tag:theconversation.com,2011:/au/topics/unemployment-rate-16533/articlesUnemployment rate – The Conversation2023-12-21T08:55:07Ztag:theconversation.com,2011:article/2084912023-12-21T08:55:07Z2023-12-21T08:55:07ZNigeria’s plantain wine: a traditional drink with huge economic potential<figure><img src="https://images.theconversation.com/files/542808/original/file-20230815-25-o1drw0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Plantain waste can be reduced in Nigeria and used in the production of wine. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.co.uk/detail/photo/green-and-yellow-plantains-royalty-free-image/1167085854?phrase=Plantain&adppopup=true">Getty Images </a></span></figcaption></figure><p>Agadagidi, a wine made from plantain, is a popular drink at festive occasions in Nigeria. But it’s not always of a high quality. </p>
<p>It is usually produced in the <a href="https://library.faraafrica.org/wp-content/uploads/2019/10/Guidebook-Plantain-production-in-Nigeria-rev.pdf#page=9">southern part of the country</a> in limited quantities because it is difficult to store. Akwa-Ibom, Cross River, Imo, Enugu, Rivers, Edo, Delta,
Lagos, Ogun, Osun and Oyo states are known for plantain cultivation.</p>
<p><a href="https://office2.jmbfs.org/index.php/JMBFS/article/view/8258">Our study</a> examined ways to improve the production of agadagidi and ultimately create more jobs. </p>
<p>Agadagidi is traditionally produced from overripe plantain by fermenting the juice, known as must, for three days and filtering it thereafter. The juice has a cloudy appearance, is effervescent and has a sweet-sour taste.</p>
<p>Given that plantain is readily available in the country, and imported wines are expensive, we conducted <a href="https://office2.jmbfs.org/index.php/JMBFS/article/view/8258">research</a> to establish if it was possible to make better quality agadagidi. </p>
<p>In Nigeria the <a href="https://www.sciencedirect.com/science/article/pii/S2468227618302357">agricultural sector</a> employs about 70% of the labour force and contributes about 30% of the national GDP. Smallholder farmers account for almost 90% of the total food production. </p>
<p>But losses due to poor post-harvest practices can reach up to 50% for some fresh food produce. Half of the food that is produced for humans never gets consumed. The country grapples with <a href="https://www.sciencedirect.com/science/article/pii/S2468227618302357">food insecurity</a> partly due to bottlenecks such as high food losses along its food supply chains. Farmers also lose out on income.</p>
<p>Plantain production <a href="https://knoema.com/data/agriculture-indicators-production+plantains+nigeria">increased</a> from 994,000 tonnes in 1972 to 3.12 million tonnes in 2021. The average production increase is 2.75% which could be a boon to the economy if well managed. </p>
<p><a href="https://office2.jmbfs.org/index.php/JMBFS/article/view/8258">Our study</a> was carried out to optimise the production process to make it safe and of consistent quality. This would be beneficial in a number of ways: it would reduce reliance on imported wine, reduce waste and encourage the production of indigenous wineries, thereby creating jobs and boosting Nigeria’s economy. </p>
<h2>How we conducted our research</h2>
<p>One batch of agadagidi was produced using the traditional method. We also produced agadagidi using controlled fermentation and divided the liquid separated into six batches testing various scenarios using sodium metabisulphite and wine yeast. Some of the samples were pasteurised and some not. </p>
<p>All samples were fermented for three days and dispensed into sterile bottles. </p>
<p>Microbial count, pH and acidity were determined at a weekly intervals for a period of three weeks. </p>
<p>Microorganisms were identified to determine the safety of the products and the consumer acceptability test was also assessed.</p>
<h2>Our findings</h2>
<p>All the unpasteurised samples treated with sodium metabisulphite with or without the addition of wine yeast were acceptable in terms of microbial count, physicochemical properties and consumer acceptability.</p>
<p>Our method could be replicated on a large scale using the same materials we did. It’s also made easier with the abundant plantain in Nigeria. The country can generate more jobs for its teeming young population. Nigeria’s unemployment rate is expected to rise to <a href="https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2023/03/kpmg-global-economic-outlook-h1-2023-report.pdf#page=47">40.6% in 2023 as compared to 2022’s 37.7%</a>, and as high as 43.9% in 2024.</p>
<p>Our findings show that plantain waste can be reduced and used in production of wine. The quantity of imported wine consumed in Nigeria <a href="https://businessday.ng/business-economy/article/nigerias-wine-consumption-hits-record-high-in-2021/">increased</a> from 26.7 to 33.1 million litres from 2015 to 2021. In 2021, Nigeria <a href="https://oec.world/en/profile/bilateral-product/wine/reporter/nga#:%7E:text=Imports%20In%202021%2C%20Nigeria%20imported,and%20Italy%20(%246.14M).">spent US$116 million on wine imports</a>, becoming the 36th largest importer of wine in the world. </p>
<p>Optimisation of locally produced wine will reduce reliance on imported wine and boost the country’s economy, especially in these days of <a href="https://www.reuters.com/markets/currencies/nigeria-central-bank-make-moves-impacting-fx-markets-days-2023-08-14/">scarce foreign exchange</a>.</p><img src="https://counter.theconversation.com/content/208491/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Malomo Adekunbi Adetola receives funding from Carnegie and Dutch Government.</span></em></p>Increasing the quality of a traditional wine sourced from plantain in Nigeria offers a viable way of reducing waste and boosting food security.Malomo Adekunbi Adetola, Lecturer in Food Science and Technology, Obafemi Awolowo UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2094862023-07-12T20:04:34Z2023-07-12T20:04:34ZNew findings show a direct causal relationship between unemployment and suicide<figure><img src="https://images.theconversation.com/files/536714/original/file-20230711-27-7uc6gy.jpg?ixlib=rb-1.1.0&rect=0%2C240%2C5184%2C3205&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Studies using traditional statistical methods have long indicated a link between unemployment and suicide. But until now it has been unclear if this relationship is causal. That is, even though the suicide rate is higher among the unemployed, can we definitely say unemployment directly leads to suicide?</p>
<p>We now can. Using advanced analytic techniques borrowed from ecology <a href="https://www.science.org/doi/10.1126/sciadv.adg3758">we have found</a> clear evidence of a causal relationship.</p>
<p>Based on Australian Bureau of Statistics data on <a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/labour-statistics-concepts-sources-and-methods/2021/concepts-and-sources/underutilised-labour">underutilised labour</a> and suicide rates, we estimate that unemployment and underemployment in the 13 years from 2004 to 2016 directly resulted in more than 3,000 Australians dying by suicide – an average of 230 a year.</p>
<p>These findings have profound political, economic, social and legal implications, particularly in light of government and central bank policies that “require” unemployment. </p>
<h2>How we detected causality</h2>
<p>To test for causal effects of unemployment and underemployment on suicide, we applied a technique known as convergent cross mapping.</p>
<p>This method has been developed over the past decade to detect causality in complex ecosystems. Among other things, it has been used to study and show causal relationships between cosmic rays and global temperature, and humidity and influenza outbreaks. The period of our study (2004 to 2016) was bound by the quality of available data. </p>
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<h2>Challenging economic orthodoxies</h2>
<p>A clear relationship between unemployment and suicide challenges governments and institutions to take greater responsibility for the impact of policies and actions. It challenges the ethics of ideas that require some level of unemployment for economic efficiency.</p>
<p>For example, last month the Reserve Bank of Australia’s deputy governor, Michele Bullock, said the unemployment rate <a href="https://www.rba.gov.au/speeches/2023/sp-dg-2023-06-20-q-and-a-transcript.html">would have to rise</a> to curb inflation. The central bank expects the unemployment rate to rise <a href="https://www.rba.gov.au/speeches/2023/sp-dg-2023-06-20.html">to 4.5% by the end of 2024</a>. The current rate <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/may-2023">is 3.6%</a>, with a further 6.3% of workers underemployed. </p>
<p>As Bullock noted, “full employment” to most people means that anyone who wants a job can find one. But most economists believe there is a need for a certain level of unemployment to prevent inflation.</p>
<p>This level is known as the Non-Accelerating Inflation Rate of Unemployment (NAIRU). It’s a theoretical concept, so there’s no way to be sure what the level should be, but before the pandemic the consensus was <a href="https://theconversation.com/vital-signs-australias-5-jobless-rate-is-not-full-employment-pushing-up-interest-rates-would-be-wrong-105523">that it was about 5%</a>.</p>
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Read more:
<a href="https://theconversation.com/with-unemployment-steady-at-3-5-inflation-fears-shouldnt-stop-australia-embracing-a-full-employment-target-203415">With unemployment steady at 3.5%, inflation fears shouldn't stop Australia embracing a full employment target</a>
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<h2>Impetus for far-reaching reform</h2>
<p>These findings of the human cost of joblessness bolsters the case for policies to achieve full employment as well as reduce the negative consequences of unemployment, through providing a liveable income and strengthening mental health systems. </p>
<p>Why should the unemployed face deprivation, stigmatisation and despair when unemployment is a consequence of deliberate policy decisions?</p>
<p>We hope our findings will spur discussions about expanding unemployment benefits and labour market reforms to achieve greater job security. We also hope to provoke a deeper conversation about the design of the economy and how it values people, beyond simply making money. </p>
<p>Building on the ideas of University of Queensland economist John Quiggin, the Mental Wealth initiative is proposing a <a href="https://insidestory.org.au/participation-income/">social participation wage</a>. Set at the rate of a liveable wage, it would recognise the social value of unpaid volunteer work, civic participation, environmental restoration, artistic and creative activity, and activities that strengthen the social fabric of nations.</p>
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Read more:
<a href="https://theconversation.com/meet-the-liveable-income-guarantee-a-budget-ready-proposal-that-would-prevent-unemployment-benefits-falling-off-a-cliff-146990">Meet the Liveable Income Guarantee: a budget-ready proposal that would prevent unemployment benefits falling off a cliff</a>
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<p>Legally there are implications concerning duty of care and the obligation of governments and institutions to safeguard the wellbeing of the population. These findings should contribute to discussions about legal frameworks relating to employment, work health and safety, discrimination and human rights.</p>
<p>A direct causal relationship between unemployment and suicide demands a re-evaluation of policies, a prioritisation of full employment, adequate social safety nets to prevent poverty, mental-health system reform, and greater urgency in shifting to a wellbeing economy.</p>
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<p><em>If this article has raised issues for you, or if you’re concerned about someone you know, you can call these support services, 24 hours, 7 days:</em></p>
<ul>
<li><p><em>Lifeline: 13 11 14</em></p></li>
<li><p><em>Suicide Call Back Service: 1300 659 467</em> </p></li>
<li><p><em>Kids Helpline: 1800 551 800 (for people aged 5 to 25)</em></p></li>
<li><p><em>MensLine Australia: 1300 789 978</em></p></li>
<li><p><em>StandBy - Support After Suicide: 1300 727 24</em></p></li>
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<p class="fine-print"><em><span>Jo-An Occhipinti is Managing Director of Computer Simulation & Advanced Research Technologies, an international alliance of centres of excellence in systems modelling to inform health and social policy. She also receives philanthropic funding from BHP Foundation for implementation of the 'Right care, first time, where you live' program working to strengthen youth mental health systems.</span></em></p><p class="fine-print"><em><span>Adam Skinner is supported by philanthropic funding from The Grace Fellowship, and from other donor(s) that are families affected by mental illness who wish to remain anonymous. </span></em></p><p class="fine-print"><em><span>Professor Ian Hickie is the Co-Director, Health and Policy at the Brain and Mind Centre (BMC) University
of Sydney. The BMC operates an early-intervention youth services at Camperdown under contract to
headspace. He is the Chief Scientific Advisor to, and a 3.2% equity shareholder in, InnoWell Pty Ltd.
InnoWell was formed by the University of Sydney (45% equity) and PwC (Australia; 45% equity) to
deliver the $30 M Australian Government-funded Project Synergy (2017-20; a three-year program for
the transformation of mental health services) and to lead transformation of mental health services
internationally through the use of innovative technologies.</span></em></p><p class="fine-print"><em><span>Yun Ju Christine Song receives funding from BHP Foundation for the implementation of the 'Right care, first time, where you live' program working to strengthen youth mental health systems.</span></em></p>We estimate that unemployment and underemployment in the 13 years between 2004 and 2016 directly resulted in more than 3,000 Australian deaths by suicide.Jo-An Occhipinti, Assoc. Professor and Head of Systems Modelling, Simulation & Data Science, Brain and Mind Centre, University of SydneyAdam Skinner, Research Fellow, University of SydneyIan Hickie, Co-Director, Health and Policy, University of SydneyYun Ju Christine Song, Research Manager, Youth Mental Health & Technology and Mental Wealth Initiative Lead, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2034152023-04-13T05:40:21Z2023-04-13T05:40:21ZWith unemployment steady at 3.5%, inflation fears shouldn’t stop Australia embracing a full employment target<p>Despite warnings of a global economic downturn, Australia has again defied the odds with its official unemployment rate remaining <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/mar-2023">steady at 3.5%</a> in March. </p>
<p>Behind that number though, plenty happened. The total number of people in jobs grew by 53,000. The increase of 116,600 in employment in the past two months surpasses anything seen since the middle of 2022, when the unemployment rate first hit 3.5%. It seems there is still plenty of strength in labour demand. </p>
<p>The only reason Australia doesn’t have an even lower unemployment rate is that labour-force participation rose by about the same amount as employment – 51,500. In fact, the similar size of increases in employment and labour-force participation in the past two months, together with continued high vacancy rates, suggests employment growth now depends on new entrants to the workforce.</p>
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<p>Another month with low unemployment is another month of the benefits that brings. Low unemployment means higher GDP, with more of the nation’s available labour supply being used to produce output. </p>
<p>It also means greater equity. Groups that have the most difficulty getting into work see the <a href="https://theconversation.com/unemployment-rate-back-down-to-3-5-its-anyones-guess-when-things-will-turn-201859">biggest boost in employment</a> when unemployment is low.</p>
<p>With these benefits in mind, you might expect that making unemployment as low as possible would be a constant policy objective for government. Yet I don’t believe that has been the case in recent times.</p>
<p>Instead, the focus has been on achieving the target rate of inflation. Since that target was adopted, in the early 1990s, attention to unemployment has progressively declined.</p>
<h2>Too much fear of inflation</h2>
<p>Certainly, there has been concern when the rate of unemployment has threatened to rise above 5% or 6%, as it did with the Global Financial Crisis of 2007-2008, and with the onset of COVID-19 in 2020.</p>
<p>But apart from those times, we haven’t seriously attended to how low the rate of unemployment should be, or designed policy to seek that objective. By not thinking more seriously about the rate of unemployment, Australia missed the opportunity to push the rate lower in the 2010s.</p>
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<p>In economics, it’s standard to regard full employment as the lowest unemployment rate possible without labour demand causing excessive wage growth and inflation. </p>
<p>This number – known as the non-accelerating inflation rate of unemployment, or NAIRU – is a matter of debate. Prior to the pandemic it was generally thought the unemployment rate couldn’t get <a href="https://www.rba.gov.au/publications/bulletin/2017/jun/2.html">lower than about 5%</a> without being likely to cause wage inflation. </p>
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Read more:
<a href="https://theconversation.com/vital-signs-australias-5-jobless-rate-is-not-full-employment-pushing-up-interest-rates-would-be-wrong-105523">Vital Signs: Australia's 5% jobless rate is not full employment; pushing up interest rates would be wrong</a>
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<p>But during 2021-22, with the stimulus from fiscal policy to deal with COVID-19, the rate of unemployment fell to its current level, 3.5%, without accelerating wage inflation.</p>
<h2>We need a new unemployment target</h2>
<p>What is needed now, therefore, is a rebalancing of macroeconomic policy objectives. We need a full employment target, expressed as a level or acceptable range of unemployment or <a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/labour-statistics-concepts-sources-and-methods/2021/concepts-and-sources/underutilised-labour">labour underutilisation</a>, to accompany the existing inflation target. </p>
<p>A full employment target will force governments to engage with what is the minimum rate of unemployment possible to sustain; and increase accountability for taking action to achieve that goal. </p>
<p>Choosing the target needs to balance the benefits of a lower rate of unemployment for national output and equity, against the potential inflationary consequences of trying to push unemployment too low. </p>
<p>It needs to draw on a wide variety of indicators of labour market outcomes; beyond just the NAIRU, which ignores the output and distributional benefits of low unemployment.</p>
<h2>Underemployment counts too</h2>
<p>Ideally, the target should also be constructed recognising that the policy problem is broader than unemployment. What should motivate policy is people not being able to work the hours they want or are willing to work. </p>
<p>Unemployment is part of this. But increasingly so is underemployment. By 2022, about 45% of extra hours that could have been worked in the Australian labour market were due to workers being underemployed. </p>
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<em>
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Read more:
<a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">Technically unemployment now begins with a '3'. How to keep it there?</a>
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<p>Hence, whatever way the full employment target is expressed, it needs to take account of the variety of types of labour underutilisation.</p>
<p>Finally, along with aggregate full employment target, we also need specific policy action for groups who require extra assistance. Even with the current low rate of unemployment, some groups are still missing out on employment opportunities to an unacceptable level – such as First Nations people, those with a disability, and people living in disadvantaged regions.</p><img src="https://counter.theconversation.com/content/203415/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland receives funding from the Australian Research Council.</span></em></p>The pandemic has changed economic thinking on how low the unemployment rate can go. We now need a new full employment target.Jeff Borland, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2018592023-03-16T05:16:18Z2023-03-16T05:16:18ZUnemployment rate back down to 3.5%. It’s anyone’s guess when things will turn<p>The latest labour force data from the Australian Bureau of Statistics shows employment in February increasing by 64,600, and the (seasonally adjusted) unemployment rate declining from 3.7% to 3.5%. </p>
<p>It’s confirmation that it’s still too early to declare that the labour market has reached a turning point, after which we can expect the rate of unemployment will rise for some time. </p>
<p>Employment growth has been slowing over the past year, but ups and downs from month to month make it difficult to work out how fast that is happening. Meanwhile, the rate of unemployment is stubbornly resisting moving too far from 3.5%. </p>
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<h2>Predictions have been hard</h2>
<p>Making any predictions for the labour market since mid-2022 has been more difficult than usual. </p>
<p>In the first six months of 2022, employment grew by 56,600 per month, while the rate of unemployment fell from 4.2% to 3.5%. But for the next three months, average employment growth was only 11,700, and the unemployment rate ticked up slightly. It looked like, maybe, the end of the expansion.</p>
<p>But no. In the months to October and November, employment growth was back to 47,700 a month, and the jobless rate moved down.</p>
<p>December and January brought decreases in employment. But it’s always difficult to draw predictions from these months. This year’s January numbers also came with <a href="https://www.abs.gov.au/articles/insights-job-attachment-january-2023">an asterisk</a> from the Australian Bureau of Statistics: a much larger number of persons than usual were classified as waiting to start work, raising the prospect of a healthy boost in employment in February, which is what has happened.</p>
<p>So if a labour market slowdown is underway, it is gradual and slow, rather than the “falling off a cliff” variety. For that reason, it’s likely to take a while longer to know exactly where we are heading.</p>
<h2>But more young people are in jobs</h2>
<p>Not everything about the labour market is unpredictable, however. On the contrary, most of the changes we’ve seen since mid-2021, once the Australian labour market started recoverng from the initial impact of COVID-19, are exactly what we would have expected.</p>
<p>When the labour market is growing strongly, we expect this will benefit most of the groups who usually face the biggest difficulties getting into work: those with lower skill levels, who live in regions with less employment opportunities, and young people. This is <a href="https://drive.google.com/file/d/1c2ciDez0TtUVM3vBD1e8oqh2I6BZwt2_/view">indeed what has happened</a>.</p>
<p>The likelihood of those without a post-school qualification being employed has increased 2 percentage points between 2019 and 2022, double the 1-point increase for those with a Bachelor’s degree or above.</p>
