Creating decent jobs: the role of regulation in facilitating transitions between employment and unemployment in the labour market.

Abstract

Many economists and other conservative commentators have advocated 'labour market deregulation' as the way to promote employment growth in welfare-capitalist democracies. Much of this debate assumes a simplistic, legally focused definition of 'regulation" whereas labour markets are in fact constituted and regulated by the state and other actors on the basis of a variety of legal and non-legal regulatory techniques. In this article, consideration is given to the potential of three state 'economic policy instruments'- investment incentives, public procurement and public-private projects - to facilitate the creation of decent jobs in a manner consistent with the theory of transitional labour markets. It is argued that these instruments are regulatory techniques by which governments can promote flexibility and security in transitions between employment and unemployment without undermining the role of labour law and social security regimes in maintaining social protection.

Introduction

Debate over the role of the state in facilitating transitions between unemployment and employment is often confined to an argument about the perceived need for 'labour market deregulation' or 'labour market reform' in order to 'create jobs'. This terminology generally equates 'labour market regulation' with labour law, or legislation and industrial instruments designed to provide social protection by providing for minimum labour standards and a level of industrial democracy. It is argued that removing or reducing social protection offered by labour law will lead to job creation by the private sector, thereby reducing unemployment (eg. Howard, 2005).

This approach fails to take account of the complexity of labour market regulation and the importance for social cohesion of balancing promotion of employment growth with the maintenance of social protection. In this article, consideration is given to the concept of 'transitional labour markets', and its potential for answering the challenge of balancing job creation with social protection in Australia.

Although the notion of transitional labour markets (or TLM) seems to encompass a number of different elements, the central premise is that Western systems of social protection are based on a regulatory model which is no longer appropriate given the changes in life and work in developed countries over the last three decades. It is argued that an institutional framework based on transitional labour markets will encourage flexibility and adaptability in the labour market, while maintaining a level of economic security for labour market participants (Schmid, 2002, Schmid and Schomann 2003). Further, such an approach may help to address the problem of persistent unemployment while at the same time acknowledging that over the last thirty years there have been significant changes in how people relate to the labour market.

A key question posed by TLM asks what institutional arrangements can provide bridges between unemployment and employment, or between education and training and employment in the labour market in a manner consistent with the idea of TLM. That is, what can be done 'to facilitate transitions between variable employment relationships as circumstances change over the life course and to do so in such a way that employability is maintained and social protection safeguarded' (Schmid and Schomann, 2003, p. 2).

There seem to be two issues which must be confronted by an examination of job creation policies with regard to their facilitation of TLM. The first relates to the objectives of job creation policies. How can we re think or re conceive of job creation objectives so that they achieve a better 'regulatory fit' with current labour market preferences and practices, (1) while not losing sight of the importance of job quality and the goal of creating better or decent jobs for those who need them.

The second issue is how to achieve these objectives. It is important to recognise that the objective of 'job creation' can be, and is attributed to many different social and economic policy approaches or strategies, and is therefore not the sole domain of government initiatives under the headings of 'labour market policy' or 'social policy'. The latter have already received considerable attention as mechanisms for addressing the problem of unemployment and promoting TLM (eg. Auer, 2002). In this article, three economic policy instruments are introduced (investment incentives, public procurement, and public-private partnerships) which are often claimed to 'create jobs'. Consideration is given to whether these regulatory techniques can supplement social policy regimes by promoting the creation of jobs in a manner consistent with the ideals of TLM.

In undertaking this task, the article is informed by ideas and approaches from within the field of regulatory studies. (2) Regulatory scholarship, consistent with the views of many industrial relations and labour market scholars, takes the view that markets are not a naturally occurring, self-regulating phenomenon which pre-exist state regulation. Instead, social order and markets are constituted, first by 'cultural elements (i.e. beliefs about what one ought to do and how one ought to do it)' and secondly 'by social structures of authority organized to establish, maintain or change institutional rules or norms to support those beliefs' (Burk, 1988, p. 8; and see Shearing, 1993). One of the implications of the constitutive conception of regulation is that markets are inevitably ordered (by social or legal, formal or informal, institutions and regulations).. State constitution and regulation of a labour market is not confined to legal regulation of minimum terms and conditions of employment, and job creation policies are an aspect of the state's role in constituting and regulating labour markets. This perspective points to the need to examine the different legal and non-legal techniques or approaches by which the state and other actors regulate the labour market. This analytical framework is applied in a discussion of economic policy instruments and their potential role in facilitating transitions between employment and unemployment which complement the role of labour law and social security regimes in maintaining social cohesion.

