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Friday lay day – the skill shortage myth in Australia

Its my Friday lay day with respect to blog writing but at the risk of today’s publication looking like an advertising catalogue, I thought I have better write something. There are a number of topics I am delving into at present so deciding what I was interested in writing about today took a little coin-tossing (in virtual space that is). So some notes on corporate greed and management lies. Familiar themes for me. In a week where we learned that wages growth in Australia is at record lows and real wages are skating along the zero growth line despite on-going productivity growth, the big business barons want the government to scrap weekend our wage system and instead allow the ‘market’ (inverted commas!) to rip. This is code for cutting wages for a range of occupations and sectors. Business is also continuing to lie about the state of the economy claiming massive skill shortages exist, which then lead them to recommend more lenient use of short-term migrant visas – which is code for bringing in non-unionised workers from abroad who will work for minimum rates and be susceptible to illegal scams that violate those minimum rates. Even the Government has noted the skills shortage argument which is part of the relentless public relations assault on workers’ conditions does not accord with the evidence. But then since when have the right-wing allowed the facts to get in the road of their ideological push to destroy unions and drive wages down as low as they can.

Last week, I providing some insights into the draft report from the Productivity Commission of Australia on how to reform the Australian industrial relations system – Workplace Relations Framework (11.7 mbs).

I noted that the free market biased Commission disappointed couldn’t even find enough flaky evidence to support their conclusions so in the best traditions of the right wing they just offered up the tripe without any coherent argument.

One of the substantive things they recommended was the abolition of special penalty wage rates on Sundays. No real evidence was offered to support the recommendation. There were several other recommendations that amount to attacks on workers pay and conditions.

The on-going narrative promoted by the employer groups who think management is about gaining more real income for profits at the expense of their workforces. They worked out long ago that with persistent mass unemployment, deliberately created by the governments that they ‘fund’ through political donations, that the workers have little power to resist.

However, the Business Council of Australia, which represents the CEOs of the big corporations, was not satisfied. They, of course, were hoping for further major deregulation that would essentially erode the concept of minimum conditions within defined skill definitions.

They are now calling for some national minimum to be established – at some low base set of conditions and pay – and then allow firms to determine the rest (Source).

But, this is only in the context of a broad labour underutilisation rate of 15 per cent or more, which clearly operates to suppress the capacity of workers to use ‘market’ power to gain wage and conditions improvements.

The reason the wages growth is at record lows is because the economy is being held in a state of prolonged weakness with rising unemployment and high underemployment.

The employer groups would not be so cocky if there was true full employment and they had to chase labour to work for them. Then they would suddenly be abandon the idea that the ‘market’ should be allowed to determine everything.

That is why they have consistently throughout our history opposed governments that propose maintaining full employment. It is so patent. But the public debate has a capacity to obscure the obvious and segment arguments.

So, with more than 2 million workers (out of a labour force of 12.5 million) underutilised in some way or another (unemployment, underemployment, hidden unemployment), at present one wonders how the employers can get away with their claims that there are massive skill shortages in Australia, which necessitate relaxation of the so-called – 457 visas – a visa class that allows employers to bring in allegedly ‘skilled’ workers on short-term contracts.

These visas are majorly rorted by private business. In the blog – Employer group demands free labour from Government – I noted that in February 2015, private firms were forced to pay their workforces more than $A23 million in unpaid entitlements after the Fair Work Australia (the wage setting tribunal) conducted some surveillance of pay conditions after complaints were received.

16,000 workers were found to be underpaid – and were concentrated in cafes, restaurants and pubs, followed closely by construction, the retail trade and service industries like contract cleaning.

These are the same sectors where the employer groups (like the Australian Chamber of Commerce and Industry) are leading the charge to abandon penalty rates for weekend and public holiday work.

See the video later in this blog for commentary on wages by the CEO of the ACCI.

The number of abused workers is the tip of the iceberg. The only way the Fair Work Australia investigates is if there is a complaint.

There are thousands of overseas workers on the special 457 Visa (temporary workers) who are exploited relentlessly but who will not mostly complain.

