Slave Labour: A Submission to the Australian Industrial Relations Commission Inquiry into Junior Rates of Pay
"It was the best of times, it was the worst of
times, it was the age of wisdom, it was the age of foolishness....it
was the spring of hope, it was the winter of despair....We had
everything before us, we had nothing before us."
Charles Dickens, A Tale of Two Cities
The paradoxes in this passage from Dickens capture the predicament
of young people entering the labour market in Australia today.
They've been born into one of the most affluent eras in human
history---with access to better medical care and a longer life
span than any previous generation. As well, rapid progress on
the medical, scientific and technological fronts will continue
to transform their lives. In many respects we can confidently
say there's never been a better time to be alive.
But the mechanisms for dealing with such remarkable change
have seldom, if ever, been so ill-matched to the task. Crucially,
the lack of flexibility in the youth labour market means that
appallingly high percentages of young people are excluded from
the world of work. The tragically high incidence of youth suicide
is one direct result. Another is drug addiction and related crimes
which account for more than half the prison population, along
with youth alcoholism, homelessness, alienation, poor health,
the collapse of family life....the list is all too familiar. And
whilst it is commonplace to suggest there are no simple solutions,
there is something close to a panacea for these ills---a job.
One of the great challenges we face in Australia today is to
harness the energy and talent of young Australians.
Unemployment robs hundreds of thousands of young people of
the opportunity to gain the confidence that comes when we are
valued for the contribution we can make to community life through
In this provocative booklet entitled 'Slave Labour' author
Bob Day contends that we have denied young people employment by
pricing them out of work. Day asserts that by regulating youth
wages at levels that bear no relationship to the economic value
of their labour we have created serious barriers to employment.
These views will not find ready acceptance in many quarters.
In fact, they will be violently opposed by some. However, if we
are serious about finding solutions to youth unemployment there
can be no sacred cows. We must assiduously examine every possible
barrier and every potential opportunity to put our young people
We simply cannot afford to ignore the talents and aspirations
of young Australians and their potential to enrich national life.
Dawn Fraser AO MBE
Sydney, July 1999
In its "Statement and Outline of Procedure", the
Junior Rates Inquiry poses the core question: "Whether it
is desirable to replace junior rates with alternatives that do
not discriminate on the basis of age". Clearly the alternatives
envisaged by the Commission rely on the concept of "competency".
It's a notion which appeals to many within the trade union movement
and the ALP because it is marginally more defensible on the basis
of equity than the present archaic arrangement---although the
proposed methodology for calculating such competencies would be
totally implausible. The main thrust of this submission however
is that neither age nor third party notions of competency ought
to have any bearing at all on junior wage rates. My submission
is that the only relevant consideration should be the value of
the labour itself to the person hiring it.
The time has surely come for the Industrial Relations Commission
to institute a self-denying ordinance---to accept that this is
an area in which its only constructive role is a negligible one
and to confront the tragic consequences of its past involvement.
Its regulatory activities are now widely accepted as being one
of the most significant barriers to the expansion of job opportunities
in the youth labour market.
If all youth employment in Australia today were provided by
firms with the resources and staffing policies of BHP in the 1960's,
we wouldn't have a problem. Companies of that kind would be able
to amortise, over time, the cost of subsidising junior wages that
were considerably in excess of the value of the work being done.
But, as Commission members know as well as anyone, the bulk of
prospective employers of young people are in the trades or small
to medium-sized businesses which simply do not have the margins
to afford such luxuries.
Under the present arrangements, these prospective employers
are precluded from providing gainful employment and on-the-job-training
to young people who are desperately looking to get a foot on the
employment ladder. Employees who want to sell their services to
an employer at a price the employer can afford are likewise legally
prevented from doing so. Yet there are perfectly sound reasons
why prospective employees might want to reach an arrangement outside
an award---a greater degree of independence, a contribution to
their own keep, job satisfaction and of course the incentive of
future opportunities are among the more common motives.
