Long-term unemployment in America falls when employment growth increases

A few weeks ago, I updated my research on the way employment growth accesses the different unemployment duration pools using Australian data. In that blog post (October 19, 2020) – The long-term unemployed are not an inflation constraint in a recovery – I showed that the claim that the long-term unemployed constitute an inflation constraint because employers will not choose to offer them jobs due to perceived scarring is a popular neoliberal assertion but has no basis in the actual data. The orthodox economists use that assertion to justify microeconomic (supply-side) policies (training, activation, etc) rather than direct job creation. The reality is that when employment growth is strong enough, both short-run and long-run pools of the unemployed are accessed by employers. In the latter case, employers alter hiring standards and offer on-the-job training to ensure they do not lose market share. I have received several E-mails stating that the US is different and the long-term unemployed are shunned by employers, which means that trying to stimulate the economy will hit the inflation constraint sooner than if there was a Job Guarantee in place. Logically, there is no reason the US labour market operates differently in any fundamental way to the Australian labour market so I decided to examine the validity of the ‘irreversibility hypothesis’ using US data. Guess what? The hypothesis doesn’t hold up in the US either.

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Australian labour market continues to go backwards as government sits idly by

On Tuesday (October 20, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 3 October 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. Last week, the ABS released the monthly labour force survey data which covered the period up until September 14. Today’s data gives us an extra two weeks of information to gauge what is happening. It also provides us more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Those restrictions were eased last weekend after the government has brought the outbreak under control. So hopefully, today’s data will signal just about the trough before the slow recovery begins as more activities open up. Overall, payroll employment has fallen by 0.7 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending October 3, 2020 in Victoria by 2.3 points. Employment has also fallen in NSW by 0.7 points over the same period. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. The problem is the federal government is now engaging itself in trivial political point scoring instead of showing economic leadership.

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The long-term unemployed are not an inflation constraint in a recovery

I gave some advice to a politician last week who had read some MMT literature that he said indicated that using the Job Guarantee reduces inflationary pressures in a recovery relative to a situation where a nation had an unemployment buffer stock. I was surprised by the question because the assertions didn’t appear congruent with the facts. It appeared to be rehearsing and endorsing the standard neoliberal supply-side agenda that defined the so-called ‘activation’ approach to unemployment, which militated against job creation programs in favour of training initiatives – the full employability rather than the full employment mindset. The fact is that long-term unemployment always lags behind the overall unemployment movements given it takes time for people to work their way through the duration categories until they get to 52 weeks, after which the national statistician terms a person long-term unemployed. The longer the recession the higher average duration of unemployment becomes and the larger the pool of long-term unemployed as people start to flow into that category. However, the way we think about solutions has been influenced by the myths about the way long-term unemployment behaves, which we summarise as the – ‘irreversibility hypothesis’. This idea has influenced governments to rely on training approaches rather than job creation as solutions to unemployment. And, it has led to the various pernicious unemployment management policies where the victims of the system’s failure to create enough jobs are considered culpable in their own misfortune and shunted through a series of compliance processes in order to receive income support, which do little to get them work.

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Australia – Treasurer’s fiscal statement 2020-21 – abandons nation building

Here is some analysis of Tuesday’s Fiscal Statement from the Australian Treasurer. It was touted as the most important fiscal statement in 100 years (or something like that). What we got was a supply-side statement about markets creating jobs, massive tax cuts for high income earners and virtually nothing for the lowest paid. There was very little about the climate crisis. There was a lot of talk about jobs, jobs, jobs but no direct job creation. And the Government’s own estimates suggest that unemployment will remain at elevated levels through 2023 which means that the scale of the fiscal intervention is grossly inadequate. I see very little good in this fiscal strategy and a lot of bad. There are many commentaries available in the mainstream media which cover specifics and so I am just concentrating on things that I find important.

