Thursday, September 21, 2006

Workchoices - no impact on job security

In today's SMH, crazed ALP lefty Tanya Pilbersek takes time off her Israel bashing schedule to give us this absolute pearl of economic wisdom:

…job insecurity is bad for workers’ health. Fran Baum from Flinders University followed the fate of Mitsubishi Motors workers who faced losing their jobs. Their health was clearly affected by the insecurity. These new work laws, which make it easier to sack workers, may contribute to worse health in companies that threaten to make use of the new provisions. Employees in companies with fewer than 100 employees can now be sacked for any reason, or no reason; and companies with more than 100 employees can be sacked for anything as long as it’s called an “operational reason”.
The Government says its package of industrial relations changes will make workplaces more flexible. That means more flexible for employers not their staff. It means an inevitable lessening of control for most people over their working environment.
So basically, she is blaming the government for job insecurity, saying its a bad thing, and that workers shold have more control over their working environment.

Let's get this straight. The latest industrial relations changes are about government stepping *out* of the market. By definition, they remove some of the restrictions and regulations that were in place. Those restrictions cannot be viewed as applying to only one party, but rather, to every employment transaction (thus both parties). Even if a worker was willing to accept a job for only 2 weeks per year of annual leave, such a form of employment was illegal.

So despite her claim to the contrary, less regulation means more flexibility for everyone. Typically, a regulation is imposed on the behaviour of an employer (i.e they must offer costly benefits such as super, leave, public holidays etc). Every employer has to factor the cost of these mandatory benefits into their calculations. If the marginal productivity of the worker is below the cost of the salary + benefits, then a rational employer will not offer the job in the first place.

You typically see very high unemployment associated with highly regulated labour markets throughout the world. Ultimately, the number and the diversity of jobs offered in an economy depends purely on the economic forces of supply and demand. When a person is willing to supply their labour, at a salary that is equal to or lower than the amount of additional revenue the employer will earn by hiring them, then employment takes place.

Ironically for stupid old Tanya, she uses the case of the Mitsubishi workers to justify regulation. The evidence justifies an opposing conclusion however, according to Andrew Norton.
If your employer is losing money your job is at risk regardless of your permanent status, as the Mitsibushi workers were; if your employer is doing well and you are performing OK you will be reasonably secure, even if you are a casual.

It follows from this that WorkChoices in itself probably won’t add much to job insecurity, which is primarily a product of the laws of supply of demand, and not the laws of the nation.

People often demand job security when they call for more regulation. They suggest that all employers are forced to put people on full time contracts. They often don't agree with the idea of flexible "casual" jobs where employees have little certainty about the future, and they can be dismissed or their working hours changed with little or no notice.

But why would an employer do such a thing unless there were dynamic economic forces driving them to ?

Every business operates in a dynamic environment. People are naturally scared of sudden change, but no legislation can protect them from that. If you work in a take away chicken restaurant, and there is a sudden shortage of chicken meat, your employer cannot sell any food and make revenue, so rationally they would close down until they can resume. If there is a regulation saying that they *must* continue to employ you every day, even if they can't earn money, then the business will lose revenue and be forced to close. So what comfort is it to you ? Its not really job security, unless you know that you are working in a job that exists because you are providing something of value to your employer.