Home > Economic policy, Economics - General > Unemployment: forgotten, but not gone

Unemployment: forgotten, but not gone

February 17th, 2006

My opinion piece in yesterday’s Fin was about unemployment. It’s over the fold.

Unemployment hasn’t been frontpage news for some years now. The main labour market story in the last couple of years has been the emergence, for the first time since the 1980s, or significant labour shortages for some classes of skilled worker.

Despite these shortages, the number of people who are unemployed or underemployed remains very high. The official rate is above 5 per cent, but when various forms of hidden unemployment are taken into account, the true rate exceeds 10 per cent. It seems to have been accepted that a headline rate of unemployment of 5 per cent is the best we can possibly do, though such a rate would have been considered disastrous in the 1950s and 1960s.

But a run of disappointing statistics in recent months should remind us how fragile even that rate might be. Employment has been flat for about six months, and the unemployment rate is rising again. A prolonged slowdown could easily push the rate back up to 7 or 8 per cent, wiping out all the progress made since the Howard government was elected. A severe recession could push the rate all the way back up into double digits.

A characteristic feature of labour markets is that unemployment rates spike rapidly upwards, but decline only very gradually as the economy recovers. When the last boom ended in 1989, the unemployment rate had inched downwards to around 5.5 per cent over six years. It took less than three years to double to 11 per cent during the ‘recession we had to have’.

Although the economy stopped contracting in 1991, unemployment did not even begin to decline until 1994. After a reasonably promising start to recovery, the labour market performed poorly. The reduction in unemployment was significantly slower in the 1990s expansion than in that of the 1980s. Between 1995 and 2003, the headline unemployment rate dropped by only two percentage points, from 8 per cent to 6 per cent.

Fortunately, even slow improvements mount up if they are given long enough to work, and it’s been fifteen years since the end of the last recession. Most discussion of economic policy seems to be based on the premise that Australia is no longer subject to the cycle of boom and recession.

It’s not that hard to identify the crucial difference between the current expansion and previous cycles. In the past, when the economy expanded, it usually wasn’t long before a balance-of-payments deficit emerged. Governments responded by tightening fiscal policy or raising interest rates, and external balance was restored, at the cost of a domestic slowdown. If the tightening was overdone, as often happened, the slowdown turned into a recession.

By this stage in the expansion, on past experience, we should have expected a blowout in the current account deficit, followed by a contractionary policy response and an upward ratchet in the unemployment rate. This time around, the current account deficit has behaved much as usual. If anything, the blowout has been even bigger this time, though its magnitude has been masked by favourable shifts in the terms of trade.

The difference has been in the policy response. Governments and central banks now adopt the ‘consenting adults’ view under which the current account deficit (and its mirror image, the gap between national savings and national investment) is the aggregate of the individual decisions of households and corporation.The current account deficit is merely the flipside of negative household savings and massive investment in residential housing. So, rather than adopting a contractionary policy, the Reserve Bank has assumed that borrowers and lenders are responsible for their own choices.

The ‘consenting adults’ view may well be right, but if the growing imbalances in the Australian economy are not resolved by policy, they will be resolved by market forces. Perhaps this will go smoothly, but we have little recent experience to go on.

If we do experience a recession, and a resurgence of unemployment, the long expansion of the last fifteen years will look, in retrospect, like a wasted opportunity to achieve permanent reductions in unemployment.

The government’s answer, presumably, will be that its WorkChoices reforms will provide the flexibility that has long been missing in Australian labour markets. Yet WorkChoices seems to be at least as much about settling scores with unions as about improving the operations of labour markets. What has been missing for the last decade, and more, is any acceptance of a government responsibility to achieve full employment and any sustained focus on that goal.

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.

  1. harry clarke
    February 17th, 2006 at 09:07 | #1

    John, I read this and it sounded negative and a bit prejudiced. You just couldn’t say anything positive about an economy that has been expanding for 15 years consecutively or for the Government that has helped (or at least not hindered) in bringing about these changes.

    5% is a great improvement over past measured unemployment rates. Unmeasured unemplyment is a problem and should be addressed but the fact that there are labour shortages in skilled areas does not seem a bad sign from the viewpoint of labour markets. Investment is strong throughout the economy.

    Yes unemployment could go higher? A severe recession would make it worse, yes. What is this saying that is not almost a truism?

    And would you have wanted the current account deficit to be met by contractionary monetary policy? How would that have helped employment? Hasn’t the Government’s performance been reasonably good in this respect? Alternative policies that might improve things please. You can’t just ask for a ‘commitment to full-employment’. What would you do and how would you improve on current outcomes?

    Is increasing labour market flexibility bad for employment outcomes even if it does ‘target unions’? I don’t get it.

  2. jquiggin
    February 17th, 2006 at 09:38 | #2

    Harry, on the macro issue, the standard Swan-Salter response to a combination of external imbalance and internal balance would be demand-switching. I’ve argued in the past that expansion of human services is the most effective way of doing this. On the converse side, I think the huge expansion in housing I mentioned has added to the deficit problem by diverting investment away from the tradeable sector.

    On the labour market in general, the combination of skill shortages and 5 per cent unemployment suggests to me that the market is not working that well. The government’s main responses over the last decade have been Work for the Dole, which is basically a stunt, and the Jobs Network, which has been redesigned many times and remains ineffectual.

    I don’t think WorkChoices really does increase labour market flexibility – it just shifts the balance of regulation in favour of employers and against workers and unions.

  3. February 17th, 2006 at 11:06 | #3

    I think it’s pretty widely accepted that there is a high level of underemployment in Australia, and that if classical economic theory actually works, the WorkChoices legislation will lead to some of this underemployment being soaked up. The big question is why on earth we’re actually happy to accept that one in twenty people in the workforce are not employed at all. If this were the fifties, there’d be hell to pay. So what’s in the way of returning to the ‘old days’ of 2-3% unemployment?

  4. February 17th, 2006 at 14:36 | #4

    Let’s also make clear what this under-employment and hidden unemployment means:

    - For the first time in my (not-so-short) life we can find in Australia, people whose main income comes from activities that we would normally only find in the developing world and at a level that is/was illegal under Australian law.

    That is, a really extremelly precarious living rellying only on tips/charity/free food, for example: street/train vendors, street boot/shoe shine, maids, waitressing, foreign labourers/seasonal workers, sweat shops and worse kinds of exploitation, where even their ID or travel documents are retained, to keep them under a constant state of servitude.

    Some of this might unfortunately have occurred in the past, but never in this scale and never before in such a concerted and organised way.

