employment

Where are all the jobs?

Published by Anonymous (not verified) on Tue, 16/01/2018 - 7:18am in

Tags 

employment, Jobs

We hear a lot about the growth of jobs in Australia’s cities, but in this article, Keenan shows that’s only part of the story.

Presenting a more nuanced story about the location and growth of jobs between the 2011 and 2016 Census periods, this is a cautionary tale for anyone analysing how jobs growth in any part of Australia has changed over time. As always, experience and familiarity with the underlying data are critical to ensuring the whole story is told.

A closer look at employment data

When the second round of data from the 2016 Census was released recently, we were able to take a closer look at how employment trends have changed between 2011 and 2016.

Glenn, our Census expert, has already noted some preliminary findings from the data. However, in light of some recent articles about the growth of jobs in certain areas, I thought I would dig a bit deeper to explore some of these changes in greater detail (at smaller, more localised geographies), to counter some of the misstatements that have been made recently.

Some people have been reporting job change figures for regions by comparing the ABS Census numbers for 2016 with those reported for the 2011 Census. Unfortunately, this is a fundamentally flawed process that often results in misleading conclusions.

Why?

In 2011, a large number of people’s workplaces (621,676 to be exact) were unable to be coded to a Local Government Area (LGA) or region. In 2016, the ABS allocated those people based on an imputation methodology devised by the NSW Bureau of Transport Statistics, where locations are coded to a business based on associated data.

So, if you are simply comparing 2016 imputed data with 2011 non-imputed data you will get quite inaccurate results (probably leading you to think jobs in your region or LGA have exploded in the last five years!).

Considering this, and a number of other reasons for the Census undercounting job numbers, analysing change by comparing 2011 and 2016 Census jobs figures will likely yield inaccurate conclusions.

This is part of the reason we always recommend using Census data to explore worker characteristic trends (such as qualifications, income and method of travel to work), but NIEIR data, modelled using ABS Labour Force Survey data, for headline employment numbers.

Since it has been available, we have had 2011 (now 2016) Census data that was imputed to show jobs (by destination zone – a geography commonly used to analyse place-of-work data) freely available on our economic profiles under ‘employment locations’.

However, the imputed data does offer a more accurate picture of jobs changes between 2011 and 2016 at a regional or small area level because it’s comparing like with like (note: this comparison betweeen different time periods is not available on our sites, as inconsistencies in geographic boundaries make it likely that incorrect conclusions will be drawn).

So, what does it show?

Jobs change by region

As expected, jobs growth is being led by the large metropolitan areas with the 5 biggest capital cities adding just over half a million jobs.

However, there is a lot of variance between them. Jobs numbers in Greater Melbourne and Greater Sydney grew by around 10% in the five-year period. In contrast, Greater Adelaide grew by only 1.4%, below most regional areas.

While it appears that the non-metro areas are growing much more slowly, it should be acknowledged that the main working-age population (15-65 years) in metro areas grew by 9% between 2011 and 2016, compared to 3.1% in non-metro areas. So, a larger jobs growth should be expected.

ABS Census Imputed Jobs change by Region, 2011-2016

Region
2011 Census imputed Jobs
2016 Census imputed Jobs
2011 – 2016 Change (Numbers)
2011 – 2016 % Change

Greater Sydney
1,998,983
2,209,296
210,313
10.5%

Greater Melbourne
1,868,693
2,046,163
177,470
9.5%

Greater Brisbane
980,222
1,037,901
57,679
5.9%

Greater Adelaide
552,433
560,316
7,883
1.4%

Greater Perth
796,641
850,158
53,517
6.7%

Total Big 5 Metros
6,196,972
6,703,834
506,862
8.2%

Rest of NSW
980,268
1,005,430
25,162
2.6%

Rest of Qld
949,056
993,925
44,869
4.7%

Rest of SA
151,414
148,131
(3,283)
-2.2%

Rest of Victoria
548,725
564,984
16,259
3.0%

Rest of WA
254,770
260,115
5,345
2.1%

Total Big 5 States Non-Metro
2,884,233
2,972,585
88,352
3.1%

ACT
210,695
220,645
9,950
4.7%

Greater Hobart
97,564
99,361
1,797
1.8%

Rest of Tas.
106,688
106,813
125
0.1%

Greater Darwin
60,887
72,120
11,233
18.4%

Rest of NT
37,773
33,860
(3,913)
-10.4%

Other (territories and no fixed address)
411,014
474,621
63,607
15.5%

Total Australia
10,058,329
10,683,842
625, 513
6.2%

Source: Australian Bureau of Statistics, Census of Population and Housing 2011 and 2016.

Inner city agglomeration benefits

Looking more closely at the largest metropolises we can explore how inner-city jobs are growing (it seems to be a popular topic). You could use SA3 geographies. However, they are difficult to compare as the area they encompass for each city is quite different. For example, Brisbane Inner is only 13.5km2 compared to Perth City at a whopping 43.5km2.

So, to generate better comparisons, I have compiled SA2 level data. For Melbourne, Sydney and Brisbane it is necessary to combine some SA2s to get a roughly comparative geography. The dominance of the Sydney central city area is obvious, and the jobs growth in both central Sydney and Melbourne is far above that experienced in other cities.

In contrast, the inner areas of the other big cities appear to have hardly grown much at all or in the case of Perth even declined. The structural transition in the resources states appears to have impacted professional services jobs in their CBDs.

(It should be noted that while all areas contain parkland, Adelaide SA2 contains 5km2 or more of parkland and therefore actually has higher job densities in the built-up area than it might appear.)

ABS Census Imputed Jobs change by Inner-city areas, 2011-2016

Region
2011 Census imputed Jobs
2016 Census imputed Jobs
2011 – 2016 Change (Numbers)
2011 – 2016 % Change

Sydney – Haymarket – The Rocks; North Sydney – Lavender Bay; Pyrmont – Ultimo; Surry Hills; Darlinghurst; Potts Point – Woolloomooloo  (11.3km2)
398,109
         463,460
65,351
16.4%

Melbourne; Docklands; South Bank; South Melbourne; Carlton (12.2km2)
311,617
359,141
47,524
15.3%

Brisbane City; South Brisbane; Fortitude Valley; Spring Hill; Newstead – Bowen Hills (10.0km2)
203,656
205,044
1,388
0.7%

Perth City (10.9km2)
142,298
137,443
-4,855
-3.4%

Adelaide (10.5km2)
105,634
107,612
1,978
1.9%

Source: Australian Bureau of Statistics, Census of Population and Housing 2011 and 2016.

A good exercise would be to generate a definition of central cities based on combining Destination Zones (smaller than SA2s) and removing parkland/water from geographies (using ABS mesh block definitions). However, how do you define where central areas finish? Sydney’s business area effectively stretches across the harbour to North Sydney and beyond. Melbourne obviously includes Docklands and Southbank but also stretches north to Parkville and south down St Kilda road. Brisbane contains a number of high job density areas along the riverside in Milton.

Is it all about the central cities?

Clearly, not all inner-city areas are growing as strongly as others.

Looking at jobs growth across all SA2s in Australia, we can see again that inner Sydney and Melbourne created a large number of jobs during the intercensal period. However, out of the 25 SA2s with the largest jobs growth (number), only 8 could be classified as inner city or inner suburbs. Most of the jobs growth in Greater Perth and Greater Brisbane actually occurred outside the inner city.

While the jobs density may not be as intense in these other locations, it shows that other employment nodes such as Tech/Knowledge clusters (Macquarie Park, Parkville, Murdoch), Logistics/warehouse centres (Truganina), secondary metropolitan service centres (Parramatta, Chatswood, Dandenong), Regional cities (Geelong) and mining/resource areas (Ashburton, Weddell) all have a role to play. Many of them also don’t benefit from the scale of infrastructure investment (historical and current) that has gone into inner cities.

