The economic news of the day was a fall in the number of jobs advertised – as measured by ANZ – to “recession levels” – the eighth successive monthly drop. A number of economists extrapolated this to an unemployment rate of around 7% by year’s end. Of course, the trend may not be a straight line, but these things have a habit of being self-reinforcing. It’s interesting to note that the Federal Opposition could currently have their own favourite line of 2008 turned around on them – they’re arguably “talking up” unemployment at the moment. Julie Bishop might like to take a lesson from any number of Labor shadows from their decade plus in opposition – this doom and gloom isn’t necessarily smart, particularly when you’re briefing your mates in the press about how exciting it is that you might be back in power after only one term.
But of more moment, probably, is the response of those who actually make decisions about the labour market. Predictably, the Howard era Fair Pay Commission Chair, Ian Harper, warned that the low paid couldn’t expect much. This, despite the fact that the pay rises awarded by the FPC over the past two years failed to have the dire impact on employment predicted by business lobbies. It was interesting in this context to read a good piece by Mike Steketee in The Australian last week:
Some economists argue that cutting wages, particularly for the unskilled and low skilled, is the surest way of keeping more people in work. Quite apart from the fact that Labor’s ruling out such an option helped it win the last election, the main problem facing businesses is lack of demand for their products.
Cutting wages would reduce consumer demand further and it would run directly counter to the Government’s policy of putting more money into people’s pockets to try to put a floor under demand. In any case, the wages share of national income is the lowest for a generation, suggesting labour costs are less of a burden for business than in the past.
In short, it’s aggregate demand, stupid.
There’s some anecdotal evidence around that some employers are looking at other means of addressing costs than shedding labour. At issue here is also the skills shortage – it’s precisely the less skilled and lower paid who are at more risk in an economic downturn which widens inequality, as Steketee points out. So disinvestment in skills is also a false economy. But it’ll be interesting to see whether an understanding of the nexus between consumer spending and employment and employment expectations actually cuts through. Harper’s tired nostrums suggest that certain orthodoxies have survived the global financial crisis.
After a decade or so when we heard so much blah about corporate social responsibility, it’d be nice to see some recognition from business that the economy is part of that responsibility. That’s actually in the collective self-interest of business, but as Keynes and others showed, that’s precisely what the incentive structure of capitalist economics has difficulty incorporating. There may well be some room here for some creative thinking from government, going beyond pump priming. Fingers crossed.
I predict you will get cramp in your fingers.
You may well be right. I hope not. Optimism of the will, pessimism of the intellect and all that…
Well you may be right to be optimistic.
After all it would be the ‘right’ [as in 'correct'] thing to do.
The ethic of helping the underdog, the creation of demand, the appeal to the poor voters and so on.
Got a lot going for it.
Plus, in continuing cynical frame of mind, can you see Malcolm arguing against the poor getting help? It’s a sure wedge [yuk I hate that word/concept] he’d have to side with the privileged rich, the media would be onside with that [Steketee aside- by the way he seems to have his head screwed on a bit better than most at the OO???] but they may find it hard to convince enough of the public about that, so I reckon the ALP would be on a vote winner and Malcolm and the media would be losers. I really can’t see corporations changing their spots, old habits die very hard.
I just think the ALP would be scared of the negative media that always follows minimum wage raises.
I’d expect no real change.
Easier to do nothing.
Sort of like the 5%.
It depends – my suspicion is that the skills shortage may have focused some attention on the labour market above and beyond a narrow cost frame. And articles like Steketee’s help. As I was saying, there’s some evidence that industry associations in retail are advising against shedding staff in favour of finding other efficiencies to maximise cashflow. At any rate, it will be something of a test case as to how far the rethinking prompted by the GFC has gone.
Hmmm, you’ve missed the boat somewhat, Mark. Gillard has publicly and emphatically accepted the basic logic of wages up = jobs down. Hence her pleas for the unions to go easy on their 2009 wage claims. Business always overstates things, but there can be no doubt that every single increase in the minimum wage throws a bunch of marginal workers on the scrapheap. Pity Howard and Costello were completely asleep at the wheel; if they had organised a root-and-branch tax review in their time, then we may have been able to repeal various payroll taxes now rather than after Henry says his piece on them later this year. These ultra-regressive and morally indefensible taxes ought to be a government’s first port of call in the fight against unemployment. Once things pick up and aggregate demand is no longer a drag, we could then have set about rebalancing income taxes, CGT and the GST so that the system as a whole favours a prudent level of household saving, rather than debt-fueled consumption. Though this would obviously involve a substantial increase of the GST rate, it does not necessarily involve increased regressivity overall. But we won’t: the ALP are too dumb (or smart?) to admit that consumption taxes must rise.
