Tag Archives: Unemployment

Economics professor Ross Garnaut said Australia volunteered to create hundreds of thousands of unemployed | Instant News

This can take a while to understand.

With weeks before the Job Seeker rate was cut, one of Australia’s most respected economists had suggested that there were hundreds of thousands of potential Australians on unemployment benefits who shouldn’t be there.

Professor Ross Garnaut, a Professorial Research Fellow in Economics at the University of Melbourne, has condemned Australian economic policymakers for the situation.

But his critics point to how they have run the economy over the years, not just the last 12 months.

He is referring to the federal government and the Reserve Bank.

He said their decision to “let” hundreds of thousands of Australians languish in unemployment in recent years to curb wages and inflation, as part of the country’s broader economic policy settings, has hurt people and cost the economy hundreds of billions of dollars. economic activity.

In his new book, Reset: Restoring Australia after the pandemic recession, Professor Garnaut says our policymakers must abandon that policy and return Australia to its original full employment.

He said it meant an unemployment rate of 3.5 percent or lower – the lowest since the early 1970s.

The unemployment rate is currently 6.4 percent.

He said it is difficult to know for sure, but the lower unemployment rate will probably be the point where wages finally start to rise and inflationary pressures emerge. But we have to test it. It could be much lower than that.

“Sure, it’s lower than ‘well below 6 percent‘which Treasurer Josh Frydenberg thinks will trigger efforts to reduce the budget deficit, “wrote Professor Garnaut.

Problems with Australia’s economic policy architecture

This is a scathing judgment.

Between 1946 and 1975, when Australia adopted a formal policy of full employment, the national unemployment rate averaged below 2 percent.

Consecutive federal governments (both Labor and Coalition) budget deficits are deliberately recorded in order to achieve that full employment.

But since the 1980s, Australian policymakers have accepted higher unemployment rates, which they think are “reasonable” under prevailing conditions.

They developed a new definition of full employment: full employment means an unemployment rate that limits inflation (that is, one that stops wages and prices from rising too quickly).

The bad term for the “full employment” rate is NAIRU, or the unresponsive unemployment rate of inflation.

Professor Garnaut said Australian policymakers had repeatedly miscalculated NAIRU in recent years, meaning they often suspected that the economy was getting closer to full employment when it was away from that point.

For example, consider a situation where the national unemployment rate is 5.5 percent and falling, and the RBA estimates full employment (i.e. NAIRU) to be 5 percent.

That means the RBA expects inflation and wage pressures to increase soon, as the unemployment rate appears to be approaching “full employment”, so the RBA will be prepared to start raising interest rates.

However, what if, in this scenario, the economy would only truly become “full employment” when the unemployment rate was 3 percent?

That means the RBA will start raising interest rates prematurely, when the unemployment rate is 5 percent (not 3 percent), effectively shutting down momentum in the labor market before everyone who wants a job can find it.

Professor Garnaut said Australian policymakers should stop guessing where the full jobs are can Becomes.

“We can find out where by increasing labor demand until wages on the labor market rise at a rate that threatens inflation above the Reserve Bank range for an extended period of time,” he said.

He said the difference between the actual unemployment rate and the lower original full employment rate represented “unnecessarily unemployed” people.

“The unnecessary number of unemployed is actually bigger than this, because more people will be motivated to find work if the unemployment rate is lower,” he said.

He said the years since 2013 were terrible.

“On average, several hundred thousand fewer people are employed [from 2013 to 2019] than is likely to happen, “he said.

“At the current level of economic activity, it has several hundred thousand unemployed people who don’t need to hold onto the annual gross domestic product [GDP] drops about $ 50 billion below what it should be, and, all other things being equal, increases Australia’s public deficit by nearly $ 20 billion each year. “

Support for an idea promoted by Modern Monetary Theory

Professor Garnaut said Australia should use as much resources as possible to bring the unemployment rate down to 3.5 percent by 2025, as a matter of national urgency.

He said the budget deficit needed to achieve full employment must be funded “directly or indirectly” by the Reserve Bank, “at least until full employment is seen.”

That puts him right next to people like former Prime Minister Paul Keating, and economists from Modern Monetary Theory, who say the RBA has the power to create its own money to finance federal government stimulus spending, so there is no reason why federal government deficit spending should be supported by an explosion of Commonwealth government debt.