  5. Andrew Reynolds
    February 17th, 2006 at 14:51 | #5

    PrQ,
    I notice that you missed answering Harry’s request for alternative policies and also his question “Is increasing labour market flexibility bad for employment outcomes even if it does ‘target unions’?”.
    I, for one, would be very interested in some responses.

  6. February 17th, 2006 at 15:16 | #6

    Don’t forget that Australian statistics now count anyone working as little as one hour a week as “employed”. With that kind of leeway, no wonder the figures are looking rosy.

  7. February 17th, 2006 at 15:18 | #7

    (Clarification): rosy compared to “past measured employment rates”, as suggested by Harry Clarke.

  8. February 17th, 2006 at 15:19 | #8

    Here are a just a few references:

    – Workers treated like slaves

    – Downward “benchmarking” of conditions and pay to third world standards

    Most of this is not even included in the statistics, and by the time it starts to show it will have had a huge effect on our society.

    And this is now becoming more and more common, to the extent that whole industries (garments, restaurants, fruit picking, some construction and trades) are being targeted by mafias that that profit by specifically import “guest workers” for such illegal purposes. The situation is so bad it is now creating such ilegal “business” opportunities.

    This is the not-so-hidden intent of the IR laws: across the board strong downward pressure on working conditions and standards, and increase in income differential, where 200% salary increases are justified for those same boses carrying out these shameful despicable attacks on our living standards and all because of their repugnant greed.

    Meanwhile, with all the rethoric on immigration, terror and security, this could not possibly be happening without ministerial approval, or without the gov. turning blind eye and leading the slide…

  9. February 17th, 2006 at 15:37 | #9

    Andrew R, here’s some proactive and positive suggestions:

    Compete up, not down. As any good salesperson will tell you, you do not discount for nothing (nothing is really free), and doing it for volume selling is a dangerous road, as our retail indutry is finding out. Upsell, upsell, upsell! Then cross-sell!

    At a business leadership level this means looking to grow and expand rather than just take the axe and cut the fat over and over and over, even if no fat remains to be cut… Drucker used to say it was despicable that the markets “reward” the value destroying option of simply sacking people! It’s all short-termism gone crazy.

    At a policy level this means playing to our strenghts now someone elses, it means investment in training and education not the lazy and innept degrading of some our world-leading advantages.

    It means making it easier to start new small businesses that employ a lot of people (%wise) and not have (or at least decrease) policies/taxes that impede such transitions, eg: payroll taxes, red-tape, monopolies (telstra, awb, etc), government tendering processes that favour big donors /MNCs, etc. it means facilitating Organisational innovation, R&D, etc.

    To pretend that attacking unions will invigorate the economy is simply dishonest and a lame stupid argument.

    Show us proof.

  10. derrida derider
    February 17th, 2006 at 16:20 | #10

    I agree with Harry – the piece is long on what’s wrong and short on how to fix it.

    But I can’t let Helen’s thing about unemployment pass. Helen, we have followed the ILO definition of “unemployment”, which includes the bit about one hour’s work in the last week, since the late 1960s. Whether you think that a good or bad definition, it does mean we are comparing apples with apples. Figures before the late 1960s *understated* unemployment as they were based on (post 1948) CES registrations and even (pre 1948) union records.

    This (totally unfounded) suspicion that the ABS’ figures are somehow “fixed” is in the long run very dangerous to good public policy. By all means criticise, but take the trouble to learn why they are the way they are first, and don’t groundlessly impugn the honesty of the many hard-working professional statisticians who really are trying to make a better country (and no, I do not nor have I ever worked for the ABS).

    As for underemployment, it’s true that it’s existence argues for more inefficiency in the labour market than the unemployment figures alone would say, but as comparable data for this from earlier periods is just not available we just don’t know whether it’s got worse or better. F’rinstance, as a boy growing up in the bush I knew people who lived on dribs and drabs of seasonal work – some of them semi-nomadic aboriginals. I doubt that their situation was accurately recorded in the stats of the time.

  11. Razor
    February 17th, 2006 at 16:34 | #11

    Carlos – when does the revolution begin Comrade and where do we sign up??

    Perhaps you would be more at home in Cuba or the Peoples Democratic Republic of Korea because things aren’t going to change in a hurry here.

  12. conrad
    February 17th, 2006 at 17:30 | #12

    I don’t think that unemployment figures are apples for apples at all over the years (let alone across countries), even if the same definition of employment is used, since they don’t include other hidden unemployment schemes that have been on the increase for years, like people getting disability pensions. A better comparison would be participation rate corrected for changes in the age structure of the population.

  13. jquiggin
    February 17th, 2006 at 17:43 | #13

    I thought my views on alternative policies were reasonably well-known, but I’ll be happy to restate them in a full-length post soon.

  14. phil
    February 17th, 2006 at 18:46 | #14

    One of the difficulties I feel is trying to identify all the factors in a relatively short piece (ie anything shorter than a book). For example, competing up, not cutting costs as a first response, etc, draws immediate reaction from analysts whose time horizon is three months – makes the political cycle seem positively infinite! Executive compensation tied to short term KPIs, especially the share price, prevents longer term planning to all except those companies with very deep pockets, I would think.

  15. James Farrell
    February 17th, 2006 at 22:42 | #15

    ‘…the standard Swan-Salter response to a combination of external imbalance and internal balance would be demand-switching. I’ve argued in the past that expansion of human services is the most effective way of doing this.’

    Do you have a paper on that human services argument, John? Meanwhile, since someone mentioned the word macro, a comment:

    A combination of trade deficit and unemployment locates us in the southern region of the Swan diagram. For simplicity, let’s suppose we’re due south of the intersection, implying that aggregate domestic spending is about right, and all we need is a real devaluation to fix both imbalances. This will work by partly by increasing exports, and partly by switching demand from imports to nontraded goods (and services). I guess this is where the ‘human services’ come in: instead of buying imported Scotch whiskey we will take more karate classes, at the same time creating jobs for idle middle-aged men as instructors.

    In either case, however – and this is my point, if anyone is wondering – our incomes go up and our total consumption stays the same (assuming we don’t want to cut back on investment). So whatever schemes one might devise involving devaluation and a renaissance in human services, we still need to raise the saving ratio. One way to achieve this is to kill two birds with one stone and use the devaulation to depress average wages, redistributing income to the rich, who have a higher propensity to save. But if this is not the favoured outcome, it becomes tricky. A higher superannuation contribution might be in order, or at least a higher default rate as suggested by Nicholas Gruen, which people could opt to reduce if sufficiently motivated.

    The bottom line is just that any macro strategy to reign in the current account without pushing unemployment back up to 10 percent, has to deal with the saving issue. Otherwise we just hold our breath and hope the consenting adults theory is right.

