putting that to one side, the
current means test is quite stringent. In July 2002, for families with one child in
care, maximum child care benefit was paid on annual family incomes up to $30 806
(Lee 2003) and maximum benefit was received by 43 per cent of all families using
long day care and family day care (DFaCS 2003). If such a family, in 2002,
were paying the average weekly fee in private long day care centres of $186
and receiving the maximum benefit of $133, then they would have a fee gap of
$53 per week (Popple and Martin 2003). If the fee gap is expressed as a percentage
of weekly disposable income, then 11–13 per cent of weekly incomes above
THE AUSTRALIAN LABOUR MARKET
IN
2003
155
$40 000 were devoted to expenditure if the family had one child in full-time long
day care (Popple and Martin 2003). Of course, the stringent incomes test results
in the bulk of the child care benefit outlays going to families with very low
incomes. This is in contrast to the absence of an incomes test in some of the new
proposals and a benchmark that child care costs should not exceed five to six per
cent of disposable income suggested by the Australian Council of Social Services
and the Brotherhood of St Laurence (cited in Lee 2003).
Thus, the changes, if implemented, would improve the affordability of child
care services for all families, would provoke a rise in demand for the services,
would deliver universal access to early education services, but would be less
targeted to low-income families and would offer some families a more convenient
way of dealing with some aspects of work–family imbalance. Of course, any
scheme might be amended to restore greater assistance to low-income families.
It should be noted that the fiscal impost associated with these proposals is not
excessive. The ACTU (2003a) cites an OECD study that estimated the OECD
average expenditure on early education and care was 0.6 per cent of GDP
compared to Australia’s 0.1 per cent of GDP. However, all of this discussion
still leaves at least one notable gap and that is the appropriate care arrangements
for children under the age of 3 years.
Very young children raise particular care issues. Parents have a strong
preference for parental care for this age group. Resource requirements to
care for these children result in higher centre-based fees and fewer places are
available. In 2002, 2-year-olds represented 14 per cent of children in private long
day care and 19 per cent of children in community-based schemes (DFaCS 2003).
In July 2003, the ACTU lodged an application with the Australian Industrial
Relations Commission to bring a Work and Family Test Case with provisions
that address the needs of care for young children. The test case seeks to increase
the flexibility available to families to alter hours of work, including moving
between full-time and part-time work, depending on the stage of family
formation. Australian industrial relations provisions currently allow 12 months
unpaid parental leave around the birth (or adoption) of a child, with return to
employment on a part-time basis at the employer’s discretion. The test case
includes a claim to extend this allowance to 24 months unpaid parental leave with
the right to return part-time resting with the employee. In addition, the test case
argues for the right to part-time hours to continue until the child is school aged
and for access to reasonable unpaid emergency leave and the right to vary daily
hours to fit child care times (the test case also proposes changes associated with
caring for school aged children and the aged and disabled, but these are not
central to the current theme). If accepted, the clauses would have the effect of
providing parents, and especially mothers, with the means to accommodate work
and care needs of children under 3 years of age, again facilitating return to work
and labour force participation. It needs to be acknowledged that the right to return
to employment on a part-time basis should not be seen as a justification for
further erosion of work conditions available to part-time and casual workers.
Finally, part-time work and flexible hours have been used to satisfy family care
needs for some time but there is little sign of change. Adoption of family-friendly
156
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
work practices have been proclaimed as one means of reducing work–family
imbalance. Indeed, the Australian Bureau of Statistics (ABS 2003, Cat. No. 4402.0)
points out that in the four child care surveys since 1993, a roughly constant
68 per cent of employed mothers used work arrangements to provide care
for children aged 0–11 years. If adjustments to work hours are the sole means
of accommodating care requirements, then they will neither require a
government subsidy nor impose a monetary cost on families. These work
arrangements included flexible working hours, permanent part-time work,
shiftwork, working at home, job sharing and other arrangements. Yet despite
the increased political and media attention given to family-friendly work
practices, there has been surprisingly little change in the diversity of utilised
working arrangements across the four surveys. Shiftwork, job sharing and other
arrangements constitute a roughly constant 10 per cent share of all working
arrangements used by employed mothers over the decade, while working from
home has experienced a share declining from 21 per cent to 17 per cent. Flexible
working hours and permanent part-time work between them have accounted for
more than two-thirds of the chosen working arrangements since 1993.
Unfortunately, data constraints mean that it is not possible to determine how
frequently and for what specific age cohort of children employed mothers used
these arrangements.
This review outlines developments that have the potential to ease the care
burden faced by the high proportion of working families with young dependent
children. However, implementation will require a commitment to being innovative, a willingness to reform the early education sector and the political will to
devote adequate funding to the sector. Despite the policy imperative to reduce
dependency rates and lift activity rates associated with an ageing of the population, the issue of child care access and provision and its links to activity rates
remains on the policy back-burner.
CONCLUSION
Will 2004 bring an end to the boom in jobs and the decline in the unemployment rate? Strong growth in China and Japan should ensure ongoing demand
for Australian commodities; however, the strength of the Australian dollar will
hit jobs in import competing and export sectors. The strength of the currency
will also give added impetus to the ‘offshorin
IN 2003
JOHN BURGESS*, JULIE LEE* AND MARTIN O’BRIEN**
T
he labour market remained strong throughout 2003 with ongoing jobs growth and
a continuation of the trend towards a lower unemployment rate. Unlike previous
years, in 2003, additional jobs were mainly full-time jobs and the female labour force
participation rate declined. After 11 years of ongoing improvement in the condition of
the labour market, this boom is lacking the three developments associated with past
improvement in the labour market: strong wages growth, strong growth in labour force
participation rates, and increased industrial disputation. The review also considers the
ongoing growth in the employment services sector associated with the spread of temporary
agency employment. The topical issue of the ageing of the population is then considered
with a critical examination of the current policy direction of extending the working life
of Australian workers. Finally, a related issue is reviewed: the provision of child care
services in Australia.