BBB
I think there can be a lot of doubt, BBB. I think our friend Ian Harper even accepted that there was no discernible effect on employment from his first minimum wage increase, which is why the dire warnings of the employers were ignored the second time round.
of interest to the economics wonks, especially in the context here of repeating tired mantras (i.e. wages up=employment down):
http://www.dollarsandsense.org/blog/2009/01/why-so-little-self-recrimination-yves.html
I think there can be a lot of doubt, BBB. I think our friend Ian Harper even accepted that there was no discernible effect on employment from his first minimum wage increase, which is why the dire warnings of the employers were ignored the second time round.
As Mark’s already pointed out, the drop in demand for G & S caused by low wages is equally likely to throw marginal workers out of work (and not so marginal.)
Re “pump priming”, I heard on the ABC yesterday that there might be another “stimulus package”. This frustrates me enormously. I wish the money could, instead, be put into huge and necessary projects – e.g., just to mention my area, huge investments in rail infrastructure and stormwater collection (including govt subsidised tanks to be rolled out all over Melbourne and surrounds.) Long-term contracts for weed mitigation and other maintenance in national parks. Stuff like that, employing people long-term and giving us something to show for it instead of another boatload of Chinese imports.
It’s more about selfish common sense.
Essentially the average businessman will figure “it works as long as my workers are paid less but my customers wages stay static or rise.”
Well, yep, tssk, that’s what Keynes was getting at. The questions are:
(a) to what degree does a better understanding of the dynamics of a recession shift behaviour?;
(b) is there anything government can do?
Mark, you say:
You seem to be implying that the GFC somehow renders all of economic theory up for reassessment. While I agree that any discipline should constantly be testing its assumptions against new evidence, I don’t see how the GFC could be seen as an argument that mainstream economics was wrong about minimum wages. The causes of the GFC (as far as this Australian economist can tell) were:
1) Laws that gave people in the US little incentive to repay their mortgages if they fel into negative equity (i.e. non-recourse mortgages).
2) The ratings agencies were performing a quasi-regulatory task (assigning ratings to classes of investments) while taking money from the people they were rating (with an implicit incentive to deliver unjustified ratings to opaque instruments). This misalignment of incentives led to investors taking on more risk than they thought they were.
3) Easy credit (whether you blame the Chinese for running excessive surpluses, the fiat money system and lack of a gold standard, or Greenspan’s penchant for rescuing the share market from getting its comeuppance). Easy credit made it easy for everybody to gear up, from mums and dads with a margin loan account to investment banks trading at ratios of 20 and 30 to 1. So when the wave hit, it hit hard.
4) Wage and bonus structures that encouraged investment bankers, mortgage brokers and other finance people to take a short-term view: it doesn’t matter if the place goes belly-up next year if you just collected a bonus equivalent to twenty times your salary, so you’ll take excessive risks.
Except for the last one, these are all failures of regulation. To be fair, some (or all) were justified using economic arguments (usualy fairly simplistic arguments about the benefits of unregulated markets). That doesn’t mean that economists are wrong about everything, or should hand over the debate of economic issues to interest groups (like the ACTU). It certainly doesn’t mean that the inescapable gravity of labour market economics no longer holds (i.e. minimum wages up = fewer unskilled jobs created or more unskilled workers laid off).
Steve Keen on “Neoclassical Wage Restraint Madness”
Keynes conceptualised elegant solutions in an era before globalisation of capital markets. He imagined national economies that were to a large degree independent of each other. Moreover, when Keynes was constructing his model, all developed national economies hunkered down behind high tariff walls.
The financial and economic world of 2009 is very different from Keynes’ world.
Legally, and perhaps even politically, if this current recession/depression gets bad enough (I’m inclining toward the view that we are entering a depression) national governments may attempt to take their countries back to policy settings that Keynes would have found familiar. Naturally, there would be domestic and international winners and losers in the wake of such a shift.
Australia could not be a pioneer in returning to closed financial markets and high tariff policies. This country is necessarily reactive, given its size and its dependence on both export markets and world capital markets.
Any thoroughgoing attempt to reintroduce Keynesian policies in Australia would be perilous.
1. Deficit financing requires access to capital in an era when capital markets are frozen. Despite historically low official interest rates, commercial interest rates are quite high, and are very high in real terms in consequence of deflationary expectations.
2. Attempts to maintain or perhaps increase real wages necessarily undermine return on capital. This would provoke disinvestment and perhaps capital flight.
However, if this depression gets bad enough, neo-Keynesian policies may come to be seen as the lesser of two evils. But this change of heart will have to happen in the US before it will become possible in Australia.
Another stimulus package? great, I can buy more books.