Australia's 'rear-view mirror' approach to industrial relations
is still based on the theory of conflicting interests which is
now completely at odds with the realities of the modern workplace.
The notion of voluntary acceptance of a wage that is unrelated
to an award seems to offend those who see it only as "exploitation".
But this view is demeaning to the common sense of those it purports
to protect as well as to the decency of most employers. And as
far as the small business sector is concerned it is a real ham-fisted
intervention in the relationship between the employee and the
The only sensible and intellectually consistent option is for
junior wage rates to be based on the value of the work to the
person purchasing it and set by agreement between the employers
and employees themselves. It is, practically speaking, impossible
for third parties, other than perhaps the parents of a junior
employee, to understand or to make judgements about what is or
is not in the employee's best interests. Those to whom such a
prospect is anathema simply have not confronted the fact that
as they presently stand nearly all junior wage rates are set at
levels which make them uncompetitive in the job market. Nor, would
I suggest, have they applied the traditional test of "Cui
bono?"---"Who benefits?" and in whose interest
are such arrangements? They certainly aren't in the best interests
of the young unemployed.
A regulatory system that excludes so many from employment and
prevents employers from giving them work must eventually be exposed
for the scandal that it is. To those most directly affected by
the intransigence of the process it is increasingly plain that
it has less to do with concerns about social justice and a lot
to do with the highly politicised role of trade unions and the
tribunals themselves. When the young jobless realise that it is
politics---rather than economic or social considerations that
are blocking their access to the world of work, we can expect
their response to be a very bitter one.
The falling rate of participation in the union movement among
those who have jobs is partly attributable to the perception that
unions are more concerned with protecting their own interests
than those of their members. The rhetoric of equity in income
distribution pales even more quickly for those who have no job
and have been priced out of the market thanks to a centrally determined
award wage. The young, who are generally well aware of their need
to acquire skills if they are to become productive employees,
will not thank those who have precluded them from on-the-job-training.
Over-regulated wage fixing systems, by contributing to the destruction
of jobs, add to the inequity they profess to correct.
As P.P. McGuinness recently observed, in the context of unskilled
workers, "It makes sense not to compel employers to pay such
a high minimum wage, but instead to preserve living standards
thought socially appropriate through the tax and social security
system. If for some reason you want employers to pay more, this
is best achieved through the tax system".(1)
The same applies to youth wages. The burden of supplementing
the value of the labour to the employer so as to achieve the unrelated
goal of a minimum wage ought to be met by the community at large.
I have no problem with that. The community is after all, like
the individual youth, getting considerable benefit from the fact
that they are employed. According to a National Youth Affairs
Research Scheme Study ("The Price We Pay" 1997)
youth unemployment already costs the Australian community more
than $2 billion a year. It is just inequitable to expect small
business and tradesmen to foot the entire bill and unrealistic
to pretend that they can afford to do so and still remain competitive.
Yet it is widely acknowledged that small business is the sector
which has the greatest potential for generating new jobs. The
Prime Minister himself put it thus, "The way to solve
youth unemployment is to liberate the small business sector".(2)
It is one of the long-term consequences of the Australian settlement
that we have developed a selective blindness about economic fundamentals.
I argued this point last year in a proposal to the Standing Committee
on Youth Unemployment:
- Historically, Australia developed a centralised wage-fixing
system as a result of the political consensus which also gave
us tariff protection. It's safe to say that without the one we
would never have had the other. High tariff walls led to what's
been called "the cost-plus mentality". Whatever goods
cost to manufacture---including the cost of labour---the manufacturer
would simply add his margin to arrive at a price.(3)
But at some point we have to stop deluding ourselves that we
can increase the price of goods or services---like labour---without
it resulting in a decrease in demand for those goods and services.
Price does matter. And "pricing young people out of the job
market" is not just employer rhetoric but a harsh reality
over which they have no control.