INTRODUCTION
For 2003, the number of Australians in work continued to grow and the unemployment rate remained below six per cent. While the rate of economic growth
continued to be around three per cent, there was some signs of a slowing in the
economy. In the first half of 2003, farm sector output contracted considerably,
largely in response to extensive drought conditions across Australia. The Reserve
Bank of Australia on two occasions increased the cash rate by 0.25 per cent and
the Australian dollar appreciated against the US dollar and most of the other
major trading currencies. For 2004, the prospects for growth and jobs in the
Australian economy are not good given the possibility of a further interest rate
rise together with the declining competitiveness of Australian industries as
the Australian dollar continues to appreciate. One of the major policy issues
emerging in Australia and in many other OECD economies is the ageing of
the population with its implications for the financing of retirement incomes and
the provision of health services. Both the Federal Treasury and the Reserve Bank
have been vocal in warning the community of the looming fiscal crisis associated
with the ageing population. The funding of child care and family allowances
continues to be in the news following the extended public debate on paid
maternity leave in 2002 and 2003.
The review commences with a brief summary of developments in the
Australian labour market in 2003. It then discusses the Reserve Bank’s raising of
* Employment Studies Centre, University of Newcastle, Callaghan, New South Wales 2308,
Australia. Email: [email protected] ** School of Economic and Information Systems,
University of Wollongong, Wollongong, New South Wales 2522, Australia.
THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 46, NO. 2, JUNE 2004, 141–159
142
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
interest rates as a policy shift, and its consequent impact on the housing and construction sector. The appreciating Australian dollar and its impact on employment is then considered. This leads on to a brief overview of the booming
employment services sector with an emphasis on the employment arrangements
common to the sector. The review then moves on to a discussion and evaluation
of the looming fiscal crisis associated with the ageing of the Australian population. The Treasurer released a statement in February 2004 announcing policy
changes to end early retirement and to extend the working life of older workers
(Australian Broadcasting Commission[ABC] 2004). Finally, the discussion turns
to child care provision and potential policy prescriptions aimed at lifting labour
market activity rates of young parents to compensate for the possibility of a labour
shortage associated with the ageing of the population.
THE
LABOUR MARKET
2003
Despite the unemployment rate reaching a 20-year low, wages, participation rates and
industrial disputation are not behaving procyclically
Throughout 2003, the unemployment rate remained below six per cent, and by
the end of the year it had declined to 5.6 per cent (seasonally adjusted), a rate
not seen in Australia since the late 1970s. Not only has the unemployment rate
declined, but also the number of the long-term unemployed has diminished, as
has the share of the long-term unemployed in total unemployment (Table 1).
While this is good news, it needs to be remembered that around 570 000
people remain officially unemployed and another few hundred thousand are in
forms of underemployment and hidden unemployment (Burgess et al. 2003: 131).
Table 1 reveals some interesting developments in the labour market over the
past year. Unlike previous years (Burgess et al. 2003), the majority of additional
Table 1
Australian labour market, December 2002–December 2003
Indicator ‘000*
Full-time employment
Part-time employment
Total employment
Unemployment
Labour force
Unemployment rate
Male labour force participation rate (%)
Female labour force participation rate (%)
Labour force participation rate (%)
Long-term unemployment**
Long-term unemployment as % of
unemployment**
Dec 2002
Dec 2003
Change
6779
2697
9477
616
10 094
6.1%
72.2%
56.2%
64.1%
134
6927
2738
9666
574
10 240
5.6%
72.1%
55.8%
63.8%
124
+148
+41
+189
-42
+146
-0.5
-0.1
-0.4
-0.3
-10
23.3%
23.1%
-0.2
*Seasonally adjusted; **November 2002 to November 2003.
Source: Australian Economic Indicators, February 2004, Catalogue 1350.0.
THE AUSTRALIAN LABOUR MARKET
IN
2003
143
jobs have been full-time jobs. While the male participation rate continues to
decline, there was a considerable reduction in female participation rates, again
reversing the longer-term trend previously highlighted (Preston & Burgess
2003b). The two developments may be related because past experience demonstrates that strong part-time jobs growth has been associated with an increase in
female labour force participation rates.