It is hoped that deconstructing the notion of labour market regulation, and giving thought to what the state and other actors can do by way of regulation in the context of labour markets, will open up some new avenues for exploration of how the ideal of 'transitional labour markets' can be achieved. This article represents some preliminary thoughts concerning these matters.

Job Creation as an Aspect of State Constitution and Regulation of a Labour Market

In order to consider how regulation can contribute to job creation which is consistent with the ideals of TLM, it is necessary to give some consideration to the concept of job creation as 'labour market regulation'. The narrow definition of labour market regulation presented at the beginning of this paper misrepresents the role of the state in relation to constitution and regulation of the labour market. That approach suggests an abdication by the state of involvement in labour market transitions which in itself is misleading and is also counter to the ideals of TLM.

The definition of labour market regulation used in this article is broader than the conventional use of the term. On one level, it is not limited to labour law or social protection regimes, but includes job creation policies and programs. State policies which are intended to promote 'job creation' are aspects of labour market regulation in the sense that they are expected either to increase the available pool of paid work in the labour market, or at least to facilitate the movement of people from that section of the labour market classified as 'unemployed' but eligible for work, into paid work.

Although the most obvious form of job creation by governments is the expansion of public sector employment, faced with sustained high levels of unemployment, governments have largely sought to promote job creation in sectors external to government. A key area of state policy-making to which a job creation objective is often attributed is that of labour market policies and programs. These include direct job creation programs such as public sector job creation schemes, wage subsidy programs and self-employment programs. However, it has also been argued that supply-side policies and programs aimed at improving the employability of jobseekers through education and training measures, and job placement policies intended to improve the mobility of unemployed workers, have job creation effects (Arup, Howe, Mitchell, O'Donnell and Tham, 2000).

In addition to labour market programs and policies, it is possible to identify a number of wider social and economic policy strategies used by both Commonwealth and State governments in Australia which from time to time have been claimed to have a job creation effect. Aside from policies promoting the alteration of protective labour law to advance enterprise flexibility and competitiveness mentioned earlier, governments frequently claim that economic policy instruments such as provision of investment incentives and other financial subsidies, public procurement, and taxation policy, increase aggregate employment in the labour market by stimulating economic growth in particular industries or sectors. (3)

What many job creation policies have in common is that they are characterised by regulatory objectives and techniques intended to ameliorate the impact of labour market 'failure', while still maintaining the market as the primary means by which labour power is allocated. (4) Apart from this, there are variations in the immediate objectives of different job creation initiatives. While many job creation policies aim to increase aggregate employment demand in general terms, some aim to create jobs for targeted sectors of labour supply (direct job creation programs), while others simply aim to achieve a better 'match' between labour supply and demand (job placement policies). In these respects, the different job creation policies are clearly key aspects of the role of the state in constituting and regulating the labour market for both social and economic purposes.

The second general point concerning labour market regulation is that the definition of 'regulation' adopted here is not confined to legal regimes defining rights and obligations. Governments do not simply 'regulate' the labour market by imposing legal obligations on employers with respect to the terms and conditions of employment of their employees. Job creation programs are generally concerned with the promotion of particular policy objectives, and are not likely to be implemented through detailed, specific, rule-based legislation administered by regulatory agencies.

It is important to recognise that the emergence of 'job creation' as a key policy issue over the last three decades coincided with a perceived shift in western liberal governance away from the regulatory techniques that are associated with the strong, centralised, welfare state characteristic of the period between the 1930s and the early 1970s. Notwithstanding that there has been significant continuity in state activities over time, it is generally accepted that over the past three decades, state policy implementation has been characterised by increasingly diverse forms of regulation--in the sense that this term describes all efforts by the state to steer the economy and to construct society (Daintith, 1997, p. 1).

Regulatory theory is a broad field of academic discourse that has sought to make sense of the role of the state and of law in the context of these changes. The strands of regulatory literature most useful here are those more broadly concerned with the capacity of the state to direct or control the operation of the market economy, of which the labour market is a key institution. In this sense, regulation may be said to include 'all acts of controlling, directing or governing according to a rule, principle or system' (Daintith, 1997, p. 3). This broad definition of regulation encompasses a number of different forms of state activity, including the use of rules as a mechanism of restriction and control, but also governance by enablement: 'the creation not merely of incentives but of those conditions that allow activities to take place' (Baldwin, Scott and Hood, 1998, p. 3-4).

