6. Nevertheless, and concluding remarks
- 6.1 Indications of changing practices
- 6.2 Organisational change and contracting
- 6.3 Concluding remarks
6.1 Indications of changing practices
Notwithstanding inadequate statistics and possibly deceptive appearances, evidence that contracts of employment were both changing and diversifying was better than anecdotal. Nor were those events confined to Australia. For example, part-time, fixed-term and self-employment increased by a total of 15 per cent in European Union countries between 1985 and 1995, despite falls in the developing economies of Greece and Portugal (De Grip, Hoevenberg & Willems 1997). International resemblances included acknowledgment in the 1995 report of the United States Bureau of Labor Statistics survey of 'contingent and alternative' employment of the possibility that some workers appearing as self-employed might be 'individuals who were "converted" to independent contractors to avoid legal requirements' (United States Department of Labor 1995).
Conversion motivated by cost-cutting was described in a survey of self-employed editors, proofreaders and indexers in British book publishing (Stanworth & Stanworth 1995). That industry had undergone structural change in response to various factors, including technological developments, was putting out more products with shorter print runs and sales lives, and was making 'increasing use of subcontractors and self-employed home-based workers.' The study found that many were regular employees before being made redundant, and its authors concluded that:
…freelancers in publishing are essentially casualised employees, rather than independent self-employed. They have few of the advantages of being employed but neither do they enjoy the accepted advantages of being self-employed. In objective terms, they are 'disguised wage labour', with very limited autonomy and freedom…they do not enjoy the legislative safeguards which accrue to employees [and they] lack the structural solidarity necessary to secure [National Union of Journalists] rates of pay. [T]he risks of obtaining a constant income-flow are moved from the publishing house onto the individual.
In 1994 Wooden and VandenHeuvel, commissioned by the ATO and the Department of Industrial Relations, conducted a sample survey of the use of contractors in workplaces employing 100 or more people. Respondents were asked to distinguish independent contractors, including homeworkers, from employees of contractors and agency workers. It appeared that in the survey month 70 per cent of workplaces had used self-employed contractors, 59 per cent employees of contractors, and 58 per cent agency workers. Thirty-two per cent had used all three, and the categories had accounted for 10 per cent of total employment. Principal reasons stated for the use of contractors were 'to access specialised skills not available in-house…to cope with periods of peak demand…and to deal with one-off tasks.' A low rate of response to the mailed questionnaires, 32 per cent, could have introduced bias.
The authors noted that their figures, as compared with the preceding AWIRS 90, 'taken at face value…point to a marked increase in the use of contractors.' Respondents had reported a smaller but substantial increase in the same period, and, 'To summarise, all indicators point to a marked increase in the importance of contractors in the Australian workforce during the last five years. The data, however, are not of sufficient quality to permit…an accurate assessment of the magnitude of this increase' (Wooden & VandenHeuvel 1996).
At best estimate, most self-employed contractors were probably 'dependent' at 28 per cent of workplaces and probably not at 41 per cent. However, the authors questioned the continuing relevance of the distinction between employee and non-employee.
The subsequent AWIRS 95, found that about the same proportion of workplaces as in 1990 used contractors or their employees, agency workers or outworkers, but they had increased from 4.7 to 6.5 per cent of all workers in the main sample, and that agency workers had been used at 21 per cent of workplaces compared with 14 per cent in 1990. The report explained that 'the…employment status of contractors depends on whether they have entered into "a contract for service" (independent contractor) or "a contract of service" (employee),' but warned, 'Although the AWIRS questionnaire specifies "a contract for service", the technical legal distinction may not have influenced all managers' responses' (Morehead et al., 1997). Indeed; and the uncertainty may have been aggravated by failure to distinguish within the category, 'contractors and their employees', the 'workers provided by contract firms' of the United States' survey of contingent and alternative employment.30 Wooden and VandenHeuvel had mentioned that 'employees of contractors…were most likely to have been used to provide cleaning services [and] equipment and building maintenance'.
One distinction made for the first time in the employee survey included in AWIRS 95 was between 'permanent', 'casual' and 'fixed-term' employment, which was reported by 9 per cent. These last were evidently not the temporary workers placed and paid by an agency. Although no statistical series exists on fixed-term contracts of service, they appear to have become more common in the 1990s. Their widespread use by tertiary educational institutions in a period of expanding numbers and budgetary constraints led to prolonged proceedings before the Industrial Relations Commission, an interim award in 1996 and a final decision by the full bench of the Commission in May 1998 (AIRC 1998). As well as general grievances related to low status and insecurity, issues had included entitlements that normally accrued with length of service, such as redundancy payments in situations where employment might be terminated simply by expiration of the latest of a series of contracts. The Commission extended entitlements and defined the circumstances in which fixed-term contracts might henceforth be used: for example, for a specific task or project, for conduct of research, and to provide temporary replacement of another employee.
