Labor’s punitive plan to further regulate the casual economy will exacerbate Australia’s $32 billion worker shortage crisis

A plan that could remove our right to be casual workers if we have a “regular pattern of work” will only make it harder for Australians trying to enter the workforce, writes Saxon Davidson.

The crackdown on casual work touted as part of the Federal Government’s next round of industrial relations reforms is set to worsen Australia’s worker shortage crisis.

Today, almost three million Australians choose to work in casual employment, this form of employment is flexible, often comes with higher hourly rates of pay, and allows for people to work in more than one job should they need or want to.

This is a critical part of the employment mix and – perhaps most importantly – it’s convenient for both sides of an employment agreement.

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The proposed reforms could remove Australians’ right to be casual workers if they have a “regular pattern of work”.

A casual employee who works at similar times on a weekly basis will now be considered permanent part-time workers.

This will make work far less flexible, increases the amount of paperwork for businesses, and puts yet more red tape into the labour market.

It has been a consistent contention of the Prime Minister and his colleagues that Australians are increasingly in perilous positions of “insecure work” and are “caught” in the gig economy.

However, this contention is undermined by the fact that the level of Australians who work as casuals has been stagnant for decades, sitting around 25 per cent for almost 30 years.

The move has even finally spurred industry groups, who have largely acquiesced to the Federal Government’s industrial relations agenda to call it out.

Noting that the proposal would “engulf” small businesses in red tape and paperwork, the Business Council of Australia’s Jennifer Westacott asked, “Why would we create less opportunity for the millions of Australians who choose which shifts they can work and limit their flexibility to make ends meet?”

The industries that have experienced the worst worker shortage increases in the past three years have been the industries that have the most casual workers, being arts and recreation services, accommodation and food services, and health care and social assistance.

There remain more than 431,000 job vacancies across the economy, which is almost double the pre-COVID level, with one in four businesses unable to find the workers they need.

Economic analysis from the Institute of Public Affairs reveals the worker shortage is costing Australians $32 billion in foregone wages, and the Federal Government $7 billion in income tax.

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The same analysis found that Australia’s worker shortage crisis is attributable to a lack of flexibility in the labour market, specifically the prevalence of red tape and tax barriers facing Australian pensioners and students.

Currently, an Australian pensioner can only work a day and a half per week before their pension benefits are reduced by 50 cents in the dollar; when combined with income tax this means they are subject to an effective marginal tax rate of 69 per cent should they choose to work more.

Similarly, students on the Youth Allowance face an effective marginal tax rate of 79 per cent should they earn more than just $288 per week.

These barriers are a major reason why only three per cent of pensioners in Australia are in work, compared with one quarter in New Zealand, which does not have the same tax and red tape barriers.

It is also why fewer than half of students on the Youth Allowance payment currently work, compared with 73 per cent of the working-age population.

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This proposed change to casual work will only make it harder for these Australians to enter the workforce and help ease this crisis.

Pensioners and students are the Australians that benefit most from casual work.

Students have semesters that change every cycle and require the flexibility that casual work provides, while age pensioners don’t need even more rigid rules placed on them should they choose to go back into employment.

Leading surveys have found that 20 per cent of pensioners would re-join the workforce if red tape was removed from the labour market, and yet the government is only adding more.

So far, the Federal Government has failed to make inroads on Australia’s worker shortage crisis and is now making changes that makes it worse.

Removing flexibility and adding more regulation during a worker shortage will only exacerbate this crisis and the economic consequences that come with it.

We need to let Australians who want to work get on with the job.

Saxon Davidson is a Research Fellow at the Institute of Public Affairs