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Select Committee on the Future of Work and Workers
21/02/2018

STANFORD, Dr James, Economist and Director, Centre for Future Work, Australia Institute

CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I now invite you to make a short opening statement, and then we will ask some questions.

Dr Stanford : Thank you very much first for undertaking this inquiry, which is incredibly important and timely, and of course for the invitation to join you today as part of your proceedings. The Centre for Future Work is a research institute based here in Sydney associated with the Australia Institute. We conduct and publish research on a wide range of labour market, employment and related issues including technology, automation, skills, the gig economy, sectors, jobs in different sectors, wages and what's happening to wages and so on. We are independent and non-partisan, and all of our work is publicly available on our website. If I may be a bit brazen, I dare suggest that our centre is surely the most appropriately named witness that you will hear in the course of all of these proceedings. An inquiry into the future of work and the future of workers must hear from the Centre for Future Work, so thank you for that.

You have received our full submission, which covers a range of topics related to your terms of reference. Let me briefly touch on just a few of the major themes and highlights of our submission. The reality is that the vast majority of Australians have to work to support themselves and their families and to build their communities. So work is not going away, work cannot go away and work will always be the absolute centre of our economic foundation as a society. At the same time, many Australians have expressed great concern about the future of work in a general sense and, of course, the future of their jobs and the jobs they hope their children will be able to find one day.

That's obviously why you've convened this inquiry and that concern is quite legitimate. I'm not going to be an economist who comes up here and dismisses the fear of average people and say: 'Oh, sure, people have worried about robots replacing humans for hundreds of years. Grow up. Get real.' That concern is absolutely legitimate because today's labour market is already a harsh and unforgiving place. First of all, there isn't enough work today, and the 5.4 per cent official unemployment rate that's published by the Australian Bureau of Statistics doesn't begin to tell the story of the true under-utilisation of workers in Australia. In our submission, we talk about other pools of unutilised and under-utilised workers and argue that the true under-utilisation rate is more like 15 per cent, not five per cent. In addition to the quantity problem, the quality of work is also clearly declining, primarily because of the long-term growth in what we would call non-standard or precarious work in all of its different forms, including part-time work, irregular work, casual positions, nominally self-employed and independent contractors and other non-standard arrangements.

Our research suggests that less than half of the Australian labour force today fills what we once considered a standard job: a permanent full-time job with entitlements that they can count on to support themselves and their families. The rest experience some dimension of precariousness. In this context, their fear that things could get worse is entirely understandable. There are many factors sparking that concern. Technology and automation are obviously high profile ones, but there is also the changing organisation of work and the changing relationships in work and jobs, in the ways that I mentioned, and a concern with the general shortage of work, both at a macroeconomic level and, more acutely, in particular regional economies.

In terms of technology, I absolutely argue and conclude that technology itself is not our enemy in this process. Of course, technology cannot be stopped, and we obviously don't want to stop technology. I will point out that technology is not a neutral and exogenous force, and, in fact, there are choices and preferences embodied in the direction of technological change, in terms of the problems that we try to solve through innovation and the directions for the innovation effort that are determined by those who are paying for innovation. I find it amazing that we have technology in many workplaces today that can use GPS or other electronic monitoring systems to track the whereabouts, in real time, of every employee at every minute of the day, including how long they spend the toilet, yet we do not have the technology to determine whether franchise owners are even paying the minimum wage to their employees. Unfortunately, there is no app for that! And that isn't a coincidence. Obviously, innovation is directed to the sorts of problems that the people who are paying for innovation are most interested in solving.

It isn't even clear that technology is accelerating. I know that sounds bizarre, but measured by aggregate trends, such as the growth of real labour productivity, which should be accelerating if, in fact, humans were being replaced by robots in a big way, or even measures of the capital intensity of work on an average basis, which has declined in Australia in recent years, the average worker today actually has less capital, tools and technology to do their job with than they did five years ago. This reflects both the slowdown in business investment activity and also the creation of a large number of jobs in very undercapitalised, relatively low-productivity occupations, whether that's in personal services—people offering boot camps in the neighbourhood park, because they can't find other ways to support themselves—or in more traditional low-productivity occupations.