Top 25 SA2s for Imputed Jobs change (number), 2011-2016

Region

(2016 SA2 Name)
State
Region Type
2011 Census imputed Jobs
2016 Census imputed Jobs
2011 – 2016 Change (Numbers)
2011 – 2016 % Change

Sydney – Haymarket – The Rocks
NSW
Inner City
270,223
320,829
50,606
19%

Docklands
Victoria
Inner City
34,858
57,555
24,160
72%

Melbourne
Victoria
Inner City
201,734
221,136
19,402
10%

Ashburton (WA)
WA
Remote
12,055
23,540
11,485
95%

Macquarie Park – Marsfield
NSW
Middle Suburb
41,481
48,394
6,913
17%

Weddell
NT
Fringe
898
7,484
6,586
733%

Murdoch – Kardinya
WA
Middle Suburb
7,632
13,618
5,986
78%

Dandenong
Victoria
Outer Suburb
59,901
65,688
5,787
10%

Parkville
Victoria
Inner City
23,049
28,207
5,158
22%

Pyrmont – Ultimo
NSW
Inner City
31,974
36,831
4,857
15%

North Lakes – Mango Hill
Qld
Fringe & Peri-Urban
5,553
10,311
4,758
86%

Baulkham Hills (West) – Bella Vista
NSW
Outer Suburb
18,912
23,584
4,672
24%

Surry Hills
NSW
Inner City
25,164
29,818
4,654
18%

Truganina
Victoria
Fringe & Peri-Urban
2,817
7,207
4,390
156%

Richmond (Vic.)
Victoria
Inner Suburb
32,472
36,837
4,365
13%

Ormeau – Yatala
Qld
Fringe/Outer Suburb
14,342
18,438
4,096
29%

Geelong
Victoria
Regional City
27,306
31,099
3,778
14%

Chatswood (East) – Artarmon
NSW
Middle Suburb
23,931
27,655
3,724
16%

Newstead – Bowen Hills
Qld
Inner City
16,643
20,347
3,704
22%

Madeley – Darch – Landsdale
WA
Outer Suburb
14,764
18,357
3,593
24%

Parramatta – Rosehill
NSW
Middle Suburb
46,819
50,227
3,408
7%

Deer Park – Derrimut
Victoria
Fringe/Outer Suburb
9,627
12,934
3,307
34%

Concord West – North Strathfield
NSW
Middle Suburb
16,587
19,823
3,236
20%

Rockbank – Mount Cottrell
Victoria
Fringe & Peri-Urban
2,616
5,740
3,124
119%

Clayton
Victoria
Middle Suburb
31,244
34,203
2,959
9%

Source: Australian Bureau of Statistics, Census of Population and Housing 2011 and 2016. ABS Census 2011 Destination Zone job counts have been matched to 2016 SA2 boundaries. Some job allocation has been applied to best fit Destination Zone boundary changes between 2011 and 2016.

If you’re working in Docklands, Ashburton, North Lakes or especially if you’re in Weddell in the Northern Territory, we would love to hear from you! How has the massive growth in jobs in your area affected you and the people living there?

If you would like to explore economic or demographic issues in your area or broader region, contact one of .id’s consultants or learn more about how we can help you put the story of your area together.

.id is a team of demographers, urban economists, spatial planners and data experts who use a unique combination of online tools and consulting to help governments and organisations understand their local economies. Access our free economic resources to help profile your local economy.

What a job? Move to NSW

Published by Anonymous (not verified) on Wed, 10/01/2018 - 12:07pm in

Tags 

employment

It's the easiest to find a job since the mining boom.

The latest count from the Bureau of Statistics shows there were a record 216,000 job vacancies in November and 661,400 Australians out of work, the lowest total since 2012.

The ratio of 3.1 means there were roughly three job seekers for each vacant job, a step up from November 2016 when there were 3.7.

In NSW, the state with the best odds, there were only 2.2 job seekers for each vacant job, one of the lowest ratios ever recorded. A year earlier there were 2.7.

While Victoria has recorded the biggest improvement, the odds remain nowhere near as good as in NSW. There were 3.1 unemployed Victorians trying to get each vacant job in November, down from 4.2 a year earlier.

In Queensland the odds improved from 4.5 per vacant job to 3.9, in South Australia from 6.1 to 5.7, in Western Australia from 4.7 to 4.3 and in Tasmania from 7.9 to 5.7.

In the Northern Territory the odds remained little changed at about two unemployed per vacancy, and in the Australian Capital Territory they slid from 1.6 to just 1.3. But the ACT figures are unrealistic because they are biased downwards by the number of ACT workers living outside of the territory and the number who come from interstate for jobs.

if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["RMl3D"]={},window.datawrapper["RMl3D"].embedDeltas={"100":553,"200":451,"300":425,"400":425,"500":425,"600":400,"700":400,"800":400,"900":400,"1000":400},window.datawrapper["RMl3D"].iframe=document.getElementById("datawrapper-chart-RMl3D"),window.datawrapper["RMl3D"].iframe.style.height=window.datawrapper["RMl3D"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["RMl3D"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("RMl3D"==b)window.datawrapper["RMl3D"].iframe.style.height=a.data["datawrapper-height"][b]+"px"});

The better odds in every state reflect both a surge in the number of vacancies, from 69,000 to 81,500 in NSW, and from 45,400 to 57,500 in Victoria, and also a drop in the number of Australians identifying as unemployed.

A near-record 383,300 more Australians have found work in the past 12 months, almost all of them full-time.

Construction vacancies have jumped 22 per cent, manufacturing vacancies 46 per cent, retail vacancies 14 per cent, and hospitality vacancies 16 per cent.

Vacancies in Australia's biggest industry group, health care and social assistance, jumped 18 per cent.

The bureau surveys employment door-to-door. It surveys vacancies by submitting questionnaires to businesses. Its vacancies count is regarded as more reliable than those of other organisations because it includes all vacancies, whether advertised or not.

Over the past year the unemployment rate has fallen from 5.8 to 5.4 per cent. Commonwealth Securities senior economist Ryan Felsman said he expected it to slide further toward 5 per cent in the year ahead.

Business Surveys suggested employment growth of about 20,000 per month, well above the 14,400 needed to merely keep unemployment steady.

In The Age and Sydney Morning HeraldPeter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.

The Underproduction of Philosophy PhDs (guest post by Daniel Hicks)

Published by Anonymous (not verified) on Tue, 19/12/2017 - 1:35am in

The following is a guest post* by Daniel Hicks (UC Davis), in which he explains how it could be that, contrary to conventional wisdom, there aren’t enough people getting PhDs in philosophy.

The Underproduction of Philosophy PhDs
by Daniel Hicks

One common explanation for the continuing structural employment problem for philosophy PhDs is that there are “too many” philosophy PhDs. That is, according to this explanation, the supply of philosophy PhDs (i.e., the number of new PhDs) is greater than the demand (specifically, the need for people with PhDs in philosophy to teach philosophy classes). One way to empirically check this explanation is to look at the tenure-track employment rate—what fraction of recent philosophy PhDs are employed as tenure-track faculty? Insofar as this rate has gone down and remains low, this suggests that the field has been overproducing PhDs.

But this empirical check ignores the phenomenon of casualization or adjunctification. That is, instead of hiring tenure-track faculty to teach, colleges and universities have hired adjuncts and other contingent faculty. Given this phenomenon, the number of new tenure-track positions in philosophy doesn’t necessarily reflect changes in the demand for philosophy teachers. So the tenure-track employment rate is not a good measure.

A more accurate way to measure demand for philosophy teachers would be based on total student enrollments in philosophy courses. However, as far as I know these data aren’t publicly available, either nationally or for individual schools. I suggest the number of bachelor’s degrees in philosophy could be a useful proxy for total course enrollments. These data are publicly available from IPEDS. This assumes that the ratio of philosophy majors to total enrollments in philosophy courses is roughly constant. But, given that assumption, changes in the ratio of new BAs to new PhDs can give us a sense of whether philosophy has recently been producing “too many” PhDs. Specifically, if this ratio is much lower today than it was, say, 25-30 years ago, then this is an indicator that the field has overproduced PhDs.

In fact, the opposite appears to be the case. Over the last 15 years, the bachelors:PhD ratio was elevated, suggesting that the field has underproduced PhDs. This is not the case in all fields.

