Economic Papers Vol 22 No. 4 December 2003 pp. 4S·60

THE EMPLOYER PERSPECTIVE OF INDIGENOUS(UN)EMPLOYMENT

by

ANDRE SAMMARTINO', JANINE O'FLYNN' andSTEPHEN NICHOLAS"

I Introduction: Indigenous Employment

Over recent years, extensive data and research have confirmed the differential status of[ndigenous Australians within the labour market. Indigenous Australians experiencehigher unemployment, lower participation rates and lower incomes than non-Indigenousworkers (Boreham, Whitehouse and Harley, 1993; Daly, 1995; Australian Bureau ofStatistics, 2000; Hunter and Gray, 200 I). Borooah and Mangan (2002) foundIndigenous Australians had poorer occupational outcomes than either white or AsianAustralians. These poor labour market outcomes are major factors in the higher povertylevels in the Indigenous community (Albnan and Hunter, 1998).

A range of factors contribute to this differential status, including geographicdisadvantages, lower education and training levels, discrimination, access to welfare,and labour market discouragement (Ross, 1993; Hunter, 1997; Daly, 2000; Hunter andGray, 2000; Gray and Hunter, 2002). Education and training levels, plus lessquantifiable attributes such as levels of workplace and job commibnent, may be seen assupply issues, as they are assumed to reflect the quantity and quality of labour on offerand therefore likely productivity levels. Levels of workplace and job commibnent maythemselves be influenced strongly by access to alternative income sources such associal welfare, and by the degree to which individuals actively seek out work, oralternatively feel discouraged from doing so. As Hunter and Gray (2000) argued,labour supply, particularly of Indigenous workers, is strongly influenced by family,cultural and social environmental factors. Indigenous employment outcomes are alsodetermined by demand factors. For example, there are fewer employers andemployment opportunities in rural than urban areas and in Indigenous communitiescompared to non-Indigenous communities. Differences in skill-sets and discriminationalso reduce the demand for Aboriginal workers. Borooah and Mangan (2002) found thedifferences in Indigenous employment outcomes sprung from both educational (i.e.supply) and racial (i.e. demand) disadvantages.

While both supply and demand factors shape the employment opportunities forworkers, most of the research on [ndigenous employment has relied on supply-sidedata, especially data on the human capital of individual workers. More recent work has

Australian Centre for International Business, University of MelbourneSchool of Economics and Political Science, University of Sydney.Funding for the project from the Departments of Workplace Relations and Small Business andImmigration and Multicultural and Indigenous Affairs is gratefully acknowledged.

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ANDRE SAMMARTINO, JANlNE O'FLYNN and STEPHEN NICHOLASconsidered demand side and context issues. Hunter and Hawke (2000), for example,identified industrial relations characteristics of workplaces employing Indigenousemployees. This paper investigates Indigenous employment from the demand-side,with the main aim being to make an initial contribution to the debate by presenting dataon senior management perceptions. Data were collected on the perceptions of 229CEOs and senior managers in Australian-based businesses. The survey revealed alarge number of firms had no Indigenous employees and no policies in place toincrease the number. Only a minority of firms employed significant numbers ofIndigenous workers. While acknowledging that CEOs and senior management do nottypically make individual employment decisions, we argue that their perceptions bothshape and reflect their organisations' employment practices. Such perceptions haveconcrete implications for Indigenous Australians in the labour market, particularly ifthese translate into preferences based on group membership. Furthermore, we arguethat their perceptions reflect the imperfect information about labour quality thatpermeates labour markets. This claim is illustrated by comparisons betweenemployers' perceptions of Indigenous and non-English speaking background (NESB)workers.

We find that Indigenous employment is constrained by CEO perceptions of theirhuman capital - namely their level of education, level of skills and commitment. CEOsbelieved there to be a shortage of Indigenous job seekers. CEOs also expressed concernabout levels of Indigenous absenteeism and retention. We argue that such behaviour isa direct result of Australian businesses' lack of the necessary human resourcemanagement policies to adequately attract, retain and manage Indigenous employeesand also NESB workers. More fundamentally, such perceptions provide evidence ofstatistical discrimination. That is, CEOs are using race as a proxy for productivity(Norman, 2003).

2 Modelling the Indigenous Employment Decision

Much of the economics literature on labour market discrimination can be categorisedinto two schools (Jonsson, 200 I). The first focuses on a taste for discrimination, orbigotry, where employers, for example, have a preference for a specific racial group(Arrow, 1998). The second school has focused on statistical discrimination whereperceptions are based on imperfect information about groups in the labour market. AsJonsson (2001) argues economists typically explain discrimination in the labour marketthrough a combination of "bigotry, asymmetric information, and/or some form of non·price rationing in the face of imperfect price adjustments" (p. 943).