<p>In the 25% of regions with the lowest rates of employment, the proportion with jobs in 2022 was 2.2 percentage points higher than 2019. That increase was about three times more than in the 25% of regions with the highest employment rates.</p>
<p>Since immediately before the onset of COVID, the proportion of people aged less than 25 in employment has grown by 6.3 percentage points, compared with a 1.9 percentage point increase for those aged 25 to 64 years.</p>
<h2>And educational enrolments have fallen</h2>
<p>For the young, there has been another consequence of the strong labour market that we’ve learned to expect: more in jobs means <a href="https://drive.google.com/file/d/1hAYu8Np3CypqAuHdot3dF2Bp9STLqAk7/view">fewer studying</a>. Between February 2021 and December 2022 the proportion of those aged 15-24 in full-time tertiary education fell from 24.3% to 21.6%. </p>
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<p><strong>Employment vs education</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=233&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=233&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=233&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=293&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=293&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515706/original/file-20230316-249-mtdkrg.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=293&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Proportion employed vs proportion in full-time tertiary education.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release">ABS Labour Force</a></span>
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<p>A <a href="https://www.rba.gov.au/publications/bulletin/2019/sep/education-choices-and-labour-supply-during-the-mining-boom.html">similar withdrawal was observed</a> in the late 2000s, during the mining boom, in the states of Western Australia and Queensland.</p>
<p>It’s having this past experience to draw on that, of course, makes it easier to see patterns in the impact of recovery, than to know where the rate of unemployment is about to head in coming months.</p><img src="https://counter.theconversation.com/content/201859/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland receives funding from the Australian Research Council.</span></em></p>Australia’s employment growth is slowing, but the ups and downs from month to month make it hard say what happens next.Jeff Borland, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1926592022-10-23T08:35:57Z2022-10-23T08:35:57ZNigeria’s 2023 budget is a plan of despair and won’t change the tempo of the economy<figure><img src="https://images.theconversation.com/files/490632/original/file-20221019-17-8yizmx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nigeria's 2023 budget may not address food inflation. </span> <span class="attribution"><span class="source">Gettyimages/istock</span></span></figcaption></figure><p>Nigeria’s <a href="https://www.budgetoffice.gov.ng/index.php/resources/internal-resources/call-circular/2023">2023 budget</a>, recently presented by President Muhammadu Buhari to the National Assembly, has generated a furore. </p>
<p>There are concerns about the impact on the country’s <a href="https://www.reuters.com/world/africa/nigerias-public-debt-rises-103-billion-second-quarter-2022-09-20/">rising deficits and debt</a>, as well as its failure to address some of the structural deficiencies behind declining revenues and <a href="https://thenationonlineng.net/rising-deficit-declining-revenue-raise-concerns-over-n20-51tr-2023-budget/">rising inflation</a>.</p>
<p>The 2023 budget <a href="https://businessday.ng/opinion/article/full-text-of-president-muhammadu-buharis-2023-budget-speech/">expenditure</a> of 20.51 trillion naira (US$43.7 billion) is the highest ever. More than half of this is money the government doesn’t have and has to be financed with new debt. This will mean that the country exceeds the 3% of GDP threshold stipulated by the <a href="https://internationalbudget.org/wp-content/uploads/Nigeria-FiscalResponsibilityAct2007-English.pdf">Fiscal Responsibility Act of 2007</a> – a pointer to the worsening of the country’s fiscal health.</p>
<p>More than 60% of the 2023 budget will finance debt repayments (N6.31 trillion), personnel costs (N4.99 trillion) and overheads (N1.11 trillion). This leaves very little for spending to revitalise the economy and raise its growth potential.</p>
<p>Rather than being a budget of hope, Buhari’s proposal is a budget of despair. It won’t significantly change the tempo of the economy. Nor will it reduce the country’s high unemployment, poverty and inflation rates. </p>
<p>In fact it could worsen Nigeria’s cycle of deficits and debts, without the possibility of fostering structural transformation, diversifying the economy, promoting sustainable economic growth, and reducing unemployment and poverty. </p>
<h2>Endless cycle of deficits</h2>
<p>The budget is consistent with previous Buhari administration budgets. </p>
<p>Most importantly, it doesn’t address structural deficiencies in the Nigerian economy. These include the lack of diversification and non-oil sources of revenue. These have been responsible for the country’s cycle of high <a href="https://www.reuters.com/world/africa/nigerias-budget-deficit-will-widen-478-fuel-subsidy-end-2022-10-07/">budget deficits</a> and <a href="https://www.vanguardngr.com/2022/09/why-nigeria-is-in-debt-dmo-dg/">government debts</a>.</p>
<p>The 2023 <a href="https://thenationonlineng.net/roads-rail-varsities-priority-in-n20-5tr-2023-budget/">budget prioritises</a> investment in road and rail projects, power projects, clean water, construction of irrigation infrastructure and dams across the country, and critical health projects.</p>
<p>These are all well and good, but it’s unclear how they will reduce the <a href="https://theconversation.com/nigerias-economy-four-priorities-the-next-president-must-deliver-on-189022">high unemployment</a> and poverty rates in the country. These projects are not widespread and labour-intensive enough to absorb millions of unemployed Nigerians. </p>
<p>It is also unclear how many of the projects will be completed, given the propensity for successive governments in Nigeria to <a href="https://www.vanguardngr.com/2021/12/nigerias-56000-abandoned-projects/">abandon projects</a>. </p>
<p>The biggest problem is that the budget fails to address the issue of diversifying the economy. This is vividly reflected in its title: <a href="https://www.thecable.ng/n9-7trn-projected-revenue-n10-7trn-deficit-highlights-of-2023-budget-proposal">Fiscal Sustainability and Transition</a>. </p>
<p>One cannot have fiscal sustainability without structural transformation. This involves resources being reallocated from low-productivity to high-productivity sectors of the economy. The budget made only a tepid reference to the manufacturing sector. Yet this could deliver a number of benefits.</p>
<p>The first is jobs. Manufacturing uses more labour per unit of output and could absorb the <a href="https://guardian.ng/opinion/unemployment-and-a-nations-40-per-cent-of-hopelessness/">high number</a> of unemployed and underemployed Nigerians. Nigeria’s informal sector contributes about <a href="https://punchng.com/80-4-of-nigerian-employment-in-informal-sector-says-wbank/">80%</a> of the country’s employment, making it difficult to collect taxes. An increase in the number of Nigerians in formal sector jobs would raise more income taxes and reduce the need for borrowing. Manufacturing enterprises also tend to be <a href="https://businessday.ng/companies/article/how-manufacturing-industry-drove-company-income-tax-in-q1/">more stable</a>.</p>
<h2>Gaps</h2>
<p>Nigeria is having to borrow because of two key weaknesses – neither of which are addressed in the budget.</p>
<p>The first is the country’s lingering “dual-gap” economic problem. This refers to a situation in which domestic savings aren’t adequate to fund a country’s desired level of capital investment – the saving-investment gap. </p>
<p>In addition, the country doesn’t generate enough foreign exchange earnings to pay for its imports – the foreign exchange gap. It’s difficult to estimate the magnitude of the foreign exchange gap in Nigeria. But it’s manifested by the fact that foreign airlines in the country have been unable to repatriate about <a href="https://www.icirnigeria.org/trapped-funds-why-airlines-cant-repatriate-money-out-of-nigeria/">$450 million</a> in ticket sales because of acute shortages of foreign exchange. </p>
<p>Nigeria isn’t generating enough foreign exchange earnings to meet the economy’s requirements. This has led to a parallel market in foreign exchange, with most businesses and individuals turning to the parallel market to source major foreign currencies such as the US dollar.</p>
<p>The 2023 budget is based on an exchange of rate of 435.57 naira to US$1, compared to over <a href="https://www.thecable.ng/naira-hits-n742-at-parallel-market-as-fx-scarcity-bites-harder">700 naira</a> at the parallel market. Buhari made no mention of government intention to close this <a href="https://www.premiumtimesng.com/news/headlines/556088-nigerias-forex-crisis-deepens-as-gap-between-nairas-official-black-rates-widest-in-six-years.html">huge gap</a> between the official exchange rate and the parallel market rate. </p>
<p>The only sustainable way to close this gap is to raise the capacity of the economy to generate foreign exchange earnings.</p>
<p>The gap has serious implications for government expenditure outcomes. Many of the ministries, departments and agencies of government buy goods and services from companies that source their foreign exchange requirements from the parallel market. </p>
<p>This automatically makes expenditure estimates in the 2023 budget unrealistic, as the suppliers of goods and services will require a revision to their contracts to cover the higher costs of sourcing foreign exchange. This would then require supplemental budgets and additional borrowings, which in turn, make expenditure projections unreliable. </p>
<h2>Lingering fears</h2>
<p>The first and second quarters of 2023 will be dominated by <a href="https://inecnigeria.org/wp-content/uploads/2022/09/TIMETABLE-FOR-2023-GENERAL-ELECTION.pdf">elections</a> and political transitions. This may have the effect of disrupting economic activities and fuelling uncertainties, especially among domestic and foreign investors. </p>
<p>The economy may therefore fall short of the 3.5% growth rate assumed in the budget parameters, which would subsequently result in lower revenues and additional borrowings.</p>
<p>Nigeria’s overall <a href="https://tradingeconomics.com/nigeria/government-debt-to-gdp">debt to GDP ratio</a> of about 37% is <a href="https://theconversation.com/nigerias-debt-is-sustainable-but-dangers-loom-on-the-horizon-166372">sustainable</a>. However, the new round of budgeted borrowing sends the wrong signal to domestic and foreign investors. </p>
<p>Deficits and debts imply that taxes will be raised in the future to pay for debts, making investments less profitable. It may also prompt nervous investors to move their capital to more fiscally stable countries.</p>
<p>There are also fears that unrestrained borrowing could tilt the country’s debt portfolio into the realm of unsustainability, which may then lead to defaults in debt repayments and a steep decline in new loans. Government obligations to contractors and other investors would be jeopardised. </p>
<p>The lip service paid by the 2023 budget to structural transformation and sustained economic development will dampen investors’ optimism about the Nigerian economy. The lack of clarity about the future direction of the economy under a new administration, as well as the lingering security challenges in the country, will make matters even worse.</p><img src="https://counter.theconversation.com/content/192659/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigeria’s 2023 budget could worsen the country’s cycle of deficits and debts.Stephen Onyeiwu, Professor of Economics & Business, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1915872022-10-04T07:00:37Z2022-10-04T07:00:37ZA basic income grant for South Africa: more money in poor people’s pockets, but at a heavy cost<figure><img src="https://images.theconversation.com/files/487325/original/file-20220929-5657-so6h92.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A South African street vendor awaits customers. The country has some of the highest inequality in the world.</span> <span class="attribution"><span class="source">Mujahid Safodien/AFP via Getty Images</span></span></figcaption></figure><p>Analyses of the implications of extending income support measures in South Africa, including a basic income grant, have focused on one of three things: how much it will cost, calculations about how much revenue would need to be raised (but without assessing the ripple effects), and how it might affect the incomes of the rich and the poor.</p>
<p>Each of these provide important contributions. But they don’t address the dynamic and long-term implications of basic income support options on the country’s economy and its finances. What’s been missing is a modelling that compares – or tests – the impact of the different policy choices and their permutations and how these are funded and who benefits and who loses.</p>
<p>In <a href="https://econrsa.org/publications/technical-background-paper-the-macroeconomics-of-establishing-a-basic-income-grant-in-south-africa/">a recent paper</a> we attempt to do just that.</p>
<p>Our model allows for both positive and negative economic effects of higher direct transfers to households. The model thus captures feedback effects between government expenditure, taxation, household consumption, firm investment, debt, interest rates and economic growth.</p>
<p>On the one hand, our model shows that a basic income grant would decrease economic growth through three main channels: an increase in borrowing costs, an increase in taxes, and crowding-out of private and other forms of public spending.</p>
<p>On the other hand, it would have a positive impact on economic growth through one main channel: an increase in consumption by poor households. </p>
<p>Overall, the results suggest that the negative economic effects of an expansion in social grants would outweigh the positive. We conclude that, without structural reform of the economy and sustained economic growth, introducing additional permanent social transfers could threaten South Africa’s macroeconomic and fiscal stability.</p>
<h2>Three possibilities</h2>
<p>The paper considers three basic income grant scenarios. And it estimates different combinations of tax and debt funding. </p>
<p><strong>Scenario 1:</strong> This estimates tax and debt outcomes for different grant sizes without imposing any specific “funding policy”. The estimated model based on historical data guides the macro-fiscal dynamics. </p>
<p>The scenario estimates two possibilities for expanding social transfers:</p>
<ul>
<li><p>convert the R350 temporary social relief of distress grant into a permanent basic income grant</p></li>
<li><p>raise the grant in three possible ways – to the food poverty line (R624 in current prices); the lower bound poverty line (R890 in current prices); the upper bound estimate of the poverty line (R1,335 in current prices). </p></li>
</ul>
<p>Different eligibility criteria can also be inferred. These include considering four potential eligibility groups. They are:</p>
<ul>
<li><p>covering 8.3 million people</p></li>
<li><p>reaching the same as the current social relief of distress grant (10.5 million people) </p></li>
<li><p>a grant targeting all poor people (33 million).</p></li>
<li><p>a universal basic income grant to the whole population (60 million) </p></li>
</ul>
<p>Converting the R350 social relief of distress grant into a permanent basic income grant is estimated to require an increase in public debt of about 3 percentage points of GDP after five years. It would require a marginal increase in effective indirect taxes (mainly the value added tax rate, VAT), an increase in the effective personal income tax rate of about 2 percentage points, and an increase in the effective corporate income tax rate of about 0.25 percentage points. </p>
<p>The model shows that the consumption of poor households would rise. But it
predicts that there would be some job losses owing to the contractionary impact on investment and growth from higher debt and higher taxes.</p>
<p>Introducing a grant at the food poverty line (R624 per person in 2022 prices for an eligible population of 10.5 million at a cost of R79 billion) would lead to higher debt, VAT and personal income tax increases. Debt would rise by 7.7 percentage points of GDP, VAT by about half a percentage point and personal income tax by about 5.3 percentage points.</p>
<p>The model predicts job losses amounting to about 200,000. These
come about because of the fiscal impact of a permanent increase in spending (higher taxes and higher interest rates).</p>
<p>The contractionary effects operate through:</p>
<ul>
<li><p>higher debt, which leads to relatively higher borrowing costs and lower long-term economic growth </p></li>
<li><p>direct crowding-out of government expenditure in an attempt to maintain fiscal sustainability </p></li>
<li><p>crowding-out of private sector expenditure through higher taxes. </p></li>
</ul>
<p>These effects dominate any expansionary effects from higher transfers. </p>
<p>As a result, a large fiscal transfer of the type proposed by advocates of BIG is not estimated to boost economic growth. </p>
<p>The largest transfer expansion considered is a grant of R840 per month for 33 million households at a cost of R333 billion. This, the model suggests, would increase debt by 42 percentage points of GDP, requiring higher VAT of 3 percentage points and personal income tax to rise by 29 percentage points, essentially a doubling. </p>
<p>The contractionary impact on the economy would be estimated to lead to nearly a
million job losses.</p>
<p><strong>Scenario 2.</strong> This focuses on a basic income at the food poverty line financed by an increase in taxes (a “balanced budget” scenario). Debt would still rise marginally because the economy would slow. If the new grant was funded by VAT alone, this would require an increase of 7 percentage points in the rate – from 15% currently to 22%.</p>
<p>If funded from a combination of higher VAT and personal income tax, VAT would need to rise by 4 percentage points and personal income tax would rise by almost 3.5 percentage points. For the average taxpayer, who earns R370,000 and pays an effective rate of 21.3%, this would mean an increase in taxes from R79,000 per year to R91,500 per year. This, in turn, would lead to significant contraction in the economy, even though there would be some short-term employment gains from the large direct income effects from higher transfers.</p>
<p><strong>Scenario 3.</strong> This models a grant at the food poverty line financed by a combination of higher VAT but also higher economic growth. In this scenario, the assumption is that government simultaneously expands government investment by R60 billion and successfully undertakes structural reforms (such as removing constraints on electricity availability).</p>
<p>In this scenario, VAT would still need to rise (by 9 percentage points without structural reform, and 5 percentage points with reform) to fund the transfer expansion. </p>
<p>This scenario is estimated to lead to job gains but only because the structural reforms permanently raise long-run growth and, therefore, government revenue. </p>
<p>Moreover, by enhancing the economy’s productive capacity, government
investment would have long-run growth-enhancing effects.</p>
<h2>The take-away</h2>
<p>Our paper shows that the introduction of a basic income grant would require significant long-term tax increases and would likely lead to employment losses. We also show that without sustained higher economic growth, much higher social transfers could threaten fiscal sustainability. </p>
<p>Poverty, inequality and unemployment are three interdependent socio-economic challenges South African policymakers are seeking to address. Addressing this triple challenge is critical for the future of the country. But an unfunded expansion of the social transfer system could lead to even worse economic outcomes — the medicine should not be worse than the disease.</p><img src="https://counter.theconversation.com/content/191587/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hylton Hollander receives funding from Economic Research Southern Africa and has received funding from UNU-WIDER. He is affiliated with Stellenbosch University.</span></em></p><p class="fine-print"><em><span>Daan Steenkamp receives funding from ERSA. He is affiliated with Codera Analytics, and Stellenbosch University Economics Department and SARB as a research fellow.</span></em></p><p class="fine-print"><em><span>Roy Havemann receives funding from Economic Research South Africa. He is affiliated with Stellenbosch University and the Western Cape Government. </span></em></p>An unfunded expansion of the social transfer system could lead to even worse economic outcomes — the medicine should not be worse than the disease.Hylton Hollander, Senior Lecturer, Stellenbosch UniversityDaan Steenkamp, Research Associate, Stellenbosch UniversityRoy Havemann, Research Associate, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1900842022-09-11T08:23:27Z2022-09-11T08:23:27ZJob creation in South Africa: the president’s advisors discuss what it will take<figure><img src="https://images.theconversation.com/files/483271/original/file-20220907-14-vx202z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's education system has not given people numeracy and technical skills needed for jobs like plumbing. </span> <span class="attribution"><span class="source">Mujahid Safodien/AFP via Getty Images</span></span></figcaption></figure><p><em>At the end of 2021, South Africa recorded its highest unemployment rate since the dawn of democracy, at 35.3%. The figure has marginally dropped but there is still concern about how the country will tackle this issue. Dori Posel spoke to Trudi Makhaya, economic advisor to South Africa’s President Cyril Ramaphosa, as well as Kenneth Creamer and Liberty Mncube, who are on the Presidential Economic Advisory Council, about unemployment, job creation, the informal sector and the country’s challenges with excessive market power.</em> </p>
<hr>
<p><strong>Dori Posel:</strong> South Africa has not been very successful in chipping away at a very high rate of unemployment. What could help?</p>
<p><strong>Kenneth Creamer:</strong> There is a strong correlation between growth and job creation. The question is, why doesn’t South Africa have enough growth? I would say that there are historical and current factors.</p>
<p>Historically, colonialism and apartheid have meant that the country’s capital markets, our capital formation, has been distorted, and infrastructure investment has been distorted. If you look around the country, you can see that people in areas that were designated as “bantustans” under apartheid still don’t have the same level of health, education, and access to security services.</p>
<p>And capital formation itself was pretty much linked to mining. There was some diversification, but the country’s industrial policy was stunted and shaped in a way that didn’t create enough jobs.</p>
<p>The current reasons include vested interests that make it difficult to implement the policies that we need. For example, it is difficult to do the right thing and to implement the energy transition due to vested interests.</p>