This marks the 11th successive year in which the average unemployment rate
has declined. With such a sustained boom in jobs, nearly two million additional
jobs since 1992/93, there are some missing elements associated with past booms
in jobs in the Australian economy (see Indecs Economics 1995, Ch. 2–4):
(a) increasing nominal wage demands and rising real wages
(b) increasing inflation rate
(c) an increase in labour force participation rates
(d) increasing industrial disputation
Why have these elements been missing over the past decade? First, the institutional change to wage determination arrangements has removed coordinated
and centralised wage determination from the national agenda. Wage determination is more decentralised, less coordinated, and staggered through time. The
concurrent and solidaristic element associated with past wage determination
arrangements has diminished (Preston & Burgess 2003a). Many of the new jobs
are in sectors that are not traditionally union active, have high part-time employment densities, and are service sector related—in these, it is difficult to bargain
for wage increases on the basis of productivity gains (Sullivan et al. 2003). Second,
the trade union density has declined and non-union and individual bargaining
arrangements have developed and expanded (Burgess & Macdonald 2003). These
arrangements are not associated with industrial action. In turn, the ability
to legally undertake action and to access the workplace to organise has been
diminished within the Federal jurisdiction. Third, the Reserve Bank has a
clear mandate to keep inflation within its acceptable range (2-3 per cent on
average) and to act pre-emptively if there are any threats to the target. It
has already indicated that unacceptable nominal wages growth will result in
pre-emptive interest rate increases (Stegman 1997). Finally, the moderate
growth in nominal and real wages may have tempered any increase in labour
force participation. The gender convergence in participation rates continues: for
men, there continues (despite the jobs growth) to be a decline in participation
rates, and for women (despite the last 12 month’s experience), there has been a
longer-term increase in participation rates. Over the past decade, male rates
have declined around two per cent (absolute), while female rates have increased
by around four per cent in absolute terms. Previous reviews of the labour
market have highlighted the dramatic shift in the industrial composition of
jobs as well as the growing share of part-time employment (Burgess and
Mitchell 2001). Over the past decade, employment has contracted in agriculture,
mining, and utilities and has remained static in manufacturing—all areas of
traditional full-time male employment. Most additional jobs are found in three
sectors: retailing, property and business services, and health and community
services. Despite the modest increase in part-time jobs over the past 12 months,
144
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
in December 2003, the part-time employment share was still a considerable
28.3 per cent.
The Reserve Bank moves beyond its inflation watching brief and addresses the growth
in household debt: Disturbing implications for the building and construction sector
The Reserve Bank raised cash rates by 0.25 per cent in November and December
of 2003. In his November statement, Reserve Bank Governor Macfarlane stated
that there were no short-term inflationary pressures; indeed, the appreciation of
the Australian dollar had reduced inflationary pressure. Over 2003, the inflation
rate was around 2.5 per cent, well within the official target range. The main
justification for the interest rate increase was the rapid expansion in credit, up
20 per cent for households during the previous 12 months. This was regarded
as unsustainable and not consistent with economic stability over the longer
term (Macfarlane 2003a). The same statement was released in December, again
blaming the rate increase on the rapid expansion in domestic credit (Macfarlane
2003b). This represents a departure from past practice because now the containment of inflationary pressures is not the primary reason behind rates adjustment,
rather, the justification is related to the perceived non-sustainability of household debt. What the Reserve Bank Governor is saying is that there is too much
borrowing, which will only lead to an asset price bubble that will have major
destabilising implications for the economy, so lets slow down the borrowing before
it gets out of hand.
The major factor behind the growth in household debt is the increase in
housing loans. This has been driven by low interest rates, competition in
housing loans market and an inexorable rise in housing prices across Australia
(Macfarlane 2003c). It is largely the demand for investment housing that is
driving the growth in borrowings. This is also linked to the above factors, together
with the incentive to borrow provided through the personal taxation system
(negative gearing).
As a consequence of the housing boom the housing and construction sector
recorded the largest increase in both output and employment of any sector
during 2002/2003—employment grew by 11 per cent in the year to September
2003 (Reserve Bank of Australia 2003). This is one of the factors driving the
expansion in full-time employment (see Table 1). The November review of
economic conditions by the Reserve Bank reported a decline in building
activity in the first half of 2003, followed by a slight pick-up in the second half
of the year (Reserve Bank of Australia 2003: 21). Towards the end of 2003 there
was a decline in building commencements and building approvals (Australian
Bureau of Statistics [ABS] Cat. No. 1350.0), although the outlook for the construction sector appeared stronger than that of the housing sector (Australian
Industry Group 2003). In the media, the reports suggested a more drastic
fall-off in building activity with warnings from industry spokespersons of a
looming slump in the sector (Gottliebson 2003; Wade 2004).
Building and construction are the sectors where the interest rate increases will
be felt and there is no doubt that the industry has boomed over the last decade,
recording a total jobs increase of nearly 200 000 since 1992/93. Also, unusually,
THE AUSTRALIAN LABOUR MARKET
IN
145
2003
employment in the sector is predominantly male and full-time, and it is an important source of apprenticeships (Toner et al. 2003). The danger is that such an
interest rate-prone industry can shed jobs and apprenticeships very quickly, and
in turn, this will have a flow-on effect to building material supply industries such
as timber, steel, concrete, bricks, transport, cabling, and plumbing supplies. While
there is the expectation of a further interest rate rise in the next few months (Uren
et al. 2004), it could be compounding an already downward adjustment in
the building and construction sectors, and in associated sectors (especially
manufacturing and transport) that support the industry. A central policy
question is whether interest rate increases are the appropriate means of
cooling off the industry when the taxation system may be a contributing
structural factor behind the industry boom. Further interest rate increases
have implications for the value of the Australian dollar (see below).
THE
RISE AND RISE OF THE
AUSTRALIAN
DOLLAR
There was a strong appreciation of the Australian dollar throughout 2003, nearly
one-third against the US dollar and over 20 per cent against the trade weighted
index (the basket of currencies that covers Australian trade) (see Table 2). In
general terms,Australian goods and services are more expensive in international
markets and internationally produced goods and services are cheaper in Australia.
This is favourable for Australian consumers (cheaper cars, French champagne,
overseas holidays, computers, software, petrol, and electronics) and for Australian
businesses that rely on imported inputs (e.g. the transport industry should have
lower operating costs). However, it makes it difficult for traded Australian goods
and services that are exported or compete against imports. There is also an
increased cost advantage to sourcing production offshore to take advantage of
the lower operating costs—this could lead to a growing exodus of service jobs
offshore such as aircrew and call centre operations (Burgess & Connell 2003).