Currently, the Reserve Bank is waiting for the Ministry of Finance to sell new Commonwealth government bonds (through the Australian Office of Financial Management) to private banks, pension funds and insurance companies that form the so-called “secondary market”, before buying the same bonds from private entities. at the agreed interest rate.

It is this traditional practice of “raising money” from the secondary market for government purchases that has led to an explosion in Commonwealth government debt over the past year.

Professor Garnaut said there was no need.

“We really argue about angels dancing with pinheads when we talk about differences,” Professor Garnaut told Eureka Report reporter Alan Kohler this week.

“The only difference between the Government selling the bonds to the market and then the Reserve Bank buying it is that you give margin to a small number of players in the bond market, to the banks that participate in that trade.

“I think let’s grab their free lunch.”

Phil Lowe, Governor of the RBA, has repeatedly dismissed suggestions that the RBA should directly finance Government stimulus spending.

However, he never said it was impossible. He just said it wasn’t necessary.

“I want to make it clear that monetary financing from fiscal policy is not an option being considered in Australia, nor is it necessary,” he said in July last year.

“The Australian government is able to finance itself in the bond market, and can do so on very favorable terms.”

The longest period of income stagnation in Australia

Professor Garnaut has provided a brutal view of the economic achievements of Australian policymakers, particularly from 2013 to 2019 (seven years from China’s resource boom to the pandemic), a time period he has dubbed Australia’s “dog days.”

He said since 2013, Australia had stood out among developed countries because of stagnant production per person and continued high unemployment and underemployment.

“A lot of Australians are used to seeing Japan as an economic basket,” he said.

“Under the best of circumstances, by 2025, Australians will go through the longest period of real income stagnation in our national history.”

There is a need for an ‘economic stability council’

He said the task of rebuilding the economy after the pandemic would be enormous, and it would require new economic institutions, such as the Reserve Bank.

“The independent authority that is needed right now is not the Reserve Bank Board which only has the power to buy and sell government securities and change interest rates,” he said.

“Circumstances require the Economic Stability Council, with the power to limit demand in fiscal and monetary ways – to charge a surcharge on the main tax if it works better than raising interest rates.

“The power of the council to adjust some tax rates will be two-sided, with tax cuts on the agenda as growth sags below full employment rates and the scope for lower interest rates has exhausted.

“If we design an independent body to support economic stability now, we will make it an independent Economic Stability Council and not an independent monetary authority. So let’s make these changes for the future as part of us. [economic] restoration.”

This is similar to the idea proposed by leading Australian economist Nicholas Gruen.

Another idea

Professor Garnaut has also provided his support behind the idea of ​​a basic income guarantee for nearly all adults, paid the same rate as dole (known as universal basic income in the economic literature), and a major reconfiguration of how businesses pay corporate taxes.

Overall, he said, Australia needed to take the opportunity to rebuild a new economy in a post-pandemic world, rather than return to “hard times” from 2013 to 2019.


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UK: Unemployment rises as COVID lockdown hits economy | Coronavirus Pandemic News | Instant News

The UK unemployment rate edged up to 5.1 percent in the last three months of last year, the highest level in nearly five years, official data showed, as severe lockdown restrictions on COVID-19 weighed on the economy.

Figures published by the UK’s Office for National Statistics (ONS) on Tuesday show that the unemployment rate increased by 0.4 percentage points between early October and late December 2020.

The increase comes against the backdrop of regional and national restrictions imposed to curb the spread of the coronavirus pandemic, which has hit Britain hard, killing more than 120,000 people and sparking its biggest fiscal slump in more than 300 years.

Even though a historic government-supported job retention scheme was launched in response to the COVID-19 crisis, overall, unemployment has risen 1.3 percent higher at the end of last year compared to December 2019, ONS figures show.

The number of payroll employees fell by 726,000 between February 2020 and January 2021, he said.

PM sets out a plan for easy locking

The gloomy ONS figures come as Britain’s finance minister, Rishi Sunak, is reportedly ready to spend billions of pounds in extra support for the economy over the next four months, in line with Prime Minister Boris Johnson’s plans to gradually ease Britain’s lockdown by the end of June. .