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Tracing the roots of progressive views on the duty to work – Part 7

This is Part 7 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. Today, I go back in history (again) to discuss a literature that influenced the evolution of my own early advocacy of a Job Guarantee. We see how I considered developments in the early C19th which established very clearly the responsibility of the government to act as an ’employer of last resort’ could be integrated with the buffer stock literature (which analysed the use of commodity buffer systems) in C20th to provide a coherent buffer stock full employment capacity in our modern economies. In Part, this establishes where the Job Guarantee idea, that is now central to Modern Monetary Theory (MMT) came from – at least, in terms of my early contribution to that body of work.

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Tracing the roots of progressive views on the duty to work – Part 6

This is Part 6 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. Neoliberalism has broken the nexus between the ‘right to work’ responsibilities that the state assumed in the social democratic period and the ‘duty to work’ responsibilities that are imposed on workers in return for income support. That break abandons the binding reciprocity that enriched our societies and has spawned a solid argument for a basic income. But the solution to the problem is to reinstate the link between opportunity to work and the societal benefits of work, especially as it enhances the material well-being of the least advantaged. In this part, I explore that theme.

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Latest employment data in Australia continues sorry tale and what I would do about it

On Tuesday (September 22, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 5 September 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Overall, payroll employment has fallen by 0.9 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending September 5, 2020 in Victoria by 2.8 points. Employment has also fallen in NSW by 0.5 points in the last 6 weeks. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I provide some clues as to where an extra $100 billion might be spent below.

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Federal government cutting spending as payroll data shows employment still in decline

On Tuesday (September 8, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 22 August 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Unsurprisingly, payroll employment fell in the six-week period ending August 22, 2020 in Victoria by 2.5 per cent. But what was also surprising was that employment fell in every other state or territory bar South Australia and NT. The Victorian case is about lockdown. The other declines are about failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I am not holding my breath.

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Tracing the roots of progressive views on the duty to work – Part 5

This is Part 5 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. In Part 4, I demonstrated that the dual concepts were long-standing ideas and the emergence of neoliberalism distorted their meaning by, one, abandoning the commitment by governments to facilitating the right to work, and, two, perverting the meaning of duty to work. Neoliberalism thus has broken the nexus between the ‘right to work’ responsibilities that the state assumed in the social democratic period and the ‘duty to work’ responsibilities that are imposed on workers in return for income support. That break abandons the binding reciprocity that enriched our societies. In this part, I examine the way in which full employment and work has been treated within the justice literature to extend the notion of reciprocity that we discussed in Part 4. In Part 5 I will consider how this bears on discussions about basic income and coercion.

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MMT blows the cover on the fictional world of mainstream economics that serves class interests

Given I presented a full analysis of the National Accounts release yesterday, I am calling today Wednesday and not writing much by way of blog posting, to give me more time to write other things that have to be done. But there is one issue that I will deal with today and regularly comes up and indicates that we are making progress. And after that we can all ‘Rise and Shine’ with some beautiful music.

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US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics

Regular readers will know that for the last few years I have been documenting the way that the dominant paradigm in macroeconomics (New Keynesianism) is slowly disintegrating as the dissonance between its empirical predictions and reality becomes too great to ignore and justify. The once-in-a-century pandemic hasn’t given us much to celebrate in 2020. One cause for optimism, perhaps, is that we might finally jettison the mainstream economics fictions about government deficits and debt, which have hampered prosperity over several decades. Last week (August 27, 2020), the US Federal Reserve Bank Chairman, Jerome Powell made a path breaking speech – New Economic Challenges and the Fed’s Monetary Policy Review – at the annual economic policy symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole. On the same day, the Federal Reserve Bank released a statement – Federal Open Market Committee announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy. We have now entered a new phase of the paradigm shift in macroeconomics.

