This a really good article. It’s amazing how these static models fail to take into account the context in which these ideas were generated. In the 1970s you have the confluence of strong trade unions that could negotiate cost-of-living adjustments and the energy crisis. The latter was largely responsible for the former. Changes to the law and the law economy have eviscerated the trade union movement, reducing workers’ ability to keep-up with supply shock. The bout of inflation we have experienced, as Krugman has argued, is beginning to look a lot more like similar episodes of inflation, such as the one that followed the Korean War. Why do institutions like the RBA cherry pick the one episode? You can’t have the plebs not doffing their caps to their bosses.
I suppose the RBA cherrypicks so it's seen to be in control of the narrative. "See? We increased interest rates and inflation's coming down already. Aren't we grand?"
And I 'liked' your comment if for nothing more than your traditional use of 'former' and 'latter'. I get confused by their modern application to an array of things.
Everyone who wants one should have a job. Not 99% of them, 100%. We live in a digital age, and matching people to unmet needs should be much easier.
Focussing only on the stickiness of inflation, while ignoring the much larger and more socially costly stickiness of employment/unemployment, is an economics driven by the priorities of the rich.
The whole notion of having an unemployment rate above 0%, held by most economists, including I believe John Quiggin, is one I don't support.
The best new employee already has a job. The easiest new employee to hire has a job at your company, so you can just transfer them to a new position. This happened to me .. yesterday. I start work in the new role .. today. There is headcount for a new employee, but they will not be hired for months.
A model where inflation is sticky is one explanation of concurrent, prolonged, high inflation accompanies high unemployment.
But another factor is that unemployment is also sticky. People who are unemployed are less employable. There can be large groups of unemployable people, with the wrong skills for the jobs on offer, and declining capital as employees as they lose the expectations, credentials, and habits of employees.
The majority of the unemployed are long-term (more than one year) unemployed. And the vast majority of them are either older, living with disability or have a mental illness.
So even if your employer has a vacancy at entry level (which sounds like it might be their strategy) that will be filled - evenually - by a young, relatively healthy person.
What we need is lower unemployment for longer. Unlike what John Quiggin says we are not at a good version of "full employment" and have not been close.
Look at the facts ... if most of the unemployed were in the category of unable to work in normal jobs, then the proportion of people unemployed for 2 years or more would increase as unemployment declined from 5.5%, pre-covid, to 3.5% in the post-covid minimum. But it did not. In fact the proportion long term unemployed went down as employers, without other choices, had to take less attractive workers.
80% of the unemployed have been unemployed for less than one year.
People who have been unemployed for longer are often unemployed for much longer.
Some people who living with disability or mental illness want to do some kind of work, and need specific employment created for them, by the welfare system, rather than having them compete in the general employment market. Others would be better off if we moved them out of the employment system altogether. But we are not down to just these people in the unemployment system.
Not quite following this. As you say, even workers who would previously have been ignored by employers are getting jobs. That seems like full employment to me. Maybe you could clarify your point
Since long term unemployment numbers were going down, and had not noticeably plateaued, I believe were were not at the lowest possible level of unemployment.
Since economists say "full employment" without meaning, "the lowest possible number of unemployed people", then I would like a new words for "the lowest number of unemployed people", and the various other levels of unemployment, with more unemployed people.
I don't know how what fraction of the long term unemployed are potentially employable in market jobs, given a shortage of more attractive workers.
But I do have a suggestion on how to find out. Keep unemployment low and watch the long term unemployment numbers.
If long term unemployment numbers **keep doing down**, and they were, then we were not at the point where the all the long term unemployed are people unemployable in market jobs, due to disability etc.
To see the number of long term unemployed you need a chart of the total number of long term unemployed, but the link I provided had a percentage, which is noisy because when unemployment overall rises, the proportion of long term unemployed declines, not because there are less long term unemployed, but because there are more other unemployed people.
Because of frictions in the job market, there will be mismatches between the unemployed and available work. We can either have those frictions in extra unemployed people, or in "skill shortages". I find the intolerance of "skill shortages", particular for non-essential workers, perplexing.
You're right about one thing - sorry I don't know where that Idea that the majority of the unemployed are LTU came from! But it's true, most LTU are VLTU.
Of course. It has been been engineered in as part of an ideology, an alibi presented by those would benefit most from the construct, ie themselves, over time. Thomas Hutcheson does point to an evolution of the construct enabling it to adapt so that the most wealthy ever increase their own wealth over some event like Covid with barely a yawn from a distracted public. The oligarchy octopus? Never mind but it does seem many locations seem electronically walled off from the communities that sustain them when legitimate inquiry is blocked.
"Reserve Bank remains committed to a NAIRU model in which the full employment goal is subordinated to an inflation target,"
The reconciliation is to chose the minimum inflation target that is consistent with full employment (of labor and other things) and to be flexible about how quickly to return to target when inflation is above target.
Over the last few decades Australia has done this better than other economies. May you so continue.
