Recent trends in labour market

In December 2009, the official ABS Labour Price Index was running at about 3% per annum. This represents a continued trend decline in private sector wage rates (although less so for the public sector).

Wage rates refect the subdued labour market. In September 2009, about 26% of part-time workers wanted to work more hours, compared with 23% in September 2008. And the mean preferred number of extra hours per week for under-employed part-time workers was up to 14.1 hours, compared with 13.4 hours in September 2008. The part-time proportion may have increased further in recent months.

In short, we are still left with plenty of spare capacity. The recent decline in unemployment rate is a bad measure of the underlying rate of under-utilisation (number of hours worked). The economy is likely to achieve a trend growth rate of below 3% in the first half of this year. Stronger private recovery is likely to be offset by the lessening impact of fiscal and monetary policy contraction. There is no immediate need for further interest rate increases until our economy starts to record 3% to 3.5% increases.

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James Farrell
James Farrell
11 years ago

…a continued trend decline in private sector wage rates.

Fred, you can’t mean that real wages are actually declining, so you must mean there’s been a decline in either either the growth rate of nominal wages or a decline in real unit labour costs. Either of these is consistent with your argument, but I just thought I’d clarify.

It’s also worth pointing out that there was no real sign of a wage break-out before the slump either. Real wages were barely growiung faster than productivity even eigteen months ago at the low-tide mark of the unemployment rate.

Don Arthur
Don Arthur
11 years ago

Fred – Is it possible to run into skill shortages while at the same time underemployment remains high?

I’m wondering if increases in production could be limited — not by shortages of labour in general — but by shortages of labour with particular skills.

You’d have wages and hours of work increasing for some workers while demand was stagnant for others.

When I look at a time series of the proportion of men aged 25 to 44 in full time work I see a downward trend (1978 to 2009). Every recession sees a sharp decline and recoveries never lift the proportion back to where it was.

I’ve also noticed that underemployment is much higher for prime aged men than it is for women.

I suspect there’s a long term increase in the proportion of prime aged men who want but can’t find full-time jobs. And I wonder whether this has something to do with technological change.

We seem to get so absorbed in the business cycle that we don’t see the long term trends.

Corin
Corin
11 years ago

I think james farrell’s point is right. It is possible to have ‘bottlenecks’ in skills formation and also have more part-time workers. Skills mismatch will almost always be inevitable in an economy where resource allocation is more fluid and technology change is more rapid. I guess this is a good argument for university education as it is broad enough to create diverse skills (hence giving people a capacity to move sideways) and defined enough (depending on the course) to be in demand. Still I reckon plumbing would be bonzer (as long as I could put up with the smells) too.

Gummo Trotsky
11 years ago

When I look at a time series of the proportion of men aged 25 to 44 in full time work I see a downward trend (1978 to 2009). Every recession sees a sharp decline and recoveries never lift the proportion back to where it was.

Don – I’d be interested to see that graph. Off-hand I’d say it has something to do with the cult of youth too.

Fred Argy
Fred Argy
11 years ago

James, you are right; I meant to say the decline has been in rate of growth.

Don, I too would like to see the long run trend please. Aggregate monthly hours worked, especially in per capita terms, has changed its direction over the ten year stretch from January 2000 to January 2010, with the downward trend occuring since January 2008 but nothing occuring in the interim. Something cyclical is happening as well as structural.

Don Arthur
Don Arthur
11 years ago

Gummo & Fred – What I’ve been graphing is the full-time employment to civilian population ratio. I do it by gender and age. The data comes from 6291.0.55.001 – Labour Force, Australia, Detailed.

The RBA’s Sarah Babb and Natalie Parlett noted the pattern of declining male full-time employment in 2002. They wrote:

The upward trend in the aggregate employment to population ratio masks quite divergent trends in the ratios for males and females and for those in full-time and part-time work. In general, full-time employment to population ratios are much higher for males than for females. Graph 2 also shows that the full-time employment to population ratio of males has decreased over the past two decades particularly in recessions but it has risen for females.

If you look at their graph 2, you’ll see what I’m talking about. I’m not interested in the raw numbers of men in full-time employment, I’m interested in the proportion of the male population.

The proportion of men in full-time employment falls in recessions and never recovers to its previous level. It’s been ratcheting downwards.

If you suspect that the effect is a product of participation in education or about early retirement, then download the ABS data to graph it by age group. You’ll see the pattern for 25 to 34 year olds.

If you suspect it’s about men staying home to share care of children then graph it by marital status.

If you suspect that it’ about ‘downshifting’ then get the ABS data on underemployment and look at the high proportion of part-time employed men who report wanting to work more hours.

Am I making a mistake here?

If not, how should we explain what’s going on? And is the effect impacting some groups of women too but being masked by another simultaneous trend, increasing female participation in the labour force?

conrad
conrad
11 years ago

Don,

I guess that’s real no suprise — if you look at educational outcomes in the last decade or two, females are now far ahead of males. It would therefore be suprising if females wern’t catching up to males. No doubt some of the main growth industries are less male oriented also, and some are not especially cyclical either (e.g., health) which is good recession protection. My bet is that this trend will continue into the forseeable future.

Sorry to side track the discussion, but it’s an interesting sociological phenomena also — as women catch up to men in terms of social power and earnings many of the so called “biological things” turn out to be cultural. So now we have “cougars” and so on, so instead of men trying to partner down and women up, it’s in reverse. So there goes 50 years of evolutionary psychology.

James Farrell
James Farrell
11 years ago

The only real mystery here is what’s the story with the ‘prime working age’ males, who aren’t studying and can’t be said to have retired early. According to the RBA paper they are victims of industrial decline, but the question is how they survive without working even part time. Some would be house husbands. If it’s true that unmarried men are also well represented in this group, the answer might be disability pensions.

conrad
conrad
11 years ago

“According to the RBA paper they are victims of industrial decline”

I think that’s entirely biased. They’re victims of themselves. No one stops older males doing jobs in growth areas like health-care, services etc. , and no one stops younger ones from going to uni and completing their degrees any more than they do females.

Don Arthur
Don Arthur
11 years ago

… the question is how they survive without working even part time.

James – I think you’re right. Of those who are not in the labour force, DSP would be a major source of income.

But there are also men who depend on support from other family members, men who rely on other government payments (eg carers payment, Newstart allowance), men who rely on savings (usually for short periods) and some who work in the informal economy.

As you say, some ‘economically inactive’ men would be ‘house husbands’, some would be taking a break between jobs, some would be caring for a person who is aged, sick or disabled, some would be sick or injured themselves and are planning to return to work when they recover. A very small proportion would be supporting themselves by working in the informal economy (and hence are not economically inactive at all).

Ralf Lattimore from the Productivity Commission has an excellent paper on men outside the labour force which has data on income and reasons for being outside the labour force.

http://www.pc.gov.au/__data/assets/pdf_file/0018/60435/mennotatwork.pdf