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Payroll employment falling again as second-wave and inadequate policy response bites

Last week, the Australian Bureau of Statistics released the latest data – Retail Trade, Australia, Preliminary , July 2020 – which showed that retail turnover in July 2020 had risen by 3.3 per cent, the second month of improvement since it fell off a cliff in the two months from March. The exception was for Victoria, which is now in Stage 4 lockdown, which caused retail sales to fall by 2 per cent. Today, the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 8 August 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions and the reimposed of harsh Stage 4 restrictions in Victoria. Unsurprisingly, payroll employment fell in the fortnight ending August 8, 2020 in Victoria by 1.6 per cent. But what was also surprising was that employment fell in every other state or territory bar Tasmania and ACT. The Victorian case is about lockdown. The other declines are about failed macroeconomic policy, which goes to the performance of the federal government. Regular readers will know that I have routinely analysed this dataset ever since it first became available in March this year. It uniqueness is that it provides the most recent data upon which an assessment of where the labour market is heading. The data shows that after a partial recovery from the downturn, payroll employment is declining again. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that that more needs to be done by the Federal government. I am not holding my breath.

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Tracing the roots of progressive views on the duty to work – Part 3

This is the third part in my historical excursion tracing where progressive forces adopted the idea that it was fair and reasonable for individuals who sought income support from the state to contribute to the collective well-being through work if they could. As I noted in Part 1, the series could have easily been sub-titled: How the middle-class Left abandoned the class fundamentals, became obsessed with individualism, and steadily descended into political obscurity, so much so, that the parties they now dominate, are largely unelectable! Somewhere along the way in history, elements of the Left have departed from the collective vision that bound social classes with different interests and education levels into a ‘working class’ force. In this Part, we disabuse readers of the notion that the ‘duty to work’ concept was somehow an artifact of authoritarian regimes like the USSR. In fact, we find well articulated statements in official documents in most Western democracies.

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Tracing the roots of progressive views on the duty to work – Part 2

This is the second part in my historical excursion tracing where progressive forces adopted the idea that it was fair and reasonable for individuals who sought income support from the state to contribute to the collective well-being through work if they could. As I noted in Part 1, the series could have easily been sub-titled: How the middle-class Left abandoned the class fundamentals, became obsessed with individualism, and steadily descended into political obscurity, so much so, that the parties they now dominate, are largely unelectable! Somewhere along the way in history, elements of the Left have departed from the collective vision that bound social classes with different interests and education levels into a ‘working class’ force. As identity politics has become a preoccupation of what were traditional working class parties, even the concept of the working class has been subjugated into a ‘social’ class (lowly educated with racist predilections if we consider the Brexit debate, for example) rather than an economic class. And that is why the Left is split and the traditional social democratic parties have become increasingly unable to win elections even though the conservative alternative have been terrible. And part of that new divide is over work – the lack of it, the duty to do it, the vast variations in quality, and all the rest. In Part 2, we see how the duty of work concept permeated progressive elements in the West and allowed the different social classes (in the C. Wright Mills meaning) on the progressive side to bind into a coherent political force. That coherence is now gone and the lower-income workers are in revolt.

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Fundamental lack of leadership vision in Australia’s response to the pandemic

Today, the Prime Minister of Australia indicated that the ‘effective’ unemployment rate in Australia is heading to 13 per cent as a result of the harsh lockdowns that have just begun in Victoria as it reels under a second wave of coronavirus (Source). The effective rate incorporates the official estimate (based on activity tests – search and willingness), the number of workers who have dropped out of the labour force due to a lack of opportunities, and those on wage subsidies who are not working at all. The Stage 4 Melbourne lockdown for the next six weeks will cut GDP by a further 2.5 per cent. While economists fuss about microeconomic losses, the daily output and income losses from the unemployment and underemployment are massive, not to mention the huge personal, family and community losses. A responsible government, which issues its own currency and can procure any productive resources that are idle, would be doing everything it could to ensure these losses do not occur. It is not rocket science. The Federal government could ensure those who are unable to work due to the lockdown maintain their current incomes. The overwhelming impression I am getting as we enter the fourth month of this crisis is that the federal polity in Australia is lost. The scale of the disaster has so confronted the neoliberal DNA of the major parties that they are failing to articulate a coherent and viable short- and medium-term plan to deal with the crisis. The challenge is for the government to abandon its inclination to see a ‘return to surplus’ as a benchmark it aspires to. That mentality is making this disaster a catastrophe. We can do much better.

