Australian Politics Forum - Unemployment Lifts To 12 Month High

Bam

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Re: Unemployment Lifts To 12 Month High
Reply #30 - Sep 20^th, 2019 at 2:36pm

Captain Nemo wrote on Sep 20^th, 2019 at 11:26am:

Yes, well ... near record employment growth, record participation rate ... trouble is that the population is growing faster than the employment growth ... so the pool of under/unemployed remains stubbornly high. Sad

Perhaps there is a case for reduced immigration after all? Huh

There is certainly a case for calling the current high levels of immigration into question.

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polite_gandalf

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Re: Unemployment Lifts To 12 Month High
Reply #31 - Sep 20^th, 2019 at 2:55pm

Bam wrote on Sep 20^th, 2019 at 2:33pm:

By listing 15 OECD countries that currently have unemployment below 4%, I have proven that calling 4% unemployment "full employment" is a lie.

It has indeed been proven thus. Yet even just a few years ago the prevailing wisdom amongst economists was that unemployment can't get below around 5% before inflation spirals out of control. This is because of the massive bargaining power employees get with an undersupply of available labour - causing prices across the board to increase. Switzerland (and others) have proven that it can actually go well below that 'floor' and not have any significant impact on inflation.

What I'm curious about though is why in Switzerland a very low unemployment rate has not translated in any noticeable increase in wages. I suspect it has something to do with the currency conversion - where all their trading neighbours use the Euro, whereas they are still using the Franc domestically. Exporters would be beholden to the going rates in Euros, while their costs are paid in the more expensive Franc. Thus profit margins are lower, leaving less opportunity for wage growth.

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Bam

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Re: Unemployment Lifts To 12 Month High
Reply #32 - Sep 20^th, 2019 at 3:32pm

polite_gandalf wrote on Sep 20^th, 2019 at 2:55pm:

Bam wrote on Sep 20^th, 2019 at 2:33pm:

By listing 15 OECD countries that currently have unemployment below 4%, I have proven that calling 4% unemployment "full employment" is a lie.

It has indeed been proven thus. Yet even just a few years ago the prevailing wisdom amongst economists was that unemployment can't get below around 5% before inflation spirals out of control. This is because of the massive bargaining power employees get with an undersupply of available labour - causing prices across the board to increase. Switzerland (and others) have proven that it can actually go well below that 'floor' and not have any significant impact on inflation.

What I'm curious about though is why in Switzerland a very low unemployment rate has not translated in any noticeable increase in wages. I suspect it has something to do with the currency conversion - where all their trading neighbours use the Euro, whereas they are still using the Franc domestically. Exporters would be beholden to the going rates in Euros, while their costs are paid in the more expensive Franc. Thus profit margins are lower, leaving less opportunity for wage growth.

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Even in Australia, there's plenty of evidence to refute it. When Australia had full employment, inflation did not spike. What caused inflation to break out in Australia in the 1970s was not low unemployment, but high fuel prices. Stagflation.

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polite_gandalf

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Re: Unemployment Lifts To 12 Month High
Reply #33 - Sep 20^th, 2019 at 3:43pm

Bam wrote on Sep 20^th, 2019 at 3:32pm:

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Well maybe unemployment has never got low enough for us to find out for sure. Maybe even at 2%, the "floor" is still holding. We don't really know what would happen if employers really did run out of job seekers. And that would involve cutting off the supply of foreign labour - a proposition that is pretty absurd in today's globalised world. Even if businesses are not allowed to import foreigners, they can always relocate their operations offshore and hire foreigners in their own country. Come to think of it, I suspect this is the reason why the "floor" is so much lower than previously assumed.

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crocodile

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Re: Unemployment Lifts To 12 Month High
Reply #34 - Sep 21^st, 2019 at 12:08am

Bam wrote on Sep 20^th, 2019 at 3:32pm:

polite_gandalf wrote on Sep 20^th, 2019 at 2:55pm:

Bam wrote on Sep 20^th, 2019 at 2:33pm:

By listing 15 OECD countries that currently have unemployment below 4%, I have proven that calling 4% unemployment "full employment" is a lie.

It has indeed been proven thus. Yet even just a few years ago the prevailing wisdom amongst economists was that unemployment can't get below around 5% before inflation spirals out of control. This is because of the massive bargaining power employees get with an undersupply of available labour - causing prices across the board to increase. Switzerland (and others) have proven that it can actually go well below that 'floor' and not have any significant impact on inflation.

