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Select Committee on the Future of Work and Workers

TWOMEY, Mr Chris, Leader of Policy Development and Research, Western Australian Council of Social Service

CHAIR: I now welcome the Western Australian Council of Social Service. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you.

Senator SIEWERT: Chair, I should declare that I am married to Mr Twomey and so I won't be asking any questions.

Mr Twomey : I should declare my undying love for Senator Siewert.

CHAIR: We will get your submissions on living with Senator Siewert later. I now invite you to make a short opening statement and at the conclusion of your remarks I will invite members of the committee to ask questions.

Mr Twomey : I'll start by saying Kaya. Ngala Kadiitj Whadjuk Noongar moort, Keyen Kaadich nidja boodja.u It is an acknowledgement in the local language of the Wajuk people of the Noongar nation, who are the traditional owners of the land on which we meet. I will keep my introductory comments fairly brief. I'm hoping you've all had a chance to look over our submission. We have tried to include a fair bit of detail on trends we've seen in the changing nature of work, both at the national and particularly the Western Australian levels. One of the things that has been of great concern to us, given our role in advocating for disadvantaged and vulnerable Western Australians, has been the rise of underemployment and precarious work. Some of the trends we've seen, as discussed by previous witnesses, are around the gig economy and how a lot of the protections and conditions that were developed over many years around occupational health and safety, minimum wages and superannuation and the retirement system are being eroded by the business model that has been developed there.

One particular concern is: at what point do we see these trends moving into the home-care arrangements for seniors and people with a disability? We are very concerned that, while there is a very strong and welcome push in giving consumers more control over the services they want, we need to make sure that both they and the workers are protected in doing that, because there is a very real risk that, if we move into independent contractor arrangements, people may not realise that they are responsible for the people who are coming to deliver services in their home if anything goes wrong. They can wear a lot of financial and personal risk around that.

We have also highlighted in our submission growing inequality and we are concerned that that has been a drag on growth. We discussed issues around resilience, and the mobility and responsiveness of the workforce and how that has been undermined as the social security system has failed to keep up with the changing nature of work. The current social security system is very much a 20th-century model, where people who were in long-term secure work would have a period out of work and then transition straight back into a similar role. We are seeing more short-term employment, more underemployment and more precarious employment—particularly people in precarious work with uncertain hours and income. It's extremely hard for them to negotiate the social security system, particularly if there are differences between the amount of money or work they're told they're going to get during a reporting period and what they actually get. People often get in trouble with the system when there are problems with the way things are reported by their employers.

We're also concerned with some of the implications around retirement. We've included in our submission a pile of recent research that we've done on our cost-of-living work around the impact on age pensioners and whether they own their own home on retirement. The modelling that we did around that was quite stark in the differences that it showed up between those who own their own home on retirement and those who don't. A couple on the pension who got the full amount of rent assistance were lucky if they had $13 left for discretionary expenditure at the end of the week compared to about $120 if they owned their own home. Certainly, what we see in the trends and statistics is that already half a million Australians at or approaching retirement age do not own their own home, and the trend shows that the number will double over the next decade or so. That's going to be a significant impost on health and social services, and it's something that we really haven't been planning for or responding to.

One of the other things that we included for the first time is some recent work that's been done around the value and contribution of the care economy. We included some recent work that was done in the OECD that looked at seven different OECD economies, including Australia, and compared the knock-on stimulatory impacts of investment in the care economy versus investment in physical infrastructure, construction and so on. That highlighted that the impacts on the economy were close to double. It showed that it was particularly around women's employment and closing the gender wage gap. I suggest that you look at that work. The other thing I would add to that is that the modelling and information we have around health and community services suggests the growing demand for these services. For instance, in Western Australia, the state training board is predicting that, by 2030, employment in this area will double or even triple, but, at the same time, at the state level we don't have a training and workforce development strategy around that and a lot of the courses that used to do that in the TAFE system have shut down or aren't getting the enrolments they need. That makes it very clear that, at some point in the future, we're going to look at importing a migrant workforce to deliver care services for us, which seems very short-sighted. If we are looking at the information around the stimulatory impact of the care economy, it gives a very strong argument for us to use that as an economic strategy to manage economic downturns and to counter-cyclical investment so that we can smooth out the economy and develop a future workforce, as well as boost the return of people's health and wellbeing.

A similar thing that we've highlighted in relation to that specifically focuses on an Aboriginal human services workforce development strategy. So far, a lot of the work that's been done at a state level around Aboriginal workforce development has focused on the traditional areas: work in the resources industry and construction or work in municipal services. There is the rise that we see in the demand for people in health and community services, plus the triple benefit that training and employing local Aboriginal staff gives in this area, in terms of a return to the local economy and having more responsive services because you are getting people with lived experience who are involved in developing and designing them in a more culturally appropriate way. Then there are service users who are more trusting of the service, particularly in a lot of the areas where we've been struggling to close the gap because we've been failing to engage those who are most at risk in prevention and early intervention. We're only seeing them at the pointy end of the service system, which costs us the most money. I think I've probably said more than enough there. I'm happy to go to questions.

