employment

Preview: Can a Universal Basic Income rid the world of bullshit jobs?

Published by Anonymous (not verified) on Sat, 14/07/2018 - 12:31pm in

In his best-selling book, Bullshit Jobs: A Theory, professor David Graeber makes the case for a Universal Basic Income (UBI) as a means to move away from the wage labour system.

I recently caught up Graeber to ask him a couple of questions, namely: why a UBI and not a job guarantee?

“I mean there’s enough meaningful work, right?,” says Professor Graeber.

“But does it have to be organised into jobs? To me the difference between the job guarantee and the UBI is simply who’s going to decide how the labor is allocated.”

“I don’t have a problem with the jobs guarantee as a supplement to a Basic Income. But one of the interesting things is who the burden is on.”

Read the rest of the interview by subscribing to my Patreon for as little as $3 a month.

Why New York City Subway Delays Don’t Affect All Riders Equally

Published by Anonymous (not verified) on Wed, 27/06/2018 - 9:00pm in

Nicole Gorton and Maxim Pinkovskiy

LSE_2018_Why New York City Subway Delays Don’t Affect All Riders Equally

The state of the New York City subway system has worsened considerably over the past few years. As a consequence of rising ridership and decaying infrastructure, the network is plagued by delays and frequently fails to deliver New Yorkers to their destinations on time. While these delays are a headache for anyone who depends on the subway to get around, they do not affect all riders in the same way. In this post, we explain why subway delays disproportionately affect low-income New Yorkers. We show that wealthier commuters who rely on the subway are less likely to experience extensive issues on their commutes.

Roughly half of employed New Yorkers living in the Bronx, Brooklyn, Manhattan, or Queens rely on the subway to get to work each day. The subway is one of the few commute methods where the distribution of incomes among riders roughly reflects the distribution of incomes throughout the city. In comparison, communities where most people walk to work or take a taxi tend to be far wealthier than the median New York City community, whereas communities in which most people take the bus tend to be poorer than the median. But even though all of these subway users are riding the same trains and waiting in many of the same stations, commute experiences (and especially commute duration) vary widely. What drives these differences?

In the figure below, the upper panel shows the distribution of median household incomes across the city’s census block groups, the smallest geographic level for which aggregate data are available, using 2012-16 data from the American Community Survey (ACS). Lighter colors indicate lower-income communities. The lower panel shows average commute times among census block groups where the majority of commuters rely on the subway each day. Lighter colors indicate relatively shorter commutes. In both maps, areas where a majority of commuters do not rely on the subway each day are grayed out.

Comparing the two panels, it is clear that higher incomes are associated with lower commute times. A short commute is often expensive because housing demand is high in city centers where many people work and hence want to live, and because people are willing to pay a premium for easy access to efficient transportation. Thus, house prices and rents are higher around transportation centers, reflecting the value that residents place on this amenity. However, this relationship between income and commute time is actually more pronounced in places that rely on the subway (subway-dependent communities) than in places that do not (subway-independent communities). In other words, the elasticity of commute time with respect to income—how commute time changes as household income changes—is significantly more negative in subway-dependent communities.

One potential explanation is that within subway-dependent communities, there is significant heterogeneity in terms of subway access, and that subway access is correlated with both household income and commute time. Individuals who live closer to a subway station spend less time walking, and those living closer to a larger number of lines and stations can take the most efficient route to their destinations and substitute away from troubled lines and stations when delays and construction affect service. And because of the housing cost premium placed on transportation access, these elements are correlated with household income.

Why New York City Subway Delays Don’t Affect All Riders Equally

When we control for these factors, we find that the relationship between income and commute time shrinks considerably, to a magnitude similar to that within subway-independent areas. This finding provides some suggestive evidence that subway access is expensive, and that access has a measurable impact on commute duration for riders. Many of these measures of access, like proximity to different train lines, are expensive in part because they are permanent, while some other measures are harder to predict—for example, when and where delays and planned work will occur. What happens to commute times when extensive delays and construction strike, and how do the effects vary across the income distribution?

Spending more time on the train necessarily increases the risk of experiencing some kind of service disruption. And as we discussed above, subway riders with the longest commute times are also less able to substitute away from a troubled line because the next subway line or station may be very far away. In addition, workers traveling during off hours (for example, to cover a nightshift) are far more likely to be at the mercy of planned work. We explore the implications of delays and planned work across the income distribution by simulating morning commutes, using data from the Metropolitan Transportation Authority on subway service status that we have collected over the past few months.

For each subway-dependent block group, we use data from the ACS on average commute time and the most common morning departure time. We also identify the set of trains available within three-quarters of a mile from each block group center. Using these inputs, we find the number of minutes during the commute that the lines available to that block group are not experiencing “good service ” for each day in our sample (subway “downtime”).

For example, say the average commute time for a certain block group is forty-five minutes and the most common departure time is 9:00 a.m. We would then identify the number of downtime minutes that occurred between 9:00 a.m. and 9:45 a.m. for each weekday in our sample and every train line available to that block group. Note that this figure is not necessarily a measure of how long people are waiting on or for a train, as our data do not allow us to calculate that, nor do we interpret it as the number of minutes added to a trip. Instead, it is simply a measure of downtime severity: for example, in a census block group that only has access to the C train, we measure twenty minutes of “downtime” on a morning when the C line was having signal problems for twenty minutes of a thirty-minute commute window. In addition, it is worth noting that, to the extent they are able, commuters probably choose departure times and trains to reduce the effect of delays on their commute.

In the figure below, we plot median household income against subway performance, as measured by the worst-case delay recorded during the morning commute period for each census block group—more precisely, the number of minutes at the 95th percentile of the morning downtime distribution for each group. We look at this measure, instead of at the mean or median downtime, because when risks are high (for example, if a job is at stake) individuals make decisions based upon the worst possible scenario, not the average scenario. Even if an extreme delay occurs only once every ten or twenty trips, individuals must commit more time to commuting every day to insure against lengthy delays. As an area’s household income declines, the length of extreme subway downtime spells increases. This result is a combination of the increased risk of experiencing downtime associated with a longer commute, the distribution of trains to which each block group has access, and differences in morning departure times.

Why New York City Subway Delays Don’t Affect All Riders Equally

We have presented some descriptive evidence that subway delays disproportionately affect lower-income New Yorkers because their already long commutes get even longer and they may have no choice but to wait out even the worst delays. There are also other mechanisms, not discussed in this post, through which subway delays make long commutes worse for low-income people relative to wealthier people. For example, low-income people may not be able to spend money on a taxi or rideshare service to get to work in the case of an extreme delay. We also do not consider differential time value of money, which may mitigate these effects. Aside from the obvious frustration of unanticipated delays, longer commutes mean people risk losing pay—or even their jobs—and may have less time to invest in their health, education, and children. That is bad news for all New Yorkers.

Chart data
Excel

Disclaimer


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Nicole GortonNicole Gorton is a senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Maxim Pinkovskiy
Maxim Pinkovskiy is a senior economist in the Bank’s Research and Statistics Group


How to cite this blog post:


Nicole Gorton and Maxim Pinkovskiy, “Why New York City Subway Delays Don’t Affect All Riders Equally,” Federal Reserve Bank of New York Liberty Street Economics (blog), June 27, 2018, http://libertystreeteconomics.newyorkfed.org/2018/06/why-new-york-city-s....

