Unemployment has fallen to 3.4%. That's the lowest rate since the Household Labour Force Survey began, and once again it is due to an absolute drop in the number of unemployed. There has also been a growth in the number of people in work, and in the number of hours worked - and to the extent that this represents people doing what they want, then this is good. But I think it's the low unemployment (meaning fewer frustrated desires) rather than higher participation rates (meaning less leisure time) that is really the result to be pleased about here.
This really does provide a contrast with Don Brash's policy as Reserve Bank Governor of encouraging unemployment to keep wages down...
5 comments:
You're not quite being fair to Brash, I think.
Brash as Reserve Bank guv' didn't have the power to simply push unemployment up or down. He did have the power to raise and lower the zero-day interest rate.
That single lever pushes around both inflation and unemployment. Pushing inflation down hard pushes up unemployment.
So a policy of being very hawkish on inflation does mean encouraging unemployment to keep wages down: but it also means other things as well. He wasn't able to _just_ pick on unemployment, or to avoid unemployment if he was focussing on other things.
I think Brash can fairly be accused of being wrong about how bad unemployment would be as a result of his policies (I think Bob Jones won money off Brash by betting Brash was bizarrely over-optimistic regards employment). And of being uncaring about unemployment, because he was monomaniacally focussed on keeping inflation down.
But there's a difference between uncaring and actively evil.
Posted by Icehawk : 11/10/2005 04:06:00 PM
According to In A Land of Plenty, he also seemed to be concerned about the inflationary effects of higher wages if unemployment went below 7%, and took active steps to maintain it at that level or above. This is still driven by a desire to decrease inflation, and so you can still regard it as uncaring rather than evil - but its getting awfully close to the line.
Posted by Idiot/Savant : 11/10/2005 05:09:00 PM
Personally I think brash's approach (as it is presented here) is incorrect in some regards but I recognise that if he is correct then he can be just as caring as anyone else. If you beleive that lowering the unemployment rate beyond a certain point will have side effects that systematically disadvantage your counry in the long run (unemployment is not the only potential goal) then it is rational to not lower it beyond that point. You would be uncaring to do it anyway just for some political gain or whatever.
Posted by Genius : 11/11/2005 06:41:00 AM
Genius,
The mistake you make here is to assume that moderate levels of inflation are more harmful to society than moderate levels of unemployment. This is far from clear. Hyper-inflation certainly is, but an inflation rate of 10% may not be (although this depends a bit on wage vs price inflation).
Posted by Anonymous : 11/11/2005 07:04:00 PM
Actually I agree with you Terence. BUT having said that I don't have all the statistics infront of me to say for sure (and I am not a reserve bank governor) and if those statistics did suggest Brash was right then he would, of course, be right and even if he was wrong if the statistics he had seen suggested what he believes he would merely be "honestly wrong".
Posted by Genius : 11/11/2005 08:21:00 PM
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