Europe – the deliberate wastage of its youth continues

Earlier this month (August 11, 2017), Eurostat published the latest European Union data for – Young people in the EU: education and employment. This data now allows us to track the fortunes of three age cohorts – 15-19, 20-24 and 25-29 years since before the crisis to the end of 2016. So a teenager prior to the crisis (2007) would be transiting into the 25-29 years cohort in 2016. One of the disturbing trends shown in the data is the increasing number of young people in the older ‘youth’ categories that in 2016 we classified as being Neither in Employment, nor in Education or Training (NEET). Some will have been in that category for the entire duration of the crisis – that is, they dropped out of school early, are not receiving any skills development and are unemployed. Whereas in 2007, the proportion of NEETs in the 25-29 years cohort was 17.2 per cent, that figure has risen to 18.8 per cent by 2016 (although the peak of 20.7 per cent was reached in 2012). This suggests that the systems which provide transitions between education and employment are not working effectively because the demand-side of the labour market is deficient. That is, there is a lack of jobs available overall and the most disadvantaged youth workers are at the back of the queue along with the disabled and other stigmatised cohorts (for example, Roma people in the European context). There is an urgent need for a true Youth Job Guarantee, to replace the faux Youth Guarantee that was introduced in 2012. But then that would require abandoning the obsession with austerity and dysfunctional fiscal rules. The European Commission’s answer to the problem will be to have another ‘summit’ or two and issue plenty of statements replete with motherhood statements.

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When neo-liberal masquerades as anti-establishment

Regular readers will know I was doing some speaking engagements in New Zealand a few weeks ago. Please read my blogs – Travelling all day today but here is something to watch and listen to and Reflections on a visit to New Zealand – for more coverage of that visit. New Zealand is in the midst of a national election campaign and it seems that one of the aspiring parties – The Opportunities Party (TOP) – which is trying to carve out a niche for itself as an ‘anti-establishment’ party in opposition to neo-liberalism – obviously determined that the Modern Monetary Theory (MMT) message that I introduced many progressive New Zealanders to during my visit threatened their own credibility (which is a reasonable perception). So, to kill off the threat TOP went on the attack, although as you will read they found it impossible producing a credible critique of MMT and still maintain their alleged anti-neoliberal stance. Whatever, I would hope not too many New Zealand voters get lulled into believing that TOP is somehow a progressive force. Their macroeconomic narrative is strewn with neo-liberal falsehoods that are like neon-signs advertising their roots!

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US labour market – improves again in July

Shonk is an Australian/NZ slang word to describe someone engaged in shonky behaviour, which the Oxford Dictionary describes as being behaviour that is “Dishonest, unreliable, or illegal, especially in a devious way”. So a shonk means a “dishonest person; swindler or con artist” and while intent is implied it doesn’t have to be conscious action (note the inclusion of the descriptor “unreliable”). It could just mean stupidity or ignorance that leads to shonky performance. I will come back to that topic soon. On August 4, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – July 2017 – which showed that total non-farm employment from the payroll survey rose by a relatively healthy 209,000 in July. The weak result for May now seems to have been a blip in the data. The Labour Force Survey data showed that employment rose by 345 thousand in July but was still not large enough an increase to offset the rise in the labour force (349 thousand), and as a consequence, official unemployment rose by 4 thousand. The official unemployment rate was stable though at 4.4 per cent. There are still 6.98 million unemployed persons in the US. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Further, the bias towards low-pay and below-average pay jobs continues.

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Australian government employment plan – racist and in breach of our laws

Today’s discussion is about how employment policy becomes so corrupted by neo-liberal ideology (overlaid with some healthy racism) that the government causes damage rather than advances well-being. The examples I outline demonstrate the wider problem that neo-liberal inspired governments clearly understand the economy is not working yet they cannot bring themselves to introduce obvious solutions to the problems identified. Further, while they claim their policy choices are constrained by the ‘money’ they have to spend (limited according to their narrative), when they do spend ‘money’ they bias the benefits to corporate interests as a profit subsidy rather than providing sustainable income support for the most disadvantaged who just become pawns in the subsidy to capital. And then, they pretend, they are obeying ‘market’ dictates when the ‘free market (not!)’ was never in the picture anyway. The on-going hypocrisy of this neo-liberal era.