6.2 Organisational change and contracting
Attention has been given to the interrelationships between organisational and institutional change and terms and conditions of employment. In 1997 Walsh, referring to 'a widely held view…that employers are increasingly segmenting their workforces along the lines of a core and periphery in the pursuit of greater efficiency and flexibility in production,' reported a comparative study of developments in the internal labour markets of two big retail banks, one in Australia and one in the United Kingdom, and in the public postal services of the two countries. 'Both industries have been traditionally associated with well-established internal labour markets.' Now the two banks, 'Ausbank' and 'UKbank':
had moved away from…lifetime career progression, seniority-based promotion and general training…Ausbank…now filters its employees into four separate career streams… Managerial positions in the two organisations had largely become the preserve of graduate recruits and were significantly professionalised… The…effects…had been compounded by the deployment of computerised technologies [with] specialised computer data centres… Branches had become outlets for the marketing and sale of financial products…to either consumer or corporate customers… Both had increased the numbers of part-time staff within the branch network, particularly during peak periods [and] there has also been some experimentation with extended opening hours…
UKbank had shed about 4 000 clerical and management posts [and] Ausbank around 1 000 staff [in its] management reorganisation and…rationalisation of staff in non-core banking activities… Clearly, however, neither…appeared to be 'casualising' the workforce… The stated aim of both banks was to maintain a predominantly permanent workforce, albeit with increased number of part-time employees (Walsh 1997).
Recruitment and career paths had changed less in the postal services. However, in promoting staff the Royal Mail now placed more emphasis on merit and less on seniority 'largely because [it had] buttressed the position of long-serving (usually male) workers and served to undermine the job prospects of female workers with shorter tenure.' Both services were making more use of part-time workers. The respective unions had delayed some changes, but '[the] relative stability may reflect the fact that key aspects of postal service and delivery are highly labour intensive and not readily amenable to fundamental technological transformation.'
Organisations respond to currents of theory and fashion as well as to technological innovation, functional change and economic environment, and the responses may have unintended consequences requiring correction. The idea that efficiency could be improved by the contracting out of productive and organisational maintenance functions previously performed by employees can be said to have become fashionable. A small study of sweeping changes in administration of Melbourne's water supply and sewerage system reported views, not necessarily unprejudiced but informed, that enthusiasm had gone too far.
The former Melbourne and Metropolitan Board of Works had been replaced by five 'business units' and staff reduced from 9 000 to fewer than 3 000 in 10 years. Union representatives and senior managers were interviewed on the effects. Managers believed that contracting out had produced savings, one explaining that not all specialised skills were needed continuously. However, most respondents, including some managers, thought important skills had been lost from the organisation, including skills needed to train and supervise contractors, and that it had become dependent on a few contractors with the required specialised competence (Bottomley 1996). Whatever the facts of the particular case, it will generally be true that, to get its money's worth from the contracting out of work related to its central functions, an organisation must put commensurate resources, including skills, into the management of contracts.
The Victorian State government elected in 1992 went further than its contemporaries in selling some instrumentalities, 'corporatising' others, contracting out of functions previously performed by the remainder, and changing the terms of employment in departments of government reduced from 48 700 staff in 1992 to 23 000 in 1998. It legislated to give departmental heads, themselves employed on 'standard executive contracts', 'similar powers to private sector employers to employ and assign people as needed'. Whereas, 'Traditionally…people were recruited at base grade level and their advancement was often related to their seniority or length of service…now…a career depends upon individual performance [and] department heads are giving priority to performance management systems that link achievement of outputs, development opportunities and rewards' (VOPE 1998).31 Details varied between departments, but included financial incentives to sign individual Australian Workplace Agreements (AWAs) and, frequently, fixed terms. In one department as of 1998 existing staff could remain under former arrangements but most had chosen to sign AWAs, and signature was required for all new employees and all persons promoted. Terms of employment would be reviewed in 2000. In another, said to have been using three-month rolling contracts, persons recruited were paid more if they signed AWAs.
In the United States, between 1972 and 1993, employment in the 'business services industry', engineering and architectural services, and accounting, auditing and bookkeeping had grown much faster than total employment. A study prompted by 'growing interest in…market- mediated work arrangements: contracting out for business support services, subcontracting, and the use of temporary employees,' used data collected in supplements to the monthly Industry Wage Surveys—of establishments employing labour—from June 1986 to September 1987. Respondents were asked what proportions of specified services were secured under contract in 1979, 1983 and currently. Subsequent analysis related propensity to contract those services out to size of establishment, wage levels—allowing for the level of skills required in particular occupations—union involvement, seasonal and cyclical variations in employment in the industry, and geographical location.