CHAIR: Thanks very much for a really detailed and well researched submission. I haven't had a chance to go through all of it, but there are lots of interesting graphs for all those policy wonks out there! This is really useful. You have some very interesting research and figures around some issues to do with employment in WA that are quite different to other states. One of the points of bringing a hearing like this to Perth is to hear about what is different in WA. Would you like to take us through that, whether it be about underemployment or—

Mr Twomey : Certainly. A couple of figures that we have there that are WA specific really look at the growth of unemployment and underemployment as well as how that's translated across men and women. One of the things that you can see very strongly is the boom-bust cycle that our economy has been through. But one of the things that it's also highlighted is that, as a consequence of that, the trend has been much stronger in Western Australia than the rest of Australia, in terms of the growth that has happened in employment being in part-time and casual work, and the amount of underemployment has increased more dramatically here. That is particularly true of women rather than men, although we have seen that trend across both.

Senator PRATT: Is that also for young people as well?

Mr Twomey : Yes, that's definitely true. In fact, that's quite well highlighted in the submission from YACWA, who are on this afternoon.

CHAIR: I'm from Queensland, and we've gone through our own transitions, but I don't think they were quite as pronounced as what has happened in WA post mining boom. Is there any evidence that any of that is starting to even out as the WA economy picks up a bit?

Mr Twomey : It certainly has, but I suppose one of the things that we've found that has been concerning is that that has happened with the general economy but there have been particular areas that have been quite sticky. So one of the things that's been a big concern to us has been rental affordability for those on the lowest incomes. And one of the things that we saw was that in the immediate aftermath of the boom the median rental rates came down quite dramatically—particularly for rental at the high end—but for the rents for those on a lower income were quite sticky because there was undersupply in that part of the market, because the supply has very much been driven by the capital return rather than the rental income. So in those areas people weren't in a position to move to somewhere else that was affordable nearby and they weren't in a position to renegotiate their rent with their landlords. So we have seen a few of those trends, which has been concerning.

Senator STEELE-JOHN: In regard to the impact of the 'gigification' of employment on the care economy, when we were in Sydney we heard from the CPSU, I think it was, although I could be wrong about that. They were talking about two platforms which currently exist. I think one was Airtasker. Can anyone else remember the other one?

CHAIR: We were told there was Ubercare. I don't know if that's actually a brand name.

Senator STEELE-JOHN: There were two with a third on the way was the impression I was given—with a nominal starting rate of $9 an hour and no particular background beyond the normal 'no qualifications required' and things like that. Could you take me a bit more deeply into what your concerns would be about a care economy dominated by that kind of work?

Mr Twomey : I suppose one of the issues here is that there are both risks and benefits. There certainly are benefits in opening up how we are doing age and disability services to give consumers a lot more choice and control around the types of services and support they need. Often there can be a pile of quite simple domestic tasks and so on that something like Airtasker may be quite well suited to for getting in that type of support. The concern is when that starts crossing across into more of the critical and professional care services that people require—in particular, as well, is people's ability to understand the choices they are making and what the implications of those are. If it means they're effectively being the employer of the people coming in and delivering services, the services may appear to be a lot cheaper and they may feel like they get more service. But then they're particularly wearing an occupational health and safety risk. There may not be the same standards, rules and regulations that apply around people's training and accreditation, and these sorts of things. They may not then have the insurance that they need sitting behind that if something goes wrong and either the consumer or the worker is hurt. I guess it's the balance of those things.

The other thing for us is, looking forward into the future, we conceive that a lot of these jobs are increasingly skilled ones. We're wanting people who can work across different disciplines to be able to provide more integrated models of care so that they're more wraparound and more responsive. The problem is if, at the same time, the way that we're employing them is actually driving their work conditions down, we're not going to get those skills happening. There's a real balancing act there around, yes, how do we give more choice and how do we deliver more services more cheaply to people, but also how do we make sure that there are good jobs there and that we're developing the care workforce we need so that, when it comes to those really critical human services and those more complex needs, we've actually got the people there that we need to deliver them.

Senator STEELE-JOHN: Whatever perspective you bring to the consideration of this question, it's pretty clear that significant parts of the economy are currently, or will soon be, in transition. Part of that transition will unfortunately involve people falling through the cracks, and none of that retraining or adaptation is made easier by the fact that the social safety net currently, if you fall onto it, leaves you below the poverty line. I guess that would be behind your recommendation regarding the increase to Newstart?

