A troglodyte in the ranks

Graham Young, who operates the group blog Ambit Gambit and prominent Australian e-journal Online Opinion, is a classical liberal in the finest sense. One of the manifestations of his studious liberalism is enlisting co-bloggers whose opinions differ markedly from his own.

Jeff Wall is one of them. He appears to be a classical left Labor troglodyte, judging by this post, which eulogises US Democratic Presidential candidate John Kerry for “promis[ing] to impose taxation penalties on US companies that outsource jobs overseas.”

Jeff wonders why overseas “outsourcing” hasn’t become an issue in the Australian election, and thinks Labor should adopt policies just like Kerry’s:

The challenge for the major political parties is to come up with policies that reward businesses that create jobs here rather than resorting to outsourcing. If they want to ignore these incentives and continue to outsource, that’s their call.

But we need even a modest incentive to restore some balance.

What I find particularly unacceptable is when Australian owned or based companies move their call centre and other high labour content operations overseas to take advantage of low wages and inferior work place conditions, while keeping other operations here just to gain taxation and other benefits such as preferences for local supplies not widely used by federal, state and local governments.

Well Jeff, the reason this hasn’t become an issue in Australia is that the abolition of just the sorts of protectionist measures you now advocate was one of the major achievements of the Hawke/Keating Labor government of the 1980s. Moreover, those reforms succeeded in turning Australia from a stagnant economic backwater into a vibrant world-leading economy that has enjoyed unparalleled growth and prosperity through the 1990s and the first part of this new century. Reversing those reforms doesn’t really seem like a very good idea somehow. Certainly Mark Latham (thankfully) doesn’t think so. He’s a classical liberal on economic issues to every bit as great an extent as Keating was (and more so than Howard, under whom reform has just about ground to a halt).

I never cease to be amazed by lefties who bemoan the “export” of Australian jobs, and condemn the “low wages” of overseas countries as if they were an evil thing and they’d be much better off if they just adopted Australian industrial awards! But the comparative advantage of those countries lies in their lower cost economies. In that advantage lies the pathway (ladder?) of opportunity to their ultimate achievement of first world standards of prosperity. By attempting to block that pathway, these so-called “progressives” are condemning the third world to permanent poverty and lack of development.

There’s certainly a reasonable case for imposing regulations seeking to deter Australian companies from “outsourcing” to countries that have dangerously low to non-existent workplace safety and environmental laws, or that allow harsh child labour. But simply trying to restrict overseas “outsourcing” per se, or subsidising employers to keep low skill jobs in Australia (which is the same thing), is a selfish “beggar my neighbour”, “I’m alright Jack” notion that needs to be decisively squashed.

Moreover, it would not only beggar our neighbours but eventually Australia as well, by preventing Australian businesses from competing effectively in global markets.

Nevertheless, I argue that there is a respectable case for government to restrict the scope for job “outsourcing” within Australia. Domestic outsourcing is much worse than the overseas kind, because it directly undermines Australian working conditions that have been hard-won over the last century, and which have formed the foundation for our harmonious, relaxed, reasonably egalitarian society. I think government should regulate to require businesses to provide all workers with basic conditions like occupational superannuation; annual, sick and long service leave; and workers’ compensation; irrespective of whether they label those workers “independent contractors” or “employees”.

Employers would still have great flexibility on rates of pay, hours, bonuses and so on (i.e. where flexibility may be needed to respond adequately to competitive pressures), but the basic conditions that underpin a fair society should be assured. In fact, failing to insist that employers continue providing those basic conditions is merely allowing them to shift costs onto the rest of the community, because sick, injured and retired workers are then likely to be forced to rely on social security benefits. To turn neoliberal rhetoric against them, allowing employers to outsource domestically without restriction is to permit them to engage in a particularly pernicious form of “rent-seeking”. Of course that wouldn’t be the case if all social security was abolished, but only the most extreme neoliberals advocate that.

