Jobs, wages and a stagnant, boiling economy

Can an economy boil while it is stagnant?

The short answer is “yes”.

Current and future standards of living are being defined by the ongoing interaction between climate change and the workings of the capitalist economy within nations and globally.

In Australia, last week we had 2 new bags of information that were treated separately, yet both in their interactions are a big deal for our future.

One was about unemployment (see below) and the other was about climate change NOT being slowed down.

The United Nations’ World Meteorological Organization put it this way:

“The climate crisis is THE defining challenge that humanity faces and is closely intertwined with the inequality crisis (my emphasis) – as witnessed by growing food insecurity and population displacement, and biodiversity loss” said Celeste Saulo.

…

“The number of people who are acutely food insecure worldwide has more than doubled, from 149 million people before the COVID-19 pandemic to 333 million people in 2023 (in 78 monitored countries by the World Food Programme).

“Weather and climate extremes may not be the root cause, but they are aggravating factors, according to the report.

“Weather hazards continued to trigger displacement in 2023, showing how climate shocks undermine resilience and create new protection risks among the most vulnerable populations.

“There is, however, a glimmer of hope.

“Renewable energy generation, …. “

The graph shows all living things are slowly boiling - on the land, in the air, lakes, rivers and the sea. For humans that is the source of food and water supply, housing and clothing, and of course all the other features of 21st-century life.

These are the conditions in which the 21st-century workers produce and distribute the necessities, discretionaries and luxuries of life, thus enabling profit-taking and the accumulation of wealth dominated by the minority of owners of the giant corporations. To their great advantage.

Urgent emergency defines the severity of interactive natural destruction, falling living standards and more poverty.

Where is the evidence that capitalist society, having created the disaster with its logic of profit-taking at all costs for private sector wealth gains, can deliver the urgent and just transition that is required?

Right now, there is none. All over the world capitalist economies are in the doldrums, each one infecting others.

In Australia, private sector productive investment is trending downwards, nowhere near what is required.

What is the government’s role here? What type of intervention by it will best meet the needs of the people? More gross subsidies and tax breaks to reward corporate failure and bribery, thus embedding the continued exploitation of workers and communities?

What needs to and can be done to slow and reverse global heating that simultaneously tackles inequality? Doing one without the other is a dead end.

Employment, stagnation and the Annual Wage Review (AWR)

Last week’s employment data followed the quarterly national accounts with an unusual mixed message – unemployment falling while the economy still lingers in the doldrums.

The Labor government is right to be on high alert about the economy, as expressed by the Treasurer recently. Here, from Trading Economics, is the sorry story showing Gross Domestic Product (GDP) annual change.

Profits and wages are the two most important components of GDP.

The rate of exploitation is a better measure of their relationship than the mainstream use of “shares”. Here is the rate of exploitation, high and trending upwards again; each fall is small, temporary and followed by an upward ratchet.

Profit levels are also important because of their relationship to new investment, and to the real rate of profit. For example, we know from the latest national accounts that the private sector is not even close to investing in the productive equipment, machinery and structures to deal with climate change, relative to unproductive money market gambling.

Even though private profits are high and trending upwards, governments spend, loan and deliver tax breaks to employers to make investment happen, with weak or zero conditions attached. Aggressive government action can stimulate new, properly skilled and long-term jobs, the opposite of the private sector’s priorities.   

The real rate of profit, in its ebb and flow, is the most revealing indicator of the real health of any capitalist society. However, it is the hardest to work out because of how the ABS presents the relevant information. And it is the indicator that all mainstream commentators do not understand or do not wish to discuss. That is true, regrettably, for modern labour economists. Instead, they are all obsessed with productivity, even doing their best to confuse that indicator in the public mind. (More to follow.)

Unemployment and wages

The ABS’ new employment data shows general unemployment falling in February to 3.7% from 4.1% in January. This has surprised and confused many economists in the mainstream commentariat.

Note, the lower unemployment rate follows relatively better increases in pay for low-income workers. Those better pay increases are still not, generally, keeping up with price increases and, certainly have not caught up with what has been lost over the years.

In brief Australian workers appear to be able to get a job easier than for some time and this trend has been on since the waning of the pandemic.

Usually, that means workers and their unions are in a better bargaining position to win pay rises that match price rises, and even win back what has been lost in the past years. Strikes and other industrial action should extract a better deal.

Employed workers without unions are dependent on what their employer is willing to pay for their capacity to work. In other words, if there is a shortage of the workers they need, employers will more likely offer a higher rate. Union workers whose wages have not been fixed by enterprise agreements may get more out of this situation.

Unionized workers who have or who want to get a new enterprise agreement tend to be in a better position to win a strong outcome. That’s what the current labour market would suggest.

However, the anti-strike laws and the legal requirement that enterprise agreements NOT flow to other workers restricts the contribution that unionized workers make to wage improvements by others. Despite some positive changes to labour law by the Albanese government the anti-strike and anti-solidarity of the wages system remains firmly in place.

Annual Wage Review (AWR) – 5%, 4%, 2%?

In this context, the AWR is a big moment in the living standards struggle, alongside of the next Labor Budget and Reserve Bank decisions on interest rates.

We know the Reserve Bank deliberately aims for higher unemployment because it believes that restrains and reduces wages, and thus prices. (Even when there is no evidence for that causal chain.) We also know that the Treasurer is dampening expectations for significant gains in living standards from the Budget. (Check here also.)

The AWR is the most important of the 4 ways for workers to get the wage rise they need to maintain their standard of living. (The others are enterprise bargaining, employers volunteering a pay rise above minimum rates because there is a shortage of the workers they need, and the government deciding an industry is a special case for it to pay for a necessary pay rise. (For example, Aged Care Services.)

Friday 28th March is the  deadline for first submissions.

This week we learned the major claims: the government proposes around 4%, the ACTU 5% and the employers 2%. The submissions will say a lot more about why. The FWC’s hands down its decision sometime in June because the law requires that any pay increase should start in July.

Following changes to the Fair Work Act in December 2022, this is the second Review that is required to take specific account of gender equality and the gender wage gap.

The outcome depends on a debate controlled by lawyers and economists through a consultation process. Low-income workers have little say in forming the claim on their behalf and they are excluded legally from any industrial action to pursue that claim. The modern union movement accepts this undemocratic and paternalistic approach to its role and fails to develop the opportunity for union growth that lies in a coherent pro-worker strategy at the AWR.

Activists learning about the economy and climate change

Unions have the primary role of helping their members understand how climate change and the economy interact. Environment organizations can make their priorities more achievable by working out the connection to living standards, the dead end of profit-taking dependency, and acting in support of unions in the struggle over jobs and wages within a just transition.

Any organization that falls short of this task is, in effect or deliberately, telling workers they cannot learn, understand and use this knowledge to act together for a lift in their standard of living, including a healthy environment. They are patting their members on the head saying, “Don’t worry, we have well-paid experts – lawyers, economists, advocates and an “independent umpire” - who will take care of that for you”.

There is a perverse sense, but quite real, that a massive weather event – from climate heating - can destroy so much of fixed assets, and the lives of people and associated small businesses, that the conditions develop to reverse any tendency for profitability to fall. Destructive hurricanes clear the way for new profitability … if you have the capital for fixed asset investment and provided there are enough working people properly skilled to work on the new profit-taking projects. Thus, the exploitation of people and nature trundles along. Unless.