To examine the issue of CEO perceptions, this paper draws on two intersectingliteratures. First, the human capital approach analyses the employment of workers withdifferential attributes and economic returns (Becker, 1962; Mincer, 1975). A worker'shuman capital affects their output and their returns to employment. Employers hire andretain those applicants with the most attractive bundle of human capital. Employers'decisions to hire and retain will be influenced by information asymmetries regarding anindividual's human capital (Williamson, Wachter and Harris, 1975). Economising onthe costs of identifying the attributes of individual workers, managers hire on the basisof preconceptions about the attributes of the group to which a worker belongs. This

46

THE EMPLOYER PERSPECTIVEtendency forms the basis of a common model of labour market discrimination (Akerlof,1974; Lang, 1986; Oettinger, 1996).

Farmer and Terrell (1996) model labour market discrimination as a two-prongedprocess. Particular demographic groups are assumed to. have lower initial expectedlevels of ability. Once this assumption is made, even when applicants from thesegroups are hired, employers attribute less causality between their efforts and anyunexpectedly high output levels. This difference in treatment feeds a process whereworkers from these groups accumulate less human capital due to reduced access totraining and due to discouragement. They argue this process generates ongoing andpotentially permanent inequities. Norman (2003) concurs, arguing that statisticaldiscrimination. establishes a self-fulfilling prophecy: minority groups in the labourmarket are unsuccessful because employers assign lower skill-sets to them on the basisof race, and minority groups are far less likely to make human capital investmentsbecause they have a belief they will be discriminated against in the labour marketregardless of their level of human capital.

Below, we compare managers' hiring perceptions of Indigenous and NESB workersin terms of their education, skills, and commitment. The group viewed as holdinglower levels of these human capital measures will be screened out of the recruitmentprocess. We also compare managers' perceptions of both groups' performance levels,as measured by absenteeism and retention. Again, any perception of difference willfeed back into the screening process and serve as justification for hiring decisions.Such perceptions will provide evidence ofstatistical discrimination.

The second relevant body of literature is that on diversity management, where aheterogeneous workforce appropriately managed can be a source of firm competitiveadvantage. An organisation's pool of human capital may be classified as diverse interms of the observable (e.g. gender or race), unobservable relational (tenure or maritalstatus) and personal (beliefs and perceptions) attributes of its employees (Kilduff,Angelmar and Mehra, 2000; Jehn, Northcraft and Neale, 1999). Of course, a firm'shuman capital, or its management, is not by itself a competitive advantage. Competitiveadvantages require policies and practices for managing diversity that uniquely positionthe firm in relation to existing and potential rivals. Diversity management involves theadoption of human resource management (HRM) policies and practices that create corecompetencies in managing workforce diversity that become the source of firm-levelcompetitive advantages, such as operating more efficiently; creating new products andservices; expanding domestically and internationally; and becoming a knowledge·creating firm.

For example, appropriately managed diverse mixes of employees may be moreinnovative due to the greater variation in cognitive processes, mental models andcommunication styles, as derived from distinctive cultural backgrounds, lifeexperiences and value systems (Cox and Blake, 1991; McLeod and Lobel, 1992). Thisinnovation may manifest itself by a firm more effectively recognising and meetingcustomer product and service needs than rivals. Firms that distinguish, develop andharness different and shared mental models will more effectively seize opportunities inculturally complex environments (Weik and Roberts, 1993; Denzau and North, 1994).

Diversity management may create a competitive advantage in the labour market - anemployer ofchoice advantage - as firms attract and retain a higher quality and greater

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ANDRE SAMMARTlNO, JANINE O'FLYNN and STEPHEN NICHOLAS

number of job applicants at lower search and management costs than rivals (Robinsonand Dechant, 1997). Even when diversity management practices do not lead tocompetitive advantages, they may reduce the costs of unmanaged workforceheterogeneity such as excessive turnover and low job satisfaction. For example, socialalienation has been shown to contribute to absenteeism and turnover through its effectonjob satisfaction (Scott and Taylor, 1985; Farrell and Stamm, 1988; Hackett, 1989).

Within the broader context of diversity management, employing Indigenous workerscontributes to creating a more heterogeneous workforce and satisfying customer needs.In Australia, firms also need to recognise their social responsibility obligations, whichmay include hiring and managing a workplace with Indigenous workers. However, itmust be recognised that, in some cases, engagement with Indigenous communities willreflect an organisation's desire to access specific natural resources and raw materials.