  16. Harry Clarke
    February 18th, 2006 at 00:07 | #16

    I think the basic way to deal with high unemployment is via wage subsidies for the unskilled or (almost equivalently) a negative income tax.

    Abolish all minimum wages and tell Ian Harper to throw his job (and his Christian religious-babble attitudes) in the rubbish tin. His position (and those pious attitudes) are unnecessary.

    Training schemes and so on are useful as longer-term strategies. I support them.

    I would prefer to eliminate unemployment at this stage than tax cuts but, if I have to pay taxes, I think it is better for everyone if $100 dollars to an unskilled worker is given as a $100 wage subsidy or tax allowance than an uncommitted handout.

    Add these onto the Howard Government’s policy agenda and you would have the strongest developed country economy on the planet.

  17. Terje Petersen
    February 18th, 2006 at 06:04 | #17

    I think it’s pretty widely accepted that there is a high level of underemployment in Australia, and that if classical economic theory actually works, the WorkChoices legislation will lead to some of this underemployment being soaked up.

    I think that the change to unfair dismissal laws will help. The change to the way in which the minimum wage is set probably won’t help for a long time. By law it can’t move down and welfare continues to be indexed upward, increasing the perversity of incentives.

    The big question is why on earth we’re actually happy to accept that one in twenty people in the workforce are not employed at all. If this were the fifties, there’d be hell to pay. So what’s in the way of returning to the ‘old days’ of 2-3% unemployment?

    The two things we had in the “old days” of the 1950s and 60s were:-

    1. A gold standard. ie stable money. The 1970 & 1980s certainly had no such discipline.

    2. Low taxes. People who worked hard could reasonably expect to fend for themselves successfully.

  18. avaroo
    February 18th, 2006 at 10:49 | #18

    If full employment is the same as the natural rate of unemployment, how close is Australia to it? Can the unemployed in Australia find a job if they want one? Not necessarily the job of their dreams (how many people have that to begin with?).

  19. jquiggin
    February 18th, 2006 at 12:00 | #19

    James, I wrote a whole book on this, back in the 90s Work for All with John Langmore. I must admit though, it didn’t attract much attention, at least from the economics profession.

    I haven’t got a fully worked out answer to your point about saving. At least in part the answer is that karate teachers don’t need much capital equipment (this is true of human services more generally) so that required investment doesn’t increase in line with income. But I think there is also some equilibrating process inherent in the shift from imports to domestic non-tradeables that I haven’t worked through yet.

  20. derrida derider
    February 18th, 2006 at 12:02 | #20

    “A better comparison [than unemployment] would be participation rate corrected for changes in the age structure of the population.” – conrad

    I agree 100% with you on this Conrad. You will no doubt be delighted to learn that most age-specific PRs have been rising for the past decade – some of them very strongly. The main exception is prime-aged (15-44) males; that’s a bit of a worry, but it is coming off a very high base. All others are at record or near-record highs.

  21. Bring Back EP at LP
    February 18th, 2006 at 13:34 | #21

    Harry,
    the fair wage commision is not allowed to get rid of minimum wages!

    Lay off Harps!

    John Langmore. A great favourite of Paul Keating as I recall for good reason

  22. Harry Clarke
    February 18th, 2006 at 15:04 | #22

    Your right Homer I’ll lay off Harps. Of course I wasn’t suggesting that the Fair Wage Commission could abolish minimum wages and I doubt the Govt would see this as politically desirable/feasible anyway.

    Still the idea of a lay cleric determining what are ‘fair’ wages riles me.

    The people who make sense to me on this issue are those like John Freebairn calling for simultaneous reform of the social security system with something like a negative income tax. We need to protect the interests of poor workers and give them incentives to work and this does that.

  23. jquiggin
    February 18th, 2006 at 15:14 | #23

    DD, I’m surprised at the implied claim that participation rates for older males are near record highs. This ABS study suggests a steadily declining participation rate across cohorts, along with rising unemployment by cohort.

    Maybe I’m misunderstanding the treatment of cyclical effects here, but it’s my impression that participation rates for males are well below those of the last cyclical peak in all age groups.

  24. Terje Petersen
    February 18th, 2006 at 15:21 | #24

    I haven’t got a fully worked out answer to your point about saving. At least in part the answer is that karate teachers don’t need much capital equipment (this is true of human services more generally) so that required investment doesn’t increase in line with income.

    Income taxes and service taxes are a major trade barrier for human services.

    For instance lets say your hourly rate is $40 per hour and your marginal tax rate is 50%. And lets say you are in a job (eg your a karate teacher) that allows you to work extra hours for extra income.

    Now lets say it takes you 5 hours to do your tax return (which you hate doing) and you would like to outsource this to a tax accountant who can do it in 2 hours. So logically you might choose to outsource this task and work the the spare 5 hours.

    5 hours earns you $200. So if the accountant charges $100 per hour its an okay deal. Until you allow for you marginal income tax rate which would mean that you actually need to work 10 hours to pay the accountants bill compared to the 5 hours you would expend if you just did it yourself.

    Lots of human services such as investing, car cleaning, home cleaning, food preparation, renovating, gardening, child minding, tax accounting, car repair, education and entertaining (to name just a few) can all be done in house. We will only outsource these tasks (and hence employ others) if the terms of trade are attractive. So whether we do these things ourselves or trade our specialty service for the services of others is at the margin very dependent on the marginal tax rate we endure.

  25. derrida derider
    February 18th, 2006 at 18:20 | #25

    Older male participation is really interesting. The PR for 45-54s has stayed pretty flat since the mid 90s, while the 55+ PR has risen. I reckon the key to understanding this is, for the 45-54s, to look at what’s happened to the 35-44 PR (which has fallen). So the 45-54s should be seen as cuaght between the delcining PR for prime age men, and the rising one for 55+s.

    On the 55+s, the interesting thing is the EP ratio. All through the 1980s and into the 1990s, the unemployment rate for this group was higher than the population average. Its now lower than the population average. Combined with a moderate rise in the PR for this group, this means the EP ratio has shot up strongly. There just aren’t anywhere near as many old men looking for work as there used to be. Rather it seems that a much bigger proportion of early retirement is now voluntary – arguably still a serious public policy problem, but a very different one from that of the 80s and early 90s.

    I haven’t seen the ABS pub before (slack of me to have missed it), but on the face of it I can’t see how you can support a *monotonically* declining cohort effect from the actual cohort PRs. So I’ll read with interest.

  26. SJ
    February 18th, 2006 at 18:29 | #26

    Terje says:

    5 hours earns you $200. So if the accountant charges $100 per hour its an okay deal. Until you allow for you marginal income tax rate which would mean that you actually need to work 10 hours to pay the accountants bill compared to the 5 hours you would expend if you just did it yourself.

