One of the salient features of the neo-liberal era has been the on-going redistribution of national income to profits away from wages. This feature is present in many nations. As I noted in yesterday’s blog – Employer group demands free labour from Government – employer groups in Australia are upping the ante and demanding that the Government provide them with free labour. It goes like this – the government runs a fiscal austerity campaign, which creates rising unemployment. They then harass the unemployed for daring to apply for the below poverty line income support. If that is not enough, then the private sector demands the Government hand these unemployed workers over to them for free to “make coffee” and other tasks. Its a lovely world that we are living in. Meanwhile there is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the December-quarter today and we learn that the annual growth in wages is now at the lowest level since the data series began in the June-quarter 1997. The annual hourly wage inflation is now down to 2.5 per cent overall and 2.4 per cent in the private sector. With productivity growth running slightly slower and the annual inflation rate dropping sharply in recent quarters as the overall economy slows down (and oil prices fall), the shift to profits slowed marginally in the December-quarter. But Real Unit Labour Costs (RULC) continued to fall. Further, the long-term trends are still alarming with employment growth flat or negative and unemployment rising.
The ABC – Four Corners – program tonight will highlight the corruption and inefficiency within Australia’s privatised labour market services sector. The program – The Jobs Game – will screen at 20:30 Eastern Standard Time. I participate in the program although the extent of that participation is at the time of writing not known. I did about 2 hours of filming for it in December. Unfortunately, the ABC geo-blocks its iView service which allows Australians to watch past programs via the Internet. If the program is available via YouTube I will post a link. The flavour of the program is summarised in this promotion piece published by the ABC News service today (February 23, 2015) – Government recovers over $41 million worth of false claims after ‘rorting’ of Job Services Australia scheme. The Guardian newspaper will also publish an article based on this blog for tomorrow’s edition (sometime during the day). So the issue is getting out there finally after successive Governments have been trying to hide the issues. After all, its ideological baby is terminally ill and they don’t want to admit that.
Another day of light blogging. It used to be the case that if you secured a University degree then you were nearly immune from unemployment and enjoyed a fairly quickly growing wage gap on those of the same age who were not so fortunate to attend university. It was always the case that the unskilled are at the back of the jobless queue. This cohort is traditionally forced to endure low wages when they are lucky enough to find work and when they are not so lucky, they have to tolerate the opprobrium that neo-liberal attack dogs impose on them for daring to try to live on the pittances handed out as unemployment benefits. Any time the economy takes a nosedive this group finds itself out of work. But, even in recessions, the possession of a University degree was a fairly good insurance policy against such misfortune. The GFC changed that and in some nations the austerity that has been enforced by mindless and unaccountable bureaucrats has not only had devastating effects on the unskilled but has also undermined the prospects of the higher skilled workers. There is no cost-benefit analysis available that could justify such an arrant waste of productive resources, quite independent of the massive personal cost that the unemployed face upon their exclusion from mainstream society. Those pushing for austerity have a lot to answer for. But most of them will be long retired on their fat superannuation pensions before the full scale of the disaster they have created is revealed.
The current evolution of Capitalism is taking the world back to where it was in the early C20th, before trade unions were strong enough to protect workers’ rights, before central governments were willing to mediate the class struggle and step in to make sure workers had the means to enjoy the material prosperity that the system generated, before wages growth allowed workers to share in productivity growth and build a modicum of material wealth. There is no class struggle, Bill! How many times do I hear that now. It is just a convenient sop by those with a vested interest in promoting that view or who has been conned to believe that to be the case. Of course there is a class struggle. Industrial capital might be sharing the hegemony with totally unproductive financial capital and the robber barons of the C19th and early C20th are less prominent and the banksters and the politicians in their pay have replaced them, but don’t ever think that there is a massive conspiracy to undermine the welfare state and put workers back into an even more subservient position than before. Unemployment, part-time precarious work, tax evasion and all the rest of the scams are working a treat.
Last week, Reuters put out a story (October 30, 2014) – Special Report: Tsunami evacuees caught in $30 billion Japan money trap (thanks Scott Mc for the link) – which provides an excellent demonstration of the true limits of government spending in a currency-issuing nation. The underlying principles should be understood by all as part of their personal mission to expel all neo-liberal myths from their thinking and to help them see the nature of issues more clearly. Unfortunately, the application we will talk about is sad and has tragic human and environmental consequences, but that doesn’t reduce the relevance of the example for conceptual thinking. In a nutshell, the central Japanese government has transferred some $US50 billion worth of yen to the local government to combat the destruction caused by the tsunami in March 2011. Thirty billion is unspent despite people still living in temporary housing and suffering dramatic psychological trauma as a result. Why is this happening? Doesn’t Modern Monetary Theory (MMT) tell us that a currency-issuing government can spend what it likes? Well, not exactly. What MMT tells us is that a currency-issuing government can purchase whatever is for sale in its own currency and that propensity is limited by the availability of real resources. Here is a classic demonstration of the limits of government nominal spending.