What I'm curious about though is why in Switzerland a very low unemployment rate has not translated in any noticeable increase in wages. I suspect it has something to do with the currency conversion - where all their trading neighbours use the Euro, whereas they are still using the Franc domestically. Exporters would be beholden to the going rates in Euros, while their costs are paid in the more expensive Franc. Thus profit margins are lower, leaving less opportunity for wage growth.

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

Complete and utter rubbish. It is a well known fact that has been shown to be true ever since the work of Phillips in the '50s. I has been refined over time but still stands.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Where are individual deciles being mentioned. Making Shitt up again

Even in Australia, there's plenty of evidence to refute it. When Australia had full employment, inflation did not spike. What caused inflation to break out in Australia in the 1970s was not low unemployment, but high fuel prices. Stagflation.

Demonstrating your lack of understanding yet again. You have thing arse a peeky. Just because low unemployment eventually raises inflation does not mean that the opposite is true. That is, high unemployment doesn't always guarantee low inflation. Buy a textbook.

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Very funny Scotty, now beam down my clothes.

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crocodile

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Re: Unemployment Lifts To 12 Month High
Reply #35 - Sep 21^st, 2019 at 12:19am

polite_gandalf wrote on Sep 20^th, 2019 at 3:43pm:

Bam wrote on Sep 20^th, 2019 at 3:32pm:

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Well maybe unemployment has never got low enough for us to find out for sure. Maybe even at 2%, the "floor" is still holding. We don't really know what would happen if employers really did run out of job seekers. And that would involve cutting off the supply of foreign labour - a proposition that is pretty absurd in today's globalised world. Even if businesses are not allowed to import foreigners, they can always relocate their operations offshore and hire foreigners in their own country. Come to think of it, I suspect this is the reason why the "floor" is so much lower than previously assumed.

As explained before, it isn't that simple. It is not possible to compare unemployment figures across different and dissimilar economies. They all have their individual nuances. In the case of the Swiss and their low unemployment numbers one only has to examine their recent history.
1. They are still recovering from a period of deflation where inflation actually turns negative.
2. There rate of productivity is appallingly low. Lower than ours and for longer. Hits the nail on the head re wages growth. Low productivity typically requires more labour input for the same output but at a lower pay rate as the output needs to be distributed amongst more workers.
3. They have a strongly positive current account meaning that they are exporters of goods rather than capital.

Everything except productivity pretty will the polar opposite of what we have here.

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Very funny Scotty, now beam down my clothes.

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Bam

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Re: Unemployment Lifts To 12 Month High
Reply #36 - Sep 21^st, 2019 at 9:09am

polite_gandalf wrote on Sep 20^th, 2019 at 2:55pm:

Bam wrote on Sep 20^th, 2019 at 2:33pm:

By listing 15 OECD countries that currently have unemployment below 4%, I have proven that calling 4% unemployment "full employment" is a lie.

It has indeed been proven thus. Yet even just a few years ago the prevailing wisdom amongst economists was that unemployment can't get below around 5% before inflation spirals out of control. This is because of the massive bargaining power employees get with an undersupply of available labour - causing prices across the board to increase. Switzerland (and others) have proven that it can actually go well below that 'floor' and not have any significant impact on inflation.

What I'm curious about though is why in Switzerland a very low unemployment rate has not translated in any noticeable increase in wages. I suspect it has something to do with the currency conversion - where all their trading neighbours use the Euro, whereas they are still using the Franc domestically. Exporters would be beholden to the going rates in Euros, while their costs are paid in the more expensive Franc. Thus profit margins are lower, leaving less opportunity for wage growth.

Switzerland has inflation at 0.3%. No real need for wages growth if inflation is also low. You've apparently fallen for the croc's cherrypick.

That also destroys the argument that high unemployment is needed to keep inflation low. That's the non-accelerating rate of unemployment (NAIRU). Switzerland: 2.1% unemployment, 0.3% inflation. If NAIRU was correct, inflation would be high in Switzerland. It isn't, therefore NAIRU must be wrong. QED.