Informed by these two literatures, a survey of Australian CEOs' perceptions of theirfirms' human capital and employment policies and their firms' diversity managementcapabilities with respect to Indigenous Australians was undertaken.

3 Data and Methodology

The survey of senior' managers of Australian-based businesses was conducted in late1999. The survey instrument was designed using the theory reviewed above,' and pre­tested in consultation with academic' colleagues, business leaders, and advisers in theDepartment of Employment, Workplace Relations and Small Business. The surveyswere accompanied by a letter of endorsement from the Federal Ministers forImmigration and MulticulturaI Affairs, and Employment, Workplace Relations andSmall Business.

The surveys were sent to a mailing list compiled from Who Owns Whom (1998) anda number of bi-Iateral business council mailing lists.' Following standard surveytechniques, the first mail out was followed four weeks later by a reminder letter to allnon-responding firms (Dillman, 1978; Claycomb, Porter and Martin, 2000). The initialand follow-up mailing yielded responses from 229 firms from a total sample of 1179firms - a return rate of 19.4 percent. This is considered a low but acceptable responserate, especially given that the survey was sent to senior managers, the potentiallysensitive nature of the topic, and the preliminary broad-brush nature of the research(Finkelstein, 1992; Waldman, Ramirez, House and Puranam, 2001; Parry and Proctor­Thomson, 2003). The rate may also reflect some selection bias, that is, responses mayhave been more likely from those firms that were good corporate citizens andrespondents that have strongly embedded discriminatory tastes. Further, the responserate may reflect the fact that CEOs are simply not interested in the Indigenous

Further details are available from authors.2 These included the American Chamber of Commerce in Australia, Australian British Chamber of

Commerce, Australian- Italian Chamber of Commerce. Australian Netherlands Chamber ofCommerce and Industry, French- Australian Chamber of Commerce, German Australian Chamberof Commerce, Royal Norwegian Consulate, and the Swedish Trade Council. The name, address,telephone number and name of the CEO or chair of the board of each finn was collected. Theinfonnation was then checked by telephone for accuracy.

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THE EMPLOYER PERSPECTIVEemployment issue (see Burke, 1993 for a similar argument in relation to women insenior management).

The survey explicitly targeted senior managers as we were seeking to capture themindset of these decision makers. Eighty (80) percent of respondents were eEOs(managing directors), board chairs or similar senior executives. The data reflected howbusiness leaders viewed resource allocation decisions and strategy choices that shapedtheir firms' HRM priorities and practices. Their distance from ongoing employmentdecisions is acknowledged, but the data captured the strategic employment and diversitymanagement directions in a cross-section of Australian·based finns.

The responding firms were drawn from all industrial sectors. Thirty (30) percentwere manufacturing firms, 31 percent services (including financial services), 17 percentagriculture and mining, i4 percent wholesale and retail, and 7 percent construction.Seventy three (73) percent were Australian-owned and the rest foreign multinationalfirms based in Australia, with i3 percent North American, 7 percent European (mainlyfrom the UK) and 6 percent Asian (mainly Japanese). The sample firms were roughlyrepresentative of the geographical distribution of firms in Australia, with all states andterritories represented. Finns in our sample were medium-large finns, with about 60percent of the sample comprised of firms with more than 400 employees. The averagenumber of employees in Australia was 2869. The median was 550. .

The survey asked respondents to indicate the importance of a range of corporatestrategies to their organisation; to assess the demographic diversity of theirorganisation, including Indigenous Australians; to outline the relevant policies andpractices in place within their organisation; to indicate the importance of a range of HRpolicies and practices in place within their organisation and identify the linkagesthrough to strategic outcomes; to indicate levels of satisfaction with different groups ofemployees including NESB and Indigenous Australians; and to indicate levels ofsatisfaction with outcomes.

The survey captured the diversity management and employment practices ofindigenous workers, as one of the demographic groups within each firm's broaderworkforce. Explicit questions were asked about barriers to Indigenous employment,factors in the employment of Indigenous employees, perceptions of Indigenousemployees and the scope for a change in labour market conditions for Indigenous jobapplicants. To provide a benchmark, similar questions were asked about NESBworkers.

To evaluate the sample firms' competencies and advantages in diversitymanagement, we asked a range of questions to assess each firm's workforce diversityand diversity management policies and practices. These competencies and advantageswere measured in terms of knowledge and learning, operating in culturally complexenvironments, marketing and HRM cost efficiency.

Several statistical tests were used to analyse the data. T-tests were used to measurethe difference in proportions and Kruskal-Wallis one-way analysis of variance by rankswas used to determine whether the means from different sub-samples were from thesame population (Mason, Lind and Marchal, 1999, pp.558-9). Sample sizes variedacross the questions tested, since all firms did not answer every question.