How much does a 60-year-old aged-care worker in Burnie actually make?

Published by Anonymous (not verified) on Wed, 20/06/2018 - 2:18pm in

Tags 

employment

economic-development-projections

This week there was a debate in the lower house about the Government’s proposed tax cuts package – and one statement caught the attention of media.

In a response to a hypothetical question by the leader of the opposition, the Prime minister responded

“..a 60-year-old aged-care worker in Burnie is entitled to aspire to get a better job, is entitled to get a promotion, is entitled to be able to earn more money.’

The assumed premise being that tax cuts for higher income earners are an incentive to lower-income workers. One would think just having the chance to get a higher income would be incentive enough, but putting that aside, I thought it would be interesting to explore just what a 60-year-old aged care worker in Burnie actually earns.

60-something aged care workers in Burnie: a profile

According to the Census there were almost 50 aged or disabled care workers in Burnie aged between 60 to 69 in 2016.

It’s no surprise that these workers weren’t actually earning that much. In fact, the mean income per year was $34,000 and the median income was between $650-$799 per week or $33,800-$41,599 per year. There were no workers earning more than $65,000 per year.

Setting aside the fact that the odds are stacked against someone in their 60s attaining a job in a higher paid industry, in terms of getting a promotion there were only 7 Aged Care workers in Burnie who would potentially stand to gain any benefit from an increase in the second highest income tax threshold from $87,000 to $90,000 in 2018/19 and then to $120,000 in 2022/23. No Aged Care worker was earning more than $104,000 per year.

As mentioned, this is not surprising as Aged Care Workers are in the lowest 10% of paid occupations when it comes to average weekly earnings (quite remarkable when you also consider that 77% of the workforce in this industry have formal qualifications, compared to 55% for the whole economy).

The Prime Minister’s recent statement comes on the back of a statement he made in May when he said increasing the high-income threshold would mean

“Middle-income earners will be vastly better off… because they will only be paying a top marginal rate of 32½c”

Middle-income earners: a profile

Now Greg Jericho from the Guardian has dealt with this statement in some detail, but it doesn’t take that much digging to understand that $87,000 is far off what a middle-income earner is currently getting.

It is estimated that the median employee income in Australia was only $51,319 in 2016, which means they would need quite a big increase in the next few years to start hitting the 37c tax rate.

The PM went on to say

“teachers and nurses, electricians and mechanics—these are the types of occupations who will be substantially better off”.

However, looking at incomes by occupations, it’s hard to suggest that the majority of these workers would be substantially better off. In 2016, the average annual earnings for these occupations were all under the current 37c tax threshold ($87,000). Only Electricians appear close to the mark and their average is boosted by large earnings in the resource states (WA and QLD).

Occupation
Average Annual Earnings, 2016

2544 Registered nurses
$71,900

2412 Primary school teachers
$68,084

2414 Secondary school teachers
$79,799

3411 Electricians
$82,935

3212 Motor mechanics
$64,376

Source: ABS Cat: 6306.0 – Employee Earnings and Hours, Australia, May 2016

Now there’s no question that the low- and middle-income tax offset set to be brought in under Phase 1 of the proposal would benefit numerous Australians. It has often been argued that tax cuts at the lower end provide the most incentive for people to seek employment and/or work longer hours.

However, it is hard to argue that people earning more than $87,000 a year require any more incentive when they are already in the top Quartile (25%) of income earners in Australia ($79,760 or more).

People are welcome to have different opinions on policy positions by both sides of parliament, but most people would at least like debate to be grounded in real evidence as a starting point. Misleading statements can influence debate and see bad policies enacted or good policies defeated.

.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.

A very British disease

Published by Anonymous (not verified) on Mon, 18/06/2018 - 3:35am in

The desire to judge people's motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain's repeated attempts to "categorise the poor".

For centuries, successive British social systems have recognised that there are people who cannot work, whether because they are too young, too old, too ill or too infirm. These people need to be provided for by others – in the first instance families, but where family support networks break down, support must be provided by the wider community.

And for centuries, successive British social systems have also recognised the existence of people who are perfectly capable of working but are not doing so. Most of these people are unemployed due to economic circumstances. But a small minority are not working because they don't want to. And an even smaller minority pretend to be ill, infirm or unfortunate in order to claim benefits, often while working on the sly.

In mediaeval times, most social support was provided by the Church, through the monasteries and the parishes. But after the dissolution of the monasteries, far more of this responsibility fell on the parishes. Welfare provision in Tudor times became patchy and inconsistent – good in some places, less good in others. Eventually, the Poor Laws of 1601 recognised and codified “good practice” in the care of those who could not provide for themselves. Poorhouses were established, in which the old, ill and infirm were cared for, and orphanages were created to house, feed and educate children.It all sounds very civilised.

But there was a darker side. People who were physically unable to provide for themselves were not the only people without work in Tudor times. Unemployment was already high at the time of the dissolution of the monasteries, and it was accompanied by persistently high inflation. A growing number of able-bodied people were either not working or not earning enough to support themselves.

There had been a history of vagrancy in England ever since the Black Death. Once feudal ties were loosened by the shortage of able-bodied workers, some people got into the habit of moving from place to place looking for the best-paid work. The first law controlling wages and restricting movement of labour appeared in 1349 and was reinforcedin 1351. But these were poorly enforced and ineffective. And they did not address the growing number of “sturdy beggars” travelling from place to place, supporting themselves with a mixture of casual work, petty crime and begging.

Such itinerant workers were regarded with fear and suspicion, much as modern-day “travellers” are. The first law outlawing “wandering” appeared in 1388. Initially the punishment amounted to public humiliation: the offender was to be put in the stocks until he could persuade someone to pay for him to return to his “hundred”.

Yet many wanderers were repeat offenders: as fast as they were sent back to their hundreds, they left again. There is little doubt that to start with, many were simply migrating around the country in search of better-paid work, while others were professional beggars (and in the case of women, prostitutes) who knew they could make more money in a place where they were not known – rather like today's homeless man in a doorway, accompanied by obligatory dog, who takes the Tube back to his flat in Mill Hill at the end of a successful day's begging*. But once unemployment started to rise in Tudor times, their ranks were swelled by men, women and children who were genuinely unable to find steady work.

The trouble was that no-one distinguished between the genuinely unemployed and the professional vagrants. Punishments for vagrancy became increasingly harsh: in 1530, the Vagabonds Act licensed begging by the old and infirm, but provided for any able-bodied person found wandering outside their hundred to be “whipped until bloody” then forcibly returned to their hundred and compelled to work. The only people excused from this were heavily pregnant women and children under seven.

The legislation was strengthened in 1536, when provision was made for mutilation, imprisonment or execution of repeat offenders. And in 1547, a law was passed allowing for enslavement of vagrants. These laws proved too much for the magistrates: neither law was ever enforced. The 1547 law was repealed in 1550, and the death penalty for vagrancy was abolished in 1597. Imprisonment was as far as magistrates would go. Thus were born the first “workhouses”.

