There’s a peculiar economic belief in Australia that is quite unrelated to partisanship or political ideology. It may reflect something more cultural than political, but it crops up right across the spectrum, from both the cultural and industrial left all the way over to the far right. It’s the belief that manufacturing jobs hold some special status in an economy, that they’re somehow more real, and thus more deserving of support and protection, than other jobs.
“Making things” seems to exercise some irrational hold on a variety of different minds. For example, on Wednesday, veteran conservative business commentator Robert Gottliebsen fretted that “we need to face the fact that, like the US, we decided to abandon our manufacturing base and overcame the standard of living implications of that decision by heavy bank borrowing to fund a housing boom”.
This idea persists despite a wealth of evidence that the loss of manufacturing jobs has been more than offset by gains in other, more important industries. In a speech this week in Sydney, deputy Reserve Bank governor Guy Debelle gave a major speech on the Australian labour market (his area of expertise) and addressed this and other myths. He noted that the majority of the jobs created over that last two years — over 600,000 — have been full time, despite years of concern from unions about casualisation and the gig economy. On a trend basis, 443,100 new full-time jobs were created, against 180,300 part-time.
The majority of these jobs have gone to women — 336,400 versus 287,500. As a result, the participation rate — which was supposed to be falling because of our ageing population — has improved from 64.8% in August 2016 to 65.6% (a record high). And the female participation rate is at, or near, record levels.
That strong growth continued in September, according to yesterday’s jobs data from the ABS, even if the participation rate came off a bit. The trend unemployment rate was 5.2%, after the August rate was revised down to 5.2%, meaning unemployment has been at the lowest it’s been since the Gillard years. Around 26,000 new jobs were created in trend terms in the month, and around 290,000 jobs were created in the year to September — a growth rate of 2.4%, still well above the 20-year rate of 2%.
Debelle notes — as Crikey readers will know — that healthcare & social assistance has been a key source of that jobs growth. Try telling a nurse or doctor, or the patients they’re treating, that what they’re doing is “just” a service job and isn’t as real as making something. He also notes that construction has been a strong growth driver, too. And there’s another, more surprising source of new jobs: manufacturing.
Recently, there has been a noteworthy increase in manufacturing employment as a result of export demand for high-quality food and beverage products, demand for manufactured goods from mining-related activity as well as the high levels of residential and infrastructure construction, which need manufactured inputs. This more recent pick-up in manufacturing employment takes it back to its level around 2011.
So much for abandoning our manufacturing base. And that growth is before the ridiculously expensive defence industry growth we’re going to waste tens of billions on in coming decades.
Debelle is still sticking to a more traditional line on wages growth, which he says has partly been curtailed by workers being less inclined to move jobs — although turnover is now increasing, he says. He also says there’s evidence employers are offering non-cash incentives to keep workers. But by and large he expects “a gradual increase in wages growth and, in turn, inflation”.
Except, it’s going to be very gradual, even if you don’t take into account that private sector workers have already had five years of stagnant wages. “The recent international experience indicates that the unemployment rate could decline further than historical experience would suggest before we see a material increase in wages growth. But against this, further increases in labour demand may be met more from the pool of unemployed rather than from people not currently in the labour force. That is, the unemployment rate may decline faster than we expect, rather than the participation rate increase further.”
As we’ve observed so often before, don’t hold your breath for a pay rise. But it might help if you changed jobs.
Phew, thanks Bernard. There I was getting needlessly upset because the rate of unemployed/underemployed was increasing and that people are finding it increasingly difficult and more expensive to live a normal life (you know like we had back in the 50s/60s/70s). That those marvellous economic managers, the Liberals, were destroying, sorry, letting go, non viable manufacturing like the auto and renewables industries. Thank you for telling me ‘don’t worry about that’, hmm, has a nice ring to it doesn’t it?
Oh, and thanks for telling all those whingers if they don’t earn enough, just to get another job, why didn’t I think of that!
I’ll go back to sleep now.
~~“Making things” seems to exercise some irrational hold on a variety of different minds.~~
It is rather more than that Bernie. There is the ever-present technological change. Electronic spreadsheets, as an example, have revolutionised office practice. What can be achieved in an afternoon (templates exist for almost every task and a skilled user can suit one to taste) would have required a fortnight (and a team) fifty years go. Ditto for manufacturing. My generation of apprentices was probably that last that fixed or repaired anything (true story: I wen’t to university in my 20s – and not as a ‘school-leaver’). The stats are noted but the larger trend deserves consideration.
Managerial (or Cost) accounting is a big deal. Any nogg can undertake financial accounting. Manufacturing, on any reasonable scale, has performance-based agreements upon which operational plans are sustained in association with output-based budgeting (which some government departments have tried [and failed]
to adopt). A digression would take us well off-topic. Supplying items for (major) assembly is timed to the minute and costs to a fraction of a cent. The only variable is labour but at a sufficient scale all costs are more or less fixed.