It has been recognised that governments have utilised a number of alternative strategies to public ownership and direct legal regulation in order to implement public policy. These strategies include economic instruments of policy intended to modify the behaviour of other levels of private actors (both for-profit and non-profit organisations), such as financial subsidies, conditional grants, tax incentives and government contracts. In federal systems, these instruments are also used by government at the higher level to regulate behaviour of other levels of government within the state hierarchy. The institutionalisation of 'self-regulation' by corporations and other non-government actors has been another popular regulatory strategy. Regulatory scholarship has also observed that notwithstanding their nature as instruments which promote policy objectives through market mechanisms and non-government actors, these economic policy instruments are nevertheless expressed and constrained by law. Even where the state adopts regulatory instruments that do not rely upon the coercive power of law, as is the case with job creation policies, legal measures continue to be present as a mechanism for ensuring regulated actors are held accountable to the policy objectives of a particular regime.

This article focuses on the use of so-called economic policy instruments both as job creation strategies and as regulatory approaches in their own right. I have adopted this focus because these policy strategies have become more important forms of labour market regulation as a result of the transformation in the liberal democratic state and the increased diversity in regulation. They are perceived to be a form of 'soft' or 'light touch' regulation which can be used to promote economic development in a manner which avoids interference with market forces. Consideration is given to whether economic instruments might be used more specifically to regulate the source of labour employed by the recipients of subsidies, address needs in particular sectors of labour demand and mandate the type and form of employment adopted by the recipients of subsidies.

Economic Policy Instruments, Job Creation and TLM

In this section of the paper, three economic policy instruments are briefly outlined: investment incentives; public procurement; and public-private partnerships. It will be argued that notwithstanding the immediate economic development objective behind these policies, there is an additional or related expectation that they will create jobs. Like other job creation policies then, these policy instruments are aspects of labour market regulation. Some consideration is given to the question of how these instruments regulate. It is important to note that in many instances, the recipients of government subsidies will be non-government actors, often large corporations. In the subsequent section of the paper, there is a brief discussion of what labour market transitions these policies might be able to facilitate.

Investment Incentives

One way that governments around the world seek to promote economic development and job creation is by offering investment incentives, or financial and non-financial subsidies which are designed to attract or stimulate new private sector investment in a country or region (Baragwanath and Howe, 2000; Industry Commission, 1996). Such incentives are just one among various forms of public assistance to industry offered by Commonwealth and State Governments in Australia. (5) Efforts to attract new investment by corporations are often ad-hoc, one-off agreements with individual applicants. They include the use of incentives such as financial subsidies, tax breaks or provision of infrastructure to attract major projects such as sporting events, to target multi-national corporations from overseas and also to persuade companies already operating in Australia to invest further. State governments often use investment incentives to entice corporations to relocate their operations from one state to another.

Although it is difficult to obtain information concerning investment incentive arrangements, it seems that assistance is frequently conditional upon corporate beneficiaries meeting targets in terms of number of jobs created and so on. However, in the event that these targets are not met there is little evidence of sanctions being imposed beyond denial of further public funding (Baragwanath and Howe, 2000).

The incorporation of public accountability criteria into investment incentive payments has been widely canvassed, especially in federal government structures where competition between states for private investment is seen as economically and socially inefficient. Studies in the United States have established that governments frequently do make such assistance conditional on achievement of social policy goals such as compliance with minimum labour standards and environmentally sustainable practices (eg, Howe and Vallianatos, 1998).

Public Procurement

Like the other policy techniques considered in this paper, Public procurement, or state purchasing of goods and services, has traditionally been used by governments to achieve a variety of policy goals in addition to the object of the procurement (Arrowsmith, 1995). These policy goals include both industrial and economic objectives such as the encouragement of nascent, local industry, as well as wider social policy goals such as promotion of fair wages and conditions in the private sector. Procurement policies have therefore been used to regulate actors, either by seeking to secure compliance with existing laws, or often by encouraging or promoting desired behaviour not otherwise required by law. This is often referred to as 'contract compliance', a reflection of the fact that the conditions of public procurement are largely imposed through contracts, even though prior to the award of the contract the conditions may have been expressed through a variety of different legal measures (Bovis, 2001).