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ANDRE SAMMARTlNO, JANlNE O'FLYNN and STEPHEN NICHOLAS

4 The Survey Findings

4.1 Levels ofIndigenous Employment

Employment of Indigenous Australians was not widespread in the sample firms. Thirty·nine (39) percent of the firms did not employ Indigenous Australians, and 7 percent ofrespondents did not know whether their firm employed Indigenous people. In the 58percent or 132 firms that employed Indigenous workers, they were typically employedin small numbers, with only 6.6 percent of the sample, or 15 firms, having Indigenousworkers comprising more than 2 percent of their workforce. This finding contrasts withHunter and Hawke (2002) who, drawing on AWIRS data, showed that 36.6 percent offirms employed Indigenous workers. This contrast reflects Hunter and Hawke's use ofemployer and employee responses. Thus, in this study, CEOs who do not necessarilyhave direct involvement in hiring decisions may overestimate Indigenous employment,or assume that their organisation does have Indigenous workers. As this study relied onemployer only responses, there was no opportunity to benchmark this against employeeself·reports of AboriginaIity. Further, this disparity may be explained by the alreadyn,oted potential selection bias in responses in this study.

TABLE IEMPLOYMENT OF INDIGENOUS WORKERS

Sector Percentage of theNumber of Finns Percentage of the

Workforce IndustryMining Do not employ 10 41.7

<2% 6 25.0>2% 8 33.3

Manufacturing Do not employ 22 53.7<2% 17 41.4>2% 2 4.9

Transportation Do not employ 2 22.2<2% 5 55.5>2% 2 22.2

Wholesale Trade aod Do not employ 18 75.0Retail <2% 5 20.8

>2% I 4.2

Financial Institutions Do not employ 10 66.7<2% 5 33.3>2% 0 0

Services Do not employ 7 24.1<2% 21 72.5>2% I 3.4

Note: Survey question was: "Please estimate the proportion of your workforce who areAboriginal or Torres Strait Islander",

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THE EMPLOYER PERSPECTIVE

Table 1 shows the employment levels for various industry classifications. Tbenumbers of Indigenous workers were unifonnly low. In several sectors ­manufacturing, wholesale retail and trade and financial services - the do not employresponse prevailed. Tbe mining sector had the highest proportion (33 percent) of finnswith Indigenous Australians comprising more than 2 percent of their workforce. But,even in mining, few Indigenous workers were employed. Seventy-five (75) percent ofall mining finns employed fewer than 20 Indigenous workers, and only two miningfinns employed more than 70 Indigenous workers.

It must be remembered that these are CEO perceptions of employment numbers.Most finns do not accurately record the levels of Indigenous employment. It is alsolikely that there is a significant level of under-reporting by individual Indigenousworkers. Willingness to self-report is likely to be positively related to the organisations'levels of commitment to improving Indigenous employment outcomes, which we showas low. Despite these caveats, we believe that our survey provides an accurate view ofthe levels of Indigenous employment in Australia.

4.2 CEO Perceptions ofIndigenous Human Capital

CEOs were asked to indicate their level of satisfaction with three key human capitalaspects of their Indigenous workforce - education, skill and commitment levels. Tbeywere also asked to rate the importance of three other issues - high absenteeism rates,difficulty with retention and a shortage of job applicants - in their decision to employIndigenous Australians. Tbe CEOs were also asked the same questions with regard toNESB workers. Tbe differences in their perceptions of these two demographic groupsshed further light on the employment issues. Tbe survey results are reported in Tables 2and 3.3

In tenns of human capital, CEOs viewed Indigenous workers as having significantlylower levels of skill (3.8) than NESB workers (4.1).' These perceived skill leveldifferences, go some way to explaining the lower levels of employment of Indigenouscompared to NESB workers. Low skill levels limit the number of job opportunities forIndigenous applicants within any given organisation. Furthennore, preconceptionsabout skill deficiencies reduce the relative attractiveness of Indigenous applicants whencompeting for roles with NESB applicants. Interestingly, education levels were ratedequivalently across the two groups (3.6). This may reflect the problems withrecognition of overseas qualifications that many NESB applicants face.

3 The respondents were asked to state the importance of each factor. The survey used a 5-pointLikert scale with "no" = I, "low"=2, "moderately low"=3, "moderately high"=4 and "high"""S.Differences between the responses for Indigenous and NESS workers were tested using Mann­Whitney U-tests.

4 All differences cited as significant between the responses for Indigenous and NESS workers aresignificant at least the 5 percent level using a Mann-Whitney V-test.

