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Back to full employment?

June 13th, 2006

I’ve been arguing for some time that the government should use the current period of strong demand to make a really strong push to reduce unemployment, particularly long-term unemployment. This piece in the Australian looks promising, though on reading closely it’s hard to see whether there is actually a serious commitment of funds and effort or just another rearrangement of the existing programs. If the government was willing to put the kind of money it’s repeatedly splashed around in tax cuts into a program aimed at driving the unemployment rate down to 2 or 3 per cent (by putting people into jobs, not by pushing them out of the labour force), they would win my support.

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  1. Kanga
    June 29th, 2006 at 10:38 | #1

    Gee, Andrew,

    All I see are trees being knocked down and little boxes going up for increasingly outrageous prices. In the hospital where I work so many of our patients are unemployed, homeless, with teeth rotting in their heads, poor nutrition, lousy educations, drug and alcohol habits and no place in society. Our society has become so financially competitive that the poor have no future unless they are exceptional.

    My collegues are all in debt to their cars and houses. They have to travel a long way to work in these cars with high petrol costs because public transport is completely inadequate due to our economic dependence on the increasingly costly and irrelevant car and car related manufacture industries. We work very hard in an ever more authoritarian workplace where cronyism masquerades as merit.

    Much of this doesn’t show up on the CPI index because the cost of land for housing was factored out in about 1999. No-one writes about the rotting teeth and we have come to accept that an increasing proportion of the population cannot read or write properly, or add and subtract.

    When I grew up there were no buskers or beggars on the street. Now people do the kinds of things that Australians used to find quaint practices in far away countries, such as pavement art for money.

    The Big Issue magazine salesmen are a common sight these days. Twenty years ago they hadn’t even been heard of. Nothing wrong with the initiative of doing this kind of job, but it is another sign of what people will accept before they consider they have hit bottom.

    Where once upon a time second hand stores were an unusual phenomenon for the unusually impoverished, they are now an industry. There are the people who buy their clothes new, and then there are the others, who are fully or partly employed, who usually buy their clothes and furniture second hand.

    So many folk who do buy big glossy new things do so on tick and, I for one, often wonder why they don’t look into the future and see that, in a few years they will be over thirty and someone younger will have their job, but they will still have their debts.

    Our national and private debts are huge. All that foreign investment is actually debt. And this debt contributes to our dwindling democracy, as successive governments pander to corporations and the world bank by eroding industrial safety and industrial relations. The outcome promises to be the destruction of local small to medium business, farming, research and science, and the installation of a US style ostentatious wealth class system.

    We are selling off finite mineral supplies and trashing irreplaceable bush and wildplaces for the dross of outer suburban housing estates. More and more of the same.

    There is more than one way to run an economy and our way is the mean and stingy way. Some countries choose full employment; others choose to put people on the scrap heap. It would be more honest to shoot them, but instead we just blame them then innocently do polls trying to find out why so many commit suicide, drink, drug or live superficially to stupidly shop.

    Kanga

  2. June 29th, 2006 at 12:45 | #2

    Kanga,
    Have you considered (just for a moment) that it may be the socialised education system that we have developed that is not preparing people for a life outside the confines of our schools? Or that it could be the very welfare systems that are meant to help these people that are in fact hindering them? That minimum wage and award conditions mean that the less productive become unemployable and end up hitting bottom?
    No – that would be too confronting.
    Government spending on welfare seems to increase faster than the number of recipients, yet all that happens is the number of recipients just increases further. Don’t you think that there is something wrong here? When we had those seemingly wonderful conditions you were describing, how large was government spending as a proportion of the economy? How large is it now?
    Think about it, Kanga – more government spending is not the solution, it is the problem.

  3. June 29th, 2006 at 15:28 | #3

    Nice that you have hopped back to this forum for a moment, Kanga.

