Andrew Leigh

HOUSE OF REPRESENTATIVES, 17 OCTOBER 2019

I rise to speak about the challenge of joblessness and poverty in Australia. This week is Anti-Poverty Week, and many community organisations are doing their best to help tackle the scourge of social disadvantage in Australia, and to help reduce the rate of child poverty, which is too high in Australia. There is, however, a difference in the philosophy that the two sides of parliament take towards joblessness. Those on the conservative side are more likely to refer to jobseekers as ‘leaners’ and to criticise them for not trying hard enough. We, on the progressive side of politics, recognise that the unemployment rate is, to a large extent, a function of the amount of jobs that are available.

If you go to Britain or to Germany or to the United States or to New Zealand, you'll find an unemployment rate that is around four per cent. That's the unemployment rate that the Reserve Bank of Australia thinks is possible in Australia and which would be consistent with starting to get wages growing again and starting to get inflation moving back into the target band. Yet, in Australia, we have a government that seems comfortable with an unemployment rate that sits above five per cent and has done so throughout the period in which the government has been in office. That means that there are hundreds of thousands of Australians who, if we had the same unemployment rate as the countries I've named—Britain, New Zealand, the United States and Germany—would have a job, but in Australia do not.

There are other consequences of unemployment being too high. When unemployment is too high it means that we don't get wage growth. Over the past six years, real wages have grown at just 0.7 per cent a year. In the six years before that, which was a period spanning the global financial crisis, real wages grew at 1.8 per cent annually. We've seen a significant wages slowdown, and part of that's been due to poor productivity, declining union membership rates, wage theft scandals, penalty rates and public service wage caps.

We need more action in order to reduce the unemployment rate. When the unemployment rate comes down, it becomes more difficult for employers to indulge in racist or sexist discrimination. It is harder to be a discriminatory employer when there is more competition in the labour market. When the unemployment rate is low, people with disabilities and new migrants are more likely to be able to find a job. When the unemployment rate is low, you get pressure on wages—that pressure which the Reserve Bank governor has acknowledged is sorely needed, which has been highlighted in reports from the OECD and the International Monetary Fund. Independent reports from Deloitte have highlighted the problems in the Australian economy and the fact that those problems are, to a large extent, homegrown. Yet the government seems to be stubbornly sticking to its talking points, pretending as though we don't have a joblessness problem in Australia.

The fact is that for every available job in Australia there are four people looking for work. For every job opening, there are four people looking for work.

A division having been called in the House of Representatives—

Sitting suspended from 11:19 to 11:40

In South Australia, there are nine jobseekers competing for each available job. In Tasmania, there are 14 jobseekers competing for every available job. Research by Anglicare Australia Network has found a decline in the share of jobs that did not require qualifications and did not require work experience. In 2006, 22 per cent of jobs were available to someone with no qualifications and no work experience. Now, just 10 per cent of vacancies don't require qualifications or work experience. For low-skilled Australians, there are fewer opportunities than ever before.

In the context of Anti-Poverty Week, it's worth acknowledging too some of the recent findings on inequality and disadvantage. The International Monetary Fund in a recently released report looked at the gap between well-off regions and struggling regions across 22 countries. Australia was ranked fourth-worst behind only the Slovak Republic, the Czech Republic and Canada for the gap between our best off and worst off regions. If you take a country such as Japan and France, which have small regional gaps, the richest areas are about 35 per cent better off than the poorest. But in Australia, our richest areas, parts of Sydney and Melbourne, are at least twice as well off as poorer areas such as regional Queensland, Western Australia and the Northern Territory. The research has found that the gap between rich and poor was growing between regions, as we have seen inequality grow more broadly for Australia and across advanced countries.

A report by Alvis Consulting on behalf of the St Vincent de Paul Society looked at electricity disconnections and found that too had been increasing. That is no surprise, given that we know that energy costs for households have been rising significantly, due in part to the Abbott-Turnbull-Morrison government's lack of an energy policy. They found when they adjusted disconnections for population, that the postcodes that had the highest number of disconnections were those that were more disadvantaged. Populations in rural areas, with more older Australians, low-income communities, were more likely to have the electricity cut off. This has massive impacts for households and can have damaging impacts, particularly for children in those households. When the power is cut off, food spoils, families aren't able to do the washing and kids aren't able to do their homework at night. So electricity disconnections are a manifestation of the social disadvantage that we see in Australia.

We need to get the wages going again. We need to get employment going again. One of the challenges of getting wages going are constraints on job mobility. Simple economics tells us that if you have a dozen wage offers, you are more likely to get a higher wage than if you're stuck with a single option. That's why people in big cities tend to earn more than those stuck in one-company towns. It's why employees who move firms get a bigger pay bump than those who stay put.

Last year, Princeton economists Alan Krueger and Orley Ashenfelter uncovered a disturbing way that the United States firms had prevented job-switching, and that was clauses in franchise agreements that made it hard for workers to move between outlets in the same chain.

When they looked at a database of franchise agreements, fully 58 per cent of franchise agreements contained so-called no-poach clauses—clauses which barred franchisees from enticing workers to change stores. That included US franchise chains Burger King, Jiffy Lube and H&R Block.