The criminal behaviour is concentrated in the already low-pay sector.

An audit by the wage Ombudsman in Australia between September 2013 and June 2014 found that “over 40 per cent of 457 visa holders … [were] … no longer working for their nominated employer” or were being paid well below the minimum wages in Australia (Source).

In one case, a workers was being paid $28,000 a year when the minimum legal wage for the classification they were recruited under was $53,900. They were recruited as a “customer service manager” under a supposed skill shortage but was actually engaged in cleaning.

Notwithstanding their rorting behaviour, the Building industry wants more access to foreign workers. The Housing Industry Association recently claimed that there is a major shortage of bricklayers in Australia which will cripple the economy unless more 457 visa workers are allowed in (Source).

The Federal Department of Employment produces a document – Skill Shortages – Statistical Summary – which was last updated on August 4, 2015.

The opening paragraph says it all:

Research undertaken by the Department of Employment shows that there are more than enough applicants with relevant qualifications, or appropriate skills and experience, for vacancies in almost every occupation.

Which means for those business CEOs who seem to struggle understanding anything – that there are no significant skill shortages in Australia worth talking about.

In terms of the building trades, the Report says that there are 2.2 suitable applicants per vacancy (building professions) and 2.9 for building technicians. In the construction trades there were 1.4 suitable applicants per vacancy.

Note that in the building professions there were 21.6 applicants per vacancy, 26.4 for building technicians and 7.9 for construction trades.

The report goes on to say that:

… more than a quarter of skilled vacancies remained unfilled four to six weeks after advertising … The reasons for the unfilled vacancies are varied, but include: no applicants (5 per cent of employers); no suitable applicants (qualified applicants often lacked experience or other attributes employers sought); and employers being unable to agree on the terms and conditions of employment with the preferred candidates.

No suitable applicants!

The concept of a skills shortage is clearly a relative concept, implying some distance from an optimal state, which begs the question: according to whom.

Unsurprisingly, analyses of skills shortages by industry and governments invariably consider the issue from the perspective of business and profitability, which places the emphasis on containment of labour costs both in terms of wages and conditions, and hence, whenever possible, externalising the costs associated with developing the skills firms require in their workers.

Within this context the notion of structural unemployment arising from so-called ‘skills mismatch’ can be understood as implying an unwillingness of firms to offer jobs (with attached training opportunities) to unemployed workers that they deem to have undesirable characteristics.

When the labour market is tight, the willingness of firms to indulge in their prejudices is more costly. However, when labour underutilisation is high firms can easily increase their hiring standards (broaden the desired characteristics they demand from workers) and the training dynamism driven by labour shortages is lost.

Then we observe, in a static sense, ‘skill mismatches’ which are really symptoms of a ‘low pressure’ economy.

One of the advantages of maintaining full employment is that it introduces what I have called in earlier work I did a dynamic efficiency into the economy. Firms have to be continually offering training and skills development as they create new jobs because otherwise they will not maintain market share.

Workers are moulded to the needs of the job with appropriate skills on an on-going basis.

With mass unemployment, firms get lazy and refuse to offer on-going training. They then cry out that there are skills shortages when, in fact, all they are saying is that they cannot be bothered laying out the resources to train their workers in job-specific skills.

But lurking behind all that is the 457 ruse – which employers know is a way to further undermine domestic wages growth and working conditions.

And, this is all in the context of the Federal government cutting back spending on vocational education (that is, skills training) because it claims it can no longer afford such public outlays. They have largely replaced our excellent training system with a private competitive training model which has also been exposed in recent months as a arena of corruption, cheating and fraud.

You can read more about skills shortages in this Fairfax article (August 14, 2015) – A million people out of work.

ABC TV 730 segment on slow wages growth

The ABC news report – Mining boom masked slide in annual wage growth, economists say – covered a story I helped with the other day.

It relates to the data I analysed in Wednesday’s blog – Australia wages growth drops to a new record low.