    You do realise, don’t you, that the accountant’s bill is tax deductible? And that the tax-deductibility kinda invalidates your argument?

  27. James Farrell
    February 18th, 2006 at 19:20 | #27

    I wouldn’t say Work For All was ignored. Why, I remember our friend Tom Valentine rating it ‘by far the least silly’ of three books in the mid ’90s on how to fix unemployment. One of the others was by Brian Toohey, but I forget what the third one was (did Clive Hamilton put out something then?). Anyway, I have WFA on my shelf somewhere in Sydney. I’ll dust it off when I get back.

  28. Terje Petersen
    February 18th, 2006 at 20:22 | #28

    You do realise, don’t you, that the accountant’s bill is tax deductible? And that the tax-deductibility kinda invalidates your argument?

    Yes a very fair point and obviously an serious oversight on my part.

    A better example instead of tax accounting might then be fixing the plumbing in the back toilet. So the example would read:-


    Now lets say it would take you 5 hours to fix the plumbing on the back toilet (which is a task you would hate doing) and you would like to outsource this to a plumber who can do it in 2 hours. So logically you might choose to outsource this task and work the the spare 5 hours.

    5 hours earns you $200. So if the plumber charges $100 per hour its an okay deal. Until you allow for your marginal income tax rate which would mean that you actually need to work 10 hours to pay the plumbers bill compared to the 5 hours you would expend if you just did it yourself.

  29. Steve Munn
    February 18th, 2006 at 20:27 | #29

    I guess I am part of a small minority in thinking that it will be a grand day when Government’s no longer have “fixing unemployment” as an objective.

    If anthroplogists are to be believed folk in some hunter-gatherer societies met their needs and wants through only a couple of hours labour each day.

    I look forward to a time when shrinking employment and expanding leisure becomes the major Government- and community- objective.

  30. SJ
    February 18th, 2006 at 21:11 | #30

    Terje, your argument boils down to: If I didn’t have to pay tax, I could buy more goods and services.

    Yes, we know that already. If you’ve got some deeper point to make, make it.

  31. Ernestine Gross
    February 18th, 2006 at 21:55 | #31

    Terje,

    Your theory of employment generation through outsourcing.

    Each couple incorporates 2 teeth brushing businesses. Corporation A1 brushes the teeth of Corporation A2 at a price and with conditions as described in their AWAs. Teeth brushing services provided amount to 1 hour per week. Unemployment would converge to zero. Now, you say this job creation through entrepreneurial activities that involves outsourcing is prevented (‘market distortion’) because of personal income tax and services tax (GST).

    Please let me know where I have violated any one of your conditions in your theory.

    Now, lets look at your example for motivating income tax cuts and cuts in services tax. I’ll take the government sector out (ie zero taxes)

    Your example of someone working an additional 5 hours (possibly at an extraordinarily boring job) to buy 1 hour of accountancy services brings out a problem with ‘services’ – some of them are too expensive relative to others. Those on relatively low incomes (and potentially very boring jobs) might act exactly contrary to what you want, namely instead of working an additional 5 hours, as you want, they may wish to work fewer hours than what they are currently working ‘in the market’ to have time to provide services ‘in-house’. (elementary economics: opportunity cost).

    I wonder how long it will take for business lobby groups to learn that the optimal strategy is not to lobby.

  32. SJ
    February 18th, 2006 at 21:56 | #32

    James Farrell Says:

    …we still need to raise the saving ratio. One way to achieve this is to kill two birds with one stone and use the devaulation to depress average wages, redistributing income to the rich, who have a higher propensity to save.

    This is the experiment currently underway in the US. I can’t say that I think it’s been successful so far. It’s a novel variation on the “trickle down” and “Laffer curve” stuff, but it still falls in the “voodoo economics” camp.

  33. avaroo
    February 19th, 2006 at 02:13 | #33

    “I look forward to a time when shrinking employment and expanding leisure becomes the major Government- and community- objective.”

    I believe that’s how it works in Germany.

  34. Ernestine Gross
    February 19th, 2006 at 07:47 | #34

    Avaroo, the USA (and the Allies) deserve credit for having written or approved or both (details are left to the historian) a constitution for the Federal Republic of Germany that reflects the humanity and rationality of the prevailing social, economic and political thinking at the time. Perhaps the USA would like to look at this constitution to remind itself of the advanced thinking it used to show to the world and to reorientate itself for the better of its citizens and the rest of the world.

  35. James Farrell
    February 19th, 2006 at 08:45 | #35

    SJ

    Premise 1: Richer people in general save a higher proportion of their income than poorer people. Premise 2: The rich get a higher proportion of their income from profits than do the poor. Conclusion: A redistribution of income from wages to profits raises the aggregate saving ratio.

    Which part of this reasoning is related, even remotely, to the Laffer Curve?
    (The Laffer Curve, insofar as it is a proposition, says that a reduction in the income tax rate, via its stimulus to effort, will increase the tax base by a greater percentage. As for the trickle down effect, I never really knew what that was. )

    And which part of it is voodoo economics?

    No one thinks that the distribution of income is the only thing that affects the saving rate. The recent decline in the overall US household saving rate is largely a consequence of reduced saving by the very rich. This doesn’t alter the fact that more is saved from profit than from wage incomes.

  36. avaroo
    February 19th, 2006 at 09:27 | #36

    Ernestine, Germany’s unemployment situation isn’t something the US would want to emulate.

  37. wilful
    February 19th, 2006 at 09:56 | #37

    Wouldn’t the removal of payroll taxes (replaced, say, by a carbon tax) do immediate good things for employment?

    From those who think that the IR changes will make a difference to employment, I’d like to know why this is so, in contradiciton of the BCA and Treasury, who try as they might couldn’t find any convincing evidence for such an effect.

  38. Ernestine Gross
    February 19th, 2006 at 13:09 | #38

    Avaroo, contrary to your apparent understanding, there is nothing in the German constitution which says that Germany has to have unemployment. On the other hand, if the USA is happy having working poor then this is presumably fine with those who don’t have to live there.

  39. avaroo
    February 19th, 2006 at 13:23 | #39

    Who is talking about the German consitution? The subject is unemployment. And the fact is, we wouldn’t trade places with Germany when it comes to unemployment. Nor , I would guess, would Australians.

  40. Ernestine Gross
    February 19th, 2006 at 15:21 | #40

    So, everybody is happy.

    And, Milton Friedman has acknowledged (in the last paragraph) that things aren’t quite the way he used to say they are. Does anybody know why Friedman thinks the problem he has discovered hasn’t been discovered by others quite a while ago?

    http://www.digitalnpq.org/archive/2006_winter/friedman.html

  41. Ian Gould
    February 19th, 2006 at 15:27 | #41

    >So what’s in the way of returning to the ‘old days’ of 2-3% unemployment?

