Pete Wargent blogspot

PERSONAL COACH | PROPERTY BUYER | ANALYST

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Business Insider.

'I've been investing 40 years & still learn new concepts from Pete; one of the finest commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate & most comprehensive analyst I follow in Australia' - Jon Tepper, Variant Perception, 2 x NYT bestseller.

Thursday, 10 May 2018

What's happened to blue collar Australia? (Elizabeth wrecks)

Curious coincidence

I was on my way to Adelaide this morning, mainly for a meeting, and also to undertake a mini-pilgrimage to take a look at the old Holden factory at Elizabeth. I'm a nerd when it comes to industry, and I hadn't been down that way for years. 

There are plenty of bloggers that sit at home in their jocks opining on everything from interstate infrastructure projects to how listed company CEOs should be doing their jobs - I do it often enough myself - but you do also need to get out there and see stuff. 

Fearing that Qantas Q-Streaming might be as useless as ever (it was) I picked up a book at Brisbane Airport to see me through the flight, Blue Collar Frayed by Jennifer Rayner. 


I'd been following Jennifer's thoughtful work on social media for a long while, and had meant to buy a copy well before now, but you know how these things go.


What I hadn't bargained for was that in examining the marginalisation of male Australian blue collar workers Rayner herself had journeyed to Elizabeth, as well as to Morwell, Gladstone, Townsville, and a range of other locations that have faced major industry closures. 

I was even cited myself in the book for something I'd written about the changes in the composition of industry employment last year, so this really was a curious coincidence.

Manual labour

Some early disclosure: unlike the author of Blue Collar Frayed, I don't hail from a family of folks that work with their hands. My parents met at University in Sheffield, England - Dad as a Probation Officer ran a hostel for young offenders, and was later an office worker in the same sector, and Mum was a teacher. Despite hailing from a large family, all of my brothers went on to higher education.

My first job for the year after I left school did involve labouring in a timber a factory - I've always been fascinated by industry - but deep down I always knew I had the education and skills to go on to study at University and undertake a professional career, which I eventually did. 

My labouring job mainly involved putting large pieces of wood through insanely loud bandsaws (in time the company had to hand out optional ear protection due to a change in employment laws), pushing pieces of fibreboard through insanely loud moulding machines (ditto), the daily inhalation of potentially cancerous MDF dust, and on one occasion - just for a special treat - demolishing an obsolete factory partly made of asbestos. 

I went back to work there during the Uni holidays to top up the ailing coffers, but although I lived to tell the tale through the MDF dust and asbestos, the business itself did not .The factory was later used by gangs as a huge and illegal ganja-growing operation, but that's a whole other story.

Many of the lads I knew had worked in the timber factory from their 16th birthday and expected to do so until their 65th. What are they doing now? All sorts of stuff, from fruit-picking, to data entry and computing roles, and lower-skilled work in meat-packing factories, or for the lucky ones, chargehand or foreman roles in other industries. 

It was always said around the warehouse that a machine would do my manual labouring job one day, but in the end offshore competition and lower wages overseas were the killer blows. 

When I did finally make it to University, I studied the industrial history of Sheffield, including the role of gender, as well as writing a dissertation on the steel industry (for which I remarkably scored a high grade, though if a copy still exists anywhere there's no doubt it would read as cringeworthy undergraduate rubbish, which is essentially what I specialised in). 

Fear factor

Rayner makes some poignant observations about the fear of unemployment for Australian blue collar blokes, which is not something people like me tend to experience. People from my background might lose a job, but we don't really fear it in the same way.

I have hundreds of business ideas - too many to ever follow through with - but even if nobody ever engaged my services ever again, I'm literate, numerate, usually personable (trying to think of something catchier here: white, polite, and contrite? OK, that needs work), and could easily pick up a new form of employment.

I'm a Chartered Accountant, so I could do that, but could just as easily find work as a barman, or a real estate agent, or a consultant, or any number of other things. Life just isn't that simple for many redundant blue collar workers, especially if they have grey hair.

Blue collar frayed

As Rayner points out in in her book, it's incredibly difficult for people that have worked in heavy industry or some manufacturing roles for their entire adult lives to transition seamlessly into service industry positions. That's partly due to a sense of self-identity, but also a lack of confidence and skills to work in public-facing roles.

One of the unforeseen advantages of having attended four different schools in markedly different locations as a kid is that through necessity I became comfortable mixing in different circles - I wasn't fazed working on a factory floor where the blokes used the F-bomb like most people use punctuation, and I'm equally comfortable mixing with Big 4 execs or hedge fund CEOs.

The world is not like that for many workers in heavy industry, where the job and workplace becomes a 'little world' of its own, and where the working of tough night shifts and weekends often leads the blokes to know their work colleagues better than they do their own kin. 

I won't ruin the book by taking screenshots of every page, but Rayner cites troubling statistics on the decline of male workforce participation rates in regional cities and the outer suburbs of Australia's capitals, as the traditional manufacturing industries have been hollowed out by the high dollar and competitive pressures. 


While it's terrific that the centres of the big cities are now creating hundreds of thousands of services jobs, Rayner challenges the reader to think about who and what is being left behind by these quantum shifts.  

