Menzies House

Your rights at work

Justin Campbell puts his slant on the thorny issues of workplace relationships, the debate that just won't go away.

“Your rights at work” words that in 2007 brought down the Howard government. The idea that an individual statutory contract could remove pay and condition guaranteed under industrial awards and enterprise bargaining agreements was enough to get voters to take a chance on Labor. The idea that access to service or minimum conditions are “rights” has become so ingrained in our society that almost no one has challenged the notion that such conditions are rights or seriously raised the question do such rights violate peoples’ more fundamental rights.

The Victorian Taxi Inquiry

 

Justin Campbell argues we need more competition in our taxi market, and not more regulation:

On the 28th of March the Victorian Government announced an inquiry into the Taxi Industry to be headed by Professor Allan Fels.This was in response to declining consumer satisfaction with the industry.The taxi industry in that state and most other places is an example of government regulatory failure.

The industry is dominated by a few large players and exhibits anti-competitive behaviour. Like any other industry where competitive markets do not exist the taxi industry under supplies and over charges. The Victorian Premier Ted Baillieu said in a press release, “It is obvious that the current industry structure and regulation has failed."

The problems outlined in the press release included:

• low customer satisfaction, with a sharp decline over the past five to six years
• safety and security for passengers and drivers
• insufficient support for drivers
• too many poorly-skilled drivers with inadequate knowledge
• a high turnover of drivers resulting in a shortage of experienced drivers;
• complex ownership and management structures
• lack of competition
• too much of the industry revenue not being directed to the service providers – the drivers and operators.

Many of these problems are related. The fact that the industry has few players results in a monosony, a situation where there are few employers of taxi drivers and operators resulting in lower wages than would exist in a more competitive labour market. This results in a decrease in quality of drivers available and higher turn-over in the industry, as many drivers and operators are able to sell their labour in other markets. The low quality of drivers naturally leads to decreases in customer satisfaction and potentially unsafe service.

Why Jessica Irvine is wrong about unions

Justin Campbell discusses the role of unions in our economy:

In a recent blog post Jessica Irvine (Economics writer for the Sydney Morning Herald) wrote the following:

"In a perfectly competitive market, there'd would be no point in unions because employers wouldn't underpay workers. They couldn't. Competition would drive them to pay workers a wage representing the value of their marginal product. If a company failed to, there would be no shortage of other firms willing to pay more. Wages would equilibrate.

In such a model, companies are price-takers, not price-makers. But, unfortunately, this is far from the reality in which many industries are dominated by one or a handful of sellers. And because workers take time to train, many are, in the short term at least, limited to a particular industry, or set of industries, to which they can sell their labour.

The result is that it is possible for certain companies to underpay their workers - that is, pay them less than the value they have created, plus compensation for inflation."

While this is certainly the public imagine the unions like to foster using examples such as, "workers that empty bedpans." The reality is organised labour is far more likely to be skilled workers who are in a position to seek economic rents for their labour by withholding it. The union member is far more likely to be a public servant, teacher, skilled tradesman or a member of a professional association such as doctors.

Where Irvine's analysis is largely wrong is that the less skilled the labour, the more competitive the labour market. Take for example workers in disability support work (an industry I use to work in), new workers regularly enter and exit the industry. After receiving their induction and shadow shifts the new worker is fully productive within a week. Of course the worker continues to learn after a week, but largely they are able to perform their duties after a week of training. If they feel they are not able to earn the income they wish or do not enjoy their work their labour is highly substitutable to other industries. The worker can switch to childcare work, retail or hospitality ect.  So regardless of whether the industry is dominated by a handful of employers, the worker has little fixed costs preventing them from retraining and enter another industry. Equally the employer is able to find other workers with no previous experience in the industry and within a week have a productive worker. It is precisely the competitive nature of the labour market in such industries that keeps the price of labour low. I would argue the monopsony market Irvine describes largely doesn't exist.