On September 15, 2014, the Melbourne Age article – Workers can forget about big pay rises for some time to come – summarised the wages outlook that workers can expect in the coming year as the labour market weakens. Its bleak. Meanwhile, CEO pay while down from the peaks of 2007 remains excessive according to a major survey released in Australia this morning. Depending on how one measures it, the average CEO of the Top 100 companies earns between 65 and 84 times what the average worker takes homeeach year. And these bosses lead the cheer squad when industry leaders and government ministers claim workers have to take pay cuts and surrender penalty rates and that the minimum wage should be abandoned. The neo-liberal obscenity survived the GFC and has now reorganised. Woe be us!
There is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. I have had a long association with these tribunals as an expert witness and I cannot recall the employers’ representatives ever agreeing that the time is right for wage rises. If their submissions are to be taken on their word then there would never be any wage increases. The facts are that real wages continue to fall in Australia – more rapidly in the private sector than the public. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the June quarter yesterday (August 13, 2014) and the data shows that hourly wage inflation is running at 2.4 per cent per annum, which is well below the current inflation rate. Real wages growth is also well below the growth in hourly productivity, which means that the Australian distribution system is still redistributing real national income to profits. And all the while employment growth is flat or negative. Meanwhile, our cigar-smoking Treasurer sees it as his role to berate the poor for being poor and distorting the public data to hide the fact that the May fiscal statement (aka budget) significantly cuts the real standard of living for low income earners and leaves the top income earners relatively unscathed. But all of this is in the name of fiscal austerity (aka madness).
The Fair Work Commission, the Federal body entrusted with the task of determining Australia’s minimum wage handed down its – 2013-14 decision – on June 4, 2014. The decision meant that more than 1.5 million of our lowest paid workers (out of some 11.6 million) received an extra $18.70 per week from July 1. This amounted to an increase of 3 per cent (up from last year’s rise of 2.6 per cent). The Federal Minimum Wage (FMW) is now $640.90 per week or $16.87 per hour. For the low-paid workers in the retail sector, personal care services, hospitality, cleaning services and unskilled labouring sectors there was no cause for celebration. They already earn a pittance and endure poor working conditions. The pay rise will at best maintain the current real minimum wage but denies this cohort access to the fairly robust national productivity growth that has occurred over the last two years. The decision also widens the gap between the low paid workers and other wage and salary recipients. The real story though is that today’s minimum wage outcome is another casualty of the fiscal austerity that the Federal Government has imposed on the nation which is destroying jobs and impacting disproportionately on low-paid workers.
Australian readers will recall earlier in the year when the Federal Employment Minister Eric Abetz warned the public that there would be a wages breakout unless union power was curbed and they negotiated collective agreements with employers that were in the national interest. The ABC news report (January 14, 2014) – Eric Abetz warns of wages ‘explosion’ unless employers stop ‘caving in’ to unions – said that the Minister berated “weak-kneed employers” who caved into “unreasonable union demands” and then lobbied him to cut union power. The same scaremongering accompanied the decision by Fair Work Australia to lift the minimum wage by xx per cent on June, 2014. This was not only a wages explosion but would cause a catastrophic loss of low-paid jobs according to the right-wing anti-worker cheer squad, including leading figures in the Federal government. The problem is that these ‘beat ups’ are lies.
Australia is caught in a bizarre warp at the moment. We have a national election in September and the incumbent Labor Party is heading for obliteration with the Party conducting an internal power struggle that defies description. The Prime Minister is deeply unpopular and is being poorly advised (as evidenced by the sequence of strategic disasters). The politician she deposed as PM is popular with the people but hated internally and he also proved to be a policy disaster. The current PM should step down to limit the electoral damage that will be wrought on the Party in September (that is, save some seats) but she won’t and the other character won’t challenge because he is behaving as the wrecking ball – bitter, revengeful and, most significantly without sufficient support (just). Its a tragic comedy of epic proportions. The Opposition is gliding into power without coherent policies and will reinstate the agenda it pursued when last in power (1996-2007), which means attacks on welfare and unions and handouts to the rich. Anticipating the change are the employer groups which are increasingly claiming they are being disadvantaged by excessive wage outcomes in Australia. Same old. It doesn’t help when the media produce headlines such as “Labour cost growth hits business hard”, which are not sustained by any coherent analysis that follows. It is a bizarre time.