    It’s interesting that Andrew Reynolds, did not dismiss the content of your post as ‘anecdotal’ and can apparently ‘see’ what you are describing as well as “rising living standards, a better environment (and more respect for it amongst the population), better jobs more time away from the office doing the things we want to do, better general health, more material wealth and longer lives.” It seems that he can, after all, “see the substance in your comments“, but not in mine.

    Nevertheless, although Andrew Reynolds can now apparently ‘see’ that all is not apparently as wonderful as he would otherwise have had us believe, it turns out that this has been caused, not by the neo-liberal economic ‘revolution’ of the last twenty-odd years, but, rather, by Governments having spent too much on the ‘socialised eduction’ system and social welfare and by not having acted sooner to abolish the minimum award conditions that are keeping so many from being employed.

    If only they would continue axing spending on health, universities, schools, social welfare, public transport, infrastructure, and stay on course with their IR ‘reforms’, a prosperous future for all is apparently assured.

    Having attended yesterday’s rally, 25,000 strong, I am told, for ‘your rights at work’ in Brisbane, and having listened to some of the workers who have been forced to confront the consequences of John Howard’s IR legislation, I can now add some further ‘anecdotal’ information ‘lacking in substance’ for Andrew Reynolds to disregard:

    1. A young worker who to sign an AWA in which penalty rates holiday pay, etc, were signed away was told that they would find another reason to sack her in a few days if she did not agree to sign. Sure enough, a few days after she refused to sign, she was sacked.

    2. A group of workers who insisted that their employer install fire extinguishers and other saftey equipment were sacked.

    3. In one factory the workforce was divided between those who had been bullied into signing new AWA’s and those who would not. A 63 year old worker, who did not want to sign the AWA, but had absolutely no prospect of finding another job, eventually relented and signed the agreement.

  4. Ernestine Gross
    June 29th, 2006 at 16:01 | #4

    Andrew Reynolds’ explanation of why he wishes to convince other that their empirical observations on labour market conditions in Australia can be refuted by reference to one US study on ‘leisure’ goes like this:

    1. a) “I would maintain that the Australian experience is not too different to the US. In the case od Australia, the data is simply not available, at least as far as I know. If so, standard procedure is to use a proxy with a good data history – in this case the US study, as I maintain it would be a good proxy.â€?

    b) The US data comes from a refereed and high quality journal.

    2. “What I am saying is akin to standard stock market theory. I am trading in shares in companies in a particular industry. Company A, a nickel mining company, announces stellar results, beating market expectations. Company B, also a nickel miner, is yet to release results, but are similar in structure to Company A. Do I go and buy Company B’s shares in the expectation that their results will be similar to Company A’s? You betcha.�

    3. “If you do not see this in your examination of the markets, I suggest you have another look. Each of the firms within an industry show strong (but not perfect) price correlation with each other. The correlation is not perfect, as I correctly pointed out earlier and is dependent on other factors, but good results in the first firm to report (or give guidance to the market) is a strong buy signal.”

    4. “Simply because one firm does not publish data does not mean that they have not had a good year, just as because the US has more data on increased leisure does not mean that Australia has not had that leisure increase – it only means that there is no data. Absence of evidence does not constitute evidence of absence. I have indicated why I believe that there would be a correlation between Australia and the US in this. Can you indicate whether you believe that the correlation would be low, zero or even negative and if you do, why you do?”

    The last question is directed to me. As most people- at least those who know how a correlation coefficient is calculated and the conditions under which such a coefficient makes sense- may appreciate, it would take an utter fool to respond to this question.