What is driving the appreciation of the Australian dollar? First, there is the
inherent weakness of the US dollar that has declined against most currencies
largely in response to sluggish US growth and a growing US trade deficit (The
Economist 2004). Second, there has been an increase in commodity prices and in
general, those countries that are commodity traders (Australia, New Zealand,
Table 2
Currency movements, foreign currency per Australian dollar
Currency
Dec 2002
Dec 2003
Change (%)
56.620
35.320
54.030
67.140
1.0792
52.200
75.270
42.250
59.900
80.490
1.1497
63.500
32.9
19.6
11.1
19.9
6.5
21.6
US dollar
UK sterling
Euro
Japanese yen
New Zealand dollar
Trade weighted index
Source: Australian Economic Indicators, February 2004, Catalogue 1350.0.
146
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
South Africa) have experienced an appreciation of their currency against other
trading currencies (Sender 2004). Third, the increase in Australian interest rates
draws investors into the Australian bond market that has very attractive yields
relative to other bond markets. Further interest rate increases (Uren et al. 2004)
will encourage further holdings of Australian bonds.
Australian companies with offshore operations will suffer a decline in their
earnings in Australian dollar terms (Ubels 2004). The Australian Industry Group
(2004) reported that a survey of 800 manufacturing companies revealed estimated
sales losses of A$7 billion in 2003 from reduced export sales and increased imports.
The survey revealed that 17 per cent of the survey respondents are considering
locating some production operations offshore. The sector leading the way in its
intention to relocate was clothing and textiles.
The currency markets remain volatile with the US dollar being supported
by Japan and China—major trading partners of the USA who are reluctant to
allow the US dollar to continue to depreciate and thus erode their competitive
advantage (The Economist 2004). At this stage, some sectors will be shedding jobs
if the appreciation of the Australian dollar continues. Further interest rate
increases in Australia will only exacerbate these problems.
THE EMPLOYMENT SERVICES INDUSTRY: LABOUR OUTSOURCING AND
SHORT-TERM EMPLOYMENT ARRANGEMENTS
The Australian Bureau of Statistics has published its second survey of the
Employment Services industry, covering 2001/2002. The first survey was
conducted in 1998/99. The constituent businesses of the industry generate
their income through employment placement, which covers both labour hire
and the direct placement of staff into employing organisations. What is
interesting about the industry, in the context of the Australian labour market,
is its growth and the extent of its activity. While to some extent the expansion
in the employment services industry is related to the outsourcing of labour
services for the unemployed through the Jobs Network (Eardley 2003), these
activities only represent a small component of the business activities of the
sector.
The two surveys demonstrate a rapid expansion in the sector with an approximate 30 per cent increase in the number of organisations operating in the
sector and a 36 per cent increase in the number of job placements being
undertaken. Around 10 per cent of total placements are linked to the Jobs
Network. Around five per cent of placements are for permanent positions and
the balance consists of temporary and contract placements. Over one half of the
temporary placements are in health care/medical and trade/labour occupations.
The number of on-hired workers (or temps) associated with the sector increased
from 307 000 in 1998/99 to 322 000 in 2001/02. While this suggests that the
number of workers employed as temps at any one time is around three per cent
of the workforce, the impact of the employment services sector in reshaping and
restructuring employment should not be understated.
As Peck and Theodore (2002) demonstrate, the employment services sector
is a global business that covers the professions and unskilled labourers, includes
THE AUSTRALIAN LABOUR MARKET
IN
147
2003
hires of a few hours and contracts covering several years, and supplies a range of
labour and human resource services to client organisations. It is expanding across
all sectors and all occupations, and has benefited from the rationalisation of the
public sector in many countries (Hall 2002). In Australia, the main concerns with
the sector are its functioning outside of labour regulations (Campbell et al. 2002),
its ability to recontractualise employment, and the potential problems for skills
and occupational health and safety associated with a transient and irregular
employment (Hall 2002; Labour Hire Taskforce 2001).
What is interesting from Table 3 is the growth in the number of operators in
the industry (around 80 per cent have less than 10 direct employees) and the
growth in the number of placements. On both counts, the sector exceeds the
growth of jobs in the economy. Permanent placements and government-related
training and employment placements both increased, but short-term placements
increased by around 900 000 in a 3-year period. The number of temps or
on-hired workers grew slightly higher than the growth in jobs, but the growth
in short-term placements is extraordinary. The reasons for this are unclear. It
could represent skills shortages, the restructuring and funding of public services,
a shift towards external recruitment and the associated provision of human
resource services, or the re-contractualisation of the workforce and associated
labour and flexibility advantages (lower on-costs, reduced protection, lower
unionisation rates). However, there does appear to be a discernable shift towards
outsourcing employment placement and short-term job placements. At the
moment, the total placements of the industry represent around one-third of
the total jobs in the economy. At the margins, extensive job churning is taking
place with many jobs of short-duration being filled through temp agencies.
IS
THERE A LOOMING AGEING CRISIS IN
AUSTRALIA?
Over the past year there have been several official statements on the looming
ageing crisis and the negative implications associated with it in terms of increasing
dependency ratios (population/workforce) and a deteriorating fiscal position
associated with the growing demand for State-provided retirement incomes and
Table 3
Employed services sector in Australia 1998/99 to 2001/02
Organisations
Locations
Direct employees ‘000
On-hired workers ‘000
Permanent placements ‘000
Temporary placements ‘000
Government supported placement ‘000
Total placements ‘000
1998/99
2001/02
2093
5013
28
307
157
2302
285
2746
2704
5574
32
322
189
3214
335
3738
Source: Australian Bureau of Statistics, Employment Services. Catalogue 8558.0.
148
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
health services (Henry 2003; Macfarlane 2003d). Treasurer Costello announced
that the government intended to extend the working lives of Australians as a way
of addressing the crisis (ABC 2004). This approach assumes that there are jobs
available for older Australians—an assumption that is challengeable.