For comparison, in this post I examine electrical engineering, English, biology, mathematics and statistics, physical science, and sociology, as well as philosophy. I use IPEDS data from 1984 through 2016. As of December 15, 2017, the IPEDS data for 2016 are provisional. I use simple sums to calculate the number of bachelor’s degrees and PhDs in these fields in each year. This produces slightly higher numbers than Eric Schwitzgebel reports in this post using the same data; usually the difference is 50 bachelor’s degrees or fewer. Since Schwitzgebel does not fully document his methods, I can’t tell where this discrepancy comes from.

The complete code to reproduce this post—including data retrieval—is available here. If you find errors in the code, please submit them as issues on GitHub or email me directly at hicks.daniel.j@gmail.com.

The first plot below shows the total number of bachelors degrees, by field and year. The plot shows a dramatic rise in biology; a sharp drop-off in physical science in the 1980s, followed by a gradual increase; and more-or-less stable numbers across the other fields.

Next we plot total PhDs. Again, there is a dramatic rise in biology, and smaller increasing trends for most other fields. Physical science is much more prominent in this plot than in the bachelors plot.

Now we move on to the ratio of new bachelors degrees to new PhDs. Again, we are using bachelors degrees as a proxy for the total demand for philosophy teachers. Comparing this ratio for recent years (the right-hand side) to 25+ years ago (the left-hand side) gives us an indication of whether these fields have been overproducing or underproducing PhDs. If the ratio is lower today than 30 years ago, this suggests that supply (PhDs) has increased relative to demand (bachelors), and so the field has been overproducing PhDs. But if the ratio is higher today than 30 years ago, this suggests that demand has increased relative to supply, and so the field has been underproducing PhDs.

Working from top to bottom, the long-term trends for sociology and (to a lesser extent) English is an increasing ratio. This suggests that these fields have been underproducing PhDs. This story is somewhat more complicated for English, which shows large peaks and troughs.

In contrast, electrical engineering and math had decreasing ratios in the first 15 years of the data, and recently have been more-or-less flat. Physical science follows a similar but more mild pattern. This suggests that these fields overproduced PhDs.

Philosophy shows a cyclical pattern, similar to English. During roughly 2002-2010, philosophy’s ratio was higher than during 1985-2000, suggesting that the field underproduced PhDs. The ratio has decreased slightly in the last few years, and today appears to be roughly where it was in the early 1990s.

Finally, the ratio for biology has been nearly flat. While the number of PhDs in biology increased dramatically over the last 20 years, so did the number of bachelors degrees.

Because the ratios for different disciplines are on different scales, it may be easier to interpret a normalized ratio. In the following plot, for each field, we first calculate the mean ratio over the first ten years of the data (1984-1994), then divide the ratio in a given year by this mean.

As with the previous graph, if this normalized ratio is high—above the dashed line at 1.0—that suggests that the field has underproduced PhDs. This appears to be the case for sociology, philosophy, English, and biology; although philosophy has increased only slightly relative to the 1984-1994 baseline, and English has recently dropped just below this baseline. There appears to be chronic overproduction in physical science, math, and electrical engineering.

So, against the common explanation for the structural unemployment problem, this analysis suggests that philosophy (along with English, biology, and sociology) has produced too few PhDs, rather than too many. This suggests, I think, that the right way to address the structural unemployment problem is to focus on de-adjunctification—that is, pushing colleges and universities to turn short-term, part-time teaching contracts into long-term, full-time teaching positions, and to turn long-term, full-time teaching positions into tenure-track faculty positions. This push is likely to be most effective by organizing strong faculty, adjunct, and graduate student unions. But that is a topic for another post.

Related posts:
Against Reducing the Number of Philosophy PhDs
Are There Too Many Philosophy PhDs? It’s Complicated

The post The Underproduction of Philosophy PhDs (guest post by Daniel Hicks) appeared first on Daily Nous.

The jobs boom is real. Government can take the credit

Published by Anonymous (not verified) on Thu, 14/12/2017 - 8:10am in

The Bureau of Statistics has produced some shockers – wildly inaccurate employment statistics it has had to disown. But not this time.

An apparent employment surge in one month might be a statistical fluke, the result of a dodgy sample or flawed bad seasonal adjustment. But not a near-record surge that goes on for month after month, 14 of them in a row.

Over the past year a near-record 383,300 more Australians have been funnelled into employment, all but 87,700 of them full-time. In the past month (acknowledging the usual caveat) 61,600 were funnelled into work, all but 19,700 of them full-time.

We won't get the detailed breakdown until next week, but a look at the latest detailed breakdown we do have, for the year to August, shows that almost all of the jump in employment of 324,900 was in two industries: 'healthcare and social assistance' (130,600) and construction (104,400).

On Monday, Victorian Treasurer Tim Pallas said the state was in the midst of a construction boom not seen since Premier Henry Bolte in the 1960s and 1970s. It's getting hard to find the right workers and hard to find steel and cement.

Much of it is the result of government road and rail projects, as in NSW. Much of that is due to the previous Australian treasurer Joe Hockey, who in 2014 awarded incentive payments to states that "recycled assets", selling roads and other things they owned in order to build new ones. Victoria and NSW started early, recycling some of their assets before the Commonwealth incentives.They made use of the riches that had been flooding in to their treasuries as Sydney and Melbourne property prices pushed stamp duty takings sky high.

Once it was thought that government investment "crowded out" the private sector. Not at the moment. It's because of the government investment programs that the private sector is investing too, building projects on contract, handing them over to state governments (which will later sell them) and then starting on the next one. The known pipeline stretches out beyond 2027.

It's not the same as widespread employment growth (employment in the finance sector and in administration went backwards) but it's worth having.

It's centred around Melbourne. More than half of those 61,600 extra workers found their jobs in Victoria. Over the past year more than one-third found their jobs in Victoria, 35 per cent when measured on a trend basis. Thirty per cent found their jobs in NSW.

if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["oONf1"]={},window.datawrapper["oONf1"].embedDeltas={"100":400,"200":359,"300":342,"400":342,"500":342,"600":342,"700":342,"800":342,"900":342,"1000":342},window.datawrapper["oONf1"].iframe=document.getElementById("datawrapper-chart-oONf1"),window.datawrapper["oONf1"].iframe.style.height=window.datawrapper["oONf1"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["oONf1"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("oONf1"==b)window.datawrapper["oONf1"].iframe.style.height=a.data["datawrapper-height"][b]+"px"});

Population figures also released on Thursday show Australians and foreigners pouring in to Victoria. In the past year its population has swelled 2.3 per cent. The rest of the country's has swelled 1.4 per cent.

Victoria's employment growth, as well as Australia's, reflects much more than more people. In the past year its employment-to-population ratio has climbed from 61.8 to 62.5 per cent. The NSW rate has climbed from 60.4 to 61.3 and the national rate from 61 to 61.9 per cent.

if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["DW7lW"]={},window.datawrapper["DW7lW"].embedDeltas={"100":526,"200":442,"300":442,"400":400,"500":400,"600":400,"700":400,"800":400,"900":400,"1000":400},window.datawrapper["DW7lW"].iframe=document.getElementById("datawrapper-chart-DW7lW"),window.datawrapper["DW7lW"].iframe.style.height=window.datawrapper["DW7lW"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["DW7lW"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("DW7lW"==b)window.datawrapper["DW7lW"].iframe.style.height=a.data["datawrapper-height"][b]+"px"});

But Victoria's faster population growth has left it with a higher unemployment rate than NSW; 5.5 per cent instead of 4.6 per cent.

So good is that NSW 4.6 per cent figure, that Commonwealth Securities senior economist Ryan Felsman says it could be effectively considered "full employment". It's rare for an unemployment rate to stay below 5 per cent for long.

Australia's national rate is 5.4 per cent, heading down into territory not seen since the Gillard government and the second of Australia's two big mining booms.

if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["uX8bR"]={},window.datawrapper["uX8bR"].embedDeltas={"100":442,"200":400,"300":400,"400":400,"500":400,"600":400,"700":400,"800":400,"900":400,"1000":400},window.datawrapper["uX8bR"].iframe=document.getElementById("datawrapper-chart-uX8bR"),window.datawrapper["uX8bR"].iframe.style.height=window.datawrapper["uX8bR"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["uX8bR"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("uX8bR"==b)window.datawrapper["uX8bR"].iframe.style.height=a.data["datawrapper-height"][b]+"px"});

Malcolm Turnbull is wrong to say that what's happening is "a direct result" of his government's policies, just as Gillard and John Howard were wrong to say that the earlier mining-related jobs booms were a result of their policies. But he might be more right than they were. What we are seeing is in large measure a government-related jobs boom. Turnbull and his Treasurer Scott Morrison owe Hockey a lot.