The rationale for using public procurement to secure social policy objectives is similar to the justifications discussed in the context of other types of economic policy instrument. That is, where public money is being disbursed to the non-government sector, it is the responsibility of government to ensure that this money has a broader public benefit, including but not limited to 'value for money'.

The use of procurement to regulate behaviour has become somewhat problematic as a result of the expansion in multilateral and bilateral free trade agreements. A prime example is the European Union, where the goal of elimination of non-tariff barriers to trade has been seen as incompatible with public procurement and its use to promote social policy and other goals (Arrowsmith, 1995; Bovis, 2001).

Notwithstanding the tension between trade agreements and public procurement, it has been acknowledged that promotion of competitive markets should not necessarily exclude all uses of public procurement as a policy tool. For example, in 2001 the European Commission accepted that public procurement contracts used by EU members may require compliance with obligations such as International Labour Organisation Conventions, provided that such requirements do not discriminate in favour of national tenderers, and are identified in the contract notice. (6)

In the Australian context, public procurement by the Commonwealth Government is governed by the Commonwealth Procurement Guidelines. The various State Governments maintain their own contracting practices and guidelines. For example, the Victorian Government maintains a complex web of policies, guidelines and other legal measures which both express and constrain the conditions under which the government and its agencies will purchase goods and services. This is overseen by the Victorian Government Purchasing Board.

The Commonwealth Guidelines specify that value for money, open and effective competition and ethics and fair dealing are the guiding and fundamental principles for government buyers. The Guidelines allow government agencies to specify conditions for participation, which are basic requirements with which potential suppliers must be able to demonstrate compliance in order to participate in a procurement. However, conditions for participation must be limited to those that will ensure that a potential supplier has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement. Having said this, there is evidence that as recently as the late 1990s, the Commonwealth Government expected its agencies to reflect its wider policies in the way they do business. (7)

Persons who supply or propose to supply goods and services to the Victorian Government must satisfy the requirements of an 'Ethical Purchasing Policy'. One of the principles which underpins this policy is stated to be the Government's 'Ethical Employment Standard'.

The EPP requires suppliers of goods and services to demonstrate 'to the reasonable satisfaction of the government buyer' that the contracting or tendering entity is meeting 'its obligations to its employees under applicable industrial instruments and legislation at the time a contract is awarded and continues to meet such obligations during the term of that contract'. (8)

Public-Private Projects

A relatively recent development in terms of government promotion or facilitation of economic development has been the 'Public-Private Partnership', or Public-Private Projects (PPP), where public bodies such as local authorities or central government enter into long-term business relationships with corporations to provide goods or services. Once established, these relationships are regulated by comprehensive contractual arrangements. PPPs have been distinguished from 'contracting out' of services on the basis that the former normally involves a combination of services (such as, for example, design, construction and maintenance), whereas contracting out is normally of one service, or a number of relatively straightforward services. They are increasingly being used in the construction of social infrastructure such as roads, hospitals or schools.

The main justification advanced by proponents for governments opting for PPPs is that they represent better value for money for taxpayers and release public money for expenditure on essential services. PPPs, like the other economic policy instruments discussed above, have also been claimed to promote employment growth. The NSW Minister for Health claimed that the PPP for re-development of Newcastle's Mater Hospital would create more than 2000 jobs 'in construction and related industries' (Stilwell and Jordan, 2004).

However, there are a number of strong philosophical and economic objections against the use of PPPs as an economic strategy, among them the criticism that describing them as 'partnerships' is misleading. One potential difficulty with PPPs is that with revenue guarantees and contracts of up to 54 years, they may restrict the capacity of the state to act in the public interest (Hodge, 2004). This is accentuated by the fact that PPP contracts may provide for compensation where governments change policy in the public interest with respect to PPP projects. In addition to these criticisms, the effectiveness of PPPs in creating decent, secure employment has been questioned (Stilwell and Jordan, 2004).

Although there is some international evidence that PPPs have included social policy criteria, for example in the context of regional development targets, the potential for PPPs to incorporate social policy criteria is a matter for further research. (9) Notwithstanding the criticism of PPPs as a policy strategy, accepting that PPPs continue to be used by State Governments in Australia as a means of furthering public policy objectives, it is worth exploring the extent to which PPP contracts could include criteria concerning job creation targets that are consistent with TLM. That is, from a regulatory or governance perspective, the funds provided by government could be conditional upon private sector partners agreeing to targets with respect to the creation of decent jobs as well as institutionalisation of other key elements of the TLM model.