<p>A second current problem has been weak state capacity, corruption and stealing. </p>
<p>We need growth to create jobs. And we need more growth to create enough jobs to cater for the growing size of South Africa’s labour market. In particular, we need expanded capital formation and infrastructure. And it’s really important that we look at our fixed investment levels. During the COVID pandemic, capital investment fell to 13% of GDP – a historic low. Government, state-owned companies and the private sector must all double their capital investment if South Africa is to increase its capital investment to the 25%-30% of GDP level required to reduce unemployment.</p>
<p><strong>Dori Posel:</strong> Why are there so few people starting very small businesses in the informal sector? </p>
<p><strong>Trudi Makhaya:</strong> The informal sector in countries similar to South Africa creates lots of jobs. In South Africa, the informal sector accounts for about 10% of jobs. That tells us South Africa has diverged from other emerging markets.</p>
<p>Our regulatory frameworks are geared towards corporates. And you can go through many aspects of regulation – zoning, how municipalities enforce bylaws, regulations and safety standards for food. You need safety standards, but you also need an enabling environment where you could have a street food culture like in Asian countries. South Africa’s regulatory environment doesn’t do that. We really over-regulate. We have a lot of requirements that are not appropriate for smaller businesses. That’s why we’ve been working on red tape reduction.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/wto-head-ngozi-okonjo-iweala-how-trade-can-help-beat-inequality-190089">WTO head Ngozi Okonjo-Iweala: how trade can help beat inequality</a>
</strong>
</em>
</p>
<hr>
<p>The human capital element is also important. South Africa’s education system has not given people the basic education and technical skills they need – to become plumbers, for example. It’s those those kinds of activities that become self employment activities in many developing countries. India comes to mind in terms of coding, and people being able to develop businesses from that. It involves fairly low skills.</p>
<p>A lot of the work that we need to do is in improving the quality of basic education. And it’s not about the quantity of money that’s been spent. As a proportion of GDP, South Africa’s education expenditure is already in line with many other countries. We’re not getting the outcomes that we need to get. </p>
<p>There are other factors too, including access to finance. There are so many concentrated industries; it becomes quite difficult for small businesses to thrive.</p>
<p><strong>Dori Posel:</strong> Excessive market power could also inhibit the growth of small businesses. Is there excessive market power in South Africa and what has been the response to this from competition policy?</p>
<p><strong>Liberty Mncube:</strong> South Africa has an excessive market power problem. Here are a few examples. For those lucky enough to afford private healthcare services, there are only three main hospital groups; in air travel, there are two main airlines. One firm controls more than 40% of each of the beer, spirits, ready-to-drink and cigarette industries. </p>
<p>The competition authorities have uncovered anti-competitive practices facilitated by excessive market power in many areas of business activity, including maize meal, bread, milk, poultry, beer, wheat flour, healthcare, aluminium, steel, bricks, cement and ticketing services. In the last two years, the Competition Tribunal has issued 48 orders in which firms have admitted to excessive market power and excessive pricing, not only in personal protective equipment including face masks, hand sanitisers and surgical gloves, but also in eggs and maize meal. </p>
<p>Excessive market power increases the cost of goods and services for consumers, depresses wages, stunts investment, blocks entrepreneurship, and retards innovation. It also concentrates economic power, which monopolies and oligopolies use to win favourable policies and further entrench their dominance. At the same time, excessive market power creates profits that flow disproportionately to the affluent in society. The left-out majority of South Africans are more likely to be the victims of excessive market power and have the least ability to avoid its costs. This dynamic exacerbates income inequality and inequality of economic opportunity. </p>
<p>There have been two responses from competition policy. </p>
<p>The first one has been embedding equality considerations into competition law. The 2018 amendments exemplify this, by placing emphasis on participation by black owned firms and small businesses as well as promoting a broad spread of ownership (inclusive of workers).</p>
<p>The second response concerns the effect competition policy generates through the promotion of greater competitiveness and subsequently on economic equality. For example, when Pepsi wanted to buy Pioneer Foods, one of the major agro-processing firms in South Africa, the Competition Tribunal approved the deal subject to a condition that it set up a broad based worker trust and implement a broad based black economic empowerment ownership plan. Last year, when ECP, a US based investment fund, sought to buy Burger King, the Competition Tribunal approved the deal subject to local procurement and creation of a worker owner plan in Burger King South Africa. </p>
<p><strong>Dori Posel:</strong> I would like us to consider another set of constraints on job growth, and this concerns issues around trust and corruption. South Africa is often described as having a “trust deficit”. What are your thoughts on how trust can be rebuilt in our institutions, and by implication, how our institutions can be made more trustworthy? </p>
<p><strong>Trudi Makhaya:</strong> The one thing that has been highlighted in various instances in the South African case is the culpability of the private sector. We see a lot of the companies slowly coming to the reckoning. </p>
<p>But I think if we’re going to rebuild trust, I would suggest that they have a lot more to do in terms of showing they have turned a corner, and understand the economic harm that has been done.</p>
<p>On the flip side of it all, we have a demoralised public sector. We do have good people who tend to err on over-compliance, being afraid to take risks. Being afraid to be innovative. </p>
<p>We also have to strike the balance between transparency and due process, and accepting genuine mistakes which are not related to corruption. </p>
<p>*<em>This is an edited excerpt of the University of the Witwatersrand School of Economics and Finance’s centenary webinar titled 100 Years of Economics at Wits: Reflecting on the Past, Looking to the Future. The event can be <a href="https://www.wits.ac.za/sef/webinar-series/">watched here</a>.</em></p><img src="https://counter.theconversation.com/content/190084/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dorrit Posel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>High unemployment rates are among South Africa’s biggest challenges. Three of the president’s advisors talk through what is needed to change the status quo.Dorrit Posel, Professor in the School of Economics and Finance, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1890222022-08-29T13:11:54Z2022-08-29T13:11:54ZNigeria’s economy: four priorities president-elect Bola Tinubu must deliver on<figure><img src="https://images.theconversation.com/files/480085/original/file-20220819-16-ccggoi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New train services like this, in Lagos, are designed to boost economic activities and ease movement of passengers. </span> <span class="attribution"><span class="source">Pius Utomi Ekpei/AFP via Getty Images</span></span></figcaption></figure><p><a href="https://theconversation.com/bola-tinubu-the-kingmaker-is-now-nigerias-president-elect-200383">Bola Tinubu</a>, the winner of Nigeria’s keenly contested presidential election, will have a daunting task fixing a near comatose economy. </p>
<p>His administration will encounter monumental economic, security and political challenges. They will be greeted by a distraught populace bedevilled by <a href="https://www.dataphyte.com/latest-reports/number-of-poor-persons-in-nigeria-to-rise-to-95-1-million-in-2022/">rising poverty</a>, inflation, unemployment and unprecedented levels of insecurity. </p>
<p>The <a href="https://theconversation.com/nigerias-poverty-profile-is-grim-its-time-to-move-beyond-handouts-163302">high poverty</a> and <a href="https://theconversation.com/a-third-of-nigerians-are-unemployed-heres-why-159262">unemployment rates</a> in Nigeria are ticking time bombs. </p>
<p>To avoid the kind of <a href="https://www.theguardian.com/world/2022/jul/09/sri-lanka-protests-thousands-storm-presidents-residence-colombo">violent protests</a> that forced the president of Sri Lanka to step down, as well as those that rocked <a href="https://www.nytimes.com/2022/08/12/world/africa/sierra-leone-protests.html">Sierra Leone</a> recently, the new president will need to take bold and decisive measures. </p>
<p>Nigeria’s 33.3% unemployment (42.5% for the youth) and 22.3% underemployment rates are an urgent issue, coupled with a <a href="https://www.nigerianstat.gov.ng/">20% inflation rate</a>. The latter is caused mainly by increases in food prices. Insecurity has forced many farmers to abandon their farms and disrupted food supplies to urban centres. The cost of living in Nigeria is <a href="https://theconversation.com/nigerian-workers-struggle-as-cost-of-living-outstrips-incomes-182069">so high</a> that Nigerians devote <a href="https://www.weforum.org/agenda/2016/12/this-map-shows-how-much-each-country-spends-on-food/">over half</a> of their income to food alone. </p>
<p>About four in ten Nigerians live below the <a href="https://www.worldbank.org/en/news/press-release/2022/03/21/afw-deep-structural-reforms-guided-by-evidence-are-urgently-needed-to-lift-millions-of-nigerians-out-of-poverty">national poverty line</a>. Only <a href="https://www.worldbank.org/en/news/press-release/2022/03/21/afw-deep-structural-reforms-guided-by-evidence-are-urgently-needed-to-lift-millions-of-nigerians-out-of-poverty">17%</a> hold jobs that pay enough to get out of poverty.</p>
<p>Amid these economic challenges, Nigerians feel a deep <a href="https://guardian.ng/opinion/why-nigerians-are-angry/">sense of deprivation</a> when they see a few elites, with privileged access to the national wealth, live ostentatiously. </p>
<p>Given all these problems, and based on my <a href="https://theconversation.com/what-buhari-has-to-do-to-take-nigerias-economy-to-the-next-level-113046">previous research</a>, I propose that a plan for economic revitalisation should be Tinubu’s first focus. </p>
<p>The plan should contain measurable targets for creating jobs, reducing poverty and decreasing the cost of living, improving security and making space for a more collaborative approach. This should involve the private sector and other players.</p>
<h2>1. Create jobs</h2>
<p>Massive job creation should be done through labour-intensive “shovel-ready” projects in construction, agriculture, renewable energy, environmental sanitation and security. </p>
<p>The new head of state should resist pressures by politicians to include self-serving projects that don’t create jobs or strengthen the economy’s productive capacities.</p>
<p>Former US president Barack Obama showed how massive fiscal stimulus programmes that include job-creating projects can be effective in reducing unemployment and revitalising a depressed economy. </p>
<p>Nigeria’s <a href="https://theconversation.com/nigerias-debt-is-sustainable-but-dangers-loom-on-the-horizon-166372">unsustainable</a> debt profile means Tinubu won’t have much space for an expansionary fiscal policy. About 65% of government revenue and over 90% of <a href="https://www.cfr.org/blog/amid-oil-price-collapse-nigeria-running-out-foreign-exchange">foreign exchange earnings</a> come from the oil sector. Uncertainties in the global oil market and sluggish revenue growth, as well as the negative impacts of COVID-19 on the economy, imply that the country will face challenges generating enough revenue to service debt and finance <a href="https://nairametrics.com/2022/05/05/nigeria-spends-96-of-its-revenue-on-debt-servicing-in-2021-worst-on-record/">budget deficits</a>.</p>
<p>But Nigeria can reduce government profligacy and rein in corruption. Fiscal challenges can also be addressed by imposing taxes on major corporations, especially those in lucrative sectors like oil and gas, telecommunications and banking. </p>
<h2>2. Reduce poverty and cut the cost of living</h2>
<p>The new administration will have to provide immediate succour to millions living in misery, destitution and hunger. </p>
<p>The Muhammadu Buhari administration experimented with conditional cash transfers. But school meals and other <a href="https://statehouse.gov.ng/policy/economy/national-social-investment-programme/">social interventional programmes</a> have only reached <a href="https://www.thisdaylive.com/index.php/2022/01/27/eradicating-poverty-with-social-investment-programme/">10 million</a> people – 5% of the population.</p>
<p>Nigeria is one of the very few resource-rich countries with no means-tested and institutionalised safety net programmes. </p>
<p>The new president should learn from India, where the government introduced <a href="https://www.bankbazaar.com/ration-card/types-of-ration-card.html">ration cards</a>. These enable poor Indians to obtain basic food items at subsidised prices. </p>
<p>Food affordability increases productivity, fosters good health, spurs demand for agricultural products and boosts economic growth. It also prevents violent protests and crime. </p>
<p>Tinubu should eliminate Nigeria’s very expensive and corruption-ridden <a href="https://theconversation.com/fuel-subsidies-in-nigeria-theyre-bad-for-the-economy-but-the-lifeblood-of-politicians-170966">fuel subsidies</a>, to create a better environment for job-creating projects.</p>
<h2>3. Reduce insecurity</h2>
<p>Nigeria’s economic problems can’t be addressed in an environment of <a href="https://theconversation.com/nigerias-spiralling-insecurity-five-essential-reads-186696">insecurity</a>. There are many causes for this insecurity, but the biggest is inadequate resources. </p>
<p>Stories have been told about how criminals overwhelm military and police posts because of inadequate manpower and equipment there. The number of security personnel should be increased massively, through recruiting new officers and withdrawing others from non-essential services.</p>
<h2>4. Collaborative approach</h2>
<p>The government cannot do it all. Tinubu should create a conducive environment for the private sector to thrive. Domestic and foreign investors need incentives to invest in the economy. </p>
<p>They need a stable macroeconomic environment with low inflation, a stable exchange rate and robust economic growth. </p>
<p>To this end, the president should be very careful about the choice of his <a href="https://punchng.com/buharis-economic-management-team/">economic management team</a>. The choice of advisors shouldn’t be dictated by ethnic, political and other extraneous criteria. </p>
<p>It is widely believed that Nigerians have never been as polarised. Across the country there are embers of religious intolerance, ethnic chauvinism, separatist tendencies and <a href="https://bti-project.org/en/reports/country-report/NGA">intra-class</a> clashes.</p>
<p>The new president should provide a credible platform for Nigerians to have frank conversations about how to resolve these issues, as well as the future political structure of the country. </p>
<h2>Practical steps</h2>
<p>Tinubu should rejig the <a href="https://www.efcc.gov.ng/">Economic and Financial Crimes Commission</a> and the <a href="https://icpc.gov.ng/">Independent Corrupt Practices Commission</a> to make them more effective in fighting corruption. </p>
<p>Nigerians want to see more corrupt individuals prosecuted and jailed. They want to move beyond mere naming and shaming. </p>
<p>To signal urgency, the new president should announce his cabinet and economic team before their inauguration. </p>
<p>This would enable them to hit the ground running. Ministerial portfolios should be assigned before ministers are screened by the senate. This will enable their eligibility to be assessed during their confirmation hearings.</p><img src="https://counter.theconversation.com/content/189022/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Bola Tinubu will be saddled with a near comatose economy. Here are four priorities that would make the difference.Stephen Onyeiwu, Professor of Economics & Business, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1887052022-08-16T03:57:43Z2022-08-16T03:57:43ZWhy unemployment is set to stay below 5% for years to come<figure><img src="https://images.theconversation.com/files/479254/original/file-20220816-20746-kn4fyv.png?ixlib=rb-1.1.0&rect=317%2C0%2C3676%2C1760&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Unfathomably, Australia’s unemployment rate has sunk to <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release">3.5%</a>. Even harder to believe is that it will soon sink lower – perhaps even this week, when the update is released on Thursday – and after that, if the ANZ’s forecasts are correct, dip below the next threshold to <a href="https://cdn.theconversation.com/static_files/files/2253/ANZ_Unemployment.pdf">two-point-something</a> for the first time since 1974. </p>
<p>That this can be happening at a time when interest rates are soaring and households are <a href="https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/economics-research/er20220809BullConsumerSentiment.pdf">tightening their belts</a> belies standard analysis.</p>
<p>So what’s driving this new ultra-low unemployment? It’s been harder for employers to get workers, because borders were closed, and because of unusually high rates of people off sick. </p>
<p>But digging further into the economic data reveals something we haven’t seen before – which has already changed the lives of almost 100,000 Australians.</p>
<h2>Time lost to illness has almost doubled</h2>
<p>Even now, an awful lot of workers on whom employers normally depend are sick, or on reduced hours, caring for someone who is sick.</p>
<p>In the years before COVID (and in the first two years of COVID itself), typically 3% of the workforce worked less than usual hours in any given week as a result of illness or injury. Calculations by the University of Melbourne’s Jeff Borland suggest so far this year it’s been <a href="https://cdn.theconversation.com/static_files/files/2254/lmsaug221.pdf">5.2%</a>.</p>
<p>The effect isn’t quite as dramatic when you examine the number of hours lost. Pre-COVID (and in the first two years of COVID) 2% of working hours were lost to illness. So far this year, with so many of us ill, it’s been 3.8%.</p>
<p>As a sign at a doctor’s surgery I visited the other day read:</p>
<blockquote>
<p>The whole world is short-staffed, be KIND to those who show up.</p>
</blockquote>
<p>Borland illustrates what sickness is doing to employment by talking about a café with five staff. He says if one is away one day per week on average, the cafe might have to put on a sixth to cover – if it can. Unfilled vacancies are <a href="https://theconversation.com/australia-has-record-job-vacancies-but-dont-expect-higher-wages-172146">higher than ever</a>.</p>
<p>It’s also true (at least until now) we’ve been spending big-time, spurred on by pent-up demand from when we were all in lockdown, as well as ultra-low interest rates and <a href="https://theconversation.com/budget-2022-frydenberg-has-spent-big-but-on-the-whole-responsibly-180122">generous</a> government support.</p>
<h2>We escaped the jobless ‘escalator’</h2>
<p>But there’s something else explaining our new ultra-low unemployment, something that flows from the nature of the labour market – and how it’s different from the market for goods in shops.</p>
<p>You can see it most clearly when unemployment climbs.</p>
<p>In the half century we have been collecting modern employment statistics, unemployment has shot up dramatically three times: </p>
<ul>
<li><p>in the mid 1970s, when it jumped from 2.1% to 5.4% in a matter of months and never came back down</p></li>
<li><p>in the early 1980s, when it jumped from 5.3% to 10.3%, and took six years to come back down </p></li>
<li><p>in the early 1990s, when it jumped from 5.8% to 11.2%, and took seven years to come back down.</p></li>
</ul>
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<p>Each time, unemployment went up by the escalator, and <a href="https://twitter.com/yahoofinance/status/1262485622796750848">down by the stairs</a>. </p>
<p>Remarkably, as the graph shows, that’s not what happened during the global financial crisis or COVID. Instead, both times the government and Reserve Bank went <a href="https://theconversation.com/the-coronavirus-stimulus-program-is-labors-in-disguise-as-it-should-be-133383">hard and early</a> with <a href="https://theconversation.com/the-key-to-the-success-of-jobkeeper-is-retrospective-paid-work-135042">as much support as it took</a> to prevent unemployment climbing too far. </p>
<p>If unemployment had shot up as it had in earlier crises, it might have taken the best part of a decade to get down.</p>
<h2>The long-lasting scars of unemployment</h2>
<p>Economists use an ugly word to describe the reasons why unemployment stays high long after the reason for high unemployment has passed. It’s “<a href="https://drive.google.com/file/d/1cob1yjBbi7mnaJ0aoiVph_ZM7z4un-ZS/view">scarring</a>”.</p>
<p>Each person who loses their job or who is unable to get a first job when unemployment shoots up can lose confidence and up-to-date work experience.</p>
<p>Then, as things improve and employers begin hiring again, people who have been out of work for longer get pushed back in the queue. Employers find it safer to take on new graduates or people with more recent experience.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/forget-the-election-gaffes-australias-unemployment-rate-is-good-news-and-set-to-get-even-better-by-polling-day-181141">Forget the election gaffes: Australia's unemployment rate is good news – and set to get even better by polling day</a>
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<p>The more those who were unlucky during a crisis get pushed to the back of the queue, the less employable they seem – and the less employable they become.</p>
<p>This puts a new higher “floor” under the unemployment rate, because it gets to the point where employers would rather not fill a vacancy than put on someone who’s been continually passed over.</p>
<p>It’s a phenomenon well known to the <a href="https://treasury.gov.au/sites/default/files/2020-06/p2020-85098-202006.pdf">Treasury</a> and <a href="https://www.rba.gov.au/publications/bulletin/2020/dec/pdf/long-term-unemployment-in-australia.pdf">Reserve Bank</a>. What’s less well known, and is only now becoming apparent, is that it can work in reverse.</p>
<h2>Almost 100,000 lives already transformed</h2>
<p>If employers are forced to hire people they wouldn’t have in other circumstances, because they’ve run out of every other conceivable option, those people become employable. They either develop the right skills, or employers discover they are not so bad after all. The floor under the unemployment rate drops.</p>
<p>We haven’t seen this before – at least, not in the past half century – because employers have never before been given no other option but to employ people they would really rather not.</p>
