Your rights at work

Justin campbell

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.

This issue can be understood by comparing positive rights
with negative rights. From the 20th century on, the definition of
what could be considered a right has changed from negative rights, which
protect individual freedom, such as free speech, the right to a fair trial or
the right to enter a contract to positive rights, such as the right to an
education or healthcare. The problem with positive rights is that unlike
negative rights they aren’t a person’s by birth. Positive rights usually
require some restriction on another person’s freedom. For example: for me to
have the right to education; that by definition forces someone else to pay for
it. By comparison the right free speech is mine and all that right does is
protect me from someone taking that right away from me.

If one accepts individual freedom as basis for all rights,
then workers’ rights cannot be considered rights in the traditional sense. In
fact, minimum wages and awards significantly restrict individual freedom. If I
wanted to start a career working for a consulting firm but my current skill-set
doesn’t justify the minimum pay required by industrial regulation then my
freedom and the freedom of the employer would have been significantly
restricted. Most likely the outcome would be that I would remain unemployed.

A more relevant example to many disadvantaged jobseekers is
the Food, Beverage, and Tobacco Manufacturing Award 2010, which cover most jobs
in the hospitality sector. Under this award it is illegal to pay someone less
than $17.88 an hour for an adult employed in a casual capacity. While this may
seem to be a small amount to many of us, for some people entering the labour
market with insufficient education or life skills this can be a major barrier
to employment. For example: someone who has never worked before may need
constant supervision, in reality the time spent supervising this person
initially may exceed the value of their labour. Preventing such a jobseeker
from working at a price an employer is willing to employ them for is violation
of their basic right to sell their labour and to enter into contracts.

Much of the industrial relations debate has been framed in
the context of international competitiveness and profitability. These arguments
have fundamentally missed the point. Employers have no more right to cheap
labour then employees have rights to high wages. Ultimately, both parties
should be free to pursue their self-interest. The argument against restrictive industrial
relations regulations should be argued on the basis of individual freedom.

 Justin Campbell is currently studying a Master
of Economics at the University of New England and is a member of the Australian
Libertarian Society. He currently works as an employment consultant and has
over five years experience in the employment/recruitment industry. In 2008
Justin ran as an Independent in the Brisbane City Council election
and maintains an educational blog/website www.econstudent.org.

The Victorian Taxi Inquiry

 

DSCF2068Justin 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.

 Of course, this may also be the result of decreased unemployment. I remember catching cabs in the late 90s -early 2000s when unemployment was still between 6%-7% the cab driver then tended to be middle-aged local men who had been in the industry for several years. In today's tighter labour market, being a cabbie is most likely less appealing to many locals resulting in the increase in foreign drivers. 

It's likely that the Victorian Government is seeking guidance on regulatory reform rather than proposals to deregulate the industry. When I first read this article my first thought was, "Why is the government regulating the taxi industry anyway?" Though I'm not familiar with the regulations surrounding the taxi industry, I know that I can't put a meter in my car and a little light on my roof that says taxi and start charging people fares. The question is why? 

One reason of course is revenue. The Victorian Government like other state governments are able to raise significant revenue from the sale of taxi licenses, driver's authorizations and other fees, they can extract from this industry. In return for their fees the purchasers of these licenses are able to compete in non-competitive markets. These fees and government regulation create a significant barrier to entry into the industry. These barriers can largely be blamed for the lack of competition in the industry. There is no natural monopoly for taxis, anyone can access the roads with a registered vehicle and cars are relatively cheap. In fact starting a taxi business should be one of the easiest industries to enter. Of course it's not. 

When I was traveling in South East Asia there was no shortage of affordable taxi services available. I had a choice between getting a ride on the back of scooter or traveling by car. On one occasion I had travelled far from the tourist part of town and was able to get a lift from a friendly local for a small fee. I was able to decide for myself the level of safety I wished to have and was willing to pay for. Obviously, taxi fares in Australia would still be far more expensive then in Asia under competitive markets but clearly the current system makes it far more expensive than it need be.  

This competitive taxi industry was a far cry from the highly regulated industry that exists in Australia. By comparison the taxis in Australia are extremely expensive and scarce. This is even more disturbing when one considers the main consumers of taxi services are the aged, disabled, poor and intoxicated partygoers. A competitive taxi market in Australia would mean lower fares, increased service and increased self employment opportunities for people with a car and driver's license. 

Justin Campbell is currently studying a Master of Economics at the University of New England and is a member of the Australian Libertarian Society. He currently works as an employment consultant and has over five years experience in the employment/recruitment industry. In 2008 Justin ran as an Independent in the Brisbane City Council election and maintains an educational blog/website www.econstudent.org.

 

Why Jessica Irvine is wrong about unions

DSCF2068Justin 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.

Compare this with the situation for doctors or registered nurses. Both roles take years of training, employers can only hire from a labour market of trained professionals. The barriers to entry are high to these labour markets as the worker has to undertake years of study and professional bodies keep the supply of workers artificially low by controlling who can and cannot enter the profession. For example, in both medicine and nursing the professional bodies have been successful in reducing competition from foreign trained professionals. Such bodies have also been successful in reducing the supply of substitutes for their service by lobby government to control who provides their services. For example, many medications require a doctor's prescription where a pharmacist could make this determination without requiring a doctor. These conditions make it possible for organised labour to gain economic rents which increase the cost of goods and services reducing the real income of many of the low skilled workers unions claim to represent. In this example it's the fact the labour market is uncompetitive that allows workers to earn economic rents through unionisation.

Where organised labour can help low skilled workers is through negotiating terms of work. The hiring and firing of low skilled workers tends to be more transactional and people are hired under standard terms. This is due to the high transaction costs involved. It would be very costly in time and effort for a director of nursing of an aged care home to negotiate conditions with individual workers. In most cases it would be very difficult for an individual worker to negotiate an early start time and roster days off. By organising workers can negotiate collectively with the employer lower the transaction cost of working conditions. Compare this with a doctor who could negotiate their own hours of work with the head of medical centre. So yes there are some benefits of unions for low skill workers, however those benefits could be achieved through workers councils or company unions such as exist in Germany and Japan. The reason why such arrangements tend not exist in this country is most likely because of the political situation. One side of politics is hostile to any organised labour and the other actively promotes industrial trade unions.

Justin Campbell is currently studying a Master of Economics at the University of New England and is a member of the Australian Libertarian Society. He currently works as an employment consultant and has over five years experience in the employment/recruitment industry. In 2008 Justin ran as an Independent in the Brisbane City Council election and maintains an educational blog/website www.econstudent.org.