They weren't called workhouses at that time. They were known as “houses of correction”. The idea was that “sturdy beggars” were choosing not to work and therefore had a bad work ethic, which needed to be “corrected”. This was done by imposing hard physical work and a spartan regime.

The Poor Laws codified this distinction. Poorhouses were for the “deserving poor” - those who, through no fault of their own, were incapable of working. “Houses of correction” were for the “undeserving poor” - those who were perfectly capable of working but were choosing not to do so.. But not many of the unemployed actually ended up in houses of correction. Belatedly, Poor Law legislators realised that unemployment was not necessarily wilful, and so chose to support the majority of unemployed with “outdoor relief”, or what we would now call unemployment benefit.

“Outdoor relief” was originally introduced to support agricultural labourers suffering seasonal unemployment. Usually it involved some form of workfare, which was supposed to be socially useful but unfortunately included such beneficial activities as parking the unemployed on benches and leaving them there all day. Finding useful work for the unemployed to do was not always easy for parish administrators in times of high unemployment: modern proponents of a countercyclical job guarantee system might like to take note. They also faced the problem known as “hysteresis”, where the skills of the unemployed degenerate over time.

All manner of creative solutions to the twin problems of unemployment and hysteresis were adopted. The so-called “labour rate” was a property tax specifically used to fund the employment of agricultural labourers. The “roundsman” system was a job guarantee system funded by parishes to ensure that all agricultural labourers were productively employed: it depressed wages, but at least it kept people busy. Philanthropists, too, did their bit to relieve unemployment: one clergyman with more money than sense even built a completely useless tower near Rothbury, Northumberland, purely to keep local stonemasons occupied. And the Speenhamland system of income support attempted to ensure that periods of unemployment and under-employment coupled with high inflation did not leave families struggling to afford bread.

The Poor Laws were in many ways a benevolent institution, reversing the harshness of Tudor times. But the cost of all this assistance grew higher and higher as the population increased in the Industrial Revolution, raising concerns about its affordability. And there was a growing belief that supporting people with benefits destroyed people's incentive to work and was therefore a bad idea from both an economic and, more importantly, moral point of view. Rather than discouraging work with benefits, therefore, people should be compelled to work, if necessary with the threat of starvation.

Driven by both moral and economic concerns, the Old Poor Laws were replaced in 1834with a new systemdesigned to ensure that people took responsibility for providing for themselves and their families. No more were parishes to provide unemployment benefits or income support (although in practice many continued to do so). No longer was there to be any attempt to distinguish between those who would not work and those who could not. Poorhouses and houses of correction merged to create a single institution – the workhouse. And into the workhouse went the old, the ill, the infirm, widows, orphans, the unemployed and their families.

Conditions in workhouses were deliberately harsh. It was believed that “work should pay”, and therefore workhouses should be a last resort for the desperate. Work itself was believed to be virtuous. So workhouses provided just that – work. Hours and hours of it. Pointless, boring, demeaning work such as breaking stones, picking oakum or – stupidest of all – walking a treadmill. The regime was harsh, food was basic and there was no leisure time. You were not in a workhouse to enjoy yourself. Nor were you there to be cared for if you were incapable of work: the old concept of the benevolent poorhouse had gone. Everyone, old, young, ill, infirm, widows and unemployed, were subject to the same regime. Regardless of the circumstances, you were in a workhouse because you had committed the crime of worklessness. There were no mitigating factors.

Because it was believed that worklessness was caused by moral defect, steps were taken to prevent such moral degeneracy from spreading. People who entered workhouses often died there. Children were separated from their parents, often never to see them again. And husbands and wives were separated, usually permanently.

And yet, for all their harshness, Victorian workhouses had benefits. They provided basic healthcare and education, which many people “on the outside” could not afford. This rudimentary safety net made them particularly attractive to the old and those with children. Because of this, they failed in their basic aim, which was to force everyone to support themselves.

The Victorian period was a time of bizarre contradictions: of appalling cruelty inflicted with the best of motives, and of real social improvements coupled with grinding poverty for far too many. The foundation of the modern welfare state was laid during that time, as campaigners and politicians genuinely concerned about the hardships of the poor enacted legislation to improve their lot.

But the moral beliefs that drove both the harsh treatment of vagrants in the 16th century and the unintended cruelty of the Victorian workhouse system persist to this day.

The idea that “work must pay” encourages politicians to make claiming benefits extremely difficult for the unemployed and – more worryingly – for those who are unable to work due to illness or infirmity, just as in Victorian times, workhouse conditions were made deliberately harsh to discourage people from entering them.

Politicians castigate “generational worklessness”, promoting the idea that a tendency to worklessness is somehow inherited, passed on from parents to children. It was this idea that led to the brutal separation of families in the workhouses.

Above all, there remains a strong belief in the moral virtue of work. Work is indeed important for human dignity, so making it possible for people to work is important: but in what way mind-numbingly boring, pointless and demeaning work is dignifying and virtuous is hard to imagine. Nonetheless, the idea that people should be forced to do basic work to “earn” their benefits – even if their time might be better spent looking for a job that actually uses their skills - is electorally popular.

Underlying this lies the unwarranted assumption that all jobs are intrinsically of value and therefore anyone who turns down work because it is poorly paid, socially useless and utterly boring is lazy. It was this idea that led to workhouse inmates being forced to work long hours in dreary, pointless jobs. Today, we impose benefit sanctions on people who turn down the dreary, pointless jobs we assign to them in the name of “work experience”. Giving it a different name doesn't change its nature. It's the workhouse work ethic all over again.

It is perhaps understandable that we feel angry when we see people we think should be working but aren't. And it is also understandable that when times are hard, we resent paying benefits to those we feel don't deserve them. I suppose the anger that we feel towards those we regard as “scroungers” and “shirkers” will never go away. But categorising the poor is not only difficult – it is harmful, not to the shirkers and scroungers, but to the genuinely deserving. And it is also economically damaging for society as a whole.

Compelling people to work depresses wages for everyone. Harsh treatment of the workless enables employers to bid down wages to the floor in the certain knowledge that people will accept any work, at any price, rather than face the consequences. In Victorian times, fear of the workhouse depressed wages on the outside, forcing workhouses to respond by making conditions inside even worse. There was a race to the bottom in grimness which culminated in the famous Andover workhouse case, where starving inmates were reduced to eating the bones they had been assigned to grind down to make fertilizer. Today, we withdraw unemployment benefits from people who refuse even unpaid “work”. Is it any wonder that real unskilled wages have been falling?

Falling wages mean reduced demand in the domestic economy and lower tax revenues. If there are in-work benefits, falling wages also mean higher benefit bills. The “roundsman” system resulted in unsustainable benefit bills, as employers under-employed at market rates in the knowledge that they could pay less for the “reserve army” of unemployed labourers auctioned off by the parishes. These days, we prevent Dutch auctions in unskilled labour by imposing minimum wages. Ostensibly, this is to “make work pay”: but as benefit withdrawal for people on minimum wages can mean marginal tax rates of 100% or more, work at the minimum wage may not actually pay at all, though it does limit the benefit bills. But we haven't addressed the root cause of the problem: because we still subscribe to Victorian ideas that people will prefer to live on benefits than work to improve their lot, we are still – nearly two hundred years later – trying to compel people to work. The result is spiralling regulation and intervention in labour markets to limit the race to the bottom that such compulsion causes. We have learned nothing from our history.