<p>People are regarded as long-term unemployed (and harder to employ) if they’ve been out of work for one year or more. In the year to June 2022, the number of long-term unemployed fell from 218,200 to 130,100.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-we-invented-unemployment-and-why-were-outgrowing-it-183545">How we invented 'unemployment' – and why we're outgrowing it</a>
</strong>
</em>
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<p>That fall is far more important than the fall in the total number of unemployed from 682,400 to 493,900. </p>
<p>It means those Australians are more likely to be employed than shunned for years to come. It means future employments rates are more likely to start with a “2”, a “3” or a “4” than a “5”.</p>
<p>It means we’ve bought ourselves long-lasting lower unemployment, whatever happens from here on.</p>
<p>It also means the best part of 100,000 lives have been transformed. It means the best part of 100,000 people no longer face years on JobSeeker.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">Technically unemployment now begins with a '3'. How to keep it there?</a>
</strong>
</em>
</p>
<hr>
<p>And it means we’ve discovered something really useful.</p>
<p>Just as a crisis that renders people near unemployable can lift the floor under unemployment for years to come, a crisis that forces employers to take on people rendered near unemployable can cut it, perhaps for a very long time.</p><img src="https://counter.theconversation.com/content/188705/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What’s driving this new ultra-low unemployment? Digging into economic data reveals something we haven’t seen before – which has already changed the lives of almost 100,000 Australians.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1869172022-07-14T07:52:14Z2022-07-14T07:52:14Z3.5% unemployment: Australia’s jobless rate at its lowest since 1974<figure><img src="https://images.theconversation.com/files/474085/original/file-20220714-17579-1j48rf.jpg?ixlib=rb-1.1.0&rect=0%2C581%2C3500%2C1744&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>It’s not an academic way to start an article about Australia’s latest jobs numbers, but all I can think is “wow”.</p>
<p>The official unemployment rate in June fell to 3.5%. It’s almost 50 years – August 1974, to be exact – since it was lower. </p>
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<hr>
<p>How we got there was through more people getting hired: 88,400 people compared with 60,600 the month before. </p>
<p>This reduced total unemployment by 54,300, even as the labour force swelled by 34,200 to 14,093,000.</p>
<h2>90,000 new jobs a month</h2>
<p>After the hit to employment in 2021 from shutdowns due to the Delta variant of COVID-19, there was always going to be a rebound. But the strength is amazing. Since October last year, employment has grown, on average, by more than 90,000 people a month. </p>
<p>We can compare this with what happened during the initial recovery from the onset of COVID-19, from May 2020 to January 2021.</p>
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<hr>
<p>That recovery came after a much bigger loss of jobs compared with late 2021. This makes the past eight months more impressive. With less opportunity for catch-up, slower growth could reasonably have been expected. </p>
<h2>Climbing job vacancies</h2>
<p>Along with a record-high proportion of the population employed – 64.4% – there is a record-high proportion of vacant jobs: 3.4%. </p>
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<hr>
<p>Exceptional growth in the demand for labour is encouraging people to join (or rejoin) the labour force. The proportion of the population in work or looking for work in June rose to 66.8%. </p>
<h2>But also record sickness</h2>
<p>Offsetting more people wanting to work, however, is more people being away from work ill. </p>
<p>In the first six months of 2022, on average, 5.2% of workers did fewer hours than usual due to illness. This compares to 3% in the same months from 2017 to 2019. </p>
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<hr>
<p>It’s likely some employers are needing to hire extra workers to cover for increased rates of absenteeism due to COVID-19 or the flu, adding to demand.</p>
<h2>So what about wages?</h2>
<p>The puzzle in all this is wages growth. How can we have unemployment so low and yet so little evidence of stronger wages growth? </p>
<p>Even with record low unemployment and record high job vacancy rates, in the 12 months to the end of March, wages grew by just 2.4%. This compares with prices (inflation) growing by 5.1%. Real wages therefore declined by 2.7%.</p>
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<p>This lack of “market” response is most likely due to Australia’s institutional arrangements for wage-setting. These arrangements make some lag in wages responding to demand inevitable. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-theres-no-magic-jobless-rate-to-increase-australians-wages-176538">Why there's no magic jobless rate to increase Australians' wages</a>
</strong>
</em>
</p>
<hr>
<p>About 35% of employees are on enterprise bargaining agreements, which are renegotiated on average every two to three years. Those agreements might have annual wage increases built in, but based on the labour market as it was when the collective agreement was struck. </p>
<p>About 23% of employees are on awards – and increases to these are set by the Fair Work Commission just once a year. </p>
<p>Nevertheless, the Fair Work Commission’s decision last month to lift wages for award workers by up to 5.2% shows that wages do eventually reflect labour market conditions. A higher rate of wage growth should also happen progressively for workers covered by collective agreements, as employers adjust their expectations about what they need to pay to keep and attract employees. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/this-5-2-decision-on-the-minimum-wage-could-shift-the-trajectory-for-all-185117">This 5.2% decision on the minimum wage could shift the trajectory for all</a>
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</em>
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<hr>
<p>Still, fears that wage increase will get out of hand, leading to a wage-price spiral as in the 1970s, are exaggerated. </p>
<p>Many factors have changed. In the 1970s, Australia had “pattern bargaining” – whereby if one group of workers got a big wage increase it would pretty much automatically flow to all other workers. This is no longer the case. Moreover, the decline in union representation, and the rise of technology and globalisation, have all made it more difficult for workers to bargain for higher wages.</p><img src="https://counter.theconversation.com/content/186917/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland receives funding from the Australian Research Council.</span></em></p>Australia has its lowest unemployment rates in almost 50 years – helped along by high numbers of employees off work sick.Jeff Borland, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1835452022-06-15T20:01:00Z2022-06-15T20:01:00ZHow we invented ‘unemployment’ – and why we’re outgrowing it<figure><img src="https://images.theconversation.com/files/468921/original/file-20220615-26-zrdu9m.png?ixlib=rb-1.1.0&rect=574%2C497%2C2239%2C1173&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>When Labor leader Anthony Albanese couldn’t quote Australia’s unemployment rate in the first week of the election campaign, many said it didn’t matter: the Australian Bureau of Statistics figure was “<a href="https://www.theage.com.au/national/victoria/employing-the-numbers-when-the-official-rate-is-rendered-meaningless-20220412-p5acyv.html">meaningless</a>”; “<a href="https://nitter.net/headshaker2/status/1513344714640003073#m">fudged</a>”; “<a href="https://headtopics.com/au/i-m-not-sure-what-it-is-albanese-stumbles-on-unemployment-rate-and-cash-rate-25505788">manipulated</a>”; and didn’t count <a href="https://twitter.com/antipovertycent/status/1483973901252456454">all those who had registered for JobSeeker</a>.</p>
<p>The truth is the official measure of unemployment does what it says on the box. It counts those without any work who are available to work and looking for work.</p>
<p>The result of an astonishingly large survey of <a href="https://theconversation.com/forget-the-election-gaffes-australias-unemployment-rate-is-good-news-and-set-to-get-even-better-by-polling-day-181141">26,000 households</a> covering 50,000 people each month, there’s little reason to question its accuracy.</p>
<p>But there are good reasons to question why the bureau does it in the way it does.</p>
<p>“Unemployment” as we have come to understand it is a fairly new concept. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468353/original/file-20220612-27912-p4esbx.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Until the 1900s much work was intermittent.</span>
<span class="attribution"><span class="source">Rachel Claire/Pexels</span></span>
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<p>As I outline in my book, <a href="https://www.bloomsbury.com/uk/inventing-unemployment-9781509952717/">Inventing Unemployment</a>, before the second world war censuses tended to divide the population differently – into breadwinners and dependants. </p>
<p>A breadwinner who wasn’t employed would be recorded as a breadwinner rather than unemployed (with their usual occupation noted). </p>
<p>That’s probably because until the 20th century, irregular work was the norm. </p>
<p>Late-19th-century Sydney had no extensive manufacturing. Work such as wool washing, tanning, meat preserving and loading sea cargo was seasonal and tied to <a href="https://www.jstor.org/stable/10.5263/labourhistory.108.0071">rural rhythms</a>. </p>
<p>Even in more stable occupations, many workers were little more than or sub-contractors or day labourers, their work intermittent.</p>
<h2>Unemployment as we know it</h2>
<p>The 1947 census introduced three distinct categories: employed, “unemployed” and “not in the labour force”. To be “unemployed” you had to describe yourself as willing and able to work, but without work.</p>
<p>Carried into the quarterly labour force surveys which started in the 1960s and continue monthly to this day, the change enabled the creation of an <a href="https://www.rba.gov.au/education/resources/explainers/unemployment-its-measurement-and-types.html">unemployment rate</a>, which is the number of unemployed divided by the total of the number of employed and unemployed, which is called the “labour force”.</p>
<p>The categorisation made more sense by then as work was becoming full-time and ongoing. Being “unemployed” (workless but in the workforce) had come to be seen as unusual and worthy of government support. The Curtin Labor government introduced <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2019/August/Creating-unemployment-benefits">unemployment benefits</a> in 1945. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/memories-in-1961-labor-promised-to-boost-the-deficit-to-fight-unemployment-the-promise-won-115376">Memories. In 1961 Labor promised to boost the deficit to fight unemployment. The promise won</a>
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</em>
</p>
<hr>
<p>The changes were in line with International Labour Organisation recommendations which themselves followed changes in the United States which in 1937 had asked all non-workers who’d expressed a desire to work whether they were able to work and were actively seeking work. </p>
<p>The context was United States President Franklin D Roosevelt’s determination to fight unemployment through job creation schemes. The advantage of the new measures was that they gave a measure of immediate unmet demand for work. </p>
<p>Excluding both those who were unwilling to work at present and those who had any work at all yielded a measure of the minimum number of jobs needed. Policy drove the definition rather than the other way around.</p>
<h2>Messy by design</h2>
<p>But the definitions were messy. Labour markets confound easy distinctions between working and not working, and there’s no particular degree of desire for work that clearly distinguishes the “unemployed” from “not in the labour force”. </p>
<p>Looking back, what was exceptional about the post-war decades is that most of the time the new definitions were easy to apply. If you were in work, the chances were you were in full-time work; if you weren’t in full-time work the chances were you weren’t working at all, and that you were either wanting work or none.</p>
<p>And the idea of the “labour force” summed up fairly stable social categories: men who entered at 15 years and were expected to work or look for work for 50 years, and women who also entered in their mid-teens only to permanently withdraw upon marriage or childbirth.</p>
<p>Not now. As social researcher <a href="https://www.radstats.org.uk/no088/Threlfall88.pdf">Monica Threlfall</a> points out, whereas once the labour force was an identifiable category,</p>
<blockquote>
<p>today it is more like an unbounded space that a variety of people of different ages enter, leave and re-enter at a variety of rates.</p>
</blockquote>
<p>When the headline monthly unemployment rate changes, what has moved is often not the numerator – the number of unemployed – but the shape-shifting denominator, which depends on whether people define themselves as looking and available for paid work at the particular time they are asked.</p>
<p>And the main questions don’t pick up underemployment. Australia has one of the largest part-time work forces in the OECD, which is why the Bureau of Statistics also asks workers whether they would like more hours, and reports the answers alongside the unemployment rate.</p>
<p>It also measures “discouraged workers”, people who are available for and wanting work but have given up the search and so aren’t counted as “unemployed”.</p>
<p>The only way to really understand whether we are succeeding or failing in providing paid work is to take all three measures together – unemployment, underemployment and the count of discouraged workers.</p>
<h2>Messier by the month</h2>
<p>What this total tells us will be quite different to the count of the number of Australians on unemployment benefits. </p>
<p>After tracking each other closely, the number of “unemployed” and the number on unemployment benefits has diverged over the past 25 years and that divergence became even more pronounced during COVID.</p>
<p>Australian experts <a href="https://theconversation.com/how-can-more-people-be-on-unemployment-benefits-than-before-covid-with-fewer-unemployed-australians-heres-how-181733">Peter Whiteford and Bruce Bradbury</a> point out most unemployed people aren’t on benefits, and increasingly unemployment benefits are available to people who are not unemployed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-can-more-people-be-on-unemployment-benefits-than-before-covid-with-fewer-unemployed-australians-heres-how-181733">How can more people be on unemployment benefits than before COVID, with fewer unemployed Australians? Here's how</a>
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<p>These days unemployment benefits are available to people not seeking paid work but engaged in voluntary work, study, or providing home schooling.</p>
<p>And people who once would not have been considered unemployed – such as single parents and people with disabilities – are now put on unemployment benefits and required to search for work in order to get them.</p>
<p>After holding together for decades, the post-war administrative and legal construction of unemployment is failing us. We’re outgrowing it.</p><img src="https://counter.theconversation.com/content/183545/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony O'Donnell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The concept of unemployment and an unemployment rate is fairly new, dating back to the end of the second world war. It’s increasingly unfit for purpose.Anthony O'Donnell, Adjunct Senior Lecturer, School of Law, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1835192022-05-20T02:45:37Z2022-05-20T02:45:37ZVIDEO: It’s not just politicians on tenterhooks – pollsters are too<p>University of Canberra Professorial Fellow Michelle Grattan and Emma Larouche, from the University of Canberra’s Media and Communications team, look at the last week of the campaign as Australians head to the polls. </p>
<p>Michelle and Emma discuss key wage and unemployment figures playing into the campaign, Labor taking a (modest) gamble with its costings, and the impact (or lack of it) of Anthony Albanese’s mistakes. Also, will those polls perform better than in 2019?</p>
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<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan discusses the political week that was with Emma La Rouche from the University of Canberra’s Media and Communications teamMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1832262022-05-19T07:56:24Z2022-05-19T07:56:24ZAt 3.9%, Australia’s unemployment rate now officially begins with ‘3’<figure><img src="https://images.theconversation.com/files/464168/original/file-20220519-12-7to7r9.png?ixlib=rb-1.1.0&rect=1166%2C237%2C1006%2C618&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Early in the election campaign, on April 14, we learned that Australia’s unemployment rate had slipped below 4% in March, to <a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">3.95%</a> – the lowest rate in 48 years.</p>
<p>But the Coalition was denied the bragging rights that would flow from an unemployment rate beginning with “3” because of a Bureau of Statistics convention of quoting the rate to only one decimal place, which meant the rate was presented as “4.0%”, the same as the month before (when it was actually 4.04%).</p>
<p>Thursday’s figure, for the month of April, has broken the barrier. Officially 3.9% (and actually <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release">3.85%</a>), it is clearly below 4% for the second consecutive month (because the March figure has been revised downwards to also round to 3.9%).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">Technically unemployment now begins with a '3'. How to keep it there?</a>
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</em>
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<p>It means the unemployment rate has decisively broken out of the band of 5-6% it has been in or near for the past two decades and slipped below 4%.</p>
<p>It has fallen to where it was a half-century ago when (in the days the survey was quarterly) it jumped from 3.7% to 5.4% between November 1974 and February 1975.</p>
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<p>Of course, 3.9% is an average. Over the country, the unemployment rate ranges from lows of 2.9% in Western Australia and 3.1% in the Australian Capital Territory, to highs of 4.5% in Queensland and South Australia.</p>
<p>For women, the rate is an almost half-century low of 3.7%, less than the 14-year low of 4.0% for men.</p>
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<p>Australia <a href="https://data.oecd.org/unemp/unemployment-rate.htm">isn’t alone</a>. The unemployment rate is below 4% in the United States, the United Kingdom and New Zealand; and below 3% in Japan, Germany and Korea.</p>
<p>Further declines are expected. The Reserve Bank is forecasting unemployment of <a href="https://www.rba.gov.au/publications/smp/2022/may/pdf/forecast-table-2022-05.pdf">3.6% by 2023</a>, a few points less than the Treasury, which is forecasting <a href="https://budget.gov.au/2022-23/content/bp1/download/bp1_bs-1.pdf">3.75%</a>.</p>
<p>But the Bank is modest about its forecasting ability. It only claims to be 90% confident that by mid-2024 the rate will be somewhere between 2% and 5%.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=507&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=507&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=507&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=637&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=637&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464169/original/file-20220519-21-lepcwo.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=637&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.rba.gov.au/publications/smp/2022/may/economic-outlook.html">Reserve Bank of Australia</a></span>
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</figure>
<p>At a press conference to release Labor’s <a href="https://cdn.theconversation.com/static_files/files/2108/ALP_Election_Costing_2022_FINAL_-_Copy.pdf">election policy costings</a> hours after the employment numbers were released, Labor treasury spokesman Jim Chalmers held out the prospect of more optimistic forecasts in Labor’s first budget as a result of the net $7.4 billion of extra spending it is proposing.</p>
<p>He said he would work with the Treasury if elected to ensure the dividends of Labor’s investments in childcare, training and energy were reflected in those forecasts.</p>
<h2>The improvement is real</h2>
<p>Sometimes the unemployment rate can be misleading. It can fall because people have left their jobs and are too despondent to search for new ones, meaning they are classified as “<a href="https://theconversation.com/forget-the-election-gaffes-australias-unemployment-rate-is-good-news-and-set-to-get-even-better-by-polling-day-181141">not in the labour force</a>” rather than unemployed.</p>
<p>And it can fall even though people are less fully employed, working fewer hours than they did (in accordance with an international convention, <a href="https://twitter.com/Bjorn_Jarvis/status/1513991565760376834">one hour per week</a> is all that’s needed to be “employed”).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/forget-the-election-gaffes-australias-unemployment-rate-is-good-news-and-set-to-get-even-better-by-polling-day-181141">Forget the election gaffes: Australia's unemployment rate is good news – and set to get even better by polling day</a>
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</em>
</p>
<hr>
<p>But in these figures the share of the working age population in work remains at an all-time high of <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/mar-2022#">63.8%</a>, well above the 62.4% before the COVID crisis and the hundreds of billions of dollars spent in response from March 2020.</p>
<p>The number of hours worked rose in April to a record 1,833 million hours.</p>
<p>Underemployment – the proportion of people working fewer hours than they would like – fell to a fresh 14-year low of 6.1%.</p>
<h2>Wages missing out</h2>
<p>Australia’s steadily falling unemployment rates have to date had little effect on wages growth. The figures released on Wednesday showed wages grew <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/mar-2022">2.4%</a> in the year to March, up only marginally on the 2.3% in the year to December.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/are-real-wages-falling-heres-the-evidence-182171">Are real wages falling? Here's the evidence</a>
</strong>
</em>
</p>
<hr>
<p>The Reserve Bank says its <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2022/2022-05-03.html">business liaison programme</a> is giving it a more positive picture, with firms telling it they are having to pay to attract and retain staff.</p>
<p>The Bank is forecasting annual wages growth of <a href="https://www.rba.gov.au/publications/smp/2022/may/pdf/forecast-table-2022-05.pdf">3%</a> by December and 3.5% by December 2023, but it concedes its wage growth forecasts have been overoptimistic in the past, producing higher numbers than eventuated in most of the <a href="https://www.rba.gov.au/speeches/2021/sp-gov-2021-07-08.html">past ten years</a>.</p>
