{"id":47058,"date":"2021-03-15T12:57:54","date_gmt":"2021-03-15T02:57:54","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=47058"},"modified":"2021-03-15T12:57:54","modified_gmt":"2021-03-15T02:57:54","slug":"we-need-trade-unions-to-grow-again","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=47058","title":{"rendered":"We need trade unions to grow again"},"content":{"rendered":"

\t\t\t\tIt is clear that the Reserve Bank of Australia (RBA) management is at odds with the elected Federal Government over the current state of the economy and what needs to be done to get through the COVID-19 pandemic. The Federal government is about to significantly wind back its fiscal stimulus, which although was insufficient at the outset, did help reduce the damage that the health responses to the pandemic caused (lockdowns, etc). The Government has the view that the private sector will now rebound quickly especially as the vaccination process has begun. The RBA though is clearly not convinced and its senior officials are wont to point out (regularly) that growth will struggle for years unless the stimulus is maintained and the government promotes an environment where wages can grow more quickly. The RBA clearly blames the Government for the record low growth in wages given the penchant of the latter to impose wage freezes and wage caps on public sector workers, which spill over into poor private sector outcomes. And that is quite apart from the damage that Government industrial relations legislation has done to the capacity of unions to gain wages growth for workers. The chances that we will break out of this malaise are close to zero. The Government is anti-union and anti-wages growth. It thinks that suppressing wages growth to historically record lows and further attacking the unions, will drive the wage share down even further (as the profit share rises). And, of course, the funding of the conservative political forces largely comes from the beneficiaries of these trends. For the vast majority of Australians the situation gets worse. Our real incomes stagnate and to maintain consumption levels we have to borrow more, even though household debt is at record levels in relation to disposable income. It is not a sustainable future but the damage will get worse until there is a pushback from the population. And one of the things holding that back is the deplorable state of the Australian Labor Party in electoral terms. We can generalise all this to most nations. The neoliberal score card: Biggest F you can find.<\/p>\n

<\/p>\n

In a Speech delivered to a Business Summit in Sydney last week (March 10, 2021) – The Recovery, Investment and Monetary Policy<\/a> – the RBA Governor noted that while the rest of the economy was still struggling, the housing market had boomed.<\/p>\n

While he acknowledged that the near zero interest rate environment was “one of the factors contributing to higher housing prices”, he also noted that:<\/p>\n

\nThere are various tools, other than higher interest rates, to address these concerns, leaving monetary policy to maintain its strong focus on the recovery in the economy, jobs and wages.\n<\/p><\/blockquote>\n

The tools he was hinting at are all related to government policy – including the massive tax gains that investors get from speculating in the housing market (negative gearing).<\/p>\n

The tax structure biases savings allocations towards investment in multi-property portfolios (totally unproductive) rather than channelling loans and investment into productive infrastructure.<\/p>\n

It also fuels the housing boom, which has made housing effectively unaffordable for low income families. That is, on top of the failure by governments in Australia to invest in social housing, which was always the way in which lower income families could get a foothold into the property market.<\/p>\n

So in that sense, he considered the problem of housing market price bubbles to be more a problem of treasury policy rather than monetary policy.<\/p>\n

He told the Summit that the RBA would maintain low interest rates until inflation was “sustainably within the 2 to 3 per cent target range.”<\/p>\n

And:<\/p>\n

\nFor inflation to be sustainably within the 2 to 3 per cent range, it is likely that wages growth will need to be sustainably above 3 per cent … and that the profit share of national income does not continue to trend higher.\n<\/p><\/blockquote>\n

He noted that “wages growth is running at just 1.4 per cent, the lowest rate on record” and this was not a condition that the pandemic had created – “Even before the pandemic, wages were increasing at a rate that was not consistent with the inflation target being achieved”.<\/p>\n

The solution?<\/p>\n

\nThe evidence strongly suggests that this will not occur quickly and that it will require a tight labour market to be sustained for some time … There is, inevitably, some uncertainty about exactly what constitutes full employment in our modern economy. Over the past decade, the estimates of the unemployment rate associated with full employment have been repeatedly lowered both here and overseas … But based on this experience, it is certainly possible that Australia can achieve and sustain an unemployment rate in the low 4s, although only time will tell.\n<\/p><\/blockquote>\n

So all of that was central bank speak for saying that the Government willingness to tolerate, as per its latest – Mid-Year Economic and Fiscal Outlook<\/a> – an unemployment rate of 6.25 per cent for the next two years at least, is the problem.<\/p>\n

The most recent RBA statement is also significant because for years they have claimed that full employment was reached at 5 per cent unemployment.<\/p>\n

Now they have “experience” that the unemployment rate can go much lower without triggering any inflationary pressures.<\/p>\n

That is progress.<\/p>\n

And the Government’s plan to withdraw a substantial portion of the fiscal stimulus at the end of this month will make it much harder to get the unemployment rate down.<\/p>\n

There is a tsunami of job losses just waiting to happen in the Australian economy as the stimulus is withdrawn. The Government claims that maintaining the wage subsidy is too expensive and distorts business choice – they have a view that a lot of zombie businesses are being propped up by the subsidy and those resources need to flow into more productive areas.<\/p>\n