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Inequality and poverty not just an indigenous problem

On Saturday (July 25, 2020), The Australian published another Op Ed that I wrote in collaboration with Noel Pearson. I understand that many people (mostly abroad) were unable to access the article (as a result of paywall restrictions on certain devices). I am unable to post the final article due to copyright restrictions but I can provide the draft article which was not too different from the final version. It also seems that the faux-progressives have somehow decided that our partnership (Noel and I) symbolises how Modern Monetary Theory (MMT) and the Job Guarantee is actually some sort of far right plot to rid the world of welfare support for the disadvantaged and enslave them in onerous Gulag work camps. It is quite amusing really but worrying at the same time. Our partnership is confusing people who cannot cope with nuance and complexity. The so-called Left have characterised Noel as being somehow on the Right, which leads them to conclude that I am selling out on my progressive credentials by working with him. Conversely, the Right, who think Noel is one of them, are accusing him of being used by a Communist (me). Hilarious. If only they knew!

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RBA governor denying history and evidence to make political points

Today, the Australian Treasurer is out in force telling us that the fiscal situation is dire and that they have to start making cutbacks. Meanwhile in the real world, the unemployment rate continues to rise, businesses continue to fail, and the lowest paid workers, are being forced to continue working in dangerous health situations because they cannot ‘afford’ to stay at home like the better paid workers and protect their health. Its doesn’t bear scrutiny. My research centre released an updated report this week that also bears on the situation. The current fiscal stimulus is probably, at least $A100 billion short of where it should be, yet the government is announcing cuts. It will not turn out well. Meanwhile, across town, the Reserve Bank governor has been trying to deny the RBA has the currency capacity to allow the Treasury to keep spending without issuing debt. Already, the Labor party are making political points out of the rising public debt, which just makes them unelectable really, rather than savvy. The RBA governor’s intervention also just proved he is prepared to deny history and evidence to make political points, which had the other consequence of demonstrating how lacking in ‘independence’ the central bank is from the political process. And so it goes on.

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Latest Australian payroll data suggests employment damage from shutdown is worse than thought

The evidence that is mounting is allowing researchers to better assess the damage that is emerging from the way in which we are dealing with the coronavirus. One of the important questions that will determine the future trajectory of our economy relates to how many workplaces have disappeared altogether as a result of the businesses disappearing forever as a result of the flow-on impacts of the compulsory lockdown. Last week (July 14, 2020), the Australian Bureau of Statistics released their latest employment data taken from Australian Tax Office data – Weekly Payroll Jobs and Wages in Australia, Week ending 27 June 2020. They have slowed the release cycle on this data (for reasons they have not disclosed), so it is a month since I have analysed it. The latest data covers the period up to June 27, 2020. The monthly labour force data released last Thursday for June 2020, covers a period that ends around June 12, 2020, so the payroll data provides a more recent snapshot of the state of affairs – an extra three weeks. As the enforced restrictions were eased, payroll employment recovered somewhat and by the end of June is now 5.7 per cent below the March 14, 2020 levels. It appears though that, while part-time work has recovered, full-time work continues to decline. Examining the age profiles of the recovery demonstrates that prime age workers have not enjoyed a commensurate recovery. The two observations are linked and are suggestive of the impacts of the initial damage have now permeated the supply chain and employment losses are spreading outside areas initially most impacted by the lockdown. So my prediction in March that many businesses will disappear because the fiscal support by the government was inadequate and poorly targetted in terms of protecting jobs is looking like being validated by subsequent data. But it now seems that the recovery in employment will be protracted given how many jobs have been lost to date and the renewed lockdowns in Victoria. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation.

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