The key issue is not stopping technology; we should think about the direction of technology. But the real challenges are: how is technology implemented; how is it managed, both at the workplace level and at the macro level; and how are the costs and benefits that come with technological change going to be shared? I do not think that the phenomenon of mass technological unemployment is likely for a range of reasons. There are a lot of adjustments and offsetting forces. When new technology is implemented it does create some jobs as well as eliminating others. There is no guarantee that those will be in balance, but I think, both historically and theoretically, there is no reason to expect that masses of people will be unemployed because of technology. But, clearly, significant groups of workers will be displaced and harmed by the way that technology is implemented, and it may be that the quality of work is more at risk than the quantity of work, depending on how technology is applied and what rights people have to negotiate, consult and have influence on how technology is implemented.

Our key recommendations about technology and work are all oriented around empowering all stakeholders in the economy to have more say in managing technological change to ensure that their interests are recognised and protected. We highlighted five in particular that relate to technology and work. These include the need in labour law to broaden the definition of 'employer' so that people who are working in new business models, digital intermediaries and so on are in fact guaranteed the same basic rights, standards and protection as other workers. We propose limits on electronic systems for monitoring, surveying and disciplining workers. I think the use, in an unregulated format, of some of this electronic surveillance is offensive to both the dignity and privacy of workers, but, more importantly, it encourages employers to take a low-road, more intensive and punitive approach to human relations rather than an positive, team-building approach.

We propose extending and clarifying the rights to negotiate collectively over the terms, timing and effects of technological change in workplaces so that employers do not have the expectation that they will impose these changes unilaterally. Unfortunately, in Australia's rather restrictive labour law around collective bargaining it isn't always clear that it's even a permitted matter to discuss technological change in the course of enterprise bargaining. We also suggest that we need to look at ways to manage technology on an industry-wide or a sector-wide basis through our strengthened institutions, including the role of the award system and the permission of sector-wide and pattern bargaining in collective bargaining.

Finally, we also recognise that one of the potential upsides of technology and productivity is the capacity that we can meet our material needs with relatively less work. The whole issue of working hours and the potential to reduce working hours over time I think is one that deserves more scrutiny and attention.

We addressed a couple of other major themes in our submission that I will just mention in passing. One is the importance of high-quality, modern labour standards and regulations to lift and enhance the quality of work. I think those regulations are more important than ever in an era of digital platforms and dispersed decentralised workplaces. Secondly, we emphasised the importance of an ambitious, multidimensional macroeconomic dimension to the job strategy, to make sure that displaced labour can be quickly and productively reallocated in other sectors.

To conclude, I believe that every Australian has a right to decent, secure work. I believe that right can be fulfilled and guaranteed. A society where every Australian can make their full contribution to our prosperity by working to the fullest of their potential will be a stronger and wealthier society. Labour-saving technology should be a good thing in that vision, but only if we manage it with an eye to maximising social benefits rather than simply reducing costs for particular employers, and only if every Australian has a fair say in how technology is implemented and how the gains, the benefits and the costs of that are shared. I will leave it at that, senators. Thank you again, and I look forward to your questions.

CHAIR: Thanks very much, Doctor Stanford. Can I just pick up on one thing that you mentioned there amongst your recommendations? It was concerning the need for collective bargaining around the introduction of technological change. Did you say that it's not a permitted matter for enterprise bargaining?

Dr Stanford : In some cases it's not clear that it is a permitted matter. The rules of the Fair Work Act are rather restrictive in terms of limiting what sorts of things can be discussed in enterprise bargaining and what sorts of things are subject to the to and fro of enterprise bargaining, including industrial action. Those permitted matters are supposed to focus strictly on the employment relationship. Other aspects of the business are often ruled out of bounds.

I think it's important to clarify this and to make sure that it's recognised that issues about capital investments, technological change and how machinery and technology are implemented are indeed legitimate concerns for the enterprise-bargaining process in all aspects.

Senator PATRICK: This is more a supplementary question. I would have thought that the sorts of restrictions you might impose upon employers in terms of technology being used in the surveillance of workers is something that is probably common, and therefore maybe needs to go up a rung to a legislative point rather than an individual agreement. Do you have a comment on that?