In The Age and Sydney Morning Herald Peter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.

Update to APDA’s Survey of Graduate Programs in Philosophy

Published by Anonymous (not verified) on Wed, 13/12/2017 - 12:34am in

Academic Placement Data and Analysis (APDA) has updated its philosophy graduate program survey infogram with more recent information and comments.

 

!function(e,t,s,i){var n="InfogramEmbeds",o=e.getElementsByTagName("script"),d=o[0],r=/^http:/.test(e.location)?"http:":"https:";if(/^\/{2}/.test(i)&&(i=r+i),window[n]&&window[n].initialized)window[n].process&&window[n].process();else if(!e.getElementById(s)){var a=e.createElement("script");a.async=1,a.id=s,a.src=i,d.parentNode.insertBefore(a,d)}}(document,0,"infogram-async","https://e.infogram.com/js/dist/embed-loader-min.js");

Philosophy PhD Programs: Graduate Ratings, Placement Profiles, and Diversity Profiles
Infogram

See this page for other material from APDA.

The post Update to APDA’s Survey of Graduate Programs in Philosophy appeared first on Daily Nous.

How Progressives Can Win Big: Casting out the Spirit of Defeatism, One Keystroke at a Time

Published by Anonymous (not verified) on Mon, 11/12/2017 - 12:44pm in

By Steve Grumbine.

Progressives Trigger warning: Compassion required. When is the last time you heard Greens, Berniecrats or Indie voters not acknowledge the distinct and pressing need for election reform, campaign finance reform, voting reform? More to the point, when haven’t they mentioned unleashing 3rd parties from the fringe of irrelevancy and up onto the debate stage?

That is mostly what is talked about, simply because it is low hanging fruit.

It has long been known that our electoral system and methods of voting are corrupt, untrustworthy, and easily manipulated by less than savvy politicians, state actors, and hackers alike. The answers to many of these issues is the same answer that we would need to push for any progressive reforms to take place in America: namely, we need enlightened, fiery, peaceful, and committed activists to propel a movement and ensure that the people rise, face their oppressors, and unify to demand that their needs be met.

What is not as well-known, however, is how a movement, the government, and taxes work together to bring about massive changes in programs, new spending, and the always scary “National Debt” (should be “National Assets”, but I will speak to that later). In fact, this subject is so poorly understood by many well-meaning people on all sides of the aisle that these issues are the most important we face as a nation. Until we understand them and have the confidence and precision necessary to destroy the myths and legends we have substituted in the absence of truth and knowledge, it must remain front and center to the movement.

Progressives, like most Americans, are almost religiously attached to the terms “the taxpayer dollar,” and the idea that their “hard earned tax dollars” are being misappropriated. Often, the most difficult pill for people to swallow is the concept that our Federal Government is self-funding and creates the very money it “spends”. It isn’t spending your tax dollars at all. To demonstrate this, consider this simplified flow chart:

These truths bring on even more hand wringing, because to the average voter they raise the issue of where taxes, tax revenue, government borrowing, and the misleading idea of the “National Debt” (which is nothing more than the sum of every single not yet taxed federal high-powered dollar in existence) fit into the federal spending picture. The answer is that they really don’t.

A terrible deception has been perpetrated on the American people. We have been led to believe that the US borrows its own currency from foreign nations, that the money gathered from borrowing and collected from taxing funds federal spending. We have also been led to believe that gold is somehow the only real currency, that somehow our nation is broke because we don’t own much gold compared to the money we create, and that we are on the precipice of some massive collapse, etc. because of that shortage of gold.

The American people have been taught single entry accounting instead of Generally Accepted Accounting Practices, or GAAP-approved double entry accounting, where every single asset has a corresponding liability; which means that every single dollar has a corresponding legal commitment. Every single dollar by accounting identity is nothing more than a tax credit waiting to be extinguished.  Sadly, many only see the government, the actual dollar creator, as having debt; that it has liabilities, not that we the people have assets; assets that we need more and more of as time goes on, to achieve any semblance of personal freedom and relative security from harm.

In other words, at the Federal level it is neither your tax dollars nor the dollars collected from sales of Treasury debt instruments that are spent. Every single dollar the Federal Government spends is new money.

Every dollar is keystroked into existence. Every single one of them. Which brings up the next question: “Where do our hard-earned tax dollars and borrowed dollars go if, in fact, they do not pay for spending on roads, schools, bombs and propaganda?” We already know the answer. They are destroyed by the Federal Reserve when they mark down the Treasury’s accounts.

In Professor Stephanie Kelton’s article in the LA Times “Congress can give every American a pony (if it breeds enough ponies)” (which you can find here ) She states quite plainly:

“Whoa, cowboy! Are you telling me that the government can just make money appear out of nowhere, like magic? Absolutely. Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it.”

That alone should raise eyebrows and cause you to reconsider a great many things you may have once thought. It will possibly cause you to fall back to old, neoclassical text book understandings as well, which she deftly anticipates and answers with:

“Now, that doesn’t mean the government can buy absolutely anything it wants in absolutely any quantity at absolutely any speed. (Say, a pony for each of the 320 million men, women and children in the United States, by tomorrow.) That’s because our economy has internal limits. If the government tries to buy too much of something, it will drive up prices as the economy struggles to keep up with the demand. Inflation can spiral out of control. There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money out of the economy through taxation.”

And there it is. The limitation everyone is wondering about. Where is the spending limit?

When we run out of real resources. Not pieces of paper or keystrokes. Real resources.

To compound your bewilderment, would it stretch your credulity too much to say that the birth of a dollar is congressional spending and the death of a dollar is when it is received as a tax payment, or in return for a Treasury debt instrument, and deleted? Would that make your head explode? Let the explosions begin, because that is exactly what happens.

Money is a temporary thing. Even in the old days we heard so many wax poetically about how they took wheelbarrows of government — and bank – printed IOUs to the burn pile, and set the dollar funeral pyre ablaze.  

In the same LA Times piece, Professor Kelton goes on to say:

“Since none of us learned any differently, most of us accept the idea that taxes and borrowing precede spending – TABS. And because the government has to “find the money” before it can spend in this sequence, everyone wants to know who’s picking up the tab.

There’s just one catch. The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard. Here’s how things really work:

  1. Congress approves the spending and the money gets spent (S)
  2. Government collects some of that money in the form of taxes (T)
  3. If 1 > 2, Treasury allows the difference to be swapped for government bonds (B)

In other words, the government spends money and then collects some money back as people pay their taxes and buy bonds. Spending precedes taxing and borrowing – STAB. It takes votes and vocal interest groups, not tax revenue, to start the ball rolling.”

Let’s be clear, we are not talking about the Hobbit or Lord of the Rings. We are not talking about Gandalf the Grey or Bilbo Baggins. We are not referencing “my precious!”. It’s not gold, or some other commodity people like to hold, taste and smell. It is simply a tally. Yet somehow, we have convinced ourselves that there is a scarcity of dollars, when it is the resources that are scarce. We have created what Attorney Steven Larchuk calls a “Dollar Famine”.

To quote Warren Mosler in his must-read book “The 7 Deadly Innocent Frauds of Economic Policy” (you can download a free copy right here) he states:

“Next question: “So how does government spend when they never actually have anything to spend?”

Good question! Let’s now take a look at the process of how government spends.

Imagine you are expecting your $1,000 social security payment to hit your bank account which already has $500 in it, and you are watching your account on your computer screen. You are about to see how government spends without having anything to spend.

Presto! Suddenly your account statement that read $500 now reads $1,500. What did the government do to give you that money? It simply changed the number in your bank account from 500 to 1,500. It added a ‘1’ and a comma. That’s all.”

Keystrokes. Is it becoming clearer? Let’s go further for good measure. Mosler continues:

“It didn’t take a gold coin and hammer it into its computer. All it did was change a number in your bank account. It does this by making entries into its own spread sheet which is connected to the banking systems spreadsheets.