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<span class="attribution"><a class="source" href="https://www.rba.gov.au/speeches/2021/sp-gov-2021-07-08.html">Reserve Bank of Australia</a></span>
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<p>The Bank remains hopeful. Previous dips in unemployment, in 2008 and 2010, boosted wages growth. </p>
<p>A recent study by two of its economists finds that in the locations where unemployment fell <a href="https://www.rba.gov.au/publications/rdp/2021/2021-09/full.html">below 4%</a> in the decade before COVID, wages grew the most.</p>
<h2>Higher rates in store</h2>
<p>The most immediate impact of Thursday’s very welcome news on unemployment will be confirmation within Reserve Bank HQ that the economy can withstand further increases in interest rates. </p>
<p>The next increase is likely a fortnight after the next government takes office, following the Bank’s June board meeting on Tuesday June 7.</p>
<p>Only if it gets clear evidence that wages aren’t climbing as it expects is it likely to consider changing course.</p><img src="https://counter.theconversation.com/content/183226/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins was formerly a senior economist in the Reserve Bank of Australia and the Australian Treasury.</span></em></p>The share of the population in work has hit an all-time high as the share of the workforce underemployed has hit a 14-year low. The fresh low in unemployment will bring higher interest rates, and perhaps higher wages.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1815452022-05-01T08:42:09Z2022-05-01T08:42:09ZA gloomy May Day awaits Nigerian workers<figure><img src="https://images.theconversation.com/files/458901/original/file-20220420-15105-ng3wci.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Minimum wage is no match for rising cost of living</span> <span class="attribution"><span class="source">Photo by Adekunle Ajayi/NurPhoto via Getty Images</span></span></figcaption></figure><p>Imagine you live alone and walk into a local food market in Lagos, the Nigerian commercial capital, to buy a week’s worth of basic food items. In less than 15 minutes, you would find that you’ve spent at least 10,000 Naira (or US$24 at the official exchange rate of US$1 = 416 Naira).</p>
<p>This may seem minuscule to privileged households but such expenditure is a heavy burden on Nigeria’s <a href="https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?locations=NG">62 million workers</a>. </p>
<p>The majority of Nigerian workers have to make do with a monthly <a href="https://www.statista.com/statistics/1119133/monthly-minimum-wage-in-nigeria/">minimum wage</a> of 30,000 Naira (US$72). Only <a href="https://www.worldbank.org/en/news/press-release/2022/03/21/afw-deep-structural-reforms-guided-by-evidence-are-urgently-needed-to-lift-millions-of-nigerians-out-of-poverty">17 percent</a> of Nigerian workers hold jobs that pay enough to get them out of poverty.</p>
<p>After factoring in rent, transportation, medical expenses and electricity, among others, the average Nigerian worker can’t make ends meet. This has been made worse by the rising cost of living. For most Nigerians, the cost of living is about <a href="https://livingcost.org/cost/nigeria">5.3 times more</a> than the average salary.</p>
<p><a href="https://guardian.ng/business-services/nlc-laments-rising-cost-of-goods-cautions-against-increase-in-fuel-price/">Soaring food prices</a> are the major cause. Nigeria’s <a href="https://nigerianstat.gov.ng/elibrary/read/1241157">inflation rate</a> was 15.9 percent in March, 2022, and food prices rose by 17.2 percent, among the <a href="https://www.fxempire.com/macro/nigeria/food-inflation">highest</a> in Africa.</p>
<p>Much of Nigeria’s inflation is due to <a href="https://nigerianstat.gov.ng/elibrary/read/1241146">increases</a> in the prices of basic food items like bread, cereals, potatoes, yam, fish, meat, oils and fats. Food prices contributed about <a href="https://uk.news.yahoo.com/high-nigeria-food-costs-push-110149878.html">60 percent</a> to Nigeria’s inflation in 2021.</p>
<p>Those prices have been increasing for several reasons, including insecurity in the country’s food-producing areas, poor transportation and storage facilities, <a href="https://documents1.worldbank.org/curated/en/389281623682704986/pdf/Resilience-through-Reforms.pdf#page=22">removal</a> of some food items from the list of imports eligible for foreign exchange through the Central Bank of Nigeria’s official windows, <a href="https://punchng.com/experts-predict-further-depreciation-of-naira/">depreciation of the Naira</a>, which led to increases in the prices of imported food, and <a href="https://theconversation.com/nigeria-needs-a-competent-customs-and-immigration-service-not-border-closure-125836">border closures in 2019</a> that resulted in steep declines in food imports.</p>
<p>The <a href="https://www.bbc.com/news/world-60525350">war in Ukraine</a> has added further upward pressure on commodity and fuel prices. This will cause overall inflation and food prices to continue to increase well into 2023, a pointer that Nigerian workers are in for a very rough ride during the next several months.</p>
<p>The rising cost of living has left Nigerian workers with a stark choice. They either spend much of their income on food and forgo other essential needs, or drastically cutting back on food expenditures in order to afford essential services. This Hobbesian choice is worse for a one-income household with multiple people, where the minimum monthly wage has to be spread across members of the household. </p>
<p>It’s no wonder that Nigeria’s number of poor people is forecast to rise <a href="https://www.icirnigeria.org/number-of-poor-nigerians-to-increase-to-95-million-in-2022-report/">95 million</a> or about half the population in 2022.</p>
<p>Many of these poor Nigerians, including those in vulnerable employment, would see their living standards deteriorate precipitously. That’s because Nigerians spend <a href="https://www.weforum.org/agenda/2016/12/this-map-shows-how-much-each-country-spends-on-food/">the highest portion</a> of their income on food. An average Nigerian household spends about 56% of income on food. The other three high spenders on food are Kenya (46.7%), Cameroon (45.6%), and Algeria (42.5%).</p>
<p>To put things in context, in the US, UK, Canada and Australia average household expenditure on food accounts for 6.4%, 8.2%, 9.1%, and 9.8% of income respectively.</p>
<p>The more expensive food becomes, the poorer and more unhealthy Nigerians become. The fact that Nigerian workers have neither embarked on food riots, nor staged mass demonstrations to protest the unbearable increases in food prices, implies they must have found ways of coping with food inflation.</p>
<h2>Coping strategies</h2>
<p>To maintain a decent level of food consumption and avoid becoming one of the <a href="https://www.oxfam.org/en/nigeria-extreme-inequality-numbers">5 million</a> Nigerians that face hunger, households are reducing expenditures on essential services like health, electricity, and transportation. It has become customary for households to switch off electricity at night to reduce energy bills. Many now postpone or avoid unessential travels.</p>
<p>Workers are also doing additional work. These include operating Uber and other share riding cabs and trading in assorted goods. They are also offering services such as barbering, hair braiding, fashion design, tailoring, event planning, photography, commission sales, digital marketing, and exploring opportunities on the web. Some workers are even cutting back on time spent on their regular jobs to devote more time to other income generating activities.</p>
<p>In their attempts to cope with food inflation and rising cost of living, some Nigerian workers have fallen prey to predatory lenders, or what are widely known as “<a href="https://www.theguardian.com/world/2022/mar/09/their-weapon-is-your-shame-toxic-abuse-from-nigerias-loan-sharks">loan sharks</a>”.</p>
<p>Cashing in on workers’ desperation, these lenders charge exorbitant interest rates as high as <a href="https://www.dw.com/en/nigeria-cracks-down-on-digital-loan-sharks/a-61347733">60 percent</a>. Unable to repay their loans on time, many borrowers find themselves stuck with unsustainable debts.</p>
<p>Is there a role for government? Instead of the usual fanfares on May Day, government officials should focus on how to make food more affordable in Nigeria. A starting point is to learn how India successfully addressed its food shortages and rising food prices.</p>
<h2>Lessons from India</h2>
<p>Food shortages were so severe in the 1950s and 1960s that India became known as the “<a href="https://www.indiatoday.in/magazine/guest-column/story/20001127-a-tribute-to-the-spearhead-of-indias-green-revolution-778501-2000-11-27">begging-bowl</a>” nation.</p>
<p>Today, India is not only self-sufficient in food, but food is widely affordable. It has become a net exporter of food.</p>
<p>It turned the situation around through the <a href="https://www.indiatoday.in/magazine/guest-column/story/20001127-a-tribute-to-the-spearhead-of-indias-green-revolution-778501-2000-11-27">Green Revolution</a> initiated by Prime Minister Jawaharlal Nehru in the early 1960s.</p>
<p>This entailed massive investment in rural infrastructure, pro-agriculture economic policies, and land reform. India also invested in agricultural technology, including seedlings, modern machinery, fertiliser, and pesticides.</p>
<p>Land reform under the Green Revolution has enabled rural dwellers to have access to agricultural land, supported by government-provided irrigation systems, rainwater catchments, and extension officers. </p>
<p>India’s land reform placed a ceiling of 25 acres on land ownership per household. Absentee landowners with surplus land were forced to relinquish portions of their land for redistribution to landless farmers. </p>
<p>Contrary to the <a href="https://businessday.ng/agriculture/article/experts-see-small-scale-farming-as-panacea-to-nigerias-food-insecurity/">myth</a> that commercial agriculture is the panacea for Nigeria’s food crisis, India’s agriculture is dominated by small and medium farmers.</p>
<p>Perhaps the greatest boost to food production in India is the country’s extremely cheap and extensive transportation network. Villages are connected to major towns, cities and markets through paved roads and rail systems. </p>
<p>State-owned buses are very pervasive and ply the most isolated regions of the country. Because of easy access to inexpensive transportation, farmers can bring their products to the open market daily.</p>
<p>It’s been a win-win phenomenon for both farmers and workers. Farmers’ incomes have been on the <a href="https://www.pnas.org/doi/10.1073/pnas.0912953109">rise</a>, while workers have benefited from lower food prices. </p>
<p>Higher rural incomes have spurred demand for manufactured goods, and in many cases has led to the <a href="https://www.niti.gov.in/sites/default/files/2021-08/5_EPW_Article_Changes_in_Rural_Economy_of_India_1971_to_2012.pdf">location of factories</a> in rural communities, hence generating employment opportunities for rural dwellers.</p>
<h2>Small-scale farming is the solution</h2>
<p>The Indian case has shown that the key to food security lies with small producers, as opposed to Nigeria’s focus on large-scale agricultural <a href="https://telecoms.com/86802/nigerias-free-phones-for-farmers-plan-reveals-incoherence-of-rural-strategy/">projects</a> that either produce cash crops or turn out to be white elephants.</p>
<p>To ease food supply constraints and ultimately reduce the cost of food in Nigeria, government should focus on boosting the productive capacities of small-scale farmers. This can be done by granting them access to arable land, providing credit for the purchase of inputs, facilitating access to markets, provision of irrigation and storage facilities, as well as safety nets that insulate them from exogenous shocks.</p><img src="https://counter.theconversation.com/content/181545/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With a monthly minimum wage of 30,000 Naira (US$72), the average Nigerian worker is groaning under the weight of the rising cost of living.Stephen Onyeiwu, Andrew Wells Robertson Professor of Economics, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1818392022-04-26T03:37:21Z2022-04-26T03:37:21ZThere are 4 economic wildcards between now and election day. The first is this week<figure><img src="https://images.theconversation.com/files/459407/original/file-20220425-31363-w5crzk.png?ixlib=rb-1.1.0&rect=309%2C82%2C3328%2C1807&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>There are four economic wildcards between now and the election, and we know exactly when each will be played.</p>
<p>The first is this <a href="https://www.abs.gov.au/ausstats/abs@.nsf/webpages/abs+release+calendar">Wednesday</a> at 11.30am eastern time, when we get the official update on inflation. We’re likely to see a figure so large it will take many of us back to the 1990s, to a time before anyone under 30 was born.</p>
<p>With the exception of a short-lived blip following the introduction of the goods and services tax in 2000, inflation has scarcely been above 5% since 1990.</p>
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<p>After a series of <a href="https://www.rba.gov.au/statistics/cash-rate/">extremely large interest rate hikes</a> in the early 1990s succeeded in taming inflation, it has been close to the Reserve Bank target of 2-3% ever since – so much so that even those of us who remember the 8% inflation of the 1980s and the 18% in the 1970s have come to regard fairly steady prices as normal.</p>
<p>When <a href="https://www.abc.net.au/news/2022-04-22/vote-compass-federal-election-issues-data-climate-change-economy/101002116">ABC Vote Compass</a> asked voters to name the issue of most concern to them in the 2016 election, only 3% picked “cost of living”.</p>
<p>Only 4% picked “cost of living” in 2019. With inflation so low it had dropped below the Reserve Bank target band, and a good deal below slow-growing wages, there was nothing much to be concerned about.</p>
<h2>Suddenly, the cost of living matters</h2>
<p>That was until the last few months. Suddenly, the latest Vote Compass finds “cost of living” is voters’ <a href="https://www.abc.net.au/news/2022-04-22/vote-compass-federal-election-issues-data-climate-change-economy/101002116">second biggest</a> concern, behind only climate change. </p>
<p>This election, 13% of voters – one in eight – regard the cost of living as the most important concern of the lot, ahead of accountability, defence, health, education and COVID.</p>
<p>It has happened because prices are climbing like they haven’t in years. The official inflation rate for December (the most recent we’ve got) had prices climbing at an annual rate of 3.5%. </p>
<p>Led by petrol and food, they climbed an awful lot more in the lead-up to March, with the figures to be released on Wednesday likely to show annual inflation approaching 5%.</p>
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Read more:
<a href="https://theconversation.com/whats-in-the-cpi-and-what-does-it-actually-measure-165162">What's in the CPI and what does it actually measure?</a>
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<p>While that’s some way short of the <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/220420/dq220420a-eng.htm">6.7%</a> inflation in Canada, the <a href="https://www.stats.govt.nz/indicators/consumers-price-index-cpi">6.9%</a> in New Zealand, the <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest">7%</a> in the United Kingdom, and the <a href="https://www.bls.gov/news.release/cpi.nr0.htm">8.5%</a> in the United States, each of these countries has begun increasing interest rates as a result, <a href="https://www.rbnz.govt.nz/monetary-policy/official-cash-rate-decisions">some quite aggressively</a>. </p>
<p>A high inflation rate on Wednesday will confirm what the <a href="https://www.forexfactory.com/news/1150662-australia-inflation-expectations-melbourne-institutes-april-survey-52">public suspects</a>: that prices really are climbing at a pace without modern precedent, and that for those who rely on wages, it is sending their living standards backwards.</p>
<p>It will also encourage the Reserve Bank to begin to push up interest rates in line with its contemporaries throughout the English-speaking world, eating into the living standards of Australians on mortgages.</p>
<h2>The second wildcard: rising interest rates</h2>
<p>That’s when the second election wildcard gets played, next <a href="https://www.rba.gov.au/statistics/cash-rate/">Tuesday May 3</a>, at 2.30pm eastern time, after the Reserve Bank board’s May meeting. </p>
<p>If inflation is especially high, there’s a chance the bank will announce it is pushing up rates, lifting its cash rate from its present all-time low of 0.10% to 0.25% or to 0.50%, and holding an afternoon press conference to explain why.</p>
<p>If fully passed on, an increase to 0.50% would add an extra $100 to the monthly cost of paying off a $500,000 mortgage.</p>
<p>The increase, and the explanation that it was much higher prices that brought it about, would be crushing for a government <a href="https://www.facebook.com/watch/?v=1009755246590673">campaigning</a> on what it is doing to address the cost of living. It would help Labor, which has made the <a href="https://7news.com.au/politics/labor-denies-pork-barrelling-accusations-c-6073061">cost of living</a> a key plank of its campaign.</p>
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Read more:
<a href="https://theconversation.com/the-rba-has-lost-patience-on-rates-but-it-isnt-rushing-to-push-them-up-180681">The RBA has lost patience on rates, but it isn't rushing to push them up</a>
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<p>There ought to be no doubt that if the bank decides it needs to raise rates at its meeting next Tuesday, it will do it then, rather than wait a month until the campaign is over. It pushed up rates during the 2007 campaign, <a href="https://www.abc.net.au/news/2007-11-07/pm-says-sorry-for-latest-rate-hike/718242">three weeks</a> before John Howard was swept from power.</p>
<p>But if inflation isn’t ultra-high but merely high, and not necessarily sustainably high, the bank is likely to wait for another piece of evidence before acting.</p>
<p>After its last meeting it said it wouldn’t lift rates until it saw “<a href="https://www.rba.gov.au/media-releases/2022/mr-22-11.html">actual evidence</a>” that inflation was “sustainably” within the 2-3% target range.</p>
<h2>The wages wildcard – 3 days before polling day</h2>
<p>To get that evidence, the board would need either very high inflation, or evidence that <a href="https://www.rba.gov.au/media-releases/2022/mr-22-11.html">wage growth</a> was high enough to sustain what might otherwise be short-lived high inflation, caused by a spike in the oil price (which has since <a href="https://tradingeconomics.com/commodity/crude-oil">retreated 16%</a>).</p>
<p>That official word on wages is the third economic wildcard, arriving at 11.30am eastern time on <a href="https://www.abs.gov.au/ausstats/abs@.nsf/webpages/abs%20release%20calendar?opendocument&dt=202205">Wednesday May 18</a>, three days before voting day.</p>
<p>To date wage growth has been frustratingly low: at <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">2.3%</a> in the year to December, well below what is needed to maintain living standards in the face of inflation, and well below what would normally be needed to make high inflation self-sustaining.</p>
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Read more:
<a href="https://theconversation.com/despite-record-vacancies-australians-shouldnt-expect-big-pay-rises-soon-180416">Despite record vacancies, Australians shouldn't expect big pay rises soon</a>
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<p>High official wage growth in the year to March could make a post-election interest rate hike all but certain, if rates haven’t already gone up ahead of the election.</p>
<p>Continued demonstrably weak wage growth – which is probably more likely – will officially confirm that prices are racing ahead of wages, just before polling day.</p>
<h2>The poll-eve jobs wildcard</h2>
<p>Which leads on to the fourth economic wildcard, to be delivered the next day, two days before polling day on <a href="https://www.abs.gov.au/ausstats/abs@.nsf/webpages/abs%20release%20calendar?opendocument&dt=202205">Thursday May 19</a> – about the only piece of economic news ahead that’s likely to play well for the government.</p>
<p>Ultra-low interest rates and massive government stimulus, originally designed to keep people in jobs during COVID but continued <a href="https://theconversation.com/budget-2022-frydenberg-has-spent-big-but-on-the-whole-responsibly-180122">beyond that</a>, have delivered an unemployment rate that rounds to 4% but is actually a touch below it at <a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">3.95%</a>, the lowest since November 1974, almost 50 years ago.</p>
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Read more:
<a href="https://theconversation.com/technically-unemployment-now-begins-with-a-3-how-to-keep-it-there-181242">Technically unemployment now begins with a '3'. How to keep it there?</a>
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<p>There’s every chance the April unemployment rate will be even lower, perhaps the 3.75% the treasury expects <a href="https://images.theconversation.com/files/459660/original/file-20220426-26-3xtn2z.GIF">later in the year</a>. If it is, the Coalition will deserve and will claim a lot of the credit. Labor will be left to talk about the cost of living.</p><img src="https://counter.theconversation.com/content/181839/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Of the news on prices, wages, interest rates and unemployment, only the unemployment update looks set to be positive for the Coalition.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1810172022-04-24T14:02:45Z2022-04-24T14:02:45ZCompanies are mitigating labour shortages with automation — and this could drastically impact workers<figure><img src="https://images.theconversation.com/files/458963/original/file-20220420-22-3lmahn.jpg?ixlib=rb-1.1.0&rect=6%2C20%2C4516%2C3241&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The pandemic and the aging population are both partially responsible for the current labour shortage.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Last month, unemployment in Canada reached a record low of <a href="https://www.ctvnews.ca/business/canada-s-jobless-rate-has-hit-a-record-low-1.5853649">5.2 per cent</a>. Alongside low unemployment, many industries saw — and are still seeing — a worker shortage, with the number of job vacancies in Canada reaching 900,000 in January.</p>
<p>Both of these things are good for workers, right? </p>
<p>Prospective employers, desperate for new recruits, are “<a href="https://www.cbc.ca/news/canada/new-brunswick/hiring-incentives-labour-shortage-1.6296609">throwing cash at applicants</a>.” Many lower wage jobs have even seen an <a href="https://www.cbc.ca/radio/costofliving/the-price-of-food-is-going-up-maybe-your-salary-should-too-1.6388201/want-a-raise-now-is-the-perfect-time-to-ask-for-it-career-experts-say-1.6403924">increase in pay</a>, like the <a href="https://www.wsj.com/articles/walmart-raises-pay-to-attract-truck-drivers-11649336400">20 per cent wage increase</a> for truckers recently announced by Walmart.</p>
<p>The pandemic is partially responsible for this labour shortage, as the immigrant workforce supply dried up throughout the lockdown. However, the <a href="https://www.thestar.com/business/opinion/2021/11/07/labour-shortage-the-answer-is-to-bring-older-adults-back-into-the-workforce.html">aging population</a> in Canada has also been a factor.</p>