Given the price of living in Oz (and the USA) there is no chance of competing in an international market. The only players in manufacturing exist in the Asian region (from India to Korea). China, despite its sub-contracting to Vietnam, is determined to be the manufacturing hub of the world. Trump, like Hanson, will not listen to informed argument if the argument will necessitate the jettisoning of some beloved prejudices.
Look at a chart (typically a pie chart) that comprises the Primary, Secondary (manufacturing) and Tertiary sectors for ANY country. Australia is almost unique in having a sizeable primary industry alongside a sizeable (and growing) tertiary industry. Most first world countries have small primary industries (circa 5%) and about three times (4x max) secondary industries).
Germany has a significant steel industry but, similarly, Germany is unusual this respect. There is nothing “unreal” about services. Similarly for jobs that don’t yet exist. As for food and beverage its a combo of
secondary and tertiary industries with the former following the latter.
As to wages growth (or the absence of) associated with underemployment or labour immobility (to provide the technical term) there most certainly is Technological unemployment along with Sectoral unemployment with Regional unemployment, as the icing, and to provide the technical names. At this juncture we ought to be sparing a thought for education requirements for the next 50 to 75 years and similarly for occupations taking robots and international out-sourcing into account. Pining for the fields will do no good. Sorry Bref.
With regard to the second to last paragraph, frankly, that much is obvious. Also just as obvious is the increasing lumpen-proletariat. The UK has excellent stats on its labour market (superior to Australia) but the “picture” is similar – even allowing or easier immigration in the case of the UK. Thirty years ago the lumpen-proletariat numbered 40,000 persons who had never had a job and it was inter-generational. Now its ten times that quantity; indeed on the threshold of half a million.
There are too many variations on the (dead) parrot sketch but here are two endings :
Mr Praline: It’s dead, that’s what’s wrong with it.
Shopkeeper: So it is. ‘Ere’s your money back and a couple of holiday vouchers
OR
Shopkeeper: (long, long pause) … Do you want to come back to my place?
Mr Praline: I thought you’d never ask.
As to the economic future : ‘ake your pick.
Having had a career in various facets of the IT industry, I’m well aware that there are enormous job losses looming worldwide with the evolution of AI, but I get annoyed when our govt glibly allows what industries we do have to slip away for idealogical reasons. Sure some new industries have taken their place, but they could have been ‘as well as’, not ‘instead of’. European countries jealously look after their industries and subsidise them for the jobs they create and maintain.
Am I pining for the fields? Not really, only in the sense that life was much more affordable. Again, in Europe the cost of living is held check by much greater regulation on what are deemed essential items, for example rent and energy, etc.
When the UBI finally becomes a reality, as I’m sure it will, the cost of living will have to be greatly reduced by whatever means necessary.
Agreed that there is no sense of venture capital in Australia and the fetish with property has distorted the financial markets even in comparison to the USA – to say nothing of Europe. If anyone thinks Gonsky(x) is a panacea they are in for a surprise.
The pie charts regarding industry sectors are real. The Common Agricultural Policy (and the Fisheries Policy) has keep the Primary industry in Europe in existence; pity about that! Farmers in the EU know what they are going to be paid on 1 Jan of any year. Their revenue has fuck all to do with (actual) production and the citizens are appropriately
taxed. However, as to stagnant wages its the same story anywhere – for those under US$60,000 p.a.
At twice that amount it is quite a different tale. The flat wages are not, in the first instance, about the employment pool. In fact the ‘Philips Curve’ (take a look) has been shot to pieces – viz., there is now NO RELATIONSHIP – since circa 1995. On this matter,
although it is unlikely that he realises it, Mr K. is correct. In fact the article amounts to one of his better efforts.
Just in regard to the future of work and skills nether Shorten or Albanese have the least clue. To this extent result of the election in November next year is an irrelevance. As to elections I slab says an independent for Wentworth!
Damn it guys : one of you, at least, could have humoured me. I would have shared the slab. Honest! For what it is worth I did take a few
of the contributors seriously on this topic. If there were no “takers” for an Independent for Wentworth there will be precious few for
asserting the contrary to the farewell of Gladys and the NSW Libs next year.
Just a small example of repairing things, a habit with which I was imbued as a child of the 50s.
Recently I went to buy some solder to repair a pair of headphones.
The small tube cost more than a new pair.
(I bought it anyway and repaired them. Dumb, me.)
Yeah – but what about the personal satisfaction (to say nothing of the independence)? One can’t by that AR.
