Public Indifference?

A few weeks ago, two connected but unrelated news items caught my attention. The first concerned the death of an elderly man, who froze to death in plain sight on a busy city street. The second, published barely 10 days later, reported that the mummified body of an elderly woman was only found two years after she died. Much of the commentary surrounding both stories talked about public indifference (even callousness) and lack of concern for our neighbours, especially those who live alone.

I suspect that two years of pandemic, lock-downs and isolation have only amplified preexisting conditions. Depending on our perspective, we may choose not to do or say anything in these situations because: we don’t want to get involved, we don’t want to interfere, we don’t want to risk infection, we don’t feel adequately trained to deal with these situations, or we simply don’t have the time.

Scenarios like these can often make us think about how we might react in similar circumstances – the thing is, we won’t know until it happens. But equally, acquiring some basic skills or adopting some common protocols might help prevent future individual tragedies.

In my inner city suburb, during the pandemic, there has been a sense of “looking out” for your neighbours – some enterprising folk even organised local soup deliveries, and unwanted home produce was left by front gates. It was all totally spontaneous, but largely driven by existing relationships. If we want to do this properly, by fully respecting older neighbours’ independence whilst not interfering in their daily lives, we need some different community models.

One positive example came from the ABC’s inspirational documentary series, “Old People’s Home For 4 Year Olds”. Although a large part of the outcome was to help older people in building up their physical and cognitive skills, by also framing it about boosting pre-schoolers’ social development, it underlined the longer-term community benefits of such initiatives. It also showed that in raising mutual awareness of the need for social interaction, and by creating a level of co- and inter-dependency, communities can find practical solutions and achievable outcomes, often using existing and available resources more creatively.

Next week: Ask an expert…

 

Where is wage growth going to come from?

How good is the Aussie economy? On the back of the stable outlook on our AAA sovereign credit rating, last week’s employment data showed a better-than-expected post-COVID recovery in terms of the headline unemployment rate and overall workforce participation. This has led to speculation of a potential uplift in wages, due to labour shortages amplified by the current halt on immigration (thanks to closed borders).

But where will this expected wage growth actually come from?

According to ABS data for February 2021, the top 5 industries by number of people employed are: Health Care; Retail Trade; Professional, Scientific and Technical; Construction; and Education. (See above chart.)

Now, contrast this with three other relevant data points: 1) the number of Australian companies by size; 2) the annual change in employment growth/reduction by industry; and 3) the national GDP contribution by industry.

First, there are nearly 2.5m registered business entities, according to ABS data. Over 1.5m of these are designated as “Non-employing” – including sole traders, self-employed, independent contractors or freelances. Over 850 thousand establishments employ fewer than 200 people. Fewer than 5,000 businesses employ more than 200 people. Although there was an overall growth of 2% in the number of registered businesses, the largest increase was in the “sole trader” category, while the largest decreases were among medium-sized companies, and large enterprises. (See table below – the next ABS data is due in August.)

Second, the largest employment growth by industry sector in 2019-20 came from logistics and healthcare – no doubt in large part to the impact of COVID. Primary industries and mining both registered decreases.

Third, the main contributors to output (GDP) are Health and Education (13%), Mining (11%), Finance (9%), Construction (8%) and Manufacturing (6%) – based on a recent RBA Snapshot. But the data is always subject to further examination and clarification – for example, while construction employs over 1.1m people, many of these are engaged as independent tradies or through sub-contractors, and in spite of the huge number of major infrastructure projects (just look at Victoria’s Big Build and all the cranes in Melborne CBD), there was only negligible growth in overall employment within the sector. And while mining is a major contributor to GDP, it does not employ huge numbers of people (it’s actually on a par with the arts…), yet the fewer than 9,000 people who are employed as mining engineers are in the top 10 occupations by salary (according to ATO data analysed by the ABC.)

