Remarks to launch Brotherhood's Social Barometer: The Working Years

Speech given by Professor Stephen Sedgwick
October 17 2007

Thanks, Michael, for your kind introduction.

Let me begin by acknowledging the Wurundjeri people, the original inhabitants of the land on which we have gathered, and any elders present here today.

It gives me great pleasure to speak on the occasion of the launch of the Brotherhood’s Social Barometer: the working years.

The Melbourne Institute has had a long and productive association with the Brotherhood, one that we hope will continue for many years to come.

This is the third in the series of Social Barometers. These draw on the work of Sen and others and consider multidimensional measures of disadvantage at key phases of an individual’s life.

The first two of the series, published in 2005 and 2006, brought together a range of indicators relating to the life chances of children and young people respectively. This document takes the story further. It considers the extent of disadvantage amongst working age Australians, defined for practical purposes for most of the report as people aged 15 to 64 years.

The compendium brings together a wealth of useful information. It provides a snapshot across eight dimensions: employment; education and training; economic resources; housing; physical health; mental health; physical safety; and social participation.

In the time available I could not possibly do justice to the richness of this compendium by attempting a summary of the main findings. So, I will not try. Rather let me dip into the report and add some perspectives of my own.

As the Barometer so rightly points out, the period of strong, sustained economic growth that Australia has experienced in recent years has transformed the job prospects of many Australians. Employment has grown steadily over the last decade and the unemployment rate is at a 30-plus year low, despite significant increases in workforce participation.

Real income per head has risen strongly as a result and measures of absolute poverty have declined, especially since 1993-94. However, relative poverty has increased over the past 20 years, and significantly so since the mid nineties. Roger Wilkins has analysed these trends in a Melbourne Institute Working Paper published earlier this year (Number 12). As he says, “the rise in relative poverty is not due to a real decline in the incomes of low income persons; rather, it has derived from the failure of incomes of low income persons to keep pace with the growth in the median income” (page 10). To strangle a metaphor, generally speaking, all the boats have been rising, but some more slowly than others.

More recent HILDA data suggests that the increase in relative poverty may be topping out, possibly even starting to decline slightly. It remains to be seen whether this continues. There are also signs in the HILDA data that poverty, at least in aggregate, may not persist beyond a year or two for most people. In other words HILDA data suggests that households move in and out of poverty after a year or two, at least when poverty is defined relative to 50 percent of median household income. Both the topping out and the generally transient nature of poverty are encouraging signs. However the fact still remains that for some Australians, thankfully a small proportion of the total, their experience of poverty is real and persistent. They are entitled to support.

The Barometer highlights a range of factors that can bear on the experience of this group. In particular the evidence suggests that two factors play a critical role in the transition of young people into the labour market. One of these, as the Barometer highlights, is the successful completion of year 12. Of course, the other is the nature of the individual’s early experiences in the labour market.

On the first of these, it has to be acknowledged that, despite the fine sentiments of the Adelaide Declaration on the national goals of schooling adopted by the Commonwealth, States and Territories almost 10 years ago, the goal of enabling all students to complete year 12 or its vocational equivalent is proving elusive. Indeed, possibly reflecting the pulling power of a strong labour market, the proportion of the age cohort completing year 12 year has declined slightly recently and in 2005 was well under 70 percent for Australia as a whole. More worrying, the proportion amounted to barely half of the cohort for students in remote areas and was not much better amongst those of low socio economic status. The retention rate to year 12 of indigenous students who began year 7/8 some years prior was appallingly low, at less than 40 per cent.

It is comforting that there are lots of truly inspiring stories of good initiatives by particular schools and communities to meet the diverse learning needs of individuals who otherwise may have become disaffected with school. Moreover, some states and territories do better than others, implying that there are practical models in place already that lead to better results. Nevertheless, the evidence is clear that we need to find better ways of making faster systematic progress on this front and ensuring that as many students as possible leave school literate, numerate and well equipped to grow throughout their life in the face of changing opportunities and challenges, especially in the workforce. It is good to see that human capital formation now figures prominently also in the National Reform Agenda adopted by COAG in 2006. However the member governments of COAG need to move beyond finger pointing and rhetoric to deliver genuine accountability for results, matched by genuine empowerment and accountability at school level, backed by adequate resourcing.

The Barometer also usefully brings together the data on unemployment, underemployment and worker discouragement, revealing a large but currently untapped pool of working hours. You might be interested to know that, Mark Wooden’s analysis of HILDA data provides an interesting additional perspective on the underemployment issue, that while 20 percent of the workforce may wish to work more hours in any year, the likelihood that this mismatch will persist beyond a year or two is small. Clearly, however, social and economic losses will be minimized if even transient effects are as short as possible.

Special attention, rightly in my view, is paid in the Barometer to the needs of those not readily accepted into the labour market, including those with various forms of disability or poor work histories. One of the original motivations for the introduction of Job Network was to encourage innovation and provide effective incentives to providers of work placement services to meet the needs of such clients. Indeed, this was one of the rationales for placing relatively heavy reliance on outcomes based payments from the beginning. Having spent the last five years abroad I have not had the opportunity to follow in detail the evolution of Job Network as the labour market has tightened in ways unforeseen even five years ago. I can’t help but wonder, however, as we contemplate the prospect of an unemployment rate “with a three in front of it” whether the time is ripe to revisit the incentives structure built into Job Network to ensure that sufficient weight is placed on encouraging innovation and securing long term outcomes for the genuinely hard to place.

As I implied at the beginning, the Barometer addresses a wider range of topics than the issues I have picked - out educational attainment or the labour market. However even this restricted list illustrates the policy relevance of the issues it canvasses. I warmly congratulate the Brotherhood for bringing this work to completion and look forward to the next installment, addressing the needs of individuals later in their life cycle, hopefully next year.

Ladies and gentlemen it gives me great pleasure to formally launch the Brotherhood’s Social Barometer, the third in the series, “The Working Years”.

Thank you.