An ageing society is typified by an absolute and relative increase in the number
of older people (generally aged 65 years and over) among the population.
Coexisting with this situation is a smaller proportion of the population in the
traditional working ages of between 15 and 64 years of age. Therefore, while the
proportion of the population ‘dependent’ on social expenditure spending is
expected to increase, the proportion of persons ‘active’ and working, and thereby
forming the traditional income tax base, is expected to shrink. At the very least,
this situation is anticipated to place strain on the Commonwealth government’s
budget to finance its social security and health obligations (Treasury 2002). At
the extreme, this situation could lead to intergenerational conflict from a younger
minority financially supporting an ageing majority (Johnson et al. 1989). Of
course, this situation becomes further complicated by a declining older male
worker (aged 55–64 years) labour force participation rate.
Is there an ageing crisis in Australia? The proportion of the Australian population aged over 65 years is projected to increase from the current 12 per cent
of the population to 18 per cent in the year 2021 and 26 per cent by the year
2051 (Bishop 1999). Figure 1 shows that the proportion of the population in older
male age groups is clearly increasing over time. Of particular importance are the
steeper sections in the age distribution at regular intervals in time, representing
the large proportion of the population comprising the baby boomer generation
(individuals born after 1946 and before 1960). This generation started reaching
Figure 1
Male population distribution by age, 1971—2051.
Source: Australian Bureau of Statistics. LFS Datasets. Catalogue 6291.0.40.001 Australian Bureau of
Statistics, Population Projections. Catalogue 3222-0.
THE AUSTRALIAN LABOUR MARKET
IN
2003
149
the 35 to 44-year-old age group in the early 1980s, and the 45 to 54-year-old
age group in the early 1990s. At present, Australia is experiencing a large increase
in the number of males aged 55–64 years.
As well as encouraging individuals to finance their own retirement income and
health, an alternative policy to allay future budget pressures identified by the
Commonwealth government in the 1980s was to encourage longer labour force
participation of older workers (Economic Policy Advisory Committee 1988).
Research has shown that projections of government social security expenditure
in the future are reduced if early retirement trends are reversed and/or a later
age of retirement is established (e.g. Guest & McDonald 1999, 2000; Access
Economics Pty Ltd 2001). Thus, legislation was introduced at the federal
level and in all states throughout the 1990s to prevent age discrimination in
employment and retirement practices. More recently, a number of policy reforms
have been initiated as part of the ‘National Strategy for an Ageing Australia’ to
encourage greater older worker labour force participation. These initiatives are
contained in welfare reform proposals (Department of Family and Community
Services [DFaCS] 2000), the House of Representatives inquiry into older age
unemployment (House of Representatives 2000), the 2001–02 and 2002–03
Commonwealth Budgets (DFaCS 2001, 2002a), and the ‘Australians Working
Together’ policy (DFaCS 2002b). Proposed policy is supply-side-based, with
the potential role of labour demand constraints to older worker labour force
participation generally considered to be minor. For example, policy initiatives
include restrictions to social security pensions traditionally used by the older
population before the age of 65 years, such and the Disability Support Pension
(DSP) and Mature Age Allowance (MAA), and increased access to training for
the older unemployed, rather than any job creation or subsidies. It has been
stated that these policies will increase the labour force participation of welfare
recipients and lower unemployment (DFaCS 2000).
Australia is not alone in experiencing the demographic effects of an ageing
society. Therefore, a number of international institutions have researched the
demographic and fiscal effects of an ageing society and recommend different
policy reforms. The World Bank recommends a gradual shift away from publicly
managed pay-as-you-go (PAYG) pension schemes. Instead, a multiple pillar retirement income system is advocated, consisting of a mandatory and publicly
managed unfunded scheme supported by a privately managed funded scheme,
and supplemented by voluntary savings schemes (World Bank 1994, Holzmann
1998). The Organisation for Economic Co-operation and Development (OECD)
has also conducted research on ageing society issues and older workers within
their ‘Maintaining a Prosperous Society—Ageing Research Project’ (OECD
2003). Their research could be interpreted as involving a three-part process
(O’Brien 2001c). First, it identifies the future budget exposure posed by an
ageing society, especially for publicly funded pensions. Second, it establishes
the role of these pensions in explaining the decline in older labour force
participation (Blöndal & Scarpetta 1998). Finally, it justifies pension reform as
a means of reversing early retirement trends via restrictions to eligibility and
lower pension value, thereby justifying a diminishing role for public pension
150
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
financing. In contrast, the International Labour Office (ILO) suggests a full
employment policy, anti-age discrimination action, and publicly funded pensions
(ILO 1995). The ILO questions the move from public to private funded retirement income schemes suggested by other institutions (Gillion 1998). However,
it is clear that the Commonwealth government has largely endorsed the OECD
and World Bank models.
