I have written about the concept of dynamic efficiency before. The most recent blog post on this theme was – The ‘truth sandwich’ and the impacts of neoliberalism (June 19, 2018) – which examined how social mobility across generations has been declining as a result of the decades of entrenched unemployment driven by neoliberal austerity biases. I also outlined the proposition in this blog post – US labour market reality debunks mainstream view about structural impediments (January 15, 2018). The point of all this is that establishing high pressure labour markets brings about more than just workers who want to work having jobs. It brings other major benefits that workers can enjoy and forces firms and governments to manage their affairs differently from when there is entrenched unemployment. The UBI proponents never really understand that point as they continue to surrender to the proposition that mass unemployment is inevitable and all the governments should do is keep people alive with some guaranteed income. All these dynamic efficiency gains are then not realised and capital has the run of the field.
You know, an Italian won the British Open golf championship yesterday (the first Italian to ever win a golf major) because of the uncertainty surrounding Brexit negotiations. The causality is impeccable. I am sure about that, although it might take me a while to work it out. But if a British golfer cannot win their Open Championship (Rose tied for second, two shots back) then it must be because of Brexit. Everything else that goes wrong is, so why not the golf? It is the same when three former US policy makers, central bankers, Wall Street-types, claim that the US no longer “have to tools to counter the next financial crisis”. They know full well that that statement is a blatant lie. But they say it. To remain relevant as their stars dim? To do service to their conservative mates? All of the above and more. But the media grab the headline and the American public and the public in general is dealt another piece of neoliberal misinformation that helps entrench the hold on power by the elites. But things are changing, and these entrenched elites and the vested interests they serve don’t like it a bit.
On July 6, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2018 – which showed that total non-farm employment from the payroll survey rose by 213,000 and the unemployment rate rose by 0.2 per cent to 4 per cent in June 2018. The employment-population ratio was unchanged in June at 60.4 percent and has been largely stable since February 2018. The Labour Force Survey data, however, showed that employment only rose just 102 thousand in June 2018 and was accompanied by a substantial rise in the labour force (601 thousand) on the back of a surge in participation (up 0.2 points), which meant that total unemployment rise by 499 thousand. The broad labour underutilisation measure (U-6) also signalled weakness, rising by 0.2 points. There is still no evidence of a wages breakout going on although wages growth for blue-collar occupations has surpassed the white-collar occupations over the last 8 quarters. However, the data shows that real wages fell in June 2018 by 0.4 points. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.
Sunday (July 1, 2018) was a very sad day in Australia because it marked the second phase of the cuts to penalty rates for workers in the lowest paid sectors of the Economy. The Fair Work Commission (FWC), which is the quasi-judicial tribunal that sets wages in Australia including legally binding minimum wages and conditions, bowed to the relentless pressure from employers (and the conservative federal government) and decided to cut penalty rates for some of the lowest-paid workers in Australia. The cuts which will eventually savage take-home pay for these workers were phased in from July 1, 2017 with the final cuts coming in 2020. The phasing in process where saw Sunday wages will fall from 200 per cent to 150 per cent over that period was justified by the FWC because the cuts would be extremely damaging to the prosperity of the low-paid workers impacted. Anyway, we have just passed the first year of the cuts and this week marks the second phase. Given we received the latest employment by industry data in the last fortnight, we can undertake some detailed analysis to see whether there is any evidence to support the employers’ claims that the cuts would benefit jobs and hours of work in the impacted sectors (Retail Trade and Accommodation and Food Services). You will not be surprised to read that the opposite seems to be the case, although the generally poor results for the industries that are sensitive to the penalty rate cuts cannot be attributed directly to those cuts. But the evidence is very strong – the cuts to penalty rates have hurt low paid workers and driven then towards or over the poverty line with no positive effects being evident in terms of employment or working hour gains.