On a much more serious level. and I think this is on topic, assuming unemployment rates do increase considerably,how are these unemployed going to be treated by the social security system. Are they still going to be seen as “dole bludgers”, non-deserving poor, harrassed to look for non-existent jobs, breached if they don’t comply – etc, etc. all that shabby apparatus of the Howard years?
I know the Rudd Government has made some changes for the better, but have not followed them closely. Might I suggest that governments have a duty to care compassionately for both the low-waged and unemployed, especially in what looks like are going to be recessionary times, as part of their social responsibility to us all. But will they?
No books for me Paul Burns
– I’m relatively young & “deliberately barren”.
As for whether or not the unemployed will be derided & despised I expect we’ll see more of the same ie: anyone who someone knows personally is a ‘hardworker’ & a ‘victim of the GFC’ but anyone we’ve never met is a welfare cheat & torturer of kittens.
Mark,
I’ve found it very interesting to see the Right effortlessly switch their arguments on IR. 12 months ago, unions were pursuing destructive, inflationary pay claims in an overheated labour market that would roon us all. Now, apparently, the same pay claims are contractionary and will lead to mass unemployment (and presumably roon us all). Unions’ activities are castigated in good times and bad, for very different reasons. The Right just changes the details of the argument to suit the times.
Today, Malcolm Colless in the Australian called Forward with Fairness a “policy for the good times”. Interesting, because during the good times he would’ve claimed that the policy could not be afforded when the labour market is operating at full employment levels.
Interesting to see that the Coalition has been silent on the death of their most fundamental tenet of economic management during their reign: the need for persistent, contractionary fiscal surpluses. Even the IMF is now calling for deficit spending to increase AD.
I was unemployed during the last recession Paul and I remember being treated like scum. I don’t see this changing. In fact I can see this sort of behviour increasing as those worried about their own job security take out their worries on “those slackers sitting at home watching Dr Phil stubbie in hand.”
I certainly wouldn’t want to be unemployed at the moment, I can see some companies making some traction with expanded work for the dole schemes.
If the government brings in tax cuts at the low end earlier as has been suggested would be part of a new stimulus package, then the lack of higher wage rises would be offset by lower taxes.
I just wanted to note that the figures quoted almost certainly overstate the decline in demand for labour as they are based upon the decline in the number of jobs advertised in newspapers.
I’m sure I don’t need to let this readership know that lots of people don not rely upon newspapers to the extent they used to, and that includes prospective employers. Whether the decline in postings on seek.com.au and its equivalents has been the same as that for job ads in newspapers is a moot point.
Also, I’ve had estimates put to me by people who were in a position to know that about 70-80 per cent of new jobs are never advertised, but rather result from the prospective employer finding the “right” person and designing the position accordingly. This is one reason why long-term unemployment rates remain stubbornly high even in times of rising job demand.
So I think I would be a bit cautious in accepting that a decline in newspaper job advertisements proves that we will have 7% unemployment in 12 months time, just as I would put all sorts of caveats around the current figures of 4.5%.
Terry, job ads indicate a high demand for labour. It’s that simple. In a situation where fewer jobs are being advertised, in print or online or on a handwritten note in the window, it means that employers are having no trouble finding the labour they need for their business operations. Now you tell me – why would this be?
1) A surplus of qualified people available via word-of-mouth or networking. [This would indicate lots of un- or underemployed people, right?]
2) Less work out there for the doing. [This would indicate businesses failing or scaling back their operations, right?]
FDB, my point was that the ANZ and others are extrapolating from a decline in the number of jobs advertised in newspapers in 2008 as compared to 2007. The extrapolation is being made because there is simply no data available or being gathered by these sources on other ways of advertising a job, particularly through online only sites, electronic word of mouth and, yes, a paper sign put up outside the shop window.
I’d also note that because of cost and other factors, newspaper job advertisements tend to be dominated by the public sector (esp. state governments) and certain types of jobs, particularly executive positions and unskilled jobs. Small businesses may well cut back on the cost of classified advertising if there are more cost-effective ways of finding a person for a job (e.g. have you ever looked at the wall of an Internet cafe frequented by backpackers?). I’d also stick by the point that lots of jobs today are filled by a prospective employer finding the person they want, and then writing the job description around that person.
I’m not saying that unemployment is not going to go up in 2009 as compared to 2008. I am, however, recommending caution in extrapolating from the number of job advertisements placed in newspapers (saying it will go from 4.5% to 7% because of a decline in the number of job ads in newspapers), as it may be part of the wider turn away from newspaper classifieds as an advertising source.
Point taken Terry. I’m pretty sure they have started counting online only ads, but in any case it’s a crude measure for making such specific predictions, you’re right.
