Senior economist with the Centre for Future Work Alison Pennington discusses the economic implications of the COVID-19 pandemic, how the federal government’s response has exacerbated disproportionate impacts on the working class and alternatives to austerity and deregulation.
She was interviewed for Green Left on 3CR Community Radio Melbourne in early August by Jacob Andrewartha, Chloe DS and Zane Alcorn.
Federal Treasurer Josh Frydenberg said the government's post-COVID-19 economic recovery plan will include a streamlining of industrial relations and that he is inspired by former British Prime Minister Margaret Thatcher’s economic policies. What is your perspective on the government’s post-COVID-19 recovery plan?
If we take our minds back to March when the shutdowns were introduced, it was quite a remarkable time. We had an austerity-prone federal government being forced into the position where it had to take up the mantle of active public investment and government spending in order to prevent an even worse recession.
The government’s first couple of packages, worth multi-billions of dollars, were mostly geared toward keeping lines of credit flowing by giving business cheap loans, and tax offsets. Only a very small amount went to households and workers.
The second package was the JobSeeker doubling of the dole, by adding the coronavirus supplement. They introduced this increase because they were predicting that the ranks of the unemployed would expand massively and they wanted to hold off on providing a wage subsidy. They brought that in later, through JobKeeper, under pressure from unions and business.
Since that big-spending program, we have seen the federal government push to reinstate the status-quo, if not push those settings further to enhance employer power in the labour market and in workplaces.
Overall, their aim is to stop Australians from having expectations that the government will spend money. Hence, the return of the rhetoric on austerity and the cuts to the JobKeeper subsidy in important workforces, such as childcare.
Part of reducing people’s expectations of pro-social government spending is the remarkable claim from Treasurer Josh Frydenberg that former British Prime Minister Margaret Thatcher and former US President Ronald Reagan are his biggest inspirations. This is in spite of the fact that it would be impossible to mount an agenda anything like what they introduced in the neoliberal period. Economic growth is still suffering from the policies introduced at that time, such as tax cuts and the smashing of workers’ wages, and we have reached a point where that project cannot go any further.
The federal government has announced that from September 27 it will slash the rate of JobSeeker and JobKeeper. What are the economic implications of these changes?
At a time when the private sector has completely collapsed, there is no business investment, businesses are shedding hundreds of thousands of jobs and government spending is basically holding the economy together, any cuts to government spending will increase unemployment.
Instead, they are not only inflicting pain on those who receive JobSeeker and JobKeeper payments, they are also ripping away $10 billion each month that they would previously have spent, and which would keep people in jobs. They will increase unemployment: they plan to take 2 million people off JobKeeper and a large proportion will go on the unemployment benefit.
They have changed the JobKeeper payment so there are two streams: if you worked less than 20 hours a week pre-COVID-19 your payment will be cut from the flat rate of $1500 a fortnight to $750. If you worked full-time hours, the payment will be cut to $1100 a fortnight. This is going to impact workers who worked fewer hours pre-COVID-19, but whose employers jacked up their hours because they received favourable changes under the Fair Work Act to allow them to increase the hours worked to match the subsidy.
Regarding JobSeeker, the old unemployment benefit, the government cut it by $300 a fortnight and substituted it with the ability of those claiming the payment to look for work and earn up to $300 a fortnight.
But we are in a depression and there are no jobs to be found. We are seeing an escalation of the politics of damning the “unworthy” poor and smashing the victims of a health and economic crisis.
The Australia Institute found that the impact of the decision to cut the payment by $300 a fortnight would plunge 370,000 into poverty, including 80,000 children. That is just from that $300 cut.
But the government is threatening to cut it further: it is creating high levels of insecurity for tens of thousands of people who will not be able to meet their basic needs of food, shelter and medicines. It is about creating a precarious workforce, so that when those people are pushed into jobs, they will take any low-paid job and will have a weaker bargaining position.
Women have disproportionately felt the economic hardship. It is relatively easy for white-collar workers to work from home, but most women workers also take primary responsibility for child rearing. What has your research shown up regarding the impact of the crisis on women?
I have grave concerns that what we are experiencing now is the erosion of decades of gains that women have made in accessing paid work. Because women are more likely to work in piecemeal, insecure and part-time work, they were the first to be sacked, the first to have reduced hours of work, and they were more likely to leave the labour market altogether.
The key reason is that women shoulder the biggest proportion of the caring burden in all areas of society — child rearing, caring for the elderly, volunteering in the community.