    For one thing, the fact that on average people are more affluent and more highly skilled and therefore quite rationally choose to be more selective in the jobs they accept.

  42. Steve Munn
    February 19th, 2006 at 16:41 | #42

    “So what’s in the way of returning to the ‘old days’ of 2-3% unemployment?”

    I would give a different answer than Ian. Those rates of unemployment were the exception rather than the norm. High unemployment has been commonplace since the start of industrialisation.

    My bet is that technology, like computerisation, will destroy old modes of employment faster than new modes of employment can be created.

    Factors that will delay- but not curtail- this trend include an aging population and the ongoing creation of low pay, low security, casual and part time McJobs. Howard’s IR “reforms” will ramp up the latter of these two factors.

  43. SJ
    February 19th, 2006 at 19:02 | #43

    James Farrell Says:

    SJ

    Premise 1: Richer people in general save a higher proportion of their income than poorer people. Premise 2: The rich get a higher proportion of their income from profits than do the poor. Conclusion: A redistribution of income from wages to profits raises the aggregate saving ratio…

    The recent decline in the overall US household saving rate is largely a consequence of reduced saving by the very rich.

    Well, like I said, and as you ackowledge, the current US experience doesn’t support your premises or conclusions.

    The definition of Voodoo Economics is “Based on unrealistic or delusive assumptions”, so that part fits.

    The relationship between your statement “redistributing income to the rich, who have a higher propensity to save” and the earlier versions, variously termed “voodoo economics”, “supply side economics” and “Reaganomics” should be obvious.

    The supply-siders were influenced strongly by the idea of the Laffer curve, which suggests that lowering taxes can raise revenue by causing faster economic growth. They pointed to the tax cuts of the Kennedy administration in justification. [2]

    This led the supply-siders to advocate large reductions in marginal income and capital gains tax rates to encourage allocation of assets to investment, which would produce more supply (Jude Wanniski and many others advocate a zero capital gains rate). The increased supply would then lower inflationary price pressures because of competition and an improved goods to money ratio, hence the term “Supply-Side Economics”.

    You use the word “savings”, they used the word “investment”. But the basic theory is the same in both cases: reduce taxes on the rich, and magical results will appear. The experimental evidence is also the same in both cases: it refutes the theory. The actual result is increased consumption, not savings or investment.

  44. SJ
    February 19th, 2006 at 19:20 | #44

    P.S., James, it’s worth noting that the Wikipedia article I linked to is in dispute, and has been for about two years.

    The dispute is due to none other than our homegrown economic genius Terje.

  45. February 19th, 2006 at 22:22 | #45

    Comrade Razor, did you wrongly asume I was a communist because I quoted (or paraphrased) that famous marxist, neo-chavista and anti-corporate fanatic Peter F. Drucker ?

    You could not be further from the truth. I know a little bit about capitalism as I’ve managed many stores and businesses, from retail, to hi-tech, to luxury goods and hospitality, hence a few of my suggestions. Go back and read!.

    If my humble suggestions are not original or not applicable at a policy level, at the very least all came from actual business experience.

    Or can you dispute the simple references I provided. Or the fact that fot the very first time in my life I saw in the last week: street shoe-shine men outside 2 different Sydney train stations (City and West), saw people selling pens and another one selling lighters, for a few bucks in the street (CBD). Late last year I even saw someone singing in a trains for tips, and onother fellow selling nick nacks, etc.

    That only used to happen in poor developing countries, not in Australia.

  46. James Farrell
    February 19th, 2006 at 22:43 | #46

    SJ

    The reasoning connectng profit income and saving has absolutely nothing to do with supply side economics or the Laffer Curve. It’s an absolutely standard argument dating from Adam Smith and the classical economists, revived in the 20th century by development economists, and famously applied to the analysis of advanced economies by Keynes, Kalecki and Kaldor. These three are the polar opposite of supply side economists – they thought that wage cuts would cause unemployment by reducing aggregate demand.

    You are simply mistaken. If you really want to persist, then at least address the analytical question itself. Tell me what you think is the effect on average saving of a regressive shift in income distribution. Please don’t just say it’s obvious – that’s exasperating.

  47. February 19th, 2006 at 23:34 | #47

    James Farrell, I just re-read your discussion with SJ and it all seems a bit unclear.

    Your premise seems to be: just pass more of the pie to the rich since they will eat less of it and save more of what’s left. Then the average of that across the whole economy should be greater savings. – Please explain again if I didn’t get it.

    That’s almost standard “trickle down” economics. Saving rates are a bit more complex than that, depending not just on income levels or rates of return but also on many other things like cultural factors, average age of population, policy settings, like compulsory super funds, etc.

  48. February 19th, 2006 at 23:39 | #48

    John,

    I think your response to James Farrell is a bit weak. Savings need to rise to deal with the imbalance. Karate teachers’ capital equipment indeed! Sounds like a fairly weak effect – even if it’s generalised over human services.

  49. February 19th, 2006 at 23:43 | #49

    Meanwhile, here’s what Howard’s workplace reforms really are trying to achieve, more of this: CEO pay up 564%

    “Whatever their public rhetoric about improved workplace productivity leading inevitably to higher total wage and salary earnings, the intent of BCA pronouncements in relation to wages, standard hours and penalty rates is quite the opposite, namely downward flexibility in unit labour costs and pay rates for ordinary wage and salary earners.”

    And here’s the BCA’s laughable BS reply: CEO wages boom healthy: BCA

    “I’ve seen the report – it’s a very simplistic analysis because it doesn’t tell the full story,” a BCA spokesman said.

    “Companies would not be doing their job if they were not prepared to pay what was a globally competitive remuneration package to get the best talent.

    best talent? bwaaahaahaahaaaaaaaa!

    Shorten’s beautiful comeback to the BCA is also a must read, from same article:

    “They want their employees to have wages that compete with those of India and China while their own salaries are in line with New York and London,” Mr Shorten said.

    “These CEOs are earning more in a year than what many Australian families will earn in a lifetime.”

    However, their productivity only warranted a 5 to 6 per cent annual salary increase, he said.

  50. James Farrell
    February 20th, 2006 at 00:19 | #50

    Yes, Carlos, you’ve got it, which is not surprising, since it’s a very straightforward proposition.

    By contrast, trickle down economics is so vague and mysterious (to use SJ’s term) that I wouldn’t waste any time discussing it. Supply side economics, on the other hand, is pretty simple too: it’s about cutting taxes (and maybe wages too) to boost incentives and stimulate supply. But nothing I said had anything to do with supply. It was about reducing consumer demand. The context, you may recall, was the problem of how to reduce unemployment without aggravating the current deficit. I did not actually advocate the strategy of cutting real wages, if that’s what you’re worried about. I’d rather increase superannuation contributions.