The story was also featured on the ABC National Current Affairs TV program 7.30 last night (August 13, 2015). You can view the – Transcript – of the segment.

The following video is the complete segment as televised.

Upcoming Event – Reframing the Debate: Economics for a Progressive Politics, London, August 27, 2015

The NHA is very pleased to be able to present an evening with Professor Bill Mitchell, Professor of Economics and renowned proponent of Modern Monetary Theory, during his visit to the UK at the end of this month.

Come and join Professor Mitchell in conversation with Richard Murphy (Tax Research) and Ann Pettifor (Prime Economics), both currently economic advisors to Jeremy Corbyn’s campaign.

How can the debate on the economy be reframed around the things that really matter – people and the environment? Does MMT hold the key?

This is sure to be a fascinating debate.

The Event will be held on Thursday, August 27, 2015 from 18:30 to 20:30 (BST).

The location:

Unite The Union
128 Theobalds Road
WC1X 8TN London
United Kingdom
London, United Kingdom

WWW site for Registration.

The event is free and all are welcome.

Upcoming Event – Book Launch Maastricht, August 31, 2015

The official book launch for my new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – will be held on Monday, August 31, 2015 at the Maastricht University, the Netherlands.

The Launch will be held at the SBE Building, Tongersestraat 53, Maastricht University. The Room will be announced in due course.

The event will run from 13:00 to 14:30 and there will be two excellent speakers:

1. Dr László Andor, former Commissioner for Employment, Social Affairs and Inclusion in the Barroso II administration of the European Commission.

2. Professor Arjo Klamer, Professor of Economics of Art and Culture at Erasmus University in Rotterdam, The Netherlands. He “holds the world’s only chair in the field of cultural economics”.

The public is welcome to the event and there will refreshments available. I hope to see a lot of people there in Maastricht on August 31.

Hugh Masekela – Bird on the Wing

And after all that promotion, some music.

I was listening to the 1987 album from Hugh MasakelaTomorrow – today (if that is not too confusing).

My particular favourite from that album is the second track on the B side – Bird on the Wing – 8 minutes of beautiful feel and melody.

The recording was done in London between January and September 1986 and the album was released on WEA.

Apart from Hugh Masekela on Trumpet and Flugelhorn the album features one of my favourite guitar players – John B “Longwe” Selolwane and if you get a chance to catch his work do so. His use of the volume pedal inspired me to learn how to use one myself in those days.

Advertising: Special Discount available for my book to my blog readers

My new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – is now published by Edward Elgar UK and available for sale.

I am able to offer a Special 35 per cent discount to readers to reduce the price of the Hard Back version of the book.

Please go to the – Elgar on-line shop and use the Discount Code VIP35.

Front_Cover

Some relevant links to further information and availability:

1. Edward Elgar Catalogue Page

2. Chapter 1 – for free.

3. Hard Back format – at Edward Elgar’s On-line Shop.

4. eBook format – at Google’s Store.

Saturday Quiz

The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    This Post Has 16 Comments
    1. Look on the bright side. The CBI here in the UK has started complaining about a ‘skills shortage’ and they have 23 million unemployed people across the EU to go at – all of whom have the right to work in the UK.

      You have to admire their brass neck.

      (Ticket booked for London btw. ;-)

    2. “(Ticket booked for London btw. ;-)”

      Must have missed something somewhere. Where do I book a ticket for London. When is it and what venue?

    3. Dear Bill

      Even if there were a skills shortage in some sectors, it would still be unethical to solve it through immigration. That would mean that foreigners will provide free skills to Australians. Those foreigners are very likely to come from countries that are worse-off than Australia. International migration is always an attempt to use foreigners to solve domestic problems. It isn’t like international trade, which can be based on reciprocity: you can get some of our goodies if you allow us to get some of your goodies.

      The default position on international migration should be: there shouldn’t be any. Mass immigration always occurs from worse-off areas to better-off ones. It is very difficult to imagine a set of circumstances in which mass immigration from LDC’s to MDC’s will be beneficial to both sides. Let’s assume that the average level of schooling in Ruritania is 6 years and in Slobodia 14 years. Is it then possible that with mass migration from Ruritania to Slobodia, the average level of schooling in both countries goes up or stays the same? The short is: no, it is mathematically impossible. Either it will go down in both countries, or else it will it will go down in one of them.