However, it may be argued that Australia occupies a unique position among
developed countries and that reforms suggested by the OECD are not applicable to Australia. First, demographically, Australia only occupies an intermediate
position between the relatively young Asian and African countries, and the
older Northern European countries (Borowski & Hugo 1997). Therefore, the
demographic ageing effects anticipated in Australia are considered mild compared
to other nations such as Japan and many European countries (OECD 1995). In
comparison to Australia’s 18 per cent in 2021, the percentage of the population
aged over 65 in 2020 will be 26 per cent in Japan, 23 per cent in Germany
and 24 per cent in Italy (Leibfritz 1995: 57). Second, social security pensions available to older workers are not as generous as those in other nations, meaning that
Australia’s government does not inherit the same future budget commitments as
other countries. Table 4 displays information for pensions traditionally used by
those younger than 65 years such as the invalid pension (in Australian known as
the Disability Support Pension [DSP]), as well as for those aged over 65 such as
the old age pension. Replacement rates are presented as the pension rate expressed
Table 4
Country
Older males and social security pensions, OECD Countries, 1995
Old age pension
replacement rate
Australia
Austria
Finland
Norway
The Netherlands
Sweden
Germany
Italy
Spain
UK
Denmark
Belgium
USA
Ireland
Canada
40.9
79.5
60.0
60.0
45.8
74.4
55.0
80.0
100.0
49.8
56.2
67.5
56.0
39.7
51.6
Invalid Pension (DSP)
Males 55-64
Replacement Labour market
(%)
rate
criteria
20.1
57.7
40.2
33.5
27.4
24.9
16.9
16.8
16.7
15.5
15.3
10.5
9.4
8.9
7.1
Source: Blöndal and Scarpetta (1998b); O’Brien (2000).
0.273
0.681
0.600
0.570
0.700
0.696
0.441
0.360
0.715
0.275
0.388
0.583
0.448
0.322
0.331
Yes
Yes
Yes
No
No
Yes
Yes
No
No
No
No
No
No
No
No
THE AUSTRALIAN LABOUR MARKET
IN
2003
151
as a percentage of average earnings. In this respect, Australia’s old age pension
is the least financially attractive of the OECD countries presented. It is also shown
that the invalid pension plays a significant role for older males’ labour force exit
in other countries apart from Australia. Invalid Pension receipt is generally higher
in countries that have labour market-related eligibility criteria. Also, the Invalid
Pension take-up is generally greater in countries with higher replacement rates.
Notably, Australia’s Invalid Pension is not financially attractive compared to overseas replacement rates, and thus, its high rate of take-up is more likely related
to the design of its (labour market) eligibility, rather than its relative financial
value.
Roseveare et al. (1996) projected pension and health outlays to the year 2030
for OECD countries under various assumptions. If present pension policies were
to continue, pension payments as a percentage of Gross Domestic Product (GDP)
would be over 10 per cent of GDP for most European nations, including up
to 20 per cent for Germany and Italy. In comparison, in the US, Canada, and
Iceland, less than 10 per cent of GDP would have been committed. In contrast,
commitments for Australia, Ireland and the UK amount to less than five per cent
of GDP. These were also projected under various pension reform scenarios such
as increasing retirement age to 70 years, reducing pension value, and targeting
eligibility to fewer potential recipients. Up to a ten percentage point saving on
GDP was evident for some European countries under these reforms. However,
only minimal effects were evident for Australia from the proposed reforms.
Therefore, it may be argued that Australia does not face an ‘ageing society
crisis’ in terms of demographic effects on fiscal commitments.
Finally, O’Brien (2001a) argues that the decline in older male labour force
participation rates experienced over recent decades was more caused by a lack
of aggregate labour demand rather than inspired by labour supply financial
incentives. The relative lack of financial incentives within Australia’s social
security system compared to those overseas indicates that pensions have not
been used as a tool to entice workers aged 55–64 years from the labour market
through their financial attractiveness. Rather, social security pensions, through
their eligibility rules, have played a role of accommodation and have allowed an
avenue out of the labour force for those otherwise suffering unemployment and
facing poor labour market prospects. Findings from econometric modelling of
older male labour force participation rates and social security usage confirm a
large role for labour force discouragement, challenging the previous consensus
in the Australian literature emphasising the role for financial (supply) variables
(O’Brien 2001a, 2001b). It is clear that the current reform policy, addressing an
ageing society, is aimed at getting the pool of hidden unemployed back into labour
force participation, primarily to address future budget concerns. However, the
policy ignores the aggregate labour demand cause of declining older male labour
force participation rates, and that social security use had accommodated
such trends rather than caused it. Therefore, without future labour shortages,
which has not been clearly established in the research literature, the pension
restrictions suggested may simply reveal hidden unemployment and lead to an
increase in official unemployment toward those estimates revealed by O’Brien
152
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
(2001a, 2001b, 2003). Therefore, this policy, which is driven by budget concerns,
may ultimately backfire through a process of benefit substitution, with an increase
in official unemployment and payment of unemployment related benefits to
those populations who would have otherwise previously been on various social
security pensions and not in the labour force.
In summary, because of milder ageing intensity and lower pension generosity,
it may be argued that Australia does not face the same ageing society crisis of
other OECD countries. Furthermore, supply-side reform policy inspired by the
OECD is ill directed when the cause of declining older male labour force
participation appears to be caused by lack of aggregate labour demand. A policy
more attune with ILO recommendations would seem more applicable to
Australia’s circumstances to avert any form of crisis associated with an ageing
society.
LIFTING
ACTIVITY RATES THROUGH CHILD CARE PROVISION?
At the other end of the age spectrum, extending the funded provision and access
to child care is one way of increasing labour force participation rates of women
and alleviating the longer term decline in participation rates associated with an
ageing population. With the run-up to the next federal election, child care
policy has been attracting more political interest and media commentary.
Various proposals have been floated. For instance, McDonald (2002) has argued
for an early child education and care policy for Australia that would provide
universal access to 20 hours of care per week to every 3 and 4-year-old child.
The Australian Council of Trade Unions (ACTU) Childcare Affordability
Guarantee 2010 Proposal (2003a) proposes a choice to families earning less than
$100 000 per annum of 15 hours free child care per week for every child or a
cap on child care contributions at 15 per cent of the household income. While
a policy that would allow 10 hours of free care a week for all children below
pre-school age and guaranteed access to a free year at pre-school has been
canvassed in some ALP circles (Sydney Morning Herald 2/2/04). These proposals
have implications for maternal decisions about the timing of re-entry to the labour
force after childbirth and the extent of participation. This review aims to explore
these implications.