    And yes, the average household saving rate depends on lots of other things too, which is why it’s been falling in the US despite the worsening income distribution. That’s what I said in my first reply to SJ.

  51. February 20th, 2006 at 07:28 | #51

    But I can’t let Helen’s thing about unemployment pass. Helen, we have followed the ILO definition of “unemployment�, which includes the bit about one hour’s work in the last week, since the late 1960s. Whether you think that a good or bad definition, it does mean we are comparing apples with apples. Figures before the late 1960s *understated* unemployment as they were based on (post 1948) CES registrations and even (pre 1948) union records.

    DD (one of my favourite online nics), I wasn’t trying to make the point that our government is trying to make itself look good in relation to other governments. The fact that the one-hour-per-week system brings us into line with others is irrelevant to me. My point is that “it’s employment Jim, but not as we know it”. When we are told on the evening news that unemployment is down to whatever percent, we tend to assume that “employed” means securely in a reasonable job, not a mickey mouse job involving less than 10 hours per week.

    In other words, the standard may be hunky dory to economists, but it’s become meaningless as an indicator of actual wellbeing to us the proletariat.

    It would be possible to construct an index which looked at the under-employed as well as the unemployed, no?

  52. Bring Back EP qt LP
    February 20th, 2006 at 08:32 | #52

    DD,
    sometime ago when I traipsed the corridors of Parliament and the rest Australia had the lowest participation rate for males 55-65.
    Treasury thought this was because people would retire at 55 live on the super and then at 65 double dip and live on the pension.
    most people then had two pensions ( husband and wife) and IF you owned your own house and only the husband worked this was quite a reasonable income to live on.

  53. derrida derider
    February 20th, 2006 at 09:41 | #53

    No, thats quite wrong BBEP@LP. Oz has a somewhat lower PR for 55-64 males than the OECD average, but by no means the lowest. Also the “double dipping” theory simply has not survived empiric scrutiny – basically, the overwhelming mass of people didn’t, and still don’t, have enough super to do that (which is not to say that it couldn’t be a *future* problem). And in the 1980s and early 90s most married females over 55 had not returned to work after they’d had kids.

  54. derrida derider
    February 20th, 2006 at 09:51 | #54

    Oh, and Helen it certainly is possible to construct an index that includes underemployment – click here for an ABS paper discussing this. The trouble is that, as I noted, its not possible to get a consistent time series going very far back (basically the ABS didn’t used to ask the right questions), so you can’t compare the past with the present easily.

  55. jquiggin
    February 20th, 2006 at 10:19 | #55

    NG.

    I agree that my answer wasn’t entirely satisfactory, though the capital intensity point is more significant than you imply. Human services are much less capital-intensive than the rest of the economy, particularly when compared to alternatives like physical infrastructure.

    My argument is that demand-switching towards human services can increase employment without a concurrent increase in the trade deficit (maybe with some reduction due to lower capital-intensity, but I have to work that through).

    In our current position we need to reduce the trade deficit not just hold it constant. That means we need to increase net savings to achieve long-run external balance. That must mean higher real interest rates, I think, whether these arise from policy-driven adjustments in the short rate, or market driven adjustments in long rates. I think that’s logically separate from my main argument, though.

  56. Bring Back EP at LP
    February 20th, 2006 at 11:19 | #56

    DD,
    I did say that was historical.
    I do remember some conversatons about this topic with Treasury people some 6-7 years ago.

  57. SJ
    February 20th, 2006 at 17:11 | #57

    James Farrell Says:

    SJ

    The reasoning connectng profit income and saving has absolutely nothing to do with supply side economics or the Laffer Curve.

    Yes, I understand that. Your argument is that reducing taxes on the rich will increase saving and reduce consumption. The supply siders argument was that reducing taxes on the rich would increase investment, which would increase GDP, tax receipts, employment, real wages, and consumption.

    The policy prescription in both cases is the same: reduce taxes on the rich.

    The assumptions in the two cases are different, but in both cases are false.

    The empirical evidence in either case shows that the policy prescription does not have the desired effect.

    In your case, you acknowledge directly that your assumptions do not hold: “The recent decline in the overall US household saving rate is largely a consequence of reduced saving by the very rich”, which directly contradicts your first premise. That’s what makes it voodoo economics. It’s “based on unrealistic or delusive assumptions”.

    Yet you advocate the policy regardless.

    Does this suggest to you (it certainly does to me) that in both cases flimsy arguments have been flung together to justify a particular policy?

  58. Voodoo Supply-Sider
    February 20th, 2006 at 17:51 | #58

    All right, SJ, one more try…

    ‘Your argument is that reducing taxes on the rich will increase saving and reduce consumption.’

    No, I made no mention of tax.

    ‘The policy prescription in both cases is the same: reduce taxes on the rich.’

    No, I made no mention of tax.

    ‘In your case, you acknowledge directly that your assumptions do not hold: “The recent decline in the overall US household saving rate is largely a consequence of reduced saving by the very richâ€?, which directly contradicts your first premise.’

    My first premise was that the rich save a higher proportion of their disposable income than the poor. I later noted that this proportion has recently shrunk. These statements do not contradict each other. As long as the rich have a higher saving ratio, even it isn’t as high as it used to be, then a resdistribution in their favour makes the overall saving ratio higher than it would otherwise have been. I can give you a numerical illustration of this if it’s really necessary.

    On the question of ‘policy prescriptions’, see my reply to Carlos.

  59. SJ
    February 20th, 2006 at 18:55 | #59

    James Farrell (presumably) says:

    No, I made no mention of tax.

    OK, OK. I can see that I’ve misunderstood your original statement.

    I withdraw my objections.

  60. Ex Voodoo Supply-Sider
    February 20th, 2006 at 20:11 | #60

    Thank you, SJ.

    Pity, though, in some ways. I was starting to enjoy my new identity!

  61. February 20th, 2006 at 22:17 | #61

    Going back to DD’s point about Helen’s point, and this response from DD:

    But I can’t let Helen’s thing about unemployment pass. Helen, we have followed the ILO definition of “unemployment�, which includes the bit about one hour’s work in the last week, since the late 1960s. Whether you think that a good or bad definition, it does mean we are comparing apples with apples.

    DD, you sure about this? I’m just wondering as I also just read a Vinnie de Paul paper that asserted that:

    official claims are made that the unemployment rate is a low 5 per cent compared to say Germany at 10 per cent or so. But they fail to mention that Australia uses the ridiculous definition of employment as have one hour of work per week. Germany, by contrast, clings to a definition of 15 hours of work a week. On that basis, and taking into account numbers deliberately excluded from labour force data in Australia, our unemployment rate is 10-12 per cent, similar to that of Germany.