Some other factors to consider as we ask, “Where will wage growth come from?”:

  • While most people are employed by SME’s, these companies are probably under the greatest strain when it comes to overheads and inputs, as they have relatively high fixed costs, and can ill-afford higher wages in the current trading conditions.
  • On July 1, the Superannuation Guarantee is due to increase from 9.5% to 10% – some commentators suggest employers (especially SMEs) may have to reduce or offset wages to pay for the scheduled increase.
  • We have an apparent choice between an asset-led recovery (inflated house prices – but risks leaving people “asset rich and cash poor” when interest rates go up ); a consumption-led recovery (reliant on higher wages so people feel comfortable to spend money); or an investment-led recovery (businesses need to invest in new equipment and projects to boost productivity, and not just bring forward planned expenditure thanks to tax incentives).
  • The sectors where we need more people (health care, aged care, child care and education) are still among the lowest paid on a per capita basis.
  • What is happening to boost manufacturing, or aren’t we interested in making things anymore?
  • Our IT and technical skills shortages have been exacerbated by the absence of overseas students and graduates – there is anecdotal evidence of wage and hiring pressures in this sector, one which is probably more important to our future economy and sustainability than mining coal or building more roads.
  • One leading economist reckons that household incomes have increased by 30% over the past 10 years. If wages have been stagnant, where has this growth come from? Is it because of tax cuts, low interest rates, quantitative easing, real estate prices (or their crypto holdings)? And do we actually feel any wealthier as a result?

Finally, will inflation and/or interest rates undermine any potential increase in wages?

Next week: Is Federation still working?

Transition – post-pandemic career moves

Even before the latest lock-down v3.0 in Melbourne, one of the other members of my co-working space in the CBD decided they’d already had enough of being confined to a 5km radius, working from home, and other lock-down related restrictions. Having had their interstate travel curtailed over the past 12 months, and suffering from cabin fever, they have opted to spend the next few months living in and working from various Airbnb locations around regional Victoria. Even though they are used to WFH, recent experience has shown that they don’t need to be confined to one place. And this post-COVID shift in our work/life patterns (already being disrupted and enabled by remote working) is only increasing.

Likewise, a client I spoke to in the USA last week informed me that they had just settled into a new location on the west coast, and was “living the dream” of a nomadic existence.

More extreme is the recent example of a Guardian employee who, having had to travel from Sydney to the UK for a family funeral last year, then took several months to get back home (due to flight cancellations), but managed to keep working remotely from various European locations as he moved around to stay ahead of border closures.

Prior to this past weekend, and despite the city being out of Stage 4 lock-down for 3 months, private offices in Melbourne’s CBD have only been allowed to operate at 50% of capacity – the proposed move to 75% capacity has been put back. It means, for example, that even on a really good day, my local coffee shop is still only doing 60% of its pre-COVID business.

It’s my guess that the combination of office restrictions and many retail and hospitality businesses simply not bothering to re-open at all means the CBD is barely operating at 40-50%. It’s deceptive – some activities (e.g., construction) have continued pretty much unabated (even expanding while there is less traffic on the roads); while others have been shut down altogether (e.g., entertainment). Certainly food delivery services are still in demand, while some retail has been doing a bit better as customers appreciate the novelty of shopping in-person.

Monday to Friday in the CBD is like a bell-curve distribution – Mondays and Fridays are much quieter, as people choose to WFH part of the week. Which is challenging for employers, as they try to revert to “normal”. But assuming a mix of remote and on-site working continues, it probably means less overall demand for office space. (It’s also difficult to assess the impact of the CBD exodus on suburban hubs.)

So all that construction work suggests we will have an over-supply of commercial premises (offices, shops, restaurants and hotels).

Residential property is a similar story – student accommodation is far from full, as overseas students aren’t returning; and more inner-city apartment buildings are still going up, but there is something of an exodus from the city to regional and rural locations.

The latter tree- and sea-changes are being fueled by a number of factors: a desire to leave the city (which is more prone to lock-downs); low interest rates (so, cash out the equity in your suburban home and move to the country where your money buys you more); increased opportunity to WFH (see, 5G and the NBN have their benefits!); and a broader wish for a different work/life balance.

Unfortunately, this shift is also putting pressure on local housing supply – average property prices are going up faster in some regional centres than in the capital cities; and more nomadic lifestyles are driving up demand for short-stay accommodation. The combined effect is higher rental costs and reduced supply, tending to squeeze out the locals.

Ironically, we’ve heard farmers and primary producers in rural and regional Australia complain that they can’t get seasonal workers due to COVID restrictions on international visitors (especially students, back-packers and experienced fruit pickers). Conversely, we’re told that 90% of jobs lost after March last year have now been recovered – although this apparent rebound is mainly in part-time roles, not full-time positions. It would be interesting to see a detailed breakdown by industry, as some sectors (tourism, aviation, universities) are still struggling.