Sunak delivers an annual budget on March 3, when he intends to set up future government assistance programs including a leave scheme and a weekly additional 20 pounds ($ 28) in main unemployment benefits.

Announcing a so-called “road map” for easing restrictions on Monday, Johnson said his government would not abandon people and businesses in need of continued assistance from the state.

Non-essential retailers won’t reopen before April 12, at the earliest, under Johnson’s four-step strategy, while some businesses will remain closed until at least June 21.

“People may be concerned about what these changes mean for various packages of support for livelihoods, for communities and the economy,” Johnson told Parliament.

“We will not pull the rug. During the pandemic, governments will continue to do whatever it takes to protect jobs and livelihoods across the UK. “

‘Every job lost is a tragedy’

Johnson’s remarks pressured Sunak to extend his state-backed 70 billion pound ($ 98 billion) leave program, which expires on April 30, long before most social distancing restrictions will be lifted.

Under the current lockdown, people are encouraged to work from home whenever possible, while hotels and restaurants are closed to the public.

“On next week’s budget, I will set out the next phase of our Work Plan, and the support we will provide through the rest of our pandemic and recovery,” Sunak said in a statement.

“I know how hard it was last year for everyone and any job loss is a personal tragedy.”

So far, Sunak has spent more than 280 billion pounds ($ 395 billion) on COVID-19 measures, including health care, support payments and tax breaks, and government loans in the financial year that just ended will be the highest as a share of the economy since that. World War II.

He wants to reinstate last year’s job-support and unemployment benefits schemes before a spike in infections in the fall forces the government to extend support and late on to tighten lockdown rules.

The government said in a statement that Sunak would go into more detail about its long-term fiscal plans during next week’s annual budget announcement.

“It is not sustainable to borrow at the current rate in the medium term,” the document says. “This means the government has a responsibility, once the economy recovers, to return to a sustainable fiscal position.”


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With thousands facing layoffs, Brazilian unions are pushing for temporary jobs at Ford | Instant News

The two main trade unions leading negotiations with Ford on halting its operations in Brazil urged workers to return to work next Monday, February 22, in clear signs of their adherence to the automaker’s profit interests. Despite knowing that they will soon be laid off, the workers must return to the factory to meet the company’s demand for spare parts.

Workers line up against Ford’s closure in São Paulo in 2019

The re-imposition of work comes amid pressure from Ford dealers who have expressed concern about a shortage of parts for cars still on sale. The announcement of factory closings triggered an immediate decline in sales of Ford vehicles in Brazil. In January, the company’s sales were cut by half compared to December, which only sold 8,100 units nationwide. It was the biggest drop among car manufacturers in Brazil.

According to a UOL Carros website report, the Brazilian Ford Distributors Association (Abradif) warned Ford in late January that parts were scarce. In their documents submitted to Ford, the organization stated that its members had received notification from the Consumer Protection Agency (Procon) due to the absence of a maintenance component on the official network.

Of the three plants Ford owns in Brazil, only one in Horizonte, in the state of Ceará, continues to operate. It is expected to be closed completely by the end of this year. Two other factories, in Camaçari, Bahia and Taubaté, São Paulo, which employ more workers, have been completely closed since 11 January, the day the automaker announced a halt to production in Brazil.

After a few weeks, however, Ford began to retract part of the workforce in Camaçari and Taubaté. The workers were notified individually by telegram or phone calls from their superiors but despite direct intimidation did not respond to the calls.

In an interview with Or Balloons the newspaper, the president of the Camaçari Metalworkers Union, Julio Bonfim, has reported: “Ford sent a notification, but zero adhesion, everything was stopped, nobody left. The factory was forced to rent a warehouse because it was in the Simões Filho area [the neighboring municipality] there is no one here in Camaçari to unload the 90 truck drivers. “


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Brazilian unions clamped down on workers’ opposition to mass layoffs following Ford’s closure | Instant News

One month after Ford announced the closure of its three remaining plants in Brazil, another company linked to its production chain laid off its workers, unleashing a wave of layoffs affecting various sectors of the auto industry. According to research by the Interunion Department of Statistics and Socioeconomic Studies (DIEESE), the 5,000 layoffs announced by Ford mark the potential for destruction of another 118,864 jobs, resulting in an annual wage loss of 2.5 billion reais (US $ 465 million).