Paul #14,
Good point, was wondering if this point would come up. There was no historical precedent in Australia, that I know of, for the demonising of the unemployed until Howard et al., backed by a willing and near hysterical media, set out to do just that. Hopefully the situation will be reversed, and the unemployed will be treated with some compassion this time round.
tssk #17. Sorry you had to be in that position during that time. During the Howard years I was at various times a student, lone parent, carer. It seems like the Howard Govt went after nearly everyone with a shotgun at some point or other.
How about a little economic history here? Remember the Accord anyone? During the 1980s, the ACTU agreed to nominal wage freezes (and hence real wage cuts) to reduce labour costs, and boost overall employment, in return for a boost in the social wage. That is, the ACTU recognised that during a period high award wages were constraining the demand for labour, the right way to address their equity concerns was not to push for higher wages, but to seek more social transfers to boost living standards at the bottom of the income distribution.
Arguments that increases in nominal wages for low-skilled workers don’t affect the demand for labour for those workers is just plain silly. Also, appeals to the fact that minimum wage increases during the boom didn’t reduce employment are even sillier – that was a period in which the supply of labour could not keep up with labour demand!! Recessions change that dynamic. We are about to go through a period in which labour demand contracts. If wages are not able to adjust, employment will contract by more than it needs to. The burden of that will fall primarily on the young and low-skilled. Businesses aren’t social welfare organisations. They will not accept lower profits out of some social obligation.
The point about wage falls (or nominal wage freezes) reducing aggregate demand are reasonable. But the way to address that is by boosting the social wage through the transfer system. That way disposable incomes are maintained, but not at the expense of maintaining an artificially high minimum wage.
There are of course arguments to be had about just how price elastic the demand for labour is in Australia. However, even if you believe it is low, it is certainly not zero, and it is definitely higher for the young and low-skilled. If you don’t want to see youth unemployment rates rise as they did during the early 1990s, accept wage freezes or wage cuts and lobby instead for more redistribution through the tax-transfer system – it is the only policy combination that meets both equity and efficiency goals during an economic downturn.
Matt C
I think you have a fundamental misunderstanding of the way the labour market works. Good labour market institutions, inter alia, ennsure that wages rise in line with worker productivity. If, during a boom, wages grow more quickly than productivity, then unit labour costs rise and inflation increases. During a downturn, if wages grow more rapidly than productivity, employers shed labour. The question is, how much unemployment are you prepared to accept? The government could turn around tomorrow and grant a 20% pay rise to all minimum wage/award employees – and that would certainly boost their incomes – but how do you think employers would respond to that?
Good government policy in this area should recognise that the right thing to do is conditional on circumstances. Steady minimum wage increases during a period of strong economic growth are defendable – they are not so when labour demand is contracting. Fiscal surpluses make sense when the economy is growing strongly, but make very little sense when there is a risk of a recession. It is not a one-size fits all policy.
Mark’s point that it makes sense for employers to look beyond the short-term (based on Steketee’s piece in the Australian) is fine – and that is why many employers hoard labour during downturns. A little known fact is that during recessions, it is not the firing rate that increases most significantly, but the hiring rate that declines precipitously. The labour market is dynamic – there is continuous churn – during downturns, employers dramatically reduce their hiring and don’t replace workers that quit/retire, etc. There are of course dismissals, but many of those are accounted for by firms that go out of business. IMHO it is a misperception that the majority of employers throw people out of work wilfully during recessions. In most cases where it is done, it is done with regret and out of financial necessity.
Governments have a number of important roles during recessions – boosting transfer payments – generalised maintenance of aggregate demand through targeted spending increases and tax reductions – making greater use of labour market policies, etc – but attempts to artifically increase the wages of the low-skilled is not one of them.
Another thing – this is addressed to Paul Burns and Polyquats – most of the apparatus for increasing the job search requirements of the unemployed were instituted by the ALP under Working Nation. Under Working Nation, the long-term unemployed were assigned case managers that set tasks for those being managed – training, labour market programs, demonstrating job search, etc – for those that did not meet these requirements, CES staff regularly recommended breaching them. Under Labor it was called reciprocal obligation. Howard basically took this approach, relabelled some of the work programs Work for the Dole and gut many of the labour market programs.
As always, things are more complicated than the Howard is evil line – like detention centres, significantly raising requirements from the long-term unemployed was a Labor idea…..
If memory serves, the term “dole bludger” was coined by Bill Hayden during the seventies (much to my disgust).
There certainly was a historical precedent. Malcolm Fraser.
Labor Outsider @ 26,
I think you will find that the CES didn’t exactly make a habit of recommending breaching the unemployed back in that time. I certainly never heard of anyone getting breached (unlike under Howard) and I myself knocked back a couple of jobs at the time and nothing became of it. Try knocking back a job through the Job Network rorts scheme that Howard set up. If they even think you might not give a 100% effort at a job interview you get threatened with a breach.