To sum up on this overview of job creation instruments, there are a number of potential advantages in the utilisation of these economic policy strategies for the facilitation of transitional labour markets. The first is that they are promotional measures, in conformity with the dominance of 'market facilitation' in discourse concerning the role of the state. Further, there is some evidence that promotion of economic growth through these instruments has been connected with criteria concerning social inclusion and cohesion. Unfortunately, experience with these regulatory techniques in Australia reveals that they can equally be used to undermine cooperation between social partners as opposed to facilitating the creation of decent jobs. (10) Subsidies and public procurement programs are frequently used to promote economic rationality through competition principles rather than to secure broader social goals.

It is therefore a key aspect of the different strategies identified above that they are regulatory instruments which are available to State and Local overnments, as well as the Commonwealth Government. These are not regulatory instruments that will necessarily be subject to central regulation or constitutional limitations. This is important given the apparent lack of political will at the Commonwealth level to address many social concerns beyond the 'labour market deregulation' perspective, a problem returned to later. Moreover, there is potential for these policies to be structured in a way which establishes networks involving corporate actors, interested non-profit organizations, trade unions and other representative organisations with the potential to enhance both the effectiveness and accountability of these policy instruments.

What Transitions Can Regulation Facilitate?

Having identified these different economic policy strategies and taking into account their regulatory characteristics, how can these strategies contribute to facilitating transitions based on the TLM ideal?

One criticism of economic subsidies that are justified on the basis of job creation is that such instruments essentially give the corporate beneficiaries of assistance a wide discretion on employment related matters (Baragwanath and Howe, 2000). For example, although investment incentives may lead to the creation of new employment positions, firms do not necessarily create those jobs for people who are unemployed and disadvantaged in the labour market. Nor do firms receiving taxpayer funded assistance necessarily create jobs which are secure rather than precarious, or which provide access to ongoing vocational education and training.

There is a strong argument that taxpayer-funded subsidies should be used for purposes that serve the wider public good and that conditions and processes attached to such expenditure are transparent and used to ensure that the recipients of expenditure are accountable to social policy objectives. It is in this way that the capacity of the state to maintain cohesion can be maintained; even though states are delegating more responsibility to the corporate sector.

Consistent with TLM theory, industry assistance, public procurement and public-private partnerships can and should be used to promote some of the important transitions identified as elements of a 'life-course' approach to labour market regulation. Such techniques are not the only changes to labour market regulation needed to establish a TLM framework. Certainly, some aspects of the TLM model are dependent upon changes to both labour law and social security regimes. However, as policies which have the potential to influence transitions between employment and unemployment, these economic policy instruments can play a role in establishing some norms consistent with the TLM ideal. In this way, they can contribute to, or complement, a restructuring of the way that labour market regulation operates based on the TLM model.

There are a number of ways in which these economic policy instruments could be used to promote transitions consistent with TLM theory. For example, public funding could be conditional upon projects facilitating transitions between employment and education, and between 'precarious' and permanent employment, to promote employment of mature-age workers, and facilitate the introduction of measures facilitating work/family balance. Government and corporate recipients of public assistance could agree to the allocation of funds and other resources for education and skills formation, and so on.

One measure that has been suggested as complementary to a TLM approach to labour market regulation is the promotion of flexible yet secure working arrangements. Thus, for example, in return for financial assistance or the award of a government contract, firms could agree that jobs created by this assistance would be of a certain quality irrespective of their status. The quality or decency of jobs would be indicated by the extent to which they involved reasonable pay, access to training and entitlement to other benefits such as leave or superannuation. Business beneficiaries would be free to determine whether jobs would be part-time, or to engage dependent contractors on the condition that certain quality guarantees are observed and that such arrangements are not part of a 'deunionisation' strategy. This idea is based on approaches developed by the EU, where a series of directives have attempted to balance flexibility and security by enhancing the employment position of non-standard employees (Dickens, 2004, p. 603). Dickens points out that in the EU debate, 'security' means more than employment security, but also encompasses capacity to remain and progress in the labour market. By securing agreement from employers to provide both new and existing workers with access to training and skills acquisition, and allowing time-off for training where necessary, governments would be promoting skill development in workers which would benefit their longer term prospects in the labour market.

Another policy strategy discussed as an aspect of TLM is working time reductions, which could have a number of social benefits. It has been argued that reductions in overtime can contribute to job creation by redistributing working hours to underemployed or unemployed workers. Reductions in working time have also been promoted as a way to promote a better work/life balance by giving workers more control over their working hours.