But worst of all, using rules and sanctions to compel the genuinely work-shy to work diverts attention and resources away from those who really need help. And it unfairly stigmatises the vast majority of those who are not working, or who are not working as many hours as we think they should, whether through unemployment, sickness or disability. Study after study has shown that in general, people want to work. The problem is that suitable jobs aren't always available. And yet there remains a prevalent view, even among people who should know better, that people must be compelled to work, or to work harder, with harsh treatment. But today's sanctions for those who won't or can't work are mild compared to the punishments of old: why should they be any more successful? We would do better to concentrate our attention on helping those who genuinely want to work to find fulfilling, productive and well-paid jobs.

And we should also stop trying to decide whether someone “deserves” social support. We have been trying to distinguish between the “deserving” and “undeserving” poor for eight hundred years, and we are no better able to make that judgement now than we were in the fourteenth century, or the sixteenth, or the nineteenth.

It is time to give up this fruitless attempt to judge people's motives. Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.

_________________________________________________________________________________

Related reading:

Rolling out Universal Credit - National Audit Office
Productivity and Employment - Coppola Comment

* I do not mean to suggest that all homeless beggars in London are frauds. But we should recognise that professional begging exists today just as it did in the fourteenth century. Some things never change.

Image is The Andover Bastille, a cartoon from the time of the Andover case. Courtesy of Wikipedia

This post was originally published on PieriaView in 2014, under the title "Categorising the Poor". 

Could Obamacare have lead to lower fertility?

Published by Anonymous (not verified) on Mon, 11/06/2018 - 10:53pm in

[just a thought]

US total fertility rates were bobbing along very placidly around 2.05 live births per woman from 1990 to 2010, when suddenly there was a clear drop to 1.8 in 2010-2017. That drop has even continued to 1.76 births per woman in 2017. When I asked myself what could possibly explain this, the only real candidate I come up with is Obamacare, which became active in 2010 and was successful at insuring more than 20 million people. Fertility rates peaked in 2010 at 2.1 and then steadily came down in 2011 (1.9) to 1.76 now.

Its an uncomfortable hypothesis, but it has to be the front runner because there is no other obvious culprit. The 2008-2010 recession had no effect on fertility, and the subsequent recovery after 2010 didn’t push employment levels above those of the early 00s. So its unlikely to be the economy. Its also unlikely related to the huge incarceration levels in the US (around 2.1 million in prison and jail in 2017), simply because those levels peaked just before 2010 and have actually gone down since then, without leading to a glut in new babies.

There is also a possible mechanism, which is that ‘the package known as Obamacare’ included increased availability of contraception and a lower barrier to entering the health system, both of which should be expected to increase use of contraceptives and more knowledge of reproductive health. This would have particularly mattered for those amongst whom pregnancy is a bit of an unwanted accident, ie teenagers. Interestingly, recorded abortions actually dropped 25% since 2008, so its not more abortions but simply less pregnancies that are causing the drop in fertility.

Surely not, I hear you scream! How could you think such a thing!

Well, there are actually papers which say pretty much the same thing. One is a 2016 paper looking at the effect of school-based health centers, finding a big drop in teenage fertility amongst the poor. There is also evidence that the cost of contraceptives reduced a lot. And you indeed see record lows in teenage pregnancies in the US.

It is difficult to convincingly show this train of thought though, because these effects are not likely to materialise immediately but will slowly emerge, which makes them impossible to detect with the methodology social scientists now prefer to identify these things: we like to see immediate jumps to a new equilibrium if a large change has occurred.

Still, the deep tradeoffs involved between average happiness and population numbers if this hypothesis were true are painful. Let us not forget that France lost its pre-eminence in Europe in the 19th century because it was out-bred by Germany! If a welfare system indeed prevents many teenage girls from becoming professional mothers, and instead leads them to more productive lives with less children, then that would mean there is a long-run effect of Obamacare on the level of the US population, which in turn will affect its clout in this world.

No more than a thought though. Happy to be proven wrong!

 

From Basic Income to Poor Law and Back Again – Part 3: Renewing the Social Minimum

Published by Anonymous (not verified) on Sun, 03/06/2018 - 10:25pm in

Tags 

employment

In part 1 of this series on Basic Income, we travelled back in time to England on the eve of the industrial revolution in search of the first Basic Income scheme. When capitalism supplanted the traditional master-and-servant system of pre-industrial England, the Speenhamland system of local benefits for rural workers was replaced by the brutalities of the New Poor Law that denied benefits to ‘able-bodied’ unemployed people so that the factories had a ready supply of labour.

In the 20th century, the labour movement and social reformers learned from the past that under capitalism, the labour market, politics and social welfare are intertwined. They built a ‘welfare state’ on a foundation of universal suffrage, full employment, labour regulation, universal social services, and social security for people lacking enough income to live decently.

In part 2, we identified challenges to the modern welfare state including precarious employment, attempts to wind back social spending, and the increasingly harsh treatment of people relying on working-age social security payments which recalls the Poor Law distinction between ‘deserving and undeserving’ poor. This has led to new questions about whether, and how, a Basic Income scheme might be part of the solution.

This piece (Part 3) examines the structure of the ‘social minimum’ (minimum incomes) in Australia, and explores the implications of replacing parts of this system with different kinds of Basic Income.

The three pillars of the social minimum

Income support is only one element of the ‘social minimum’ – the set of social guarantees that underpin income security in wealthy capitalist societies. The three pillars of a decent minimum income are the family, labour market regulation, and the welfare system, broadly defined.

Figure 1 shows trends in key components of the social minimum income in Australia.

Figure 1: Wages, benefits and pensions for a single adult ($ per week, adjusted for inflation)

social minimum graph

Sources: ACOSS (2017)OECD StatExtractsDepartment of Social Services
Note: Minimum wage for a fulltime worker, excluding overtime. Average weekly ordinary-time earnings in main job for men and women. Family payments for two children (one of primary school-age, the other of preschool age), including maximum Rent Assistance.

Over the last two decades, the social minimum has lagged behind growth in average full-time wages. This has contributed to growth in poverty and income inequality. Figure 1 shows:

  1. Newstart Allowance (unemployment benefit) is very low (currently $38 a day) and has not increased above inflation for over 20 years. The last ‘real’ increase was a $2 a week rise from the Keating government in 1994.

2.Minimum wages have barely increased in real terms for two decades, and there is a reasonably consistent relationship between them and Newstart Allowance rates.

  1. Consistent with Poor Law principles, allowances for those deemed ‘able to work’ are much lower  than pensions for those deemed ‘unable to work’.
  2. Apart from pensions (which are indexed to wages), the social minimum is falling behind wider community living standards, proxied here by the average full-time wage. That is, the benefits of rising productivity and living standards have largely been denied to unemployed people and minimum wage-earners for two decades. Their living standards were effectively frozen in an era when the internet was in its infancy.
  3. Family payments for those with low incomes rose in real terms during the 2000s but have since declined. This is due to the removal of their indexation to wages in 2009 and subsequent decisions to freeze maximum rates of payment.