  5. June 29th, 2006 at 18:30 | #5

    So, Ernestine – when you discuss working hours vs. leisure hours in Australia (if you do) you are more comfortable working with a total absence of data rather than using proxies? Must make any work you do in this area (if any) very short – or not very informative.
    In the real world, data is often discontinuous or absent but assumptions have to be made about it to allow for management of whatever it is you are trying to manage, icluding our lives. We have to use proxies for the missing data, assumptions about the behaviour of the underlying and occasionally a few guesses or rules of thumb when operating in an uncertain environment.
    In this case, published data on working hours in both Australia and the US show similar trends (if my information is correct). The research I have pointed to indicates that the true picture in the US, based on strong underlying data, is not that which the other data indicates. I believe that, if similar research were done in Australia a similar trend may be uncovered.
    If you need to be an utter fool to comment on that, Ernestine, then most of us outside an ivory tower must be utter fools. I make no secret of the fact that I am not an economist or an academic. Perhaps you should disclose your experience operating outside university.
    If you have some data on the subject, or even some real research you can point to let us all know. Where I am wrong, let me know. But do not just put me down and flounce off as if that is enough – as, IMHO, you often do. Engage in the debate.

  6. Kanga
    June 30th, 2006 at 00:44 | #6

    Dear Mr Reynolds,

    Could you please let me know your interpretation of the meaning of the following in the document on leisure that you have cited:

    p.19, “… one definition of “leisure” is as a characterization of technology, that is, how substitutable are time and goods in the production of the ultimate consumption commodity.”

    regards,

    Kanga

  7. Ernestine Gross
    June 30th, 2006 at 00:58 | #7

    Andrew,

    The heading of this thread is “Back to Full Employment?” Several interesting points have been made by commentators, most importantly, IMO, changes in the measurement of employment over time.

    In an attempt to discredit a commentator, J.S., and authors of publications referenced by J.S. (AR, June 22nd, 2006 at 12:39 pm) you introduced a link to a Working Paper, by Mark Aquir and Eric Hurst, titled “Measuring Trends in Leisure�, published by the Federal Reserve Bank of Boston, in February 2006. You then quoted selectively from this paper. And, you demanded others to disprove your belief that US data can be used in the absence of Australian data (which turned into “the USA is correlated with the Australia�).

    You asked for “killer evidence� to disprove your believes. To gain time to read the working paper I first queried the methodological foundation of your belief that US data can be used in the absence of Australian data. The outcome, which I reproduced, was most revealing. I abstain from comment.

    The paper, you have referenced, contains an intertemporal time budget study, using 4 measures of ‘leisure’ and hence 4 measures of non-market work (the implication follows from a 24 hour real resource constraint, called ‘time budget’ in this literature). Incidentally, the increase in leisure in the excerpt you quoted, holds only for 2 of these 4 measures of leisure. Many other observations could be made about the content of the paper inrelation to your quote. But this is not essential here.

    The important point is, IMO, that the paper you have referenced is, in the first instance, irrelevant to the topic.

  8. June 30th, 2006 at 02:14 | #8

    Here are some excerpts from Measuring Trends in Leisure: The Allocation of Time over Five Decades (pdf 566K), the document that Andrew Reynolds believes has more useful to say about what is going on in Australia than Clive Hamilton, Elisabeth Wynhausen, the four young sacked workers who addressed the “Rights at Work” rally on Wednesday, myself, Kanga and other contributors to this forum:

    page 6 : … In the Beckerian model, whether a wage increase draws a worker into the market depends not only on preferences embedded in the utility function but also on the production functions, fn, as well as on how time is allocated across these productive activities. If agents are engaged in activities that have a high degree of substitution between goods and time, they will supply labor to the market differently in response to a real wage increase than will agents engaged in activities that have a low elasticity of substitution.

    page 15 : Another important consideration raised by the trends in total work hours is whether the economy is on a balanced growth path. Taken as a whole, the strong downward trend in total work (market plus nonâ€?market work) suggests that the economy may not be on a balanced growth path, although this does not rule out the possibility that the economy may asymptote to such a path. The relatively stable figure for marketâ€?workâ€?hours per adult over the last 40 years (in the presence of steady increases in real incomes) is often used to justify utility functions in which the income and substitution effects of wage changes cancel. …

    page 18 : However, no large increase was found. Depending on the specification, the PSID data are consistent with an increase in parental time spent with children of between zero and oneâ€?half hour per week between the mid 1990s and early 2000s. However, using the consistently measured PSID data, …

    page 19 … We argued in Section 3 that one definition of “leisureâ€? is as a characterization of technology, that is, how substitutable are time and goods in the production of the ultimate consumption commodity. This definition is empirically problematic in that we typically do not have independent measures of the underlying “productionâ€? functions or their outputs. A commonly used alternative definition of leisure is as a residual of total work. Under this definition, the results just discussed suggest that, conditional on demographics, …

    page 20: For example they provide a model in which time spent sleeping is a choice variable that both augments productivity and enters the utility function directly. Furthermore they provide strong empirical evidence showing that sleep time is, in fact, a choice variable over which individuals optimise. For example, …

