I was coming through the streets of inner Melbourne the other night after playing in my band. I couldn’t believe how many little scooters with those big boxes on the back were buzzing around, in and out of traffic, turning here and there, presumably, delivering food to people who preferred to stay in from the cold weather. I had sort of noticed these ad hoc cavalcades of cheap scooters before but never really assessed the extent of the proliferation. It represents an amazing and highly disturbing trend in our labour market. Okay, that sounds like something someone from another (older) generation might say. He who grew up when there was secure employment and wages and conditions were more tightly regulated. And I have seen Tweets from young people telling us ‘oldies’ to step aside. But what the scooter riders don’t realise is that they will get old themselves one day. And secure, well-paid work coupled with a broad spectrum of high quality public services is what makes that transformation liveable. In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why.
It is Wednesday and I have only a short blog post today as I have had a lot of commitments that stop me from writing. But I did read a recent Australian Treasury paper – Wage Growth in Australia: Lessons from Longitudinal Microdata (July 2019) – which purports to model the reasons why there is wage stagnation in Australia. The results were presented at the Australian Economists Conference earlier this week and set off a storm because it appeared, at first blush, to blame workers lassitude and excessive risk averse attitudes for the lack of wages growth. I read it slightly differently. It tells me that, first, the Treasury is reluctant to acknowledge the legislative attacks on unions’ capacities to gain wage increases that have been characteristic of the neoliberal era; and, second, that the unions might take the message as a call to arms – take the employers on more often through costly industrial action within the tight legal environment that is left to them.
Some years ago, I was a panel speaker at an event in Sydney covering the topic of wage developments. I shared the podium with a young woman who was something like NSW Youth of the Year. It was at a time that employer groups were lobbying the conservative government to abandon penalty rates for workers in low-wage industries (hospitality, tourism, etc) and strip powers from trade unions. I spoke about how that agenda was designed to advance their class interests and fitted squarely with the neoliberal intent to redistribute real income away from workers towards profits. The young woman followed and announced that class was dead and that there was no such thing as a worker anymore – she said “we are all entrepreneurs now!”. Prior to that, as our national government was privatising our public companies such as Qantas and Telstra, our prime minister announced “we are all capitalists now” referring to the idiocy of people buying shares in the companies that we collectively ‘owned’ anyway while they were in public hands. The more recent manifestation of this delusion that class is dead and we are all entrepreneurs is the so-called ‘gig economy’. It seems that we now have millions of people (first young but increasingly older) who think that entrepreneurship is about buying a cheap scooter and tearing around streets delivering pizzas in all weather to earn a few dollars while the companies that ’employ’ them (or rather contract them) walk away with millions. These workers, sorry, entrepreneurs, face a bleak future. When there are no pizzas being ordered they have no shifts. When they are sick they have no pay. When they go on holidays they have no pay. And when they get old they will have no superannuation. Sounds like a plan to make someone rich.
On Thursday (May 30, 2019), Australia’s wage setting tribunal, the Fair Work Commission handed down its – Decision: Annual wage review – which saw the minimum wage rise by 3 per cent from July 1, 2019. The new minimum wage will be $740.80 per week or $19.49 per hour. Given that the annual inflation rate is running around 1.3 per cent (or thereabouts), the decision means that the real minimum wage is now higher than it was a year ago, which is a good sign. But over the last year, low-paid workers have had to endure cuts in pay rates for work during non-standard hours (so-called penalty rates), which Fair Work Australia made operational on July 1, 2017 and being phased in over a few years, with more pain to come. Given the conservatives won the federal election a few weeks ago, those penalty rate losses will not be restored. So the 3 per cent increase should be seen in that light. Our wage setting tribunal is giving with one hand and taking it back (and then some) with the other. The most sordid aspect of all this is that many employers demanded Fair Work Commission deliver real wage cuts in the annual review.
Last Wednesday (May 15, 2019), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (March-quarter 2019). Private sector wages growth was 0.5 per cent in the March-quarter which remains a very low rate of growth. Over the year to March 2019, overall wages growth was 2.3 per cent and with the annual inflation rate running at 1.3 per cent, workers were able to enjoy some real wages growth. However, over the longer period, real wages growth is still running well behind the growth in labour productivity, which has allowed profits to secure a substantially increased share of national income.
In yesterday’s blog post – Australian national accounts – growth continues but deep uncertainty looms (September 5, 2018), my theme was that the current period of economic growth in Australia was being built on what we might consider to be quicksand – increasing household debt and a run-down in household saving. Australia’s household saving ratio is now down to 1 per cent and falling, which is taking us back to the madness of pre-GFC. By any stretch this is an unsustainable growth path. Last Monday (September 3, 2018), the Australian Bureau of Statistics published their data series – Business Indicators, Australia, June 2018 and – Retail Trade, Australia, July 2018. The latter gives a more recent estimate of what the economy is doing, given the national accounts data that came out yesterday covers the period from April to June. Things are definitely not going in the right direction. The data shows that the benefits of growth are being disproportionately captured by profits and wages are lagging well behind. Overall, this is a recipe for disaster.