Government spending is all done by data entry on its own spread sheet we can call ‘The US dollar monetary system’.

There is no such thing as having to ‘get’ taxes or borrow to make a spreadsheet entry that we call ‘spending’. Computer data doesn’t come from anywhere. Everyone knows that!”

So why do we allow people to tell us otherwise? Maybe it is too abstract. And on cue, Mosler explains this phenomenon via a sports analogy for those who are not comfortable with the straight economic narrative:

“Where else do we see this happen? Your team kicks a field goal and on the scoreboard the score changes from, say, 7 point to 10 points. Does anyone wonder where the stadium got those three points? Of course not! Or you knock down 5 pins at the bowling alley and your score goes from 10 to 15. Do you worry about where the bowling alley got those points? Do you think all bowling alleys and football stadiums should have a ‘reserve of points’ in a ‘lock box’ to make sure you can get the points you have scored? Of course not! And if the bowling alley discovers you ‘foot faulted’ and takes your score back down by 5 points does the bowling alley now have more score to give out? Of course not!

We all know how ‘data entry’ works, but somehow this has gotten all turned around backwards by our politicians, media, and most all of the prominent mainstream economists.”

Ouch! Mosler pointed out the obvious, the propaganda machine has polluted our understanding. So how is this done in economic language? Let’s let Warren finish the thought:

“When the federal government spends the funds don’t ‘come from’ anywhere any more than the points ‘come from’ somewhere at the football stadium or the bowling alley.

Nor does collecting taxes (or borrowing) somehow increase the government’s ‘hoard of funds’ available for spending.

In fact, the people at the US Treasury who actually spend the money (by changing numbers on bank accounts up) don’t even have the phone numbers of the people at the IRS who collect taxes (they change the numbers on bank accounts down), or the other people at the US Treasury who do the ‘borrowing’ (issue the Treasury securities). If it mattered at all how much was taxed or borrowed to be able to spend, you’d think they’d at least know each other’s phone numbers! Clearly, it doesn’t matter for their purposes.”

So why do progressives allow the narrative that the nation has run out of points deter us from demanding we leverage our resources to gain points, to win the game of life, and have a robust New Deal: Green Energy, Infrastructure, free college, student debt eradication, healthcare as a right, a federal job guarantee for those who want work and expanded social security for those who do not want to or cannot work?

How has a movement so full of “revolutionaries” proved to be so “full of it” believing that we must take points away from the 99% to achieve that which the federal government creates readily, when people do something worth compensating? Why does the narrative that the nation is “broke” resonate with progressives? Why do they allow this narrative to sideline the entire movement?

I believe it is because progressives are beaten down. Many have forgotten what prosperity for all looks like or sounds like. Many are so financially broke and spiritually broken that the idea of hope seems like gas lighting. It feels like abuse. It crosses the realm of incredulity and forces people into that safe space of defeatism.

If they firmly reject hope, then they can at least predict failure, be correct and feel victorious in self-defeating apathy. If the system is rigged; if the politicians are all bought off; if the voting machines are hacked; if the deep state controls everything; then we think we are too weak to unite and stand up and demand economic justice, equality, a clean environment, a guaranteed job, healthcare and security and then we have a bad guy to blame.

Then we can sit at our computers, toss negative comments around social media, express our uninformed and uninspired defeatism about the system, and proclaim it is truth by ensuring it is a self-fulfilling prophecy about which we can be self-congratulatory in our 20/20 foresight as we perform the “progressive give-up strategy”. Or, if we want to achieve a Green New Deal, then in a radical departure from the norm we can own our power; we can embrace macroeconomic reality through the lens of a monetarily sovereign nation with a free floating, non-convertible fiat currency and truly achieve the progressive prosperity we all deserve.

The choice is ours. It is in our hands.

 

**For more of Steve’s work check out Real Progessives on Facebook or Twitter

The post How Progressives Can Win Big: Casting out the Spirit of Defeatism, One Keystroke at a Time appeared first on The Minskys.

Savings are NEVER needed for investment

Published by Anonymous (not verified) on Thu, 07/12/2017 - 10:48pm in

With acknowledgement to PublicDomainPictures. 

With acknowledgement to PublicDomainPictures. 

Yesterday I spoke to a group of important economists about my book The Production of Money - but omitted to make one important point. So am making it here. 

Savings are not needed for investment. Ever. There is absolutely no need for example, for the Chancellor to rattle the tax collection box, or cut government spending - to build up savings, before the government is able to invest. No need whatsoever. 

To understand why, think of your own investments. When you (and I am assuming you are not a Saudi princess) set out to buy a new home that costs say £500,000 - you do not have that money in your bank account. You may have some savings for a deposit - a downpayment on your commitment to pay. But you do not have £450,000 in your bank. All you have is a contract. A Promise To Pay. That promise - its called money - may deliver a new roof over your head, somewhere secure to live, and perhaps a place to expand your family. 

Its the same when you travel to a white goods store to buy a washing machine. All you have is your credit card. If you're a regular gal (or guy) there is no money for the machine in your credit card account. All you have is a card which effectively says: the bank thinks that ........(insert name here) will uphold a Promise To Pay.  You hand over your card, the seller of the washing machine stamps and acknowledges it, and then - she hands it back to you. You have not engaged in barter. You have not handed over any money. 

Instead you have handed over your Promise to Pay. And that is what we call 'money'. 

Its a wonderful thing. It gives you purchasing power (that is, if your bank trusts your Promise To Pay). And it gives the white goods store a sale. That helps the store make a profit, and probably helps the store or washing machine factory to employ a new member of staff. 

Of course the important thing is that you, the buyer must have income. And for most of us, that means having a job - because employment generates income. Not just for you, but also for the Chancellor (in the form of tax revenues). 

The Chancellor of course, has the biggest credit card of all. Not only is he backed by British employees - but he is virtually guaranteed income from 31 million taxpayers. And so his 'credit card' - gives him enormous powers of expenditure. Powers to purchase infrastructure, like flood defences against climate change, but infrastructure that is both social and capital investment. But investing the Chancellor is helping to create jobs (many in the private sector) which, hey presto - provides him with even more (tax) income from construction workers, nurses and teachers. 

That is the magic of the Magic Money Tree. 

 

Ten considerations for the next Alberta budget

On November 17, the working group of the Alberta Alternative Budget (AAB) sponsored a one-day workshop at the University of Alberta. The event’s main purpose was to discuss recent developments in Alberta public policy, as well as expectations for the upcoming Alberta budget. Twenty speakers presented in total.

In light of what was discussed at the event, here are 10 considerations for the upcoming provincial budget:

  1. Governments often face pressure to privatize important public services—yet, privatization sometimes comes with its own costs. According to my long-time social policy mentor Allan Moscovitch, privatization “refers to the movement from public to private service delivery.” Governments of all stripes typically want to reduce the short-term cost of delivering important services. However, privatizing important public services can result in higher costs of services, reduced quality of services, and a deterioration in working conditions. For example, during her presentation, Hitomi Suzuta noted that public long-term care facilities (operated by Alberta Health Services) provide approximately four hours of direct care per senior in a typical day, while for-profit facilities in the long-term care sector provide just three hours of direct care per day (for more on this, see this recent report by David Campanella).
  1. Provincial funding needs to account for demographic changes. In his presentation, Jonathan Teghtmeyer noted that, since 2009-10, the number of students attending K-12 schools in one of Alberta’s public, separate or francophone school boards has increased by 18% (as a result of both high birth rates and high rates of in-migration to Alberta). During this same period, approximately 3,000 new teachers were hired—but according to Jonathan’s research, Alberta would have needed 6,000 new teachers in order to maintain the previous teacher-student ratios.

 

  1. Inflation erodes the value of funding, and new funding levels need to reflect this. During our workshop, John Kolkman noted that, since the election of the NDP government of Rachel Notley in 2015, there’ve been no increases to social assistance benefit levels.[1] Yet, during this time, there’s been roughly 4% inflation—that means that the value of annual benefits received by Alberta’s social assistance recipients has decreased by this same amount. Considering that a ‘single employable’ adult on social assistance in Alberta (without dependents) receives approximately $8,000 a year to live on, such an erosion in annual income can make life challenging. (For a recent overview of inflation in Alberta, see this November 2017 piece. And for an overview of social assistance in Alberta, see this blog post.)