Back to a Basic Income?

A Basic Income scheme alone cannot guarantee that everyone in or out of paid work has a decent income. Critics of universal basic income are right to warn that replacing employment, wage and welfare protections and services with a minimum income guarantee is risky. It risks a repeat of the Speenhamland experience that powerful interests pull the new system down, arguing that it’s too costly and work incentives and the ‘dignity of work’ would be diminished. Another risk is that income protections in the other pillars of the social minimum – especially wages and human services – would be adjusted downwards.

A better question to ask is whether a Basic Income, together with reforms to strengthen the other pillars of the social minimum, could ensure income security for all.

Much depends what kind of Basic Income scheme is introduced. Some options are:

  1. A ‘living income’ (which people can live on in accordance with general community expectations – that is, above poverty levels) to replace the present social security system. This has two variants – an income-tested payment and a universalone.
  2. An ‘income supplement’ which is not enough to live on, but supplements wages or social security payments to give people more flexibility to negotiate a more uncertain labour market, help with extra costs (such as a disability or retraining) or to combine employment with other roles such as care. This is usually advocated as a universal payment, or one that at least extends to the majority of income-earners.

At the heart of the contest between different Basic Income models are tensions between adequacy and universalism, and between the obligations and entitlements of citizens.

Either a living income or an income supplement could be conditional (for example, on labour market participation) or unconditional (for example, an entitlement of citizenship). This distinction was drawn by Tony Atkinson, who advocated a ‘Participation Income’.

Tensions between adequacy and universalism arise due to the high cost of a universal scheme providing sufficient income for people to live on. As Martinelli (2017) puts it: ‘an affordable UBI would be inadequate, and an adequate UBI would be unaffordable’.

Whiteford estimates that a universal, unconditional Basic Income set at the pension rate ($21,000 a year for a single adult), with allowances for partners and children, would cost $360 billion a year, compared with the $150 billion cost of existing social security payments. A large increase in tax rates (not only for high income-earners) would be needed if this were funded through the income tax system, even if the Univeral Basic Income replaced the tax-free threshold (Scutella 2004).

On the other hand, a Universal Basic Income costing the same as the current social security and welfare programs would yield a payment of around $6,000 a year, less than half the already inadequate Newstart Allowance ($13,500).

Basic Income options for Australia

Most debate in Australia has focused pragmatically on two options (the shaded segments of Table 1):

  1. A ‘Basic Living Income’ that replaces existing income support and is means-tested. An example is the ‘common working-age payment’ advocated by a government welfare reviewin 2001.
  2. modest ‘Universal Basic Income’that supplements income support and minimum wages and is not means-tested. An example was the ‘Guaranteed Minimum Income’ advocated by the Henderson Poverty Report in 1976.

Table 1: Types of Basic Incometypes of basic income

Impact of options on the labour market and welfare system

What is the likely impact of these basic income options on the labour market and welfare system?

Much of the debate over the labour market impact of a Basic Income scheme concentrates on ‘work incentives’ for paid work. As Martinelli (2017) and Bowman et al (2017) point out, this argument has been over-stated. Experimental unconditional Basic Income schemes in the United States and elsewhere have only marginally reduced labour force participation. The myth of the ‘dole bludger’ who would rather do nothing at home than work is just that. The main impacts on paid workforce participation were among people who gave priority to other activities, especially caring and studying.

The more interesting, and more important, labour market impact of a basic income is its effect on wages. This could go either way. If workers have an alternative to working for wages they may drive a harder bargain, in which case wages would rise. Alternately, if workers have access to a wage supplement, employers may drive a harder bargain to capture this subsidy, or the Fair Work Commission may discount minimum wages, in which case wages would fall.

According to Martinelli (2017) and Gray (2017), who can drive the harder bargain depends on which Basic Income option is chosen.

Option 1 (Basic Living Income) is likely to improve pay and conditions for low-skilled work. It might (modestly) reduce workforce participation among unemployed people, especially if unconditional. Low-skilled workers, who are less likely to have substantial family resources or personal savings to fall back on, would have a viable alternative to working in a job they don’t want.

If the Basic Living Income were income tested to moderate its cost, then it is of no immediate benefit to middle and higher income-earners, but would still play a vitalinsurance role for those households. We all face risks such as redundancy, ill health or marital separation.

Option 2 (modest Universal Basic Income) is likely to strengthen pay and conditions for higher-skilled work and may reduce their paid workforce participation slightly (mainly among parents and other carers). This is because even a modest Basic Income would enhance choices for those with significant family support or savings.

However, it would probably reduce wages for low-skilled workers who lack family support or savings. A modest Universal Basic Income would do little to improve their bargaining power. Unless it is built on a solid foundation of robust minimum wages and secure working hours, the subsidy is likely to captured by employers, especially if Fair Work Commission takes account of a major increase in public support when setting minimum wages.

Climbing or sinking?

ladder

(Source: Koi Bito Forum)

The end result could be an increase in wage inequality. By supplementing low-paid, insecure work, there is a risk that a Basic Income that is too low to live on could entrench it for people lacking bargaining power.

In Part 4, I will examine three possible responses to the dilemmas identified above: (1) a means-tested Basic Living Income; (2) a less strictly means-tested ‘life cycle’ Living Income and (3) A set of smaller Supplements to meet particular costs. These could be combined to form a two-tier Basic Income scheme with a base rate of payment to meet general living costs and a supplementary tier to meet additional costs.

This four part series is written based on the presentation, ‘From basic income to poor law and back again: can a UBI break the Gordian Knot between social security and waged labour?’, by Peter Davidson at the Australian Social Policy Conference at UNSW on 27 September 2017.

 

The Job Guarantee and the Economics of Fear: A Response to Robert Samuelson

Published by Anonymous (not verified) on Sat, 26/05/2018 - 12:43am in

The Job Guarantee is finally getting the public debate it deserves and criticism is expected. Building on several decades of research, the Levy Institute’s latest proposal analyzes the program’s economic impact and advances a blueprint for its implementation. Critics have taken note and are (thus far) restating the usual concerns, but with a notably alarmist tone.

The latest, courtesy of the Washington Post’Robert Samuelson, warns that the Job Guarantee would be 1) an expensive big-government takeover, 2) unproductive and impossible to manage, 3) dangerously disruptive to the private sector, and 4) inflationary.

Samuelson wants us to be afraid—very afraid—of big government. But he forgets that we already have big government—one that devotes hundreds of billions of dollars, time, resources, and administrative effort to deal with all the economic and social costs of unemployment, underemployment, and poverty.

Unemployment is already paid for. In this context, the program does not increase the government’s costs—it reduces them—while also cutting costs to households and firms and creating real actual benefits by supporting families, communities, and the economy. As David Dayen points out, whether we can afford the Job Guarantee is not up for debate.

Will the Job Guarantee create impossible-to-manage make-work projects? This is a fear that James Galbraith—a self-proclaimed former skeptic of the Job Guarantee—calls “an admission of impotence and a call for preemptive surrender.” Kate Aronoff recalls that New Deal projects were often derided as boondoggles. Still, they rebuilt communities, the economy, and people’s lives, while leaving a lasting legacy.

