Towards Prosperity
Pru Goward
Sex Discrimination Commissioner and Commissioner responsible for Age Discrimination
Towards Prosperity Conference
Adelaide
Tuesday 2 May 2006
Thank you
for inviting me to be part of your Towards Prosperity conference.
Let me
first congratulate the Government and the community for engaging in such a
democratic, but time consuming process. And maybe even a risky one. Who knows
where participatory democracy might eventually end?
You’ve also made some controversial assumptions. Some of these are bound to end up being modified, ignored or noisily rejected. For instance, the Strategic Plan assumes South Australia’s population should grow by 40% in the next forty years, and yet there is nothing like consensus on the desirability of increasing our population, let alone by this much or on the means for doing so in an age of low fertility. It will be interesting to watch debate on that assumption, for starters.
There is no doubt I have, like you, spent many an hour pondering
why South Australia, with its excellent supply of raw materials, strong rural
sector and diverse and essentially benign climate, as well as a culture based on
the Methodist work ethic, should have struggled economically for so long. Yes,
progressive tariff reductions and the computerisation of precision engineering
have hit manufacturing hard; the question is why business has not been able to
diversify into other fields. The high unemployment in South Australia for most
of the 80s and 90s cannot be disconnected from the obsolescence of assembly line
manufacturing which absorbed so many migrants in the 50s and 60s. The large
scale immigration of low-skilled non-English speaking migrants during this
period was, in retrospect, a labour market programme done on the cheap. There
was relatively little investment in the language and work skills of these
migrants with the result that they did not easily move jobs to other industries
and made up the bulk of the long- term unemployed of the 1980s, a rejected group
of sad middle- aged non-English speaking males with no prospects. Dumped on the
unemployment heap from where they have mostly never returned. They frequently
went on disability pensions in preparation for the old age pension. Our long
term unemployed still consist disproportionately of these men whom Australian
taxes will now carry until their deaths. What we saved in education and
training thirty years ago we are now spending many times over on welfare. The
price of short-sightedness is high indeed. These are mistakes that I trust this
strategic plan will not repeat.
Australia’s 1950s recipe for
growth consisted of four ingredients beloved by premiers like Tom Playford:
tariff protection; centralised wage fixing; tight economic regulation along with
generous subsidies to industry; and cheap public housing. This is a mixture we
would clearly not contemplate today in our new, sexy, globalised trading
environment. Having said that, undoubtedly during the next thirty years,
demographic pressure and the forces of international competition will , I
suspect, cause a re-think of the virtues of free trade. I sense they are
beginning to cause this re-think already in Washington and the capitals of
Europe. Whilst not wishing to dwell on this too much, suffice it to say that
the antagonism in Washington towards the People’s Republic of China-
thinly disguised as concerns about Taiwan, Japan, regional security and Chinese
human rights abuses, antagonism which is about much more than the under-valued
RMB- is evidence that the world’s most open superpower is beginning to
sweat in the heat of this unprecedented international competition.
Interestingly, I understand the United States has ruled out a free trade
agreement with China.
But leaving the possibility of a policy reversal aside
for the moment, the challenge for South Australia today is achieving prosperity
in a world of increasingly open trade and twenty-four hour global operations.
Prosperity, as your leadership group has identified, is also based on
assumptions about our population size and productivity, increased through a
combination of improved skilling and hi-tech employment.
Australia, not just
South Australia, will certainly need to raise its productivity. The present
Chinese-Australia trade arithmetic goes something like this: China’s work
force is a third as productive as ours but a tenth of the price. Thus your
disappearing white goods industry. To maintain our current economic profile will
probably require some real wage cutting and a fair bit of productivity
improvement. Productivity improvement, in the case of India as well as China,
is going to be difficult given the enormous investment they already make in
industrial training. They produce more engineers in a year, for example, than
Australia has altogether. Bearing in mind India’s long tradition of
English education, we may also find it difficult to compete with India in
occupations traditionally reliant on high levels of language fluency, like the
law.
But let’s not get too anxious about China and India- their 8% growth rates are clearly supporting the resources boom going on here and in Western Australia and are expected to do so for the next twenty years. They’re also driving the boom in petrol prices, but that’s another matter.
So far I’ve been talking for nine minutes about things I know little about. What I do know is that a state like South Australia faces an enormous number of uncertainties and factor changes over which any state has little control. Macro economic settings are the responsibility of the federal government, as is trade policy and even industrial relations. Australia has always tossed on the seas of international trade, rarely a price setter, and it is difficult to see that changing.