The laws of supply and demand are immutable and they apply
as much in the workplace as in any other market. When there are
external distortions, it is the weakest who suffer the most. It
was once the case that bricklayers employed lads to carry their
bricks, as plumbers did so that someone younger could dig the
trenches for them. In exchange the lads were taught a trade. Until
the cost became prohibitive as a direct result of centralised
wage-fixing, this arrangement suited all the parties and was well-understood
Historically, the collapse of that employment-generating system
is well documented. In 1951 a first year apprentice's wage was
approximately 7.5% of a tradesman's wage and there were virtually
no unemployed teenagers. By the mid 1970's the wage rate had doubled
to 15% and the term "youth-unemployment" began to have
some currency. The wage rate is now 40% and youth unemployment
is now regarded as the "single most important social problem
of our time".(4)
In the Sexton Report, 70% of respondents, unprompted, characterised
the issue in those terms. Approximately 70% of respondents also
said they "would support the introduction of a youth wage
equivalent to the dole or Austudy in return for full-time apprenticeship
employment or training". Among respondents, as an indication
of the gravity and familiarity of the issue, "youth unemployment
is a problem which has directly affected 4 out of every 10 households
having 16-24 year old family members in the last 5 years."
Among the survey target group---people living in the northern
and north-eastern suburbs of Adelaide, acquaintance with the realities
of our Proportional Rate System was more than merely theoretical.
Respondents were well aware that a scheme which locks adult rates
and junior rates together is incapable of adapting to contemporary
conditions. In the 1970's for example an inexperienced school-leaver
or job seeker was typically only 16 years of age. Today that same
inexperienced person is more likely to be 18 years old and the
relevant rate is much higher than the rate for a 16 year old.
It is absurd.
Another anomaly inherent in centralised wage-fixing systems
is the preoccupation with ascertaining what constitutes a "living
wage"---a rhetorical construct which ought to be recognised
as such. Variations in the cost of living across Australia make
it virtually impossible to determine what an appropriate living
wage might be. A young person living on a farm in the mid-north
of South Australia clearly has a completely different set of circumstances
to deal with---and thus different criteria in deciding on what
constitutes an adequate income---compared with young people living
on their own in the inner-western suburbs of Sydney. I have no
difficulty at all with the proposition that people in different
situations need differing amounts of money to live. But that has
nothing intrinsically to do with the employer-employee arrangement.
Cost of living adjustments ought to be made through the welfare
system---not through an award system.
It is very clear to most of the people who are directly involved
that the intangible benefits an employer confers by taking on
a young employee are as significant---and probably more profound
in their consequences, than the wage transaction itself. Anyone
who doubts this greatly underestimates the capacity of young people
to understand where their own best interests lie. They can see
the benefits of starting on a low wage to learn a trade and there
is increasing evidence of their wholly justified resentment of
paternalistic state interference which prevents them receiving
From a young person's perspective, there must be something
especially galling and hypocritical about society's double-standards
regarding employment. On the one hand we praise young people who
undertake volunteer work. On the other we hold in high regard
those who have found employment. Yet woe betide anyone who offers
or accepts any arrangement in between. It is a 'no-go' area---although
it is self-evidently a fertile field for mutually acceptable and
agreeable arrangements between the parties.
It is, I think, inconceivable that the present system with
all its inflexibilities will be allowed to continue indefinitely
to exclude so many of our young from the world of work. Not even
the most relentless demonization of the motives of small business
employers could achieve that end. In the meantime I feel compelled
to liken the struggle for the liberalisation of the existing wage
regime to the campaign against slavery and to invoke Ernest Howe's
description of it as "a bitter conflict with contemporary
sentiment and interests of gigantic power".(5)
Liberty. Freedom. The long struggle
to break the shackles of workplace regulation goes on.
Sydney Morning Herald "So, Back to the Quack Remedies
for Jobs", page 15, 29 October 1998.
The 7.30 Report, 28 February 1997.
"Checkpoint Charlie", a submission to the House
of Representatives Standing Committee on Youth Unemployment, 1997.
Sexton Report, 1997.
Howe, E., The Clapham Sect and the Growth of Freedom.