It is a truism that the resolution of the conflicting time demands of work and
family requires, among other things, appropriate care arrangements for children
in an era when both parents are active in the labour force, and this circumstance
is increasingly common. The proportion of couple families with dependent
children that have both parents in the workforce has increased from 44 per cent
in 1981 to 62 per cent in 2000 (ACTU 2003b: 4). Moreover, mothers of quite
young children are increasingly seeking paid employment. ‘The proportion of
mothers who work with children aged less than 12 months more than doubled
from 17 per cent in 1976 to 36 per cent in 2001’ (ACTU 2003b: 4). ‘By the time
a child is in its second year, 57 per cent of mothers are working. By the time
their children have turned 3 years old, 68 per cent of mothers are back in the
workforce’ (Crean 2002: 7). However, the choice of appropriate child care is
complex. The child care solutions vary with the age of the child, have different
THE AUSTRALIAN LABOUR MARKET
IN
2003
153
financial implications for the family, will invariably confer other benefits apart
from releasing the parents from full-time care, may attract government subsidy
and may need to be synchronised with other care arrangements where there are
multiple children in the family or multiple care types used. For the sake of
easy exposition, this review will primarily be concerned with the care options
available to children aged 0–4 years as this age range corresponds to the ages
implied in the recent media pronouncements.
The child care options open to parents range from adjustments to working
hours to enable the parents to care for children themselves through to the use
of market-based paid child care service providers. The period 1990 to 2002, has
seen the proportion of 0 to 4-year-olds that use only parental care decline from
40 per cent to 36 per cent, while the share using some formal care has consistently
risen from 28 to 44 per cent (ABS 2003, Child Care). Thus, not withstanding
significant changes in the funding arrangements for the various care providers,
there has been a marked shift toward formal care. It is these care arrangements
that have been the subject of the debate. For 0 to 4-year-old children, long day
care, family day care and preschools are the major suppliers of formal care.
However, as McDonald points out (2002) these services embody different philosophies. Preschools have developed under the auspices of State and Territory
governments to provide low or zero-cost early childhood education in the years
immediately before school age, while federal government funding of long day
care and family day care has been aimed at providing child care for working
parents. These federally subsidised services are work-tested and means-tested,
and require a co-payment from parents. The child care proposals above cut across
these differences, but for now, these practical issues of implementation will be
put to one side. It is also acknowledged that there is no firm political commitment
to any of these scenarios at present, so they should be taken as indicative of
possible policy developments. Nevertheless, they serve to raise three issues of
importance: the ages of eligible children; the hours of care to be subject to
subsidy; and the conditions attached to eligibility.
The McDonald proposal specifically mentions ages 3 and 4 years, while the
other proposals appear to have children before school age as the target. The
broader the age range, the higher the fiscal impost of subsidised care. In 2002,
83 per cent of 4-year-old children participated in formal care, with this age
cohort accounting for 62 per cent of all preschool attendees. For 3-year-olds,
63 per cent experienced some formal care with over a half in long day care and
a quarter attending preschool (ABS 2003, Child Care). However, the proportion
of 2-year-olds in some formal care was only 41 per cent and the proportions for
younger children are even lower. Thus, a proposal targeting 3 and 4-year olds
could expect to draw more children into early childhood education, but the
greatest effect will be for families with 3-year-olds. Some mothers not presently
in the workforce might be induced by these changes to consider employment.
For all children using preschools, the median weekly hours of care was 10 hours
in 2002. The comparable figures for long day care and family day care were 16
hours and 12 hours, respectively (ABS 2003, Child Care). Current provisions
under the federal government’s Child Care Benefit allow up to 50 hours of
154
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
subsidised care per child per week for work related care in approved care (as per
formal care above but excluding preschools) but only three per cent of children
attended long day care centres for this long (DFACS 2003) with 59 per cent
attending for less than 20 hours per week (the system also allows for up to
20 hours of subsidised care for non-work-related purposes). On existing usage
patterns, 20 hours of universal care would seem generous, with 15 and 10 hours
less so. However, the free care provision would effectively lower the average
price of any care purchased by a family provoking a rise in demand from both
existing and new users of the system. This would be consistent with the rise in
service usage following the introduction of the more generous benefits available
to families with the Child Care Benefit available from 2000 (DFaCS 2003). So
working parents might be expected to combine the universal care provision with
some ‘top-up’ care hours, making it easier to accommodate work and family
pressures, provided the family could secure a child care place. It is not possible
to link child care hours for children aged 0–4 years to maternal working hours,
though for children aged 0–11 years in couple families, 77 per cent of mothers
worked part-time with 37 per cent working less than 16 hours per week (ABS
2003, Child Care), so there is potential to increase the effective labour force by
extending maternal working hours.
The median weekly net cost to parents (after the Child Care Benefit has been
paid) per child for preschool, long day care and family day care was $13, $38 and
$21, respectively, in 2002 (ABS 2003, Child Care).But the weekly cost of formal
care is sensitive to the hours of care, which in turn is linked to parental work
hours and parental weekly income. For instance, the median weekly out-of-pocket
cost to parents of all types of formal care for all children aged 0–11 years was
$21 but for 30 to 39 hours of weekly care the median cost was $100. The
proposals under discussion offer families a quantum of child care that is free and
not subject to other eligibility criteria. Hence, the effect would be to reduce the
effective price of all care hours used for all family income groups as noted above.
