Jobs, jobs, jobs . . . not!

In a recent meeting with a person who is pretty senior in the automotive industry he was telling me that certain things close to his heart (which had something to do with the government subsidising his business!) would be ‘good for jobs’. He’s a bright sensible guy and, unlike lots of them acknowledges that he knows that, in the absence of unusual circumstances, if the government had a billion dollars with which to promote industrial development, it could do a fair bit better than give it to the automotive industry.

When he said something would be ‘good for jobs’, I said “why do you want to create jobs. Haven’t we already got more than we can handle?” He immediately got what I was saying. The RBA have already said as much. Trying to slowly push down unemployment – already well below the figures that people had previously estimated the NAIRU or Non-Accelerating Inflation Rate of Unemployment at – the RBA reckons we need to ease up on all that job creation.  It’s specifically concerned that job growth is fuelling wage inflation. So if you hear that something will be good for jobs, just pay a bit closer attention.  Jobs on their own are no longer a blessing.
That doesn’t mean we shouldn’t keep trying to increase employment – there’s still lots to be done – to increase the employment of those that could benefit from being in the workforce, to get those who’s marginal productivity is below the current basic wage into the workforce and to move up the skill chain. To grow high skill jobs. But creating jobs for the sake of it?  No.

It reminds me of the politics of the late Menzies period – when there was genuine full employment, meaning that pretty much anyone could get a job if they wanted one.  And yet we kept coming up with new and ingenious ways of expanding protection – for instance in the car industry.

There’s a passage in Hansard where (I think) the Deputy Leader of the Opposition the Hon Edward Gough Whitlam asks Menzies about the automotive industry.  Whitlam was one of the few people who was critical of the industry for not exporting more.  Meanwhile protection was rising alarmingly in the industry as a result of the agitation for local content plans of Sir Charles McGrath, Chairman of Repco and also of the Victorian branch of the Liberal Party – from memory.  Menzies said words to the effect “Well I keep being invited to the opening of factories and if the Deputy Opposition Leader has a problem with that, I don’t”.  And so the merry go round of protection all round went round faster and faster.  As people took protected jobs – and so became unavailable for more productive jobs for employers in other industries who didn’t have access to the cancerous local content plans.

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8 Responses to Jobs, jobs, jobs . . . not!

  1. Jacques Chester says:

    That doesnt mean we shouldnt keep trying to increase employment – theres still lots to be done – to increase the employment of those that could benefit from being in the workforce, to get those whos marginal productivity is below the current basic wage into the workforce and to move up the skill chain. To grow high skill jobs.

    Or you can cut the minimum wage. About as popular as stabbing babies, I realise, but hard to argue with in economic terms.

  2. Fred Argy says:

    Nicholas, total joblessness (official and hidden) is closer to 7% than 4%. But it does not alter the validity of your point – that all our existing joblessness is frictional or structural in character and does not respond to increases in aggregate demand. Until governments address the structural labour market problem (whether through deregulation or active labour market programs – and you can guess which I prefer), the current level of joblessness is unsustainable.

    I know Harry Clarke ridicules the concept of the NAIRU but the authorities take it seriously. A senior Treasury officer, Steven Kennedy, has recently prepared a paper which, using various approaches, estimates the NAIRU at between 4.5 and 5% in official (headline) terms. This paper was written before the recent acceleration in inflation and I suspect he would now revise the figure upwards. Kennedy paper is on http://www.treasury.gov.au/contentitem.asp?NavId=008&ContentID=1328

    In such an economic environment it is silly to create new jobs through government intervention. If, as I fear, the economic environment deteriorates over the next 18 months time, I would rather see governments spend more on infrastructure than on industry protection.

  3. Spiros says:

    Ah, Repco, the very byword of the Liberal Party – proectionist axis.

    Thank goodness we now have a sensible industry minister in Kim Carr. No protectionist faux job creating rackets for him, no sirree.

  4. Jacques, we should indeed pursue a wage tax tradeoff for the lower paid. In fact that’s one of the ways our previous great and fearless leader might have spent his tax windfalls – sorry ‘our’ windfalls. One of the ways he might have turned the giveaway into a process of ‘buying’ a bit of reform.

  5. pablo says:

    ….’So when you hear that something will be good for jobs just pay a bit closer attention. Jobs on their own are no longer a blessing’.
    Exactly how I felt listening to Antony Albanisi talking about jobs, jobs, and more competition in fares in the Federal Government decision along with the US to increase flights across the Pacific. Remember this is the former shadow environment spokesman spruiking up a win win for everyone, except for the environment. I have a feeling Rudd’s spruikers on jobs might have to do a bit of radical re-think when Prof Garnaut reports. Downsizing might become vogue.

  6. PeterC says:

    Whitlam may well have been critical of the car industry in the 50s and 60s for not exporting more, but he and the Labor Party did not attack protection per se at that time.

    Rather later, Whitlam should be properly credited for the 25% tariff cut in 1974, even though it was undertaken more as a ‘crash-though’ on inflation rather than part of a properly-considered structural economic reform such as we had in the 80s and 90s.

    Bert Kelly was the only free-trader prepared to outspokenly buck the major parties on protectionism in the 50s and 60s.

  7. Spiros says:

    “the 25% tariff cut in 1974”

    It was 1973. Nicholas, wasn’t it your father’s idea?

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