Beyond robots and foreigners: finding blue-collar Australian jobs

We’d flown over the saltpan and brush on a little plane so that my then boss could announce $100 million to help refurbish and update the plant, if only someone would buy it and keep it open. It was an election promise that carried little weight coming from an opposition no one expected to win, but the workers there grabbed at it like a drowning man grabs for an upturned Esky.

Over 3000 workers’ jobs were hanging in the balance then. Almost 900 more had already been shed from the company over the preceding year. Together, those workers represented around one in six of Whyalla’s entire population; almost every family in town had a connection to the steelworks one way or another. And you could see it in their faces: the fear of what would happen if it went under.

As they crowded around my boss I hung back to talk to one of the men who’d guided us around the factory, taking the piss out of the camera crews walking backwards to get footage while we weaved around streams of livid orange molten steel.

I asked him if he had any plans in the event Arrium did close, if he’d thought about what he’d do next. On reflection it was an insensitive thing to ask – like a little kid blithely poking their finger into a fresh cut.

His face hardened and he looked away for a long moment. When he answered me it was in a voice as flat and dry as the scrubby earth that stretched away to the horizon: "What would I do? There’s nothing else here."

Whyalla is one of many places around Australia where local jobs rely heavily on a single industry – or sometimes even a single firm. Victoria’s Latrobe Valley, the Hunter region of NSW and regional centres across Queensland like Gladstone and Townsville also come quickly to mind. Our lack of focus on lessening this reliance when we know their industries are in transition or decline is just one of several important ways policymakers and governments have let blue-collar workers down in recent decades.

It has become something like conventional wisdom that blue-collar jobs are disappearing as a consequence of two things: global free trade and technological change. The story goes that because we’re an open economy, it’s hard for our local companies to compete with cheap labour and cheaper imports from offshore. And because we have more machines these days, we simply need fewer workers.

But there’s surprisingly little hard data on how this is playing out in our own backyard.

What Australian research there is doesn’t contradict the idea that globalisation and technological change are eating into our blue-collar jobs base. But it does suggest the impact of these factors is less open-and-shut than foreigners and robots walking off with all the work.

Let’s look first at what we do know about the role of offshore competition and technology in all this.

One of the best-known studies on the impact of trade, by economics professor David Autor and colleagues, established a clear relationship between the amount of competition US manufacturing industries faced from foreign imports, and employment outcomes for workers in those industries. Manufacturing workers in heavily trade-exposed industries had lower earnings than those in less-exposed ones, faced greater risk of unemployment and switched jobs more often.

Similar studies, including by David Vanzetti and Ralf Peters for the International Labour Office, have found that increased trade liberalisation leads to a reduction in agricultural employment in developed economies but an increase in developing ones. 

Here at home, research by Razib Tuhin from the Office of the Chief Economist has found the same relationship between how much international competition a manufacturing industry is exposed to and the extent of job losses within it. But there was an important qualification: it matters how much firms in that industry are exporting, as well as how much competition they face from foreign imports.

Tuhin’s analysis shows that the worst manufacturing job losses have been in industries such as footwear, clothing and textiles, where relatively few Australian firms export at any scale but local products face very heavy competition from overseas imports. The industries where jobs have held up best are those that face relatively limited international competition – food and drinks manufacturing, for example – and those where a significant proportion of production is exported, like minerals and metals.

Importantly, Tuhin and plenty of others have also found that the positive impact of exports on employment is greater than the negative impact from imports.  Foreign import competition may wipe out the local-only firm, but the exporting firm can keep growing and, importantly, expanding its workforce as it finds new markets.

While Australia has traditionally had diverse manufacturing and agricultural sectors spanning most of the goods and products you can imagine, beyond bulk commodities this has tended to skew towards serving local markets. The most recent ABS survey of Australian businesses found just 7 per cent were exporting overseas, a figure that has gone backwards since the GFC.

So the fact that Australia is open to the world is not, in itself, a problem. What matters is the imbalance between the amount we import and the extent to which the majority of our own firms are connected to international markets. As is well known, one factor that has made it particularly hard for local firms to seek those markets in the past decade has been the high Australian dollar.

Between 2003 and the start of 2008, our dollar averaged 75 US cents – a figure local firms believe makes their products competitive. But as the mining boom took off, so did our exchange rate. With a higher dollar making it harder to attract customers overseas or maintain the profit margins they’d had in the past, many Australian firms simply shut up shop.

There were 20,300 fewer companies operating in our five male-dominated industries at the end of 2015–16 than in 2008–09, as the disappearance of agriculture and manufacturing firms was not even close to cancelled out by the smaller growth in construction, mining and utilities.

All of this goes to demonstrate that the impact of international trade competition on blue-collar jobs isn’t as straightforward as the Trumps and Hansons of this world would have us believe. It’s the shortfall of firms that are exporting, coupled with currency impacts from the mining boom, which have really hit hard over the past decade. We need to draw this distinction because if we don’t, there’s a risk that cutting back or shutting down trade altogether becomes the answer, which would end up harming blue-collar workers even more than the status quo.

Turning to technology, there’s no doubt that the rapid leap forward in things machines can do is displacing some Australian workers, from robot welding in the car industry to the automatic checkouts at Woolies.