For some mothers this may provoke a substitution from domestic duties to
paid employment, but for others already in the labour force it may result in a
reduction in the patchwork of care arrangements for more formal care arrangements and a reduction in the ‘juggling act’ that accommodating work and
family can impose.
The current Child Care Benefit invokes family income as the basis to determine
eligibility. It is debatable whether family income is an appropriate benchmark,
given disincentive effects, if the objective is to encourage maternal labour force
retention in the face of an aging population, but putting that to one side, the
current means test is quite stringent. In July 2002, for families with one child in
care, maximum child care benefit was paid on annual family incomes up to $30 806
(Lee 2003) and maximum benefit was received by 43 per cent of all families using
long day care and family day care (DFaCS 2003). If such a family, in 2002,
were paying the average weekly fee in private long day care centres of $186
and receiving the maximum benefit of $133, then they would have a fee gap of
$53 per week (Popple and Martin 2003). If the fee gap is expressed as a percentage
of weekly disposable income, then 11–13 per cent of weekly incomes above
THE AUSTRALIAN LABOUR MARKET
IN
2003
155
$40 000 were devoted to expenditure if the family had one child in full-time long
day care (Popple and Martin 2003). Of course, the stringent incomes test results
in the bulk of the child care benefit outlays going to families with very low
incomes. This is in contrast to the absence of an incomes test in some of the new
proposals and a benchmark that child care costs should not exceed five to six per
cent of disposable income suggested by the Australian Council of Social Services
and the Brotherhood of St Laurence (cited in Lee 2003).
Thus, the changes, if implemented, would improve the affordability of child
care services for all families, would provoke a rise in demand for the services,
would deliver universal access to early education services, but would be less
targeted to low-income families and would offer some families a more convenient
way of dealing with some aspects of work–family imbalance. Of course, any
scheme might be amended to restore greater assistance to low-income families.
It should be noted that the fiscal impost associated with these proposals is not
excessive. The ACTU (2003a) cites an OECD study that estimated the OECD
average expenditure on early education and care was 0.6 per cent of GDP
compared to Australia’s 0.1 per cent of GDP. However, all of this discussion
still leaves at least one notable gap and that is the appropriate care arrangements
for children under the age of 3 years.
Very young children raise particular care issues. Parents have a strong
preference for parental care for this age group. Resource requirements to
care for these children result in higher centre-based fees and fewer places are
available. In 2002, 2-year-olds represented 14 per cent of children in private long
day care and 19 per cent of children in community-based schemes (DFaCS 2003).
In July 2003, the ACTU lodged an application with the Australian Industrial
Relations Commission to bring a Work and Family Test Case with provisions
that address the needs of care for young children. The test case seeks to increase
the flexibility available to families to alter hours of work, including moving
between full-time and part-time work, depending on the stage of family
formation. Australian industrial relations provisions currently allow 12 months
unpaid parental leave around the birth (or adoption) of a child, with return to
employment on a part-time basis at the employer’s discretion. The test case
includes a claim to extend this allowance to 24 months unpaid parental leave with
the right to return part-time resting with the employee. In addition, the test case
argues for the right to part-time hours to continue until the child is school aged
and for access to reasonable unpaid emergency leave and the right to vary daily
hours to fit child care times (the test case also proposes changes associated with
caring for school aged children and the aged and disabled, but these are not
central to the current theme). If accepted, the clauses would have the effect of
providing parents, and especially mothers, with the means to accommodate work
and care needs of children under 3 years of age, again facilitating return to work
and labour force participation. It needs to be acknowledged that the right to return
to employment on a part-time basis should not be seen as a justification for
further erosion of work conditions available to part-time and casual workers.
Finally, part-time work and flexible hours have been used to satisfy family care
needs for some time but there is little sign of change. Adoption of family-friendly
156
THE JOURNAL
OF
I N D U S T R I A L R E L AT I O N S
June 2004
work practices have been proclaimed as one means of reducing work–family
imbalance. Indeed, the Australian Bureau of Statistics (ABS 2003, Cat. No. 4402.0)
points out that in the four child care surveys since 1993, a roughly constant
68 per cent of employed mothers used work arrangements to provide care
for children aged 0–11 years. If adjustments to work hours are the sole means
of accommodating care requirements, then they will neither require a
government subsidy nor impose a monetary cost on families. These work
arrangements included flexible working hours, permanent part-time work,
shiftwork, working at home, job sharing and other arrangements. Yet despite
the increased political and media attention given to family-friendly work
practices, there has been surprisingly little change in the diversity of utilised
working arrangements across the four surveys. Shiftwork, job sharing and other
arrangements constitute a roughly constant 10 per cent share of all working
arrangements used by employed mothers over the decade, while working from
home has experienced a share declining from 21 per cent to 17 per cent. Flexible
working hours and permanent part-time work between them have accounted for
more than two-thirds of the chosen working arrangements since 1993.
Unfortunately, data constraints mean that it is not possible to determine how
frequently and for what specific age cohort of children employed mothers used
these arrangements.
This review outlines developments that have the potential to ease the care
burden faced by the high proportion of working families with young dependent
children. However, implementation will require a commitment to being innovative, a willingness to reform the early education sector and the political will to
devote adequate funding to the sector. Despite the policy imperative to reduce
dependency rates and lift activity rates associated with an ageing of the population, the issue of child care access and provision and its links to activity rates
remains on the policy back-burner.
CONCLUSION
Will 2004 bring an end to the boom in jobs and the decline in the unemployment rate? Strong growth in China and Japan should ensure ongoing demand
for Australian commodities; however, the strength of the Australian dollar will
hit jobs in import competing and export sectors. The strength of the currency
will also give added impetus to the ‘offshorin