In theory, contracting out rather than having work performed in-house might appeal to an employer as 'a way for high-wage organisations to take advantage of low market wage rates for certain types of low-skill work,' or 'the desire to smooth the work load of the regular work force may encourage organisations to contract out peak period tasks, while…discouraging them from contracting out tasks that could…keep the regular work force occupied during | off-peak periods.' Or, on the other hand, the decision could reflect 'the existence of scale economies accruing to the providers of particular services.' It might not be economical for the firm to invest in the necessary equipment or skills (Abraham & Taylor 1996).32
Conventional but well-designed econometric analysis of the data led to the conclusion that 'observed contracting behavior seems to reflect a mixture of all three of [those] influences', and supported speculations strongly reminiscent of notions of the labour market—here the internal labour market—as a social institution:
Contracting for janitorial services—the only low-skill activity included in the set of services we have studied—appears to be motivated primarily by a desire to reduce hourly labor costs. The major correlates of contracting out for machine maintenance, engineering, and drafting, accounting, and computer services…are consistent with the existence of important economies of scale in the provision of these services. Establishments in more cyclical industries are more likely to contract out for accounting services [but] appear to be less likely to contract out for janitorial and machine maintenance services, suggesting that [they] may be discouraged from using outside contractors by the desire to reserve certain tasks to be performed by the regular workforce during off-peak periods.
[E]vidence on which employers use outside contractors is of interest for the light it sheds on the underpinnings of the employment relationship. Our findings concerning the relationship between an establishment's wage level and its contracting behavior corroborates other evidence suggesting that internal equity considerations constrain the relative wages paid to employees within a single internal labor market. [Otherwise] there would be no reason to expect any difference in the contracting behavior of high-wage and low-wage establishments. [T]hat high-wage establishments are more likely to contract out for janitorial services suggests that [they] cannot readily pay low wages to janitors on their own payrolls. Similarly, the finding that low-wage establishments are more likely to contract out for certain…high-skill services suggests that [they] cannot easily pay high wages to workers in selected occupational groups.
[T]he relationship between the volatility of the demand faced by the establishments and the propensity to contract reinforces the…view of labor as a quasi-fixed…factor of production. [E]stablishments facing more volatile demand are less likely to contract out for janitorial and machine maintenance services, and we infer that…more of this work is performed in-house during slow periods. Such behavior is indicative of the value that employers attach to maintaining stable relationships with their regular employees.
Contractual arrangements can also be the means of transmission and development of new technology. Analysis of input/output statistics from the latter part of the 1980s for Italy, Germany, France and the United Kingdom indicated that:
Communication and business service industries are the new strategic sector of the emerging…economy. Their products are key intermediary inputs to the rest of the economy. A small increase in their use makes it possible to increase significantly the output levels… [T]he competitiveness and innovative capacity of the European economy is increasingly [dependent on] the new information and communication technologies and, consequently, the…knowledge-intensive business service sector (Antonelli 1998).
Studies of substitution of external for internal contracts illustrate the ambiguity of aggregate figures on trends in employment by industry. The ABS assigns respondents to industrial divisions and subdivisions according to the activity of the establishment that employs them, not their own occupations. If, over time, an establishment producing and distributing goods were to contract out for, say, transport and technical services it would contribute to apparent growth in those sectors and apparent relative decline of its principal activity, even if the volume of services were unchanged.33
6.3 Concluding remarks
Information collected by the ABS gave a reasonably clear account of the changing demography of the labour force, and the employment status and earnings of its members, which was its principal purpose. However, it omitted much that was increasingly of interest and importance to public policy.
This study proceeded from the idea that what happened to Australian employment in mid- 1974 was not an interruption of normality but marked both the end of the period of growth dated approximately from the White Paper of May 1945 (Australia 1945, Full employment in Australia) and also the beginning of something quite different. It has attempted to trace and, where possible, explain trends in the labour market over the succeeding quarter-century.
Perhaps the most basic statistics are those presented in Figures 4 and 5, covering the periods 1972-2000 and 1975-2000 respectively. Rates of unemployment rose abruptly in 1974 and never fell back to what was regarded as a satisfactory level, but the material summarised in Figure 5 shows that total labour supply, calculated as hours worked per head of total population aged 15 years and above, barely changed. What did change was who supplied the labour and in what kinds of jobs, and that the work they did was much more productive at the end than at the beginning of the period. Those changes are summarised in Figure 4, on the distribution of jobs between males and females, and full-time and part-time employment. Here the constant feature over time was the rate of change, hardly disturbed by the fluctuations of the business cycle. However, that development could not continue indefinitely.