Work For The Dole was another one of Howard’s sick programs that in true Howard fashion he said he would never bring in. Keep in mind that WFTD kicked in in a lot of cases at three months unemployment so it didn’t have much to do with reducing the long-term unemployed, but we already knew that. It is slave labour pure and simple. I thought we had a minimum wage in this country? Not if you’re unemployed and forced to enter into a WFTD “agreement”.
Unfortunately Howard viewed the unemployed as a political tool to kick the shit out of when required. The unemployed are not a commodity to be traded between private companies stuffing themselves with extra helpings of the magic pudding. We’ve seen how well the JN system works with so many companies being clipped behind the ear for rorting a process that is in effect a rort in itself.
Salvo’s fudge their books to get an extra $5 million in funding they’re not entitled to? Who cares. What about Mercy Ministries (backed by the demented owners of Gloria Jeans in a big way) performing exorcisms on young girls and taking control of their Centrelink benefits? Ehh, it happens.
To even compare how things were under Keating to what they became under Howard is deceitful at best and to be expected from the far-right trying to defend the “legacy”. Thankfully it was recently announced that Rudd has not only withdrawn quite a lot of funding for Howard’s WFTD programs but Howard’s extreme job search activity requirements/obscene penalty breaches will also be relaxed.
A few of you have mused about the origin of the term ‘dole bludger.’ It was actually coined by Clive Cameron when he was Minister for (i think) Labour and National Service, or its equivalent , in the Whitlam Government.
Neverthelees, as Jacques de Molay @ 29 so ably points out, to equate Keating’s Working Nation with the persecution of the unemployed under Howard is blatantly dishonest.
I was on unemployment benefits briefly under Working Nation and never at any time did I fear I was likely to be peresecuted. Under Working Nation the only way you were likely to be breached was if you viretually said to the now much lamented CES, “Fuck you, I don’t want a job and I won’t do a job preparation course.” Very very few unemployed people are like that. Sorry to disappoint Labor Outsider, but 99.9% of unemployed people actually want a reasonably paid job. They really like having the money at award rates in their pocket.
As for Work for the Dole – it was slavery – not wage slavery – just plain slavery – under another name, and a disgrace to this country’s democratic traditions, like so much else JWH did.
one thing we should all agree on is that the Job Network scheme is an abomination and should be destroyed utterly.
Here’s my brother’s story: after finishing high school without an OP in 2002, he took out a large loan to pay for a course in IT support at a private institution, while on Newstart, as Centrelink did not recognise the course as worthy of Youth Allowance. Several months in he began to be harassed and ended up being forced to attend a ‘job training’ day at Sarina Russo or one of those places, where he was forced to watch a ridiculous video full of the most exaggerated bogans talk about how to get a job, and then made to do a mock interview with a Sarina Russo “expert”. Shortly thereafter they found him a job – delivering Pizza for Dominos at Ipswich – a job that paid $12 an hour, where you paid for your own petrol, and were ordered to speed to deliver the pizzas on time, resulting in speeding fines that of course you had to pay for yourself, resulting in a net wage of zero or less. Not taking the job would result in Newstart being cancelled. Fortunately by that stage he had finished his course and found a much better job in IT support, but that didn’t stop the phone calls and letters from Centrelink and Job Network coming for several months. They demanded to know why he hadn’t taken the Dominos job, and ordered him in to explain himself – ignoring the fact that now that he was working full time and didn’t have time to come in. Finally after months of harassment, they called up one day and thanked him for using Sarino Russo, and offered him two free movie tickets. He told them to fuck their movie tickets. I have since been told by people in the know that whenever somebody in the Job Network like my brother finds a job – even if it is a job that they did absolutely nothing to help find – that the Job Network company gets given a commission of several thousand dollars from the government. Fucking Howard!
I actually worked for a short time for DEYA in the early ’80’s , which was the department which ran the old CES. I used to do training for new CES employees and I can’t remember any harassment or demonisation on the ground. That was my first job out of uni and my memory is that the unemployment figures were fairly bad.
I quit and went on the dole for a while after that and never felt hassled. Yeah, you could even quit a job and go straight on the dole. As long as you didn’t go out of your way to to annoy them, they kept out of your way. It was really only under Howard that he silliness started. Fraser might have made some ugly noises, but my experience was that it wasn’t followed through in real terms.
Yep, I only meant to suggest Fraser talked the talk.