Dr Stanford : Sure. When I said that technological change should be fair game for enterprise bargaining, I wasn't just thinking of the surveillance issue; I was thinking of all aspects of technological change, including how jobs are redesigned or displaced, and making sure that workers and the unions have a right to negotiate those.

On the surveillance aspect in particular, I think that should be addressed at a legislative level as well as in enterprise bargaining. I think there are fundamental rights: for example, the right to due process in any kind of discipline and discharge system. Right now, there are people in certain jobs—Uber drivers, for example—who can be discharged on the basis of electronically collected consumer ratings. The worker has no normal due process in terms of verifying these complaints, having advanced warning about their performance going through and escalating a discipline-type of process like a normal worker would have. Those are the types of protections that should be in legislation and regulations, and then, as well—hopefully, if the enterprise-bargaining regime is doing what it's supposed to do—you would also look for more specific tailor-made provisions in particular workplaces.

Senator PATRICK: If you don't mind me taking you somewhere slightly different to where your submission went, I'll declare that your paper on manufacturing is one of my favourite papers of the last couple of years.

Dr Stanford : Thank you, Senator.

Senator PATRICK: Obviously, that relates to this inquiry in terms of moving manufacturing forward. Do you have a view as to the way in which, say, the German government has approached manufacturing looking forward, principally through Industry 4.0, and the way that contrasts with what is or isn't happening here in Australia?

Dr Stanford : I think it's a great example and it's relevant to other sectors as well; not just to manufacturing. The Germans have been incredibly successful at ensuring that individual workers do not see change as a threat, and with good reason, because there are protections and mechanisms through which workers are able to participate in the process of innovation and technological change. They have a very strong influence over how it occurs, with everything from works councils deliberating at the enterprise level to worker representatives on boards of directors of companies. So right from the beginning workers are engaged in the process of imagining innovation and thinking about how it will be implemented within a firm to, at the sector level, sector-wide collective bargaining and consultation and tripartite structures that engage unions, employers, universities and research institutes in the whole process, to a similar kind of multistakeholder vision at the macroeconomic or national level.

In manufacturing, that's been brilliant. It's a source of brilliant success for the Germans because you have everybody pulling in the direction of high-quality innovation, productivity, product quality and export competitiveness, with obvious results—Germany has consistent success in international markets in very high-value products—but without the fear that you're just going to get thrown out on the street if, in fact, productivity did grow. Right now in Australia you would have that fear. Manufacturing is a great place to apply that vision of consultative, proactive, engaged management, but it does require employers to give up some of the unilateral control over the process that they currently have.

Senator PATRICK: So you would say that the Industry 4.0 approach is an ideal model for us to at least examine?

Dr Stanford : I think there are many aspects of the German approach to manufacturing policy, including the 4.0 dimension of it, the vocational education and placement aspect of it, the way they support innovation in a general sense, as well as applied innovation and productivity growth at the firm level. There are so many things that we could learn from that model.

Senator PATRICK: One more question on that: a lot of German companies seem to be family owned and therefore have a much longer view of where the company's going, as opposed to short-term or perhaps stock market driven outcomes. Do you have a view on that? Would that be a fair contrast between what happens there and what happens here?

Dr Stanford : I think it's probably one dimension of it. First of all, the German industrial structure does have this middle ground—the Mittelstand, as they call it. They are not small but medium-sized enterprises, between 100 and 2,000 employees. They're not giant corporations, but big enough to be investing in innovation, to be well capitalised and to be oriented around export markets. Those are some of the key qualitative features that make those medium-sized businesses in Germany so successful. Many of them have a tradition of family ownership, but many don't.

Even the larger companies that are traded on the stock market will experience more of that sort of myopia of looking at the next quarterly results—that is the downside to that form of business structure—but they are constrained by those other institutional forms and practices that we talked about. Even they have 49 per cent of their boards of directors representing the workers of the enterprise in the co-determination system. So even though they're traded on the stock market and they keep an eye on the analysts, they are required because of those institutions and practices to be less myopic. So I think the family ownership is a piece of it, but I think there's a bigger commitment to viewing the corporation as a socially embedded institution that has obligations to the other stakeholders in society rather than be given carte blanche to maximise its own profits no matter what.