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There is nothing much that Milton Friedman got right!

“If we want to ensure more people are well-employed, central banks alone will certainly not suffice” is a quote I am happy to republish because I consider it to be 100 per cent accurate. The only problem is that the way I think about that statement and construct its implications is totally at odds with the intent of its author, who claimed it was “an important lesson of Friedman’s speech”, which “remains valid”. The quote appeared in a recent Bloomberg article (July 17, 2017) – What Milton Friedman Got Right, and Wrong, 50 Years Ago – written by journalist Ferdinando Giugliano. It celebrates the Presidential Speech that Friedman gave to the American Economic Association on December 29, 1967 at their annual conference in Washington D.C. In terms of the contest of paradigms, the speech is considered to be the starting point proper of the Monetarist era, even though it took at least another 5 or 6 years (with the onset of the OPEC oil crises) for the gospel espoused by Friedman to really gain ground. The problem is that Friedman was selling snake oil that became the popular litany of the faithful because it suited those who wanted to degrade the role of government in maintaining full employment. It was in step with the push by capital to derail the Post War social democratic consensus that had seen real wages growing in proportion with productivity, reduced income inequality, jobs for all who wanted to work and a strong sense of collective solidarity emerge in most advanced nations. This consensus was the anathema of the elites who saw it as squeezing their share of national income and giving too much power to workers to negotiate better terms and conditions in their work places. Friedman provided the smokescreen for hacking into that consensus and so began the neo-liberal era. We are still enduring its destructive consequences.

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The conservative opposition to full employment legislation in the US

In 1946, with the Second World War at an end, the world governments turned to the question of how to maintain the full employment that the prosecution of the War had brought in the peace. It was clear that governments could choose whatever unemployment level they wanted through the manipulation of fiscal and industry policies and so the only question was the political will to maintain the full employment state. In the US, the political debate led to the Employment Act 1946, which demonstrated that the parameters of the conflict between conservative and the more liberal forces over what constituted full employment and what responsibility the currency-issuing government had for maintaining high levels of employment. We can see through successive attempts in the US to legislate for full employment how the economic profession has influenced the political process and how we have reached the point today where governments pay lip service to fulfulling their responsibilities as the fiscal agency to maintain sufficient jobs for those who desire to work.

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US labour market – improves in June but still no growth trend is apparent

On July 7, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2017 – which showed that total non-farm employment from the payroll survey rose by a relatively healthy 222,000 in June, after a much weaker result in May 2017. The Labour Force Survey data showed that employment rose by 245 thousand in June but was still not large enough an increase to offset the rise in the labour force, and as a consequence, official unemployment rose by 116 thousand. The official unemployment rate rose by 0.1 points to 4.4 per cent as a result. There are still 6.98 million unemployed persons in the US. The Federal Reserve Board’s Labour Market Conditions Index showed a slight deterioration in the overall labour market. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Further, the bias towards low-pay and below-average pay jobs continues.

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Employment as a human right

As I indicated earlier this week, I will progressively add notes to the body of work that will become the manuscript for my next book (with long-time co-author Joan Muysken) on the – Future of Work. As I write bits and pieces, I will post them here for comments and feedback. The book will be published sometime in 2018. At present, I am working on the philosophical considerations that we will deploy to underpin the more prescriptive elements (policy proposals) that we will produce. Today, I have been writing about the ethical basis for work. This is derived from work I did at the turn of the century. Part of the text today was written in collaboration with a former colleague John Burgess and the body of work we produced was subsequently published in several periodicals and book chapters around that time. However, the ideas sketched here were taken from parts of the papers that I mostly wrote although trying to decipher the exact division of labour is impossible. In that sense, I acknowledge the fruitful nature of my interaction with John at that time and the body of work we produced together.