I came across a nasty prick at Bega in the Fraser years who gave me a hard time because he didn’t believe I was making a bit of a living out of writing radio plays, though not enough to disqualify me for the dole. (I declared all my income.) Fortunately soon after I became a full time uni student on Austudy, so I couldn’t be hassled any more.
yeti @ 31,
Sorry to hear what your brother went through but rest assured it’s not exactly unusual. Yes, Job Network’s have a nasty habit of drumming it into the plebs that if you find a job to make sure you inform them immediately. This way they can say they got it for you and collect the tens of thousands they get for “finding” someone employment. If you’ve ever delt with a JN you know they do SFA.
I’ve experienced a couple and I found the Salvo’s (god forbid) to be the most extreme. I was required to report to my case manager type person once a week when I first arrived. So on a day I wasn’t required to be there I went in there and started looking for jobs on the computers. A nasty young lady from behind the counter came over and asked what the hell I was doing. I told her and she said I’ve never seen you in here before. On it went to the point she asked me to leave as she believed I was lying about being under their job care control, WTF?. She demanded my name, I gave it to her and she did the search and then said “Oh yes, you’re allowed to use the computers”. I said “see ya later” and walked out.
In one of their job search meetings when we were being told that we should put adverts in the paper declaring ourselves to be available for anything (at our expense, they refused to help cover the cost of placing the ads) a young guy closed his eyes for a brief moment and was kicked out of the meeting and then forced to explain why he shouldn’t be given a breach! Close your eyes for a split second and that then almost cost the guy $40 per fortnight for six months. I believe breaches went up to $60 per fortnight and then finally still under Howard to losing your entire payment for 8 weeks.
Which of course means if unable to find a job they would then need to resort to crime which leads to prison where the unemployed should be.
Polyquats @ 14 it’s worth pointing out when I was last unemployed it was under the Keating government. I know it got worse for the unemployed under Howard but make no mistake, those on the dole were treated as low scum long before the Howard years.
Jaques – I worked for the CES for a period during the mid-1990s, I know exactly how government policy was enforced in the offices I worked in. The strict job-search requirements were primarily placed on those that were LTUE – you probably didn’t fall into that category – I presume you didn’t have a case manager. My point was simply that there is more commonality between the two parties on such issues than some posters seem to understand. Indeed, the ALP imposed breaching and other sanctions in part because it didn’t want to be seen as being too soft on the unemployed.
You are all missing your point with your criticism of me. I was not conveying support for the process of breaching – just discussing how the policy came about. Large numbers of LTUE were breached in the offices that I worked in. The policy distressed a number of the people that worked in those offices. On a daily basis LTUE would come through the office doors furious at having their income support withdrawn. Yes, it became more pronounced under Howard’s regime, but the policy of reciprocal obligation was orginated by the ALP. Howard took the apparatus and made it much stricter.
And by the way – Paul Burns – equating work for the dole with slavery is just plain ridiculous. How about you actually read some texts about the experience and effects of slavery and think before writing such utter drivel.
“A little known fact is that during recessions, it is not the firing rate that increases most significantly, but the hiring rate that declines precipitously”
Labor outsider @25
It isn’t working like that in the mining sector.
And every one job in the resource sector creates six service jobs.
BFF
There is quite a detailed economic literature on this question. On AVERAGE, across the entire economy, the hiring rate is more cyclical than the firing rate. That of course does not mean that it applies to all sectors during all periods. However, while the firing rate in the mining sector has increased recently, I’m pretty sure that the hiring rate has declined enormously from what it was a couple of years ago. So my point would still stand.
The point of my comment was really just to point out that the labour market is dynamic and not static, and that during downturns it is at least, if not a more important policy goal to focus on things that will encourage firms to begin hiring again, as it is on policies to stop them from firing people.
I think the misperception about this aspect of the labour market comes from the way job losses are reported in the media. X announces 100 job cuts today, and so on. Whilst important, and awful for those that lose their jobs, such stories detract attention from what is really going on. Indeed, just as applicable a headline would be “10 000 firms decided today that they would not hire anyone over the next 6 months” – the aggregate impact of those actions has an even more profound impact on the unemployment rate than firm firing employees does.
Here is another way to think about it. Each year, hundreds of thousands of people aged 15-25 enter the labour force. To absorb those people without the unemployment rate increasing, firms in aggregate (new and existing) have to absorb those entrants through hiring. During cyclical downturns, that rate of hiring declines so that those entrants find it more difficult to get work – some register as unemployed (the youth unemployment rate increases enormously during downturns), others decide to stay in education (why TER thresholds are pro-cyclical), some find jobs, and others simply remain out of both education and the labour force.
That’s not a recession – that’s an usustainable bubble bursting.
Completely different, even though it may help lead to a recession.
I’m aware that it is compounded by firms deciding not to hire LO. Just pointing out the parlous state of the resource sector at the moment and how firing directly in the mining sector flows through to firing elsewhere.