The Job Guarantee is subjected to a unique double standard for managerial efficiency. We never hear objections to going to war, “nation building,” or bailing out the financial sector on the grounds that these efforts would be an “administrative nightmare.” And yet our proposal to put our underutilized labor force to productive use, by using much of the existing institutional infrastructure in the nonprofit and state and local government sectors is dismissed as an impossibly difficult task.

The claim that the Job Guarantee is unproductive misses another basic point: unemployment is inherently unproductive. What is the productivity of an unemployed person and her family struggling to make ends meet, compared to her productivity when she is employed in a public service job with decent pay?

Environmental renewal and restoration, clean up of blighted communities, enrichment programs for children, care for the elderly, and jobs for artists and musicians are unproductive under some definitions—those that treat only work that produces output for sale as productive. We disagree. Employing previously unemployed or underemployed people is inherently more productive than the current model of unemployment and neglect.

Critics think the program will face large skill and geographical mismatches, but ignore the fact that communities with the highest levels of unemployment also have the greatest social needs. The Job Guarantee puts the two together. It “takes the contract to the worker” and “takes workers as they are.” We have provided many examples of such projects that fulfill community needs, are labor intensive, and can employ even the least skilled among us.

But according to Samuelson, the Job Guarantee is dangerous for another reason: workers outside the program who realize that the Job Guarantee offers decent pay, healthcare, and childcare to its employees will stage a “political rebellion.”  This—he supposes—is a much scarier scenario than having millions of workers earning poverty-level wages, without health coverage or affordable childcare.

Which brings us to the fear of disrupting “business as usual” in the private sector. Yes, we want to disrupt business models that can only be successful if they pay poverty-level wages without the benefits that are common in all of the developed countries. In the IT world, “disruptions” are hailed as progressive and innovative. The Job Guarantee is the policy innovation that secures a true antipoverty wage floor for all—one that firms must meet.

And if none of the above scares you, critics want you to fear the program’s inflationary effects that are supposed to result from raising the program’s wage to $15 per hour by 2022. That would establish an effective national minimum wage—raising it from the current abysmal $7.50 an hour to $15 per hour. As wages rise, it is true that that the price level will probably increase as employers adjust to higher labor costs.

But Samuelson, like others, confuses a key issue: a one-time increase in the price level is not inflation (i.e., a continuous rise in the price level). Our model finds negligible inflationary impact from the program and we stress its key anti-cyclical feature: the program shrinks in expansions—i.e., it is a dampening force on inflation.

So let’s recap. What should we fear more: a world in which unemployment and depressed wages are the norm, or one with an employment safety-net and living wages for all?

Samuelson may think the Job Guarantee is a “loony economic agenda.” Thankfully, the architects of the New Deal reforms or the Civil Rights legislation did not think this way. Americans are tired of being told what can and cannot be done. They demand bold action and a majority supports the program. The Job Guarantee is a first step toward completing the Roosevelt revolution and securing Roosevelt’s economic bill of rights.

The Job Guarantee and the Economics of Fear: A Response to Robert Samuelson

Published by Anonymous (not verified) on Sat, 26/05/2018 - 12:43am in

The Job Guarantee is finally getting the public debate it deserves and criticism is expected. Building on several decades of research, the Levy Institute’s latest proposal analyzes the program’s economic impact and advances a blueprint for its implementation. Critics have taken note and are (thus far) restating the usual concerns, but with a notably alarmist tone.

The latest, courtesy of the Washington Post’Robert Samuelson, warns that the Job Guarantee would be 1) an expensive big-government takeover, 2) unproductive and impossible to manage, 3) dangerously disruptive to the private sector, and 4) inflationary.

Samuelson wants us to be afraid—very afraid—of big government. But he forgets that we already have big government—one that devotes hundreds of billions of dollars, time, resources, and administrative effort to deal with all the economic and social costs of unemployment, underemployment, and poverty.

Unemployment is already paid for. In this context, the program does not increase the government’s costs—it reduces them—while also cutting costs to households and firms and creating real actual benefits by supporting families, communities, and the economy. As David Dayen points out, whether we can afford the Job Guarantee is not up for debate.

Will the Job Guarantee create impossible-to-manage make-work projects? This is a fear that James Galbraith—a self-proclaimed former skeptic of the Job Guarantee—calls “an admission of impotence and a call for preemptive surrender.” Kate Aronoff recalls that New Deal projects were often derided as boondoggles. Still, they rebuilt communities, the economy, and people’s lives, while leaving a lasting legacy.

The Job Guarantee is subjected to a unique double standard for managerial efficiency. We never hear objections to going to war, “nation building,” or bailing out the financial sector on the grounds that these efforts would be an “administrative nightmare.” And yet our proposal to put our underutilized labor force to productive use, by using much of the existing institutional infrastructure in the nonprofit and state and local government sectors is dismissed as an impossibly difficult task.

The claim that the Job Guarantee is unproductive misses another basic point: unemployment is inherently unproductive. What is the productivity of an unemployed person and her family struggling to make ends meet, compared to her productivity when she is employed in a public service job with decent pay?

Environmental renewal and restoration, clean up of blighted communities, enrichment programs for children, care for the elderly, and jobs for artists and musicians are unproductive under some definitions—those that treat only work that produces output for sale as productive. We disagree. Employing previously unemployed or underemployed people is inherently more productive than the current model of unemployment and neglect.

Critics think the program will face large skill and geographical mismatches, but ignore the fact that communities with the highest levels of unemployment also have the greatest social needs. The Job Guarantee puts the two together. It “takes the contract to the worker” and “takes workers as they are.” We have provided many examples of such projects that fulfill community needs, are labor intensive, and can employ even the least skilled among us.

But according to Samuelson, the Job Guarantee is dangerous for another reason: workers outside the program who realize that the Job Guarantee offers decent pay, healthcare, and childcare to its employees will stage a “political rebellion.”  This—he supposes—is a much scarier scenario than having millions of workers earning poverty-level wages, without health coverage or affordable childcare.

Which brings us to the fear of disrupting “business as usual” in the private sector. Yes, we want to disrupt business models that can only be successful if they pay poverty-level wages without the benefits that are common in all of the developed countries. In the IT world, “disruptions” are hailed as progressive and innovative. The Job Guarantee is the policy innovation that secures a true antipoverty wage floor for all—one that firms must meet.

And if none of the above scares you, critics want you to fear the program’s inflationary effects that are supposed to result from raising the program’s wage to $15 per hour by 2022. That would establish an effective national minimum wage—raising it from the current abysmal $7.50 an hour to $15 per hour. As wages rise, it is true that that the price level will probably increase as employers adjust to higher labor costs.

But Samuelson, like others, confuses a key issue: a one-time increase in the price level is not inflation (i.e., a continuous rise in the price level). Our model finds negligible inflationary impact from the program and we stress its key anti-cyclical feature: the program shrinks in expansions—i.e., it is a dampening force on inflation.

So let’s recap. What should we fear more: a world in which unemployment and depressed wages are the norm, or one with an employment safety-net and living wages for all?

Samuelson may think the Job Guarantee is a “loony economic agenda.” Thankfully, the architects of the New Deal reforms or the Civil Rights legislation did not think this way. Americans are tired of being told what can and cannot be done. They demand bold action and a majority supports the program. The Job Guarantee is a first step toward completing the Roosevelt revolution and securing Roosevelt’s economic bill of rights.

