A suite of policy settings, from wage cuts to unaffordable education, shows the government turning its back on a generation. By Mike Seccombe.
Charting the war on young people
In this story
Let’s call him Dave. Dave works as a permanent part-time shop assistant, putting in 16 hours a week while studying at university. Every weekend he works eight hours on Saturday and eight hours on Sunday.
But the penalty rates Dave receives for working his unsociable hours are being cut. As a result, his earnings before tax will fall from $505.44 a week to $427.68 a week. Annualised, that’s a wage decrease of $4043.52, or 15.38 per cent.
Dave’s example is one of a couple of case studies provided to The Saturday Paper by the ACTU, to illustrate the impact of last week’s determination by the Fair Work Commission to cut penalty rates for many of Australia’s lowest paid workers.
Another was Jess, a student and part-time pharmacy assistant whose annual wage will fall $4043.96, or 13.91 per cent, according to the ACTU’s calculations.
Neither Dave nor Jess was a real person, although the numbers calculated by the union body are real, and the hundreds of thousands of people whose wages will fall are real, too.
Let’s take another example, a real one. A high school student, 14, who works the checkout at the local supermarket at nights and weekends, saving so he can buy a car when he’s old enough to drive. He also worries about the prospect of lower wages, although he hasn’t worked out exactly how much lower. He is my son.
Another of my kids, the eldest, works as a pharmacy assistant. It is pure coincidence the examples the union body provided reflect personal family circumstance. And my third child has no time for work, because she’s in year 12, frantically studying, and fretting about the cost of university, the chances of finding a job, the daunting prospect of entering the Sydney real estate market, climate change, and other uncertainties in her future.
I mention all this in the interest of full disclosure. But the story is not about my family or even just the people, disproportionately young and female, affected by the Fair Work decision. It’s about a much broader, multifaceted issue of intergenerational equity and the manifold ways young people are being betrayed by their elders, and in particular by our current government.
It is now well understood that inequality of wealth and income has been accelerating across the developed world since the late 1970s. As Warren Buffett, then the world’s second-richest person, famously told The New York Times a decade ago: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
But it’s not just a class war, it’s also a generational war. Buffett was 75 when he said those words. He might well have added that his generation, and the baby boomers a few years younger than him, were the ones winning. And every subsequent generation was losing in greater and greater ways.
Work has become harder to find and more insecure, education has grown more expensive and produces less yield for the effort of learning, housing has become vastly less affordable, career advancement has slowed as boomers linger longer in the workforce, and wealth disparities have become greater between generations.
Before going to the bigger picture, though, let’s deal with the immediate issue of the Fair Work determination, which is pretty extraordinary, given current circumstances.
Wages in Australia have been largely stagnant for several years and in the last three months of 2016 they actually went backwards by half a percentage point – even as company profits surged 20 per cent. The big story of this week’s national accounts figures was not the most widely reported – that the Australian economy is growing again, albeit at a modest rate – but that workers are not seeing the benefits of that growth. Indeed, real labour costs are the lowest they have ever been.
The logical consequence of people earning less is people spending less. We are seeing some evidence of that lack of demand, and we would see more but for the fact that consumers have been dipping into their savings to buy things.
So how will cutting the spending power of many of Australia’s lowest-paid workers boost demand and further the government’s plan for jobs and growth? How many jobs will this create?
Tellingly, when Treasury Secretary John Fraser was asked exactly that in a senate estimates committee hearing on Wednesday, he declined to offer a view.
Likewise, Treasurer Scott Morrison was asked four times at a media conference whether the Fair Work decision slashing Sunday and holiday penalties would create jobs. He, too, avoided a straight answer. The closest he would come was to say: “They made the decision. They said it would have that impact, and that’s why they made that call. I’m not here to offer opinions.”
The same is true for the government as a whole. They haven’t tried to sell the benefits of the decision. Instead, they have distanced themselves, stressing the independence of the commission, making a show of more or less reluctantly accepting the umpire’s decisions and pointing out, quite correctly, that Bill Shorten appointed the umpires and had previously promised to accept their decision.
