Monday, November 01, 2004



Policies for the labour shortage

At the end of a post discussing the documentary In A Land of Plenty, Big News notes that "at the moment, we seem to have too many employers chasing too few qualified workers", and then asks

what is the answer to increasing productivity (and skills and wages), and decreasing unemployment in this current political climate

To which I'd answer that in the short term, the labour shortage itself should see to that. Employers cannot simply add more workers anymore, so they have little alternative but to invest in their staff or invest in their plant. Wages should also naturally rise as a consequence of the free-market boot being on the other foot, helped along by the restoration of employee and union bargaining power under the ERA. As for decreasing unemployment, the market seems to be dealing with that as well. The problem is really with skills, but the government seems to have reasonable policies to encourage training, and has reduced the economic risk of moving from a benefit to full-time work, so I'm not sure what else can be done in this area (other than encouraging migrants with the right skills - but that doesn't really lower unemployment).

What I am sure of is that Brash-style policies of engineering a labour surplus solely for the purposes of keeping wages (and hence inflation) down is not any sort of solution. In fact, that's one of the reasons we've fallen behind Australia: real improvements in our standard of living come from investing in increasing productivity, but the ECA and Reserve Bank-engineered high unemployment gave employers no incentive to do this, and instead encouraged them to slash wages and hire more lower-skilled workers. Unfortunately, ACT is still stuck in this mindset, as betrayed by their calling solo parents a "130,000-strong latent workforce". I guess Marx was right about employer's desire for a "reserve army of labour" to hold worker's claims in check - either that, or Muriel Newman couldn't find anyone to clean her toilet...

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