Manufacturing Industry in Australia Term Paper

  • Length: 4 pages
  • Subject: Economics
  • Type: Term Paper
  • Paper: #95444065

Excerpt from Term Paper :

Manufacturing Industry in Australia

The question that is being studied here is of unemployment, and this is clearly not being lost because of imports. The calculations have been made by the Australian Center for Industrial Relations Research and Teaching, and they say facts about the net changes in the rate of employment between 1988 and 1998 in a number of industrial sectors. It can be seen that there is a clear decline in employment in eight sectors of industry during this decade. There was a net loss of about 250,000 jobs and more than sixty percent of the loss was in areas where there was no competition. This concerned employers like Commonwealth Bank, SECV, State Rail NSW, AMP, and the federal public services. (Do imports cost jobs: What's wrong with fair trade?) Compared to this, the total number of people employed in sector of textiles, clothing and footwear manufacture in Australia has been 80.2 thousand as per the figures available for 1998. (Manufacturing employment) The important areas of job loss have been in the manufacture of different products with low import threats, and where the imports come from high wage countries. The exception is in the case of textile, clothing and footwear -- TCF. In the case of these products, the imports are from medium wage countries and that import is 36.0% of the total market for these goods in Australia. The largest import is from China, and they are now selling 20% of all TCF goods in Australia. (Do imports cost jobs: What's wrong with fair trade?)

This has been confirmed at meetings of the productivity commission regarding the future of industry in the city of Melbourne and the state of Victoria. In the public hearing, they have also confirmed that if the recommendations of the commission are implemented then there would be another loss of 30,000 jobs. An industrialist, Brian Rush had this to say about the textile industry -- "Commodity sewing, as such, in Australia has a real struggle in front of it. Our all-up labor rates in Bendigo, with all the add-ons, are about $28 an hour. You go to China and it's less than 50 cents an hour." (Textile jobs under threat. 2003) It is not that the government is not aware of the situation in the country and has already allocated $575 million for the textile, clothing and footwear sector under the Strategic Investment Program as stated by the minister for Industry, Tourism and Resources. His statement said "Australia's $9 billion textile, clothing and footwear manufacturing industries can now apply for investment and R& D. assistance under the package which has been closely and extensively negotiated with industry players." (Australia: Textile, clothing & footwear sector investments worth AU $575mn approved, 2005)

But this does not seem to have helped the workers as in one case, the workers sacked by National Textiles on January 21st are still on a 24-hour picket outside their factory and that is located about 170 kilometers north of Sydney. There are 342 workers and the claimed dues are on account of entitlements which are not paid consisting of leave on a yearly basis, sick leave, long service, redundancy payments and superannuation. (Sacked Australian textile workers picket for $11 million in unpaid entitlements) Regarding TCF, the economists at Reserve Bank have stated that about one third of the jobs lost in clothing are due to low wages and that is a total of 28,000 jobs. For footwear this amounts to 6,000 jobs lost. Well this seems to support that fair trade is the main reason for the lost jobs but they have also stated "Despite this large import effect, productivity improvements accounted for about two-thirds of the fall in employment in this sector" (Do imports cost jobs: What's wrong with fair trade?)

This can be seen from a comparison of the figures of 1994 and 1999 where in the case of machinery and equipment the productivity has risen by 23.2% and the job losses have been only 3.9% reduction. In the TCF sector, the increase in productivity has been 15.1% and the job losses are 15.3%. (Do imports cost jobs: What's wrong with fair trade?) When one looks at the total employment figures the picture becomes even clearer with a reduction between 1974 and 1999 with a total reduction in textiles clothing and footwear by 53%, whereas in transport equipment and machinery the reduction was by 39% and in metallic products by 29%. Thus it is clear that employment is on the way down with a total reduction by 22%. This is hurting the workers as 24% of the total workers were employed in manufacturing in 1974, but this came down to just 12% in 1999. This does not mean that this section of industry has started producing less, and the production has increased, but the gains have not been passed on in terms of additional workers. This is reflected in the fact that the major portion of Australia's workers is now engaged in the service sector -- 82% of them. (Productivity Commission: Move to scrap tariffs sooner rather than later)

To some extent the mismatching of the Australian government timing of cutting the protection of the textile, clothing and footwear sector with the change of the global TCF industry to get into a new form of organization, the commodity chain is also responsible. Due to this change, some Australian TCF manufacturers could not continue business any longer, while the others followed a number of strategies to remain in business, and these including a change of the labor required. This has led to losses in jobs determined by age, gender and ethnicity in the skilled and semi-skilled levels of production. This has been replaced by jobs in design, marketing and management. The jobs in the factories of Australia have to the Pacific Rim. (Trade and inequality: Australia's textile, clothing, and footwear industries, 1986 -- 1996)

As an example one can see that in December, there was a reduction by the Sara Lee clothing factory of 200 workers in the factories of Sydney, Wollongong and Kempsey. The number was half of the total employees of workers in the organization. This company now plans to get most of the production for the company done at Fiji, where the labor is cheaper. A similar decision was also taken by Levi Strauss, the famous jeans manufacturer. They are now planning to cut down about 60% of the workers in Elizabeth, near Adelaide. They amount to 100 workers. (Australian Job Losses) For many of the workers this means social changes and increases unemployment rates in many areas leading to losses in consumer demand for products. For the people there are long-term effects on health due to the loss of jobs and finding a job when one is over 50 is not easy. For the company also it is a loss of manufacturing capacity. (Productivity Commission: Move to scrap tariffs sooner rather than later)

In the meantime, a new breed of employers has come up and these are the employment agencies. They offer high efficiency when placing the employees in a firm. They claim to offer economies of scale due to their being a specialist third party managing the aspects of personnel management like recruitment. This is normally the function of the personnel department. They also lead to lower transaction costs and thus increase efficiencies due to the matching involved. Yet it is not very popular as in 2003 a survey showed that organizations are using hired employees for the purpose of getting workers for immediate requirements. Yet, a survey showed that 42% of the firms believe that there are good benefits for the firms using hired employees. The perceived benefits are the reduction of administrative costs, being able to go through a thorough process of recruitment and getting skilled workers. A very small portion of the firms gave their reason as reduction of employee cost due to lower payments. (Temporary employment agencies as labor market intermediaries -- new ways of working in an open economy)

According to a study done by ABS in June 2002, there were 290, 000 employees hired through the employment agencies at that time. This is a 3.1% share of the total employment market. According to them the organizations which had a union with a closed shop had the least chance of using a labor hire agency. This is thus a limiting factor on labor hire agencies. The positive factor for a labor hire agency is an organization with an employee relations manager. These managers are knowledgeable about the different sources from where they can get labor, as also the different types of labor with them. They are more likely to use the agencies when appropriate. Yet organizations hire labor sparingly and along with other flexible forms of labor like part-time labor and casual labor. (The Growth of Labor Hire Employment in Australia) It is wrong to expect the free traders or the fair traders to really have the interests of the…

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