This a really good article. It’s amazing how these static models fail to take into account the context in which these ideas were generated. In the 1970s you have the confluence of strong trade unions that could negotiate cost-of-living adjustments and the energy crisis. The latter was largely responsible for the former. Changes to the law and the law economy have eviscerated the trade union movement, reducing workers’ ability to keep-up with supply shock. The bout of inflation we have experienced, as Krugman has argued, is beginning to look a lot more like similar episodes of inflation, such as the one that followed the Korean War. Why do institutions like the RBA cherry pick the one episode? You can’t have the plebs not doffing their caps to their bosses.
I suppose the RBA cherrypicks so it's seen to be in control of the narrative. "See? We increased interest rates and inflation's coming down already. Aren't we grand?"
And I 'liked' your comment if for nothing more than your traditional use of 'former' and 'latter'. I get confused by their modern application to an array of things.
Everyone who wants one should have a job. Not 99% of them, 100%. We live in a digital age, and matching people to unmet needs should be much easier.
Focussing only on the stickiness of inflation, while ignoring the much larger and more socially costly stickiness of employment/unemployment, is an economics driven by the priorities of the rich.
The whole notion of having an unemployment rate above 0%, held by most economists, including I believe John Quiggin, is one I don't support.
The best new employee already has a job. The easiest new employee to hire has a job at your company, so you can just transfer them to a new position. This happened to me .. yesterday. I start work in the new role .. today. There is headcount for a new employee, but they will not be hired for months.
A model where inflation is sticky is one explanation of concurrent, prolonged, high inflation accompanies high unemployment.
But another factor is that unemployment is also sticky. People who are unemployed are less employable. There can be large groups of unemployable people, with the wrong skills for the jobs on offer, and declining capital as employees as they lose the expectations, credentials, and habits of employees.
The majority of the unemployed are long-term (more than one year) unemployed. And the vast majority of them are either older, living with disability or have a mental illness.
So even if your employer has a vacancy at entry level (which sounds like it might be their strategy) that will be filled - evenually - by a young, relatively healthy person.
What we need is lower unemployment for longer. Unlike what John Quiggin says we are not at a good version of "full employment" and have not been close.
Look at the facts ... if most of the unemployed were in the category of unable to work in normal jobs, then the proportion of people unemployed for 2 years or more would increase as unemployment declined from 5.5%, pre-covid, to 3.5% in the post-covid minimum. But it did not. In fact the proportion long term unemployed went down as employers, without other choices, had to take less attractive workers.
I am looking at these statistics on unemployment:
https://www.aihw.gov.au/reports/australias-welfare/employment-unemployment
80% of the unemployed have been unemployed for less than one year.
People who have been unemployed for longer are often unemployed for much longer.
Some people who living with disability or mental illness want to do some kind of work, and need specific employment created for them, by the welfare system, rather than having them compete in the general employment market. Others would be better off if we moved them out of the employment system altogether. But we are not down to just these people in the unemployment system.
Not quite following this. As you say, even workers who would previously have been ignored by employers are getting jobs. That seems like full employment to me. Maybe you could clarify your point
Since long term unemployment numbers were going down, and had not noticeably plateaued, I believe were were not at the lowest possible level of unemployment.
Since economists say "full employment" without meaning, "the lowest possible number of unemployed people", then I would like a new words for "the lowest number of unemployed people", and the various other levels of unemployment, with more unemployed people.
I don't know how what fraction of the long term unemployed are potentially employable in market jobs, given a shortage of more attractive workers.
But I do have a suggestion on how to find out. Keep unemployment low and watch the long term unemployment numbers.
If long term unemployment numbers **keep doing down**, and they were, then we were not at the point where the all the long term unemployed are people unemployable in market jobs, due to disability etc.
To see the number of long term unemployed you need a chart of the total number of long term unemployed, but the link I provided had a percentage, which is noisy because when unemployment overall rises, the proportion of long term unemployed declines, not because there are less long term unemployed, but because there are more other unemployed people.
Because of frictions in the job market, there will be mismatches between the unemployed and available work. We can either have those frictions in extra unemployed people, or in "skill shortages". I find the intolerance of "skill shortages", particular for non-essential workers, perplexing.
You're right about one thing - sorry I don't know where that Idea that the majority of the unemployed are LTU came from! But it's true, most LTU are VLTU.
Of course. It has been been engineered in as part of an ideology, an alibi presented by those would benefit most from the construct, ie themselves, over time. Thomas Hutcheson does point to an evolution of the construct enabling it to adapt so that the most wealthy ever increase their own wealth over some event like Covid with barely a yawn from a distracted public. The oligarchy octopus? Never mind but it does seem many locations seem electronically walled off from the communities that sustain them when legitimate inquiry is blocked.
"Reserve Bank remains committed to a NAIRU model in which the full employment goal is subordinated to an inflation target,"
The reconciliation is to chose the minimum inflation target that is consistent with full employment (of labor and other things) and to be flexible about how quickly to return to target when inflation is above target.
Over the last few decades Australia has done this better than other economies. May you so continue.