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When Austrians ate dogs

You will notice a new ‘category’ on the right-side menu – Future of Work. It will collect all the blogs I write as part of the production of my next book (with long-time co-author Joan Muysken) on that topic. We aim to present a philosophical, theoretical and empirical analysis of a plethora of issues surrounding the role, meaning and future of work in a capitalist society. As I complete aspects of the research process I will produce the notes via blogs. Eventually, these notes, plus the input from Joan will be edited to produce a tight manuscript suitable for final publication. Today, I am discussing an important case study that needs to receive wider attention. Its lack of presence is in some part due to the fact that it was written up in German in 1930 and escaped attention of the English-speaking audience until it was translated in 1971. In selected social science circles this study provides classic principles that transcend the historical divide. The relevance of the study is that it provides a coherent case for those, like me, who argue that work has importance to societies well beyond its income-generating function. Humans need more than just income and in a society where work is considered normal time-use and frames the time we spend not working, it is an essential human right. Progressives who think that only income should be guaranteed by the state rather than work miss many essential aspects of the issue. The case study is important in that respect.

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US labour market – poor results – not close to full employment

On June 6, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2017 – which showed that total non-farm employment from the payroll survey rose by just 138,000 in May. While the payroll data confirms an on-going deterioration in job creation, an examination of the Labour Force Survey data presents an even worse picture. The official unemployment rate fell from 4.4 per cent to 4.3 per cent, the lowest rate since May 2001. But the fall in unemployment of some 195 thousand persons was not a sign of strength. Total employment fell by 233 thousand but was a smaller decline than experienced by the labour force (down 429 thousand) on the back of a fall in the participation rate (0.2 percentage points). In other words, hidden unemployment rose while official unemployment fell as workers gave up looking for work in the face of declining employment growth. The estimate of employment change from the Labour Force Survey was also positive (156 thousand net jobs added). There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Which makes the claims by a number of analysts that the US jobs market is so strong that inflation is about to accelerate on the back of wages growth (which at present is largely non-existent). In other words, there are many assessments that the unemployment rate has reached the so-called NAIRU (Non-Accelerating Inflation Rate of Unemployment) below which accelerating inflation becomes inevitable. I doubt that assessment.

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MMT is what is, not what might be

One of the things I have noted with regularity is that readers and other second-generation Modern Monetary Theory (MMT) bloggers often fall into the error which we might characterise as the “When we have MMT things will be different” syndrome. Or the “we need to change to MMT principles to make things better” syndrome. Thinking that MMT constitutes a regime change is incorrect and steers one away from the core issues. In this blog, I reflect on that syndrome and some other aspects of the development of ideas, which I hope will provide readers with a clearer picture of what the core (early) MMT developers (Mosler, Bell/Kelton, Wray, Mitchell, Tcherneva, Fullwiler) had in mind when we set out in the early 1990s to construct a better way of doing macroeconomics. The point is that while MMT constitutes a regime change in economic thinking within the academy it does not constitute a regime change in the way the monetary system operates. We need to separate the operational principles exposed by MMT academics from their ideological values to really come to terms with the fact that MMT is what is, not what might be.

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US labour market – hard to read at present but probably improving

On April 7, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2017 – which showed that total non-farm employment from the payroll survey rose by only 98,000, a considerable shortfall when compared to the previous two months. The unemployment rate fell to 4.5 per cent (down 0.2 points). The question is whether this month’s results signal a slowdown after the positive ‘Trump’ spike or is just a monthly variation that will iron itself out over the longer period. Whatever the direction, there is still a large jobs deficit remaining and the jobs created since the recovery are still biased towards low pay sectors.

