Insights

Casualisation and COVID-19: New analysis reveals tears in Melbourne's social fabric

Posted August 10, 2020

SGS Economics and Planning casualisation and COVID 19

New analysis shows that COVID-19 is not affecting Melburnians equally. Many of Melbourne's disadvantaged municipalities with substantial concentrations of casual workers have the most confirmed cases of COVID-19.

The value creation paradox

A seeming paradox in the modern economy is that we have become more efficient at creating value at the same time as the number of people and transactions required to generate that value has exploded.

Take preparing a meal in a restaurant for example. In decades past, the restaurateur would more than likely have kept a stable and trusted team of employees both in front and back of house, geared to cover maybe 80 per cent of the peak trading hours in the week. When things got busier, the team just worked harder for the relatively short period in question. When the customers were few and far between, the boss carried the spare capacity and deployed workers to other tasks, like keeping the place clean and tidy and running errands for particular supplies. Typically, the team would have sourced the required produce independently and prepared most ingredients in house.

It’s different now.

It is common for restaurateurs to hire labour in precise quantities to match the trading profile of the week. It is also common for these businesses to buy some ingredients in pre-prepared forms – like pre-cut chips or frozen desserts - themselves assembled in factory kitchens employing precise quantities of labour. Services like cleaning, marketing, menu writing, cellar purchasing, book-keeping and equipment selection are out-sourced.

The apparent paradox is that even though the meal in question would have been processed by many more hands, so to speak, than years gone by, it probably lands on the table at a higher quality and lower real price. This represents an increase in productivity.

This atomisation of the value creation process, with concurrent increases in productivity, has occurred throughout the economy and especially so in sectors that directly sell to humans – health care, aged care, retail and education to name a few.

Increases in productivity is meant to bring higher wages. Instead, we’ve seen very sluggish wages growth for many years, and the overall share of wages and salaries in the national income pool is at historic lows.

One of the reasons for low wage productivity growth is the casualisation of work, this being an essential ingredient in matching labour input precisely to production needs. Casualisation diminishes the bargaining power of labour. It makes union organisation difficult and saps the motivation of individual workers who can see no real career in their employment.

Unsurprisingly, casualisation bears a correlation with low income and socio-economic disadvantage.

Casualisation and COVID-19

In the map below, we have produced a proxy for casual workers at the small area level by filtering 2016 census data to identify workers employed between 15 and 35 hours per week and earning less than $25 for each hour worked. This is in line with the current national minimum wage rate, including a 25 per cent loading for casual employment.

The map shows the distribution of these workers across metropolitan Melbourne. They appear to be most strongly concentrated in outer growth areas, established western and northern suburbs and some inner-city localities.

In growth areas, maintaining income flows to keep up with home purchase obligations is essential, prompting households to keep up a portfolio of jobs. Areas in the western and northern suburbs hosting migrant and refugee communities, where workforce skills are less developed than other parts of the metropolis, may be drawn to casualised sectors of the labour market. In inner-city areas, the concentration of casual workers may reflect the student population.

SGS Economics and Planning Casual Workers and COVID 19 number of workers melb
Low wage part time workers (earning less than $25/hour and working between 15 and 35 hours per week) – 2016 Census

In the second map, the distribution of casual workers broadly echoes the pattern of socio-economic disadvantage and privilege across the city. The lower the SEIFA score, the greater the socio economic disadvantage.

SGS Economics and Planning casual workforce and COVID 19 SEIFA map
ABS ‘SEIFA’ score (lower score means greater socio economic disadvantage) – 2016 Census

For many workers, casualisation will mean churning through multiple workplaces and sectors in compiling their required income quota for the week. This, in turn, is likely to mean more face to face contact with employers, customers and clients per hour worked compared to the average employee.

On the face of things, this greater propensity for contact will render these workers at greater COVID-19 risk. This appears to be borne out by the pattern of confirmed cases of COVID-19 in Melbourne as accumulated since the start of the pandemic. Three municipalities – Wyndham, Brimbank and Hume – account for almost a third of all cases recorded in Melbourne. All of these areas have substantial concentrations of casual workers.

SGS Economics Planning Marcus Spiller
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Marcus Spiller

Principal & Partner

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SGS Economics Planning Rob Weston
For further information contact:

Robert Weston

Consultant

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