<h2>Is automation the answer?</h2>
<p>The solution to the worker shortage proposed by the <a href="https://www.cbc.ca/news/business/job-skills-shortage-1.6409237">Business Development Bank of Canada’s chief economist</a> is <a href="https://www.businesswire.com/news/home/20220119005323/en/Survey-Reveals-Businesses-Are-Doubling-Down-on-Automation-to-Balance-Against-the-Global-Labor-Shortage">increased automation</a>. </p>
<p>Advocates and critics have long argued over the impact of automation on employment. Advocates believe automation can be used to perform <a href="https://www.finance-monthly.com/2021/11/automating-the-mundane-how-it-solutions-can-rescue-staff-from-needlessly-repetitive-time-intensive-tasks/">mundane</a> or <a href="https://www.automate.org/blogs/how-robots-are-taking-on-the-dirty-dangerous-and-dull-jobs">physically demanding</a> jobs, freeing up workers to learn new skills and take on better jobs.</p>
<p>Recent <a href="https://doi.org/10.1287/mnsc.2020.3812">research from the University of Pennsylvania</a> supports the argument that automation creates jobs. The study found that investing in robots boosted the efficiency and quality of work while reducing costs, increasing productivity and creating more job opportunities. Similarly, a 2020 report from Statistics Canada also found that <a href="https://theconversation.com/the-robot-revolution-is-here-how-its-changing-jobs-and-businesses-in-canada-155267">companies that used robots hired more human workers</a>.</p>
<p>The impact of automation on work can only be assessed over the longer term and according to whether vacancies are created by those leaving their jobs or retiring and whether the activities of those departing are fully automated. </p>
<p>But critics have argued that automation and advancements in technology create an <a href="https://www.oxfordreference.com/view/10.1093/oi/authority.20110803095946632">hourglass economy</a> where opportunities only exist for highly and lowly skilled workers, leaving less work for semi-skilled workers who must either increase their skills or take <a href="https://www.resolutionfoundation.org/app/uploads/2014/08/The-Changing-Shape-of-the-UK-Job-Market.pdf">lower-skilled (and waged) work</a>.</p>
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<img alt="A building in an empty parking lot that says BLOCKBUSTER across the front" src="https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=522&fit=crop&dpr=1 754w, https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=522&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/458915/original/file-20220420-11-ip0gfs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=522&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Netflix automated the video rental business while Blockbuster retained its physical labour-intensive model until it was too late.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jonathan Hayward</span></span>
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<p>A common example used to illustrate the detriment of technology to employment is the case of <a href="https://hbr.org/2017/04/automation-makes-things-cheaper-so-why-doesnt-it-feel-that-way">Blockbuster</a>. Once a titan of physical video rental with 60,000 employees, Blockbuster was unable to compete with Netflix’s (who only had around 2,500 employees) new streaming services and <a href="https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html">filed for bankruptcy in 2010</a>. Netflix automated the video rental business while Blockbuster retained its physical labour-intensive model until it was too late.</p>
<h2>Automation might not be so bad after all</h2>
<p>The reason why automation hasn’t had a more detrimental impact for workers can be explained by two factors. Firstly, employees are also consumers. To reduce employment is to reduce the market for products, which is bad for <a href="https://www.americanprogress.org/article/raising-minimum-wage-boost-economic-recovery-reduce-taxpayer-subsidization-low-wage-work/">manufacturers and capitalism itself</a>. </p>
<p>As a management professor, I often use an incident that supposedly occurred between <a href="https://www.economist.com/babbage/2011/11/04/difference-engine-luddite-legacy">Henry Ford II and Walter Reuther</a>, leader of the United Automobile Workers trade union, to illustrate this point. </p>
<p>While showing Reuther the new automated assembly lines at his car factory, Ford subtly threatened the future of the union: “How are you going to get those robots to pay your union dues?” Unfazed, Reuther replied: “How are you going to get them to buy your cars?” </p>
<figure class="align-center ">
<img alt="Two huge robotic arms sitting in a large, empty garage" src="https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/458961/original/file-20220420-15105-hp4bir.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">RoboTire patented robotic systems use software to automatically change vehicle tires.</span>
<span class="attribution"><span class="source">(Rick Osentoski/AP Images for RoboTire)</span></span>
</figcaption>
</figure>
<p>Secondly, firms can easily resolve issues with new technology by employing human workers to take over. Take for example, the failure of automation in the fast food industry and the tale of <a href="https://hbr.org/2021/11/automation-doesnt-just-create-or-destroy-jobs-it-transforms-them">Flippy, the burger flipping robot</a>, that lasted a single day, only to be replaced by human workers when it couldn’t keep up with demand. Such instances reveal the way in which workers offer an easy substitute for automation that fails to cut the mustard (or flip the burger).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/covid-19-has-fuelled-automation-but-human-involvement-is-still-essential-153715">COVID-19 has fuelled automation — but human involvement is still essential</a>
</strong>
</em>
</p>
<hr>
<p>The current situation is different because employers are struggling to source workers. The reliance on automation is becoming a necessity, rather than a source of competitive advantage. Moreover, the labour shortage means that turning to workers as a substitute for failing technology is a less viable strategy, so firms are more likely to persevere in introducing new technology. </p>
<h2>The future of automation</h2>
<p>It has been argued that about half of the activities undertaken by workers could be <a href="https://www.mckinsey.com/%7E/media/mckinsey/featured%20insights/Digital%20Disruption/Harnessing%20automation%20for%20a%20future%20that%20works/MGI-A-future-that-works-Executive-summary.ashx">automated by 2055</a>. This does not mean that all of these activities will be automated. Nor does it mean that 50 per cent of jobs will necessarily disappear in the next 30 years without other jobs emerging as a result. </p>
<p>However, current circumstances, especially the shortage of workers, is a powerful motivation for automation. We could see a significant increase in automation use in the workplace over the next few years. </p>
<p>The challenges of filling worker vacancies may be good news for workers now, but the longer terms consequences still remain to be seen.</p><img src="https://counter.theconversation.com/content/181017/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geraint Harvey does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With employers struggling to hire enough workers, reliance on automation is becoming more of a necessity than just a source of competitive advantage.Geraint Harvey, DANCAP Private Equity Chair in Human Organization, Western UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1812562022-04-21T06:10:36Z2022-04-21T06:10:36ZAlbanese has dropped Labor’s pledge to boost JobSeeker. With unemployment low, is that actually fair enough?<p>One of the first things Labor’s Bob Hawke did on being swept to office in March 1983 was to <a href="https://images.theconversation.com/files/458070/original/file-20220414-20-lhyool.GIF">lift the unemployment benefit</a> in April, seven weeks later, without even waiting for his first budget.</p>
<p>One of the first things Labor’s Anthony Albanese did during the first week of this election campaign was to let it be known that Labor was <a href="https://www.sbs.com.au/news/article/labor-hasnt-committed-to-jobseeker-increase-and-has-no-plan-to-review-payment-if-it-wins-election/287i8merx">no longer committed</a> to lifting the unemployment benefit at any time up to and including his first budget.</p>
<p>A promise to review the payment made in the last election by then Labor leader Bill Shorten was no longer operative.</p>
<p>Hawke’s 1983 increase was the first of many. Over 12 years the Hawke and Keating governments lifted the real value of unemployment benefits <a href="https://guides.dss.gov.au/social-security-guide/5/2/1/10">27%</a>.</p>
<p>Albanese said last week Labor had no plan to lift what is now called JobSeeker in its first budget. Government debt was “<a href="https://www.afr.com/politics/federal/albanese-says-1t-debt-makes-jobseeker-rise-untenable-20220413-p5ad53">heading toward a trillion dollars</a>”.</p>
<p>The single rate of JobSeeker is A$642.70 a fortnight, about <a href="https://www.servicesaustralia.gov.au/how-much-jobseeker-payment-you-can-get?context=51411">$46 a day</a>. </p>
<h2>Is JobSeeker enough?</h2>
<p>Some JobSeekers get more. Single parents and those aged 60 and over who have been on payments for nine months can get up to $691 per fortnight. Partnered jobseekers can get $585.30 each. </p>
<p>There is also a small <a href="https://www.servicesaustralia.gov.au/payment-rates-for-energy-supplement-pension-or-allowance?context=22286">Energy Supplement</a> of 63 cents to 86 cents per day, and <a href="https://www.servicesaustralia.gov.au/how-much-rent-assistance-you-can-get?context=22206#a1">rent assistance</a> offering single people renting privately up to $145.80 per fortnight and renters sharing with other people up to $97.20 per fortnight.</p>
<p>And for some months during the pandemic the temporary <a href="https://www.servicesaustralia.gov.au/coronavirus-supplement">Coronavirus Supplement</a> introduced in March 2020 almost doubled the base rate. </p>
<p>Calculations by the ANU Centre for Social Research and Methods suggest this cut the share of Jobseeker recipients in poverty from 67% to <a href="https://csrm.cass.anu.edu.au/research/publications/covid-19-jobkeeper-and-jobseeker-impacts-poverty-and-housing-stress-under">just under 7%</a>. </p>
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<p>But the boost was short-lived. By 2021 the supplement had been removed entirely and replaced with a much smaller increase of $50 a fortnight.</p>
<p>Research by Anglicare found that, <a href="https://www.anglicarewa.org.au/docs/default-source/advocacy/anglicare-wa---jobseeker-summary.pdf?sfvrsn=39bfbc60_2">while it lasted</a>, the supplement allowed families to pay rent, access nutritious food and avoid emergency relief services</p>
<p>As shown in the chart, that $50 a fortnight has done little to redress the extent to which the living standards of people on unemployment benefits have been falling behind. For the last three decades, they have done little more than increase in line with prices, while the living standards of wage earners have grown strongly.</p>
<p>The base rate has fallen from 84% to 66% of the poverty line, defined as half the median income over that time, even taking account of the latest increase. </p>
<p>And Jobseeker has also fallen further behind the <a href="https://povertyandinequality.acoss.org.au/income-support-since-2000/">minimum wage</a></p>
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<p>Even for those able to receive the maximum rate of rent assistance, unemployment payments have fallen from 57% of the net minimum wage at the start of the 2000s to 50% now. This is on top of a fall of four percentage points during the 1990s. </p>
<p>This makes it difficult to make a case that unemployment payments are generous enough to discourage jobseekers from seeking the minimum wage.</p>
<p>Compared to the high-income countries Australia normally compares itself with, the JobSeeker “net replacement rate” is low, about the lowest in the OECD.</p>
<p>The net replacement rate is the assistance provided to a single person aged 40 who has been unemployed for two months as a proportion of the average wage. </p>
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<p>Australia’s minister for social services has argued these comparisons are not relevant, because Australia’s social security system is based on <a href="https://ministers.dss.gov.au/transcripts/6756">different principles</a> than those in most other countries. </p>
<p>Australian income support is unrelated to previous earnings. This is correct, but it does not change the fact that when Australian workers lose their job, their income drops by far more than workers in other OECD countries.</p>
<p>Moreover, when the government announced the $50 a fortnight increase in February 2021, the prime minister justified it by saying that this would move the replacement rate <a href="https://www.pm.gov.au/media/press-conference-australian-parliament-house-act-230221#:%7E:text=41.2%25%20of%20the%20national%20minimum,had%20fallen%20down%20to%2037.5%25.">back to where it had been</a> under the Howard Government.</p>
<p>It would be:</p>
<blockquote>
<p>41.2% of the national minimum wage, which puts us back in the realm of where we had been previously</p>
</blockquote>
<p>While this is similar to the replacement rate at the end of Howard’s term, it is nothing like the replacement rate at the start of the term. </p>
<h2>But unemployment has fallen…</h2>
<p>At just 4%, unemployment is now much lower than the 5.2% that prevailed at the time of the 2019 election when Labor promised to review JobSeeker.</p>
<p>But the number of people receiving Jobseeker and Youth Allowance (Other) is actually higher than it was back then; there were <a href="https://data.gov.au/data/dataset/jobseeker-payment-and-youth-allowance-recipients-monthly-profile">935,000</a> people receiving these payments in February 2022, compared to 765,000 in May 2019.</p>
<p>The reasons for this difference are complex, but a significant factor is that a very large share of people receiving unemployment payments are not required to seek jobs and have a reduced capacity to work. </p>
<p>Among them are people whose access to the <a href="https://www.bsl.org.au/research/publications/dead-ends-social-security/">disability support pension</a> has been cut and Australians who would have been of pension age before the age was lifted.</p>
<h2>What would Labor actually do?</h2>
<p>On almost any measure, JobSeeker is too low, as the inquiry promised by Labor in 2019 would have discovered.</p>
<p>Labor’s <a href="https://alp.org.au/media/2594/2021-alp-national-platform-final-endorsed-platform.pdf">present national platform</a> talks about rewarding </p>
<blockquote>
<p>those who work hard to create a better life for themselves. Labor is the party for those who want to get ahead, as well as the party of compassion for those doing it tough</p>
</blockquote>
<p>It goes on to pledge that </p>
<blockquote>
<p>Labor will make sure people who are looking for work get the financial support they need to live a life of dignity through a strong social security system as well as the support they need to find and keep a job</p>
</blockquote>
<p>This offers some hope, but, unlike in 2019, no guarantees.</p><img src="https://counter.theconversation.com/content/181256/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Whiteford receives funding from the Australian Research Council and has undertaken research for the Department of Social Services. He is a Fellow of the Centre for Policy Development and an advisor to the Australian Council of Social Service.</span></em></p><p class="fine-print"><em><span>Bruce Bradbury receives funding from the Australian Research Council and conducts contract research for other government bodies. This article is based in part on research conducted as part of the Poverty and Inequality Partnership between UNSW Sydney and the Australian Council of Social Service. </span></em></p>Even with the latest small increase, JobSeeker remains low by overseas standards – and, on one measure, it’s the lowest in the OECD.Peter Whiteford, Professor, Crawford School of Public Policy, Australian National UniversityBruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1794872022-03-17T11:33:03Z2022-03-17T11:33:03ZFrydenberg targets budget at cost of living and attacking debt<p>The March 29 budget will contain “targeted and proportionate” help for families with cost of living pressures and move fiscal policy towards stabilising and reducing debt.</p>
<p>These are the messages in Treasurer Josh Frydenberg’s speech, released before its Friday delivery, laying out the priorities and fiscal setting of the budget, which will be a launch pad for the government’s campaign for the May election. </p>
<p>“The time for large scale, economy-wide emergency support is over,” Frydenberg says, pointing to where the government has already ended emergency measures and rejected requests for more support. </p>
<p>Fiscal settings “need to be normalised,” with the government moving to the next phase of its fiscal strategy. </p>
<p>Government sources stressed this doesn’t mean the government is planning to start cutting. Rather, they said, it aims to control new spending while continuing to grow the economy so there can be a steady then declining ratio of debt to GDP. </p>
<p>With the government under pressure over the cost of living, especially with the soaring of petrol prices, Frydenberg points to what it has done on power prices, child care and tax. </p>
<p>In the budget “there will be further measures to support families to meet the cost of living pressures, in a targeted and proportionate way”, he says.</p>
<p>His speech comes as unemployment fell to 4% in February, in figures released on Thursday. This is the equal lowest in 48 years.</p>
<p>“The Australian economy has recovered strongly and now has real momentum,” Frydenberg says. </p>
<p>“The initial phase of our fiscal strategy has delivered on its objective, with full employment in sight.” The budget “will show the fiscal dividend of this strong recovery.</p>
<p>"With our recovery well underway it is now time to move to the next phase of our fiscal strategy. </p>
<p>"This will see a focus on stabilising and then reducing debt as a share of the economy. Rebuilding our fiscal buffers without risking growth.” </p>
<p>Frydenberg says the budget “will confirm that this is the trajectory we are now on”.</p>
<p>The bottom line will show “substantial improvement”, he says, a result of more people in work and fewer on welfare. </p>
<p>Gross debt as a proportion of GDP will be forecast to peak lower than expected in the December budget update. It is projected to decline over the medium term. </p>
<p>“This is the fiscal dividend of a strong economy”. </p>
<p>Frydenberg stresses the uncertainties ahead, including the pandemic’s continued presence and the war in Europe which has heightened geopolitical risk and threatens global economic growth. Supply chains are strained, and energy prices and inflation are being driven up. </p>
<p>“As we saw entering this crisis, a strong budget and a strong economy put us in the best position to respond. </p>
<p>"That is why it is important to move to the next phase of our fiscal strategy, which will stabilise and reduce debt as a share of the economy”. </p>
<p>Frydenberg emphasises the need for the pace of fiscal consolidation to be gradual.</p>
<p>“It is about striking the right balance. A sharp and sudden tightening in the fiscal settings would likely be counterproductive, undermining the economic recovery and ultimately hurting the budget.” </p>
<p>He says Australia’s debt to GDP levels, even when they peak, will remain low by international standards. “Even as interest rates gradually rise, our debt servicing costs will remain manageable”.</p><img src="https://counter.theconversation.com/content/179487/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The March 29 budget will contain “targeted and proportionate” help for families with cost of living pressures and move fiscal policy towards stabilising and reducing debt.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1794632022-03-17T04:30:56Z2022-03-17T04:30:56ZPolitics with Michelle Grattan: Stay calm, petrol is headed down, budget is improving – economist Chris Richardson<p>Australia’s budget situation has been quietly improving. Deloitte Access Economics director Chris Richardson says the remarkable strength of the Australian economy means it no longer needs the emergency support it has been getting from the government and the Reserve Bank. Government spending fell by a record 10% in the year to January.</p>
<p>He counsels against emergency measures to protect Australians from the soaring price of petrol, saying today’s international oil price implies that in less than a fortnight petrol prices will be between 15 and 20 cents lower a litre. </p>
<p>While there is no guarantee they won’t climb again, the relief that’s in store is half as big as the relief the government could deliver by cutting fuel excise, a measure he says would be like applying a Band-Aid that would be difficult to rip off.</p>
<p>Rather than pumping more money into the economy, the March 29 budget should be withdrawing support in a measured fashion. Although government debt has climbed, low interest rates mean the payments on government debt cost less than before COVID.</p>
<p>With Australia just a “handful of months” away from an unemployment rate of 3.5% – Thursday’s February rate was 4.0% - Australia should celebrate its success in getting its economic policies right during COVID. While the reopening of borders will slow Australia’s success in bringing down unemployment, it is unlikely to reverse it. </p>
<p>After petrol prices, the next challenge for Australians will be higher mortgage rates, but they will be going up for a reason, Richardson says, because inflation is climbing and wage growth is climbing, which will improve the budget position further.</p><img src="https://counter.theconversation.com/content/179463/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan speaks with Deloitte Access Economics director Chris Richardson about the Australian economy, the budget, and petrol pricesMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1767242022-02-22T14:11:41Z2022-02-22T14:11:41ZFor workers in Africa, the digital economy isn’t all it’s made out to be<figure><img src="https://images.theconversation.com/files/446333/original/file-20220214-13-xeilgr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Staff members of an e-commerce company in Rwanda.</span> <span class="attribution"><span class="source">Xinhua/Wang Teng via Getty Images</span></span></figcaption></figure><p>Today <a href="https://www.itu.int/en/mediacentre/Pages/PR-2021-11-29-FactsFigures.aspx">more than half of the world’s population</a> is connected to the internet. In Africa, there are over <a href="https://www.internetworldstats.com/stats1.htm">590 million internet users</a> and over <a href="https://data.worldbank.org/indicator/IT.CEL.SETS.P2?locations=ZG">800 million mobile phone subscribers</a>. </p>
<p>Some <a href="https://www.brookings.edu/research/the-fourth-industrial-revolution-and-digitization-will-transform-africa-into-a-global-powerhouse/">observers</a> note that such diffusion of digital tools and connectivity is bringing political, economic, social and cultural transformations on the African continent. </p>
<p>One such change is that workers from Lagos to Johannesburg to Nairobi are carrying out various forms of digital work. These are activities which involve manipulation of digital data using tools such as mobile phones, computers and the internet. </p>