I am a little concerned about what this year may bring my town. I live in Gladstone, a port town in central Queensland which is a major coal exporter and is very heavily involved in alumina/aluminium production and exports.
Rio Tinto is the town’s biggest employer.
With two alumina plants, an aluminium smelter and a large coal facility, resource exports are our lifeblood. Many, many more jobs exist as a direct result of servicing these facilities and from the good wages the resource workers pump into the town.
Following Rio’s announcement of 14 000 retrenchments from it global operations (and that many of these would be in the aluminium arm) we are holding our breaths here.
Labor Outsider,
If you work you should be paid a living wage. Old fashioned of me, I know.
Uh, books on slavery. How about:
Gary B. Nash , The Forgotten Fifth. African Americans in the Age of Revolution.
Benjamin Quarles, The Negro in the American revolution.
Cassandra Pybus, Black Founders.
Duncan J. MacLeod, Slavery, race and the American revolution.
Simon Schama, Rough Crossings. Britain, The Slaves and the American Revolution.
Sylvia R. Frey, Water from the Rock. Black Resistance in a Revolutionary Age.
Cassandra Pybus, Epic Journeys of Freedom.
Daniel P. Mannix and Malcolm Cowley, Black Cargoes. A History of the Atlantic Slave Trade 1518-1865.
James Walvin, A Short History of Slavery.
James Walvin,Black Ivory, A History of British Slavery.
Marcus Rediker, The Slave Ship. A Human History.
That do you?
I repeat, work for the Dole is a form of Slavery. If you’ve read some books on slavery, particularly 18C slavery, then you’ll know slaves were sometimes paid a pittance for the work they did.
it’s a shame we don’t have Stan Zemanek to guide us through these troubled times
“I’ve found it very interesting to see the Right effortlessly switch their arguments on IR. 12 months ago, unions were pursuing destructive, inflationary pay claims in an overheated labour market that would roon us all. Now, apparently, the same pay claims are contractionary and will lead to mass unemployment (and presumably roon us all). Unions’ activities are castigated in good times and bad, for very different reasons. The Right just changes the details of the argument to suit the times.”
Unions raising wages above market clearing rates is always bad, but the particular bad effects change from time to time depending on the conditions. It is not controversial to say that a wage/price spiral is a risk in an economy experiencing high demand for labor (we’ve had plenty before you know; this is actual lived experience). In past times the spiral was co-ordinated by the ACTU but this time round WorkChoices and the legacy of the Accord, enterprise bargaining and three-decades de-unionisation prevented it from happening. Something to remember when you recall with glee WorkChoices’ demise. But anyway it is also not controversial to say that raising wages when demand for labor is falling will inevtiably result in avoidable unemployment. A few tips: inflationary is not the opposite of contractionary, Gillard is not ‘the Right’ and the arguments that (a) union claims can provoke inflation in the good times and (b) unions claims can cause unemployment in the bad times (but also the good, which you omitted to mention), are not contradictory.
BBB
So, what, Paul, you can write down a list of books on the topic of slavery and you think that is sufficient to draw an analogy between work for the dole and the institution of slavery? You have got to be kidding. So, unemployed Australians under Howard were in bondage? Weren’t able to vote and deprived of civil rights? Could be traded by their owners and separated from their families? Subject to corporal punishment by their owners? Female work for the dole recipients subject to institutionalised rape? Deprived of all state-sponsord educational opportunities?
Just because some slaves recieved a small income stream does not mean that all government income recipients that receive a small income stream in return for some labour are slaves. It is a logical phallacy.
Indeed, unemployment benefits, as with other forms of social insurance is a modern phenomenon that did not exist in the 18th and most of the 19th centuries. The treatment of, and opportunities provided for, those not able to find work were far more extensive in the last quarter of the 20th century than at any time in human history.
Sure, you would like that support to be greater and of a different nature – more like the approach of the Scandanavians. That is fine and I’m not debating whether that would be superior or inferior to what is in place in Australia.
All I am saying is that dumb comparisons of WFD to slavery do not help your cause. There might be (and might is pretty strong) 500 fringe-dwelling Australians in total that would agree with your categorisation. It is just a stupid thing to say.
Paul, thanks for your list of books on slavery. I was intrigued by the author Daniel P Mannix. Alas, it was not, as I had hoped, the great Australian Catholic cleric moonlighting.
However I was interested to learn that the historian Daniel P(ratt) Mannix’s varied career included time spent as a sword swallower and fire eater in a circus and that he founded the Munchkin Convention of the International Wizard of Oz Club. I was intrigued to learn that he was the last person to see Grace Olive Wiley alive before she was fatally bitten by a poisonous snake.