Quarter acre blocks

Upon landing in Adelaide, I picked up my rental car from a lovely old fellow who was probably once a blue collar worker himself. He was awkwardly apologetic about 'little old Adelaide', which was amiable, but also felt a little regrettable. I've been awkwardly apologetic about Sheffield enough times myself over the years, so it's a familiar refrain.

Once you get out beyond the wonderful Oval or the University, Adelaide is very much a low-rise and low-density city, long and spacious suburbs of low-set housing and wide roads. It's a stark contrast from Brisbane, which is now building upwards as well as outwards and is very much embracing the concept of an Asian century. South Australians quite likely prefer things their way, and fair enough too. 

Adelaide is also quite cold at this time of year, about 15 degrees to Brisbane's 30 today, and feels rather more like driving around Christchurch NZ than it does one of Australia's eastern seaboard cities, though true to form I somehow still managed to get stuck in traffic.

Elizabeth wrecks

45 minutes later I eventually made it out to the behemoth Holden manufacturing operations factory, a colossal area in Elizabeth opened for Holden's automobile production in 1963.


Some academic papers had implied that the closure of Holden and Toyota could cause an Australian recession or leave a hole totalling hundreds of thousands of jobs, but this never seemed likely given that Holden formally announced the closure all the way back in 2013. At least most of the workers here had fair warning; many others don't. 

In the event Australia's annual employment growth hit a record high in early 2018, but it would be fair to say that the closure of a totemic employer was not positive for morale in Adelaide, and was reflective of the manufacturing industry's struggles more broadly. 

And as Jen Rayner points out, although support networks and retraining programmes may be put in place for those made redundant, these are not always fully embraced or successful, for a range of sometimes complex reasons. 


Digging the new breed

I used to chart the small area labour market unemployment rates on this blog, but won't today. Elizabeth's unemployment rate has improved a little in recent times, but it remains among the highest in Australia at above 31 per cent. 

In spite of this, Elizabeth's town centre seemed to be tracking reasonably well; it would be hard to imagine the shopping centre could be any busier midweek. I'm an optimist in life, and over the longer term the Holden site will reopen as a business park, and new employment will come to pass via the services sector. And there are still some local industries ticking along: scrap metals, food packaging, garden centres and supplies, and so on. 

I took a look at nearby Davoren Park, another place where the unemployment rate has been improving at a glacial pace, now down to 18 per cent, but to be honest it's not really the sort of place where I'd be inclined to set foot outside my vehicle in a hurry, and I didn't. By and large developers have adopted the same view, instead opting to unleash five-dozen and more acres of land to build a couple of thousand new homes, including creating an adjacent new suburb at Eyre.


The display homes give a preview of what is to come, which is to say lots and lots of homogeneous, single storey housing. 


It's interesting to consider that unlike Australia's major metropolises the population of South Australia its entirety is growing only moderately, at about 0.6 per cent or 10,000 per annum, in part due to the leaking of residents interstate, largely to Melbourne. Victoria is growing at 15 times that pace in absolute terms at about 150,000 per annum. 


Nevertheless, there is plenty of new construction underway and planned for in northern Adelaide.


And that's just the new suburb at Eyre. A total of 2,500 acres of industrial land is ultimately set to be redeveloped at across Playford and the greater Edinburgh Parks region, with the intention of creating 38,000 jobs in the northern part of Adelaide. 

Rayner's challenge

Blue Collar Frayed is a punchy book that doesn't drone on unnecessarily as this blog post has. It directly challenges the reader to think and to care about what happens to blue collar workers when their positions are lost and as many of the traditional industries and employers move on. There a couple of fleeting moments of supremely satisfying snark, but overall that's not the tenor of the discourse running through the interviews conducted by Rayner as part of her research.

Rayner highlights how some workers have developed incredibly detailed skills in their respective roles over years and sometimes decades. This rings true. I can recall working with machinists who knew more than anyone in the world about how to run their class of machine, even more than the manufacturers in Germany that built them. But such highly specialised skills may not be directly transferable to new jobs and new industries. 

It's very easy to look at headline numbers - jobs numbers are growing, unemployment is low, and so on - without considering how the shift away from manufacturing industries affects individuals and their families. In the last Australian recession, many workers that lost their jobs didn't see a day of work again.

My middle-aged conservative tendencies should probably prohibit me from endorsing interventionist policies, but I can hardly be unsympathetic to the views in this book.

After all, I grew up in a coal mining region with a failing heavy steel industry in the 1980s, in the midst of the UK miners' strike, the son of a trade unionist and an anti-nuclear campaigner, and my parents remain socialist voters today. Even decades on some of the old South Yorkshire pit villages are terribly forlorn places to visit, yet were once vibrant hubs populated with close-knit families and loyal and gainfully employed workers. 

Moreover, only the most heartless of free market economists would suggest that allowing cities like Whyalla or Morwell to die on their knees is a worthy course of action. In some one-industry towns there are zero alternative forms of employment for male workers, and the associated decline in home values keeps those with mortgages tethered to their abode.

There has to a be better way for governments to respond with better policies, argues Rayner, including the rebirth of apprenticeships, redundancy pooling, improved retraining initiatives, the provision of capital for investment, combined with investment in renewable energy and other advanced manufacturing industries.

And moreover placing a real value on the future role and importance of blue collar workers in Australia. 

These and other solutions are discussed in Blue Collar Frayed.  A great and intelligent read - buy yourself a copy.