To suggest that governments could promote such arrangements through regulatory strategies such as those discussed in this paper is not controversial. There are various examples of corporations adopting temporary working time reductions even without government incentives or assistance (Schmid, 1998, p. 13). However, there have also been criticisms of working time reductions as being used by firms to reduce the number of 'traditional' or secure forms of employment, and create jobs with inferior terms and conditions (O'Reilly, Cebrian and Lallemant, 2000). Therefore, making the availability of public assistance or contracts conditional on firms adopting working time reductions should be subject to consultation with trade unions or other independent organisations representing workers interests. This would go some way to ensuring that any jobs created by such reductions were secure rather than precarious.

In addition to this, firms benefiting from public assistance or contracts could also undertake to make a certain percentage of any jobs created by this assistance subject to other family-friendly working arrangements, such as provision of child care, to reinforce the work/life balance aspect of working time reductions. At the present time, labour law in Australia has taken only tentative steps towards achieving a widespread adoption of better work/life balance arrangements. Although the Australian Industrial Relations Commission's (AIRC 2005) recent decision in the Work and Family Test Case 2005 suggests a way forward for progressive reform in this area, the changes to Australia's labour law system recently proposed by the Coalition are likely to limit the impact of the AIRC's decision. It may therefore be productive for other levels of government in Australia to consider how work practices and policies which recognise work/life balance issues can be promoted through a mixture of financial incentives and the terms of the supporting contracts.

In the best of all worlds, these transitions would be enshrined in existing labour law and social security regimes. For example, recognition of a legal right to request part-time work might ensure a more widespread take-up of flexible but secure working arrangements balancing the interests of both employees and employers, (11) Given the Commonwealth Government's proposals for winding back the award system and the role of the AIRC, coupled with its planned takeover of State industrial relations systems, there is an opportunity for policymakers to consider innovative approaches to regulatory challenges. State Governments can use their own sectors and the offering of public subsidies, as leverage for introducing changes into the custom and practice of the corporate sector. Incorporating these requirements into government contracts, or promoting self-regulation or private regulation by corporations, are forms of 'soft law' or 'light touch' regulation which may be appropriate alternatives to 'hard' statutory regulation given the present political and legal context of labour market regulation in Australia.

This approach may also offer some flexibility to non-state organisations in terms of responsiveness to individual organizational circumstances; although it is unlikely to succeed without a commitment by government to monitoring and enforcement of compliance. Such a commitment may simply entail a regulatory structure which, in addition to government and business corporations, includes both worker representation or participation mechanisms (where they are in place) as well as relevant social justice organizations (Dickens, 2004, p. 609). Elements of self-regulation and co-regulation could be introduced into regulatory arrangements to promote compliance with TLM objectives. As suggested in relation to implementation of working-time reductions, firms could agree where applicable, to ensure that flexibilities are negotiated into collective bargaining agreements with trade unions.

Potential Limitations and Challenges

There are a number of potential limitations to the implementation of the ideas presented in this article which need to be explored in greater detail before they can be turned into concrete policy initiatives.

The first limitation is the fact that there is likely to be a lack of political will to use any of these regulatory instruments as suggested, because of the dominance of the value of competitive efficiency in Australian politics. This is in part because of the reality of the competitive environment faced by various levels of government caused by the 'footloose' nature of global capitalism. It is especially an issue at the Commonwealth level in Australia, where enthusiasm for the values and goals of market competition, and the pursuit of competitive efficiency, is most dominant. At least at Commonwealth level, there seems to be little potential for a corporatist or 'social partnership' approach to facilitate the implementation of the the policy ideas discussed here. This is in contrast to the EU and member states, such as Denmark, where there seems to be more of a corporatist culture which in some instances has assisted in the acceptance of concepts such as 'flexicurity' which are central to the TLM model (Wilthagen and Tros, 2004).

The argument that these economic policy instruments are, can and should be used to promote desired social policy outcomes will no doubt be criticised by those who see these approaches as inconsistent with economic efficiency or good governance as recognized by the criteria of 'value for money'. However, these requirements would not necessarily impede the requirement that the state promote economic efficiency and value for money. It is increasingly being recognised that the idea of labour market deregulation is both misleading--it invariably leads to increased regulation of markets--and no panacea for labour market problems. Moreover, it is widely recognized that the right forms of regulation and institutional settings can be conducive to economic performance. Wilthagen and Tros have argued that social policy is increasingly being typified as a 'production factor' in the EU, and that policies which balance flexibility and security can be seen a way of synchronising economic and social policy (Wilthagen and Tros, 2004, p. 172).

