Cuts to Queensland public sector jobs and wages would deepen the recession and negatively impact hundreds of thousands of people who depend on the economic stimulus provided by public sector work, new research from the Australia Institute’s Centre for Future Work has warned.
The report published on Friday found that for every 10 direct jobs in the state public service, another 4.5 jobs were supported in the private sector. This has meant that some 480,000 positions were supported by the provision of state-funded public services — 331,000 direct jobs in the state public sector in 2017-18, and more than 150,000 positions supported in private sector activities.
“This includes people employed on the basis of the upstream supply chain purchases of public service agencies, and people employed thanks to the downstream consumer spending of public sector workers and those working in the supply chain,” the report said.
Cuts to public services and staffing would therefore deepen the recession. The research has found that misplaced fiscal austerity would hinder the state’s economic recovery by reducing spending, employment and production in the private sector.
Regional and remote communities would feel the negative impacts the most, the report noted, with state public sector workers accounting for almost 12% of employment in remote and very remote regions of the state.
“Regional and remote Queensland depends particularly on the public sector workforce; the state public sector is a crucial source of decent, socially valuable jobs, performed by well-qualified people, earning (and spending) middle-class incomes in their regional communities,” it said.
The report has outlined two possible three-year austerity scenarios: a freeze in public sector payrolls, considering both wages and staff levels; and a 5% cut in public sector payrolls, effected through a combination of wage and staff cuts.
Over three years, the first scenario would reduce total GDP by a cumulative total of over $9 billion, with a loss of more than 20,000 person-years of downstream, private sector employment.
The second scenario would reduce cumulative GDP by $15 billion, and would represent a cumulative loss of 35,500 person-years of private sector employment over the three years.
“Attacking” public sector jobs and pay would be a “major policy mistake”, according to economist and report author Dan Nahum.
“In this unprecedented time, the maintenance of public services is surely a more urgent priority than cutting government spending in pursuit of some illusory fiscal target,” he said.
“By cutting employment and incomes for public sector workers (and the private sector industries which depend on public services for their own markets), misplaced austerity would undermine economic recovery and reduce GDP.
“A more constructive and effective response to the COVID crisis is to expand the economic and social footprint of government, including state governments — not shrink it.”
The report has argued a better response to the pandemic and recession would be to expand the “economic and social footprint” of government.
“We will need more public services, more government income supports, and more decent public sector jobs as Australia strives to recover from this unprecedented crisis,” it said.
The paper has made six recommendations:
- Queensland’s Charter of Fiscal Responsibility should be suspended until the state has fully recovered from the pandemic and associated recession. As the charter “acts to limit emergency responses to economic crises”, it should also be replaced with a more balanced and flexible fiscal policy framework.
- The state government shouldn’t contract out additional public sector services to private sector actors. Where possible, previously contracted-out services should be insourced to public provision in the interests of better quality, accountability and cost.
- There should be no forced redundancies of Queensland public sector workers. Staff downsizing for operational reasons should be achieved through voluntary severance incentives and redeployment to other roles.
- The Queensland government should increase and accelerate expenditure on the state’s capital works program.
- As women have been harder hit by the COVID-19 economic crisis, the state government should directly invest in expanding output and employment in female-dominated sectors, such as health care, aged care, and education. It should also create stronger pathways for women to enter industries that have been traditionally male-dominated.
- Substantial special fiscal transfers from the Commonwealth to the states are necessary given the unprecedented economic hardship being experienced at all levels of the economy and decreased state tax takes.