|Issue No 115||12 October 2001|
Why Exports Are Good For Workers
Austrade chief economist Tim Harcourt argues the benefits for local workers from global trade are there in black and white.
Why does Australia need to export? There are, of course, macroeconomic reasons. We do so partly to pay for our imports and to help grow our economy in order to provide employment. There are also microeconomic reasons. By exporting overseas we compete with the best companies in the world and are therefore driven to be innovative and use the most modern technology and management practices. It is like playing 'away games' in sport. Only the very best teams win on the road as well as when they have the security of their home ground. This enables firms to increase productivity and therefore raise living standards for Australians overall.
But what about the effect of exports on the labour market? There is much debate about the effect of trade and the labour market. The net effect of trade on jobs will depend on both growth rates and structural change in the economy. It is also important to recognise that there are winners and losers as a result of trade. But for the most part, an open economy that is competitive and growing will produce more better quality jobs than a closed stagnant economy that is unable to adapt to new technology and changes in world economic conditions.
But whilst exports are good for the economy and for the successful exporters themselves it is important to know how exports benefit workers and the Australian community in general. A comprehensive study of 540,000 Australian companies by the Australian Bureau of Statistics (ABS) does confirm that overall; exports are good for workers. Exporters, generally speaking, are good employers as they outperform non-exporters in terms of wages and salaries, employment conditions, occupational health and safety and employment status.
In terms of wages and salaries, exporters, on average, pay better than non-exporters. This is because exporters are usually more innovative than non-exporters, investing in technology and using advanced management techniques. Their workers are typically highly skilled. The higher productivity generated enables exporters to pay higher wages. According to the ABS data, in 1997-98, exporters overall paid each full-time equivalent employee an average of $46,000 per annum compared to $28,600 being paid on average by non-exporters. Using an alternative measure, 34 % of exporters paid their workers above average weekly earnings (AWE) compared to only 12 % of non-exporters.
It is often said that this is a function of scale (exporters being larger firms and hence more capital-intensive). But the data shows that exporters pay better than non-exporters regardless of firm size. For small businesses (less than 20 employees) 30 % of exporters paid above AWE compared to 12 % of non-exporters. For medium sized businesses (20-199 employees) 43 % paid above AWE compared to 19 % of non-exporters. For large businesses (200 employees and above) 61 % of exporters paid above AWE compared to 35 % of non-exporters.
Workers have been able to achieve better pay through enterprise bargaining as opposed to awards. According to the data, exporters were more inclined to use enterprise bargaining than awards. For exporters, 39 % of their employees had their pay determined by enterprise agreements with 27 % determined by awards. By contrast, for non-exporters only 25 % of the employees were covered by enterprise agreements compared to 50 % by awards. This indicates that exporters are more likely than non-exporters to take the high skill, high wage, and high productivity route through enterprise bargaining rather than leaving conditions to the award safety net.
Not only do exporters provide a more technologically sophisticated work place than non-exporters but it is also likely to be safer as well. The statistical evidence clearly shows that exporters are more committed to a safe work environment than their non-exporter counterparts. This is the case for written management statements (36 % of exporters compared to 10 % of non-exporters); consultation programs (50 % to 23%); training programs (23 % to 10 %); provision of information (66 % to 38 %); regular workplace inspections (59 % to 36 %) and hazard guidelines (47 % to 31 %). According to the ABS data shown, exporters generally adopt a policy of high safety standards in their workplaces.
Finally, exporters are more likely than non-exporters to provide job security to workers on a full-time, permanent basis. According to the data, whilst exporters make up 4% of businesses they provide 16% of total employment. Exporters employ 91 % of their staff on a full-time basis, which compares to 69 % of non-exporters. Exporters are also more likely than non-exporters to provide more permanent employment. Exporters employ 90 % of their staff on a permanent basis compared to only 72 % for non-exporters. Casual work is far more prevalent in the non-exporting sectors of the economy.
In conclusion, the ABS data shows that exports are good for workers because on these criteria, exporters are good employers relative to non-exporters. On average, exporters pay better than non-exporters. Exporters are more likely than non-exporters to negotiate enterprise agreements than simply relying on the award safety net only. Exporters are more committed to occupational health and safety than non-exporters and provide a higher proportion of full-time and permanent jobs. This reflects the tendency of exporters to be more dynamic, innovative and modern than non-exporters because of the challenges of international competition. It pays exporters to be good employers as they gain in productivity benefits which raises living standards for the economy overall. In short, Australia needs more companies to export not only to assist our macroeconomic challenges but also to benefit Australian workers and their families. After all, we engage in trade not as an end in itself but to raise living standards for the Australian community as a whole.
Note: This is an edited extract from 'Why Australia Needs Exports: The Economic Case for Exporting' available from http://www.austrade.gov.au/economistscorner/
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