Consider pcbs (printed circuit boards). The solder bath is a very big deal. Weigh (out of interest) a main board manufactured circa y2k and one now (e.g. an ATX or mini or micro ATX) and compare the weight!
Keep in mind that for a generic board everything (video, sound, whatever) is on-board whereas the trend was just beginning 20ish years ago.
Ahh those were the fields. The future’s all graphene and stuff.
Not heard of “strategic industries” BK?
In WWII, we began from scratch to construct fighters, strategic bombers and transport aircraft.
Lotsa luck trying to build a fridge, vacuum cleaner or car now.
To say nothing of a communications industry at the time of Bell (the first intercom likely occurred in Ballarat between to general stores at opposite ends of the main street), an optics industry and radar (distance measuring radar) – to identify three. Its less a question of expertise than of political will.
Yet the content of Y12 is a joke (except it isn’t funny) compared to what it is in the UK or Scotland or Europe or Russia but it is better than SAT (in the USA) but probably not Advanced Placement in the USA – which is required for a place in the Ivy League.
BTW, who (which MP and later PM) trashed those innovative industries? First clue : surname begins with a ‘M’
I was in the Engineering section of the PMG in 1963 – it had, 20years earlier, developed a telex, used internally because no commercial application could be grasped.
It also built the first electronic PABX, a dry ink photocopier, initiated fiber optic cable (for sound ha!) and other wild eyed fings wot nobody could see having any appeal to the stodgy Establishment.
Xerox jumped on the initial designs, pity about the toxic/carcinogenic ink from DuPont, and decades later some computer wonks figured out why fiber was the future.
Sigh.
oops, wifi drop out, pliz scuse the repetition.
Divine justice : Apple (Jobs) “jumped” at the mouse having seemed a prototype demonstrated by Xerox. Even in 1985 Jobs didn’t think that Xerox appreciated what they had developed.
Interesting that HP attempted to rip of the Intellectual Property of the developers of wifi at ANU.
I have remarked previously : Oppo and other Chinese technologies did not exist 18 years ago. Now the country has an established communications and a data network industry (with network products having a stunning similarity to those of Cisco – but be that as it may).
The difference between the engine of a mid 80s Toyota land cruiser and a 1935 chev was the oil filter being on the other side of the block. The list goes on.
The MAJOR point is that with a bit of innovation Australia could have been part of the global act. Gonsky(x) will take the joint in the other direction. There are a number of papers with this theme that are not getting a photon of light.
All we have to do is emulate an education system as expressed above. However, the consequences for having only Yr 11 & 12 students with a clue at school (doing real work and not finger painting) will have consequences for dole queues.
Off topic I know, but… 🙂
Evidently Xerox tried to market their WYSIWYG + mouse machine for around $60K in the 70s. I remember reading about it in Byte magazine and was amazed. By 1976 the Ollivetti desktop with 8″ floppy and others were around $10K, so I guess the Xerox machine never took off. Needless to say I was an enthusiastic and very early (1984) adopter of the Mac.
Yes, who needs the neo-liberal utterances of Newscorp union/labour haters like Terry McCrann, Judith Sloan et.al. when we have the biased ravings of our very own BK and GD? Manufacturing is not to everyone’s taste like Medicine, dentistry, flying planes, driving trucks, etc. but I can’t see Australia developing much of a skills base or providing work for the unemployed without a viable manufacturing sector. Manufacturing is first of all value adding to primary products and secondly transforming these into more sophisticated products for consumer use or capital production. That is why we need a viable manufacturing industry in Australia.
It provides employment to those who cannot obtain employment or who are not suited to employment in the service sector.
It adds value to products.
It keeps the imports bill down and helps our current account sheet. Without strong current account balance we are forever borrowing, we are forever relying on resources to back our currency which is nominally floating, we are in a weaker position regarding the value of the dollar and are weakened in our interest rate regime having to keep them higher to attract foreign capital.
Manufacturing is something that not many other countries can do and do well. WE did and only dropped the ball when our governments kept handing out money to companies in the form of tariffs and industry assistance however that is defined and demanded nothing from these companies in return other than they pay a decent wage which was if truth be known only half decent. Few of these companies invested back into their businesses. The government might as well have run many of these businesses themselves.
I dispute that manufacturing is good that it is dead or that it is dead. The Federal Government is spending A$50 billion on a submarine building project, projected to go up to A$100 billion if things go wrong. This is manufacturing for political and ideological reasons. A$50 billion is enough for the Federal government to buy back Holden at least. A$100 billion is enough to buy back not just Holden but Ford as well and run a cattle industry obviating the need for live cattle exports. And still make a profit.
Australia has outsourced its labour costs and environmental protection responsibilities associated with manufacturing to Asia. That’s why we have low inflation. It’s paid for by others and we don’t have quality products into this so called bargain.