At the same time, government should foster the development of high skill jobs in Australia through investing in enhanced national infrastructure, enhanced training and retraining programs, R & D grants and much more generous but carefully targetted capital investment allowances. That would ensure the maintenance of Australian employment and living standards, at the same time as the “export” of low skill jobs overseas fosters the prosperity of those countries and Australian businesses as well. It’s a “win-win” situation, and an area of policy that we ought to be discussing.

I at least agree with Jeff Wall on the need for discussion and new ideas, and also on the fact that government does have a legitimate and larger economic role than hardline “neoliberal” advocates would allow. But it certainly must not involve winding back the clock and re-imposing a thinly disguised form of protectionism. In fact I wonder how John Kerry could actually even implement the sorts of measures he’s apparently promising without running foul of WTO rules which are legally binding on the US.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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thersites
thersites
2022 years ago

The best comment I have seen related to this issue is an article written a few years ago by Paul Krugman,prominent liberal/democtrat economist and current Bush – hating NY Times columnist. Should be compulsory reading for all anti-globalising ‘troglodytes’:

http://www.pkarchive.org/trade/smokey.htm

yobbo
2022 years ago

“I think government should regulate to require businesses to provide all workers with basic conditions like occupational superannuation; annual, sick and long service leave; and workers’ compensation; irrespective of whether they label those workers “independent contractors” or “employees”.”

What gives you the right to dictate to employers and employees the terms they can agree on?

I have a great number of friends who work in IT, and an even bigger number who are skilled tradesmen. They predominantly work on contracts.

Forcing employers to provide annual, sick and long service leave would mean that they would be forced to reduce pay. All my friends would much rather take a higher pay cheque than they would receive time off.

They move jobs frequently – holidays for today’s workers are the days that come between contracts. What good is long service leave in an industry where you change employers every 6 months on average?

I think this is a case of your own isolation rather than any mistaken economic notions. You wrongly assume that the conditions in other industries are like those in the education industry – they’re not.

Ken Parish
Ken Parish
2022 years ago

Sam

The NT is about to legislate for portable long service leave, and some other states already have it. Occupational superannuation is also effectively portable (but should be more so), so your point about people changing jobs every six months is irrelevant.

Nor do I accept that in many maybe even most situations the worker “chooses” to work on contract (rather than as an employee) in any meaningful sense. It’s a “choice” imposed by employers because it reduces their overheads.

However, I do accept that there are SOME people who genuinely choose contract work and the slightly higher hourly rates it may involve, and knowingly trade off the lack of sick leave, workers’ comp, super etc. I don’t think I’d have a problem with legislating so that workers can have a genuine choice along those lines, as long as the workers were fully informed about the parameters and consequences of that choice. And that might include consequences of non-eligibility for social security benefits where workers choose the “take the cash and run” option but fail to self-provide for their own retirement or illness (by saving or taking out insurance cover). Why should the employed workforce be forced to support the short-sighted cash-takers through the tax system (given that tax rates will necessarily be higher to provide social security for those people than if they had self-provided via sick leave, superannuation etc)? I’d wager that if these were the consequences and they were clearly pointed out, there would be far fewer (if any) people choosing the “independent contractor” option

Scott Wickstein
2022 years ago

And that might include consequences of non-eligibility for social security benefits where workers choose the “take the cash and run” option but fail to self-provide for their own retirement or illness (by saving or taking out insurance cover). Why should the employed workforce be forced to support the short-sighted cash-takers through the tax system (given that tax rates will necessarily be higher to provide social security for those people than if they had self-provided via sick leave, superannuation etc)?

Here, hang on. These contractors pay taxes as well you know. If they are still forced to pay up the taxes then they should receive the benefits from them.

If your not prepared to provide these guys with a pension, you should not expect to get money from them via taxation.

