Jobs and services go, private profit grows

Jobs and services go, private profit grows

By Jonathan Singer

Just where does the privatisation of public services get you? Some of the answer — cuts to jobs and services — has been splashed across the front pages of the establishment newspapers recently.

On March 8, Telstra announced a $2.1 billion half-yearly profit. At the same time, it announced cuts of 10,000 permanent jobs and 2000 "outsourced" casual positions over the next two years (this adds to the more than 28,000 jobs cut since its privatisation began in 1997), and the sale of a division, Network Design and Construction, with 6000 employees.

The government retains 50.1% ownership of Telstra but does not intervene in how the company is run (that is, in the interests of its private shareholders). PM John Howard, backed by the company's chairperson, wants the government to sell its remaining share.

Communications minister Richard Alston said that most jobs lost would be in the capital cities and that the sacked workers will be able to find other work readily. However, it has been reported that call centres in rural areas have also been targeted for cuts.

On March 10, the Commonwealth Bank (CBA), the privatisation of which began in 1990 under a Labor government, announced a $7.5 billion takeover bid for the Colonial bank. Up to 450 branches would be closed, and 2500 jobs cut (more than 8% of the total) under the plan.

CBA chief executive David Murray claimed, "This is in the national interest because the combined group will have the scale, efficiencies and scope of activities ... If we sit here and do nothing the Australian financial services industry will be a branch office of the rest of the world."

World market

Murray expresses one of the major aims of Australian governments' privatisation programs and their support for policies such as the "four pillars" in banking. Governments want to help develop corporations ability to compete in the world market and formerly publicly owned corporations (like Telstra and CBA) have become market leaders in doing just that.

Privatisation's proponents argue that it removes the supposedly inherent inefficiency of public enterprises and benefits the government's budgetary bottom line by freeing funds to pay off government debt. But such arguments are either absurd or unsubstantiated.

In 1998, Professor John Quiggin of James Cook University said, "There has not been one major privatisation in Australia where the government has made a profit, relative to the alternative of retaining ownership".

Around the world, corporations are merging at a fierce pace, primarily through shares in the dominant company being issued to share owners of the company being subsumed. The CBA takeover of Colonial has taken this form.

Telstra's management would like to do the same. It has the funds available and the desire to take over other businesses because, according to the March 21 Bulletin, cost-cutting has raised the company's profits by 15% annually, while sales are rising by only 5%. However, it is unable to do so because the issuing of more shares to private shareholders would reduce the government's holding below the legally required 50.1%.

Telstra management is therefore working on an alternative. It wants to float divisions — perhaps including mobile phones, internet services, directories and international telephony — as separate companies which remain subsidiaries of Telstra. In the process, divisional heads would become company heads, with all the perks attached.

The formation of Telstra subsidiaries has already begun with the creation of Stellar, jointed owned with a US telecommunications company, which has contracts from Telstra to provide the bulk of directory assistance work.

According to Stellar's former human resources manager, Andrew Hillard, Telstra "intends to sack rural employees and break the back of the Telstra unions by creating a low-wage alternative call centre work force".

In December, the Federal Court ordered Stellar to apply Telstra-equivalent pay and conditions at its first work site at Robina on the Gold Coast, where 150 workers are employed. Stellar has now established workplaces in Adelaide and Perth also, which have a potential work force of 750.

Working conditions

The deregulation of the communications industry and the part-privatisation of Telstra have been openings for telecommunications managements to attack workers' pay, conditions and right to organise. The working hours in the industry's new companies are notoriously bad.

An internal memo from the employee relations manager at Telstra, reported in the March 15 Australian, said managers must treat workers on contracts (who had shown "trust") with "dignity and respect", not "compromise these important values in the way they implement cost reduction initiatives which lead to staff reductions". Telstra said that suggestions that this was directed against union members, who support collective agreements rather than contracts, were misinterpretations. But Col Cooper, president of the communications division of the Communications, Electrical and Plumbing Union (CEPU), told the Australian that Telstra management was making redundancy decisions to further its industrial agenda.

The proposed Telstra job cuts also serve to keep the main game — its sell-off — in sight. The job cuts are being pursued regardless of the effect on employment or services.

Government leaders are denying this. Howard has said Telstra services were not included in his rural "listening" tour promise that there would be no further cuts to government rural services and the Coalition's Senate leader, Robert Hill, said on March 13 that "lower employment did not necessarily mean lower services".

They have been backed by Telstra CEO Ziggy Switkowski, who sent a letter to all federal parliamentarians claiming improved service performance across the board in the last two years, and price cutting and major investment in telecommunications plant in rural areas.

Service levels can, of course, be shored up by new technologies and by labour productivity improvements (which are generally gained through longer working hours, including unpaid overtime, and the intensification of work). But new technologies result in justifiably higher service expectations and these can't be met without people working to provide the services.

Rural services

Some MPs, particularly from the National Party, have highlighted the poorer communications services available to people in rural areas. Consequently, an inquiry into Telstra service provision has been brought forward and may include public hearings in the bush.

Communications services in the country lag behind those in the city and there is no plan to correct this; moreover, Telstra charges higher prices to provide them. And the impact of service and job cuts in a rural area tends to be greater, since alternative services are more distant than in the cities and suburbs.

The inquiry will do little more than veil National MPs support for Telstra's privatisation and allow them to pit city against country. While rural areas face particularly intense service problems, services in the cities will also worsen.

Switkowski's claim of improved Telstra services also ignores the fact that this was from a low starting point when privatisation began in 1997. Repair times in rural and remote areas are still worse than in '97 and the number of customer complaints has increased.

Service obligations

The privatisation of Telstra has also negatively affected its former policy of cross-subsidising services in rural communities from revenue generated in the capital cities. The government now subsidises this highly profitable company to meet its "universal service obligation" to provide at least a basic communications service in rural areas.

Alston, however, advocates the tendering out of the universal service obligation. This poses many questions. How will the government enforce the provision of services by a successful tenderer? What happens if no company tenders to provide services to a region? What disruption to services may occur if the tenderer changes?

But the government's primary concern isn't ensuring service provision: tendering the universal service obligation will free Telstra of particular legal obligations and complete its commercialisation.

Every element of the government's policy on Telstra — support for its privatisation, defence of its job cuts and commercialisation of its service obligations — is designed to aid the drive for profits. In the process, a publicly owned monopoly is being replaced by an oligopoly of privately owned companies. The result can be observed in banking; profits up for big corporations and services reduced (and charges for them increased) for working people.