    So, tell me, why would Germany not use the ILO definition? Just so it can cop a bagging round the world whenever the issue comes up? Something isn’t right here. Does anyone have any links that will allow us to run this rabbbit down?

  62. Terje Petersen
    February 20th, 2006 at 22:38 | #62

    Terje,

    Your theory of employment generation through outsourcing.

    Actually I think it was JQs theory. I was just talking about the implications that tax had on such a policy aspiration. However I will push through to your other points.

    Each couple incorporates 2 teeth brushing businesses. Corporation A1 brushes the teeth of Corporation A2 at a price and with conditions as described in their AWAs. Teeth brushing services provided amount to 1 hour per week. Unemployment would converge to zero.

    You are not very clear. I assume you are trying to say that two people start businesses brushing teeth and sell the same service to eachother for the same price. That seems unlikely and irrelevant. Nobody would do this with or without tax so I don’t see what point it illustrates. Whereas in the example I gave somebody might realistically sell Karate lessons and then use the money to pay their plumbing bill.

    Now, you say this job creation through entrepreneurial activities that involves outsourcing is prevented (’market distortion’) because of personal income tax and services tax (GST).

    No I don’t. Let me be really clear. If tax was zero I would still find it unlikely that two people would start teeth brushing businesses and sell the service to eachother. It seems absurd.

    Please let me know where I have violated any one of your conditions in your theory.

    Given that the teeth brushing business will probably see zero dollars worth of service with or without taxation then I can say that business has doubled with the ellimination of tax and their would be no contradiction. Two times zero is zero.

    Now, lets look at your example for motivating income tax cuts and cuts in services tax. I’ll take the government sector out (ie zero taxes)

    Your example of someone working an additional 5 hours (possibly at an extraordinarily boring job) to buy 1 hour of accountancy services brings out a problem with ’services’ – some of them are too expensive relative to others. Those on relatively low incomes (and potentially very boring jobs) might act exactly contrary to what you want, namely instead of working an additional 5 hours, as you want, they may wish to work fewer hours than what they are currently working ‘in the market’ to have time to provide services ‘in-house’. (elementary economics: opportunity cost).

    If that is a more efficient use of their time then it sounds like an economic improvement to me. They work less and get more. Some would call that a productivity improvement. In fact if I could stay home and have more I would. Why should we make policies that stop people maximising their utility in this manner. It would seem that you would see some merit in a policy that abolishes weekends or evenings off.

    If tax cuts make people stay home more than great. Obviously that would imply that such people want more time at home.

    I wonder how long it will take for business lobby groups to learn that the optimal strategy is not to lobby.

    Me too.

  63. James Farrell
    February 20th, 2006 at 22:50 | #63

    Chris

    The German Federal Statistics Office publishes unemployment data according to the 1982 ILO definitions, and this is used in all reputable international comparisons. But the Federal Employment Agency also publishes numbers of officially registered unemployed, which are probably used in the domestic discourse to some extent. You can work up to 15 hours in Germany and still be registered. Against that, some hidden unemployed would not be registered, but I expect that on balance the Employment Agency’s figure would be higher.

  64. February 20th, 2006 at 23:10 | #64

    Thanks for that, James.

    Must try to ferret the Agency figure out. It might give us a rough margin to guess the real Oz rate (15 hours strikes me as a reasonable first guess minimum standard, in the real world; but then again, what about a say, 40 hours equivalent comparison?).

  65. James Farrell
    February 20th, 2006 at 23:39 | #65

    An alternative is to get underemployment on the agenda, even if you keep the figures for it separate. There has been work on this of course, for example by Roger Wilkins at the Melbourne Institute (pdf file). An outfit called at Newcastle CofFEE also looks into these matters, for example here. DD would know more, I’m sure.

  66. Ernestine Gross
    February 21st, 2006 at 18:02 | #66

    Terje,

    1. No, there is no requirement that the prices paid for tooth brushing services provided by A1 and A2 are the same (2 contracts).

    2. My question was not whether you consider the situation I described as realistic in your eyes but whether or not it satisfies the conditions of your theory.

    3. Pitty, you let the tax argument slip only because you consider the described situation as unrealistic. (Tax argument: think of transfer pricing).

    4. Your own assessment of the likelihood of the described situation occurring implies that there is a limit on the job creation via outsourcing of services. It is also yet another reminder that growth in GDP is not necessarily a meaningful ‘economic growth’. (I would consider GDP to be a meaningful economic indicator if the ‘structure of the economy’ remains approximately unchanged.)

    5. Incidentally, the mutual tooth brushing business example is consistent with theoretical models of economies with complete markets.

  67. Terje Petersen
    February 22nd, 2006 at 02:36 | #67

    1. okay.
    2. it does not violate any conditions of the theory that taxation discourages trade.
    3. Huh?
    4. I have no real disagreement with you on this.
    5. It is still an unrealistic example with which to explore behaviour. Perhaps its absurdity has some merit, but the point of it escapes me.

  68. Ernestine Gross
    February 22nd, 2006 at 09:53 | #68

    1. In an earlier post you suggested the price for the mutual teeth brushing service would be the same. I suggest many people would consider your suggestion as corresponding to a ‘fair price’. To make the 2 prices consistent with my item 5, (ie two different commodities) one requires that either 2 units of time are involved or 2 locations. Many people would consider this as ‘contrived’. I suggest many people would put forward the same argument in relation to the new industrial relations laws. (The underlying reason is just not as obvious as with the tooth brushing services example.)

    2. and 3. I don’t doubt that you wanted to have a theory from which it follows that taxation discourages trade. But your argument is not a theory but a hypothetical example. I constructed an example, which many people would find ‘absurd’ (because it is not the custom, but PPPs were not the custom 25 years ago). But my example allows for ‘tax induced trade’. Say t = .5, tax free threshhold = $100, A1′s taxable income is $1000 without the tooth brushing service and the tax is .5(900) = 450. A2′s taxable income is $0. A2 charges $100 for the service, A1 charges $1. A1′s taxable income becomes $801 and the tax payable becomes .5(801) = $400.5. A2′s tax payment remains at $0. Their combined tax payment is reduced. This is an example of the tax implication of ‘transfer pricing’. You may say this is not ‘fair’ and many would agree with you because the prices are not ‘arms-length. Yes, but only because something is not ‘fair’ doesn’t mean it doesn’t happen. Where are the ‘arms-length’ prices determined with ‘individually negotiated AWA’s'? and for those of CEOs and those of trades among interrelated companies? I would suggest that your example does not exclude the possibility that the person has to work longer hours in order to pay for what is customarily a necessity and this would not be considered as ‘fair’.