Ken Parish
Ken Parish
2022 years ago

Scott

OK. If you think that’s unfair (and it may be from one viewpoint anyway), then we have to go back to my original proposal for compulsory super, leave and workers’ comp beenfits for everyone, irrespective of whether they’re “employees” or “independent contractors”. These issues become more and more critical with people living longer, babyboomers retiring in large numbers and so on. The compulsory occupational super system was designed to ensure that people provided for their own retirement to minimise the burden of a foreseeable future situation where a disproportionately large, long-lived retired population will have to be supported by a much smaller workforce having to pay crippling taxes. That system is subverted if (as is currently happening) large numbers of employers subvert it by “outsourcing”. What they (and their ex-employee “independent contractors”) are actually doing is “rent-seeking” at the expense of the next generation of workers.

One other alternative might be that self-employed workers pay an additional tax levy to fund their retirement and sickness and accident cover, so they don’t become an unfair burden on future generations.

Yobbo
Yobbo
2022 years ago

“One other alternative might be that self-employed workers pay an additional tax levy to fund their retirement and sickness and accident cover, so they don’t become an unfair burden on future generations.”

That’s ridiculous. Many of these contract workers (I won’t say “all” because obviously there are a few dim bulbs) are taking the extra money rather than the leave because it gives them extra money to increase their own private wealth.

Superannuation is not the only way to ensure income after retirement. Why should people be taxed extra because they choose to invest in their own private portfolios rather than a managed fund?

Ken Parish
Ken Parish
2022 years ago

Sam

Good point. I’m not sure how you could factor that in. In fact, it’s exactly what I’ve done. Jenny and I have an investment property portfolio that means we’ll never have to rely on social security. I’ll think about it and post in the morning, because I don’t have any more time right now.

Niall
Niall
2022 years ago

I agree with Wall that outsourcing, especially the domestic sort, is an insidiously spreading stain across a wide range of industries, and getting wider. It pisses me off greatly to call a finance institution, be answered by a computer which then re-directs me to some nameless call centre on the sub-continent where I get transferred again and again to Indian-accented persons who don’t know their products and could care less about what it is I’m after.
Same financial institution before they shutdown their locally headquartered call centre, the call took one third of the time to complete and left me feeling satisfied. Last weeks call left me feeling decidedly the opposite. But, I suppose, living in a cave will do that to you.

peggy sue
peggy sue
2022 years ago

The compulsory occupational super system was designed to ensure that people provided for their own retirement to minimise the burden of a foreseeable future situation where a disproportionately large, long-lived retired population will have to be supported by a much smaller workforce having to pay crippling taxes.

This claim is requently made, but the federal government keeps undermining the system, by making the age pension available to people who are in fact quite well off.

Before the introduction of GST, pensions (which includes benefits paid to single parents) had a taper of 50c, that is, for each dollar over the threshold, the pension was reduced by 50c. After the introduction of GST this was reduced to 40c.

At the present time the age pension for a single person is reduced for income over $3,172 p.a. and reduces to zero at $33,722 p.a. For a couple, reduction starts at $5,616 p.a., and pension reduced to zero after $56,381 p.a.
If the old taper were in force, those top figures would be $27,612 and $46,228.

Considering that the basic age pension at the moment is $12,220 p.a. single, and $10,153 each p.a. for a couple, do we really need to be “topping up”

Darlene
2022 years ago

I share the concern about outsourcing, both for the people who lose their jobs as a result and the people who end up with them because they are surely paid a pittance. At my workplace we have had a few calls from Call Centres that sound like they are many, many miles away.

By the way, Graham likes to get classical left Labor troglodytes on board because we don’t cost much to house.

Graham Young
2022 years ago

Ken,

Interesting comments, most of which I agree with. However, you have Jeff’s political orientation 180 degrees wrong. He’s no lefty, so he’s probably just an unreconstructed McEwenite. Non-Labor has never been unanimous about free trade, and it used to confuse me when I was younger. All the “small l” liberals used to lionise Alfred Deakin when I was first cutting my teeth, but nowadays they’re probably closer to George Reid. I realised that before most of them did, but Jeff is an earlier generation and has never had the epiphany.

I’ve sent him an email about your post, so hopefully we will see what he says in his own defence.