The hiatus (and disruption) brought about by COVID and subsequent lock-downs has no doubt prompted many people to reassess their careers: where do I want to live/work? what type of work do I want to do? which industries or companies are hiring? and for what roles? As part of a wider re- and up-skilling initiative, the Federal and State governments are offering a range of free vocational courses (mostly Cert I to IV programmes), as well as some enhanced “pathways” to trade apprenticeships.

While this is to be applauded, I can’t help feeling the effort is at least 5-10 years too late to address the technological, demographic and societal changes that began at the end of the last century, with the advent of the internet, cheaper technology, an ageing population, increased globalisation, inefficient taxation and tariff systems, and general economic restructuring. If nothing else, COVID has demonstrated the need for more resilience in the domestic economy, (and a reduced reliance on overseas imports and supply chains) such as smart manufacturing and food security.

Meanwhile, a friend of mine recently related that a nephew of his had dropped out of college (like many of his peers in the USA and elsewhere) and decided to become a self-taught expert in DeFi, as there is more chance of financial success (and career satisfaction) than obtaining an “off the shelf” bachelor degree….

Next week: Corporate Art

The Day That Can’t Be Named…

Today’s date, January 26th, has developed a deep identity crisis, much like the Australian psyche: who are we, how did we get here, and what does this day actually mean? A celebration of colonialism – or a day of indigenous mourning?

Leading up to this year’s public holiday, there has been: a muted response to suggested changes to the current National Anthem; a bewildering comment by the Prime Minister about finding equivalence in the circumstances of people sailing on the First Fleet and the impact those arrivals had on the indigenous population; constant bickering between the State and Federal governments about pandemic-related border controls (hardly an advertisement for Federation); renewed angst about the Australian cricket team (always a measure of the public mood); and an apparent drop in public support for an Australian Republic.

And there lies the nub of the issue. For some time now, it has felt that progress on a number of constitutional and cultural reforms has been hampered by the fact that Australia still hasn’t reached the maturity of declaring itself a Republic. The impediment to moving forward is the adherence to the post-colonial model of a Federation retaining the British Crown as the Head of State. The fact that we don’t formally recognise or celebrate Federation is in itself very telling.

Lack of maturity is endemic – from the habitual need to shorten words and phrases verging at times on baby talk (why on earth do the Prime Minister and the Leader of the Opposition choose to refer to themselves by their nicknames, “Scomo” and “Albo”?); to the suspicion of anything subtle, sophisticated or successful (the tall poppy syndrome).

Another foil to constitutional progression is the disproportionate influence (and position of privilege) that religious institutions retain in what is supposed to be a secular society.

Then there is the inability or reluctance to celebrate national success (apart from on the sporting field). Yes, Australia does “punch above its weight” in many areas, but there is so much inherent conservatism (small “c”) built into the system. The combination of 2-party politics, 3-tiers of government, cosy commercial duopolies, complex taxation, rigid regulatory frameworks, the laggardly trade union movement (not to say timid public policies on the environment, science, technology, education and the arts) inhibits innovation and experimentation. This institutional inertia (or conspiracy) all adds up to on overwhelming sense of acceptance, complacency and “she’ll be right”.

What if we had to work from the basis of some alternative histories? How would that change our views about January 26th? For example, what if either the French, Dutch, Spanish or Portuguese had colonised this land in the 17th or 18th century instead of the British arrived? What if the First Nations of Australia had developed metal tools and had fought back and won? What if Chinese fishing fleets or Indian trading vessels had established control of Australian waters and harbours long before the Europeans arrived? What if Indonesian or Malay tribes had settled here even further back than that? What if Japan had won the Pacific War?

This is not to excuse or justify the actions of the British in colonising the many nations that already existed in Australia, and all that followed from that. After all, the British Isles themselves had been invaded and conquered on many occasions over the centuries, so the First Fleet could be seen as a logical extension of that sequence of events. But perhaps this perspective can provide some additional context, helping us to reflect on the events and circumstances that have brought us to this point, and hopefully point to a way forward.

Next week: The Return of Cultural Cringe