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Wednesday, 10 February 1999
Page: 2385

Mr SNOWDON (6:12 PM) —It gives me no pleasure to speak in this debate on the Workplace Relations Legislation Amendment (Youth Employment) Bill 1998 , in the sense that I would have thought this government would have learnt some time ago that its policies on wages are completely inappropriate in the context of 1999. I say that knowing well the problem of youth unemployment, but I also say it with an awareness of the possibilities that are open to us in addressing that particular problem.

I note when looking through this legislation that a strange, but nevertheless predictable, aspect of it is the way it presumes to pre-empt an inquiry into the very matter by the Australian Industrial Relations Commission. I would have thought that, given an agreement which had been reached as a result of a previous piece of legislation, it would have been entirely appropriate for the government to live by that agreement and ensure that the inquiry that had been proposed was undertaken fairly and objectively to examine the implications that had been foreseen. But that is not to be the case.

Now we have this government proposing to exempt on a permanent basis junior rates from the age discrimination provisions of the Workplace Relations Act 1996 and the Workplace Relations and Other Legislation Amendment Act 1996. That will obviously remove the sunset clause, which is presently in place until 22 June 2000. It will require the Industrial Relations Commission to include junior rates of pay into awards that presently do not contain them if the work is or may be performed by young people. That is what the Minister for Employment, Workplace Relations and Small Business, Mr Reith, said in his second reading speech.

Why though is he adopting this course? Why is the government presuming an approach which clearly anticipates the outcome of a properly constituted inquiry based on an agreement he reached with the Democrats as a result of the previous piece of legislation being passed? Firstly, he is obviously breaking his agreement with the Democrats—that should be no surprise to anyone. Secondly, and perhaps more importantly, he is presuming to determine the outcome of the inquiry without the inquiry having actually been undertaken. In doing so, he has denied us—the parliament of Australia—the possibility of considering the report of that inquiry in terms of this debate and this piece of legislation.

Not only is that quite unfair, it demonstrates the political objectives of this government. All the rhetoric about trying to assist young people to work and to ensure that they get a fair and reasonable deal in the labour market comes to nought when you judge them against that basic question: why is this government taking this particular approach to this particular piece of legislation at this particular time?

We know the history behind the industrial relations debate in this country. We know the government ascribes to the opposition motives concerning the way we deal in this place which relate to unions and union members. But he does not relate to us how he behaves in this place in terms of undermining the rights of individuals, of all Australians, by anticipating, as he has done, what this inquiry may find is the real impact of reductions in youth wages.

A lot has been said in this place and elsewhere about the so-called impacts of reducing wages for youth and what that will mean in terms of employment. Frankly, there is no accurate information which can be relied upon to demonstrate to us what the effects of this piece of legislation on youth employment—or employment generally—will be.

I have looked through the literature. I am not an econometrician. I am not someone who is used to mathematical modelling. But I am not a dummy. I do understand this: studies elsewhere in the world on the issue of minimum wages and the impacts on both youth unemployment and total employment levels when you change those minimum wage rates provide no indicator of the benefits of the type that are being claimed by this government.

The Productivity Commission's report asserts, from memory, that there will be an increase of one per cent or thereabouts in youth employment if you adopt this particular course of action. The report says that the analysis finds a significant negative relationship between youth employment and youth wages and that the best estimates suggest that a one per cent increase in youth wages would lead to a decrease in youth employment of between two per cent and five per cent in the industries employing a relatively high proportion of young people.

I ask a number of questions. Firstly: what other indices do you need to assess the question of employment or unemployment? Is it just a question of wages? Certainly it is not. The Productivity Commission has alluded to part of it in the way they have written that report. What they need to look at—and what has not been looked at as far as I am aware—is the impact on aggregate employment levels of changes in youth wages. There has not been a decent analysis of the displacement effects of youth wages on the labour market. I do not believe that anyone in the government has a reasonable understanding of the displacement impacts—whether negative or positive—of changes in youth wages on the labour market.

I will use just one example. We all know that the nature of work has changed considerably for many Australians—indeed, around the world. We all know that many of the trades that existed in the 1950s, 1960s and 1970s are no longer available to us. We all know that the skill base has become in many senses more sophisticated, although in other senses less sophisticated. We all know, for example, that a compositor's trade as set up in the 1950s—a compositor lay lead type and the printer printed from it—no longer exists. We all know that. We all know that those people trained in those skills are either out of work or finding it very difficult to retain their work.

I would have thought that that raises a very important question in terms of the demographics of the labour market—a question which has not been addressed in the discussions which have taken place in the government on this legislation, but one which is very important. On the one hand, we have the government relying on the Productivity Commission's report, trying to assert that we will have an increase in youth employment of between two per cent and five per cent in industries employing a relatively high proportion of young persons—I have made that point. But they give us no picture about what the total impact on employment would be of increasing youth wages—no picture at all.

Consider this example. You are paying youth wages to someone working in a semiskilled industry like the building industry—they may be labourers or trades assistants. They may be 18 or 19 and under the government's proposals you can pay them a reduced wage. Indeed, if you are on the `Engineering on-site construction award 1989' you would have a wage reduction of $137.77 a week. That makes that young person potentially very employable—that is granted. But what happens to the bloke who is 45, who has been in this industry all his working life and who has the same skills? I know what happens. When those two people go to compete for the job the employer says, `Mate, I will take you. I can get you for $138 a week cheaper than the bloke who is 45.'