There are two possible reasons for such reticence on the part of the government to embrace a decision for which their supporters in the business community have long called. One: they don’t think it will create jobs and growth. Or, two: they realise the politics of the decision will go badly against them.
The evidence from labour market specialists and pollsters would suggest they are right on both counts.
One thing we can say for certain, though, is that if the decision stands, many of Australia’s most poorly paid workers, in the hospitality, retail, pharmacy and fast food industries will be worse off. And disproportionately, they will be young people.
In some of those areas, says Shirley Jackson, who is working on a PhD in the area of youth employment at the University of Melbourne, the majority of the workforce is under 25.
Long before the Fair Work decision, he says, the labour of young people was undervalued. Australia’s long-established junior pay rates system, for example, provides for the biggest differential between youth wage rates and the minimum wage in the world. But things have got harder for younger workers over the past couple of decades.
“It can be traced back to the labour market deregulation of the ’80s and ’90s, which have contributed to young people remaining in insecure work for much longer than their parents, in casual jobs, on low pay, with few opportunities for advancement,” he says.
“Young people are facing conditions very different from previous generations, and they’re doing it tough.”
Some statistics, culled from political adviser Jennifer Rayner’s forensically angry book Generation Less: How Australia Is Cheating the Young, underline the point.
In the late 1970s, when the baby boomers were entering the workforce, unemployment was just a couple of per cent. The rate of underemployment – that is people who had less work than they wanted – was also very low, at 3.2 per cent for people aged 15 to 24, and 2 per cent for workers aged 45 to 54.
By 2014, the underemployment rate for that young cohort had grown fivefold, to more than 16 per cent. It had grown for older workers, too, but not by nearly as much. The underemployment gap had increased from 1.2 per cent to more than 10 per cent.
Not only has work become harder to find, but also relatively less well paid. As Rayner notes, during the past 25 years, the real weekly full-time earnings for workers under 25 grew 25 per cent. Wage growth for those in their 50s grew 59 per cent.
Work also became more precarious. The deregulation of the labour market in the 1980s and ’90s saw a huge shift to casual employment. The number of casual jobs increased more than 70 per cent in the 15 years to 1998, but since then the proportion has remained pretty constant: about one in five. That figure, however, hides a generational reality: among young workers, notes Rayner, the rate of casual employment has grown from 34 per cent to more than 50.
The middle-aged seem to have managed to quarantine the best jobs – the permanent, more highly paid ones with regular hours – for themselves. And they are sticking to them. For her book, Rayner looked at the average ages of people in powerful positions and found major company chief executives in Australia had on average grown eight years older over the quarter-century to 2014. Departmental secretaries were five years older, newspaper editors seven years older, federal politicians five years older.
Dr Jim Stanford, director of the Centre for Future Work at The Australia Institute, worries that what he calls the “deteriorating quality of work” will, over time, affect ever more people up the age range.
“Since most new jobs being created are part-time, and increasingly precarious, it is a matter of simple maths that young people will be concentrated in those positions,” he says. “But there’s no guarantee that their conditions of work will improve automatically just as they age. Employers are learning that they can run their businesses with hardly any permanent full-time employees at all.”
Stanford notes the most recent Bureau of Statistics figures show almost 30 per cent of those under 25 are either unemployed (12.3 per cent) or underemployed (17.2 per cent). That’s more than double the rate for the workforce as a whole.
“The job situation is so bad for young people,” he says, “hundreds of thousands of them are willing to work for free through unpaid internships.”
He’s not exaggerating. Professor Andrew Stewart, a specialist in employment law at Adelaide University, is an expert on the growing phenomenon of internships, and has provided advice to the Fair Work ombudsman on what is a very murky legal area.
Fifty-eight per cent of people aged 18 to 29 had taken part in unpaid work experience over a five-year period, according to Stewart’s survey figures.