For good measure, I will throw in one more factor I know little about but which has been constantly raised with me during consultations for my national discussion paper ‘Striking the Balance, Women, Men, Work and Family’. That is the question of whether or not we want more prosperity. Do we need more stuff? This disease of excessive stuff is known as affluenza. It would be convenient to dismiss affluenza as the concern of the usual suspects; socialists, greens, religious fundamentalists. But it was in fact raised by business owners and managers, older people, young people - just about anyone who didn’t have children. I am tempted to think that as international wage rates rise, and goods and services become expensive again, so this golden hue is set to fade. A few more oil shocks might also have us rethinking the old Australian virtue of making-do!
Whatever the outcome, it should not be a foregone conclusion that everyone wants to be richer, more harried and hurried.
What we do know with certainty is that South
Australia’s prosperity is driven by a combination of its natural resources
and its people. It is also driven by standards of governance and social
stability which lower the cost of doing business.
When it comes to people,
the equation is simple; the more of them you have in work and the more
productive they are, the richer South Australia becomes.
How do we do this in an age of longevity, declining fertility and why is our workforce expected to grow only marginally for the next twenty years? It’s extraordinary to think that over the space of a working life, Australia could have gone from a country with too little work and too many workers to one with too few. There are two points to be made - we need to improve the workforce participation, particularly of two distinct groups, and second, we need to maintain and, says the Plan, actually increase the current size of the workforce in a future of low fertility and rapid ageing.
Increasing workforce participation is necessary, not just because of its impact on growth, but because it minimises welfare spending and ‘non-productive’ government spending. As you may know, in less than forty years time one in four of us will be over sixty five. On present trends we will be spending almost twice as much of our Gross Domestic Product on the old age pension as we do on Defence. South Australia currently has more than its share of aged people.
You might say that is no bad thing so try seeing it this way - Federal Treasury Secretary, Ken Henry, a calm and collected man not known for panicking, has estimated that once you include health care, spending on aged care by the year 2042 will require a GST of 24 cents in the dollar.
It’s difficult to see Australia being able to pursue prosperity with so much of its wealth tied up in funding retirement, essentially in transfer benefits.
For this reason planning for prosperity needs to enable more Australians to work for longer. With baby boomers fast reaching retirement, one day an Australian government might otherwise find itself in the middle of an intergenerational war, with younger tax payers demanding some tax relief, some reduction in publicly-funded benefits available to the aged. It is clear that those free health benefits available to the aged, in particular expensive pharmaceuticals, will become more limited. There are already countries which limit the access of the elderly to life saving surgery, unless the patient is self-funded, and clearly the same could happen here.
Yet despite the irresistible way of this argument, at present Australians over the age of 55 don’t participate as much in paid work as older workers in other developed countries. This is especially true of women.
Only 40% of Australian women between 55 and 64 are in paid work, much lower than most of Europe and the US. Try Sweden where almost 80% of this age group works.
Why is this? First of all they have welfare and retirement
entitlements which encourage them to leave, they have older partners who might
have already retired and finally, many have other responsibilities. Elderly
relatives, parents, maiden aunts. 91% of informal care received by aged parents
is received from daughters, not sons, sisters, not brothers. These older women
often have grandchildren to mind while their daughters pay off a mortgage. One
in five of our children under twelve are cared for by a grandparent, almost
always a grandmother.
You could say this is the mindset of a particular
generation of women except that we are talking about women leaving school in the
swinging sixties, with swinging expectations to match. I am part of that
generation.
How do we keep the knowledge, experience and expertise of
this group? How do we persuade employers they are worth keeping, that there are
possibilities other than full-time retirement, how do we persuade employees to
stay? How do we enable them to balance their work with their other
responsibilities?
Policy makers often approach workforce retention issues assuming people love their jobs.
That everyone is energetic and engaged and
wants to stay in the workforce longer. Workaholics think everyone else is a
workaholic.
But there are not many of them. Call centre or factory workers,
for example, are unlikely to be bounding to work with unbridled enthusiasm day
after day, year after year, decade after decade.
Interestingly, many businesses tell me it is older male managers in their sixties who are now as likely to seek part- time work as young mothers. The ANZ is leading the way with part-time work programmes for older workers, men and women, trying to hang on to all their skills and experience. Some want shorter days, some want shorter weeks - the most popular type of part time work for older workers is a shorter year - where they get to take 3 months or 6 months a year off but with their salary averaged over the full twelve months. Others want less responsibility and are prepared to drop pay- something many organisations baulk at, particularly supervisors young enough to be their children.
Retaining
these workers means providing working conditions that fit with their caring
responsibilities as well as their retirement dreams.
Conditions that enable
double-shift workers to work for the company during the day and their families
the rest of the time. With older mums now having teenagers at home as well as
elderly parents to care for, you can make that triple-shift workers. The
sandwich generation. And, with an increase in the number of only children, you
can soon put middle-aged men into this sandwich.