What we saw in the pandemic was an explosion in that caring burden as families had to immediately pull together to get through the lockdowns, home school the children, and care for each other. With schools and childcare centres closed, women resumed that caring role, which effectively doubled their workload.
The government’s free childcare scheme was one of the easiest and most straightforward ways to support and offset that macro explosion in caring needs. But, a few months in, the policy was cut just as women were already suffering from a drop in income and the loss of jobs. This made it impossible for those women, who still had them, to hold onto their jobs or to look for work, as they had to stay home to look after their children.
It has been a perfect storm for women’s access to paid work. But, it is not just what is happening in the labour market. Employers will do what suits them, and that means laying off the cheapest workers, who tend to be women.
The government has made this much worse: it has cut the childcare subsidy, reduced public sector pay and the tiny stimulus provided to industry has gone to male-dominated ones, such as the construction industry.
This has exacerbated the unequal gendered impacts of the pandemic on women.
There was also a stratification of workers into those who could work from home and those who couldn’t.
We estimated that about 30% of the workforce could work from home, based on the types of work tasks undertaken such as working on a computer. It gave them more agency in their working hours.
But, it also meant that 70% of the workforce did not have the ability to earn an income from home. They are more likely to be essential, insecure workers and more likely to be women. As the shutdown continues and the economic recession unfurls, hours will increasingly be cut back too.
Statistically-speaking, women take on more of the unpaid caring burden at home, so even women who have more secure incomes working from home will still suffer as the gendered impacts hit.
Another key issue is unemployment. The government always points to the lower Australian Bureau of Statistics figures but you believe the real unemployment rate is 19%. Could you elaborate on how you came to that figure?
Official unemployment statistics operate well in a time of relative stability. But in a crisis, when people are being laid off and government support programs are helping people stay in jobs, it is difficult to know the real impact.
We do know for certain that the official unemployment rate, now and pre-crisis, is not an accurate indicator of the level of people’s capacity to work.
In addition to unemployed people, there are also the underemployed and people who fall outside the labour market statistics altogether. Before the crisis there were more than 1 million people who were not working, but not counted as unemployed. Most of these were young people and there is a worrying trend that young people are becoming disconnected long-term from work and education.
The most recent statistics for June, before the Victorian shut down, showed about 992,000 people, or 7.4% of the workforce, was unemployed. But if you add those workers who are formally classified as employed, but did not work a single hour, and those whose hours of work were reduced by a great number, it adds another 1.15 million people.
We include those people because, in a recession, if an employer cuts your hours back to near nothing, there is a good chance that you are either on the JobKeeper subsidy and/or the employer isn’t going to make it on the other side.
If you add those two together and then you add the 400,000 people who have given up on looking for non-existent jobs and have left the labour market since the March lockdowns, it equates to 2.4 million people, which is 19% of adjusted total labour force.
Youth unemployment and insecure work were already problems before the pandemic. How has it exacerbated those issues?
Usually in downturns and recessions, full-time workers in generally secure industries, such as manufacturing, feel the pinch. But what is so unique and brutal about this recession is that it immediately hit those in the most insecure jobs.
People in customer-facing jobs, such as hospitality, retail and the arts, were already the most precarious workers. Because these jobs were seen as entry-level work, they were more likely to be filled by young people, women and migrants — the three most vulnerable groups in the workforce.
Like any big economic crisis, the pandemic led to an explosion in survivalist employment, which is what gig work is all about. Contrary to the narrative that the gig economy is a form of entrepreneurism, it is always taken up by the most insecure and beaten-down workers.
Gig work became important in the pandemic because more than 1 million migrants were shut out of any government support. A conservative government will always do that because migrants are the easiest people to beat: it can trumpet the idea that they are undeserving because they are not Australians.
As the pandemic goes on, we will find that more young people will turn to survivalist employment in the gig economy. It lies outside labour protections and employers can freely exploit workers and force them to pay for their own capital costs. It is also unsafe, despite the good work that some unions, such as the Transport Workers Union, have been doing to try to install some workplace health and safety measures.
Gig work is just a particularly exploitative form of self-employment where big platform companies are taking advantage of our unequal society.
We will see a rise in young people seeking cash jobs and scrambling to do whatever they can to get the income they need.
This generation of young people is the most educated in Australian history. World history shows that if smart young people go backwards compared to their parents’ generation, they eventually organise to do something about those conditions.
It will be painful for young people for some time, but I have a lot of hope that, combined with the climate change reality, young people will pull together.
