Labor’s plan for casuals is an election bombshell for jobs

Portable perks would not just halve the number of casual jobs, it would consign them to the outer margins of the workforce.

Mark Wooden

One of the many features of the Australian labour market that sets it apart from that of other Western nations is the high incidence of casual employment. The general consensus is that, for most of the past two decades, about one in every five workers (and close to one in every four employees) in Australia is employed on a casual basis.

Following the COVID-19 pandemic, this high level of casualisation has come under increased scrutiny. In part this reflects the realisation that casual workers bear the brunt of job losses in an economic downturn, and in part concerns that casual workers may have contributed to the spread of the virus because of their lack of entitlement to paid sick leave.

Civil engineering was the biggest area of job vacancies.
Casual employment recovered quickly during the pandemic.  Louie Douvis

ACTU secretary, Sally McManus, in a speech to the National Press Club in December last year, called for a halving of the number of insecure jobs by the end of the decade, which would require a serious reduction in casual employment. And we are talking about no small change here: as at February this year, more than 2.5 million employees did not have access to paid leave entitlements (a characteristic that is common to most casual employees) in their main job.

The ACTU has been campaigning for action in this space for at least a decade, but with little success. At the start of the century, employees without paid leave entitlements represented 20 per cent of all workers, while 19 years on, in August 2020, this fraction was little different, at 19.7 per cent.

But then along came COVID-19 and the associated lockdowns, and in the few months between February 2020 and May 2020, the number of employees without paid leave entitlements declined by 540,000 and their share of total employment fell by 3 percentage points, from 20.1 per cent to 17.1 per cent.

The pandemic recession, however, was very different from past recessions in that the ensuing recovery has been extremely rapid, with the unemployment rate in the latest figures back to where it was pre-pandemic.

Importantly, most of the casual jobs have returned. In February 2021, 19.2 per cent of all those employed were without leave entitlements. This is slightly lower than the pre-pandemic level, which I suggest reflects a labour market that, in the absence of temporary immigration, is characterised by vacancies and shortages in many areas, rather than any secular decline in casual employment.

The 25 per cent wage premium that employers pay to casuals remains a powerful incentive for workers to reject offers.

In short, McManus’ vision of a halving in the number of insecure jobs seems unlikely to come to fruition without some intervention that dramatically changes the incentive to employ or supply casual labour.

The current government’s intentions were spelt out in its Fair Work Amendment Bill, and while the bulk of that bill was rejected in the Senate, most of the provisions relating to casual employment were accepted and have now passed into law.

Of greatest significance is the requirement for employers (with 15 or more employees) to offer conversion to permanent employment to casual employees who have been employed by that employer for at least 12 months and have worked a regular pattern of hours on an ongoing basis for at least the past six months.

The existence of casual conversion in awards, however, is not new. Indeed, since the start of 2019, most award-covered casual employees who met the employment conditions described above had the right to request conversion to permanency. The 2021 act strengthens these provisions by shifting the onus from employees to employers: rather than employees needing to request conversion, it is now incumbent on employers to offer conversion to eligible workers.

But whether we will see any real change is doubtful. First, as the ACTU has emphasised, there is no mechanism to ensure employers comply. Second, employers can easily evade these requirements by rostering workers in a way that ensures their working pattern is not regular. Third, the provisions do not apply to small employers. Finally, the 25 per cent wage premium that employers are required to pay to casual employees remains a powerful incentive for workers to reject offers.

Thus, if any significant intervention is to be made, it will need to come from the Labor side of politics, and at face value it does appear that an Albanese-led Labor government would make big changes. This is reflected in its Secure Australian Jobs Plan. While a mere 600 or so words long, this document contains one major bombshell – the intent “to develop portable entitlement schemes for annual leave, sick leave and long service leave for Australians in insecure work”.

While we have no details yet about what this involves or how it will be achieved, I make the simple observation that to have portable paid leave entitlement schemes, workers first need to have paid leave entitlements. I thus draw the conclusion that Labor intends making paid annual leave and sick leave a universal entitlement and, if so, that will not just halve the number of casual jobs but probably consign them to the outermost margin of the workforce.

But one question remains: is this a winning electoral strategy?

Mark Wooden is professorial fellow, Melbourne Institute of Applied Economic and Social Research, University of Melbourne. He will be a presenter at the Melbourne Economic Forum today, which is supported by The Australian Financial Review.