It is Wednesday, so just a (relatively) short blog post today. I am using the time today to further scope out the material and logic for my next book with Thomas Fazi, which we hope to publish sometime in 2019. I will provide more details on that project soon but it is intended to be the followup to our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). So, today, a bit of that sort of flavour. In 1977, the Young European Federalists, which has long campaigned for European integration, released its Manifesto, which coined the term “democratic deficit”. While they intended it to be a concept to advance their pan-European intentions, the idea resonates strongly in the current climate and can be used to support a return to grass roots democracy aimed at reclaiming the nation state from the neoliberals and the progressive pretenders who have become infested with neoliberal ideas. In the last week, we have seen two notable events. First, the entrenchment of the colonial status of Greece under the watchful eye and collaboration of so-called ‘socialists’. Second, the magnificent success in today’s New York Democratic Primary election by a truly progressive candidate. These events are diametrically opposed. The former tells you what is wrong with traditional progressive political parties. The latter tells us that we can do something about it.
The Centre for European Reform, which must have little to do given the snail pace of so-called ‘reform’ that goes on in Europe, released a report over the weekend (June 23, 2018) – What’s the cost of Brexit so far? – which all the Europhile Remainers found filled their Tweet and other social media void for the day. I would have thought that they should have been happy, given England’s demolition of Panama in the soccer and 5-zip thrashing of Australia in the ODI cricket tournament. But no, they wanted to amplify the CER propaganda and makes themselves feel sad. Britain’s economy, apparently, is already 2.1 per cent smaller than it would have been had the vote to exit in June 2016 not won. And apparently, this has been a “hit to the public finances is now £23 billion per annum – or £440 million a week”. If you delve into the way the CER came up with these results you will quickly move on with a ho-hum and get back to the World Cup, which is infinitely more interesting (and that is saying something! read: I don’t enjoy soccer). The saying – Apples and Oranges – is relevant.
On May 4, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2018 – which showed that total non-farm employment from the payroll survey rose by just 164,000 in April, which was an improvement on the very modest rise in March. The Labour Force Survey data, however, showed that employment only rose by 3 thousand) in April 2018 but was accompanied by a substantial fall in the labour force (236 thousand) which meant that total unemployment fell by 239 thousand. The unemployment rate fell to 3.93 per cent (from 4.07) but this does not signal a stronger labour market. There is still a large jobs deficit remaining. Finally, there is no evidence of a wages breakout going on. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.
People are allowed to change their opinions or assessments in the light of new evidence. Diametric changes of position are fine and one should not be pilloried for making such a shift in outlook. Quite the contrary. But when the passage of time reveals that a person just recites the same litany despite being continually at odds with the evidence, then that person’s view should be disregarded, notwithstanding the old saying that a defunct clock is correct twice in each 24 hours. The US Congressional Budget Office (CBO) released its latest – The Budget and Economic Outlook: 2018 to 2028 (April 9, 2018) – and various commentators and media outlets have gone into conniptions over it. The economists that have responded – and they come with affiliations from both sides of US politics (although it is hard to differentiate separate ‘sides’ in the US anymore such is the demise of the Democrat Party) – have significantly embarrassed themselves. Their hysteria is not matched with the facts and they have been guilty of invoking these hysterical responses year-in, year-out for many years. A crack in a record, goes click, click, click, click and repeats ad infinitum. Sort of like the nonsensical arguments about US fiscal deficits that have appeared in the US press this last week.
Tomorrow, I will consider the furore that has arisen in the last few days after the US Congressional Budget Office released its latest forecasts, which showed the US deficit will rise, and, because they still insist in matching the deficit with bond-issuance to feed the corporate welfare machine, public debt will also expand. With an on-going jobs gap and depressed labour force participation rate, the rising deficit if properly targetted would be desirable. The rising public debt is a negative but only as a result of its unnecessary corporate welfare dimension rather than any concerns about capacity to pay etc. But today, given it is Wednesday and a ‘blog light’ day for me now I have only one related observation to make, which will contextualise tomorrow’s more detailed discussion. For today though I am mostly engaged in revising the final manuscript of our new, upcoming Modern Monetary Theory (MMT) textbook after receiving edits from the publishers, Macmillan.
On April 6, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2018 – which showed that total non-farm employment from the payroll survey rose by just 103,000 in March – or “edged up” to use the BLS words. The Labour Force Survey data, however, showed that employment fell (37 thousand) in March 2018 but was accompanied by an even larger fall in the labour force (158 thousand) which meant that total unemployment fell by 121 thousand. The weaker labour market means that underutilisation outside of the official labour force will have risen (‘hidden unemployment’). There is still a large jobs deficit remaining and the bias towards low paid work intensified in the first three months of 2018. Finally, there is no evidence of a wages breakout going on. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.