Wednesday, July 25, 2018

Philip Soos - It's time to say goodbye to low wage growth

Since the Government is reluctant to do anything about the problem of low wage growth, Philip Soos suggests ways in which it can be solved.

Philip Soos, an Australian economist,  goes over a number of issues but these ones below stood out. 

Philip Soos says the ruling elite like mass immigration not because they are nice people who have a benevolent love for mankind, but because it massively boosts their profits. The neoliberal elite can go and live in the wealthy suburbs in houses that have acres of land, while the cities become pressure cookers. House prices are whacked up and so the young can't afford to buy a home anymore. But it's great for landlords and bankers. 


1. Implement a job guarantee program

The job guarantee (JG) is a full-employment policy designed to eliminate involuntary unemployment. Australia had similar policies during social democracy of the early post-war period to great effect — the unemployment rate remained very low. It was only abandoned due to the outbreak of inflation from the mid-1970s onwards.
Inflation has now declined to the point that institutions such as the RBA are advocating higher inflation from wage growth.
Under the JG, the government is the employer of last resort, providing jobs at the national and local levels to those who want them. Public bureaucrats target employment to areas of the economy where insufficient goods and services are currently produced due to existing arrangements.
Jobs are full-time and secure, generally attracting the minimum wage, including retaining some welfare payments. Employees are free to switch to another employer in the public or private sectors for a higher-paying job.
Recent estimates point to the output gap (the difference between theoretical and actual GDP) caused by unemployment at around $60bn annually, or 4% of GDP. The cost of the JG program would be around $22 billion (net), after accounting for higher income tax receipts, lower welfare spending and the abolition of the horribly fraudulent private “jobs provider” system. It would generate around 600,000 jobs and eliminate all involuntary and hidden unemployment, bringing down the unemployment rate to 2%.
While there are concerns that the JG would generate “workfare” or pointless jobs, this is hardly a reason to oppose the policy. The anthropologist David Graeber’s new book, Bullshit Jobs, demonstrates that many of these types of jobs already exist in the public, private and university sectors, at high levels of pay.

2. End the Extreme Immigration Policy

Population growth has ballooned since 2006, primarily through net immigration. Australia has had the highest average population growth rate in the OECD over the last decade, driving population growth far above the long-run average.
 Record immigration numbers are having a corrosive effect upon the public. It has clearly outstripped the ability of the labour market to absorb so many immigrants, as evidenced by the slight uptick in underutilisation during the one million “jobs boom”. Two-thirds of all new jobs have gone to immigrants.
Infrastructure is at breaking point, evidenced by rising traffic congestion and overloaded public transportation. Hospitals and schools are likewise overrun, while state governments continue their obsession with running budget surpluses. The outcome is a spiralling infrastructure deficit never to be dealt with in the foreseeable future. There is a concurrent housing crisis with no end in sight, adversely impacting low-income households the most.
It is easy to see why political elites are in favour of what should be termed “population quantitative easing” or PopQE for short: Boosting headline GDP growth while ignoring per capita measures, which have stalled over the last decade. Economic elites are using PopQE to drive down wage growth, boosting profits from expanding markets and increasing real estate demand.
PopQE has the signs of a policy fraud given there has been no public debate, all major political parties and industry organisations are in favour of it, with benefits reaped by the wealthy while costs are forced upon everyone else.
The business news site MacroBusiness has thoroughly documented the negative effects of PopQE. Allowing millions of immigrants into the country, far above historical norms, has created permanent slack in the labour market.
As a consequence, wage theft is at epidemic proportions. Countless investigations have uncovered mass underpayment of wages and benefits. It has gotten so bad that some businesses end up with negative wage costs — immigrants effectively pay employers not to rescind their visas.

Independent Australia

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