Tag Archives: work

Weak jobs, weak budget

Forget Tony Abbott’s boasts about how many jobs have been created since his government was elected.
The facts are that the labour market is weak, and the incentive for business to put on more staff is low (though the ANZ job ads survey out early this week indicated employers are increasingly looking to hire).
Not only has the unemployment rate (6.4 per cent last month) jumped to its highest point in almost 13 years, the average hours worked each week is stuck around a record low 31.7 hours.
In practice, it means there is plenty of scope for employers to bump up the hours of existing staff before they need to start thinking of hiring someone extra.
Today’s labour force figures simply reinforce Reserve Bank of Australia warnings that the growth outlook is underwhelming – the central bank expects the economy to have expanded by just 2.25 per cent in the 12 months to June this year, and doesn’t expect any major improvement until into 2016.
There are some positives. The exchange rate is hovering around $US0.76, interest rates are at a multi-decade low of 2.25 per cent, petrol prices have tumbled in recent weeks and consumer sentiment has jumped.
But the improved outlook of households is likely to be short-lived as worries about job security and political turmoil in Canberra drag on confidence.
Altogether, it is not a great time to be framing a federal budget, with little reason to think that the huge slowdown in revenues from company and personal income tax will be reversed any time soon.
If ever the nation needed to have a serious conversation about broadening the tax base and reigning in tax expenditures (which were worth $113 billion in 2009- 10 alone), this is the time.
As Stephen Bartos noted in testimony to the inquiry into the establishment of the Parliamentary Budget Office, “tax expenditures are the unloved orphan of fiscal scrutiny, paid little attention and not well understood and analysed”.
It is time to change that.

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Time to curb outrageous salaries – or lift investment?

People really have got Maurice Newman all wrong.

When the former ASX boss compared minimum wage rates across the Anglosphere and Europe, many assumed he was pushing for a pay cut for low paid workers.

In fact, in his roundabout way, he was making the case for the top-heavy wage structures of the major corporations to be heavily pruned.

He mightn’t have said so outright, but Newman was challenging company boards to rethink the way they set executive pay – instead of trying to match the highest rates on offer on the global market, he was urging them to go low-ball.

That, at least, seemed to be the logical extension of his argument.

In an incisive piece of analysis, uncluttered by arcane economic concepts such as purchasing power parity, Newman told the Committee for the Economic Development of Australia at a function on 11 November that a worker on the minimum wage in Australia working a 38-hour week earned $US33,355 a year, compared with $US22,776 a year for a worker on the Canadian minimum wage, and just $15,080 for an equivalent worker in the United States.

“We cannot hide the fact that Australian wage rates are very high by international standards,” he thundered, “and that our system is dogged by rigidities.”

His argument brought to mind an interesting piece of analysis in The Economist examining the labour share of national income. It cited figures from the Organisation of Economic Cooperation and Development showing that labour captured 62 per cent of all income in the 2000s, down from more than 66 per cent in the early 1990s.

The United States, which Maurice regards so enviously, has shared in the decline, though the pain is spread unevenly – there, the top 1 per cent of wage earners have seen their share of income increase while the remaining 99 per cent have suffered 4.5 percentage point decline.

As The Economist notes, this has meant that productivity gains are no longer translating into broad-based wage increases. Instead, the benefits are accruing to the owners of capital.

This is not just a northern hemisphere phenomenon.

Figures compiled by the Reserve Bank of Australia show that unit labour costs as a proportion of gross domestic product have shrunk since the early 1990s. And the latest Wage Price Index figures from the Australian Bureau of Statistics show that salaries are keeping just ahead of inflation – the index was up 0.5 per cent in the September quarter, taking annual wages growth to 2.65 per cent.

Interestingly, while some of this decline can be attributed to the effects of competition from cheaper imports, researchers at the University of Chicago have found that a substantial part of it is due to technology.

They found that the cost of capital goods, relative to consumer items, has plunged 25 per cent in the last 35 years, making it increasingly attractive to swap labour for technology.

If Maurice is really all about increased productivity, and isn’t just attempting to restart the class war from the top, he should drop his tired old wage cutting rhetoric and instead urge his business compadres to increase their capital investment.

Just a thought.

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A shortage of jobs, but no shortage of work

In contemporary Australia there might be a (relative) shortage of jobs, but it seems there is no shortage of work.
While the unemployment rate hovers just below 6 per cent (it held steady at 5.7 per cent last month according to the latest official labour force figures), just about anyone with a job will tell you that their work demands are rising relentlessly.
So what is going on?
The latest official employment figures are consistent with a trend that emerged in the middle of last year in which employment growth is slowing but hours worked is accelerating (see Reserve Bank of Australia chart of labour input growth below).

10bl-labinpu

According to the Australian Bureau of Statistics, aggregate hours worked increased marginally in both trend and seasonally adjusted terms last month, while employment and unemployment were flat (a net 1100 jobs were created, while an additional 9000 job seekers joined the labour market).

The increase in pressure on those still with a job has been accentuated by the inclination of employers to take on part-timers over full-time staff – in the 12 months to October, 53,000 full-time jobs were lost, while during the same period 145,000 part-time positions were added.

Business surveys and the latest job ads report from the Australia and New Zealand Banking Group suggest wary employers are reluctant to take on extra staff.  According to the ANZ, the number of job ads has bottomed in the last two months after falling for most of the year, while an Australian Chamber of Commerce and Industry index of labour market conditions reached a four-year low of 43.6 points in the September quarter.

It is not hard to see why: though low interest rates have injected some vigour into the housing sector, the economy remains sluggish.

As RBA Governor Glenn Stevens observed earlier this week, the economy is still fumbling its way forward as the mining investment boom rapidly dissipates and other sources of growth are yet to establish themselves.

Couple this with the continued strength of the dollar and tepid global growth, and it is little wonder businesses are reluctant to take on extra staff.

Instead, as the data indicate, employers are choosing to use their existing workforce to cope with any increase in demand.

This is why those who have a job feel like they are working twice as hard, even as hundreds of thousands are banging on the door looking for employment.

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