      For a country like Australia, it is foolish to import a lot of unskilled immigrants, and it is unethical to import a lot of skilled ones. Conclusion: if we want to be both prudent and ethical, then we don’t allow immigration. Employers who complain about a lack of skilled workers or a lack of people willing to do “dirty jobs”, should be told in no uncertain terms that they should raise their wages.

      My position against immigration is not a manifestation of xenophobia but the product of reflection since I have an immigrant background myself. My Dutch parents emigrated to South America, where I was born and lived till the age of almost 18. Then they emigrated again to Canada, where I have lived all my adult life. I can tell you one thing about immigrants: they are guided sole by self-interest or family interest. An immigrant is someone who asks: Which country can do the most for me?, or: For which country can I do the least?

      Regards. James

    4. “An immigrant is someone who asks: Which country can do the most for me?, or: For which country can I do the least?”

      Very good way of summarizing it, this is way neoliberalism LOVE immigration and open borders, it removes further power, obligations and rights towards/from the nation state, and empowers the individual while destroying the social fabric.

      The left plays along as they are obsessed with internationalism and universal harmony, the best example is the EU, where things are playing along the lines the oligarchs exactly want, and the left dances to the neolibs in power songs exactly how they want.

    5. Paul,

      Aha. That’s the trouble with skip reading, especially when I’m not hugely interested in Australian skill shortages.

      Ticket booked.

    6. So it is in the US with our H1-B visa program. A famous entertainment company recently was exposed for laying off tech workers, who were told to train their immigrant replacements as a condition of their severance. It’s clear there was no shortage of workers (or they wouldn’t be laying off) and the immigrant workers lacked the necessary skills (or they wouldn’t have required training).

      Employers seem to be in a “race to the bottom”. By suppressing wages we reduce the purchasing power of the population. With reduced purchasing power we reduce demand for goods and services. With reduced demand for goods and services, markets will shrink, increasing competition among suppliers, forcing companies to offer incentives or reduce prices to sell their goods, cutting into profit margins and putting more pressure on reduced wages.

      Where does it end? In a deflationary spiral I guess. Is deflation what the upper class really wants? It tends to increase the value of the wealth they hold, whereas inflation tends to erode their wealth. So they favor deflation. Is it that simple?

    7. James Schipper: Is it then possible that with mass migration from Ruritania to Slobodia, the average level of schooling in both countries goes up or stays the same? The short is: no, it is mathematically impossible. Either it will go down in both countries, or else it will it will go down in one of them.

      No, it is not mathematically impossible at all.

      Think of two sets A ={10} and B= {20, 30}. Average (A)= 10, Average(B)=25
      Let 20 “immigrate” to A, so we have A’= {10, 20}, B’= {30}. Average (A’)=15, Average (B’)=30. Both averages went up!

      It is very difficult to imagine a set of circumstances in which mass immigration from LDC’s to MDC’s will be beneficial to both sides. It is easy because they are historically common enough. Looking solely at the welfare of the (mainly European-descended population of) USA & Europe, the mass immigration was beneficial to both sides, according to most.

      As I said before at the “British Labour must escape from its austerity lite prison” post, I have no particular position on immigration, especially concerning countries I don’t live in. It’s none of my business. But thinking immigration necessarily causes problems for anyone, any class in realistic conditions, say as before, in the case when only one EU state went whole hog MMT is not based on any rational economic concern. An “open” (or a “closed” ) JG would benefit basically everyone compared to the state without a JG. By any ordinary way of purely economic measurement, it would be one of the common beneficial-to-both-sides cases of immigration, so “open immigration” is not an obstacle to the permanent institution of any sort of JG. My own country, the USA, is certainly big enough that if it went whole-hog (but Green) MMT – there would be nothing to worry about with an open immigration policy with respect to the whole world.

