Companies hide for nothing at the top of employment

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Australian businesses will come to this week’s Jobs and Skills Summit with one thing in mind: to give us more workers.

The unions will be there with another idea in mind – give us more money.

Both will likely end up disappointed, but business is hiding for nothing.

The increase in immigration that will likely be announced at the summit will be only a fraction of the hundreds of thousands of vacancies that currently exist and, anyway, migrants need to live somewhere and shop, so their demand creates almost as many new vacancies as people to fill them.

And education, even if the subject goes from fine words to concrete ideas, is a long-term proposition and will not solve the problem of 2022.

In any case, it is possible that part of the problem is that too many people have been over-educated by doing arts and philosophy in college, rather than a trade or a degree in a TAFE.

As for the union’s demand for higher wages, the plan is to allow the return of industry-wide collective bargaining, which the ACTU says will improve workers’ bargaining power.

Business negotiation and its disadvantages

Many independent observers and scholars argue that the corporate bargaining system is broken because the world has moved on, but hey, the world has moved on since the last application of collective bargaining in the 1980s.

The introduction of company bargaining in 1991 was a spectacular Labor goal and was a disaster for unions and workers’ bargaining power.

That’s because there’s a fundamental problem with it: strikes or work bans in a company simply hand it over to competitors for destruction – unless it’s a monopoly.

Going on strike against a company in a competitive industry actually reduces workers’ overall bargaining power because other companies not affected by the industrial action are getting stronger.

The only effective wage bargaining is industry-wide, with all companies being treated the same and forced to bargain together…with a union.

If this were to be restored, union membership would skyrocket, the ACTU would be reborn, and much of the economy would be transformed by a shift in the balance of power from capital to labor.

But if the summit turns into a bargaining session – give us collective bargaining and we’ll give you more migration – companies would be the losers.

Indeed, a little more migration would not solve the labor shortage in many industries, if any, but industry-wide collective bargaining would go a long way to solving the creeping irrelevance of unions.

The Reserve Bank is watching

But unions also have to be careful what they wish for.

The Reserve Bank is on high alert, ready to crush the economy and drive up unemployment if wages rise much faster than they are.

ACTU secretary Sally McManus said the RBA governor “isn’t quite up to speed with the reality”.

Unions and Greens prepared for the summit with a steady stream of claims that the lack of wage growth is a crisis and must be item #1 on the summit and political agenda economic.

But interest rates have been hiked four times in four months, and are likely to be hiked again next week, as the RBA’s ‘trade liaison’ says wages are already rising too fast, or soon will be, which is completely at odds with the official statistics. on the issue and the assertion that this is a crisis.

The RBA’s contention is that, if anything, the crisis is the other way around, so aggregate demand in the economy must be reduced quickly and smartly and unemployment increased to stop rising wages. , even if it causes difficulties in housing and mortgages.

Just another day in the complicated life of the economy.

The other main point on the summit’s agenda is retirement pensions, especially for projects of national interest, such as infrastructure and housing.

It doesn’t have much to do with jobs and skills, but it’s a perennial favorite in national politics offsites like this because there’s so much money, sitting there in waiting to be better employed (according to those who want to employ him).

The super funds present at the top will no doubt be polite and profess their undying desire to help. But there’s this thing called the “single purpose test,” you know, so you can’t use the money for the national interest plus retirement savings because that would be two purposes, no is this not ?

On the other hand, give us something to invest in that has high single-digit returns or a government guarantee, or both, and we’re on to you.

The Keating Solution

Paul Keating proposes a way to use super money to circumvent APRA risk weightings for banks advising them against lending to businesses in favor of home mortgages. (As little as 20% of homeowner mortgages count towards the capital needed to support them, whereas all small and medium business loans do count, making them much more expensive to finance, and therefore avoid at all). any cost. That’s why there’s so much housing debt.)

Australia has excess capital and companies that lack credit, so homeowners have to sell shares to raise capital or put their homes up as collateral.

The problem is that super funds aren’t lenders, don’t know how to assess credit risk, and don’t know enough about individual companies to lend to them – they invest primarily through fund managers.

Keating’s idea is for banks to arrange business loans for super funds and perform credit checks in exchange for 10% of the loan plus fees.

He believes APRA would not weight the 10% share as much as full business loans due to the presence of super funds, but this is unconfirmed.

But at least this idea is neither self-serving nor insufficient, like collective bargaining and more immigration.

Alan Kohler writes twice a week for The new daily. He is also editor-in-chief of Eureka Report and financial anchor on ABC News

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