    I have been unable to include anything from pages 7, 8 and 11 because they contain mathematical formuale I am unable to reproduce.

    Does anyone else here, other than Andrew Reynolds actually believe that it is necessary to read, analyse and dissect the 61 pages (30 pages core document and 31 pages of appendices) in this document that Andrew has referred to, produced by the Federal Reserve Bank of Boston, in order to have any idea about what is going on in this country?

    Thank you, Ernestine, for having taken the considerable trouble to confirm what I strongly suspected all along, that is that the document is completely irrelevant to the discussion at hand.

    Andrew, if you wish to be taken seriously from now on, please firstly don’t try to waste our time by sending us off on any more wild goose chases, and secondly, please respond to the substance in contributions from other people.

  9. June 30th, 2006 at 11:18 | #9

    James,
    I was waiting for you to pile in. If it is irrelevant, then you, yourself need to take the blame. I was countering your comment:

    that is without having to work non-stop from the minute he/she walked in the door, and being allowed to have his/her mind wander from the job from time to time and be able to stop and have the occasional chat with fellow workers – could expect at least an adequate standard of living including…

    The clear implication of this was that we are working longer and longer for less and less. There appears not to be the depth of data in Australia to either support or refute this – so I used a demonstration that the published data on working hours does not tell the whole story.

  10. June 30th, 2006 at 11:21 | #10

    James,
    I was waiting for you to pile in. If it is irrelevant, then you, yourself need to take the blame. I was countering your comment:

    that is without having to work non-stop from the minute he/she walked in the door, and being allowed to have his/her mind wander from the job from time to time and be able to stop and have the occasional chat with fellow workers – could expect at least an adequate standard of living including…

    The clear implication of this was that we are working longer and longer for less and less – that employers are working us to the bone. There appears not to be the depth of data in Australia to either support or refute this – I presume either you or Ernestine would have directed me to it if there were – so I used a demonstration that the published data on working hours does not tell the whole story from a situation where I believe a close proxy is available. Ernestine promptly attacked the use of a proxy, while both of you were steadfastly refusing to engage in the actual debate.
    Perhaps you should restrict your own wild goose chases, James.

  11. June 30th, 2006 at 11:33 | #11

    Apologies for the double comment.
    I also note that Ernestine has not yet responded with any proof that one of:
    1. His earlier comment can be understood to reveal a deep understanding of the operations of a market; or
    2. It was an abberation used merely to try to score a cheap point and that he actually knows much better.
    3. Some other reason why I should withdraw other than his apparently hurt feelings.
    On any of those proofs being presented I will happily withdraw my earlier comment regarding his academic approach. Until then, it stands.

  12. Ernestine Gross
    June 30th, 2006 at 11:46 | #12

    Andrew,

    To whom is your last post addressed? I am asking because my name appears in it.

  13. June 30th, 2006 at 13:34 | #13

    Ernestine,
    Perhaps you should read the advice you ascribed to me here.

  14. Ernestine Gross
    June 30th, 2006 at 13:59 | #14

    Andrew, You are talking in riddles.

    My question remains: To whom is your post of 11.33 am addressed?

    My second question is: Which advice do I ascribe to you where and where would I locate it?

    For your information, the heading of this thread is “Back to Full Employment”. If you don’t understand any one or all of these words, please ask JQ or read up.

