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.
When the Hawke Government came to power in March 1983, the unemployment benefit for a single adult was worth $192 in today’s dollars. By the time Labor left office in 1996, it had lifted the real (inflation-adjusted) benefit, renamed Newstart Allowance, to $245 a week. Over the course of those 13 years in office, the Hawke and Keating Governments raised the real value of the unemployment benefit by $53 per week, a 27.4% rise. Contrary to the recollections of some, increases in unemployment benefits were part of the “Keating model”.
Since Keating left office, the unemployed haven’t fared as well. It’s worth $252.70 a week now, including the Clean Energy Supplement, a $7.70 or 3.2% increase over 17 years.
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.