The headlines in the last week summarised the inherent inadequacy of capitalism for most of us who depend on real wages growth to enhance our material standard of living in economies that are growing. The latest report from the Australian Council of Superannuation Investors released on Thursday (July 17, 2018) – CEO Pay in ASX200 Companies: 2017 – shows how unfair and unsustainable the income distribution is in Australia. Australian CEOs were fully committed to the ‘greed is good’ binge leading up to the GFC along with their peers across the globe. The GFC interrupted that ‘party’, albeit temporarily. As the emergency environment that surrounded the business community during the GFC abated as a result of extensive government support (bailouts, stimulus packages, etc), the managerial class in Australia has returned attention to its on-going ‘national income grab’. The Report shows that in 2017, CEO pay reached its highest level in 17 years and the managerial class enjoyed real growth in pay at a time when the average worker is enduring either flat to negative growth in pay. Further, overall economic growth in Australia is being driven by increased non-government indebtedness as real wages growth (what there is of it) lags well behind productivity growth. And, at the same time, the Federal Government is intent on pursuing an austerity policy stance. All these trends are similar to the dynamics we experienced in the lead-up to the GFC. They are unsustainable. A major shift in income distribution away from capital towards workers has to occur before a sustainable future is achieved.
The Australian Bureau of Statistics released a new labour market framework on Tuesday (July 10, 2018) – Labour Account Australia, Quarterly Experimental Estimates – which will improve statistical analysis and allow new conjectures to be examined against the evidence. This blog post is really an exploration on my behalf of this new dataset and I know it is rather dry. But that is part of my work and it has to be done to build an evidential basis for the claims I make about this and that. I am still exploring the framework and will obviously use it to advantage (hopefully) in the future but for now here are some of the compelling insights that emerge from it. The first obvious new insight we can gain is to divide total filled jobs (employment) into Main and Secondary jobs. This allows us to assess the quality of the change in overall employment. Up until now we have considered employment in terms of persons employed. But now we can work out how many persons are employed in more than one job and where those jobs are. It provides an excellent check on statements made by politicians etc about the number of jobs being created and their quality.
There is an interesting dilemma currently emerging in Australia, which provides an excellent case study on how governments can use fiscal policy effectively and the problems that are likely to arise in that application. At present, the Australian states are engaging in an infrastructure building boom with several large (mostly public sector) projects underway involving improvements to road, ports, water supply, railways, airports and more. I travel a lot and in each of the major cities you see major areas sectioned off as tunnels are being dug and buildings erected. Not all of the projects are desirable (for example, the West Connex freeway project in Sydney has trampled on peoples’ rights) and several prioritise the motor car over public transport. But many of the projects will deliver much better public transport options in the future. On a national accounts level, these projects have helped GDP growth continue as household consumption has moderated and private investment has been consistently weak to negative. But, and this is the point, there have been sporadic reports recounting how Australia is running out of cement, hard rock and concrete and other building materials, which is pushing up costs. This is the real resource constraint that Modern Monetary Theory (MMT) emphasises as the limits to government spending, rather than any concocted financial constraints. If there are indeed shortages of real resources that are essential to infrastructure development then that places a limit on how fast governments can build these public goods. The other point is that as these shortages are emerging, there is still over 15 per cent of our available labour resources that are being unused in one way or another – 714,600 are unemployed, 1,123.9 thousand are underemployed, and participation rates are down so hidden unemployment has risen. So that indicates there is a need for higher deficits while the infrastructure bottlenecks suggest spending constraints are emerging. That is the challenge. Come in policies like the Job Guarantee.
It is a public holiday in Australia today. Would you believe it is the annual Queen’s Birthday holiday – the Queen of England that is. How Australia maintains this colonial relic is down to progressive forces being divided on rather irrelevant details and some of them siding with the monarchists. Tomorrow’s blog post will analyse the recent ECB behaviour with regard to Italian government bond purchases. But today I consider the minimum wage decision that was handed down on June 1, 2018, by Australia’s wage setting tribunal, Fair Work Australia in its – Annual Wage Review 2017-18. This is the process through the Federal Minimum Wage in Australia is adjusted. The decision announced will increase the minimum wage by 3.5 per cent from July 1, 2018 so that the new minimum wage will be $719.20 per week or $18.93 per hour. Given that the annual inflation rate is running around 2 per cent (or thereabouts), the decision, on the face of it, would suggest that the real minimum wage is now higher than it was a year ago, which is a good sign. But over the last year, low-paid workers have had to endure cuts in pay rates for work during non-standard hours (so-called penalty rates), which Fair Work Australia made operational on July 1, 2017. For some workers the losses from the penalty rate cuts amount to more than $6,000 per year. So our wage setting tribunal is giving with one hand and taking it back (and then some) with the other. The most sordid aspect of all this is that many employers demanded Fair Work Australia deliver real wage cuts in the annual review.