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Bam

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Re: Unemployment Lifts To 12 Month High
Reply #37 - Sep 21^st, 2019 at 9:21am

crocodile wrote on Sep 21^st, 2019 at 12:19am:

polite_gandalf wrote on Sep 20^th, 2019 at 3:43pm:

Bam wrote on Sep 20^th, 2019 at 3:32pm:

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Well maybe unemployment has never got low enough for us to find out for sure. Maybe even at 2%, the "floor" is still holding. We don't really know what would happen if employers really did run out of job seekers. And that would involve cutting off the supply of foreign labour - a proposition that is pretty absurd in today's globalised world. Even if businesses are not allowed to import foreigners, they can always relocate their operations offshore and hire foreigners in their own country. Come to think of it, I suspect this is the reason why the "floor" is so much lower than previously assumed.

As explained before, it isn't that simple. It is not possible to compare unemployment figures across different and dissimilar economies. They all have their individual nuances. In the case of the Swiss and their low unemployment numbers one only has to examine their recent history.
1. They are still recovering from a period of deflation where inflation actually turns negative.
2. There rate of productivity is appallingly low. Lower than ours and for longer. Hits the nail on the head re wages growth. Low productivity typically requires more labour input for the same output but at a lower pay rate as the output needs to be distributed amongst more workers.
3. They have a strongly positive current account meaning that they are exporters of goods rather than capital.

Everything except productivity pretty will the polar opposite of what we have here.

Yet amongst those alleged problems, unemployment in Switzerland has not been above 5.7% for decades. Unemployment in Australia has been above 5.7% for about half of the time in the last 40 years.

Governments in Australia from both sides of politics actually boast if they get unemployment below about 5.7% (often by comparing it to their political opponents). It's nothing to be proud of. It's shameful that Australia has chronic high unemployment. Is 4.0% really the best we can do?

Part of the problem is the RBA's slavish adherence to NAIRU and neoliberal doctrine. NAIRU is proven false, so the RBA should let unemployment fall below 2%. Inflation isn't going to spiral out of control.

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Bam

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Re: Unemployment Lifts To 12 Month High
Reply #38 - Sep 21^st, 2019 at 9:25am

polite_gandalf wrote on Sep 20^th, 2019 at 3:43pm:

Bam wrote on Sep 20^th, 2019 at 3:32pm:

It's worse than that. It has never been demonstrated that low unemployment causes high inflation. It is simply an article of faith postulated by neoliberals.

It is a ludicrous proposition. How can incomes in the bottom income decile exert so much price pressure on the other nine?

Well maybe unemployment has never got low enough for us to find out for sure. Maybe even at 2%, the "floor" is still holding. We don't really know what would happen if employers really did run out of job seekers. And that would involve cutting off the supply of foreign labour - a proposition that is pretty absurd in today's globalised world. Even if businesses are not allowed to import foreigners, they can always relocate their operations offshore and hire foreigners in their own country. Come to think of it, I suspect this is the reason why the "floor" is so much lower than previously assumed.

We did find out. 1953 to 1972: average unemployment in Australia was 1.3%, average inflation was 3.0%. That was real full employment.

Full employment was only killed off in Australia when the oil shock of 1973 brought stagflation to the Australian economy, and then the RBA bought the lie of NAIRU.

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Grappler Truth Teller Feller Gold Member Online Australian Politics Posts: 80331 Proud pre-1850's NO Voter Gender:	Re: Unemployment Lifts To 12 Month High Reply #39 - Sep 21^st, 2019 at 11:56am Damn - and just before school's out .... of course, a few of the kids will cop a Macca's job for a few hours a week.... but that will die off once the summer season is gone..
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juliar

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Re: Unemployment Lifts To 12 Month High
Reply #40 - Sep 23^rd, 2019 at 9:20am

A quite interesting description of un/employment.

Some quite good Comments after article.

Unemployment is low, so why aren’t wages rising?
Euan Black 9:50pm, Sep 20, 2019 Updated: 9:56pm, Sep 20

The low unemployment rate masks deeper problems in the labour market. Photo: Getty

Unemployment may be trending upwards, but it’s still at historically low levels.

At 5.3 per cent, it’s only a fraction above what central bankers and economists consider “full employment” – the rate at which wages start to soar.

Despite this, wages lifted just 2.3 per cent in the 12 months to 30 June 2019, well below the historical average of 3-4 per cent.

According to BIS Oxford Economics chief economist Sarah Hunter, Australia’s sluggish wages growth has a lot to do with the casualisation of work.

For while ABS figures show 34,700 new jobs were added to the economy in August, a closer look reveals 15,500 full-time jobs were replaced with 50,200 part-time ones.

Read the full story PLUS the good relevant COMMENTS here.

https://thenewdaily.com.au/money/finance-news/2019/09/20/low-unemployment-low-wa...

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