I was intrigued by these findings, so I wrote to some of the largest Australian franchises to ask whether their standard agreements included no-poach clauses. It turned out that at least three did: McDonald's, Bakers Delight and Domino's wrote back to me to say that their standard clauses prevent franchisees from hiring workers who were working at other stores. Let me read to the House the text of the agreement that McDonald's franchisees must sign up to. It says:

Neither Licensee nor Principal shall employ or seek to employ any person who is at the time employed by McDonald's or by Licensor or by any of the subsidiaries or associated or related companies of McDonald's or Licensor or by any person who is at the time operating a McDonald's restaurant, or otherwise induce, or attempt to induce, directly or indirectly, such person to leave such employment.

It's a complicated clause with a simple impact for McDonald's workers: they can't get poached away for a better wage by another chain. That puts downward pressure on the wages of McDonald's workers, a significant employer in the Australian labour market.

I have to give credit to McDonald's, Bakers Delight and Domino's, who at least replied to my request as to whether their franchise agreements contained no-poach clauses. Two franchises—Subway and 7-Eleven—said their agreements did not, but we don't have the details that are necessary to know what other franchises do. But we do know that franchising accounts for a significant portion of the economy. According to a report from the Parliamentary Joint Committee on Corporations and Financial Services, franchising accounts for nine per cent of the Australian economy.

We also know that job switching has declined markedly. Treasury's research shows that the rate of job switching has declined by about a third since the start of the century. None of this is to blame workers, but the research by the late Alan Krueger and Orley Ashenfelter, and my own findings for Australia, suggest that structural forces are moving against workers—that no-poach clauses are one way in which downward pressure is placed on wages by impediments on workers moving firms.

I call on those franchise chains—McDonald's, Bakers Delight and Domino's—to scrap no-poach clauses. Following the release of the Krueger and Ashenfelter research in the United States, state attorneys-general began investigating whether that no-poach clauses were anticompetitive. Very quickly, a number of US franchise chains announced that they would scrap no-poach clauses. But that has not yet occurred in Australia. These chains—and, potentially, others—have no-poach clauses at the moment, which means that tens of thousands of employees are affected. The three chains I mentioned—McDonald's, Bakers Delight and Domino's—have between them over 2,000 franchise stores, and are significant employers of low-skilled labour.

We should also shine a spotlight on franchise agreements elsewhere. It is not appropriate to 21st-century transparency that standard franchise agreements are kept secret. To the extent that they bar employees from starting a competing firm and to the extent that they bar employers from hiring workers from another franchise chain, we need better oversight of what these franchise agreements say. Healthy competition for workers is good for wages, and if we want to get more rapid wage growth then we need more opportunities for workers to seek out a better-paying job. These chains should do the right thing immediately, and should get rid of these clauses from their agreements. I promise to them that if they do not, I shall continue raising the issue in this place.

I turn finally to the issue of poverty and disadvantage right here in the ACT. Outsiders often think of Canberra as being a city without poverty, but that is far from the truth. In the ACT the winters are cold and housing affordability can be a challenge, so it's a tough place to be without a job and a tough place to need more income support. I held a roundtable with heads of a range of local community sector organisations on 4 October. I thank representatives of ACOSS, YWCA, Volunteering ACT, MARSS, Vinnies, Companion House, Anglicare and GIVIT for joining me for that important conversation. We discussed the issues of overlapping disadvantage, challenges around disability and incarceration, and the way in which housing affects so many other aspects of the lives of low-income Canberrans.

There is a recognition among these organisations of the need to innovate. On 8 October I held another breakfast with young social entrepreneurs. I thank C Moore, Ashleigh Streeter-Jones, Caitlin Figueiredo, Josh Gonzalez, Jarret Anthoney, Julia Faragher, Sophie Fisher, Nip Wijewickrema, Dhani Gilbert, and Jenna Allen for joining me for that conversation. It was focused on what philanthropically funded organisations can do to target poverty and disadvantage and how these organisations can fill gaps that may emerge in social disadvantage. The work that's been done by Jenna Allen for the Take One, Leave One project, recognises that in a cold winter it is important to provide low-income people and homeless people with a coat that they feel comfortable in, that they will be proud to wear, that will keep them warm on a cold Canberra night. The work that Sophie Fisher does with Girls on Bikes ACT recognises that, particularly for migrant communities, it is important to provide bicycles and learn-to-ride lessons to be a part of the Canberra community, a city with as many bike paths as any other part of Australia. So the work that is being done by these social entrepreneurs makes us a stronger and more connected community.

Finally, I must conclude with a plug. For the last decade, Vinnies ACT has been coming to this building to hold a Christmas barbecue. This was an event auspiced by Jenny Macklin, the former member for Jagajaga. With her departure from the parliament at the last election, I have taken over the coordination of the Vinnies barbecue, which this year will be held on 5 December. We would welcome to the Vinnies barbecue all members of parliament, their staff and the press gallery. Joining us at the Vinnies barbecue on 5 December is a simple way of showing that you want to help deal with poverty in the Canberra community. It's a way of showing your commitment to social justice and a way to get a photo with Father Christmas, to enjoy a sausage sandwich with parliamentary colleagues and to turn a snag on the barbecue with the great Vinnies volunteers. The Vinnies barbecue will be supported too by the members for Bean and Canberra and by Senator Gallagher. It is a terrific community event in which the Vinnies workers in Canberra come into the parliament. We make a modest donation, and they serve us a terrific sausage sandwich lunch to get us through that final sittings week. Come along and join us in the usual courtyard. Do your bit to show your commitment to building a stronger, more socially connected Canberra and to a great community organisation in Vinnies.

ENDS

Authorised by  Paul Erickson, ALP, Canberra.