The downside of lower unemployment

In the middle of the ‘should Morrison go’ or should he stay brouhaha a couple of weeks ago, there was some interesting news to think about — Australia’s unemployment rate is likely to be under 5% for some years to come.

Economists will tell you that there is a natural unemployment rate of around 5% because people may be officially unemployed while changing jobs, studying, looking for their first job and so on. So an expected rate of under that for a period of time is something worth discussing for a variety of reasons.

It means that there should be, in the words of politicians and economists, some upward pressure on wages and conditions. If there are only a certain number of candlemakers in Australia, how do you entice a candlemaker to leave their current job and commence working for you? The conventional logic is you make them a better offer. The offer could be employment closer to the candlemaker’s home, better quality materials to work with, better facilities to work in, more pay or some combination of those or other ‘inducements’. It’s not unheard of in the current environment for companies that employ a number of tradespeople (such as electricians, plumbers and the like) to offer ‘sign on’ bonuses paid retrospectively after a few months or years of employment.

It means that people who ordinarily wouldn’t get a look in get a chance to demonstrate they are in fact capable and would be valuable employees. Frequently, the employee repays the reluctant trust shown in them by being a far better employee that the ‘usual’ group of people that are targeted. A frequent outcome from this is that the employer realises that they have been ignoring a valuable group of people as potential employees for a considerable period of time.

It means that more people are contributing to the costs of running our society, better known as paying taxes. In addition there are less people receiving unemployment and related benefits, increasing the self-worth of individuals who are no longer faced with the stigma of compliance with the rules around Jobseeker and related payments. ‘Contributing to society’ is also good for an individual’s mental health, especially after being told for years they are not good enough to hold a job or don’t deserve handouts.

The Albanese Government has convened a Jobs and Skills Summit as clearly a long-term shortage of employees is not in anyone’s best interests. While a small proportion of employers will falsely claim they cannot afford increased wages or skills training for staff, the claim is genuine for a far larger number of small and large businesses. The Coaltiion’s practice of plugging skills gaps by importing people to do the work certainly put downward pressure on wages — however Crikey reported recently the Grattan Institute found
For a start, increasing permanent skilled migration won’t have a major effect for some time, because “three quarters of permanent skilled visas are allocated to people already here on a temporary visa”. It would just mean fewer temporary workers leave — undoubtedly a good thing at this point, but unlikely to deliver a major increase in skilled migrants.
The report also discussed that increasing migration adds to demand for labour and labour supply, won’t fix worker shortages and put more pressure on the housing market, health, education and all the other services that are having problems meeting current demand.

There are also issues around economic growth — those whose wages are not increasing in an environment when prices are increasing are effectively going backwards financially and accordingly will reduce their expenditure, harming the economy. The alternative situation whereby employers genuinely can’t afford to keep the lights on or the phones connected is also to be avoided.

There is no real benefit to us as a nation if all the power that surrounds employment is held by either unions or employers — there has to be some give and take. There are some from both sides of the discussion that can’t see the figurative wood for the trees — the government will have to walk a fine line to protect the interests of all.

Hopefully the Jobs and Skills Summit does achieve the objective of an equitable balance in the employee/employer balance, leading to livable wages, reasonable access to training for all to ensure there are no skills shortages and the ability for businesses to make sufficient profit to ensure long term viability.

What do you think?

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