We have argued for a long time that the so-called collapse of the Phillips Curve, which shows that unemployment and inflation are (as is intuitively obvious) in inverse proportion, is really no collapse at all! The reality is that the reported unemployment rates simply hide the under-employment that suppresses wage-cost push - and therefore keeps inflation low. It takes very little thought to work this out - but it seems our bourgeois economists are having difficulty seeing the blindingly obvious. Anyhow, below are two stories pointing these pellucid matters out. Of course, as Western workers rebel and re-work our nation-states in more confrontational ways, the Han Chinese Rats (whom we haven't left out of the equation) will find that ANGRY WESTERNERS WILL DESTROY THEIR CHINA DREAM AND TURN IT INTO THE WORST POSSIBLE NIGHTMARE.
The people with the most to fear, of course, are the Han Chinese Diaspora - those living outside of Rat land, who will soon feel the full impact of our anger! To them I say, Leave the West before it's too late!
The people with the most to fear, of course, are the Han Chinese Diaspora - those living outside of Rat land, who will soon feel the full impact of our anger! To them I say, Leave the West before it's too late!
This week the Governor of the Reserve Bank,
Philip Lowe, made it known that the rate of interest on overnight loans between
banks is about to be lowered by means of his minions intervening in the market,
something they may have forgotten how to do, it’s been so long.
The gamblers who comprise the futures
market had arrived at that conclusion a while ago, so futures contracts are
currently priced for at least two, perhaps three, rate cuts of 25 basis points
each in the months ahead.
APRA has joined in the anxiety-fest by
freeing banks to use reality in assessing their customers’ ability to repay, as
opposed to a fictitious 7 per cent deemed mortgage rate.
Second, the RBA is being forced into it by
fiscal tightening and wants to be seen to be doing something while waiting for
the government to come to its senses and respond to its pleas to loosen fiscal
policy.
And third, the economists in charge of the
central bank have acknowledged that they don’t understand economics any more,
or at least the way it operates now. And it seems to me the reason that plot
has been lost is that they’re looking the wrong way: the problem these days is
underemployment not unemployment.
It used to be thought that at least 5 per
cent of the workforce — about 700,000 souls at the moment — had to be out of
work for the average level of annual price rises to be kept to 3 per cent or
less. This has always been the central bank’s main project: to ensure that
enough people were unemployed and without any money, so that the people who
have money were not robbed by inflation.
They normally achieved this by artificially
lifting the cost of debt capital for both businesses and households to the
point where staff levels had to be cut for firms to stay viable.
But right now there are, indeed, 744,800
people without a job — more than 5 per cent — yet the rate of inflation is not
much more than 1.5 per cent, half the level at which alarm bells go off, and
well below the level decreed to be the minimum level of inflation required for
a happy society (2 per cent).
As the governor pronounced in this week’s
speech: “My judgment of the accumulating evidence is that the Australian
economy can support an unemployment rate of below 5 per cent without raising
inflation concerns.”
Oh? How long might this have been going on?
How long, to be specific, might another 100,000 or even 200,000 people have
been allowed to get a job if the RBA had been a bit less cautious and a bit
less stuck in the past?
Better late than never, we suppose. But
underemployment is where it’s at, and that’s much bigger than unemployment —
currently 8.3 per cent, on top of the unemployment rate of 5.2 per cent.
That is, while 744,800 people can’t find
work at all, another million or so can’t get enough work. And underemployment
is arguably more insidious than unemployment because you can’t get the dole,
and you are at the mercy of the rosters.
In total, about 1.8 million people are
“under-utilised”, to use the supply-side jargon, or 13.5 per cent of the
workforce. In non-jargon, these people are struggling to make ends meet,
delivering Uber Eats for peanuts, trying to wrangle an extra shift or two from
the czar of the roster.
Thirty years ago, when economics worked
properly, underemployment was minimal, a fraction of unemployment. Now it’s the
other way around and “under” is now the greater problem than “un”. It is also
the main reason wages growth, and therefore inflation, is persistently low.
As a chart in the governor’s speech this
week showed, while unemployment has fallen from 6.4 to 5 per cent since 2014,
underemployment has barely come down at all — from 8.4 to 8.3 per cent.
But the words in that speech, and in the
minutes, and monetary policy in general, remains steadfastly focused on
unemployment, not “under”.
This is not just a matter of semantics, but
part of the fundamental change that’s happened in the nature of work, aka the
gig economy.
Employment is no longer binary, where
you’re either employed or not. Everyone can get a few shifts delivering pizzas,
or serving coffee, and that means they’re employed according to the ABS
definition of working for at least one hour a week, but they’re not really
employed, not in the way they need, and certainly not in the way that would
result in higher wages and inflation in the macro economy.
Economics has changed but economists and
central bankers have not. Will one or two rate cuts get underemployment down,
and wages and prices up? No, but it will have to do til something else comes
along.