Mr Twomey : Yes, absolutely. The other concern that we have is that the combination of the uncertainty and the level at which the payment for a lot of these services has been set is stopping a lot of the existing services from investing and developing their services or planning their services or training their staff. There's a real risk that if that doesn't stabilise—if the return isn't sustainable—then we'll see a lot of the existing services hollowing out or disappearing. That's been a concern for a whole pile of the medium and, particularly, regional services that are having to transition from a grants based model where they would be paid up-front to a payment model where they're getting payment in arrears. That means they've got to find finance and meet the cost of that finance, and so on, to deliver their services without actually knowing what level of service and payment they're going to get. There's a huge amount of that uncertainty out there.

Senator STEELE-JOHN: That'll do me, thanks.

Senator PRATT: The submission you've put forward makes recommendations with respect to our social security framework and its responsiveness. You've called for a review of that, noting insecure work and part-time work. What do you think such a review would find in terms of what needs to change around the current system?

Mr Twomey : I think the core thing that it will find, given the changing nature of work—the uncertainty and the amount of transitions that we see—that people who are unemployed or underemployed or in and out of precarious work are facing, is that we need to be increasing people's resilience, their ability to be able to respond and their ability to be able to travel for work and prepare themselves to move around and respond where there are opportunities. What we've done over the last decade or two is the opposite: we've actually reduced people's resilience, we've put more and more requirements around what they're doing and we've reduced a lot of the things around liquid assets, and all these sorts of things, so their financial resilience is very much undermined. In fact, the level that we're paying them at is simply insufficient for them to be able to seek work. It's to the point where it's creating a barrier. We haven't seen a rise in that for 20 years.

Senator PRATT: So, if we looking for greater flexibility in our workforce and within the economy, you're essentially saying that the current social security system is a constraint on that flexibility in terms of being able to make a contribution to the economy?

Mr Twomey : Yes, and I'd say it's also very much an unnecessary constraint. In terms of where we've come in this period in the capacity that we've got around data systems and reporting on financial income, we could actually have a much more flexible system that could be sure that it's going to be able to balance things up at the end of the day, at the end of the month and at the end of the financial year. So we could actually allow people a bit more flexibility around their income, we could simplify a lot of the reporting requirements and we could actually make it so that it was more responsive and people had more capacity to respond when they were moving in and out of work, particularly when their incomes are very uncertain, because I think we will increasingly find that that level of uncertainty, combined with that level of financial hardship and precariousness, is going to have wider and long-term impacts. Certainly there's some research there that we quote around what we already know about the psychological impacts of long-term unemployment and underemployment.

Senator PRATT: Thank you. In that context how would we go about assessing the economic impacts of structuring our social security system in a way that doesn't facilitate people's access to employment and I guess facilitate and encourage economic participation because of its punitive nature?

Mr Twomey : I think that's a very good question, and it would be a good one to ask my colleague behind me here when he's up. I think there are two things. One is: what is the opportunity to look where we've got natural experiments where we can do comparisons between other OECD countries that have got similar economies but very different social security systems to see what the impacts around there are? The other thing is then you're getting down to how do you actually go about modelling those impacts. That's the stuff that I'm not sure how to answer.

Senator PRATT: Okay. So essentially we need to have a look—and it's covered in your recommendation—at the social security system not only in terms of its role as a social safety net but in terms of the extent to which it enables flexibility that supports that in and out of the workforce, not that that's necessarily what we want to encourage but, if that is an inevitable trend, then we've got to look specifically to how we help people fill those gaps in their employment.

Mr Twomey : The other thing I would add to that as well is that, looking forward when we're actually concerned about our international competitiveness and where we go next when we're looking at decreasing productivity gains, one of the greatest opportunities that we've got is engaging and enabling those who are currently the most excluded from the economy. Anything that we can do that actually puts them in a position where they are able to make more of a contribution will have much more of a dramatic impact on our economy than anything else. One of the simplest things that we know from our cost-of-living work is that even the smallest boost to the wages of low-income workers goes immediately back into the economy because they spend so much more of their income on the basic standards and basic costs-of-living issues.

The other thing that I forgot to mention is that we also included in the submission some of our research that we did using WA financial counselling data. This is the first time we've been able to do this comparison and the first that we know of that it's been done anywhere. We compared that to the recent ABS household expenditure data. It showed very dramatically that the rises to housing costs in particular and utility costs to a lesser degree had impacted most dramatically on those on the lowest incomes. You could see as a consequence that they were cutting down on their health and recreation spending—stuff that we know will have long-term impacts on their health and wellbeing and longer term costs to our economy. So it's getting to the point where it's actually having some negative long-term impacts.

Senator PRATT: Yes, so, in terms of the future of work, it's the extent to which work today can keep up with one's living expenses?

Mr Twomey : Yes, absolutely.