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ANDRE SAMMARTlNO, JANlNE O'FLYNN and STEPHEN NICHOLAS

TABLE 2CEO PERCEPTION OF INDIGENOUS AUSTRALIANS

Importance (% of respondents)Moderately Moderately Mean

No Low Low High High (Standard NI 2 3 4 5 Error)

Level of Education 2.0 14.0 27.0 32.0 25.03.6

100(1.0)

Level of Skills 1.0 10.1 242 34.3 30.33.8

99(1.0)

Level of Commitment 5.1 7.1 28.6 29.6 29.63.7

98(1.1)

High Absenteeism 10.6 16.0 30.9 35.1 7.53.1

94(1.1)Difficulty with 12.4 19.1 93.3 24.7 4.5 2.9

89Retention (1.1)Shortage ofJob

19.0 25.3 17.9 14.7 23.23.0

95Applicants (1.5)

Note: Survey question was: "For employing indigenous Australians, please ronk the importance of.....

TABLE 3CEO PERCEPTION OF NESS WORKERS

Importance (% of respondents)Moderately Moderately Mean

No Low Low High High (Standard NI 2 3 4 5 Error)

Level of Education 2.6 9.7 28.4 40.7 18.7 3.6 155(1.0)

Level of Skills 1.9 5.1 15.4 39.1 38.54.1

156(1.0)

Level of Commitment 2.6 5.9 13.8 44.1 33.6 4.0 152(1.0)

High Absenteeism 18.7 30.6 25.4 20.2 5.2 2.6 134(1.2)Difficulty with 18.8 39.8 23.4 17.2 0.8 2.4

128Retention (1.0)Shortage of Job 26.1 29.7 24.6 13.0 6.5 2.4 138Applicants ( 1.2)

Note: Survey question was: "For employing Non-English Speaking Background workers,please rank the importance of .....

On a behavioural human capital question - level of job commitment - Indigenousworkers also rerumed a significantly lower rating (3.7) than NESB workers (4.0).Lower commitment is generally seen as directly correlated to poor performance (Wahn,1998). This perception that Indigenous workers have lower levels of commitment andthus lower performance levels may reduce the likelihood of a given Indigenous

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THE EMPLOYER PERSPECTIVEapplicant being hired relative to an NESB applicant with similar skill and educationlevel. Such behaviour is consistent with models of labour market discrimination(Akerlof, 1974; Lang, 1986; Oettinger, 1996; Farmer and Terrell, 1996).

Two further behavioural human capital characteristics - high absenteeism rates anddifficulty with retention - saw significant differences between Indigenous and NESBworkers. Absenteeism was viewed as a significantly more important issue whenemploying Indigenous workers (3.1) versus NESB employees (2.6). Indigenousemployees were also seen as significantly more difficult to retain (2.9) than the NESBcounterparts (2.4). Both absenteeism and turnover are significant costs for an employerto bear. Again these perceptions of differential payoffs from employing Indigenousapplicants serve to increase the likelihood of discrimination or screening.

These differentials in CEO perceptions of Indigenous workers' human capital go asubstantial way in explaining the poor Indigenous employment outcomes in terms oflower demand for Indigenous workers from employers. There was also a significantdifference on the supply side. CEOs reported a shortage of job applicants as a muchmore significant issue in the Indigenous employment decision (3.0) relative to hiringNESB workers (2.4). This CEO perception of a shortage of job applicants points to aninteresting anomaly. There are large numbers of unemployed Indigenous Australians.Hunter and Gray (2000) found unemployed Indigenous Australians to be moremotivated to work than their non-Indigenous counterparts, but they also foundsubstantially higher levels ofdiscouragement among the Indigenous unemployed. Thereis clearly a mismatch between location of demand and location of supply bothgeographically and along the spectrum of required skills. This mismatch, coupled witha lack of engagement of firms with Indigenous job applicants is escalating thediscouragement effect.

There were no significant differences in the ranking of importance of factors in theemployment of Indigenous people across firm size, nationality ,and firms with Asianversus non-Asian operations.' The largest employers of Indigenous workers ratedIndigenous job commitment as slightly higher, indicating perhaps that experience withIndigenous workers may assuage some ill-founded preconceptions among CEOs. Thisfinding is not particularly strong, however, and is inconsistent with the finding thatthese employers also reported higher concerns with issues ofIndigenous absenteeism.

4.3 Policies and Practices Supporting Indigenous Employment

A key indicator of proactive engagement of Indigenous employees is the existence ofdiversity management and Aboriginal employment policies and practices. CEOs wereasked to report the areas in which they had documented policies, comprisingoccupational health and safety (OH&S), equal employment opportunity (EEO),diversity management and Indigenous employment policies (see Table 4). Ninety-five(95) percent of firms had documented OH&S policies and 83 percent had documentedEEO policies. In contrast, only 33 percent of firms had documented diversity policies.Few firms, less than 14 percent, had made an explicit commitment to Indigenous

Kruskal Wallis tests were used. Large finns were defined as having more than 1000 employeesand small less than 1000.

