Sunday Sanity Break, 28 May 2017 - Why real wages are falling
This is a global issue. For decades new workers have entered global labor markets, in China, India, South East Asia and other developing nations. In developed nations, this already brings competitive pressures on developed nation workers. Slow growth since the Global Financial Crisis has weakened recovery and bargaining power of workers. 'Headwinds' abound and stall growth - high and rising debt levels, aging populations, experienced 'discouraged workers' dropping out of the workforce, mismatch of education and available jobs, generous welfare and reluctance of many to take work that is perceived to be too hard or too unpleasant.
As a minister in the Whitlam government said: 'One man's wage increase is another man's job', or words to that effect. The Hawke government accepted that logic and unions agreed. Jobs grew more quickly when the Howard government's labor market reforms were introduced but the Rudd-Gillard-Rudd governments knew better and reversed these reforms. Yet real people ('the punters' in political argot) are capable of understanding the messages of market experience and many have settled for low wage increases rather than risk becoming unemployed.
In developed nations, governments have opted for definitions of unemployment that makes things look better. For over a decade, Roy Morgan Research and Henry Thornton have been pointing this out and finally Adam Creighton of the Oz has accepted the point. Mr Murdoch's august organ is now taking every opportunity to tell us that the Aussie labor market is in a parlous state.
People in the marketplace understood this only too clearly, which adds to caution in claiming wage increases. One might be tempted to imagine that Governments, Treasury officials and RBA forecasters all work in sheltered workshops and are last to accept this message. Indeed, their proven blindness has larger consequences. Predictions over the past eight years of increases in wages growth - see image below - and faster economic growth have lead successive governments to predict imminent return to budget surplus. The implications are dramatic. Budget action is effectively fudged, and debt headwinds keep growing. Successive Treasurers keep saying 'Things will soon be better', a great case of generic bullshit that one imagines could only come from a government-wide sheltered workshop.
A correct narrative from government would be honest about the battle Australia faces to create some genuine approximation to full employment, strong growth and budget surplus. Not the miniscule surplus currently predicted, but a real and growing surplus based on hard work, productivity increasing economic reform, increased investment and household spending restraint.
Household debt has reached 189 % of household incomes. Global interest rates are rising. How many households will be bankrupt when global rates return to normal?
Fiona Prior watches the forging of a new treaty at Sydney Theatre Company’s Black is the New White
The sporting life
Already a great weekend in footy to celebrate indigenous round. Lovely jumpers, gentlemen, and some great games. Richmond reversed weeks of heartbreaking narrow losses to overcome Essendon. Hawthorn overran the Swans in a dramatic finish. Adelaide flogged Freo by a mere 100 points, with superstar goalsneak Eddie Betts joined by another superb indigenous small forward in booting 3 goals.
Big thrill when Caaaarlton! can back from being flogged (43 points down) to hit the front against the Kangaroos with 10 minutes to go. Sadly our gallant lads failed to go on with it, but they will be a fearsome combination when teenagers grow up. Memo to recruiting team: we badly need a tall ruckman and a key forward.
The cricket standoff appears unlikely to be resolved, meaning Australia's best cricketers will be unemployed. Lots of money available elsewhere and if the officials don't reach an accommodation it looks as if Australian test cricket will again be decimated. No doubt Henry's old team, the Mont Albert Fourths, will put their hands up and if chosen will fight bloody hard.
Image of the week