‘Poor-performing businesses are driven out’: Danielle Wood opens Jobs Summit with call to maintain full employment

Committing to maintaining full employment, as the Business Council of Australia and Australian Council of Trade Unions have agreed to do, would be the single best thing the Jobs and Skills Summit could do to improve our living standards.

That’s according to Grattan Institute CEO Danielle Wood, who opened the hotly-anticipated summit with a rousing keynote speech declaring full employment should be “our economic lodestar”.

Citing Australia’s record number of workers within a tight labour market, Wood’s glass-half-full view was that “more people who want a job now have one”, a great leveller for the nation’s equitable access to work.

“It means that some people otherwise at the fringes of the labour market — young people looking for their first job, people with a disability, older workers, and the long-term unemployed — are now seeing doors open in ways they haven’t in the past,” she said.

But Wood continued the economic benefits from full employment can also lead to “better labour market outcomes for all Australian workers”, which will, in turn, translate to higher wages after a decades of sluggish growth.

“A strong economy with low unemployment is necessary and vital to getting wages moving again.”

Interestingly, Wood said Australia was not experiencing the Great Resignation — “it’s something like the opposite … The proportion of workers who change jobs each year had been declining steadily for decades,” she said.

Plus, she says, workers moving seamlessly between jobs actually can improve the country’s productivity.

“Poor-performing businesses that survive, not on the strength of their products or services but off the back of exploiting their workers, are driven out. Investments and workers flow instead to better-run businesses.”

“And when workers are harder to find, businesses have an incentive to invest in new equipment and processes, which ultimately boosts productivity and drives higher living standards.”

Wood continued that productivity and wages “go hand in hand”, but the rate of Australia’s productivity growth has slowed over the past decade, much like most of the OECD.

Crucially, however, she said, “our relative performance has also slid down the international rankings. Everyone is running slower, but Australia is also falling back in the field”.

Australian productivity is growing at the slowest rate for 60 years, the Productivity Commission recently concluded, with each Australian in 2020 short some $4600 lost in productivity gains than if it had grown at a consistent rate.

Several factors are at play, Wood continued. Along with declining gains from technological advancements, the slowdown of international students, and greater market concentration and power, she pointed to the rapid expansion of service sectors.

Service roles like health and care, teachers, scientists, tech workers, cleaners, drivers and administrators now account for 70% of our national economic output and employ eight out of 10 Australians, she said.

“Despite being an overwhelming majority, these jobs are too often overlooked in public discourse and policy-making.”

Yet, Wood continued, government response to things like the pandemic overwhelmingly emphasises support for the construction and manufacturing sectors.

“Similarly, government bail-outs, subsidies, and tax breaks for private businesses also weigh heavily toward these sectors.”

Looking forward, Wood said Australia can expect technologies like AI, data analytics, quantum computing, and robotics to develop “leaps and bounds”, which will continue to transform the way business delivers “better and cheaper” goods and services.

“From touchscreen ordering in dumplings bars to AI algorithms to prioritise scarce emergency room resources, the use case for these technologies will continue to evolve,” she said.

However, Wood acknowledged that the country was held back by things like slow internet — the Australian Competition and Consumer Commission recently found NBN speeds had shown “no significant improvement” since 2020 despite lagging at 85.6% of speeds advertised by retailers.

She also highlighted limited skills and a reluctance to replace legacy systems as barriers, which she argues requires government investment in areas including tech skills and cyber security.

“But they also require Australian managers to have the know-how to recognise and respond to the opportunities ahead,” Wood added.

One such major opportunity was women’s participation — and promotion — within the workforce, pointing out that Australia ranks 38th in the world on the metric despite having world-leading levels of female education.

“I can’t help but reflect that if untapped women’s workforce participation was a massive ore deposit, we would have governments lining up to give tax concessions to get it out of the ground,” Wood quipped.