Undeniably, the so called family-friendliness of work is now recognised as a key driver of workforce participation. The Victorian Government has recently embarked on a Work and Family Action Plan which includes working with companies to develop work and family friendly policies, working with communities and being a best practice employer. They have also given a number of grants to companies keen to develop workable policies.
New South Wales has a similar approach - enabling companies to develop
solutions that help them.
But it’s not just older women (and men)
who are under-represented in paid work by OECD standards.
Just over half of
Australian women of working age are in any paid work; lower than most European
countries, although more than double that of the Arab world and some less
developed middle European states.
It is instructive I think that these countries also have very low economic growth rates; the Arab world, for example, averages around half a percent a year growth (excluding oil). Australia grows eight times faster. The absence of women’s rights has been identified by the Arab Development Bank as one of three causes of this low growth. Undoubtedly, the economic burden of carrying a relatively large number of unproductive dependents is part of it. It must also be true however, that limiting the number of women who can work limits the size and merit of the country’s labour market.
The other group of under-represented women in work are women with children.
Fewer than half of all pre-school mothers in
Australia are in any paid work - low compared with Germany, the US or the UK.
True, Hungary, the Slovak and Czech Republics and Spain are lower still - but
none of them is an economic powerhouse or a model for us.
Only 43% of women
with two or more children do any paid work at all - including a spot of casual
work!
According to the research, increasing the number of working mothers is not only good for the economy, it might also lift the birth rate. Let’s not forget one of your aims is to increase South Australia’s population by 40% in forty years. Doing this with a national fertility rate of 1.75 children per woman will require a serious rethink of social planning.
The number of only child families has risen from one in five of all families in 1980 to one in three today. In our capital cities it is closer to one in two. And women in full-time work, or in managerial or professional positions, are the least likely to have children. Overall, 25% of Australian women are expected not to have children, a record percentage for any generation, and amongst our high achievers, that number is likely to be higher.
Women with careers and professions frequently leave it too late to have any, or more than one, or they just find it all too hard to combine with the tyranny of work and decide one or two is enough.
Who can blame thirty something lost-in-the-city singles for being bitter when they see their ex husbands, contemporaries and brothers, equally well educated and accomplished, not only having stellar careers and children, but more children even than men of lower economic or social status? For men, the rule is the more you earn the more children you have - for women, it is the reverse.
So the harder this state works at attracting highly educated and trained young women as well as young men into its work force, to increase your productivity, the harder it will need to work at enabling women to have children as well.
Again, international evidence suggest that countries
that support women and men to work flexibly with children, financially support
their working parenthood with benefits like paid maternity leave, have
experienced improved fertility rates. Traditional countries such as Italy,
Spain, Portugal and Germany, on the other hand, have some of the lowest birth
rates in the developed world. Where you force women to choose between work OR
children, but not to have both, a significant number will choose work and no
children.
Interstate comparisons bear this out. Canberra, which has a
very high percentage of women in work on the other hand, has a higher fertility
rate than Melbourne and Sydney, arguably because public service flexibilities,
short commuting times and reasonable child care make combining work and family
much easier.
But it is also true that many women prefer not to work when they have children. Whether they choose to, or are forced to by what they consider to be family unfriendly working conditions is immaterial; they constitute a large untapped resource. Surveys suggest the shortage of child care places, quality child care especially for infants and toddlers, inflexible hours and the poor availability of part-time work at senior levels makes working just too hard. (Remember women don’t have their first child now until they’re into their thirties, when they do have some seniority, yet there are few part-time jobs in professional and managerial circles.)
To make up for this I might add, their husbands and partners do even longer job hours, always looking for overtime or even a second job. Forty percent of men in full-time work in Australia work more than fifty hours a week.
Dads become credit cards on legs, someone who nods to the kids before bed time and who may be there but who isn’t really there. On the phone, logging in from home. Someone whose working conditions rarely allow them to be fifty/fifty parents after divorce and who, over time, drift away from their children to the sorrow of both or the cost of the country.
No wonder women frequently complain they don’t have the time to be in paid work; their job is to keep the family together.
The consequence of this female underemployment is female poverty- either poverty for a woman and dependant children or poverty in old age. Australian women are already 2 and ½ times more likely to live in poverty (that is, just the pension) in their old age than are men. Because so few of them have superannuation. It is a loss for them and for the nation – and that means for your state.
The state makes up for it by funding welfare benefits and services. The other consequence of this poor balance between work and family in Australia is a tension which is so widespread and acute the Prime Minister has described it as a barbecue stopper. There is widespread awareness of the risks to health, children and relationships from work-induced stress, lack of exercise and lack of time together. All these outcomes not only put pressure on Australia’s social sustainability but also on the gains from prosperity.