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Amazing what politics does to people

In 2012, while unemployment and underemployment was still at elevated levels after rising in the early days of the GFC, non-government spending was weak, the external deficit was around 4 per cent of GDP, real GDP growth remained well below its trend in the 5 years before the GFC, and the economy was no-where near full employment, the then Treasurer, Wayne Swan launched into the largest fiscal shift away from deficit in recent history (in the modern era since 1970). He was obsessed with ‘getting the budget back into surplus’ in the following year because somehow he had gleaned from the work of John Maynard Keynes that a responsible government has to pay back deficits with surpluses. The Australian government’s deficit had risen because tax revenue had fallen as a result of the slowdown in activity and because the Government introduced a rather large fiscal stimulus, which saved Australia from going down the recession route that other nations were mired in. Maintaining that deficit or enlarging it with further stimulus is what a responsible government should have done. But Swan, apparently thought that with Europe heading further into the morass (as a result of mindless austerity) that he had to show the world what a good government does – run surpluses. Apparently, he thought the credit rating agencies would close the government down. Apparently, he thought inflation would runaway from its low levels. Apparently, he believed the lie that fiscal deficits pushed up interest rates. Apparently, he didn’t know that introducing fiscal contraction when non-government spending was weak would further slow the economy and damage confidence. All of which happened. Quite obviously he didn’t know a thing. Swan, ever the politician (but in opposition now) is apparently thinking differently – now he is claiming fiscal deficits have to rise to push the economy towards full employment. This chameleon-like performance is rather sickening given the damage he caused when he was actually the Treasurer in charge of fiscal policy and full of neo-liberal lies and confusion.

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US labour market improves and interest rates will rise as a consequence

On March 10, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2017 – which showed that total non-farm employment from the payroll survey rose by 235,000, which built on the 227,000 net change in January 2016. The unemployment rate fell to 4.7 per cent. The Labour Force also grew strongly as participation rose by 0.1 points. The signs are more positive than a few months ago, even if broader indicators (the U6 measure supplied by the BLS ) suggest caution. Overall, there is a large jobs deficit remaining and previous analysis has shown that the jobs that have been created in the recovery are biased towards low pay. One suspects though that the Federal Reserve Bank will take the chance offered by a stronger monthly result (February) to increase interest rates a notch when it meets this week.

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US labour market deteriorating – the losses from GFC will be long-lived

In September 2016, I assessed that – The US labour market is nowhere near full employment. This was in the context of an increasing number of commentators claiming that the US economy had already returned to full employment. The IMF World Economic Outlook is also estimating that the output gap in the US (actual relative to potential) has turned positive (meaning the US is beyond full employment). By way of contrast, the Congressional Budget Office considers the US had an output gap of around 0.9 per cent (actual below potential) in the December-quarter 2016. The facts point to even higher output gaps. The current BLS data release – Employment Situation Summary – January 2017 – has not altered my view. It showed that total non-farm employment from the payroll survey rose by 227,000 and the unemployment rate remained “little changed” at 4.8 per cent. But from the perspective of the labour force survey (Current Population Survey), total employment fell by 30 thousand. See below for an explanation of that paradox. The point is that employment still remains well below the pre-GFC peak and the jobs that have been created in the recovery are biased towards low pay. Additional research reveals that the losses from this sluggish economic performance will be long-lived and undermine the prospects of future generations. Fiscal austerity is bad for our grandchildren! In general, the problem is less job creation as quality of the work being created and the capacity of US workers to enjoy wage increases.

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Greece still should exit and escape the grip of the vandals

Greece is back in the news as the IMF, the Germans and the European Commission slug it out pretending to talk tough and propose solutions to the Greek tragedy. There is no solution of course. All the debate about whether the primary surplus target should be 3.5 per cent of GDP (European Commission position) or slightly lower (IMF position) is just venal hot air. Anybody who knows anything and isn’t protecting their past mistakes would assess that a fairly large and sustained fiscal deficit is required in Greece to rebuild some of the lost capacity and to provide an inkling of hope to the youth who are facing a lifetime of diminished prospects as a result of the decisions the adults around them took. All the talk about ‘deficits mortgaging the grand kids future’ – sick. The austerity has meant the grand kids might not ever emerge given the constrained circumstances their would-be parents will face as they progress through adulthood. The reality remains – firmly – Greece should exit the Eurozone, convert any outstanding liabiliites into a new currency at parity, and stimulate its domestic economy with expansionary fiscal policy. It should continue to impose capital controls. As part of the stimulus, it should introduce an unconditional Job Guarantee at a decent wage to provide a pathway back into employment for the many that the Troika have rendered jobless.