    4. –

    5. I am introducing the notion of ‘custom’ because observations on ‘behaviour’ are difficult to separate from ‘custom’. Changes in the institutional environment may bring about changes in behaviour. Its up to you to form your opinion on the merit of an ‘absurd’ example. I had in mind several topics that are recurring in debates on the blog.

  69. Terje Petersen
    February 22nd, 2006 at 13:34 | #69

    Ernestine,

    1. No I did not say it would be the same. I assumed you were saying it was the same. I had to make some assumptions because I really did not understand your example.

    2 & 3. Yes it was a hypothetical example. Although your inference that I have a theory about tax and trade is correct.

    4. -

    5. Yes I have formed an opinion. You are being absurd or at least unnecessarily difficult. Perhaps you will say something to change my opinion however that is where it stands at present.

    6. Do you find that when you explain concepts to your students a lot of them look confused?

    Regards,
    Terje.

  70. Ernestine Gross
    February 22nd, 2006 at 14:53 | #70

    Terje,

    1. o.k. you assumed the price is the same. This does not change the argument that the number of prices depends on the institutional environment. I believe the aspect of ‘fairness’ is an interesting one. I have yet to meet one person who categorically objects to the idea of a ‘fair exchange’ in trade. The difficulty seems to be how to achieve ‘fair trade’. Institutions are designed by humans. They are not like ‘natural laws’ such as water always runs down-hill. The absurdity of my example does not lie in the activity chosen (mutual teeth brushing) but that there are empirical observations for each of the implications I’ve drawn from the example.
    2 & 3 —

    4. —

    5. –

    6. I did not treat you as a student. Should I change my premise?

  71. February 22nd, 2006 at 23:24 | #71

    I suppose this is a good place to remind people of my favourite starting point to address unemployment, a Negative Payroll Tax which works out in the long run like the negative income tax approach Harry Clarke mentioned, only with more immediate effects and less need for a new equilibrium to be reached first. To make it more interesting, here’s the text of an email I just got from someone else who’s following it all up:-

    Dear mr Lawrence,

    As you refer to professor Swales on your website,
    you might be interested in the below.

    Regards,

    Thomas Cool / Thomas Colignatus
    http://www.dataweb.nl/~cool/

    Forwarded Message:
    > To: [email protected]
    > From: Thomas Cool
    > Subject: DRGTPE on unemployment and taxes
    > Date: Tue, 21 Feb 2006 23:48:59 GMT
    > —–
    > Dear professor Swales,
    >
    > I happened to see some of your work, and conclude that you would be
    > interested in some of my work, for example on the tax void and the
    dynamic
    > marginal tax rate, and the impact of differential indexation of the
    > minimum wage on stagflation. Easiest is that I refer to this link:
    > http://www.dataweb.nl/~cool/Papers/Drgtpe/Index.html
    >
    > Sincerely yours,
    >
    > Thomas Cool / Thomas Colignatus
    > http://www.dataweb.nl/~cool/
    >
    > (Your links:
    > http://en.wikipedia.org/wiki/Minimum_wage
    > http://www.faxfn.org/03_jobs.htm
    > http://en.wikipedia.org/wiki/Kim_Swales
    > http://homepages.strath.ac.uk/~hbs96106/teaching%20staff/kim%20swales.htm
    > http://member.netlink.com.au/~peterl/publicns.html#ECONOPTS)

  72. Terje Petersen
    February 23rd, 2006 at 00:26 | #72

    6. If you are trying to teach me something then yes. As you have previously remarked yourself we are all students. If I can learn something from you then I am most open to the opportunity. Unfortunately you frequently make points that just baffle me.

    I don’t seek to pass judgement as to whether the cause of this communication issue is with you or with me. I rarely manage to figure out if you are debating me because you disagree, if you are trying to learn from me or trying to teach me. I would prefer that the motive was one of the latter two and that any debate was merely incidental to the process.

  73. Steve Munn
    February 23rd, 2006 at 00:35 | #73

    I was interested to see a Tim Colebatch article in yesterday’s “The Age” that notes a decline in the number of full time employed 15-64 year olds since the Howard government was elected. The decline is small but I find it surprising.

  74. February 23rd, 2006 at 02:39 | #74

    No surprise Steve Munn, it is almost impossible to get staff. Potential employees are being chased down by employers, much in the manner of a lebanese restaurant operator chasing down stray bull terriers.

    Monday night is the favourite night, recruiters swarm through my place offering jobs to almost everyone who is sitting at the bar. I have had to bar most other publicans from my place, as they are only trying desperately to poach my staff.

    In such a climate it would be downright amazing if numbers of unemployed had not shrunk.

  75. Ernestine Gross
    February 23rd, 2006 at 17:47 | #75

    Terje,

    I don’t find it easy to reply. But, given your frankness, I feel I ought to.

    Lets start with the easy part. I didn’t say we are all students, I merely spoke for myself. I recall having said something to the effect that it is difficult to be an economist because there is a fine line between contributing to society on the basis of one’s knowledge and remaining non-dogmatic. Everybody is a member of ‘the economy’ and therefore every individual has some (private) information which an ‘economist’ couldn’t possibly have. Still, economists do have some knowledge which not every member of ‘the economy’ has. In a later communication with James Farrell I said something to the effect that in addition to the objective of being non-dogmatic there is the problem of perceptions.

    In my posts, I essentially apply economic knowledge, which the supply siders and economic rationalists ignore, to show up holes or contradictions in their story. So my posts have nothing to do with you as a person. Its entirely up to you whether you want to think through the puzzles or not.

  76. Terje Petersen
    February 25th, 2006 at 14:01 | #76

    Ernestine,

    I am all for puzzles. It is just something in the way you frame things that often makes me miss your point. Often I can’t even find the contradiction that you are hinting at. In the example in this thread I am still clueless as to what you were getting at. Something about brushing other peoples teeth to be sure, however there are obviously a few leaps of logic that are obvious to you but completely obscure to me. So whilst I appreciate any help in seeing flaws in theories the help to date has not helped much.

    I also try and make others see the contradictions in their position. It seem to haver very mixed results.

    Regards,
    Terje.

  77. Ernestine Gross
    February 26th, 2006 at 19:44 | #77

    Terje,

    On an earlier thread you volunteered the information that you are an engineer. On a more recent thread you volunteered the information that you are a paid-up member of the political arm of some libertarian party.

    I suppose your last revelation solves a puzzle.

  78. terje
    February 26th, 2006 at 20:32 | #78

    What puzzle is that then?

Comments are closed.