From Basic Income to Poor Law and Back Again – Part 2: Whither the Welfare State?

Published by Anonymous (not verified) on Sun, 20/05/2018 - 4:45pm in

Tags 

employment

In the first part of this series, we followed the introduction and abolition of the first ‘Basic Income’ scheme, the Speenhamland system in the United Kingdom in the 19th century. When Britain industrialised, cash benefits were replaced by the ‘New Poor Law’ and the Dickensian workhouse. The conclusion drawn by social reformers was that to end poverty and financial insecurity, they would have to work on a broad front: from industrial regulation to universal suffrage and the construction of a welfare state (social security, education and community services). This strategy was very successful, but now there are concerns that it no longer works and can’t be sustained.

The Australian post-war welfare state was built upon a ‘social minimum’ in two parts.

In the labour market, it included a high minimum hourly wage, full employment and regular working hours (for men), and a high unionisation rate that supported collective bargaining and industrial arbitration. Frank Castles (1996) described this as a ‘wage-earners’ welfare state’.

This was complemented by social protections won through universal suffrage and political campaigning. They included free public education, (mostly) free public health services, a robust public Vocational Education Training (VET) system, the Age Pension, an unemployment benefit safety net backed by a public employment service, and family payments to supplement the minimum wage and reduce child poverty (both for families in & out of paid work).

It’s now argued that these social protections (at least for people of working age) cannot be sustained as the neo-liberal form of capitalism has removed trade barriers, restricted public spending, and brought intense competitive pressure to bear on the labour market so that a regular job as we know it will soon be a thing of the past. This is one of the main arguments for a new system of social protection to replace the social security system and/or minimum wages: a Universal Basic Income (UBI). More ambitious than Speenhamland, this form of basic income would extend well beyond the working class as a universal citizen entitlement.

Some UBI advocates argue that the final nail in the coffin of traditional ‘welfare’ is the emergence of the ‘gig economy’ and widespread use of intelligent machines, which have been predicted to displace almost half of today’s jobs. This, they argue, would make room for an economy where we don’t need to work as long or hard as we do now. With fewer jobs, the link between social security and paid employment will become outdated and ‘work tests’ will be pointless.

In our search for the ‘shock of the new’, we sometimes forget that Australia has undergone three decades of labour market and social change, including expansion of the role of markets in a traditional domain of the State (for example VET and employment services), the re-casting of women’s roles in care and the formal labour market, the erosion of collective bargaining and the shrinking of industrial awards to a safety net, and growth in part-time and casual employment.

What’s changed and what has stayed the same?

Some of the above predictions are wide of the mark. It’s vital that we understand to what extent the old rules of the economy and welfare state have changed, and to what extent they remain the same.

First, and most obviously, public social expenditure has not collapsed despite decades of ‘austerity’ policies (see Figure 1). As quickly as old programs were cut, new needs were identified (especially in health care).

Figure 1: Public social expenditure has grown
basic income-welfare spend

Source: OECD Social expenditure data base

Rather than retrench social programs, governments have redesigned them and shifted priorities. Among the most important changes were ‘activation policies’, which prioritise employment for people of working age on social security payments, and the use of market mechanisms for government services.

One of the biggest shift in priorities in Australia and elsewhere was from benefits and services for people of working age (which have been neglected while their recipients are pilloried in the media), towards necessary improvements in retirement incomes and health care as the baby boomers retire (Daley & Coates 2016).

One sign of this bias against poorer, younger people is the failure in Australia to increase Youth and Newstart Allowances for unemployed people and students, whose real value has been frozen for the last 20 years. As a result, Newstart Allowance for a single adult is just $270 a week, $180 less than the pension. Pensions are indexed the way all social security payments should be: to wage movements, so that those on the lowest incomes share in the benefits of productivity improvements across the economy.

Another sign is the ‘welfare dependency’ mantra which blames unemployed people, sotto voce, for the cost of social security, even though unemployment payments comprise just 10% of overall Commonwealth social security and welfare spending (ACOSS 2017).

Activation policies

Over the past 25 years, expectations of paid workforce participation among social security recipients have intensified, under ‘activation’ policies pursed in most wealthy nations. This is part of an international trend towards higher workforce participation in wealthy nations, especially among women.

Activity requirements aren’t new for people we used to classify as ‘unemployed’: work tests have always been part of the eligibility conditions for unemployment benefits. What’s changed is the scope and intensity of these requirements (including supervised job search and joining training courses and other programs), and their extension to ‘new groups’ of working-age payment recipients. In 2003, the Howard Government launched an ‘Active Participation Model’ of employment services in which unemployed people had to follow a ‘service continuum’ of gradually intensifying requirements including Work for the Dole. Three years later these requirements were extended to many sole parents and people with disabilities under the ‘Welfare to Work’ policy.

Promotion of workforce participation, and help to secure a decent job, has potential benefits. Whiteford & Adema compared anti-child poverty policies across wealthy nations and found that a combination of adequate benefits and help to secure paid employment – as pursued in the Nordic countries – achieved the best results. Where many are excluded from paid work by structural changes in the economy, disabilities, or caring roles, public investment in paid work experience, training, child care and other employment-related assistance (including partnerships with employers to encourage them to take on people they would not otherwise employ) can make a difference.

Employment assistance is in need of improvement in Australia, where over two-thirds of people receiving Newstart Allowance have received income support for more than a year, often for the above reasons.

Not all countries have pursued the same ‘activation’ policies. It’s widely acknowledged that some countries aim to strengthen people’s work capacities and skills while others resort to ‘work first’ policies that impose activity requirements mainly to pressure people to leave benefits as quickly as possible.  ‘Work for the Dole’ is a good example of the latter approach.

In Australia today, unemployed people are caught in a welfare trap but not the ‘intergenerational dependency’ the present government claims. They are caught between the high expectations and ever-increasing requirements of activation policies and the reluctance of governments and employers to invest in people who can’t simply walk into a job within a month or two of unemployment, even if the labour market picks up.

Our lean welfare state imposes maximum activation with minimum support. For example, unemployed people must generally search for 10 jobs a fortnight but consultant caseloads in ‘jobactive’ services of up to 300 have been reported. Many don’t receive the help they need.

As long as our two-tier social security system remains, ‘welfare to work’ policies mean that a growing number of parents and people with disabilities are shifted from pensions to the lower Newstart payment.

In recent years, the government has imposed new expectations on unemployed people that extend well beyond what can reasonably be expected to improve their job prospects: 15 to 25 hours a week of ‘Work for the Dole’, income management, and lately drug tests – all on the assumption that unemployment is caused by some kind of moral failure.

It seems the poor law is still with us.

Yet, activation policies challenge at least part of the old poor-law logic: if all who are able to join the paid workforce are required and supported to do so, there is no longer any justification to pay them less than those who cannot. Activation policies make the pension-allowance divide redundant, opening up the possibility of a ‘basic income’ that’s based on need rather than ‘deservingness’.

What’s changed in the Labour market?