“Around half were people whose unpaid work was undertaken as part of an educational training course,” he says. “But half weren’t, and among those were people doing unpaid trials, people who had been offered a job but were required to do some form of unpaid training before they started being paid, some doing unpaid work in order to keep their dole payments, and there was a big chunk that is termed ‘open-market internships’. That just means either a firm has set up some kind of work-experience program or a jobseeker has offered their services. A lot of that is happening in a grey area, legally.”
And it is not just the private sector that is involved in this.
Treasurer Scott Morrison and Employment Minister Michaelia Cash put out a press release at budget time last year headlined, “Creating a path to real jobs for young people”.
A few weeks from now, on April Fools’ Day, the promise of that announcement will be put into action. To quote from the release, “up to 30,000 young jobseekers each year will be eligible to undertake an internship placement of 4 to 12 weeks”.
These “real jobs” do not, however, come with much in the way of real pay. Those unemployed young people who take part will be paid just $200 a fortnight – a few dollars an hour – on top of their welfare benefits.
It’s a good deal, though, for the businesses that “host” these young people. They will get an upfront payment of $1000.
Naturally, many people are sceptical about the benefits of the scheme. The welfare sector and unions worry that it will displace workers who might otherwise be hired on proper wages, that unscrupulous bosses will take advantage, that the hopeful young unemployed will simply be churned through the program, and back onto welfare.
Professor Stewart also has concerns.
“My view is that it is worth a try, but they should be paying minimum wage,” he says.
And there are also some legislative issues. Without an amendment to social security legislation, “any payments the interns receive will then count as income and reduce their social security payments”.
At least it is an attempt by the government to do something to get young people employed, rather than simply trying to protect the budget from the cost of their joblessness.
And the government continues to do a lot of that. It persists, for example, in pushing for a five-week waiting period before young unemployed people can get the dole. And trying to push those aged under 25 off the Newstart payment onto the lower Youth Allowance, at a cost to them of about $48 a week. They bowled up those changes again in legislation this week. The senate continues to resist.
Even as things stand, the rate of Newstart – $38 a day – has been condemned as inadequate not just by the welfare lobby but the Business Council of Australia.
The government, however, seeks to make a virtue of paying the young unemployed punitively low benefits. Social Services Minister Christian Porter last year said it was a “design point” of the system, intended to make them try harder to get a job. No matter that statistics show there simply aren’t enough jobs to go around.
But there is so much else the government has done that threatens the future welfare of the young, either directly or indirectly.
In the direct category go things such as the increased costs and reduced quality of education and training – it now takes an average 8.5 years for a tertiary graduate to pay back the cost of their degree. There are also the swingeing cuts to vocational education that see TAFEs increasingly supplanted by private providers offering courses of varying and often dubious quality. Since September 2013, the number of apprenticeships has plunged by some 130,000.
The indirect impediments to the young are perhaps even greater. And the big one is real estate prices. Between 1982 and 2011, home ownership rates fell from 55.5 to 34 per cent among those aged 25 to 34, according to Bureau of Statistics data. And since then, of course, housing has become vastly less affordable.
We’ve seen the stories, over and over, of young hopefuls outbid by investors. And the expert advice is near unanimous that the government could do much to alleviate the problem if it simply cut out the tax breaks – negative gearing and the capital gains tax discount – that give investors an advantage.
Yet the government shows no sign of taking meaningful action.
And that, probably more than any other factor, is driving generational inequality in Australia, as illustrated by one killer statistic in Rayner’s book.
“Between 2004 and 2012,” she noted, “people in every age bracket over 45 saw their net worth grow by more than the total wealth of those under 25.”
No wonder those young people, mine included, worry a lot. Seen from their perspective, it must look as though not only this government but the whole system doesn’t care about their future. In fact, it looks as if there is a war on young people.
And I, who entered a labour market straight from school when unemployment was 2 per cent, who got free tertiary education thanks to Gough Whitlam, and who was able to afford a first house in my mid-20s on a junior journalist’s salary, find it hard to reassure them otherwise.
This article was first published in the print edition of The Saturday Paper on Mar 4, 2017 as "Charting the war on young people".
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