Based on this perspective, one can predict the waves of opposition among Brazilian workers. On January 26, about 800 workers at the Arteb parts factory, located at the ABC industrial complex in São Paulo, went on strike to protest the 200 layoffs. Founded in 1934, Arteb produced headlights and headlights for major automakers, and blamed the layoffs on Ford’s closure in Brazil. Workers were fired by mail.

The strike was led by the ABC Metalworkers Union (SMABC), which is affiliated with the Workers’ Party (PT)-controlled CUT federation, and ended in just two days. The union acted swiftly to keep the strike isolated, without calling on other workers in the area who would soon face a similar situation. Linking layoffs to the company’s previous financial problems and the “normalized” high unemployment rate in the industry, the secretary general of SMABC, Moisés Selerges, proposed ending the strike.

Ford assembly. Photo by: Sam VarnHagen / Ford Media

“The situation is complicated. It’s not just Arteb’s problem, but the industry as a whole. The industry is submerged in water because this government does not have an industrial policy, ”Selerges said when meeting workers. “As I told you at the start, the union is working on a possible deal. So here’s a possible deal that we reached. “

The “may” deal reached by the union received 200 layoffs. Even in the face of obvious defeats for these workers, the union is still trying to boast that the negotiations have “guaranteed” severance pay, extended medical benefits to September and payment for strike days.

The announcement on the SMABC website on January 21 has warned of the general nature of the “Ford effect,” as evidenced by the recent cutbacks in working hours at factories in the ABC region that used to serve carmakers.

“With the announcement of the closure of Ford, we are concerned about the domino effect on auto parts in our region, as several companies supply products to auto manufacturers, including auto parts factories,” said another union official, Genildo Dias Pereira. “In São Bernardo, for example, we have Samot, Fiamm, Rassini, ZHS, Mahle, Selco, among many others. Not to mention that Arteb has closed the Camaçari factory [in the state of Bahia, where Ford had one of its factories] after the decision. “


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Mass layoffs in Germany as companies restructure amid the coronavirus pandemic | Instant News

On Monday, the official number of COVID-19 deaths in Germany rose to 61,675 and the DAX stock index hit a new record of 14,169 points. Parallel increases in the death toll and share prices suggest that the pandemic is good for big banks, hedge funds and companies.

On the one hand, this is because the federal and state governments subjugate the health and lives of those who work for the benefit of their companies and shareholders, pumping hundreds of billions of Euros into the economy for the greatest benefit of financial markets and the greatest. corporation.

On the other hand, large companies are using the pandemic to implement long-planned rationalization measures and destroying hundreds of thousands of jobs, while smaller companies are not receiving government support. Not a day goes by without the company or business announcing layoffs and the closure of factories and branches.

Protests against layoffs at the Daimler plant in Berlin-Marienfelde in November 2020 (WSWS Photo)

Workers face not only companies, but trade unions and their workplace representatives. Trade unions have a large apparatus whose main focus is to ensure the highest possible return on investment to company owners, regardless of the cost of work and wages of workers.

This is exemplified by IG Metall who likes to call itself the single largest labor union in the world. Although it still has about 2.2 million members, that is a fifth less than it was 20 years ago. The enormous loss of membership under conditions of growing attacks on workers indicates a lot about the character of the union – which serves as an arm of management, not as a representative of the workers.

Of the € 591 million in membership fees that IG Metall collected last year, they spent only € 25 million on things like strike payments and legal protection, which is about four percent of total revenue. The lion’s share of membership fee income, € 216 million, is used to pay officials and branch offices. The unions have set aside another € 89 million for “hard times”; this money “works” for IGM in secret. This has spent € 31 million on training sessions for workplace representatives and functionaries.

While betraying workers, IG Metall would occasionally stage toothless protests, signature campaigns, and other calls on those in power to cover up its sales. While simulating a “struggle,” behind the scenes is working on a plan with the company’s top on how to implement the attack as smoothly as possible. So-called “social” plans destroy jobs through staff turnover, early retirement and partial retirement, forced severance pay and “transfer companies,” which only delay the inevitable commute to useless offices.


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