While up to 3.5 million people are now on JobKeeper, the sales of luxury cars has sky rocketed and the stock market is doing very well. How can we get out of this mess before it gets worse? Is there hope?
Australia’s economy is dominated by mining and resources, and it has been this way since the colony began. Mining and resources still controls what happens in this crisis. That is why the government instituted the mining-dominated National COVID-19 Commission and parliament was suspended.
It is not possible to maintain a set of economic conditions where mining controls industrial relations and the overall tax environment, and the government provides income support and helps generate a climate of insecure low-wage jobs. That was the pre-COVID-19 situation and that is the program of the Coalition now.
There are some significant barriers to continuing like this. Unemployment is too high for government to keep pedalling the myth of a business-led recovery. A business-led recovery is impossible given the scale of recession we are in now.
The private sector has been completely shattered. But because their power is so much greater than that of everyday people, they are allowed to use the levers of government investment to their own advantage.
There will be billions of dollars of public money spent — it will be a public-led recovery.
That is where opportunities will open up for organising everyday people. It is not just the number of people who have been dislocated by this crisis, but it is difficult to point to any layer of workers and say they are doing better than any others. The pandemic is a totalising experience.
There is an ongoing battle about the relative stability and strategy of the public health approach Australia has taken. Some have underestimated the scale of the fight that is continuing between the “let it rip” Trump-esque conservatives in the federal Coalition and the way some state governments, such as Victoria, are using government levers to literally shut down production to save lives.
If we think about the overall trajectory of capitalist economies, this is a radical and remarkable situation: a government has been forced to step in and halt the profit motive to save human lives.
It is an amazing opportunity that should be recognised and better exploited.
We can promote a public-led reconstruction agenda that is democratic and builds out of the support for our public health-care system, and from the proposition that we want to save lives and make lives better after this crisis is over.
Can you comment on the role of the trade union movement during the pandemic? And what is your view about how a green new deal could help get us out of this slump?
The green new deal is a version of the idea that there needs to be a more democratic public-led investment project — one that empowers workers to lead a process of changing and rebuilding the economy in their interest.
Australia is ill-prepared to confront the impact of what climate change means for our ability to produce and live on this land. The green new deal is a good framework for that: it is a branding of the principle of democratic public-led investment.
It would be a very positive development if the left could seriously engage with the mechanisms of worker power.
Regardless of the challenges, unions are still the most important and powerful institutions we need to change the world for working people.
Looking at the history of the labour movement, it’s not difficult to identify that it has been hamstrung at critical pivotal moments. It is not just the various Accords [under the Bob Hawke-Paul Keating Labor governments], there have been other periods where, if unions had had the capacity to step out and strike on their own, literally and in an ideas sense, they could have gone down a different track.
A lot of unions’ problems stem from them too often deferring to their political wing — the Labor Party. But I don’t think that is a permanent situation. In fact, there are a lot of contradictions and bubbling tensions there. Some senior Labor figures think that the party’s connections to working people don’t offer the Party anything. And so we will only see further decline in the relevance of the ALP.
The Australian Council of Trade Union’s five-point jobs plan starts to articulate and develop a vision for working people and is an important response to the crisis. It is advocating for free adult education combined with a “rediscover Australia” policy, which is basically proposing the federal government pay the wages of the tourism and arts sectors to rebuild them.
Recentring TAFE and free education into a reconstructed skills system that gives people tangible skills to do quality public services work like aged care and teaching, upgrade the grid and develop renewables infrastructure is also good.
There are many technical and theoretical jobs that need to be done, and it is better for workers if unions lead that process. We also need serious public infrastructure investment to rebuild the country’s manufacturing capacity. All the important things we need to build will be that much harder if we don’t have industrial capacity.
Making a distinction between work and wage labour is critical to being able to embrace worker-led economic strategies. Many assume that when we talk about economics or the economy it is the same thing as private-led investment or private-led activity.
But, if we remove the wage relation, everyday working people are working all the time. Some of the time they sell their labour to a boss for wages, but a lot of the time they are working in the home and reproducing human life and the community.
That human effort is different to the human effort captured by a small number of private interests who have created a market system that allows them to exploit that effort and pay us less than our effort is worth.
It is time to start embracing a more pro-worker concept of work, one that says work on our terms is the ideal because if we want a sustainable, inclusive and equal world, workers have to be empowered to connect to their work as something they own — for themselves, their colleagues, their families and communities.