He seems to have had a much more interesting life than the Melbourne prelate.
Labor Outsider, I think the point trying to be made here is that if you have a job available then the worker should be paid a just wage for it.
Work for the dole distorts the free market as it enables some businesses unfair advantage over others in terms of how much they pay for their resources although it does haver some positive effects such as pulling average wages down. It can also be disheartening for the newly unemployed. (Especially the case I heard about the landscaper sacked by a council because they no longer needed him only to be required to work for the same council in the same rol for work for the dole rates.)
One thing is true. Work for the dole isn’t slavery. For one there is choice involved. You don’t have to do it. (Of course without the dole you might find food and rent difficult but it’s still a choice.)
Also as one South Australian academic pointed out when he suggested we bring back slavery for the unemployed, slave owners have certain responsibilites in terms of their slaves. That is they have to feed, clothe, shelter and take care of the health. With work for the dole (and extreme min wage conditions) all that pesky stuff is outsourced as the responsiblity of the pleb. Yay for progress!
Bill@42
I agree mining has been an unsustainable bubble – but it is rapidly deflating because of recession elsewhere in the world leading the charge. The US and the Eurozone need to keep buying lots of manufacured goods from places like China for China to keep buying shitloads of our raw materials at a high price. The deepening recession in the US and increasingly in Europe has broken this chain.
Labor Outsider,
Not exactly the titles of the books, what’s inside ‘em.
I suppose if you’re cut off the dole for refusing to take part in WFD and you’re starving and homeless for eight weeks because you have no money to buy food or pay rent. Oh, I forgot you can always go to the Sallies, or Vinnies or the Smith Family or some other charitable institution. After all, being breached is really a service to the country – you’re contributing to the sacred budget surplus (which, it seems, the GFC will throw out the window.)
If you work you should be paid a proper wage for it, not treated like some 18C slave artisan, white or black, labouring from sunrise to sunset in an American colony. In this day and age, that’s just NOT FAIR!
PB @ 51 – Just out of interest how many hours/week are the work for the dole jobs and what sort of hourly rate do you end up with if you divide the unemployment benefit by the number of hours that you have to do?
Was the sword-swallowing Mannix ever kidnapped by the British Navy?
Oh, I could go into a long screed about the ways in which 18 C Slavery, as it applied to work practices,and that is a very important qualifier, (but not the apalling mistreatment of women slaves, and the ever present fear of the permanent breaking up of families. which I readily grant you,) differed from Ante-Bellum slavery. but, Labor Outsider, since its completely OT, I’m not going to. Suffice to say the main reason slaves in the !8C in colonial/revolutionary America resisted slavery, regardless of the good or ill-treatment of their masters,unless they came to mainland America from the West Indies, from whence they carried across a culture of rebellion, was they just didn’t want to be slaves. In fact, the main reasons for the mistreatment of slaves in the 18C was that they ran away and were recaptured, and, most importantly, fear of slave rebellion, usually instigated by slaves purchased in the West Indies, not those who came direct from Africa. Period.Strangely enough, the simplest explanation of human conduct is usually among the most accurate.
Sorry for going OT. Will cease now.
chris @ 52,
I have no idea. I’ve never had to do it. I object to the practice on principle. IMO, its demeaning, stigmatising, and exploitative, as is the whole attitude to unemployed people at Centrelink, if the dole recipents I’ve spoken to are correct in what they tell me. And I’m talking about everyone on Newstart now, not just WFD. I understand the Rudd Government have stopped WFD, but am not sure if that’s true. If they have, they wouldn’t have done it for reasons other than those of humanity, given their consewrvative bent in economics.
Work for the dole is less like new world slavery than it is like the corvee, which is old-world feudalism.
Under the corvee, persons of low estate were put to work under the authority of feudal lords.
Under Work for the Dole persons without a legitimate role in the economy are put to work under the authority of governments whose survival depends upon acting out the prejudices of the marginal voter.
Katz,
Yes. I agree. I should have thought of it. And, as I understand it,resentment the corvee was one of the many causes of the French Revolution.
I just want to see the unemployed stop being treated like second-class citizens.
Labor Outsider @ 37,
Yes, I had a case manager with the CES.
Chris @ 52,
From memory WFTD for the long-term unemployed (that very definition kept changing under Howard from 12 months to 9 months to 6 months etc) was 30 hours a week and for someone over 18 worked out to be about $7 an hour.
There has been little social responsibility or ethical conduct from business. this person has been not in the labor force for more than seven years at last count, with cumulative periods out of the labor force and/or unemployed exceeding twelve years. If the applicant is a transsexual, as I am, its an experience of being consistently passed over, even for mediocre competitors.