Ahead of the 2019 Federal election and in light of recent events, Lyn Goodear, chief executive of the Australian HR Institute, reflects on the meaning of the social contract.
I have to travel in my job, but when I’m not on the road I work most days in Melbourne’s Bourke Street and walk to the office from where I live in South Melbourne. Over the past few years it has been impossible to avoid noticing the increasing number of people taking up residence in the doorways of shops and other public buildings, many with the bare requirements of a blanket and something makeshift to rest their head during what must be a broken night’s sleep. Other street dwellers have more clothing and gear but must limit themselves – knowing that they will have to carry it wherever they go when they’re moved on during daylight hours.
I regard myself as fortunate to live in such a wonderful city as Melbourne but, like other Australian cities in the Southern parts of the country, at this time of the year the days tend to be marked by greying skies and chilling rain, and our cutting winds are not welcoming to those out of doors. Most Melburnians during these mid-year months look for refuge behind a door, whether it be a door to a shop, a bar, a restaurant or a home.
An Anglicare study landed in my inbox last week. It found 98 per cent of rental properties are out of reach for minimum wage earners in Australia. That to me is an alarming number and a stark reminder of the street people I walk past. Many of them carry a sign requesting small change and somewhere on the sign is the inevitable word ‘homeless’. The sign won’t say they don’t have a job, though keeping down a job would pose difficulties if the street is your main address. The sign will just say they don’t have a home, a place to go back to with a door that shuts out the wind.
For those who have a job, I’m aware that for most of the past decade in Australia wages have been growing at about 2 per cent a year, down from the usual 3 to 4 per cent during the previous 50 years since the 1970s, and their purchasing power has also markedly declined. An open letter a couple of months ago was published in the national press by a hundred or more labour market researchers, some of whom are members of the institute I lead. The Reserve Bank Governor, Philip Lowe, has also alluded to the negative long-term effect of low wage growth on government revenue and consumer spending.
At the other end of the income spectrum, when Kenneth Hayne handed his recent report to government on the Royal Commission into misconduct in the finance sector, he concluded that the offending “entities and individuals did what they did because they could”. He was describing a broken system in which an executive could suggest to a senior colleague that selling junk insurance products was not in the interests of the bank’s customers and the practice should cease, only to be advised to “temper your sense of justice”.
Those insurance products generated handsome profits to the company and rewarded the executives who sold them with generous bonuses for hitting financial key performance indicators. That advice might not have been so forthcoming had the executive heeded the caution from the chief executive of the Australian Council of Superannuation Investors, Louise Davidson, who observed in 2017 that board decisions to pay large bonuses simply for meeting financial targets “may be a sign that boards have lost sight of the link between a company’s social licence and the expectations of communities and investors”.
In the wake of the Hayne Royal Commission, it is pleasing to see that the Australian Prudential Regulatory Authority chairman, Wayne Byers, is preparing to release guidelines to shift the singular focus from achieving financial targets to meeting multiple intangible targets such as customer satisfaction, ethical practice, sound governance and staff wellbeing.
Hayne’s damning conclusion noted that individuals as well as entities had behaved disgracefully, if not illegally. Entities don’t make decisions and cannot behave badly if individual people within them are not initiating or being complicit. In concluding that executives “did what they did because they could”, Hayne pointedly suggested that there is merit not simply in entities and individuals doing what they can, but in doing what they should.
Like many other elections in democratic countries around the world in the past few years, the election we are facing in Australia this weekend is one in which there appears to be a crisis of consent around what is often called the social contract.
While no one actually signs up to such a contract, there has long existed a tacit agreement in democracies that individual members of society accept rights and responsibilities in the interests of the general good. The origins of the principle go back to Thomas Hobbes and John Locke in Britain and Jean-Jacques Rousseau in France. In response to thinkers such as these, we saw the outlawing in Western civilisation of abominations such as child labour and trafficking of slaves.
The principle also assumes that nobody gets rich on his own. If we run an enterprise in Australia, we transport our goods to market on the roads everyone paid for. We hire workers everyone paid to educate. We are secure in our workplace because of police forces and emergency services that everyone paid for. The ‘self-made man’ may claim his achievements as his alone, but a more realistic assessment is that our successes are built on the foundations that others have created.
Over time that thinking has led to the pursuit of social agendas in bodies such as the International Labour Organisation that include full and productive employment, decent work, sustainable economic growth and the elimination of poverty.
I understand that over the ages worthy citizens have urged the character-building values of adversity, but urgings of that type tend to come from those with comfortable means rather than those with lived experience of poverty and lack of opportunity.
From next Saturday we can persist with national policy settings that enable some citizens to live very well, while at the same time making it difficult for others to escape lives marked by privation and misery. My hope is that the parties and candidates we elect on 18 May bring to the parliament the vision and courage not simply to do what they can for the benefit of a few, but what they should do for the benefit of us all.