Senator PRATT: In the context of underemployment and the increasing inequality gap in Australia in terms of capital and who has access to capital in the context of job creation, have you picked up any trends in that regard?

Mr Twomey : The trend we've highlighted has been twofold. There's been that clear and rising gap in underemployment. The other thing that's been a concern has been the gap we've seen between increases in productivity and the returns to the workforce. As you know, that's got to the point where we recently had the Reserve Bank governor coming out and commenting on the fact that there's been a huge gap between workers' wages and the increases in productivity they've delivered over the last few years and it's a concern because it's to the point where it's a drag on economic growth.

CHAIR: I know we've covered this a little bit, but could I ask about your recommendation that we need a review of the social security system to modernise it and bring it up to speed with the fact that people are now moving in and out of less secure work. Have you got any early thoughts about any specific changes that need to be made to the social security system to bring it up to date?

Mr Twomey : One of the most obvious things, I guess, is that the system has evolved over many, many years in an ad hoc sense. It's become extremely complex, and even those who are working in it often get confused about how things work. One of the first things is: can we move to a much simpler payment system that applies across the board to everyone who is entitled? You then look at: what are your top-ups around particular areas of need, be they age or disability or parenting—all those sorts of things? Certainly it is the ability to do that.

I think it's also the ability to be a bit more flexible in terms of people with uncertain incomes—to create some ability to smooth their income out a bit more over time. It is giving people the benefit of the doubt when it comes to the initial reporting of their income, knowing that you can catch that up over time because, at the end of the day, you'll be able to see what happens through the tax and transfer system.

CHAIR: With regard to the point you made about smoothing out income: I noticed that in your submission you talked about there needing to be some changes to the application of reporting periods and compliance activities. Is that the same sort of concept?

Mr Twomey : Yes.

CHAIR: With regard to what you've said about the social services workforce of the future: I think everyone recognises there is going to be—there already is—explosive growth in that sector, and we've talked in brief about some of the dangers of it becoming a highly deregulated sector. Again, are there any particular suggestions you would have that would avoid us going down that track?

Mr Twomey : I think it's part of the same wider question about what we are actually doing with these kinds of disruptive platforms and how we catch up our industrial relations and occupational health and safety systems to match the changing nature of work. It's clear that, while the new technologies and platforms have been part of enabling these more responsive systems, the biggest way they're saving the money is by bypassing the cost of the existing regulation, and that's regulation we put in to protect people—occupational health and safety, superannuation income and so on. By bypassing those they're simply spreading those costs to the wider community.

As to the question of how we deal with some of these kinds of arrangements, which are almost sham contracting arrangements, where people are defined as independent contractors, there is a model in Europe of a dependent contractor arrangement which says: if you are acquiring just about all your income through one particular employer, you're not, in a sense, an independent contractor and there should be a higher level of regulation and protection around some of those things.

CHAIR: I don't know if you were here for what previous witnesses had to say. They said that the introduction of dependent contracting in some jurisdictions had actually led to undermining of employees, because there was a tendency to push employees into becoming dependent contractors, losing the benefit of employment.

Mr Twomey : Yes.

CHAIR: There are some risks associated with that.

Mr Twomey : I think the risks there are about how you define your rules about what counts as a dependent employment relationship. It may be that the idea of a dependent contractor is still problematic, and it's the whole way that we've allowed contracting to be defined so loosely that we've been able to push a lot of existing employers into contracting arrangements where they're effectively still an employee of an organisation. Maybe we simply need to tighten up how we test what really counts as an employment relationship. At what point is an organisation actually responsible for you and committing to you in that sense?

CHAIR: I've got one more question. The only other point in your submission that I don't think we've touched on is your recommendation that we provide some incentives to allow the growth of worker cooperatives and mutuals and that sort of greater employee participation in decision-making. That is something that's been raised with us in some of the previous hearings as well. Would you like to elaborate on that?

Mr Twomey : I think one of the areas where it's been most successful is where you've seen existing operations and industries that have been forced to close down due to financial mismanagement rather than actually because of the viability of the particular workplace or what they're doing. So creating the opportunity for the workers to take that over, or even just over time increasingly become shareholders in their own workplace, is a way of making it more resilient. In a sense, you can see that it's one model that gives you quite a different and flexible response around how you might deal with some of these industries that are perhaps being increasingly marginal in a financial or globally competitive sense but are still very much delivering necessary supplies to industry in our local community. Whereas, you might say that the high-level financial competitiveness might not make them attractive to capital to invest in, but, from the workers' point of view, if they know they can build a particular widget and people will buy those at a reasonable rate of return, then being able to keep them employed and delivering that in Australia rather than closing down a particular workplace or industry and sending it overseas makes a lot of sense.

CHAIR: Thanks very much for coming along today.