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ANDRE SAMMARTlNO, JANINE O'FLYNN and STEPHEN NICHOLAS

stakeholders in the form of an Aboriginal employment or management policy, SinceOH&S and EEO are legislatively required in most jurisdictions, the greater value givento OH&S and EEO relative to diversity management and Indigenous engagement mayreflect a strong compliance culture amongst Australian business.

TABLE 4DOCUMENTED POLICIES AND PRACTICES

Mean LevelPolicy/practice Yes (%) No (%) N of N

Imp0rlanceOccupational Health and Safety Policy 95.1 4.9 224 4.6 218Equal Opportunity Policy 82.9 17.1 222 4.1 212Diversity Policy 32.6 67.4 212 3.2 175Indigenous Employment Policy 13.7 86.3 212 2.8 155Occupational Health and Safety Training 88.7 12.3 221 4.5 204Equal Opportunity Training 59.8 40.1 214 3.6 192Diversity training 26.7 73.3 206 3.0 164Occupational Health and Safety Officer 85.1 14.9 222 4.3 204Equal Opportunity Officer 48.6 51.4 214 3.3 181Diversity Officer 12.4 87.6 210 2.7 153Indigenous Employment Officer 12.4 87.6 209 2.7 152

Note: Survey question was: "Please indicate whether your finn has the following documentedpolicies and practices and their importance"

Documenting policies is not the same as actively implementing the policy content,and firms might practice diversity policies that are not documented. CEOs were askedto identify the presence of key indicators of diversity management implementation,such as explicit training activity and designated areas of responsibility. OH&S trainingwas reported by 89 percent of firms while 85 percent of firms had OH&S officers. Sixty(60) percent of the firms had documented EEO training and 49 percent of firms hadEEO officers. It is clear that for OH&S and EEO, policy was put into practice. Diversitytraining was only undertaken by 27 percent of firms, while 33 percent claimed to havedocumented diversity policies. Most diversity policies were without a champion, withonly 12 percent of firms employing a diversity officer. The equivalent proportion (12percent) of respondents employed an Indigenous relations officer.

CEOs were also asked to indicate the importance to their organisation of OH&S,EEO, diversity and Indigenous employment policy and practice. Using the 5-pointLikert scale (I equals no to 5 equals high), CEOs ranked the importance of OH&Spolicies at 4.6, OH&S training at 4.5, EEO policies at 4.1 and EEO practices at 3.6, allin the medium-high range. In contrast, diversity policies were rated significantly lowerat 3.2 and diversity training at 3.0. Indigenous employment policies were ranked evenlower in importance at just 2.8. In terms of the importance of employing staff withdesignated responsibilities for these areas, CEOs ranked Indigenous employment anddiversity officers at 2.7, but OH&S officers at 4.3 and EEO officers at 3.3.

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.-~~--------------------------------------_ .. __ ._--- --

THE EMPLOYER PERSPECTIVEThese findings reflect an environment in which minimal financial and people

resources were dedicated to the cause of improving organisations' scope to employ andretain greater numbers of Indigenous employees.

Firms with Indigenous employees reported higher levels of policy documentation,training efforts and dedicated officers in the areas of EEO and Indigenous employment(see Table 5). Almost all firms (95 percent) with Indigenous employees had an EEOpolicy, and almost three quarters (73 percent) engaged in EEO training. Thissignificant difference is comparable to that reported in Hunter and Hawke's (2002,p.386) analysis of the AWIRS data. Almost a third (32 percent) had formal Aboriginalemployment policies, and a similar proportion had an Indigenous employment officer.These firms also reported the importance of Aboriginal employment policies and officeras significantly higher than the total sample, but not EEO policies' Interestingly, theincidence and importance of diversity policies, training and officers did not differbetween these firms with Indigenous employees and the total sample. It may be thecase that diversity policies are not seen to adequately meet the needs of Indigenousemployees.