Lastly what with this shit: “Try telling a nurse or doctor, or the patients they’re treating, that what they’re doing is “just” a service job and isn’t as real as making something”. No one is suggesting or saying any such thing. This is just a straw man argument from the Crikey neo-liberals who have an aversion to trade unions and Australians who work with their hands. Outright snobbery. Service jobs like this are extremely valuable and should be rewarded better – especially nurses and other health professionals and non-professionals. It is a sign of weakness that Australia has outsourced its manufacturing to the Third World as we are now at the mercy of their industrial and technical and intellectual capacities and no longer self-reliant.
However at a risk of some snobbery myself there are a lot of service jobs that I don’t value much and are there courtesy of our government immigration policy. We do not need 7-Eleven workers, Uber drivers, more taxi drivers, kitchen hands, cooks, hair dressers, Deliveroos, etc. and others in the gig economy. They are there by virtue of our government’s student visa program and rorted 457 visa system. A sizeable dent to our migration program and our student intake will deliver a longed for death blow to these toxic industries – far more toxic than was ever conceived through our manufacturing status and that includes toxic chemicals, uranium, coal and asbestos. And others I have left out. Wage or income slavery and subsistence is not something we should be embracing.
With all due respect I wonder, from time to time, if you comprehend any of the ideologies to which you refer. There is nothing pro ‘neo-lib’ in the article OR it is incumbent upon you to show that there is. An argument pining for the shoe or clothing industry in 2018 is not pro ‘Left’ but merely incongruous with the realities (internal costs etc.) of first world countries.
“It provides employment to those who cannot obtain employment or who are not suited to employment in the service sector.”
Error : Manufacturing *did* (once upon a time) provide jobs for the semi-skilled and unskilled but not nowadays and NOT in first world countries. That much is obvious by just looking at the employment sector pie charts for any first world country (which you, obviously, did not do).
“Without strong current account balance we are forever borrowing”
Wrong (again) : the Capital account needs to be considered also. Your’s is a Trump-ism type statement (but we’re not discussing the National Accounts).
“Few of these companies invested back into their businesses.”
Another Error. The matter turned upon internal costs and labor costs as a percentage to total (unit) costs in Australia (and other 1st world countries) – so wrong again. By altering the labour costs (flicking manufacturing to China etc.) the products became internationally viable!
“I dispute that manufacturing is good that it is dead or that it is dead.”
Then you do not understand fundamental Cost/Managerial Accounting or (worse) are arguing about angels on pinheads. Just look at the decline in manufacturing for ANY group (to see the trend) of 1st world countries. It is not a difficult exercise – and the reasons are only too apparent; indeed its a year10/11 exercise.
“The Federal Government is spending A$50 billion on a submarine building project, projected to go up to A$100 billion if things go wrong. This is manufacturing for political and ideological reasons.”
This is capital infrastructure for tech-based reasons. Its got noting to do with component manufacture or items that one finds in KMart or Target.
As for recovering Holden – one would have to do the numbers to say nothing of the required market research BUT the manufacturing WOULD have to be undertaken off-shore; Indonesia would be the obvious choice. Alternatively, as with Korea or Japan, invest in 5th generation robots that do not require superannuation or maternity or long service leave. The only option for 1st world labour is high tech Primary industry or Tertiary industry. One more thing. Those that are not trained in something tangible are screwed. See my post above.
“Australia has outsourced its labour costs and environmental protection responsibilities associated with manufacturing to Asia. That’s why we have low inflation.”
The first, more or less, correct statement – but, more accurately it is ONE of the reasons for low inflation.
“It’s paid for by others and we don’t have quality products into this so called bargain.”
ALL that has to be satisfied is the Trade Practices Act – i.e. merchantable quality.
That Bernie struggles with types of services etc. is fairly obvious but not necessarily snobbery.
“However at a risk of some snobbery myself there are a lot of service jobs that I don’t value”
Yeah – you don’t seem to have a particularity high regard for demand and supply. These jobs do absorb perople and increase the GDP. You may well pine for manufacturing but its over for any 1st world country.
“Wage or income slavery and subsistence is not something we should be embracing.”
True enough (2nd reasonable statement) but as Marx pointed out (from Henry II to Queen Vic) wages are determined at subsistence; i.e. at the minimum that a worker can “reproduce” himself. That number is circa A$60,000 and it aint gonna increase in real terms for another decade or two.
With all due respect the Arthur Calwell, Hugh Gaitskell, Michael Foot (include Neil Kinnock) era is just not relevant. Policies directed to 50s-70s style working classes are not relevant. Left or Right is no longer relevant. Its NeoLib or Popularism; not much of a choice but there it is.
I’m happy to continue the discussion but I’d prefer it to address specific points and not general statements (which seems to be for forte)