Government Passes The Buck

Dr John Buchanan
Dr John Buchanan

The O’Farrell Government’s attacks on public sector wages and conditions are merely the latest policy instalment to make households carry the burden of financial risk.The O’Farrell Government’s law that limits public sector wage increases to 2.5% per annum at a time when inflation is running at 3.2% virtually guarantees an ongoing cut in real wages. This, say researchers at the Workplace Research Centre (WRC), is consistent with patterns in our economy for the past two decades.

‘Over the past two decades the share of GDP in Australia that has gone to wages has dropped from 60% to 40%. This is an astronomical shift in the allocation of resources,’ says WRC Director Dr John Buchanan.

‘There has also been a significant shift in employment since the Global Financial Crisis,’ he says. ‘Without the employment in the health and community services the economy would be in a hole. This shows the important economic role of the welfare state. Health is at the forefront of employment and economic growth.’

NSW Treasury analyses of public sector wage increases have been used to justify the O’Farrell Government’s wage policy. This is strongly contested by Dr Buchanan, who says acting on this advice in health will exacerbate the nurse shortage.

‘Nurses and other NSW public sector workers are not overpaid and there is no wages blowout,’ he says.

‘In previous studies about nursing, conducted by the Workplace Research Centre, the fundamental reason why people leave the profession was because of the pay.’

‘It is unfortunate that wages policy is what Treasury decides when they have consistently got things wrong.’

Dr Buchanan maintains that the NSW Industrial Relations Commission (IRC) is more reliable and better placed to determine wages than the Treasury.

‘In its deliberations the IRC takes a broad view, which includes the cost of living. It looks at the relativities. It looks across the board at all the relevant issues.’

Shifting the risk from the state to workers

Blaming public sector workers for the condition of state finances is consistent with a trend of governments abandoning their responsibility for public services.

Previous research conducted by the Workplace Research Centre for the ACTU into the impact of the Global Financial Crisis on work and working life in Australia highlighted the transfer in economic risk from the state to households and from employers to workers over the previous two decades.

The report found that with the retreat of the welfare state, individuals are now expected to use their earnings not just for their daily needs but also to pay for their own retirement, future health care and education.

In spite of the entry of more women into the workforce and the rise of dual-income households, the proportion of household spending on fixed expenses such as housing, childcare, education, health care, tolls and transportation rose from around 54% in the 1970s to 75% in 2004, according to this study.

This leaves working families more sensitive to shocks from an increase in the cost of living or from a drop or loss of income.

NSWNA General Secretary Brett Holmes says the attack on NSW public sector workers needs to be seen in this context.

‘Providing good public services is an important part of the state’s role in our lives. That is why we pay taxes. Governments have been walking away from this responsibility and we have to challenge this.

‘One of the consequences of the GFC everywhere is a deterioration in state finances. Public sector workers in the United States, in Europe and now in Australia are been used as scapegoats for a mess that was created by bankers and an irresponsible corporate sector.

‘Public sector wages are not the cause of this problem and we need to resist those who try to pin the blame on us.’