Well, if you think about that, if there was a torrent of new high productivity activity just waiting to burst forth, then they would easily be able to attract labour resources away from the zombie businesses that were ‘hanging on’ as a result of the wage subsidy.<\/p>\n

They would just have to offer wages above the subsidy (in most cases) and if they were really highly productive then they would be able to pay large premiums on the subsidy and the zombie firms would collapse because they would not be able to retain their labour forces.<\/p>\n

But the problem goes deeper than this.<\/p>\n

I read an interesting article in the Financial Times the other day (March 9, 2021) – Trade unions are back after a long absence<\/a> – which referred to the trend in the UK economy for renewed growth in trade union membership after 30 years of decline.<\/p>\n

The article notes that if there is such a trend then:<\/p>\n

\n… it would mean the reversal of a trend that has lasted more than 30 years and spanned most of the developed world. Since 1985, trade union membership has halved on average across OECD countries, while coverage of collective agreements signed at the national, sector or company level has declined by a third.\n<\/p><\/blockquote>\n

Trade unions originally formed to provide a counterveiling force against industrial capital, and also, in the pre-welfare state period, to provide welfare services to their members and their families during period of unemployment, illness, and death.<\/p>\n

In Australian colonial history, “As early as 1791 there is evidence of convicts taking strike action to demand that their rations be distributed weekly” (Source<\/a>).<\/p>\n

One of the major reasons that wages growth has plummetted and the wage share in national income in Australia has fallen from high 58-59 per cent to below 50 per cent in the most recent quarter is because trade union density has fallen to record levels.<\/p>\n

On December 11, 2020, the ABS released the latest Australian data – Trade union membership<\/a> – which shows that:<\/p>\n

\n– 14% of employees (1.4 million) were trade union members.<\/p>\n

– Since 1992, the proportion of employees who were trade union members has fallen from 40% to 14%.\n<\/p><\/blockquote>\n

We have to distinguish between the effectiveness of trade unions in gaining wages growth for their membership and the impact on overall wages growth of a declining density.<\/p>\n

Examining the first question, there is a clear wage premium for unionised workers in Australia as is shown in the first graph. Note this data series became bi-annual in 2014.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

But it is also clear that union members in Australia have not been able to extract higher real Median Weekly Wages growth than non union workers (see second graph).<\/p>\n

The growth of both segments in the workforce (unionised and non-unionised) have been very poor since 2004 (when this dataset started).<\/p>\n

And both segments of the workforce have endured very little real growth in the last 6 years (don’t be fooled by the vertical axis). Productivity growth has been much stronger over this period, which is why the wage share has collapsed below 50 per cent.<\/p>\n

So even though union members enjoy higher median weekly earnings than non-union members, the unions have also had a hard time gaining wages growth for their members.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

The decline in trade union density (proportion of workers in unions) is a global phenomenon as the FT article noted.<\/p>\n

The following rather messy graph uses the OECD trade union density data from 1960 to 2018 for some 35 nations (only Israel is missing) and just demonstrates the historical decline.<\/p>\n

That is Iceland at the top resisting the trend (especially since the GFC collapse of the banking sector). That example, is perhaps what the FT article is suggesting.<\/p>\n

That the COVID-19 crisis is now encouraging workers to once again join unions.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

Here is a less messy graph showing some of the big declines since the 1960s.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

One of the problems facing the union movement is the increase in precarious, casualised employment, which is difficult to organise.<\/p>\n

Further, government regulations have encouraged the growth of ‘independent contractors’, which is a major way that firms get around legal minimum wage and conditions requirements.<\/p>\n

Everyone is an entrepreneur in this regard – and the capitalist who is really the only entrepreneur shifts the risk of the enterprise onto the workers, who are convinced that they are the entrepreneurs.<\/p>\n

The current Australian government is planning even more dire industrial relations legislation that will further impact on the ability of unions to penetrate workplaces.<\/p>\n

The problem is clear:<\/p>\n

1. As union density declines, more workers are paid less – they lose the premium.<\/p>\n

2. As the legislative framework becomes even more coercive against unions, they struggle to use their counterveiling power to extract wages growth for their members, even though they can preserve the premium.<\/p>\n

3. All workers are enduring the structural shifts promoted by legislation that has broken down protections and minimum standards.<\/p>\n

4. Poorly conceived and executed macroeconomic policy, which maintains elevated levels of unemployment and unemployment make it very hard for any worker – union member or not – to extract wages gains from firms.<\/p>\n

Conclusion<\/h2>\n

If the RBA governor is to get his wish – which is for wages growth to start pushing the inflation rate in Australia up into the 2 to 3 per cent range – then there has to be major changes in federal government policy.<\/p>\n

They will have to maintain and extend the stimulus for many months yet and start revising some of the industrial relations framework that has undermined the operations of unions as legitimate representatives of labour.<\/p>\n

The chances of them doing either is – well – zero.<\/p>\n

That is enough for today!<\/p>\n

(c) Copyright 2021 William Mitchell. All Rights Reserved. \t\t<\/p>\n","protected":false},"excerpt":{"rendered":"

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