<p>Examples are <a href="https://journals.sagepub.com/doi/abs/10.1177/1024529420914473">transcription</a>, <a href="https://journals.sagepub.com/doi/abs/10.1177/1024529420914473">article writing</a>, <a href="https://www.tandfonline.com/doi/full/10.1080/03056244.2020.1728243">image tagging</a>, <a href="https://www.tandfonline.com/doi/full/10.1080/03056244.2020.1728243">search engine optimisation</a>, and <a href="https://theconversation.com/most-call-centre-jobs-are-a-dead-end-for-south-africas-youth-117516">inbound and outbound customer services</a>, which can be done for clients <a href="https://firstmonday.org/ojs/index.php/fm/article/view/9913">anywhere</a>. </p>
<p>As a result, governments, development organisations and civil society look towards digital work as a fix for African countries’ development problems, including unemployment, poverty, and inequality.</p>
<p>For our new book, <a href="https://fdslive.oup.com/www.oup.com/academic/pdf/openaccess/9780198840800.pdf">The Digital Continent</a>, we conducted a five year study to investigate call centre work and the remote gig work and its implications for workers in five African countries: South Africa, Kenya, Uganda, Nigeria and Ghana.</p>
<p>We argue that job quality in digital work remains questionable. </p>
<p>We show that while digital work can bring some forms of freedom and flexibility into the lives of workers in the five countries, it can also contribute towards their precarity and vulnerability.</p>
<h2>Employment insecurities</h2>
<p>We conducted in-depth interviews with call centre workers and remote gig workers to understand their experiences of digital work, income, working hours, employment relations, and algorithmic management of their labour and body.</p>
<p>A majority of those we interviewed noted new digital jobs as one of their important sources of income. But this should be read with caution. </p>
<p>Call centres are notorious for <a href="https://theconversation.com/most-call-centre-jobs-are-a-dead-end-for-south-africas-youth-117516">contingent employment relations</a> – that is, flexible and short-term contracts. </p>
<p>Firms’ use of temporary staffing agencies to cut labour costs is also common. Call centre agents can be <a href="https://library.oapen.org/handle/20.500.12657/26026">hired and fired</a> easily. For example, an agent in Nairobi told us that in April 2016 his firm fired 70 workers. </p>
<p>Companies also relocate with relative ease. Though in <a href="https://theconversation.com/most-call-centre-jobs-are-a-dead-end-for-south-africas-youth-117516">South Africa</a> call centre operations have grown in recent years, <a href="https://www.tandfonline.com/doi/full/10.1080/19376812.2019.1589730?needAccess=true&instName=University+of+Edinburgh">several</a> have closed down in Kenya, Nigeria and Ghana. Some companies moved to <a href="https://fdslive.oup.com/www.oup.com/academic/pdf/openaccess/9780198840800.pdf">destinations with cheaper labour</a>. Unfortunately exact data on this is hard to come by. </p>
<p>Similarly, workers on the continent see the digital gig economy as a new opportunity. While technological barriers may have been reduced, they face various hurdles to earning a living in the global gig economy. A worrying trend is that few actually earn an income on platforms where flexible digital work is made available. </p>
<p><a href="https://www.upwork.com/">Upwork</a> is the world’s largest platform in terms of registered workers and the most popular among workers on the continent. But <a href="https://firstmonday.org/ojs/index.php/fm/article/view/9913/7748">our estimates</a> suggest that less than 6% of the Africans registered on it ever earn a single US dollar. In the case of Ghana and Uganda, these figures are as low as 3.1% and 2.7% respectively. </p>
<p>There is an <a href="https://fdslive.oup.com/www.oup.com/academic/pdf/openaccess/9780198840800.pdf">oversupply of labour</a> on the gig economy platforms. Respondents also told us that some clients do not want to give contracts to workers on the continent. </p>
<p>On platforms, work is primarily short-term. Some tasks (like image tagging) take as little as a minute to complete; others can last longer (like virtual assistant work). The short-term contracts mean that workers have to constantly search for work on platforms to earn an income. Yet compensation can be low. </p>
<p>Because some platforms <a href="https://www.mturk.com/pricing">pay as little as $0.10 per task</a>, workers resort to working on multiple contracts, which means longer and unsociable hours. Some of those in our study spent up to 80 hours a week working.</p>
<p>Platforms also give employers access to a planetary workforce, so workers have become more expendable than ever. Workers we spoke to noted that clients preferred lower-cost labour destinations, such as India and the Philippines. </p>
<h2>Managed by algorithms</h2>
<p>Increasing use of <a href="https://fdslive.oup.com/www.oup.com/academic/pdf/openaccess/9780198840800.pdf">algorithmic management</a> for surveillance and control of workers and the labour process is making digital workers even more vulnerable. </p>
<p>In call centres, technological tools like customer relationship management and workforce management are used to maximise workers’ time on call. Call centres are known as <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2338.00113">“assembly lines in the head”</a> for this reason.</p>
<p>In the gig economy, workers face similar pressures with <a href="https://journals.sagepub.com/doi/abs/10.1177/1024529420914473">algorithms keeping track on them</a> by taking a screenshot of their laptops. </p>
<p>While some platform workers can schedule the time and place of work the way they want, this flexibility isn’t available to everyone. Only experienced gig workers were able to achieve some form of flexible working.</p>
<p>Surveillance and algorithmic control result in loneliness and social isolation. Complaints about mental and physical stress, including sleep deprivation, were common among our respondents. </p>
<p>Some gig economy platforms openly state that clients do not have to pay if workers fail to meet the target or if clients are not satisfied with the work. There were dozens of stories of workers in our sample who never got paid for work done. Wage refusal or withholding pay is considered forced labour by the <a href="https://www.ilo.org/global/topics/forced-labour/publications/WCMS_081999/lang--en/index.htm">International Labour Organisation</a>.</p>
<h2>Lack of career opportunities</h2>
<p>Call centres are considered flat organisations with very few opportunities for internal progression within a firm. A majority of the agents we interviewed did not consider their work at call centres as a long-term career option. We met workers who had been in the sector for over five years with no real progression in salary or working conditions.</p>
<p>Platform companies and organisations such as the <a href="https://openknowledge.worldbank.org/handle/10986/22284">World Bank</a> have built a rhetoric around the gig economy as enabling self-employment or entrepreneurship. Our book shows a less positive reality. Digital work opportunities don’t always translate into good quality jobs, and may not be sustainable.</p>
<p>We see a need for research and activism that exposes how digital work is done. We also call for government action to uphold worker rights. And we advocate for building worker solidarity in digital economy networks.</p><img src="https://counter.theconversation.com/content/176724/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mohammad Amir Anwar has received funding from British Academy, Economic and Social Research Council (UK), and Scottish Funding Council. </span></em></p>Whereas digital work can bring freedom and flexibility into the lives of workers in Africa, it can also contribute towards their precarity and vulnerability.Mohammad Amir Anwar, Lecturer in African Studies and International Development, The University of EdinburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1765802022-02-20T05:55:30Z2022-02-20T05:55:30ZGhana’s debt makes development impossible: here are some solutions<figure><img src="https://images.theconversation.com/files/445584/original/file-20220210-27-186mld.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ghana's economy is in dire straits</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p><em>By the year 2000, the government of Ghana had borrowed so much that the country was in <a href="https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr0211">debt distress</a>. It then subscribed to the <a href="https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr0211">Heavily Indebted Poor Countries initiative</a> of the International Monetary Fund and World Bank. Consequently, much of the country’s external debt of over US$4 billion was written off by creditors. By the time the initiative ended in 2006, Ghana’s total public debt stock was US$780 million (25% of GDP). The debt stock has since risen by 7000% to <a href="https://www.ghanaweb.com/GhanaHomePage/business/Ghana-s-public-debt-stock-now-GH-341-8-billion-as-of-September-2021-1406452">$54 billion, which is 78% of GDP</a>. The current debt to GDP ratio is 78%, while the average for developing countries is 60%. Economist, Adu Owusu Sarkodie, explains how this happened, why it’s a problem and what can be done.</em></p>
<h2>How did Ghana get into this situation?</h2>
<p>After the Heavily Indebted Poor Countries initiative ended in 2006, the public debt stock has largely been driven by the continuous accumulation of budget deficits (48.6%), the currency deprecation (28.2%), and off-budget borrowings (23.2%). Between 2017 and 2019, Ghana’s debt stock grew astronomically for three main reasons, beyond the normal drivers. </p>
<p>First was the country’s <a href="https://www.fitchratings.com/research/sovereigns/energy-sector-debt-is-key-risk-to-ghana-post-pandemic-debt-trajectory-03-03-2021">energy sector debt</a>. This is debt owed to the country’s power producers and suppliers. It has been accumulated largely by Ghana’s state-owned enterprises, that struggle to generate enough internal revenue to pay their loans. In 2021, for instance, the government has so far provided a $3 billion bailout. </p>
<p>Second was the financial sector <a href="https://isd.gov.gh/topstories-isdnews-authentic-government-news-at-every-corner-of-the-nation/764/">clean-up exercise</a> undertaken by the country’s central bank. Between 2017 and 2019, the Bank of Ghana revoked the licences of some banks, savings and loans, micro-financial institutions, finance houses, and investment institutions due to their insolvency and financial malpractices. The government had to raise another <a href="https://isd.gov.gh/topstories-isdnews-authentic-government-news-at-every-corner-of-the-nation/764/">$3 billion in bonds</a> to pay customers of the defunct banks and financial companies.</p>
<p>Thirdly, like many countries in the world, COVID-19 has had a <a href="https://www.emerald.com/insight/content/doi/10.1108/IJSE-08-2020-0582/full/html">serious impact</a> on the Ghanaian economy due to lockdowns, border closures, restrictions in movement, and the fall in crude oil prices. The economic restrictions resulted in a fall in revenue of US$2 billion, while COVID-19 expenditures increased total government expenditure by US$1.7 billion, giving a total fiscal impact of almost US$4 billion in 2020.</p>
<h2>How bad is it?</h2>
<p>The current rigidity in the Ghanaian budget makes it impossible for the government to do anything without borrowing. Rigidity refers to those statutory payments in the budget over which the government has no control. Just two of the statutory payments (compensation of employees and debt service) consume the total revenue and grants. In 2020, debt service alone (paying interest plus amortisation) consumed 70% of revenue. That’s close to the level of 72% before the country subscribed to the Heavily Indebted Poor Countries initiative. </p>
<p>Based on the estimated revenue and expenditure figures in the 2021 and 2022 budgets, the debt service burden is expected to worsen in 2021 at 82%, before improving at 45% in 2022. </p>
<p>For the government to be able to meet the remaining statutory expenditure and all other discretionary expenditures, it will have to borrow. If the government does not instil discipline and raise revenue domestically, or cut down some expenditure (or both) to create fiscal space, it will have to seek help in an International Monetary Fund programme.</p>
<p>Recently, some international credit rating agencies have downgraded Ghana’s economy, citing the country’s inability to raise enough revenue to service its debt. The signal this sends to investors is that Ghana’s sovereign bond is not profitable and its default risk is too high. </p>
<p>The implication of this is that the government may not be able to raise money from the international capital market. The options are to either borrow domestically and crowd out the private sector, or borrow from other countries. If this option is exhausted, it will have to seek an International Monetary Fund programme.</p>
<h2>What has been the impact on the economy?</h2>
<p>The impact of the huge public debt and the slowed growth of revenue is that the country has to borrow to finance its spending every time. Until the government borrows it can do virtually nothing. This has slowed down the government’s ability to implement its programmes and policies to grow and transform the economy and create jobs. </p>
<p>Over a 16-year period (2006-2021), the country’s economic growth was largely driven by the extractive sector. This sector is capital intensive: it uses more machines than human beings. The effect is that, though there is some economic growth, the source of growth is not from sectors of the economy that can generate employment. This is why unemployment has <a href="https://www.bloomberg.com/news/articles/2021-12-19/ghana-unemployment-rate-has-tripled-in-10-years-census-shows">increased</a> from 5% to 13%. </p>
<h2>Are there any solutions?</h2>
<p>Ghana finds itself in difficult position. The only way out is to raise enough revenue to finance its development. Even if the government succeeded in borrowing, it would still have to raise revenue domestically to service the debt. Therefore, there is no substitute for domestic resource mobilisation. The projected budget deficit for 2022 is $6 billion. The government will have to raise revenue through taxes (without overburdening the taxpayers) and non-tax sources.</p>
<p>The Institute for Fiscal Studies <a href="https://www.ifsghana.org/the-role-of-the-extractive-sector-in-ghanas-comparatively-low-public-sector-revenue-mobilization-policy-brief-no-11/">researched</a> the sources of revenue to the government in 2018 and made the following recommendations as the possible additional revenue to Ghana’s public finance annually:</p>
<ul>
<li><p>Personal income tax of the workers in the informal sector – $47 million </p></li>
<li><p>Property tax – $157 million</p></li>
<li><p>Tax exemptions – $790 million </p></li>
<li><p>55% share of the extractive sector – $4 billion</p></li>
</ul>
<p>According to the Ghana Statistical Service, there are about <a href="https://statsghana.gov.gh/gssmain/storage/img/infobank/2021%20PHC%20Provisional%20Results%20Press%20Release.pdf">7.7 million workers</a> in the informal sector but it is difficult to measure their incomes. There is a difficulty in taxing incomes that are unknown. That is why there seems to be a good economic justification to tax them using the <a href="https://www.uncdf.org/article/7408/ghana-electronic-levy">proposed e-levy</a>. But the levy must be designed to achieve the objective of taxing the incomes of workers in the informal sector. </p>
<p>In addition to raising revenue, the government must also plug all loopholes, and ensure prudent management of public finance. The Auditor-General department and Public Accounts Committee of Parliament usually identify financial irregularities in their reports. </p>
<p>The recent Auditor-General’s <a href="https://www.myjoyonline.com/12-85bn-irregularities-committed-by-state-institutions-in-2020-auditor-general-report/">report</a> identified about $1.8 billion worth of irregularities in public finance. When these irregularities are checked, the government will gain the confidence and support of the citizens.</p>
<p>If the current growth in the public debt stock continues, then the country is likely to find itself in debt distress, which might lead to seeking an International Monetary Fund bailout.</p><img src="https://counter.theconversation.com/content/176580/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adu Owusu Sarkodie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ghana’s economy is in its most precarious state in decades.Adu Owusu Sarkodie, Lecturer, Department of Economics, University of GhanaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1772182022-02-17T19:03:56Z2022-02-17T19:03:56ZVital Signs: Unemployment steady at 4.2%, but it will need to go lower still to lift wages<figure><img src="https://images.theconversation.com/files/446957/original/file-20220217-21-o5q38f.png?ixlib=rb-1.1.0&rect=605%2C145%2C1989%2C1202&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.datawrapper.de/_/IlK82/">ABS/Shutterstock</a></span></figcaption></figure><p>Thursday brought news that Australia’s official unemployment rate in January remained at a historically <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/jan-2022">low 4.2%</a>. In parliament, Prime Minister Scott Morrision boasted of the nation being on track to achieve a rate “with a 3 in front of it” this year. </p>
<p>It’s entirely possible the unemployment rate will drop further. The Reserve Bank of Australia’s <a href="https://www.rba.gov.au/speeches/2022/sp-gov-2022-02-02.html">central forecast</a> is 3.75% by the end of 2022. Some economists <a href="https://theconversation.com/unemployment-below-3-is-possible-if-australia-budgets-for-it-176025">have suggested</a> it could be driven down below 3%.</p>
<p>With economic management is a key issue at any election, it is clear the state of the labour market will be a big part of the Coalitions re-election narrative. </p>
<p>But the story on wages is not impressive.</p>
<p>Real wages (that is, wages adjusted for inflation) have <a href="https://www.rba.gov.au/publications/confs/2019/pdf/rba-conference-2019-andrews-deutscher-hambur-hansell-discussion.pdf">not grown strongly</a> in recent years. From 2013 to 2018 they grew at 0.5%, compared with 0.8% from 2008 to 2012, and 1% from 2001 to 2007.</p>
<p>Australia is not alone in this respect. Growth in real wages has been sluggish since 2013 in many advanced economies. For the average American worker they <a href="https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/">haven’t budged in 40 years</a>.</p>
<hr>
<p><strong>Annual growth in real wages</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/446941/original/file-20220217-25-11zt3ea.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">12-month growth in total hourly rates of pay excluding bonuses minus growth in consumer price index.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">ABS Wage Price Index, Consumer Price Index</a></span>
</figcaption>
</figure>
<hr>
<p>There are many reasons for this. Labour-saving technologies are reducing demand for all sorts of human workers, from <a href="https://theconversation.com/vital-signs-the-end-of-the-checkout-signals-a-dire-future-for-those-without-the-right-skills-129894">truck drivers and cashiers</a> to junior lawyers and accountants. Globalisation and international trade have increased competition for less-skilled labour. </p>
<p>What <a href="https://www.aeaweb.org/articles?id=10.1257/0022051026976">economists call</a> “skill-biased technical change” – new technologies requiring workers to have more skills – has increased wage inequality. The question is what to do about all of this. </p>
<h2>Market forces prevail</h2>
<p>The first-order policy response should be recognition that a tighter labour market than in the past is now needed to drive wages growth. That is, to get wages up we need to get unemployment down even further – and keep it there.</p>
<p>There is some resistance to this idea. </p>
<p>One argument is that Australia’s labour market isn’t all that competitive – that it’s full of all sorts of regulatory institutions such as the award system and enterprise bargaining that obscure or even break the relationship between unemployment and wages growth.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-theres-no-magic-jobless-rate-to-increase-australians-wages-176538">Why there's no magic jobless rate to increase Australians' wages</a>
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</em>
</p>
<hr>
<p>This has never been a persuasive argument. At most these institutions mean there will be lags in adjustment – with the Fair Work Commission reviewing awards <a href="https://www.fairwork.gov.au/newsroom/news/annual-wage-review-2021">once a year</a> and enterprise agreements typically negotiated every three years.</p>
<p>Yet even these lags are less important than they used to be, now the percentage of private-sector workers covered by enterprise agreements is <a href="https://www.ag.gov.au/industrial-relations/publications/historical-trends-data-current-quarter">just 10.9%</a> compared with nearly a quarter in 2010.</p>
<h2>What governments can and can’t do</h2>
<p>The reality is that the majority of Australian workers have their pay determined by market forces, mediated by individual agreements. Supply and demand in the labour market is the key determinant of wage outcomes.</p>
<p>Understanding this helps frame what governments can and can’t do about wages.</p>
<p>They certainly can enact policies that drive unemployment down and hence wages up. On this count the Morrison government gets high marks and deserves due credit.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vital-signs-wages-growth-desultory-unemployment-stunning-161099">Vital Signs: wages growth desultory, unemployment stunning</a>
</strong>
</em>
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<p>They can also help provide workers with better skills, which lead to higher wages. One of the central lessons from economics is that <a href="https://www.theatlantic.com/science/archive/2019/02/green-new-deal-economic-principles/582943/">people basically get paid for their skills</a>.</p>
<p>Australia’s major political parties could do a much better job of formulating a comprehensive education and training policy.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/446943/original/file-20220217-19-1uwyjtn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Apprenticeship schemes are tinkering.</span>
</figcaption>
</figure>
<p>On the Labor side, announcing a few new apprenticeships is fine but really just tinkering. On the Liberal side, whining about postmodernism isn’t going to provide students with more human capital.</p>
<p>Governments could also encourage schemes to give workers a stake in the profits of the enterprises they work for – through employee share ownership or worker ownership schemes. Rosalind Dixon and I have proposed a “<a href="https://theconversation.com/introducing-shadow-equity-a-fresh-idea-to-escape-the-low-wage-trap-113362">shadow equity</a>” scheme as one way to implement this.</p>
<p>What governments can’t do is turn back the tide of globalisation and pretend automation won’t continue to replace or reduce demand for human labour.</p>
