The job layoffs are just beginning. And the Gillard government should expect them to get a lot worse this year before confidence begins to improve towards the end of the year due to a pseudo stimulus package (carbon tax refunds pumping money into the economy) and lower interest rates.
Companies are busy finalising their first half-year numbers while looking ahead to the next six months. No surprise that they are feeling less and less confident they are going to get anywhere near their budgeted numbers.
New jobs that were optimistically planned late last year are being dumped, as staff are being told to do more with less. And company owners, increasingly concerned about risk, are starting to lay off staff.
Westpac and the ANZ have led the charge. Sources tell me up to about 5,000 jobs are going this year in the financial sector, no doubt about it. Why? Analysts have already factored that in. Not to continue along the job destruction path will hammer the banks' share prices. Retail and hospitality will also continue to cut jobs as people look for better deals online and more gloomy news makes householders cut back even further. And "safe as houses" public sector jobs will also go, as both federal and state governments tighten belts.
For a government that lives and dies by the 24-hour news cycle, and is trying to develop a vision and communications strategy around growth, jobs and innovation, this will be a disaster. Every month there will be headlines screaming about the rise in the unemployed and the fall in the creation of new jobs.
Frustrated business owners like chef George Calombaris will step forward to talk about the crippling affect of weekend rates as the inflexible rules under Fair Work come increasingly under scrutiny. And the struggling baker and grocer will always create great photo opportunities, guaranteeing a big run at the front of newspapers.
To make matters worse, there are a lot of enterprise agreements coming up this year for renegotiation in the next six months, so get set for disputes led by unions to dominate the headlines. And as we saw with the Qantas dispute, the public is far less tolerant of disruption to services through union action and will take to social networks and the airways to express their anger and frustration.
Yet the answer to all this mess is staring the government right in the face. Where do the bulk of new jobs come from? Research has consistently shown policy makers that they come from the small and medium business sector. Large companies that employ half the workforce lay staff off. Small and medium business owners who employ the other half of the workforce create new jobs.
I am reminded of this every September, as I stand up at our SmartCompany Awards and announce to the room full of excited entrepreneurs how many jobs they created that year. On average the 50 companies in the room have created 1,000 jobs that year, most of them full-time and in new industry sectors. These entrepreneurs are creating new skills, take on the cost of training their new staff and receive almost no assistance from government. (They also hand over to the state government a big chunk of money in the form of payroll tax every time they put on a new person.)
As an entrepreneur myself, I know the huge pride that comes with creating a new job and giving someone (and their family) a future. So we always take a moment at the awards to applaud each other – the job creators of Australia that usually receive no recognition.
These companies, of course, are rapidly expanding and in doing so, creating a lot of jobs. Many companies can't grow that fast and create hundreds of jobs a year, but let's do some back-of-the-envelope calculations.
There are 1.8 million business operators in Australia. A million of them are home businesses or micro affairs, not employing or growing. Imagine if we could get them to take on a few staff a year. (The ABS stats reveal that if a lone business owner does employ a few staff members they have a much better chance of survival.)
Then we have the next layer of say half a million business owners who do want to grow. That group might, with some encouragement and incentive, be prevented from laying off staff this year and maybe even to hire.
And then there are the 100,000 or so entrepreneurs that are Australia's biggest job creators who have an aspirational mindset, a gung-ho attitude and, with the right policy package, could be encouraged to take on a lot more staff.
So what the Gillard government is going to have to do to counter the screaming headlines this year and turn the solution around, is to come out with a jobs package based around small and medium business.
It should include incentives to take on workers, it must include changes to Fair Work to allow more flexibility in labour laws and it needs to dust off Terry Cutler's excellent report into innovation that has largely been ignored and cherry pick the best bits to be implemented immediately.
Of course, it also needs to understand which companies are Australia's biggest job creators, which industries they are in and what can be done to assist their growth. But this would mean assisting successful companies and why would you do that when you have a car industry that needs to be constantly propped up, unions to support and a workplace ideology that is as inflexible as some of its laws.
This article first appeared on SmartCompany on January 20. Republished with permission.