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When mainstream economists jump the shark and lose it completely

There was an Op Ed last week from an Australian academic who attacked Modern Monetary Theory (MMT) along the lines that its proponents are “a bunch of cranks” and practice “charlatanism”. He also considers us to be sellers of “snake oil” and other nasty things. It was an extraordinary public intervention given that the argument was based on assertions drawn from an intermediate mainstream macroeconomics textbook, bereft of historical understanding and bereft of any real knowledge of the way the monetary system and the institutions within it (government, central bank, commercial banks) actually work. The MMT critique went like this: (a) misrepresent MMT through attributing claims to its proponents that are not remotely to be found in the literature; (b) claim you are not misrepresenting the MMT literature by selective quotes that are not actually consistent with the misrepresentations; (c) bring in one liners from textbooks that have been demonstrated to have no real world application and are patently wrong in many key elements of the banking system and the way bond markets operate; (d) call us fools for not knowing any of this. Well, it doesn’t take long into the article to realise who the fool is. The other point is that MMT is now clearly at the stage of development where the mainstream think they have to attack us and put us down. That is the next stage in our development (following years of being totally ignored). Progress is being made.

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Australia – weak employment growth, rising unemployment – need for policy shift

The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for December 2016 shows total employment barely increased and the ABS said the trend to part-time work remains. Over the last 12 months, Australia has lost 34 thousand full-time jobs (in net terms) and added only 91.5 thousand overall. This status as the nation of part-time employment growth carries many attendant negative consequences – poor income growth, precarious work, lack of skill development etc. The teenage labour market remains in a poor state and went backwards in December. It requires urgent policy intervention. Overall, with weak private investment now on-going and real GDP contracting (in the September-quarter), the Australian labour market is weak and there needs to be a policy shift. It is clear that the current policy position adopted by the Federal government is not sufficient to redress the inadequate non-government spending growth.

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Policy changes needed to arrest decline in fortunes for low-pay British workers

Its hard to keep track of the variety of ways that this neo-liberal era has screwed workers. The latest report from the UK Institute of Fiscal Studies (January 13, 2017) – Two decades of income inequality in Britain: the role of wages, household earnings and redistribution. I read that report after I had studied the latest income distribution figures from the British Office of National Statistics (January 10, 2017) – Household disposable income and inequality in the UK: financial year ending 2016. The latter suggests that income inequality has decreased in Britain since . The former revealed that in the last two decades there has been a “four-fold increase” in the prime-age males (25-55 years) working part-time on low wages. But closer scrutiny of the figures reveals that they are not inconsistent because the falling inequality is not the result of low-wage workers improving their position. Anyway, this is another legacy of New Labour – screw the workers you claim to represent. It is just another part of the scam of Blairism exposed.

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The Obama legacy

I heard some of President Obama’s Farewell Address on the radio yesterday and read the transcript later. Early on, the crowd started chanting “Four More Years” and at that point I concluded they were blind too the reality before them. Obama’s legacy and the legacy of the Democratic period in office is Donald Trump. But it is much more than that. It was full of American exceptionalism, which those from the outside just brush off as the usual hype from a nation that is close to being a failed state but just has more guns and ammunition than anyone else. Press those E-mail send buttons now, I have the full fire suit on – as always. I get more hate E-mails from Americans who profess to love freedom and liberty than any other nation. At any rate, if I was departing what has been a failed Presidency when judged in progressive terms, I would have gone quietly. The ultimate Obama legacy is the Trump presidency. The embrace of the Clinton divine right to rule helped get Trump across the line but the damage was done earlier and Obama only consolidated the failure of Democratic party to offer an alternative to the rabid neo-liberalism of its opponents. The first problem is that the Democratic Party has long ceased being a voice for progressive policies. It masquerades as a progressive party. Obama adopted that masquerade and when one puts together a report card, he gets a failing grade on so many fronts, a few of which lie within my expertise, that I discuss below.

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