  15. June 30th, 2006 at 14:29 | #15

    Andrew,

    The fabric of our society has changed in the last 30 years, and much of it in the last 10 years since John Howard won office.

    Do you believe that it is an acceptable way for a democracy to operate, that such major changes, which have affected the lives of everybody, have been made and yet there has been no attempt, as you have acknowledged, except for the use of the clearly deficient GDP measure, to comprehensively measure the effects of these changes?

    As as I wrote earlier the claim that John Howard’s social and economic policies have led to an improvement in our living conditions have again and again been used to trump the very serious objections to his rule.

    In the absence of such a comprehensive study to measure the effects of these changes, I believe we have an obligation to point to large and growing body of evidence which is in conflict with the claims that Howard’s polices have improved our quality of life, and I we should not be expected to stop doing so, on the basis of a study done overseas, which requires a lot of work to read and to understand and which relates to circumstances in another country, with which few of us are familiar.

  16. Ernestine Gross
    June 30th, 2006 at 15:08 | #16

    Andrew, Kanga asked an interesting question, addressed to you. I would be interested in getting your answer.

  17. June 30th, 2006 at 15:20 | #17

    James,
    You are free to point to any body of evidence you want: I am also free to do so. The Australian voters then get a say on it at least every 3 years. I am comfortable with that.
    If you (Ernestine, or our good host here) want to do that research, go ahead – I would be very interested in the outcome. I suspect, though, if it was done in a robust manner, it might not confirm your beliefs.
    .
    If it is not too much trouble I would also appreciate an acknowledgement that I was answering your point in raising this study. I do not insist on it and will not mention it again, but I think it would be fair to do so.
    .
    Ernestine,
    I will speak as clearly to you as you do to me. Read the comment- it should be clear to you. If not, please reply clearly to my previous questions which you seem to have treated with disdain and I will return the compliment. Follow the link and you will find the advice.
    I perfectly understand “Back to full employment”. Please read my comment on why I raised the study or continue to ignore it – up to you. James (IMHO) raised the topic, I countered.
    It is in the nature of threads to wander – they are not an academic paper. I have no problem with that and am happy to follow the debate.

  18. Ernestine Gross
    June 30th, 2006 at 18:22 | #18

    Andrew,

    Have you read the paper you referenced, namely a Working Paper, by Mark Aquir and Eric Hurst, titled “Measuring Trends in Leisure�, published by the Federal Reserve Bank of Boston, in February 2006?

  19. June 30th, 2006 at 19:29 | #19

    Ernestine,
    If you refse to answer my questions, I see no reason to answer yours.

  20. Ernestine Gross
    June 30th, 2006 at 21:01 | #20

    Andrew, you don’t answer Kanga’s question either.

  21. Ernestine Gross
    July 1st, 2006 at 00:08 | #21

    No Andrew, I can’t find any evidence that you were countering James’ comments.

    To substantiate my conclusion:

    You quote from James S.: “that is without having to work non-stop from the minute he/she walked in the door, and being allowed to have his/her mind wander from the job from time to time and be able to stop and have the occasional chat with fellow workers – could expect at least an adequate standard of living including…�

    And, your write: “The clear implication of this was that we are working longer and longer for less and less – that employers are working us to the bone. “

    But:

    1) James S.’ statement, which you quote, means to me, unambiguously, that James is talking about the working conditions of paid work (market work in the study you referenced) per unit of time in relation to money wages per unit of time and enough hours of work to afford an adequate standard of living (ie ‘full employment’ as stored in the memory of many Australians and elsewhere in the world). James S’ statement on working conditions is related to the notion of ‘labour productivity’.

    2) Not long ago, you have given me strong advice that I must not use mathematics – I got a lecture of sorts. I can see that you avoid mathematics, with the result that I don’t know how you would measure ‘longer and longer’ and ‘less and less’ – what is the unit of measurement? I am not trying to be cynical. I assume here that you would be measuring ‘longer and longer’ in units of time and ‘less and less’ in terms of money wage per unit of time (or, if you like in terms of purchasing power of marketable commodities).

