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After the car industry

December 13th, 2013

With the closure of GMH locked in, it seems virtually certain that Toyota will follow the same path in the end, along with most of the supporting components industry. It’s possible that a well-designed policy, combined with a sustained depreciation of the $A, could keep the industry alive (the fact that it survived the end of the high tariff era was largely due to the Button Plan in the 1980s), but this is the Abbott government we’re talking about, so it seems unlikely.

The impending end of the car industry constitutes the effective end of large scale manufacturing in Australia, at least as the term is ordinarily understood. The remaining manufacturing sector consists mainly of basic processing of agricultural and mineral products for export, along with food and beverages for the domestic market. Elaborately transformed manufactures, on which such high hopes were pinned in the 1980s and 1990s have been declining for years, and will be confined to niche markets once we stop exporting automotive products.

An immediate policy implication of the end of car production is that it’s time to drop a bunch of policies whose rationale was to support the domestic industry. The most obvious candidate is the FBT concession, just reinstated by the Abbott government. But there’s also the maintenance of some of the worlds weakest fuel efficiency standards, driven by the desire not to tilt the playing field against Falcons and Commodores. More generally, a whole range of pro-car policies will need to be reassessed, given that they increase our dependence on imports and therefore our vulnerability to terms of trade shocks.

There are direct implications for employment policy, arising from the job losses that are about to take place, and longer term implications for education and training. More on these soon, I hope.

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  1. TerjeP
    December 16th, 2013 at 15:47 | #1

    The misery of ending subsidies should not be blamed
    on those that end them but on those that enact them in the first place. I am sympathetic to the transition pain for those exiting the industry but keeping the industry afloat with subsidies just draws more workers into the scheme. Continuing an industry that should not exist by pumping in subsidies is in my view reckless.

  2. kevin1
    December 16th, 2013 at 16:49 | #2

    @TerjeP

    Many of these discussions have the feel of a palliative care ward. Should we up the morphine dose, when do we turn off the life support, we need to talk to the patient about their preferences for ending their life. It’s all workers as victims, losers, rejects – not the best frame of mind to confront a threatening future.

    Bill Mitchell estimates unemployment, underemployment and hidden unemployment (such as discouraged workers) as around 13%. http://bilbo.economicoutlook.net/blog/?p=22954 As SA premier Weatherill came out the meeting with Abbott the other day saying ““This is a government that was calling for this decision to be made. You would have thought there would be a plan, but there is no plan. The sense of urgency is completely lacking.” Vic Premier Napthine estimates 13,000 workers will lose their jobs.

    Talking of youth unemployment, Mitchell is critical of Labor’s approach of “endless training initiatives (supply-side approach) without significant benefits. The research shows overwhelmingly that job-specific skills development should be done within a paid-work environment.” For the older group now to be made redundant, rather than applying half-hearted “palliative care”, tea and sympathy, this unutilised labour needs to be reframed as an available productive asset which reduces potential GDP if not used. As the manufacturing sector shrinks, how can these skills be redirected rather than abandoned for speculative attempts to develop new skills? Are there public projects which can use these thousands of professional, skilled and semi-skilled workers?

  3. December 16th, 2013 at 22:11 | #3

    We could look to the future and invest in driverless electric cars. The technology will be very exciting. Great opportunities for smart young Australians to get involved with something really challenging without leaving home.

    Taking the money out of salary packaging and putting it into subsidies for an emerging industry – lets face it, its not something the Libs would be up for.

  4. paul walter
    December 17th, 2013 at 02:35 | #4

    I agree with Quiggin as to the lack of imagination at best of US oriented local maufacturers, or duplicity, in not adjusting to a small car world rather than relying on Australian auto consumer force of habit for sales.
    This unimaginative slovenliness, along with ultimate decison making now centred off-shore might be the real reason for thousands of workers losing their livelihoods and this country losing a whole skills base.

  5. TerjeP
    December 17th, 2013 at 03:54 | #5

    Kevin1 – lots of people in Australia routinely lose their job and need to adapt. Some say 7000 mining jobs in Queensland have been lost in the last year alone and nobody is suggesting we subsidies mining to minimise hardship to workers. It will be difficult for many of the Holden workers but they have four years to prepare.