Economists have been predicting the emergence of a ‘leisure society’ for a long time now. John Maynard Keynes famously predicted that by 2030 most jobs would be part-time and that ‘we shall do more things for ourselves than is usual with the rich today, only too glad to have small duties and tasks and routines.’ As John Quiggin points out, Keynes missed a few important trends including the conversion of much of traditional ‘women’s work’ into paid jobs. And of course, capitalism and modern marketing created new ‘needs’ which kept our noses to the (paid work) grindstone.

This is not the place to follow these debates in detail. The following relies much on an excellent paper by Borland & Coelli (2017), in which they track the impact of technological change on the Australian labour market over the last two decades, and assess whether jobs have become more scarce or precarious. Below are some of their key conclusions.

  1. Jobs and working hours have not declined overall

Since much growth in employment has been part-time, the volume of working hours per capita is a better summary of the state of employment than the share of people employed.

Figure 2 shows that, apart from the 70s and early 80s (which economist Bob Gregory called the ‘disappointing decades’), overall working hours increased from the 1960s to the Global Financial Crisis in 2008.

Figure 2: Hours of work per capita, Australia, 1965/66 to 2015/16, Actual hours worked series (Equals 100 in 1965/66)

basic income-trends in working hours

Source: Borland J & Coelli M (2017)

  1. Robots won’t simply replace jobs, they will redistribute and redesign them

In 2013, Frey & Osborne made the explosive prediction that over the next decade or two from 2010, 47% of US jobs were at high risk from the spread of intelligent machines (computers and robots).

Others argued that this risk was unlikely to be realised in most cases, as intelligent machines complement the work of humans as well as displacing it. Borland & Coelli (2017)suggest that 10% or less of current jobs in Australia will go over the next few decades.

Whether we end up with the same number of jobs and hours per capita or not, there is a broad consensus that the labour market will continue to polarise between skilled and routine jobs (Figure 3), and manual labour and services (with the former gaining ground at the expense of the latter in each case):

Computerization has substituted for low-skill workers in performing routine tasks while complementing the abstract, creative, problem-solving, and coordination tasks performed by highly-educated workers.

As the declining price of computer technology has driven down the wages paid to routine tasks, low-skill workers have reallocated their labor supply to service occupations, which are difficult to automate. (Autor D & Dorn D (2013))

 Figure 3: Share of employment by skill (Australia, 1986-2006)

basic income-jobs by skill

Source: Borland & Coelli (2017)

So far, the losers have been workers with skills suited to routine jobs, especially routine manual jobs.

  1. Jobs are less secure for some, much the same for others

Another common claim is that jobs are less secure and more people are unable to obtain the working hours they need for a decent income. The real story here is mixed – with winners and losers depending on age and gender.

Figure 4 shows that a declining share of employees is leaving or losing their job each year, and that job turnover among women is converging downwards towards male turnover rates (which are gradually rising). Men still fare ‘better’ (to the extent that staying in the same job is a good outcome, which is not always so), but less so than in the past.

Figure 4: Rate of outflow from employment: Australia (1980-2016)

basic income-job mobility

Source: Borland & Coelli (2017)

Figure 5 shows trends in un- and under-employment. That is the share of people who lack the paid hours they seek.

The striking trend since the early 1990s is the divergent experiences of young, middle-aged and older people. It is clear that young people have borne the brunt of growth in un- and under-employment since then. However, if mature age workers lose their old ‘steady job’, they seem to face a labour market just as hostile as that confronting young people.

Figure 5: Labour under-utilisation (unemployment + under-employment) by age (Australia, 1978-2014)

basic income underemployment

Source: Borland & Coelli (2017)

  1. The ‘gig economy’ is not new

Growth in precarious employment is not inevitable. Jim Sandford points out that for the first half of the 20th century a large share of jobs, especially low-skilled ones – were either casual (daily hire) or paid at ‘piece rates’ (according by work done rather than by the hour).

In the 1940s, wharfies lined up outside the docks each day to be told whether or not they would be given a job. ‘Uberisation’ is a high-tech version of the ‘hungry mile’.

The 1940s: The Hungry Mile
basic income-hungry mile

‘It was to this mile of wharves that maritime labourers in the nineteenth century and on into the 1940s, tramped each day regardless of the weather to find casual, low paid work, because that was the nature of waterfront work in those days.’ (Source: Rowan Cahill, Union Songs)

2010s: ‘The gig economy’

basic income-gig economy

(Source: New York Times)

We managed to turn the tide against casualisation under conditions of full employment after World War Two. Information technology increases the risk, but also makes it easier to organise against it (for example, through union recruitment campaigns, cooperatives, and consumer boycotts).

There is a danger that if we concede defeat in the face of the ‘gig economy’, casualisation could become a self-fulfilling prophecy for a new generation of workers.

Conclusion

The threat to traditional forms of social protection is real, but it does not take the form that is popularly assumed. Jobs are not disappearing but workers with ‘routine skills’, and people entering or re-entering paid work after a long absence (including many young people, women and retrenched mature-aged workers) face greater risks of unemployment and job insecurity.

The welfare state is not shrinking but it is increasingly subjected to market disciplines, for example in the treatment of unemployed people.

In Parts 3 and 4 of this series, we ask whether a UBI or other variant of a basic income could help mitigate these risks.

This four part series is written based on the presentation, ‘From basic income to poor law and back again: can a UBI break the Gordian Knot between social security and waged labour?’, by Peter Davidson at the Australian Social Policy Conference at UNSW on 27 September 2017. 

 

Doubts aside, one million more jobs was never a big ask

Published by Anonymous (not verified) on Thu, 17/05/2018 - 8:05pm in

The biggest myth surrounding the Tony Abbott’s pledge of 1 million jobs in five years is that he reached for the stars.

Welcoming the 1 million mark several months ahead of schedule Malcolm Turnbull said it “seemed pretty ambitious at that time”.

It didn’t, because at the time Abbott made it, in November 2012 a year before the election, it was unexceptional.

His full commitment was to create “1 million new jobs within five years, and 2 million new jobs over the next decade”.

The previous five years had been pretty unimpressive. They included the financial crisis. But the five years before that, during the mining boom, had been stellar. Over the entire 10 years employment had climbed 2,106,500.

Which is why Abbott promised 2 million.

Early in his term a Coalition insider told Fairfax Media there had been no modelling or detailed calculations behind the pledge.

Abbott had looked at what Howard had achieved and “assumed they could achieve the same outcome”.

Population growth would help. It would be easier to boost the workforce by 2 million with the larger population we would have in 10 years time than with the smaller population Howard had.

For a while, unusually low jobs growth during Gillard’s last year and Abbott’s first made it look as if the target would be hard to beat. Calculated decisions to deny lifelines to Holden, Ford and Toyota forcing them to close made the target harder.

Labor’s Chris Bowen succumbed to the pessimism, saying at the time that all the evidence was that Abbott would “fall well short”.

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But an improving international economy and a gift from Julia Gillard turned things around. So big is the National Disability Insurance Scheme that it’ll cost $20 billion per year when fully operational, two thirds as much as defence.

The Productivity Commission believes it will create one in five of all the new jobs in the second half of this decade.

Abbott is odds on to get his second million, whether or not he or his colleagues are around to deliver it.

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.

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