The future was unpredictable as always, but by the year 2001 it seemed possible that the labour market was approaching an equilibrium in a form unprecedented historically and, although not immune to recession, likely to persist until new forces for change asserted themselves. One prediction that could be made with confidence was that there would be no return to the conditions of, say, 1960. Not that nothing of value had been lost, or all interests advanced, or social justice established. As understood by Schumpeter, economic evolution is destructive as well as creative, and not to be confused with cumulative progress.
It seemed that female employment and labour supply would stay much higher than in the past, and male employment somewhat lower. Rates for older males might recover significantly, if hardly to past levels, and women were likely to make further gains. Demand could be influenced by aging of the population. Employment ratios were still rising for women with children and older single women, and the continuing rise in female participation in tertiary education, with higher rates than for males, would be reflected in earning capacity and labour supply. Segmentation of the labour force by sex would persist, but developments in technology and organisation would probably open areas of opportunity for women in industries previously dominated by men.
Neither the nature nor the extent of change in systems of production, forms of employment and contractual arrangements during the 1970s, 80s and 90s can be determined from the available statistics. Various organisational and institutional changes were intended to overcome impediments to economical and productive use of available human and material resources, and to facilitate their reallocation. They had some success, but in the process established practices, expectations and interests were threatened. Some welcomed 'flexibility' and consequent competitiveness; others denounced 'globalisation' and 'casualisation'.
Where the past was taken as a standard of judgment it may have been idealised and in any case was beyond recall. On the question of insecurity, the statistics provide no clear evidence of increasing rates of job change, whether voluntary or involuntary, and although literally permanent employment may have become rare it could never have been common. Coverage of formal entitlements related to employment spread, and apparently they were distributed more evenly. Wider opportunity may have compensated, to an unknown extent, for any loss of security.
Lack of information over time on literally casual employment—'casual1'—its uses, and the circumstances of those dependent on it, is more to be regretted than lack of information on its opposite, literally permanent employment. All that can be said is that it continued to exist and was of significant economic importance. The ABS category—'casual3'—defined by lack of formal entitlements and intended as a rough approximation to the 'casual2' award provisions was easy to enumerate but supplied little information about casual2 and much less about casual1.
The complex interactions between economic processes, social change, public policy and the labour market were beyond the scope of this study. Evidently, social and economic factors, including technical innovations, were primary and the contribution of policy was to facilitate and ameliorate rather than initiate. Some of the negative and wholly unintended effects of change, such as higher rates of unemployment and non-employment, were mitigated by social security provisions designed for other circumstances but adaptable to the new conditions, although with negative effects of their own.
Many unemployed, males in particular, were led to redefine themselves as unemployable and retired. At the same time, transfer payments may have contributed to the formation of a new ancillary labour force made up of persons mainly committed to some other activity or whose principal income was unearned. The clearest example was the substantial contribution of students to casual, part-time and temporary employment. Conditions of eligibility for statutory payments were modified specifically to encourage those types of work, often on the stated but unproved and questionable assumption that individuals, once employed, would increase their labour supply and earnings. Single mothers could, if they wished, retain eligibility for reduced payments while working full time but in the 1990s, as indicated by Figure 16, rates of part- time employment rose but full-time employment fell, suggesting that many optimised rather than maximised.
Apart from the income security provisions, much of the growth in community services, and employment in them, was also publicly funded. Meanwhile, market incomes rose. The net result was that, despite the intervening years of low growth rates and high unemployment, and although as compared say with 1968 relative inequalities may not have been reduced, many fewer people in the more prosperous society of 2000 had to choose between any work they could get, however unrewarding, and severe deprivation.
The causes of change probably do include innovations in information technology and its applications. We have seen indications of its impact on banking. The Federal Court's decision in De Luxe Red & Yellow Cabs v Commissioner of Taxation mentioned, in discussing the extent to which drivers worked under direction, that 'approximately 25 per cent of drivers now use mobile phones, which they provide themselves, to obtain work.' By itself, the mobile telephone must have had a profound impact in freeing not only self-employed but many other workers from close dependence on bases and support staff.
Continued use of the terms 'standard' and 'non-standard', or 'typical' and 'atypical' employment, and of the categories they refer to, is questionable. The terms have connotations of superiority and inferiority or normality and abnormality, and the categories imply simple dichotomy or polarity, whereas each of the types discussed here, often shading into each other, will contain good and bad jobs, satisfied and dissatisfied workers. Each changes over time, new forms emerge, and none is defined adequately by reference to any fixed standard.