A blog lay day

A few years ago I decided that I would not write a blog on Fridays unless something big was happening. Instead I was using it as my notes for the development of our textbook, which you will pleased (or not) to know is nearing completion and should be published before year’s end. This year I have been using the Friday spot for on-going development of my Europe book, which is in the final stages of editing. So today I decided that I could use all my time for that latter task and the product of that editing is not of ‘blog interest’. Therefore, a blog lay day. Although I have been studying all the documents surrounding the Argentinean debt saga, which would have made a nice story today. The Argies have the vultures licked and I hope they know that!

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German economics minister “austerity policies have failed”

There was a report in the papers this morning about a horrific beating in one of the poorest migrant areas north of Paris. The article – Roma teen attacked: the images that will shock France was really a repeat of a story in the UK Telegraph. I don’t want to go into the details because I don’t know them. But what is apparent in modern day Europe is the increasing breakdown of social stability and an emerging law of the jungle driven by unemployment, poverty and the inevitable social exclusion. I do not accept that migrants have to poor just because they start with nothing and cannot speak the local language with proficiency if at all. What is clear is that austerity is undermining the social fabric of Europe and this shocking incident is just one of many manifestations of that. And it will get worse.

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The Looters and Moochers are apparently back in Australia

Last week (June 11, 2014), the Australian Treasurer gave a speech at the right-wing Sydney Institute entitled – A Budget For Opportunity. The Treasurer was attempting to spin the impossible – that the May Fiscal Statement was fair (equitable) in that all Australians would be contributing to the deficit reduction. That is patently false. It is clear that the largest burden arising from the fiscal reduction will be borne by those with least income, including those reliant on public income support to scratch out the barest of existences. But in trying to make this impossible case, Hockey also invoked the classic divide and conquer strategy that conservatives use to segment and coopt certain sections of the population into agreeing with policy changes that will not only undermine their own prosperity but devastate the prosperity of other ‘segments’ who they manage to vilify. And while that is going on, the high income earners and wealthy, who are more likely to support the conservative political parties sit back sipping on their gins laughing their smug heads off. What a world it is.

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Not a wages breakout in sight

Australian readers will recall earlier in the year when the Federal Employment Minister Eric Abetz warned the public that there would be a wages breakout unless union power was curbed and they negotiated collective agreements with employers that were in the national interest. The ABC news report (January 14, 2014) – Eric Abetz warns of wages ‘explosion’ unless employers stop ‘caving in’ to unions – said that the Minister berated “weak-kneed employers” who caved into “unreasonable union demands” and then lobbied him to cut union power. The same scaremongering accompanied the decision by Fair Work Australia to lift the minimum wage by xx per cent on June, 2014. This was not only a wages explosion but would cause a catastrophic loss of low-paid jobs according to the right-wing anti-worker cheer squad, including leading figures in the Federal government. The problem is that these ‘beat ups’ are lies.

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Teenage employment decline in Australia reaching catastrophic proportions

Regular readers will know that for some years we have been documenting the parlous state of the youth labour market in Australia. In an environment where fiscal cuts are being justified as looking after the future as the population ages, the most glaring thing that will undermine our future prosperity is the lack of attention policy makers are giving to the youth unemployment problem. The media has only just started to register that our ‘future’ workers are growing into adults having never worked nor gained the requisite experience to deliver high productivity outcomes. The personal future of this cohort is bleak. Recently, the Brotherhood of St. Laurence as (finally) launched a national campaign My Chance, Our Future to “draw attention to the crisis of youth unemployment in Australia”. Better late than never I suppose but what took them so long.

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Saturday Quiz – June 14, 2014 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Changes to unemployment benefit entitlements – the work of sociopaths

The new conservative Australian government is scaling new heights in their attack on the most disadvantaged. The May Fiscal Statement was littered with nasty cuts, which reduce spending by trivial amounts at the macroeconomic level but which will have devastating effects to the recipients of the income support. Today I briefly look at the changes in the unemployment benefit regime that have been foreshadowed. Let us hope the Senate blocks them for good.

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Australian labour force data – weaker and slowly deteriorating

Today’s release of the – Labour Force data – for May 2014 by the Australian Bureau of Statistics confirms, once again, how weak the labour market is. All the talk recently from the financial markets and the government about how the economy has ‘turned the corner’ and the lean times are behind us are plainly wrong. Today’s data confirms the stagnant situation that we have been witnessing for the last few years. Employment growth was negative and unable to keep up with the underlying population growth and unemployment rose modestly as a result. The participation rate fell again and held the rise in unemployment down by around 0.2 points. Workers are exiting the labour force because there are not enough job opportunities available. As a result, hidden unemployment rises as well. underemployment has risen since February by 0.2 points and the broad labour underutilisation rate (sum of underemployment and unemployment) stands at 13.5 per cent or more than 1.65 million workers. If we add the workers who have exited the labour market due to the lack of job openings then the total labour wastage will be well above 15 per cent. The other on-going disaster is the teenage labour market and that group fell further behind this month. The policy settings are wrong and the politicians are moving in the opposite direction to what is needed.

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Beware of structural explanations of cyclical events

One of the things you can always bet on with surety is that the conservatives will always try to convince the public that a cyclical event is, in fact, a ‘structural’ event. This has two, linked purposes. First, they can downplay any hint that aggregate fiscal policy interventions, which work at the macroeconomic level are necessary no matter how bad the problem is. Second, they can then wheel out their favourite ‘structural’ remedies, all of which just happen to result in national income being distributed to profits or high income earners, less capacity for low-wage workers to enjoy real wage rises or reasonably share in national productivity growth, and lower government income support payments to the disadvantaged. A double-whammy strategy. Here is an example of that sort of lie. The US Employment-Population ratio has fallen dramatically since the onset of the crisis and remains stuck at low levels. The reason is clear – there was a huge collapse in employment in 2008 and 2009 and, in the recovery, the rate of job creation has not been sufficiently strong to reverse that decline. Total employment growth has been around or just above the underlying growth in the civilian population (above 16 years), which is why the ratio is stuck. There needs to be much faster employment growth for the US to make back the ground that was lost in the downturn. While the US civilian population is growing older and that is having an impact on the calculated Employment-Population ratio, the impact is small and doesn’t alter the fact that a huge negative cyclical event occurred in the US and the fiscal intervention was not large enough to fix the problem.

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