Why Abbott’s two million jobs promise isn’t as good as it sounds

Why Abbott’s two million jobs promise isn’t as good as it sounds

Creating more jobs is a rather common promise in politics. Some politicians are more daring in pledging to create a certain number of jobs within a given period of time.

During the 2013 electoral campaign, now-prime minister Tony Abbott repeatedly pledged to create two million new jobs over a decade, if elected. In its Real Solutions Plan, released earlier last year, the Coalition promised to generate one million new jobs over the next five years and two million new jobs within a decade.

Committing to a numerical target should be applauded. It is easier to verify and makes the candidate more accountable to voters.

That said, Abbott’s promise does not look particularly ambitious. Seasonally adjusted data on Labour Force Status published by the Australian Bureau of Statistics (ABS) indicate that in the ten years preceding the formation of Abbott’s government (that is, from September 2003 to September 2013), employment in Australia had already grown by 2.06 million units.

If Abbott were to maintain his promise, total employment would grow by about 17.5% in the decade ending September 2023. But in the decade ending September 2013, the growth of employment was already 21.8%.

So, the prime minister is actually promising to do slightly worse than the past. Considering that the past included the worst recession since the Great Depression, one would like to hope that the government will do better than what Abbott pledged during the electoral campaign.

Slowly, but gloriously?

In the meantime, it is interesting to see how the labour market has performed in the first ten months of Coalition government. To this purpose, the table reports some basic labour force data from ABS.

ABS produces two series of labour data. One is seasonally adjusted to remove the effect of normal seasonal variation in economic activity. The other is obtained by smoothing the seasonally adjusted series to remove its irregular component.

The table actually reports figures from both series. While numerically different, the two set of figures present the same broad picture for employment. If anything, trend data seem to be more favourable to the government.

The good news is that employment has increased by approximately 110,000 units over a period of nine months (data for July 2014 are not yet available). A rather large share of this increase is due to part-time employment.

The increase in employment in the manufacturing sector is also good news, as it marks the consolidation of a trend started in the last months of the Labor government, after a prolonged period during which manufacturing employment had been shrinking.

But, of course, it is not yet time for celebration. If the current rate of increase in employment were maintained for ten years, Abbott would undershoot his two million jobs target by more than half a million units.

Extrapolating a trend for a decade from a period of nine or ten months belongs with the field of astrology more than economics. So, let’s just say for now that if the government really wants to meet its already not-so-ambitious employment target, then it will have to switch gear and achieve considerably more than what these first months indicate.

The dark side of the labour market

The somewhat good news on the employment side is matched by bad news on the unemployment side. As the data in the table show, the number of unemployed persons has increased since September 2013.

At the same time, the labour force has grown proportionally more than employment. The net effect is an increase in the unemployment rate, which has hit 6% in June 2014 (5.9% if considering the underlying trend).

This increase in unemployment suggests a couple of considerations.

After weathering the global financial storm well, the Australian economy is now going through uncertain times. The unemployment dynamics confirm that what the country needs is a macroeconomic policy framework to support the recovery.

In this regard, the Reserve Bank of Australia is actually doing its share by keeping the interest rate low. The same cannot be said for the government. Obsessed with a debt problem (that in fact does not exist), the government is driving fiscal policy towards a path of austerity that is not going to benefit employment and is making more difficult for the unemployed to cope with economic hardship.

We all agree that high debt is undesirable, but Australian debt is not high. Or, to put it differently, do you prefer to have growing unemployment or a debt level around 30% of GDP?

This article originally appeared on The Conversation.


Notify of
Inline Feedbacks
View all comments
SmartCompany Plus

Sign in

To connect a sign in method the email must match the one on your SmartCompany Plus account.
Or use your email
Forgot your password?

Want some assistance?

Contact us on: support@smartcompany.com.au or call the hotline: +61 (03) 8623 9900.