Weathering the downturn, planning for the upturn

When facing a cyclical downturn, the old chestnut ‘people are our greatest asset’ quickly turns to ‘people are our greatest cost’ in the hands of many company CFOs. Especially when the downturn has the magnitude of the current global recession. When this view leads to mass sackings, it is more than a personal tragedy for those in the firing line – it is also a massive loss of accumulated capability. And that lost capability has a critical effect on an organisation’s ability to emerge from a downturn with its productive capacity intact.

Australia has experimented in the past with innovative public policy in the face of structural shifts in the economy, such as the restructuring (or ‘de-structuring’!) of the textile, clothing and footwear industries – providing active labour market programs to assist workers transfer to new industries.

However our response to cyclical downturn has been largely confined to employer-provided income support (redundancy pay) and to protecting accrued employee entitlements (by ensuring that these debts are prioritised in insolvency and by providing compensating payments when insolvent companies can’t meet their obligations). These initiatives partially address employee hardship (although they fall a long way short) but do nothing to safeguard the productive capacity of organisations.

So Sharan Burrow’s call at the recent ACTU Congress for a new approach that encourages under-utilised workers to remain connected to their workplace and so be able to use downtime for ‘re-tooling’ and ‘re-skilling’, is an idea whose time has come. Similarly, the AMWU’s proposal for constructive use of downtime in the vehicle industry – in the face of both recession-induced downturn in demand and the massive restructuring of the parent company of a major player, GM Holden – signifies a positive new direction in policy.

This approach has been adopted in some European countries for some time. Austria has a model called Kurzarbeit, or ‘short work’ 1 in which:

  • workers accept a reduction in working hours of between 10% and 90%;
  • the employer pays a government subsidised allowance in lieu of wages for the downtime,
  • the downtime allowance is enhanced if the worker undertakes training.

The key to this policy is the active partnership between government, the employer and trade unions – a negotiated agreement ensures the pain (and the gain) is shared between all the players. This is not simply social or corporate welfare. It is a sensible investment by all stakeholders in the retention of capacity, both in the organisation and the broader economy. Australians don’t have recent experience of government/union/employer compacts (I haven’t heard the term ‘tripartism’ being used lately) but this is what will be required if such a policy is to get legs in the current environment.


  1. Kurzarbeit: An Alternative to Lay-Offs Graf & Pitkowitz Rechtsanwalte GmbH International Law Office May 2009
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