Should we consider the croupiers at Crown Casino to be public sector employees? How about people who file away books at the National Library of Australia? The answers to those questions seem to be yes and no, respectively, according to the Institute of Public Affairs.
A discussion of Australian political and economic issues and ideas, by Matt Cowgill.
Archives for posts with tag: employment
How would we know if the labour market was ‘flexible’? One way is to look at how the jobs market responds to economic shocks. During the GFC, when the Howard Government’s labour laws were still in effect, the number of hours worked in Australia fell while the number of people in employment didn’t fall.
Tasmania has set an unfortunate record: it’s the first Australian state in which less than half of all adult men are employed full time. In the lead-up to the financial crisis, the proportion of Tasmanian men in work soared, rising faster than the national ratio, but it has since plummeted. In February 2013, just 48.3% of Tasmanian men aged 15 and over were in full-time work; this was 8.3 percentage points below the national figure of 56.6%.
It’s hard to sum up the state of the labour market in one statistic, but that doesn’t stop us trying. The most commonly used figure is of course the unemployment rate, but that can hide some interesting developments in the world of work, like if people have their hours cut or if others leave the labour force entirely. I generally prefer the employment-to-population ratio, which tells us the proportion of working age people (usually just everyone aged 15 and over) who are in work. Still, the employment-to-population ratio doesn’t tell us about changes between part-time and full-time work.
For that reason, I’ve been looking at this measure that I’ve spliced together from the Labour Force statistics: the number of hours worked in a given month, per working age person (everyone 15+). This is a bit like the employment-to-population ratio, but it uses hours rather than employed persons as the numerator.
The hours worked-to-population ratio
This chart tells us that there isn’t as much work to go around as there was before the GFC, but we’re doing better than we were in early 2009. The number of hours per person flattened out in 2011, dipped in January and has recovered some lost ground in March.
Inspired by this analysis of the jobs crisis in the US, I thought I’d have a look at how Australia compares to the US and Europe.
Richard Farmer has made a couple of strange comments in Crikey about the latest jobs numbers.
Yesterday, Farmer wrote:
More evidence from the Australian Bureau of Statistics this morning that economic growth is less than the Treasury and Reserve Bank experts had expected. Unemployment in June remained at 4.9%.
I do not know how Farmer reached this conclusion. Read the rest of this entry »
This blog represents my personal views, and not necessarily those of my employer, the ACTU.
Nevertheless, there is a fair amount of crossover between the things I write about on this blog and the things I write about for work. Given this crossover, I thought some readers might be interested in this piece I wrote for the ACTU’s Rights at Work blog (re-posted at The Drum).
The post was written in response to a front page article in Monday’s edition of The Australian, in which some retailers and retail associations made a few claims about the state of their industry, and blamed their alleged woes on the IR system and minimum wages. As you might imagine, I don’t agree with their diagnosis.
The Financial Review ran an article on its front cover yesterday about the perils of wage inflation (it’s paywalled, so no use linking). Wages are apparently rising at an unsustainable level, threatening the only economic indicator that matters, the overnight cash rate:
The mining boom has triggered a wages blowout that could ignite inflation and tip the Reserve Bank of Australia into raising interest rates more quickly than planned. Labour costs rose by 4 per cent in the year ended August 31, up from 3.7 per cent in July, according to NAB’s monthly survey of business conditions.
Oh no! A 0.3 percentage point increase in year-ended terms!
Note that the entire story hangs off one data source, the NAB business survey. Even then, the crux of the story is a rise in year-on-year wages growth from 3.7% to 4%, hardly the stuff of central bankers’ nightmares.
The evidence of wage pressures comes as the ACTU secretary Jeff Lawrence and president Ged Kearney will have their first meeting today with the Gillard Government.
Oh no! Unionists!
It’s the full scare campaign. News of the apparently unsustainable wages growth is mixed in with news that union officials are meeting with ministers. The clear implication for readers is that the two are connected and there’s cause for concern. The problem for the Fin is that there are hardly any facts to support its strongly-worded warnings.
The available ABS wages data would give the RBA no cause for alarm.
Here’s the quarterly growth in the Wage Price Index for the past three years, with the long term average (1997-2010) as a dotted line. Wage growth dipped below average in January 2009, and still hasn’t recovered. Private sector wage growth has flatlined for the past few months, while public sector wage growth has fallen. There is no evidence here to support the Fin’s claim that wages are spiralling out of control.
If we set aside the fact that the NAB survey results seem like an aberration, what about the article’s suggestion that wage rises necessarily imply unsustainable inflation?
Although the increases aren’t big by historic standards, the survey showed wages are growing faster than prices.
Oh no! Real wage growth!
I had a look at how common it is for wages to grow faster than prices. I compared year-on-year WPI and headline CPI and found that wages have in fact grown faster than prices for 37 of the past 48 quarters. It’s far from unusual for wages to grow in real terms; in fact, it’s the norm. I don’t recall too many hyper-inflationary price spirals over that period.
And yet, we have ANZ Banking Group economist Katie Dean claiming that:
Catch up or not, higher wages are inflationary.
Really, Katie? I would have thought that if there are productivity improvements then real wage growth is justified, even within a neo-classical economic framework.
So, what has happened to productivity? An easy way to measure the relationship between productivity and wages is to look at real unit labour costs. This measures the average cost of labour per unit of output, adjusted for inflation. If real unit labour costs are falling, then it costs employers less, in real terms, to employ people to produce a given quantity of goods or services.
Here’s what has happened to real unit labour costs over the past 25 years:
Inconveniently for a newspaper wanting to run a 1970s-style “unions lead wage breakout” story, real unit labour costs are at their lowest on record. They were roughly stable throughout the 1990s, and fell steadily in the 2000s, with sharp falls in the past year. Productivity is rising, real unit labour costs are falling and the wage price index is stagnant. Not exactly the perilous, overstretched labour market the newspaper depicts.
Let’s instead focus on the Fin’s other claim, that we’re reaching “full employment”. Forget for a moment the theoretical debates about where the full employment level lies, or the ideological debates about whether we should accept the concept. Instead, we’ll just take the Fin’s assumptions as given.
The paper claims that unemployment is “dangerously close to the 5 per cent mark, which economists say is the lowest level the jobless rate can go before tightness in the labour market pushes inflation above the Reserve Bank’s target band”.
There’s good reason to think that 5% unemployment in 2010 does not look like 5% unemployment did in 2008. We have more underemployment (people who are working part time, but want more hours) and we’re working fewer hours, on average. The labour force underutilisation rate, equal to unemployment plus underemployment, is at 12.5%, still well above its pre-financial crisis low (9.9%).
Employees are still working fewer hours, on average, than they were before the downturn.
This doesn’t look to me like a labour market with no spare capacity. The ‘headline’ unemployment rate only tells part of the story.
I don’t quibble with the basic point that things are getting better in the labour market: wages are going up, unemployment is coming down. The RBA might well start increasing rates soon, though the futures market still only sees an increase at the next meeting as a one-in-four chance. We know that the Bank has its eye on the medium-term (ie. a couple of years out), so it’s more concerned about emerging trends than the current state of play. It may well be tilting towards a more hawkish position, and the Fin’s readers would want to know that.
What I take issue with is the Fin’s shallow analysis, based on one survey, that seeks to whip up unjustified consternation about moderate wage rises and imply that unions are somehow behaving irresponsibly. As usual, the real story here is subtle, one of slightly improved conditions in the labour market, with the potential for moderate impacts on inflation over the medium term. The problem is that that doesn’t make for very appealing front-page copy, so instead we get the typical hyperbole.