But there’s a growing body of research pointing out that it’s actually how routine a job is that determines how exposed its workers are to replacement. In Australia, researchers Michael Coelli and Jeff Borland looked at hundreds of different jobs over several decades, and found that the most routine jobs have had the weakest growth while the least routine jobs have seen the strongest growth.

Jobs in healthcare, teaching and aged care that involve providing personalised services which are responsive to the needs of others aren’t just growing because of our community’s changing demographics. They are also hard to fill with machines, given their variable and unpredictable nature.

Taken together, trade and technology clearly matter a lot in driving the disappearance of blue-collar jobs. People in suits tend to like these explanations because there isn’t really anyone to blame. The tariff walls that had kept foreign imports at bay came down more than 20 years ago, and no one seriously believes we can halt or reverse the march of technology.

But there’s a lot more to this story: some of the challenges now facing blue-collar workers are a direct consequence of things governments have done, and failed to do.

Let’s start with training. We’ve been letting the vocational education and training sector run down for at least two decades now, first because of the Howard government’s indifference and later as a result of the Rudd–Gillard government’s push to see more students heading to university.

Through a series of well-intentioned and deeply misguided policies delivered from 2008 on, federal and state governments have wrecked VET in a way that may take a generation to recover from. The losers from this are the young men who need a trade and the older men who urgently need retraining to remain in work.

When VET FEE-HELP was first introduced, students had to be participating in Diploma or Advanced Diploma study that provided a pathway to university to be eligible for a loan. But then as part of changes introduced between 2009 and 2012, the Commonwealth agreed to make VET FEE-HELP loans available for all courses – from plumbing to Pilates instructing – as long as the states and territories opened their VET systems to competition from private providers.

As private providers flooded into the market, the quality of training and student completion rates plummeted. There were reports of hairdressing courses that left graduates unable to do basic cuts or colouring, while in 2014, the 10 largest private providers received $900 million in loans but had an average completion rate of less than 5 per cent. 

By the time the Turnbull government finally shut the scheme down in 2016, it had wrecked the standing of vocational training among employers, drained hundreds of millions from the well-established public system, put tens of thousands of low-and middle-income Australians deeply in debt and cost the federal government billions.

Identifying those who most need help with skilling and retraining before they face unemployment requires us to do something else we’ve generally neglected in recent times: think ahead for communities that are facing the transition or decline of their local industries.

When Alcoa announced the closure of its Point Henry aluminium smelter and rolling mill in February 2014, around 800 local workers lost their jobs at little notice. When the smelter’s pot line went cold five months later, only about 50 of the workers had found new jobs; many were still struggling to find good work a year later.

Things should never have played out that way, because the risk of Alcoa’s closure had been well known years in advance. In 2012 the Gillard government gave the firm a $40 million bailout as it struggled to stay afloat with the Australian dollar sitting higher than the US dollar. That is when serious thinking about a future without Alcoa should have kicked in.  

The more recent closure of Hazelwood’s coal-fired power station in Victoria’s Latrobe Valley unfolded in much the same way.

Despite it being almost uniformly acknowledged that Hazelwood’s remaining life could be measured in years, not decades, there was no transition plan in place for the Latrobe Valley when owners Engie finally announced its closure in November 2016.

Perhaps the only decent example of planning for the foreseen loss of blue-collar jobs is the way governments and firms teamed up to prepare for the end of Australian car production in 2017. Workers at Holden, Ford and Toyota received support and retraining assistance while still in their jobs, and the governments of South Australia and Victoria encouraged and incentivised new firms to open up in the affected parts of their states to provide replacement jobs.

This came about only because the car companies announced their closure plans years in advance.

The last factor affecting blue-collar workers that is within our influence is job creation.

Australia’s policy environment has been incredibly volatile for more than a decade now; this is often dated to the election of the Rudd government but arguably goes further back, to John Howard’s control of the Senate from 2005.  Our policy ADHD means we don’t really know which government interventions work best to strengthen existing industries and encourage new ones, because we’re forever changing tack.

The lack of certainty about what the rules governing Australia’s energy sector will look like three, five or 10 years from now means companies have so far been slow to switch their investment to renewables or develop significant new facilities. While globally the number of "green energy" jobs grew by over 70 per cent between 2012 and 2016, Australia’s renewables workforce actually shrank by 40 per cent. This matters a great deal because renewable energy represents one of the natural growth sectors to help replace jobs being lost in places like the Latrobe Valley and the Hunter.

Try mapping the different manufacturing assistance programs introduced and withdrawn between 2007 and 2017; I lost count at 19. We end up throwing billions at industry assistance, but without any idea if it really helps where it counts: reducing job losses.

Governments need to stick with some policies for longer than one term of parliament. There are many other excellent reasons for our national politics to have a Bex and a good lie down, but almost none are as important as the positive influence this could have on the creation and maintenance of blue-collar jobs.

Acknowledging that some of the problems facing Australia’s male workers stem from choices and decisions we’ve made (or failed to make) isn’t about assigning blame. It’s about taking responsibility. Because once we accept that it’s not just trade and technology affecting their fortunes, then we accept that it isn’t beyond our ability to turn these around.

But the conversation about how to do this has to start with the people who are directly affected, otherwise we risk getting it wrong all over again.

This is an edited extract from chapter 2 of Jennifer Rayner's book Blue Collar Frayed: Working Men in Tomorrow's Economy (RRP $22.99), part of Black Inc Books' Redback series. It comes out on April 2.