Senator STEELE-JOHN: Can I take you back to your comments around employee surveillance and those issues?

Would you be able to take us into a bit more depth of what that looks like in practice? We have heard from a couple of people and I'm a social media user myself. Can you take through that in detail?

Dr Stanford : I can list some of the ways that this technological surveillance is occurring. It won't be a surprise that the old-fashioned way is closed circuit video monitoring. Computerisation and digitalisation have made that much cheaper and more ubiquitous, so it's easier for workplaces to have CCTV facilities everywhere. Another route is the electronic monitoring of your work effort. There are many jobs where the pace or the output of your work can be monitored cheaply and immediately—whether that's cashiers in a supermarket and how fast they are scanning the products or typists with their typing or turning out other digital products. There would be other ways of digitally monitoring what you're doing at any given point in time, including monitoring your computer at your desk. How much time are you spending on Facebook? How many personal emails did you send? All of that, by and large, is fair game for employers to use.

Location monitoring is another one. Of course, GPS is very common in any kind of mobile occupation where you have a truck or a car for work, and then the employer can track how long you stopped for a coffee. Even within given workplaces, your ID card or some other chip— and in some places internationally they're implanting the chip into the workers arm, which surely is a dystopia in the making—allows them to follow you around a large workplace and know exactly where you are and then to discipline you, based on how fast you respond. Think of a cleaner in a hospital who may be in one part of the hospital; they will know where the cleaner is and demand a certain response time to get to a cleaning need somewhere else.

The downsides of this are, again, not just for the quality of the work life that workers experience but you have somebody literally looking over your shoulder every second of the day that you're on the job— which I don't think is legitimate. It also has, I would say, macroeconomic implications. Every employer faces a choice in how they're going to recruit, retain and elicit an optimum work effort from their workforce. That choice typically involves, if I can be blunt, a mixture of carrots and sticks. The carrots are the positive incentives: the good wage, which is probably a better wage than you could get elsewhere, bonuses, the chance at promotion, the chance at security. The sticks are that negative disciplining devices: we're monitoring you, we're criticising you, we're disciplining you and, ultimately, we may discharge you. Every employer has some balance between those two, and the balance that they choose depends on, like anything else, the relative costs and benefits of the two options.

The unrestricted ability to monitor and discipline and even discharge workers on the basis of electronic monitoring systems makes the stick much easier and cheaper for employers. I think it is one of the factors that has contributed to the slowdown in wage growth. Employers don't feel the same compulsion, for a range of reasons but I think this is an important one, to offer premium compensation for premium performance as they once did. Instead, I would argue, they're relying, in many cases, on methods of electronic discipline and supervision to do the job for them. They don't even have to hire a foreman or a supervisor—a human being—to monitor you; they can do it all by digital methods. Providing workers with more protection against the invasion of privacy that comes with that and protection against the abuse of those methods for discipline and discharge, you must still have access to due process and a regular or normal system of escalating discipline, instead of being vulnerable to being fired on the basis of some electronic outcome.

Senator STEELE-JOHN: In preventing that, do you see the need to expand current protection mechanisms? Or do we need a slightly new framework that sits within an existing framework or something new altogether?

Dr Stanford : I would say that we're just beginning to recognise this as a problem and we're going to need some careful research and policy development. I would suggest, as I mentioned earlier, it's probably going to involve a combination of extending and clarifying existing rights and protections in labour law, including the right to due process in any type of discharge situation, as well as a greater awareness of the downsides of electronic surveillance and the ability at the workplace, through enterprise bargaining or other channels, to address them.

Senator IAN MACDONALD: Thanks for your submission and for being here. I don't have any questions.

Senator STEELE-JOHN: You mentioned in one of your key recommendations the need to ensure that digital platforms don't escape their roles as employers. We've heard a bit about that over the last couple of days, as you can imagine, but I just wanted to get from you what that form of escape is taking. What does it look like when these platforms attempt this kind of subversion of protection frameworks?

