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?
Peter Martin has an interesting piece regarding the Commission of Audit in today’s Fairfax papers. He looks back at the 1996 Commission of Audit to draw some lessons for the current Commission. He notes that the 1996 Commission recommended scaling back tax expenditures to businesses and high-income households, reducing politicians’ entitlements, and changing the model of school funding.
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.
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.