 

  1. When it comes to annual spending by Alberta’s provincial government, there’s potential for cost savings. In the K-12 education sector, the Alberta government gives $263 million annually to private schools—yet, not everyone considers this to be money well spent. Speaking at our workshop, Barb Silva noted: “Many Albertans have no idea that private schools in their province receive public funding.” And in the homelessness sector, it’s well known that targeted spending on affordable housing can reduce public spending in other sectors, most notably the health and justice sectors.

 

  1. In order for crucial public services to be financed in Alberta, there’s a need for tax reform. During his presentation, Nathan Jackson (an Edmonton-based economist) noted that Alberta is the only Canadian province without a provincial sales tax; he also suggested that Alberta introduce one (along with a rebate for low-income households). This, he argued, could help stabilize provincial revenue. A 5% provincial sales tax (with rebates for low-income households) could result in more than $4 billion in additional annual revenue for the province.

 

  1. Gender matters. In her presentation, Angele Alook stated that in communities where there’s a lot of resource extraction, there are high rates of violence against women. She also noted that, in those communities, most of the high earning jobs in those sectors go to men. Perhaps not surprisingly, Alberta has the highest gender income gap of any Canadian province. It should also be noted that Alberta has yet to introduce pay equity legislation.

 

  1. Alberta not only needs more jobs…it needs more ‘good jobs.’ It’s important to discuss the quality and cost of public services delivered. But it’s also important to remember that the workers who deliver those services often need to raise families and maintain healthy lifestyles themselves. Wages need to be in line with Alberta’s high cost of living, and job security matters. In his presentation, Christopher Smith discussed wages in Alberta’s early childhood education sector. He noted that the average worker in this sector receives an hourly wage somewhere in the $16-$23-per-hour range. (Of course, the Notley government’s move to increase the minimum wage by nearly 50% over four years is consistent with a move toward higher-quality jobs.)

 

  1. Not every community in the province has the same needs. For example, Medicine Hat’s municipal government is in an exceptionally sound fiscal position. On a per capita basis, its annual revenue is more than six times the average for a Canadian municipality. Medicine Hat’s municipal government owns several public utility companies (something that’s quite unusual for a Canadian municipality). It owns both an oil exploration company and a gas exploration company. And it owns more than 4,000 gas wells. All of this is very good for the city’s bottom line, allowing it to have the lowest property taxes in the country and the lowest utility costs in the province (and all of which contribute to Medicine Hat having a relatively low cost of living). This also makes it relatively easy for Medicine Hat’s municipal government to donate land for the purposes of subsidized housing—typically, the donated land covers one-third of the capital cost of new subsidized housing. (The dynamic whereby some governments having more resources than others at the same level is sometimes referred to as a horizontal fiscal imbalance.) Perhaps not surprisingly, Medicine Hat has very little homelessness relative to other municipalities; by contrast, there are more people experiencing homelessness in Calgary than there are in the rest of Alberta combined (a point made by my colleague Victoria Ballance during her presentation).[2]

 

  1. Good public policy needs to be well-funded, but regulation matters too. In his presentation, Christopher Smith noted that, when it comes to child care, Alberta has regulated spaces for just one in three children aged 0 to 5. In her presentation on long-term care, Hitomi Suzuta recommended that the Alberta government introduce regulations for supportive living facilities stipulating minimum staffing requirements. And in his presentation, Ian Hussey noted that the Notley government has announced the ‘phase out’ of coal-powered electricity production (by 2030) and that this will come with compensation for the plant owners, as well as a $40 million transition fund for coal sector workers.[3]

 

  1. Even in the context of discussions about Alberta’s provincial budget, the role of federal government remains crucial. Social spending in Canada often relies on federal leadership and cost-sharing with other orders of government. For example, during her presentation, Victoria Ballance noted that Alberta, along with all other provinces and territories, receives funding on an annual basis from Canada’s federal government to operate existing social housing units (mostly for low-income tenants). This funding does not simply cover the mortgages; it also helps with the ongoing operating costs—that is, the difference between the rent received from tenants and what it actually costs the housing provider to keep the units in a decent state of repair. Funding agreements, which typically last between 35 and 50 years, have already started to sunset and are scheduled to end altogether in 2039. Fortunately, on November 22, Canada’s federal government unveiled its much-anticipated National Housing Strategy which, among other things, announced a 10-year plan to preserve the affordability of those units (the plan requires provincial and territorial cost-sharing). This federal plan was excellent news for social housing providers across Canada!

 

In Sum. As the Notley government prepares to release another provincial budget, Albertans need to be mindful of the many layers of analysis required to properly assess the document. With that in mind, our November 17 workshop helped shed light some of the wrinkles involved in a provincial budget. My hope is that this November workshop, held on the eve of the Parkland Institute’s annual conference, becomes an annual event.

 

 

I wish to thank the following individuals for assistance in preparing this blog post: Laurie Adkin, Angele Alook, Sandra Azocar, Victoria Ballance, Carolyn Blasetti, Dave Campanella, Ian Hussey, John Kolkman, Lindsay Lenny, Mel McMillan, Rick Mueller, Nathan Jackson, John Kolkman, Michael Parker, Jenn Prosser, Barb Silva, Christopher Smith, Garry Sran, Hitomi Suzuta, Jonathan Teghtmeyer and Trevor Zimmerman. Any errors are mine.

 

[1] Specifically, he noted that since 2012 benefit levels for Alberta’s ‘big three’ income support programs haven’t increased (representing a 10% loss in their real value during this time). He was referring to Assured Income for the Severely Handicapped, Income Support, and the Alberta Seniors Benefit program. He also noted that income thresholds to qualify for child care subsidies were last increased in 2012.

[2] For more on how homelessness differs across Alberta communities, see this web link.

[3] The funding will ‘top up’ Employment Insurance benefits to 75% of a worker’s previous earnings. It will also provide some post-secondary education assistance and training. Approximately 2,000 workers will be affected.

Ten considerations for the next Alberta budget

On November 17, the working group of the Alberta Alternative Budget (AAB) sponsored a one-day workshop at the University of Alberta. The event’s main purpose was to discuss recent developments in Alberta public policy, as well as expectations for the upcoming Alberta budget. Twenty speakers presented in total.

In light of what was discussed at the event, here are 10 considerations for the upcoming provincial budget:

  1. Governments often face pressure to privatize important public services—yet, privatization sometimes comes with its own costs. According to my long-time social policy mentor Allan Moscovitch, privatization “refers to the movement from public to private service delivery.” Governments of all stripes typically want to reduce the short-term cost of delivering important services. However, privatizing important public services can result in higher costs of services, reduced quality of services, and a deterioration in working conditions. For example, during her presentation, Hitomi Suzuta noted that public long-term care facilities (operated by Alberta Health Services) provide approximately four hours of direct care per senior in a typical day, while for-profit facilities in the long-term care sector provide just three hours of direct care per day (for more on this, see this recent report by David Campanella).
  1. Provincial funding needs to account for demographic changes. In his presentation, Jonathan Teghtmeyer noted that, since 2009-10, the number of students attending K-12 schools in one of Alberta’s public, separate or francophone school boards has increased by 18% (as a result of both high birth rates and high rates of in-migration to Alberta). During this same period, approximately 3,000 new teachers were hired—but according to Jonathan’s research, Alberta would have needed 6,000 new teachers in order to maintain the previous teacher-student ratios.

 

  1. Inflation erodes the value of funding, and new funding levels need to reflect this. During our workshop, John Kolkman noted that, since the election of the NDP government of Rachel Notley in 2015, there’ve been no increases to social assistance benefit levels.[1] Yet, during this time, there’s been roughly 4% inflation—that means that the value of annual benefits received by Alberta’s social assistance recipients has decreased by this same amount. Considering that a ‘single employable’ adult on social assistance in Alberta (without dependents) receives approximately $8,000 a year to live on, such an erosion in annual income can make life challenging. (For a recent overview of inflation in Alberta, see this November 2017 piece. And for an overview of social assistance in Alberta, see this blog post.)