That something else must be fiscal policy,
specifically tax cuts.
Elsewhere in his speech this week, Dr Lowe
pointed out that “over the past year, tax paid by households increased at a
much faster rate than did income; almost 10 per cent, compared with 3¼ per cent
— that is a big difference and it is unusual”.
In other words, the disconnect between
employment, wages and inflation is partly due to the fact that the government
has been suppressing household disposable incomes by stealthily increasing
taxes via bracket creep.
The gig is up: America’s booming economy is built on
hollow promises
Contract
workers prop up big earners but under Trump’s anti-labor administration are
ruthlessly exploited themselves
Sun 2 Jun 2019 06.00 BSTLast
modified on Sun 2 Jun 2019 06.01 BST
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Uber just
filed its first quarterly report as a publicly traded company. Although it lost
$1bn, investors may still do well because the losses appear to be declining.
Uber drivers, on the
other hand, aren’t doing well. According to a recent
study, about half of New York’s Uber drivers are supporting families with
children, yet 40% depend on Medicaid and another 18% on food stamps.
It’s similar elsewhere in
the new American economy. Last week, the New York Times reported that fewer than half of Google
workers are full-time employees. Most are temps and contractors receiving a
fraction of the wages and benefits of full-time Googlers, with no job security.
Across America, the
fastest-growing category of new jobs is gig work – contract, part-time, temp,
self-employed and freelance. And a growing number of people work for staffing
firms that find them gig jobs.
The standard economic measures – unemployment and income – look
better than Americans feel
Estimates vary but it’s
safe to say almost a quarter of American workers are now gig workers. Which helps
explain why the standard economic measures – unemployment and income – look
better than Americans feel.
The jobs problem today
isn’t just stagnant wages. It’s also uncertain incomes. A downturn in demand,
change in consumer preferences, or a personal injury or sickness, can cause
future paychecks to disappear. Yet nearly 80% of Americans live paycheck to
paycheck.
According to polls, about
a quarter of American workers worry they won’t be earning enough in the future.
That’s up from 15% a decade ago. Such fears are fueling working-class
grievances in America, and presumably elsewhere around world where steady jobs
are vanishing.
Gig work is also erasing
85 years of hard-won labor protections.
At the rate gig work is
growing, future generations won’t have a minimum wage, unemployment insurance,
worker’s compensation for injuries, employer-provided social security,
overtime, family and medical leave, disability insurance, or the right to form
unions and collectively bargain.
Why is this happening?
Because it’s so profitable for corporations to use gig workers instead of
full-time employees.
Gig workers are about 30%
cheaper because companies pay them only when they need them, and don’t have to
spend on the above-mentioned labor protections.
Increasingly, businesses
need only a small pool of “talent” anchored in the enterprise – innovators and
strategists responsible for the firm’s competitive strength.
Other workers are
becoming fungible, sought only for reliability and low cost. So, in effect,
economic risks are shifting to them.
It’s a great deal for
companies like Uber and Google.
They set workers’ rates, terms, and working conditions, while at the same time
treating them like arms-length contractors.
California is countering Trump on this, as on other issues
But for many workers it
amounts to wage theft.
If America still had a
Department of Labor, it would be setting national standards to stop this.
Yet Trump’s Anti-Labor
Department is heading in opposite direction. It recently proposed a rule making
it easier for big corporations to outsource work to temp and staffing firms,
and escape liability if those contracting firms violate the law, such as not
paying workers for jobs completed.
On the other hand,
California is countering Trump on this, as on other issues.
Last Wednesday, the California assembly passed legislation codifying
an important California supreme court decision: in order for companies to treat
workers as independent contractors, the workers must be free from company
control, doing work that’s not central to the company’s business, and have an
independent business in that trade.
(The bill is not yet law.
It still has to pass the California Senate and be signed by the governor. And
businesses are seeking a long list of exemptions – including ride-share drivers
and many of high-tech’s contract workers.)
Whatever national rule
eventually emerges for defining gig workers, they’ll need a different system of
social insurance than was the case when steady full-time employment was the
norm.
For example, they need
income insurance rather than unemployment insurance. One model: If someone’s
monthly income dips below their average monthly income from all jobs over the
preceding five years, they automatically receive half the difference for up to
a year.
They’ll also need a
guaranteed minimum basic income – a subsistence-level cushion against earnings
downturns. And universal health insurance and more generous social security, to
make up for the unpredictability of work.
All of this should be
financed by higher corporate taxes, ideally in proportion to a corporation’s
use of gig workers.
Gig work is making
capitalism harsher. Unless government defines legitimate gig work more narrowly
and provides stronger safety nets for gig workers, gig capitalism cannot
endure.
- Robert
Reich, a former US secretary of labor, is professor of public policy at
the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. He is also a columnist
for Guardian US
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