The question for economic and social planners such as yourself is this - how to do we achieve an increase in the number of Australians working, and raise their productivity, while minimising the social costs - social costs which become economic costs. That, surely, is why the work-life balance equation is relevant to this Strategic Plan?
We should take some comfort from the fact that most of the western world, including our trading competitors, have already been through this debate. Not reconciled it, but at least embarked upon it.
These challenges are not unique to Australia - what is unique is our determination, to date, to largely turn our back on the problem. To keep working some of the longest hours in the OECD, to encourage women to stay home and not to work, to allow an entire generation to retire early with 30 years to live on a pension or limited savings ahead of them.
So let me conclude the first part of my address:
Prosperity requires work and workers. In South Australia, as in the rest of the country, it requires greater participation. Yet in order to increase the workforce without increasing the number of dependents, and in order to make better use of prime age skilled workers, such as women, who are currently lost in large numbers through motherhood, it will be necessary to develop a life-friendly work culture that not only attracts South Australian women back to work, but attracts those from interstate and arguably from overseas. There is a world competition for skilled young workers who speak English and promoting South Australia as a place where young women can do both and older workers can also work flexibly just has to be a plus. It might also actually increase your fertility rate.
I am sure there is no one here who is not aware of the cost benefit arguments for retaining people with caring responsibilities. Again, in a world of emerging skilled labour shortages, retaining people saves advertising, selecting and training. Woolworths estimates the cost of losing and replacing a check out operator is $3,000, banks estimate it is over $100,000 for a teller, a quarter of a million to lose a law graduate you’ve spent a couple of years training up. The same is true at a macro level for the state for this state and for the country.
There is an added benefit to developing a labour-planning framework that enables older workers to stay, even if at reduced capacities or hours and that enables dads as well as mums to combine their work and family responsibilities in ways that suit them. The benefit is about adding to the total merit of the labour pool. It also adds to the diversity of the labour market and in doing so adds to its capacity to respond to change and solve problems, to work innovatively. No company, government or economy can prosper through periods of change without diversity. Diversity that gives it more options and more ideas. Respect for diversity reduces the perceived risk in doing something different.
You can’t prosper from change without
diversity and you can’t have diversity if you don’t have a culture
of tolerance and respect for it.
When asked to identify the benefits of
diversity the CEO of Alcoa Australia, Wayne Osborne explained:
“Quantitatively we found diversity hard to measure. But qualitatively what we see is that sites with mono cultures do less well at solving problems, working with their local communities and dealing with change”.
This is not to say diversity does not produce measureable outputs. Autoval, for example, the Melbourne car parts manufacturer, has employed a range of measures to improve their diversity. For example, they have introduced paid maternity leave for their assembly line workers. Proof of success to them is a fall in staff turnover from 10 to 1 percent, abstenteeism down to 3% and profits up 20%.”
This business bottom line argument is confirmed by Giam Swiegers, CEO of Deloitte’s Australia, who says: “My business units have always made the best profit and have the most equity for women. The two are related”.
You will note how easily diversity and equity are interchanged.
But diversity is of course about more than having two types of workers, men and women. It is also diversity of race, background, geographical location, disability, personality and age. It is not the role of the state to dictate that employers shall diversify. You would think employers would work this out for themselves. But there is a role for the state in promoting a culture where difference is tolerated and celebrated, where diversity becomes possible. As complaints to the Human Rights and Equal Opportunity Commission frequently demonstrate, while the boss has no trouble with difference, co-workers and other customers often do.
The challenge for the state, for social planners, is to promote the need for respect and tolerance, to not be blind to the difficulties of doing so and to manage the inevitable social edginess that comes from difference - without closing it down.
Which brings us to the relationship between social sustainability and prosperity.
Social sustainability means peaceable, law abiding communities where people look out for and after one another, voluntarily and unpaid. It makes economic prosperity possible and also sustainable. Otherwise we spend the hard won gains of technological and economic change on taxes and transfers maintaining law and order, policing one another to protect people from the price of difference, keeping our families together only by frequent interventions from teachers, counsellors and an army of social workers, all paid.
But social sustainability takes time. It means parents joining school associations and raising funds, it means adult children with time to look after their parents, and it means children being able to spend enough time with their families to grow up loved, guided and secure. It means the state investing in programmes and regulating in ways that aren’t always obviously connected to economic prosperity. It means the Strategic Plan recognising that prosperity is a balancing act. That you can’t have prosperity without respect and acknowledgement of the rights of men and women, young and old, of those of different races and creeds. That you can’t have prosperity without supporting for family life as well as good roads, education systems and first class research establishments.
And it means the Strategic Plan never losing
sight of its ultimate goal, which is not, in fact prosperity, but the happiness
and contentment of the people of South Australia.
Thank
you.