 

  1. When it comes to annual spending by Alberta’s provincial government, there’s potential for cost savings. In the K-12 education sector, the Alberta government gives $263 million annually to private schools—yet, not everyone considers this to be money well spent. Speaking at our workshop, Barb Silva noted: “Many Albertans have no idea that private schools in their province receive public funding.” And in the homelessness sector, it’s well known that targeted spending on affordable housing can reduce public spending in other sectors, most notably the health and justice sectors.

 

  1. In order for crucial public services to be financed in Alberta, there’s a need for tax reform. During his presentation, Nathan Jackson (an Edmonton-based economist) noted that Alberta is the only Canadian province without a provincial sales tax; he also suggested that Alberta introduce one (along with a rebate for low-income households). This, he argued, could help stabilize provincial revenue. A 5% provincial sales tax (with rebates for low-income households) could result in more than $4 billion in additional annual revenue for the province.

 

  1. Gender matters. In her presentation, Angele Alook stated that in communities where there’s a lot of resource extraction, there are high rates of violence against women. She also noted that, in those communities, most of the high earning jobs in those sectors go to men. Perhaps not surprisingly, Alberta has the highest gender income gap of any Canadian province. It should also be noted that Alberta has yet to introduce pay equity legislation.

 

  1. Alberta not only needs more jobs…it needs more ‘good jobs.’ It’s important to discuss the quality and cost of public services delivered. But it’s also important to remember that the workers who deliver those services often need to raise families and maintain healthy lifestyles themselves. Wages need to be in line with Alberta’s high cost of living, and job security matters. In his presentation, Christopher Smith discussed wages in Alberta’s early childhood education sector. He noted that the average worker in this sector receives an hourly wage somewhere in the $16-$23-per-hour range. (Of course, the Notley government’s move to increase the minimum wage by nearly 50% over four years is consistent with a move toward higher-quality jobs.)

 

  1. Not every community in the province has the same needs. For example, Medicine Hat’s municipal government is in an exceptionally sound fiscal position. On a per capita basis, its annual revenue is more than six times the average for a Canadian municipality. Medicine Hat’s municipal government owns several public utility companies (something that’s quite unusual for a Canadian municipality). It owns both an oil exploration company and a gas exploration company. And it owns more than 4,000 gas wells. All of this is very good for the city’s bottom line, allowing it to have the lowest property taxes in the country and the lowest utility costs in the province (and all of which contribute to Medicine Hat having a relatively low cost of living). This also makes it relatively easy for Medicine Hat’s municipal government to donate land for the purposes of subsidized housing—typically, the donated land covers one-third of the capital cost of new subsidized housing. (The dynamic whereby some governments having more resources than others at the same level is sometimes referred to as a horizontal fiscal imbalance.) Perhaps not surprisingly, Medicine Hat has very little homelessness relative to other municipalities; by contrast, there are more people experiencing homelessness in Calgary than there are in the rest of Alberta combined (a point made by my colleague Victoria Ballance during her presentation).[2]

 

  1. Good public policy needs to be well-funded, but regulation matters too. In his presentation, Christopher Smith noted that, when it comes to child care, Alberta has regulated spaces for just one in three children aged 0 to 5. In her presentation on long-term care, Hitomi Suzuta recommended that the Alberta government introduce regulations for supportive living facilities stipulating minimum staffing requirements. And in his presentation, Ian Hussey noted that the Notley government has announced the ‘phase out’ of coal-powered electricity production (by 2030) and that this will come with compensation for the plant owners, as well as a $40 million transition fund for coal sector workers.[3]

 

  1. Even in the context of discussions about Alberta’s provincial budget, the role of federal government remains crucial. Social spending in Canada often relies on federal leadership and cost-sharing with other orders of government. For example, during her presentation, Victoria Ballance noted that Alberta, along with all other provinces and territories, receives funding on an annual basis from Canada’s federal government to operate existing social housing units (mostly for low-income tenants). This funding does not simply cover the mortgages; it also helps with the ongoing operating costs—that is, the difference between the rent received from tenants and what it actually costs the housing provider to keep the units in a decent state of repair. Funding agreements, which typically last between 35 and 50 years, have already started to sunset and are scheduled to end altogether in 2039. Fortunately, on November 22, Canada’s federal government unveiled its much-anticipated National Housing Strategy which, among other things, announced a 10-year plan to preserve the affordability of those units (the plan requires provincial and territorial cost-sharing). This federal plan was excellent news for social housing providers across Canada!

 

In Sum. As the Notley government prepares to release another provincial budget, Albertans need to be mindful of the many layers of analysis required to properly assess the document. With that in mind, our November 17 workshop helped shed light some of the wrinkles involved in a provincial budget. My hope is that this November workshop, held on the eve of the Parkland Institute’s annual conference, becomes an annual event.

 

 

I wish to thank the following individuals for assistance in preparing this blog post: Laurie Adkin, Angele Alook, Sandra Azocar, Victoria Ballance, Carolyn Blasetti, Dave Campanella, Ian Hussey, John Kolkman, Lindsay Lenny, Mel McMillan, Rick Mueller, Nathan Jackson, John Kolkman, Michael Parker, Jenn Prosser, Barb Silva, Christopher Smith, Garry Sran, Hitomi Suzuta, Jonathan Teghtmeyer and Trevor Zimmerman. Any errors are mine.

 

[1] Specifically, he noted that since 2012 benefit levels for Alberta’s ‘big three’ income support programs haven’t increased (representing a 10% loss in their real value during this time). He was referring to Assured Income for the Severely Handicapped, Income Support, and the Alberta Seniors Benefit program. He also noted that income thresholds to qualify for child care subsidies were last increased in 2012.

[2] For more on how homelessness differs across Alberta communities, see this web link.

[3] The funding will ‘top up’ Employment Insurance benefits to 75% of a worker’s previous earnings. It will also provide some post-secondary education assistance and training. Approximately 2,000 workers will be affected.

Productivity and Employment: A Cautionary Tale

Published by Anonymous (not verified) on Sat, 25/11/2017 - 2:21am in


Ah, productivity. Who knew that our whole prosperity was totally dependent on a concept as nebulous as this?

To be sure, it doesn't sound nebulous. It is output per worker per hour. What is so difficult about that?

The problem is how you define "output". Usually, we take this to mean GDP (gross domestic product), though we might use GNP (gross national product) or GVA (gross value added). In this post, I shall use GDP.

As Diane Coyle has engagingly written, GDP is a deeply flawed measure. Yet we are obsessed with it. The Eurozone uses government debt-to-GDP and deficit-to-GDP ratios to justify harsh spending cuts and tax rises. In the UK, "WE MUST PAY DOWN THE DEBT!" roar the headlines, entirely missing the point that debt-to-GDP is a ratio, so even if we never borrowed another penny, it would rise if GDP fell. Even if GDP growth remained positive, but slowed down - say to 1.5% per annum instead of the predicted 2% -  debt-to-GDP would take longer to reduce for the same nominal amount of debt.

The same applies to the deficit. The deficit is the gap between taxation and spending, expressed as a percentage of GDP. If GDP falls, the deficit automatically widens. If GDP increases more slowly than forecast, the deficit takes longer to close than forecast. So the next time someone says that the fact that the deficit is taking longer to close than the Government predicted means that the Government has "eased off on austerity", tell them to go and learn some basic maths.

And the same also applies to productivity. Productivity is GDP per worker per hour. If the number of workers doesn't change, and the hours that they work don't change, then if GDP is growing, workers are producing more per hour. Their productivity is increasing.

There is thus a firm positive link between GDP growth and productivity. Ceteris paribus, rising productivity means rising GDP.

This is why the OBR's downward revision of UK productivity figures is so devastating. As a direct consequence, the forecasts for GDP over the next five years are significantly lower than before. And this means that the deficit will take longer to close than predicted, and debt-to-GDP will take longer to fall than predicted.

But why should we expect workers constantly to increase their output per hour? Surely there is an absolute limit to the amount that workers can produce per hour. What if we are simply approaching that limit? What if productivity is flat-lining because workers are at full capacity? Are we reaching the limit of GDP growth?