  6. John Quiggin
    December 17th, 2013 at 05:08 | #6

    @TerjeP

    Actually, the Qld LNP government is proposing precisely this, and of course the FBT decision was advocated as preventing the loss of jobs in the salary packaging industry.

  7. Ikonoclast
    December 17th, 2013 at 08:00 | #7

    @kevin1

    Bill Mitchell has the right end of the stick in most respects. But tell that to more orthodox economists and they won’t believe it. It is clear that the current approach to macroeconomics (neoliberal, monetarist, supply-side and austerity-type) has failed working class people. Labour under-utilisation of 13% is a total failure. Youth unemployment of over 20% is a total failure.

    Clearly, if private enterprise fails in this regard (market failure), the state ought to step in with a job guarantee (JG). The JG can set a minimum wage and government be the employer of last resort as it were. Anyone who says a JG is un-fundable does not understand government budgeting nor basic macro-economics. I’ll post support for this last statement if people query it. It does not even require an MMT argument to support it.

  8. kevin1
    December 17th, 2013 at 08:56 | #8

    @TerjeP

    Well yes, if carworkers got mining workers’ wages (ABS says 63% of fulltime adult non-managers got >$2000 per week last year) then I’m sure the conversation would be quite different.

    You have questioned why “smoothing the transition” is important, proposing a “natural level of smoothness” to transition for these workers; natural is obviously a synonym for hands-off without reference to the empirical situation ie. ideology. I’m more interested in seeing if history can support intervention as beneficial: eg. the support scheme introduced when BHP closed down Newcastle in 1999.

    According to Alicia Payne (@ Crikey, 30 May 2013 “Jobs lost, but skills gained: lessons for Ford from Steel City”), the 1800 affected were males, average age 44, with average length of service of 21 years. Her paper says “Pathways was a personalised and flexible retraining program that supported employees to train in almost any area of their choice if it was likely to help them find employment. The program was not based on financial constraints or a set training program. Instead, each employee was interviewed about his or her aspirations in a post-steelworks world. BHP would cover whatever was required, including university or TAFE fees, textbooks and flexible work arrangements around study. The scheme gave rise to a wide range of individually chosen career changes – everything from nursing to flying to public relations. In several instances, employers experiencing a skills shortage approached Pathways and offered guaranteed employment. The match between the experience of the employees and the shortage of technology teachers in NSW sparked collaboration between BHP, the NSW Department of Education and the University of Newcastle.” Using existing skills in new ways, eg. the tech teacher recruitment, was intrinsic. Whether the unions will extract something similar from GM (I think we can drop the veil of the H now) is unknown but unemployment in the Hunter region is now about 3% I think. There are alternative views about the program’s success: Bill Mitchell was interviewed on ABC Radio the other day talking about small business failure rates and the shift of breadwinner roles to women who took on more than one paid job; it may be that mining expansion saved the day.

    Funny that we are in an age when soft rather than hard is ascendant: intellectual capital in skills and knowledge, many companies have intellectual property as their main asset, soft skills in workplace relationships and international diplomacy are prized. But, as pointed out by submission 67 to the current PC inquiry from a professional engineer, what does the gearbox design engineer, the robotic welding engineer, engine combustion engineer, the fuel systems engineer, the production planning engineer, the car body designers, or any of their associated support drafters do now? Specialised automotive employees may find they have more to lose than most.

    Keeping up morale is important and I suspect many people affected look for some empathy and committment from the political leadership as representing validation from society, but so far Abbott has shown that wary, disengaged, scripted style we have come to expect. If he wants the people affected to be independent and resilient in the future, not dependent on the state and socially disaffected, he needs to snap out of it fast. As said by others, this mob have a lot of political experience, but it doesn’t show. (I can’t resist adding that some have too little experience outside politics and that shows too – Christopher Pyne’s 2 years as a solicitor between uni and parliament!)

  9. December 17th, 2013 at 10:34 | #9

    kevin1, did Pyne actually have a real job at same stage? You learn something every day!

  10. TerjeP
    December 17th, 2013 at 14:58 | #10

    Actually, the Qld LNP government is proposing precisely this, and of course the FBT decision was advocated as preventing the loss of jobs in the salary packaging industry.

    Fair point.

    On a separate not what will the unions that these workers paid their dues to for many years be doing to assist with retraining and job placement. I presume they will be stumping up to assist.

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