TABLE 5DOCUMENTED POLICIES AND PRACTICES FOR FIRMS WITH INDIGENOUS

EMPLOYEES

Mean LevelPolicy/practice Yes (%) No(%) N of N

ImportanceOccupational Health and Safety Policy lOO 0 81 4.8 81Equal Opportunity Policy 95 5 80 4.2 80Diversity Policy 35.1 64.9 77 3.2 66Indigenous Employment Policy 31.6 68.4 79 3.1 65Occupational Health and Safety Training 97.5 2.5 81 4.6 79Equal Opportunity Training 72.7 27.3 77 3.7 75Diversity training 32.0 68.0 75 3.0 62Occupational Health and Safety Officer 97.5 2.5 80 4.6 78Equal Opportunity Officer 60.5 39.5 76 3.5 68Diversity Officer 14.3 85.7 77 2.7 55Indigenous Employment Officer 32.1 67.9 78 3.1 62

Note: Survey question was: "Please indicate whether your firm has the following documentedpolicies and practices and their importance". Data are for all firms reported one or moreIndigenous employee.

There were significant differences between different industry groupings. Miningfirms ranked the importance of Indigenous employment policies significantly higher(3.7) than for non-mining firms (2.6) and ranked the importance of Indigenousemployment officers significantly higher (3.7) than non-mining firms (2.5). Miningfirms were also significantly more likely to put into place Indigenous employment

6 Kroskal Wallis tests were used in these instances and for the subsequent comparison betweenindustries. All differences cited are significant at least the 5 percent level.

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ANDRE SAMMARTINO, JANINE O'FLYNN and STEPHEN NICHOLAS

policies (36 percent versus 10 percent), and to have Indigenous employment officers(46 percent versus 6 percent).

It is not possible from the data to imply the direction of causality between thedevelopment of targeted Indigenous policies in the mining sector and the higher levelsof Indigenous employment in the sector. It is highly likely that we are witnessing alooped feedback process whereby firms have responded to the dual needs to moreeffectively engage with their local communities and to tap into the local labour market.Such engagement encourages the development of more effective and substantivepolicies and practices so as to retain and develop these new employees. Such afeedback process is consistent with the employer ofchoice arguments of the diversitymanagement proponents (Robinson and Dechant, 1997). While recognising the specialchallenges facing the mining industry, the practices of these firms warrant greateranalysis and research as they may serve as models of best practice for organisations inthe broader Australian business community.

4.4 CEO perceptions ofIndigenous Employment outcomes

CEOs were also asked to assess the organisation's overall satisfaction with theexperience of engaging Indigenous employees. Tbe three areas were probed ­integration into the workforce, acceptance by'co-workers, and performance. Tbese threeaspects of employment outcomes distinguish between those areas over whichemployees may have greater control, and those substantially affected by organisationalculture and the presence of appropriate policies.

TABLE 6SATISFACTION WITH THE EMPLOYMENT OF INDIGENOUS WORKERS

Satisfaction (% of respondents)Moderately Moderately Mean

No Low Low High High (Standard N1 2 3 4 5 Error)

Integration into the0.0 5.9 34.1 40.0 20.0

3.785workforce (0.9)

Acceptance by co-0.0 3.6 32.\ 39.3 25.0

3.984

workers (0.8)

Perfonnance 0.0 8.3 25.0 50.0 \6.73.8

84(0.8)

Note: Survey question was: "If you employ Indigenous Australians. please indicate your level ofsatisfaction with ..."

As shown in Table 6, both the level of satisfaction with the integration of Indigenousworkers in their workforce (3.7) and an acceptance of Indigenous workers (3.9) wereranked medium, revealing the continuing impediments facing Indigenous employees inthe workplace. Six percent of firms ranked their satisfaction with integration ofIndigenous workers into the firm's workforce as low, and only 20 percent ranked theirsatisfaction with integration as high. Similarly, only 25 percent of CEOs rankedacceptance of Indigenous workers by their co-workers as high. Tbe performance of

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THE EMPLOYER PERSPECTIVEIndigenous workers was also ranked medium (3.8). On the S-point Likert scale, 8percent of CEOs gave a low ranking to their satisfaction with Indigenous workers'performance and only 17 percent ofCEOs gave a high ranking.

Mining firms did not rank their satisfaction with Indigenous workers higher thannon-mining firms. This is surprising given the better-documented Aboriginalemployment policies, employment of Aboriginal relations officers and the higherimportance given by mining firms to Indigenous employment practices. CEOs'assessment of Indigenous workers varied according to sample characteristics.Manufacturing firms ranked their satisfaction with the performance of Indigenousworkers significantly higher than did non-manufacturing firms. There were nodifferences across firm size.

TABLE 7SATISFACTION WITH THE EMPLOYMENT OF NESB WORKERS

Satisfaction (% of respondents)

Moderately Moderately MeanNo Low Low High High (Standard N1 2 3 4 5 Error)

Integration into the1.8 3.6 26.8 39.9 28.0

3.9168

workforce (0.9)Acceptance by co-

1.8 2.4 16.1 46.4 33.34.1

168workers (0.9)

Performance 1.8 0.6 19.8 47.3 30.54.0

167(0.8)

Note: Survey question was: "If you employ workers from a Non-English Speaking Background,please indicate your level of satisfaction with ..."