Another reason why governments might be reluctant to implement job quality criteria through economic instruments is that it would require those responsible for assessing applications for financial assistance and government contracts to develop some expertise in labour policy, which might inhibit efficiency. This might be especially true if requirements were always responsive to individual cases, as distinct from a situation where governments incorporated a set of standard criteria in all contracts. Causing procurement agencies or industry assistance units to become more knowledgeable about labour policy issues would not necessarily be a bad thing--it would reinforce the arguments made about public accountability for government expenditure. It certainly has not prevented US State and local government from passing legislation and by-laws governing financial assistance measures (Howe and Vallianatos, 1998). Alternatively, the approach suggested could be restricted to larger investment incentive deals and procurement contracts, at least in the short term, as a way of dealing with this concern.

The second significant limitation is one mentioned previously, that is also related to the first limitation, and that is the impact of so-called 'free trade' agreements on the capacity of nation states and their constituent governments to promote social policy objectives which conflict with competition principles. (12)

This issue deserves proper consideration in its own right. However, the promotion of TLM concepts through the various regulatory strategies discussed in this paper would not necessarily conflict with Australia's obligations under international trade agreements. For example, the criteria to be applied in determining eligibility for subsidies or public procurement would not have to include local content requirements which discriminate against international competitors. Further, governments could require firms benefiting from economic instruments to regulate their own supply chains with respect to meeting core labour standards. This would at least go some way to ensure that public funds were being applied on an ethical basis, while also taking into account the requirements of non-discrimination.

Conclusion

Some of the ideas presented in this article may seem somewhat unfashionable given the pervasiveness of the value of market competition in debates over regulation and governance. However, the ideas which underpin the regulatory agenda presented here, have a timeless quality based on sound ethical principles. That the apparatus of the state should use public funds to promote good public and social policy is not a controversial suggestion. Rather than being promoted as stand-alone proposals, the ideas canvassed here are intended to complement other ideas and proposals put forward as part of a TLM framework for addressing risk and transitions. They also represent stepping stones to an environment where the regulatory and institutional framework is such that these sorts of interventions are no longer needed to ensure that flexible labour markets are also secure and equitable.

References

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Endnotes

(1) The term 'regulatory fit' is used by Dickens (2004).

(2) For an introduction to the field of 'regulatory studies', or 'regulatory theory', see Braithwaite and Parker (2003)and Daintith (1997).

(3) For a useful survey of the various job creation policy measures used by the Commonwealth Government, see Arup et al (2000). A wider discussion of the various state economic policies to which a job creation purpose can be attributed is contained in in Glyn (1997).

(4) That is, however insignificant state job creation efforts might be, the labour market will never be 'unregulated'. However, regulation will be limited in its purpose and scope by the state's maintenance of capitalist assumptions: Offe, 985, p. 45.

(5) The Productivity Commission has estimated that Commonwealth industry assistance and tax concessions alone amounted to over $4 billion dollars in 2003-2004. Previous studies by the Productivity Commission have found that State Government expenditure on industry assistance is even more significant when viewed collectively (Industry Commission, 1996).

(6) See discussion in Morris (2004, p. 173). Morris cites the Interpretive Communication of the Commission on the Community Law Applicable to Public Procurement and the Possibilities of Integrating Social Considerations into Public Procurement (COM (2001) 566 final) para 1.6.

(7) Australian Permanent Mission to World Trade Organisation, (2005) Information on Procedures and Practices On Transparency in Government, 17 February 1998, available at http://www.wto.org/english/tratop_e/gproc_e/w14.wpf, accessed 1 February, 2005.

(8) Ibid (emphasis in document).

(9) See, for example, Cockerill (2004).

(10) For example, the Commonwealth's requirement that State Governments sign up to a National Building Code of Practice in return for funding of construction projects.

(11) For a discussion of the implementation of a right to part-time work in the Netherlands and Germany, see, for example, Jacobs and Schmidt (2001).

(12) For consideration of the impact of the US-Australia Free Trade Agreement on domestic policy-making in Australia, see Arup, 2004.

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John Howe, Centre for Employment and Labour Relations Law, Faculty of Law, University of Melbourne