      Ignacio:
      MMT / FF opposes what Lerner called “sentimental internationalism” – the apotheosis (apocolocyntosis?) of sentimental internationalism being the Euro. But like Lerner, most MMTers are (rational?, sensible?) internationalists – I confess I forget his antonym for his own phrase, which I remember just reading. Unfortunately, as you say, most of the left, most Marxists are utterly infatuated with this kind of sentimental internationalism. But opposition to immigration on defective economic grounds is something like “sentimental nationalism”- it uses specious arguments, like the one above, but they can sound right, sound realistic, just as the sentimental internationalist arguments can sound like they’re promoting universal harmony.

    8. Oops James – I misread what you said James. You are not committing a fallacy at all. For the average in both to go up, the “immigration” has to be of below average from above average, if you get what I mean. Egg on my face! But years of schooling of human beings are not fixed characteristics, can change in a way that does eventually contradict what you said – you are missing “dynamic efficiencies” perhaps of the kind Bill speaks of, and I have nothing to change on the rest of the post.

    9. Dear Some Guy

      You are right, the average in both groups can go up if there is a transfer from the high-average group to the low-average group. The classic example is a transfer from a good sports team to a mediocre one. If the worst player from Team A (good) is transferred to Team B (mediocre), then the average in both teams can indeed go up.

      Cheers. James

    10. Of course, there is always a lack or shortage of those with exceptional skills. For example there aren’t many who can play football with the same level of skill as Lionel Messi. The Australian cricket team could well benefit from someone who can get their bat behind the ball rather than edge it to the slips :-) There would be an immediate job for anyone who had the right skills and abilities in that regard.

      It is a strange argument, though, from those who subscribe to a neo-liberal economic school of thought. In their textbooks there is always a lack, or shortage of nearly everything. According to the neo-liberals, it is a shortage of anything desirable which causes it to have a price. That argument is obviously true to a large extent. There are many good golfers for example. But, its is only those who are exceptional who would expect to be paid for their services. The better they are the more they are paid. There’s a shortage of housing, too. If there were a greater shortage, rents would be even higher.

      I would expect that Australian capitalists aren’t that concerned about the shortage of good cricketers. They would probably say there was a shortage of engineers. Or a shortage of qualified electricians, or a shortage of IT professionals , or whatever. OK so what? There would be a shortage of milk in my refrigerator if I wasn’t prepared to pay the market price.

      So what’s behind all this ‘skills shortage’ nonsense? It’s simply a blame shifting exercise. Instead of unemployment being the fault of government and the large corporations, the blame is directed at those without work. The message is : All outcomes are determined by individuals. If you don’t have a job then don’t blame the system. It’s all your fault! If you were capable of regularly hitting those 90mph deliveries to the boundary you’d have no trouble at all finding work!

    11. Once again great taste in music Bill, that b9 @3:58 (a concert Eb) gave me chills. The b5 (I think? Perhaps it was a major 7? The note was a concert B, but I can’t place the tonic) at 3:49-50 was also nice.
      The rest of the blog post was also a good read.

      The irony for me is, I became friends with a man named … [Bill edited out name for privacy reasons] … who came to this country on a 457 visa, but since the Abbott government cut foreign aid his Engineering Firm employer lost sales and did not renewed his contract and visa.
      He was only a fortnight away from being able to apply for permanent residency, unfortunately he now going to be forced to leave the country – no one seems to want to hire him when they find out he’s on a 457 because paperwork – after being instrumental in setting up a new NGO which is advocating for MMT among other things.

    12. Great post professor.
      As Jeff has highlighted this is something of an established scam
      in relation to the H1-B visa in the USA, particularly in relation
      to STEM workers.
      Michael S. Teitelbaum,a Wertheim Fellow at Harvard Law School
      has written a book on the subject called “Falling Behind” which
      shows this scam has been going on for quite some time.
      Indeed this shortage mythology is such strong “Kool-Aid” that
      even the Labor party has recently been promoting “careers” in
      maths and science through promised increased science funding in schools.

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