Non‐Standard Employment and Wage Growth in Australia

• Author: Inga Laß,Mark Wooden
• DOI: http://doi.org/10.1111/1467-8462.12382
• Published date: 01 September 2020
• Date: 01 September 2020

The Australian Economic Review, vol. 53, no. 3, pp. 325–342 DOI: 10.1111/1467-8462.12382

Non‐Standard Employment and Wage Growth in Australia

Inga Laß and Mark Wooden*

Abstract

Using data from the Household, Income and

Labour Dynamics in Australia (HILDA)

Survey, and after restricting attention to

employees, we observe an increase over time

in the non‐standard employment share, all of

which is concentrated in the period since

2009. Further, we find clear evidence that

employees in non‐standard forms of employ-

ment have experienced relatively low rates of

growth in hourly wages when compared with

permanent full‐time employees. Nevertheless,

decomposition analysis suggests that changes

in workforce composition by employment type

have had a very small (and insignificant)

impact on the overall rate of wage growth in

recent years.

1. Introduction

Recent decades have seen increased concern,

both in Australia and elsewhere, about

changes in the nature of work, and more

specifically growth in non‐standard forms of

employment (such as part‐time and casual

work), and what this implies for the quality of

jobs (see Laß and Wooden 2020). Changes in

the mix of ‘standard’and ‘non‐standard’jobs

may also have implications for wages.

Haldane (2017), Chief Economist at the

Bank of England, for example, identifies the

changing nature of work, and especially

growth in self‐employment, temporary em-

ployment and zero‐hours contracts, as a factor

contributing to weak wage growth in the

United Kingdom. Similarly, in Australia,

Cassidy and Parsons (2017) point to the

potential role that growth in the part‐time

employment share may have played in

restraining real wage growth. More specifi-

cally, they point to both the concentration of

part‐time jobs in low‐paying occupations and

industries and relatively low levels of bar-

gaining power among part‐time workers as

factors that could drive down observed wage

growth. In a similar vein, Pickering (2018)

points to the rise not just in part‐time jobs, but

in jobs where workers have no paid leave

entitlements (that is, casual employment), as a

likely contributing factor to relatively low real

wage growth in recent years. That said, the

wage floors created by minimum award wages

may have shielded many of the lower paying

non‐standard jobs from any erosion in real

wage growth. Prima facie evidence for this is

provided by growth in minimum award wages

*Laß: Federal Institute for Population Research,

Wiesbaden, Germany; Wooden: Melbourne Institute of

Applied Economic and Social Research, University of

Melbourne, Victoria, Australia. Corresponding author:

Wooden, email <m.wooden@unimelb.edu.au>. A longer

version of this paper was first presented at the 2019

Reserve Bank of Australia Conference, Sydney, 4–5 April

2019. It uses unit record data from Release 17 of the

Household, Income and Labour Dynamics in Australia

(HILDA) Survey (doi: 10.26193/PTKLYP). The HILDA

Survey is conducted by the Melbourne Institute of

Applied Economic and Social Research on behalf of the

Australian Government Department of Social Services

(DSS). The findings and views reported in this paper,

however, are those of the authors and should not be

attributed to the Australian Government, DSS or the

Melbourne Institute. Further, this research was supported

under the Australian Research Council's Discovery

Projects funding scheme (project # DP160103171).

© 2020 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd

in recent years (19.6 per cent in the 6 years to

2019) that has been considerably above the

growth in consumer prices over that same

period (11.7 per cent).

Despite these arguments, we are unaware

of any previous research that has examined

the link between growth in non‐standard

employment and wage growth in Australia

within a multivariate framework. Previous

research has focused on associations with

the wage level (for example, Booth and

Wood 2008; Green et al. 2010; Laß and

Wooden 2019; Watson 2005), but not with

the rate of growth in wages. The aim of this

paper is therefore to re‐assess the strength

and validity of arguments linking changes in

the prevalence of employment types to wage

growth in Australia.

Using data from the Household, Income

and Labour Dynamics in Australia (HILDA)

Survey we find that the share of non‐standard

employment in total employment has, perhaps

surprisingly, not increased much since the turn

of the millennium. However, a major factor

working against growth in non‐standard

employment has been self‐employment—the

self‐employment rate in Australia has been in

long‐term decline. If we restrict attention to

employees, which seems appropriate for an

analysis of wages, then we do observe an

increase over time in the non‐standard em-

ployment share. Further, all of this increase is

concentrated in the years since the global

financial crisis (GFC)—over the period

2001–2008 the share of employees with non‐

standard employment contracts actually

declined.

Such trends are suggestive of an association

with low wage growth, with most indicators

showing real wage growth declining to, and

persisting at, quite low levels in recent years.

Nevertheless,while it is true that some types of

non‐standard employment (notably casual

work) are associated with relatively low wages,

once we control for worker characteristics

these differences disappear. Indeed, if any-

thing, permanent part‐time, casual and fixed‐

term contract workers earn hourly wage

premiums. Suc h findings are in line with

previous research using the HILDA Survey

data (for example, Booth and Wood 2008).

However, we also find clear evidence that

employees in n on‐standard forms of employ-

ment have, throughout the period covered by

this study (2001–2017), experienced relatively

low rates of growth in hourly wages when

compared with permanent full‐time employees.

Growth in the share of non‐standard types of

employment in total dependent employment

(that is, employees) thus might be one factor

contributing t o slower rates of real wage

growth in recent years. Nevertheless, a simple

decomposition analysis suggests that the mag-

nitude of this effectis small (and insignificantly

different from zero).

2. Non‐Standard Employment in

Australia—A Brief Definition

As discussed at greater length in Laß and

Wooden (2020), non‐standard employment

has most commonly been defined as any job

that differs from full‐time, permanent, depen-

dent (that is, wage and salary) employment.

This covers a broad and disparate array of

employment arrangements, including self‐

employment, part‐time work and any job

where there is no commitment on the part of

the employer to a long‐term relationship (for

example, fixed‐term contracts and casual

employment).

In line with this definition, we operationa-

lise non‐standard employment as comprising

five sub‐groups of workers:

the self‐employed;

contributing family workers;

employees on fixed‐term contracts;

casual employees; and

permanent employees working part‐time

hours.

Note that we treat all owner managers,

regardless of the legal status of their busi-

nesses, as self‐employed. We define part‐time

jobs based on the number of hours worked in

the main job (rather than all jobs), and in line

with Australian Bureau of Statistics (ABS)

practice, use a 35 weekly hours threshold.

326 The Australian Economic Review September 2020

© 2020 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business

and Economics