There is no analysis being undertaken by this government of the social implications of this piece of legislation in terms of other age groups in the work force or of skill levels—no analysis whatsoever. It seems to me that this government is failing us, because what it is trying to do is provide a cheap way to employ young people without ensuring they have got the skills they might need to do these jobs. I say this knowing full well, as we all do now, that this government's analysis of youth is one which is dominated by the view that they have got to be suppressed in some way or other, that they have to be given less. In almost every aspect of public policy they have been victimised by this government. Now we are being asked to ensure that they are discriminated against in terms of wages, but at the same time what we are doing, perversely, is discriminating against other people in the labour force who might be competing with them for jobs.

I know the importance of youth and the question of youth unemployment, but I am not at all convinced by the arguments being put forward by the government in relation to whether or not the impacts are positive or negative when you increase youth wages. I make the point that in research that has been done overseas at best it is equivocal. Some studies have indicated negative impacts, some studies have indicated positive impacts. I go to a document which is produced by the Productivity Commission entitled Minimum wages: review of the literature, and I just make a couple of quick observations. I will quote very briefly in terms of the experience of Europe, the United States and Canada. On page 27 of this document it says:

Evidence from recent European studies appears to be broadly similar to US studies, that is, they indicate that the influence of changes in minimum wages on employment can be both negative or positive but that the effect is small to very small.

I go to the study done on Canada in the literature search. They find evidence of small to negligible effects of employment from an increase in the minimum wage. They find the surprising result that the minimum wage has no effect on the employment of teenagers, a find that is consistent upon the various specifications of the model which they used.

I do not at all trust the observations of the Productivity Commission on this matter, because I do not think it is a reasonable assessment of what the total impacts are of increasing or diminishing youth wages on the labour market. I do not think it really expresses an accurate examination of what the labour market is, nor do I think it demonstrates to us that the government has got an understanding of the different elements that make up the labour market and the different influences on employment. Granted, skills are very important. That is why the government should be adopting the approach which we foreshadowed and indeed was put forward by the previous Labor government in tying wages to skill levels. That is the way to test. Why should someone who has got the skills to do a particular job be paid less than someone else because of their age? What is the logic behind it? If they are as productive as one another, what is the logic behind it? There is no logic, at least in terms of the potential value of those two employees to a potential employer.

The logic is that it is cheaper. That is what the government wants us to believe. It may be cheaper, but there is a cost, and I believe there are hidden costs in respect of other parts of the labour market. I do not believe that this government has shown any understanding at all of the real displacement impacts of unemployment in other age groups as a result of lowering wages where youth are employed. It is worth while observing what happened when studies were done in Australia on the introduction of equal pay for women in the early 1970s. I quote again from this document from the Productivity Commission. It says:

While not focusing on the minimum wage per se, Gregory and Duncan, 1981, look at the effects of the introduction of equal pay for women in Australia in the early 1970s using the Australian Bureau of Statistics data on wage and salary earners for the period 1948 to 1978. They find that the level of measured unemployment for males was largely unaffected by the change in relative wages, with female unemployment as a proportion of male unemployment falling since the introduction of equal pay for women. They also find that female employment grew faster than male employment following the equal pay decisions.

Obviously you cannot translate that into a similar interpretation for youth at this point, but it says a few things about the labour market which I do not think have been properly comprehended by the government.

I do not believe that it is in our nation's interest to pursue the course which has been promoted by the government in this case. I say that in full knowledge that in my own electorate, where unemployment generally is quite low—in fact the lowest in Australia, somewhere around four per cent—amongst certain sections of the community the unemployment is as high as 80 or 90 per cent. What I do know about the proportion of the population who are going to be heavily penalised by this government's approach to unemployment is that having youth wages will make not one jot of difference to the employability of young people in those communities. There is a very simple reason why not. It is because they do not have even the most basic skills to get a job in terms of some of the potential employers who might be looking for employees.

It is worth noting that the government is promoting the idea that the young, the old and anyone who has a problem with literacy will be penalised because they are illiterate. You need to understand that, in the case of the Northern Territory, if you happen to be born an Aboriginal person and you live in a remote community, you may end up at least five years and in most cases more than eight years below the grade-for-age standard. According to a study done for the Public Accounts Committee of the Northern Territory Legislative Assembly, secondary age students in remote Aboriginal communities are only achieving low primary standard reading and mathematics scores. Very simply translated, that means that people aged perhaps 15 or 16 have reading ages and skills in mathematics of a person aged nine or 10.

This government intends to penalise those people, and reducing youth wages will not make one jot of difference to their employability. Those people and similar people around Australia require a comprehensive set of labour market programs which address their particular issues and a comprehensive approach to primary and secondary education. Those are things this government has failed to provide.

We hear a lot about literacy, but what this government is going to do is penalise unemployed people for no other reason than that they cannot read or write. Then, if they are lucky enough to have the skills that are required to get a job, they are going to be penalised further and discriminated against, not only because they cannot read and write but, in this instance, because they happen to be young people.

At the same time, these rates can have a very important negative impact as a result of the displacement effect they create in the labour market. Other people might be competing for those jobs, but they cannot get the work because of the wage rates being applied to young people.

I do not think the government arguments on this issue are at all satisfactory,. I do not think the government has put up a case which is anywhere near cogent enough to let us even contemplate passing this piece of legislation. This is a very short-sighted approach, undermining the interests of all Australians. (Time expired)