Similar data were cted with respect to NESB workers (see Table 7). WhileCEO rankings of the int,_.dtion into the workforce ofIndigenous (3.7) and NESB (3.9)were not significantly different, tests revealed a significant lower ranking of Indigenousworkers' acceptance by co-workers (3.9 versus 4.1) and of their performance (3.8versus 4.0) compared to NESB workers. Almost two times the number of CEOs rankedthe performance of NESB workers as high (30.5) than ranked the performance ofIndigenous workers as high (16.7). These data confirm the persistent problems shapingIndigenous employment practices in Australian firms. Different perceptions of co­worker acceptance of Indigenous employees compared to NESB workers indicate CEOsdid recognise potential systemic or organisational culture barriers for incomingIndigenous hires. Given this recognition, it is concerning that so few organisationsdemonstrated a commitment to policy development and resource allocation in this area.

Finally, the differences in perceptions of Indigenous workers' performance indicateongoing CEO concerns about the quality of labour being provided. It should not beignored that performance can also be considered as an outcome of existing HRMpractices. Very few of the sample organisations had incorporated diversity managementinto their suite of HRM practices. It may be the case that Indigenous employees aremore deleteriously affected by the lack of such policies, and that together with the

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ANDRE SAMMARTlNO, JANlNE O'FLYNN and STEPHEN NICHOLAS

integration and acceptance barriers noted above, this is showing up as poorerperfonnance. This would be consistent with the alienation arguments cited earlier(Scott and Taylor, 1985; Farrell and Stamm, 1988; Hackett, 1989). Further, it mayreflect an embedded acceptance of attributing lower perfonnance, productivity andhigher absenteeism to Indigenous workers in Australian finns, thus providing evidencefor statistical discrimination (Arrow, 1998).

5 Conclusion

This paper analysed survey data regarding CEO perceptions of their finn's labourmarket engagement with Indigenous Australians. For the majority of theseorganisations, there was a low level of engagement with Indigenous job seekers. CEOsperceived the quality of the Indigenous labour supplied to be lower than the marketnonn, and lower than NESB workers. There is also a view that it is difficult for finnsto tap into the Indigenous labour pool. Worse yet, there is little evidence that finns areactively seeking to improve their own level of engagement. Few firms have developedexplicit diversity management and Indigenous employment policies to tap into theIndigenous labour market and few have allocated ongoing resources to managing theirfirm's employment relationships with their Indigenous workers. Where this hasoccurred it has been concentrated in specific industries - notably mining. A morecritical assessment of this finding could be that such engagement reflects the desire ofsuch companies to access raw materials under constraints imposed by Native Titlelegislation in the Australian context, rather than an attempt to overcome the outcomesof labour market discrimination.

The absence of such policies and practices exists despite recognition of concernsabout integration and acceptance of Indigenous employees in the workplace. This lackof activity, coupled with the poor perception of Indigenous labour, serves as asubstantial barrier to greater employment of Indigenous Australians. In fact, theperception of Indigenous employees as underperforming and prone to absenteeism andflight may well be exacerbated by the ongoing inaction of Australian employers intenns of modifying their HRM practices to better address any differentials needs ofIndigenous employees. At worst, such findings reflect entrenched discriminatorypractices in Australian finns which require broader and more sophisticated publicpolicy responses.

A strong social justice case can be made for great engagement of Australian businesswith the Indigenous labour market and Indigenous community in general. In anenvironment of triple bottom line reporting, business is increasingly called to bear onthis very issue (Department of the Environment and Heritage, 2003). An optimisticinterpretation of the findings is that some finns, specifically those in the mining sector,appear to have heeded these responsibilities earlier than others. These finns' policies,practices and implementation strategies warrant further research. In terms of potentialsteps forward from these findings, there is an urgent need for finns to develop effectiveIndigenous employment policies and practices as part of a wider diversity managementstrategy. But it is unlikely that such policies and practices will be made from withinmost firms. This is exacerbated by the small proportion of the labour force, andpopulation more generally, that Indigenous Australians comprise. Such a minority

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THE EMPLOYER PERSPECTIVEgroup may find it difficult indeed to generate sufficient mass within firms to demandchanges in ways in which other historically disadvantaged labour market groups have(e.g. women). The broader social good of non-discriminatory and equal employmentopportunities for Indigenous Australian will fall victim to market failure. Externalstakeholders, including Government, should develop and communicate a business casefor Indigenous employment that captures the attention of Australian business leaders.

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