<p>It is futile, for example, to seek to resurrect Austrlia’s car manufacturing industry. Sure, let’s talk about developing new manufacturing industries, such as in battery technology, but a 1970s-style industry policy won’t bring back the jobs.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/an-unemployment-rate-below-4-is-possible-but-for-how-long-175618">An unemployment rate below 4% is possible. But for how long?</a>
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<p>To get wages growth moving again we need lower unemployment, and to ensure it stays low. That won’t happen effectively by just mandating higher wages. It will happen by ensuring workers have the skills the market values, and by keeping macroeconomic policy settings tuned for low unemployment.</p>
<p><iframe id="cccqr" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/cccqr/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p><img src="https://counter.theconversation.com/content/177218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is President of the Academy of the Social Sciences in Australia.</span></em></p>A tighter labour market than in the past is now needed to drive real wages growth.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1765382022-02-08T19:09:41Z2022-02-08T19:09:41ZWhy there’s no magic jobless rate to increase Australians’ wages<figure><img src="https://images.theconversation.com/files/444934/original/file-20220208-25-s4n5th.jpg?ixlib=rb-1.1.0&rect=0%2C535%2C5410%2C2782&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>With the <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release">official unemployment rate</a> now 4.2% – the lowest since 2008 – Prime Minister Scott Morrison has <a href="https://www.afr.com/politics/federal/morrison-sets-unemployment-goal-not-seen-for-50-years-20220201-p59ss9">predicted</a> a rate “with a 3 in front of it this year”. The Reserve Bank of Australia <a href="https://www.rba.gov.au/publications/smp/2022/feb/pdf/statement-on-monetary-policy-2022-02.pdf">agrees</a>, forecasting unemployment below 4% in coming months.</p>
<p>Many economists have been surprised at how quickly employment has rebounded from the effects of COVID-19. Now they are scratching their heads for another reason. </p>
<p>With unemployment so low, why aren’t wages growing more quickly?</p>
<h2>Real wages falling</h2>
<p>If something is in short supply, its price is supposed to rise. That’s according to conventional economics, which treats the price of labour (wages) much like any other commodity, from pork bellies to rapid antigen tests. </p>
<p>But there is little sign of that happening. </p>
<p>Since 2013, growth in nominal wages (not accounting for inflation) has been weaker than any time since the 1930s, with the <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release#data-download">average annual rate of 2.1%</a> growth half the typical rate of earlier years. </p>
<p>After grinding to a halt during the lockdowns, wage growth has rebounded – but only to those anaemic pre-pandemic rates (up just 2.2% in the past 12 months). Nominal wages are now lagging well behind consumer prices. Real wages (accounting for inflation) are therefore falling – the opposite of what free-market theory predicts when unemployment is low.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/unemployment-below-3-is-possible-if-australia-budgets-for-it-176025">Unemployment below 3% is possible – if Australia budgets for it</a>
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<p>This outcome puzzles those economists who focus on market forces to explain income distribution. But it’s not surprising to those who consider a broader array of structural, institutional and social determinants of wages. </p>
<p>Unemployment may matter to wage trends, although not necessarily for the same reasons assumed by market-focused theories. But many other factors – including minimum wages, collective bargaining, the award system, and even politics and culture – also explain who gets paid what.</p>
<h2>Market-based ideas driving policy</h2>
<p>A simple market-based understanding of wages has guided the policy stance of the government and the RBA for a generation. </p>
<p>Both still ascribe, for example, to the concept of a “non-accelerating inflation rate of unemployment” (or NAIRU).</p>
<hr>
<p><strong>The Non-Accelerating Inflation Rate of Unemployment (NAIRU)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The non-accelerating inflation rate of unemployment (NAIRU)." src="https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=483&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=483&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=483&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=607&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=607&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444936/original/file-20220208-12-1h8rv0k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=607&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">RBA</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>This refers the lowest unemployment rate achievable without causing wages to grow and inflation to rise. Both keep changing their estimates of its precise level, with the treasury’s <a href="https://treasury.gov.au/sites/default/files/2021-04/p2021-164397_estimatingthenairuinaustralia.pdf">most recent calculations</a> putting it at 4.5% to 5% in the years before the pandemic. </p>
<p>One reason the estimates shift is because the concept is impossible to measure. Many countries have abandoned this <a href="https://d3n8a8pro7vhmx.cloudfront.net/theausinstitute/pages/3111/attachments/original/1573673492/Tolerate_Unemployment_but_Blame_the_Unemployed_Formatted.pdf?1573673492">widely criticised</a> concept. Yet it still underpins Australia’s fiscal and monetary policies. </p>
<p>A gentler approach acknowledges wages will accelerate gradually, instead of taking off suddenly, as unemployment approaches the estimated non-accelerating inflation rate of unemployment (NAIRU). </p>
<p>This relationship is expressed graphically in what is called the Phillips Curve. </p>
<hr>
<p><strong>The Phillips Curve</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Phillips Curve" src="https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=530&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=530&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=530&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=665&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=665&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444930/original/file-20220208-21-13ze7pg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=665&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/education/resources/explainers/nairu.html?utm_source=twitter&utm_medium=social&utm_content=nairu&utm_campaign=explainer">RBA</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>As unemployment falls, wage growth should gradually gain steam. That allows policy makers, especially the RBA, to try to guide the economy to a “sweet spot” on the Phillips Curve: with wage growth consistent with the RBA’s inflation target. </p>
<h2>Nice in theory, not in reality</h2>
<p>Unfortunately for both theories, the expected automatic relationship between unemployment and wages isn’t visible in the real world. Australia’s unemployment rate has fallen through successive estimates of the NAIRU (first 6%, then 5%, now 4%) with no sign of inflationary take-off.</p>
<p>The Phillips Curve is also morphing, changing both its vertical position and its shape. The accompanying figure plots unemployment versus the annual rate of growth in wages. </p>
<hr>
<p><strong>Wage growth and unemployment, 2000-2021</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="alt" src="https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=433&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=433&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=433&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=544&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=544&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444944/original/file-20220208-15-1y0rhi8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=544&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS wage price index and labour force data.</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>Before 2013 only a weak relationship was visible between wages and unemployment. Since 2013 the curve has shifted down and flattened, with hardly any discernable connection between unemployment and wages.</p>
<h2>Other factors at play</h2>
<p>The only way to explain this seeming anomaly is to look at the broader, structural determinants of wages. </p>
<p>No economy simply sets the market loose to determine how much people get paid. </p>
<p>Regulations, institutions and processes mediate the distribution of income across classes, occupations and jobs. They can be used to create a more equitable distribution. Or they can be used to reward certain groups and suppress the incomes of others. Either way, it is institutions and policies – shaped fundamentally by politics and power – that determine how the economic pie gets divided.</p>
<p>Circumstances now provide a telling insight into how important those institutions are – and how dramatically they have changed. The accompanying table compares labour market outcomes and institutional parameters today, to those that prevailed the last time unemployment was below 4%. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Unemployment and wages indicators, 1972 vs 2022." src="https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444975/original/file-20220208-23-pyrogd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>Fifty years ago nominal wages were growing robustly, at more than 10%. Inflation was high (close to 6%) but real wages still rose. Now inflation is half that rate, yet wages are falling behind prices.</p>
<p>This is due to a night-and-day contrast between labour-market institutions then and now. </p>
<p>The minimum wage now is much lower relative to the average. The awards system has been restructured to serve only as a safety net, rather than leading improvements in wages and conditions. Unions and collective bargaining have been decimated, with strikes almost non-existent. Workers’ bargaining power has been further eroded by the spread of part-time work, casual jobs and other non-standard employment, including digital gigs.</p>
<p>Fifty years ago workers had institutional power to win decent wage increases – even when unemployment was relatively high. That power has been steadily and deliberately stripped away through privatisation, suppression of union activity and liberalisation of insecure employment.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/top-economists-expect-rba-to-hold-rates-low-in-2022-as-real-wages-fall-175054">Top economists expect RBA to hold rates low in 2022 as real wages fall</a>
</strong>
</em>
</p>
<hr>
<p>Higher wages would strengthen household finances, support consumer spending and achieve a fairer distribution of income. But there’s no magic unemployment rate that will deliver that outcome. </p>
<p>If we want higher wages, we must win them through deliberate wage-boosting policies.</p><img src="https://counter.theconversation.com/content/176538/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jim Stanford is a member of the Australian Services Union.</span></em></p>If we want higher wages, we must win them through deliberate wage-boosting policies.Jim Stanford, Economist and Director, Centre for Future Work, Australia Institute; Honorary Professor of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1756182022-01-26T19:07:38Z2022-01-26T19:07:38ZAn unemployment rate below 4% is possible. But for how long?<p>It would be nice to think Australia’s low unemployment rate – now 4.2%, the lowest since August 2008 – is here to stay.</p>
<p>We’ve been waiting a long time to see this. In the decade before the onset of COVID-19 the jobless rate hardly moved. In March 2010 it was 5.4%. Ten years later, in March 2020, it was 5.3%. In between the lowest the rate was to 4.9% - and then just for two months. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing Australia's unemployment rate from December 2011 to December 2021." src="https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442446/original/file-20220125-23-vbh20m.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption"></span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>In 2021 the unemployment rate was under 5% in six out of 12 months.</p>
<p>A lower rate of unemployment makes us all better off. It means more of the nation’s productive resources are being put to work, and higher living standards for those extra people employed and their families.</p>
<p>Even with the effects of Omicron, there are good reasons to think the rate will fall further in 2022. </p>
<p>The bigger question is whether whatever lower rate we achieve can be sustained once all the effects of the pandemic are behind us. This will depend largely on how macroeconomic policy makers handle the transition. </p>
<h2>High job vacancies</h2>
<p>One reason to expect the rate to go lower in 2022 is recent employment growth – 365,000 in November, and 65,000 in December. With that pace of growth it’s likely there’s more to come, especially given the high level of job vacancies. </p>
<p>Had the vacancy rate at the end of 2021 been the same as before COVID-19, an extra 158,000 jobs would have been filled. Just half of those jobs going to the unemployed would have seen the December unemployment rate drop to 3.6%. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-has-record-job-vacancies-but-dont-expect-higher-wages-172146">Australia has record job vacancies, but don't expect higher wages</a>
</strong>
</em>
</p>
<hr>
<p>Uncertainties make it difficult to predict exactly how much lower the jobless rate could go, or for how long. That will depend on macroeconomic policy – the reason the unemployment rate is where it is now.</p>
<h2>Government action has been crucial</h2>
<p>The <a href="https://drive.google.com/file/d/1I0R68BHr9ozS8doqtqi53yuM4YArEgGp/view?usp=sharing">big reason</a> the unemployment rate has fallen is due to growth in the proportion of the population who are employed accelerating since mid-2021.</p>
<p>When you think about what changed in 2021 to make this happen, government policy has to be the main explanation.</p>
<p>Government spending on COVID-related programs has added considerably to gross domestic product, increasing employment. </p>
<p>Closed borders may also have added to GDP – by as much as 1.25% per annum, according to economist Saul Eslake – due to Australians redirecting spending from international travel to domestic consumption.</p>
<p>What follows is that a low rate of unemployment will depend on the policy makers being willing to continue to provide stimulus to economic activity.</p>
<h2>An opposing force</h2>
<p>One headwind blowing the unemployment rate higher may be faster growth in the labour-force participation rate, which measures the proportion of the population who want to work. </p>
<p>Before COVID-19 the participation rate had been increasing rapidly. With COVID-19 it slowed, due to reasons such as parents having to withdraw from the labour force to care for children.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="ABS labour force participatin rate, December 2021." src="https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442448/original/file-20220125-13-p9rn2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>Should growth in the labour-force participation rate return to its previous pace once the impact of COVID-19 recedes, the rate of unemployment will be pushed back up.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/just-4-5-during-lockdowns-the-unemployment-rate-is-now-meaningless-167805">Just 4.5% during lockdowns? The unemployment rate is now meaningless</a>
</strong>
</em>
</p>
<hr>
<h2>Statistics for young workers</h2>
<p>Issues to do with measurement may also be temporarily making the rate of unemployment artificially low. </p>
<p>The strongest employment growth from March 2020 to December 2021 was for those aged 15 to 24 years. </p>
<p>Younger workers were hardest hit during the 2020 downturns associated with COVID-19. But by December 2021 the proportion of young people employed was 3.5 percentage points higher than in March 2020. This compares with the employment rate being 1.2 percentage points higher than before the pandemic for those aged 25-64 years, and 0.9 percentage points higher for those 65 years and older. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Percentage change in proportion of people employed, by age, since March 2020." src="https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442655/original/file-20220126-19-wilsxv.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>The strength of employment growth for the young – given all we know about the increasing difficulties they faced in the labour market in the 2010s – is surprising.</p>
<p>My guess is it may in part be due to young Australian permanent residents taking over jobs previously held by international students and working holiday makers, and being more likely to be captured in official surveys. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-economy-cant-guarantee-a-job-it-can-guarantee-a-liveable-income-for-other-work-153444">The economy can't guarantee a job. It can guarantee a liveable income for other work</a>
</strong>
</em>
</p>
<hr>
<p>In that case, total employment of the young may not actually have changed by much, but the statistics show it increasing because of who is doing the work.</p>
<p>Before COVID-19 we could reasonably have expected the rate of unemployment today to be 5%. Instead, we’re at 4.2% and looking ahead in 2022 to further falls in unemployment. What lies beyond that is less certain.</p><img src="https://counter.theconversation.com/content/175618/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland receives funding from the Australian Research Council. He is a Board member of the Committee for Economic Development of Australia.</span></em></p>There is enough momentum for Australia’s unemployment rate to go lower than 4.2% in 2022. Keeping it low is another matter.Jeff Borland, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1745342022-01-07T17:50:32Z2022-01-07T17:50:32ZLurking behind lackluster jobs gain are a stagnating labor market and the threat of omicron<figure><img src="https://images.theconversation.com/files/439847/original/file-20220107-34182-12c3t6m.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C5774%2C3809&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Flipping jobs?</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/JobsHiring/9e0cb556d2c5492b8b2fe2561e2ad0ca/photo?Query=hiring&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=15002&currentItemNo=13">AP Photo/Jenny Kane</a></span></figcaption></figure><p>The first U.S. <a href="https://www.bls.gov/news.release/archives/empsit_01072022.htm">jobs report of 2022</a> showed continued – if lackluster – growth. But perhaps of greater significance for the economic year ahead are two factors that lurked behind the headline unemployment rate: a stagnating labor pool and the impact of omicron.</p>
<p>First, the good news. The economy did <a href="https://www.bloomberg.com/news/articles/2022-01-07/u-s-adds-fewer-jobs-than-forecast-unemployment-rate-falls">add jobs in December</a>, 199,000 of them, with gains in most sectors. This was less than the 440,000-job increase that <a href="https://www.barrons.com/amp/news/possible-us-job-boom-in-december-lynchpin-to-fed-rate-hikes-01641520209">some economists expected</a>. Still, the gains are an indication of a reasonably healthy economy.</p>
<p>And October and November jobs numbers were revised upward by the Bureau of Labor Statistics. Meanwhile, gains were seen across a number of key sectors. The leisure and hospitality sector was up, as expected given recent trends, as were business services and manufacturing.</p>
<p>Construction was also up and should continue to gain in the months to come – if it can find the workers.</p>
<h2>The stagnating labor market</h2>
<p>The unemployment rate was down to 3.9% – a <a href="https://finance.yahoo.com/news/december-2021-jobs-report-labor-department-unemployment-usa-192453058.html">new low in the pandemic era</a>. This is good, to a degree. People who want jobs are finding them.</p>
<p>The problem is employers are having a hard time finding the workers amid a somewhat <a href="https://www.nytimes.com/2021/01/08/business/labor-force-participation-is-stagnating-and-some-workers-may-never-come-back.html">stagnating labor market</a>.</p>
<p>The number of people in the labor force <a href="https://www.bls.gov/news.release/archives/empsit_01072022.htm">increased a little in December</a>, but not by much – only about 168,000. And with job openings outpacing this small increase in the labor market, there remains a significant risk that worker wages may begin to rise too quickly for the economy. </p>
<p>While this is great for workers, it poses a concern for those trying to tamp down the rising prices of goods. Higher wages in the hands of workers means more money to spend, which generally drives prices of goods upward.</p>
<p>The latest report shows that wages are up, hours worked remain constant and the participation rate was unchanged. Even the number of people not in the labor force but wanting a job changed little. It is very much a sellers market in labor right now. Strikes, wage pressure and more flexible work environments may become the new normal.</p>
<p>Separate data from November, <a href="https://www.bls.gov/news.release/jolts.nr0.htm">released on Jan. 4, 2021, by the Bureau of Labor Statistics</a>, provides further evidence of a drying up labor market. There were 6.9 million hires that month but 10.6 million job openings – a clear imbalance. Meanwhile the share of workers voluntarily quitting their jobs continued to be high.</p>
<p>It appears that many Americans who lost their jobs in 2020 have either <a href="https://www.cnn.com/2021/12/15/economy/labor-force-retirement-great-resignation/index.html">taken early retirement</a> or are still delaying re-entering the workforce.</p>
<p>And those hesitating to rush back to the office or factory floor are unlikely to be encouraged by the problem not yet reflected in jobs data: omicron.</p>
<h2>The slowdown to come</h2>
<p>The latest jobs report does not really reflect the effect of omicron on the labor market. The monthly jobs data is typically collected mid-month – before the highly contagious COVID-19 variant really took hold in the U.S.</p>
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<p>But if the U.S. doesn’t see omicron cases peaking soon, Americans will likely see some real slowdown in hiring. With more workers falling ill and unable to work, managers at retail stores, as well as bars and restaurants, may well be forced to reduce hours of operation, reducing revenue and slowing growth in the process.</p>
<p>We are already seeing this with airlines, which have been forced to cancel flights. The real sectors at risk here are the leisure and hospitality sectors and retail – two industries that have bounced back quite well of late.</p>
<p>This may all sound a little downbeat given that the December jobs report did show gains. Growth is growth – it is just that the risks to the economy are quite high right now.</p><img src="https://counter.theconversation.com/content/174534/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Decker does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The job market continued to improve in December, but a stagnating labor pool will pose more challenges for employers in 2022.Christopher Decker, Professor of Economics, University of Nebraska OmahaLicensed as Creative Commons – attribution, no derivatives.