Well, there might be such a limit. But I don't think we are anywhere near it. You see, what enables workers to produce more is investment. And in the UK, investment - both by business and government - is very low.

Let me use an historical example to show how productivity relates to investment. Recently, I have been reading about the Irish potato famine of the mid-19th century. Ireland at the time was part of the United Kingdom and ruled directly from Westminster, so the policy responses to what was by any standards a dreadful humanitarian crisis came from the UK Government. One of the things it did was provide work for unemployed labourers. The work was utterly pointless, building "roads to nowhere" so as not to benefit any particular landowner, or digging holes in existing roads and filling them in again. But it was work, and it paid a wage which was supposed to be sufficient to provide bare subsistence for the labourer and his family.

To start with, they paid the labourers a day rate. But the labourers, worried that when the pointless road was built they would lose their jobs, stretched the work out by doing as little as possible. So the UK government, prompted by public anger in England about the "lazy Irish" (does this sound familiar, Graecophiles?), responded by changing the way it paid the labourers. Instead of paying them by the day, it paid them according to the amount of road they built - we might call this "road inches". This was a productivity incentive: the more road they built per hour, the more they would be paid. The Government's benchmark productivity level would pay workers a subsistence wage.

But there was a problem. In fact there were several problems. Firstly, the Government did not provide equipment - picks, shovels and the like. But the labourers had sold their own equipment for food, so they were forced to dig the roads with their bare hands. Secondly, the labourers lacked road-building skills, since their usual occupation was growing potatoes. And thirdly, the labourers were severely malnourished and often ill. So productivity fell far below the benchmark. The roads were built, but painfully slowly. And the labourers were paid less than half the amount they needed to live. They starved despite being in work.

Now, at this point most of you will say "That's ridiculous. Why didn't the Government provide equipment and training for its workforce? And why did it pay them so little they starved?" Of course, these were roads to nowhere, so nobody really cared whether or not they were built. The Government was simply creating work to justify paying benefits. If the workers didn't work, and therefore didn't get paid, it was their own fault. The Government's conscience was clear.

But just suppose that these were real roads that would have brought real benefit to the economy of the West of Ireland. How could they have been built faster and better?

Well, the Government could have employed more labourers. There was at the time something of a glut of half-starved Irish labourers, so employing lots more would not have been difficult. The roads would have been built more quickly - although as any manager will tell you, there comes a point at which adding additional bodies becomes counterproductive. However, employing extra workers does not raise productivity. It increases the quantity of labour, but the output of each worker per hour remains the same.

The Government could also have increased working hours. Suppose that our labourers were doing a standard 12-hour working day (this was not unusual at the time). The Government could have increased the working day to 16 hours. There's a snag, of course: in the winter, there is a shortage of light. Productivity falls catastrophically when people are working in the dark. But the roads would still have been built more quickly.

However, increasing working hours isn't increasing productivity. It's the same as adding more workers. There is more output, but the output per worker per hour remains the same (or probably worsens, especially in the winter). I've noticed that this is widely misunderstood. Working more hours is not working more productively. As we shall see, working more productively might actually mean working fewer hours.

But what if the Government decided, rather than employing more workers or increasing the length of the working day, to equip its existing workforce with state-of-the-art picks and shovels, plus light and heat so they can work better in the dark, cold winter mornings and evenings? With better equipment, workers could produce considerably more road inches per hour. This is increased productivity. It arises directly from capital investment.

So, let's suppose the Government invests in equipment. The labourers produce more road inches per hour, and their pay therefore rises. In this case, there is a firm positive link between capital investment, productivity and wage growth. However, note that when labourers are paid a day rate regardless of output, there is no such connection.

If labourers are paid more, they can buy more and better food (there was never an absolute shortage of food in Ireland during the famine, only a disastrous shortage of money among the agricultural poor, especially in the West). So their general health improves, and their output therefore increases again.

But even without the equipment, paying the labourers better would improve productivity. In fact as the workforce was half-starved to begin with, providing workers with food and basic healthcare free of charge would probably be a good strategy. Fit and strong labourers produce more road inches than weak half-starved ones, even with poor equipment. Paying people starvation wages is a false economy, unless you think working people to death because there are plenty more where they came from is a reasonable way to run a business.

Now suppose our enlightened Government decides not only to equip its Irish navvy gangs properly, and provide free food and basic healthcare, but to train them in modern (for the 19th century) road-building techniques. Remarkably, their road inches output increases considerably, because they now have both good tools and the skills to use them efficiently. Their pay rises more. They begin to look well and feel happy.

By this time the UK Government has invested rather a lot in its Irish workforce. The combined investment in fixed capital (picks and shovels, light and heat), and human capital (food, healthcare, training) has caused a massive productivity increase. Roads have never been built so fast or so well, and the now-skilled workers are earning more than ever before. Private sector employers, impressed with the new roads, start to move in to poach workers by offering even better pay and conditions. Some are British firms, since they have heard that Irish road builders are the best in the United Kingdom.

Of course, the success of the Government's road-building scheme could cause a problem in an agrarian economy. Indeed it did cause a problem, even though it was nowhere near as productive as the scheme I have described. In 1848, there was famine not because the crops failed, but because they didn't get planted in the first place. Too many people were working on the roads.

However, the fact remains that if the UK Government had abandoned its belief in the morality of work and its laissez-faire economic ideology, and invested in its Irish workforce, many thousands of deaths could have been avoided.

But employing so many people is expensive. They are highly productive, but - could there be a way of reducing the number needed for each road? After all, skilled road builders are in demand. And we still need people to till the fields, anyway.

And so the quest for productivity goes high-tech. Innovation raises productivity far beyond the capability of manual labour, even with high quality picks and shovels. Nowadays, roads are no longer dug by Irish navvy gangs. One man with a JCB can produce more road inches per hour than any number of labourers, and although his pay is higher than theirs, it won't be as much as the total cost of a navvy gang for the employer.  I wrote before about how wages historically have never kept pace with productivity. Of course they haven't. If all the benefit from productivity increases went to the workers, there would be no incentive for employers to invest in productivity-enhancing technology.

Technological advancements have the potential to create massive productivity increases. They also reduce the need for workers. Indeed, the story of the Industrial Revolution is one of declining need for workers. As technology increased worker productivity,  first children, then women (some occupations), and then the old, sick and disabled, left the workforce.

And this brings me to where we are in the UK today. We are going backwards. In the last ten years, the Government has systematically forced back into the workforce the old, the sick, the disabled, and single mothers of young children. The current government continues to insist that as many people as possible must work, and that work must pay. As I have pointed out before, the combination of "everyone must work" with "work must pay" inevitably results in increasingly harsh treatment of those who are unable to work. The imperative to accept any job, however badly paid, puts downward pressure on wages: this, in combination with the belief that those who work must be seen to be better off than those who don't, forces ever-deeper cuts to benefits for those unable to work.

The OBR notes the inverse correlation of high employment (high participation rate) with poor productivity. Indeed, this must be so. For when there is a glut of low-wage, low-skill labourers, and the economic outlook is uncertain, employers have little incentive to invest, whether in fixed assets or human capital. It is much easier to hire and fire unskilled workers at will than to mothball plant or write off investment in training. The flip side of high employment is weak business investment, and this is exactly what we see. The OBR has substantially reduced its forecast for business investment.

The Government seems intent on creating a low-skill, low-wage, high-employment economy. And if that is what we want, I suppose that is what we can have. It would be a stable equilibrium. But it would not be a prosperous advanced economy. That combination is characteristic of poor countries with large populations and wholly inadequate safety nets. Just like 19th century Ireland, in fact.

Related reading:

The Financialisation of Labour - Pieria
Bifurcation in the labour market
The Graves Are Walking - Kelly

The econ nerds among you will note that this post is really an historical deconstruction of the Cobb-Douglas production function. 

Image at the head of this post is of the "Famine roads" in Dingle. The visible vertical and horizontal lines on the hills are the scars left by the "roads to nowhere" built by forced labour in the Irish potato famine. Interestingly, there are similar roads in Scotland from the same time: "Destitution road" was built by Scottish potato famine victims. 

Pages