Dr Stanford : It's funny that digital platforms are seen as what's new, what's innovative, what's hip, the way of the future. In fact, majority of what they do is actually tried and true and has been around for hundreds of years. This includes hiring people on an on-demand or irregular basis only when the work is immediately there; paying them on a piecework basis—that is, paying for each unit of work rather than per hour or per day; requiring workers to provide their own capital equipment—tools, cars, workplaces; and also the concept of triangulated intermediation, where you have somebody performing the work, somebody using the work as the end user and then someone in between, whether it's a labour hire agency or a gang master or a digital platform—somebody who is in between the two who occupies this unclear intermediate space. Those features of so-called modern gig work are hundreds of years old in fact, as old as capitalism. The only thing that's new is the method for managing, organising, disciplining and compensating the work—and that is the smartphone, of course, which didn't exist in the putting-out system of late mediaeval Europe.

The way that employers are using this is similar to how employers have always used the intermediate status of a labour hire setting to say, 'I'm not an employer; I'm just an intermediary,' and of course that's what Uber says. Uber says, 'We don't hire workers—in fact, we work for the drivers.' That's the fiction that Uber promotes. For all intents and purposes, practically, the drivers are clearly doing work for Uber. They are told where to go, what passenger to pick up, where to take them, what route to take them. Uber controls the payment. People can't work without Uber doing that. Even the fact that the workers have flexibility in choosing their hours isn't unique. There are lots of jobs where people can choose their hours. So I think that is a good example of how people use a technology to facilitate the evasion of traditional responsibilities associated with being an employer, right down to pretending that they aren't an employer at all.

Senator STEELE-JOHN: And that they don't make any money.

Dr Stanford : Well, Uber doesn't make money. This is the great irony. In our research we've indicated that ride-share drivers, including for Uber, almost certainly do not make the minimum wage. They are in effect providing an enormous subsidy that's worth hundreds of millions of dollars to Uber in Australia through that below-minimum-wage labour. Yet, despite that, Uber can't make money. It hasn't made a profit and won't. But the owners of Uber have made money off the speculative demand for the shares, for the equity, in Uber. That's where the subsidy paid by workers through subpar compensation ends up showing in billions of dollars of wealth for Uber's owners, and other platforms as well.

So there are interesting debates and processes underway around the world, not just in Australia, to explore that issue of when someone is an employee and when they aren't. Some jurisdictions are finding that, for all intents and purposes, digital workers are employees and have to be treated as such. We've seen precedents in that regard in Europe and Britain and in some US states. So far in Australia we have just begun to touch this issue. There has been one case that was heard by the Fair Work Commission. It was not a real test case. It was one Uber driver who, on his own account, took a case to the Fair Work Commission and didn't even have a lawyer. So that should not be seen as the end of the debate. This debate is just beginning. One way or another, either by clarifying the obligations under existing law or, as we suggest, revising the law to make sure that this category is in fact captured by the concept of an employee I think will be required in order to give digital platform workers the protections that any worker deserves.

Senator STEELE-JOHN: Fantastic, thank you.

CHAIR: One thing you haven't touched on too much is your views about skills and the education and training system. Is there anything in that space that you'd like to comment on?

Dr Stanford : Sure. We do have some material on that in the full submission. I apologise I didn't get to that in my opening remarks. Skills are obviously important. I reject the idea that we're somehow constrained by a lack of skills in Australia. Other than a few very specialised occupations, in general, Australians have the skills that we need to do the work today, and millions of Australians underutilise skills that they have. Young people today are by far the best trained, best skilled generation in our history and among the best trained, best skilled generations of any country on earth. So the lack of skills is not our problem today. That being said, we have to invest all the time in updating skills, adding to skills, modernising them. So, as part of an overall package that involves efforts to nurture the jobs that use those skills, I believe more investment in skills is essential and it should be as practical and as tied to labour market outcomes as possible. I agree with one of the other witnesses you heard today that the failures of Australia's vocational education and training system in particular are abysmal and we need to modernise, reinvest in and reorient the vocational training system away from these fly-by-night operators who see a quick buck in basically misleading people into thinking, 'If I give them money, I'm going to get a job at the end' into something that's higher quality, more stable and more publicly accountable.

CHAIR: Is there anything else you haven't had a chance to cover that you would like to?

Dr Stanford : No, I think we've covered a lot of ground. Thank you very much for having me.