I’ve seen a few suggestions lately (eg. in the Fin) that Australians should envy the New Zealand economy’s performance. Here are a few charts to keep in mind when comparing the two countries.
Is the Australian labour market today in worse shape than it was during the Great Depression? There were about half a million unemployed people in 1932, at the height of the Depression, but around 730 000 unemployed in January this year. The second number is certainly larger than the first number, so does that mean we’re in sub-Depression territory? Of course it doesn’t. The population is about 4 times larger than it was back then and the labour force is about 4.7 times bigger, so comparing the number of unemployed people today and in 1932 doesn’t really tell you much about the relative health of today’s labour market. There’s a reason why people look at the unemployment rate rather than the number of unemployed people when they want to make comparisons over time.
John Black has another piece in The Weekend Australian, which I read against my better judgement. His point seems to be that the federal Labor government sabotaged the labour market, and particularly that it worked against the interests of employees in traditional blue collar industries.
After reaching an all-time high of 65.8% in November 2010, the proportion of people aged 15+ who are either in work or actively looking for work has declined sharply, hitting 64.8% in October this year. An important question for policy makers is this: is the participation rate declining because people are being discouraged from looking for work, or is it declining as a natural consequence of the ageing of the population?
Saturday’s AFR ($) featured a discussion with anti-union campaigner Ken Phillips, which included the following snippet:
Large firms – “bureaucracies” captured by senior staff – employ far fewer people in aggregate than small business, yet dominate economists’ thinking, he argues.
This claim is not supported by the data.
Three types of blog posts I’m sick of writing, and I’m sure you’re sick of reading, are generic defences of the Fair Work Act, angry screeds against predictable partisanship from The Australian, and basic summaries of labour force data. Yet every time I swear to myself that I’m going to take a break from each of these genres, someone writes something that gets me sufficiently riled up that I feel compelled to respond. John Black’s piece in yesterday’s Oz, titled ‘Workers at the mercy of a jittery economy‘, ticked all the boxes. He uses a highly selective and skewed bundle of labour force data to try to make the case that the Fair Work Act is the cause of rising unemployment. Here’s my response.
TL;DR version: no, it has not.
I have a new post at the Chifley Research Centre on the recent decision to hold the real minimum wage constant. Please read it!