Thursday, December 07, 2006

Workchoices may well have created more jobs


That's what you would expect in the good times.

The question is... what will happen in the bad times.

That was the point of my analysis piece after Thursday's employment figures.

The Treasurer's claims (as quoted by me) are below it.

Analysis CT Friday December 7, 2006

The Treasurer says that WorkChoices deserves a lot of the credit, and he is probably right.

Employers have taken on almost 200,000 extra Australians in the seven months since WorkChoices came into force, almost all of them in full-time jobs.

As Mr Costello put it in a Parliament House courtyard yesterday: “I think something structural may well have gone on in the labour market. It appears that employers are now more confident of hiring people, and they have gone out and they have done it.”

It was an outcome never in serious doubt.

All of the literature about employment protection laws says that when those laws are weakened employers will be more confident about hiring people. If they know they can easily sack them later there is little reason to hold back.

In an economic upturn weakening employment protection laws will encourage employers to take on even more workers. It’ll be good for jobs.

But that’s not all the literature says.

In an economic downturn weaker employment protection laws will make it easier for employers to cull their workforce. Weak employment protection laws will encourage employers to sack even more workers. It’ll be bad for jobs.

These two forces are not in dispute. What is in dispute is which one will predominate over time - whether, averaging out the good times and the bad, we would have more people in employment with or without a regime such as WorkChoices.

We won’t know that until there is a downturn.

The jury is still out.

What Peter Costello said CT Friday December 7, 2006

The Treasurer has declared WorkChoices a success in the wake of a yet another surprise jump in the number of Australians in work.

An extra 36,200 Australians found jobs in November, more than reversing a contraction in October and taking the total number of Australians in work to yet another all-time high.

Since the introduction of WorkChoices in March an extra 197,300 jobs have been created, almost all of them full-time.

Peter Costello said yesterday that while he was not claiming that WorkChoices itself had created those jobs he could say that those who had warned that WorkChoices would destroy jobs had been proven wrong.

“I doubt that we have seen a year like this - a quarter of a million new jobs in the space of one year. Remember the ACTU audience at the Melbourne Cricket Ground last week where they got 40,000? I want you to think of six times that crowd, because that is the number of people that got jobs this year. Six times the crowd the ACTU pulled out to the MCG. And since the introduction of WorkChoices, five times the crowd got new jobs that they pulled out to the MCG.”

Australia’s national rate of unemployment remained steady at 4.6 per cent in November. It has been below 5 per cent since WorkChoices become law.

Until recently 5 per cent had been thought of as full employment. The Treasurer said yesterday that in light of the latest inroads into unemployment it might be time to redefine full employment.

“We have gone below what used to be considered full employment. Now, we don’t actually know what full employment is now because we are outside the range but seeing as the economy is still producing jobs at the rate that it is, we should try and get unemployment lower. Here is what we should try and do – have a job for everyone who wants one and it is clear there are still some people who are looking for work who don’t have jobs, and we should try and create opportunities for them,” he said.

Mr Costello agreed that the news on jobs was inconsistent with weak news on economic growth released on Wednesday. “Employment is a lagging indicator but you normally wouldn’t see such robust increase in an economy which is slowing. Now, it is an interesting point as to how and why this is happening. It may well be that people are more confident about putting on employees in the aftermath of WorkChoices,” he said.

Unemployment in the ACT remained broadly steady at 2.9 percent, the lowest rate of any state or territory.