Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Last month’s Australian labour force data showed what a part-time employment nation we were becoming. The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for July 2016 shows that trend to be intensifying with modest employment growth and collapsing full-time employment growth. With more than 86 per cent of total net jobs created over the last 12 months being part-time, it is clear that Australia is becoming a nation of part-time employment growth with all the attendant negative consequences. The teenage labour market remains in a poor state and requires urgent policy intervention. Overall, with weak private investment now on-going, the Australian labour market is looking in pretty dismal shape and the recently elected Federal government should have introduced a rather sizeable fiscal stimulus immediately upon re-election to provide some fiscal leadership to the nation. This should have included a large-scale public sector job creation program which would ensure teenagers regained the jobs that have been lost due to the fiscal drag over the last several years. There are no signs that our polity understands any of that.
The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the June-quarter 2016 today. Annual private sector wages growth remained steady at 2.0 per cent (0.5 per cent for the quarter), which is the third consecutive month that the annual growth in wages has recorded its lowest level since the data series began in the December-quarter 1997. In the 2015-16 fiscal statement (aka ‘The Budget’), the Government assumed wages growth for 2015-16 would be 2.5 per cent rising to 2.75 over 2016-17. On current trends, that is highly unlikely to occur, which means the forward estimates for taxation revenue are already falling short and the fiscal deficit will be larger than assumed. Depending on how we measure inflation, the annual wages growth translates into only a modest real wage rise since January 2016 for Australian workers. More importantly, real wages are growing well below trend productivity growth and Real Unit Labour Costs (RULC) continue to fall. This means that the gap between real wages growth and productivity growth continues to widen as the wage share in national income falls (and the profit share rises). The flat wages trend is intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth in consumption spending. The lessons have not been learned.
A few weeks ago, I was waiting for a flight at the airport and during a conversation with a person who often travels the same route and schedule that I use on a regular basis (we are now sort of ‘fellow travellers’ and share stories of delays, diverted flights etc), he asked me whether I use Uber. My reply was in the negative – I do not use the service and do not think it is a positive labour market development. He then said something like “but it is a flexible service and drivers can choose their hours”. To which I said something like “flexibility is just the latest buzz word for low-pay, casualised employment” except Uber takes that trend even further in the direction of capital. Uber is a replay of old models of worker exploitation jazzed up in Silicon Valley hype to appear to be ‘cool’. The ‘gig economy’ just layers additional disadvantages for workers and takes us back to the days following slavery. Progressive should avoid using the service for many reasons. There are also other issues relating to the commodification of our lives that also apply to services like Uber. Interestingly, a few weeks after that interchange, the Financial Times published an article (August 11, 2016) – Uber hitches a ride with car finance schemes – which reinforced my views on the scheme. And just yesterday (August 15, 2016), there was a very terse Letter to the Financial Times about this article – An economic model from the feudal age – which summarises why progressives should boycott this type of labour market trend.
I recently wrote about minimum wage principles in relation to a progressive manifesto and the desire to reduce income inequality, which has risen sharply in the neo-liberal era where mainstream ‘free market’ economics has been the dominant narrative. Please see – Reducing income inequality – for that discussion. That blog considered some evidence that refutes the mainstream economics mantra that implementing minimum wages undermines the employment opportunities for low-wage workers. The standard lie that is rammed down the throats of economics students is that whenever governments impose minimum wages the market retaliates and minimum wage workers are worse off as a result. There are layers of erroneous concepts embedded in that orthodoxy, which I have dealt with many times before. But a significant point is that the real world is doing a good job to expose the lies of the ‘competitive’ model without recourse to any deep theoretical debates about whether ‘marginal productivity’ can be identified (it cannot), or whether the labour demand curve is downward sloping (it isn’t), which also includes a debate about whether productivity declines with extra employment (it doesn’t!). An interesting research paper released July 2016 by researchers at the The Seattle Minimum Wage Study Team based at the University of Washington in Seattle – Report on the Impact of Seattle’s Minimum Wage Ordinance on Wages, Workers, Jobs, and Establishments Through 2015 – provides further evidence to contest the veracity of the mainstream economics myths.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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.
There was an interesting article from Spanish political scientist (and economist) Vicente Navarro (August 4, 2016) – Is The Nation-State And Its Welfare State Dead? A Critique Of Varoufakis – which contested the former Greek finance mininster’s claims that the “nation state is dead” and so pan-international movements are required to restore democracy and provide a bulwark against global capitalism. I have a lot of sympathy for Navarro’s argument given that the topic is closely related to current book manuscript I am working on with Italian journalist Thomas Fazi on the reasons that the Left have vacated the progressive space and adopted neo-liberal economic positions that guarantee its steady demise as a political force. So in that context, the work of the former finance minister in trying to revive a Left narrative is admirable but, as Navarro notes, is misguided. DiEM25 is not likely to form a basic of a progressive manifesto for the future.
In yesterday’s blog – Time for fiscal policy as we learn more about monetary policy ineffectiveness – I discussed, in part, the way that fiscal and monetary policy in Japan were working in a harmonious way, in contradistinction to the way these two major policy levers are working elsewhere (for example, Australia and the Eurozone). One of the results of that harmony is that the official unemployment rate in Japan has dropped to 3.1 per cent, the lowest since July 1995. I considered the willingness of the Japanese government to introduce and maintain large fiscal stimulus programs under its Prime Minister – Shinzō Abe – to be a major contributing factor in that reduction (down from 5.5 per cent in July 2009). However, a Bloomberg journalist asserts that – Japan’s Plunging Jobless Rate Is All About Aging, not Abenomics (published August 10, 2016). We can explore whether that assertion is true. It will certainly be partly true given the population ageing in Japan. That is what this blog is about today.
The week before last, the Bank of Japan didn’t set off any bazookas and basically held ground on monetary policy. In its – Summary of Opinions at the Monetary Policy Meeting on July 28 and 29, 2016 – (released August 8, 2016), we detect some tension among the Board members as to the effectiveness of monetary policy as a counter-stabilisation force (altering the economic cycle). The distinguishing feature about Japan is that monetary and fiscal policy are working in harmony in contradistinction to other nations (or currency blocs) where monetary easing is being accompanied by fiscal contraction. The latter ensures that growth will not occur, while the former provides a virtuous cycle. The recent retail sales data for Australia, released last week by the Australian Bureau of Statistics provides further evidence that monetary policy is not very effective in stimulating spending. The same data demonstrated categorically in 2009 how effective fiscal policy can be. It is time for the Australian government to shift policy positions and introduce another major fiscal stimulus and stop relying on the central bank to salvage what is becoming an ugly situation. The latter simply hasn’t got the policy tools available to fulfill the task it has been (implicitly) set by the Government’s irresponsible pursuit of fiscal surpluses.