    3) I have read the study in question, ie that which you referenced. I could not find any data on working conditions or on labour productivity in relation to wages per unit of time, as proxies, for the issues raised by James S.

    4) I would be surprised if you would find any data on labour productivity in a time budget study. However, please feel free to correct me by pointing out the relevant pages in the study you have referenced. (By data, I mean numbers on these variables and not words in footnotes or questions arising from the study or beliefs.)

    5) This leaves ‘hours worked for money per unit of time’. There is comparable data for the USA and for Australia, published by the respective national statistics authorities.

    6) So, I believe James S’ characterisation of your contribution on this occasion, namely to sent us off on a wild goose chase, is appropriate.

    I believe you could make a contribution to the discussion if you would answer Kanga’s question.

  22. Ernestine Gross
    July 1st, 2006 at 00:11 | #22

    Andrew,
    Who is “He� in your post, reproduced below? This is a serious question.

    “Apologies for the double comment.
    I also note that Ernestine has not yet responded with any proof that one of:
    1. His earlier comment can be understood to reveal a deep understanding of the operations of a market; or
    2. It was an abberation used merely to try to score a cheap point and that he actually knows much better.
    3. Some other reason why I should withdraw other than his apparently hurt feelings.
    On any of those proofs being presented I will happily withdraw my earlier comment regarding his academic approach. Until then, it stands. “

  23. Ernestine Gross
    July 1st, 2006 at 17:00 | #23

    Alright, Andrew, as you wish.

    I am not the ‘he’ in the questions because I am a female.

    Given the links you have set, the he is you.

    So, I shall answer your question:

    1. You have failed to provide a proof that your earlier comment can be understood to reveal a deep understanding of the operations of a market.

    PS1:I am the only Ernestine on this blog site for at least 8 months. If you want to go back through all the blog threads, you’ll find a post by Katz in which he wrote to you something to the effect that he would not give to much weight to comments made by a man by the name of Ernestine. You left out part of the statement and started talking about ‘him’. I made a post, which reintroduced the distinction between ‘a man by the name of Ernestine’ and Ernestine. So, Andrew, academic rigour may be quite useful in ‘the real world’. You and I were part of the same ‘real world’ at the time. I do hope this is the last time you or any of your ‘mates’ will talk about none-sense such as ‘ivory tower’ and the ‘real world’ versus academics.

    PS2: I am going on an extended blogging holliday.

  24. July 1st, 2006 at 18:10 | #24

    Apologies, Ernestine. I have known one other Ernestine and he was male. Please feel free to correct the comment as you see fit to correct for my mis-conception.
    .
    Kanga, I did miss your earlier question and thanks, Ernestine, for pointing it out.
    Page 6 and following (section 3) of the paper has a full discussion and I am worried I might do it a dis-service. I will try to answer anyway, I am sure others will correct any errors I make.
    p.19, “… one definition of “leisure� is as a characterization of technology, that is, how substitutable are time and goods in the production of the ultimate consumption commodity.�
    In this case they are trying to point out that technology gives us some options around our leisure. As an example, they use cooking, eating and watching TV. The maths, as usual, obscures some of the meaning, but what I think they are saying is that technology gives us options – we can substitute watching TV for cooking by using some technological innovation – microwaves, our cars to get takeaway food etc. What we cannot do it use technology to substitute time for watching TV – the time spent in a leisure activity is not substitutable using technology.

  25. July 12th, 2006 at 13:37 | #25

    Andrew (and Ernestine),

    Firstly my apologies for having dropped out.

    Secondly, I now see that you are correct. I had mistakenly thought that the thread “Penalty” entitled “The Servant Problem”.

    I stand by what I had written. A highly technical study, purportedly showing an increase in the amount of leisure time in the US since the 1960′s is no answer to the concerns of hundreds of thousands of Australian workers about the erosion in their standards of living. Even though you thought it would carry some traction, I somehow doubt if John Howard will be relying on this to get himself back into power in 2007.

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