October 8th 2016


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Articles from this issue:

COVER STORY Reaper mows down first child in the Low Countries

CANBERRA OBSERVED Coalition still gridlocked despite foreign success

EDITORIAL Trump v Clinton: choice between bad and worse

GENERATION RENT The economics behind political unrest

SAME-SEX MARRIAGE Kevin Andrews: defend marriage on principles

WA DRUG POLICY Forum told intervention works with cannabis, ice

OPINION "Deconstruction" fosters contempt of its object

POPULATION POLITICS Philanthropy as a weapon of mass destruction

SUPERANNUATION Take away the number you first thought of ...

HISTORY Germany and its long history of immigration

CINEMA The online madding crowd: Nerve

BOOK REVIEW Tale of forestry dynasty not quite pulp quality

BOOK REVIEW Roman refresher

LETTERS

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GENERATION RENT
The economics behind political unrest


by Patrick J. Byrne

News Weekly, October 8, 2016

Three economic realities go a long way towards explaining why 22 per cent of Australians no longer vote for any of the major political parties.

The average 18 year old will have five changes of career and 17 jobs by the time he or she is 75.

“Generation rent” describes under 35 year olds, because the proportion owning their own home has fallen from 61 per cent in 1981 to 47 per cent today.[1]

Morgan Research shows that unemployment plus underemployment (those in part-time work looking for more work) has risen from around 13 per cent at the start of the 2008 global financial crisis to hover consistently around 18 to 20 per cent since the end of 2012.

These statistics describe a sizable, struggling section of Australian society that has lost faith in the major political parties, if not the political system itself.

They no longer believe that the policy outcomes promised by major parties are real.

First home buyers dare not even
dream of a house like this.

The same strugglers around the world are forcing some political leaders to rethink trade policies, industry and financial sector policies. A recent McKinsey Global Institute report, “Poorer than their parents? Flat or falling incomes in advanced economies”, describes the struggling underclass across the developed world.

The report found that “between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 per cent of households, or more than 540 million people. And while government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade.”[2]

The problem extends to the developing world.

Edoardo Campanella, a Eurozone economist at UniCredit, recently wrote in a piece entitled “Generation jobless”, (Project Syndicate, June 3, 2016): “Young people have been the main losers of the Great Recession brought on by the 2008 global financial crisis – and not just in the advanced world.

“Millions have been pushed into highly unstable jobs, condemned to indefinite unemployment, or forced to move abroad in search of better opportunities. As Jean Pisani-Ferry of France Stratégie, a French government advisory body, points out, it is ‘much worse to be young today than it was a quarter-century ago’ …

“Simply put, around 45 per cent of the world’s economically active young people are either unemployed or are living in poverty, despite having a job. And, given inadequate statistical reporting in many poor countries, where populations tend to be younger, these figures almost certainly underestimate the severity of the problem.”[3]

Martin Wolf, chief economics commentator at London’s Financial Times (July 19, 2016), says that “aspirants to power” like Donald Trump in the United States and Marine le Pen in France are appealing to the “dissatisfaction of so many citizens” but their solutions are a mixed bag and often naïve.[4]

The revolt against political elites was seen in the Brexit vote in Britain, the rise in the U.S. of Donald Trump and the electoral strength of the failed challenger to Hillary Clinton, Bernie Sanders. (See further political analysis in this News Weekly’s Editorial.)

The problem is being compounded as the fourth Industrial (Technological) Revolution obliterates jobs across many sectors, often replacing them with fewer, more highly skilled jobs or machines.

The fourth Industrial Revolution is under way in biotechnologies, energy, information technology, financial and legal services, defence technologies, retailing, government services (where computers are automating online taxation, welfare and family payments) and in manufacturing (where, just to take one example, FoxConn, which manufactures Apple’s products in China, plans to replace its workforce with 1.2 million robots).

Education systems have been slow to reset their priorities to match the demands in these areas. Today, 38 per cent of the world’s employers cannot find the skilled workers they are seeking. Consequently, there is a growing concentration of wealth globally among the salaried corporates and the top 10 to 20 per cent of well-educated, flexible workers who can shift between jobs and careers.

Back to Australia.

Regardless of what Malcolm Turnbull thought that his election promise of more innovation would deliver in terms of jobs, many saw innovation to mean more job losses.

McCrindle Research has found that, assuming the average person starts work at 18 (in a part-time role), by the time they retire from all work by 75 they will have had 17 different employers. Based on three jobs before upskilling or career changing, this means that they will also have five separate careers in their lifetime.

Young people have always had greater job mobility; the big change is for workers over 45. Their average time in a job has dropped from 10 years (with long service leave) to six years and eight months.[5]

In 1975, just 8 per cent of those aged 55 and over stayed less than a year in a job. Today it is twice this proportion, at 15 per cent.

With high levels of unemployment and underemployment, job instability and high housing prices, is it any wonder that 22 per cent of voters no longer vote for the Labor, Liberal or Nationals parties.

 

References:

[1] “Maintain the rage: Why young voters should be fuming this election”, SBS, July 1, 2016.

 

[2] “Poorer than their parents? Flat or falling incomes in advanced economies”, McKinsey Global Institute report, July 2016.

 

[3] “Generation Jobless”, Edoardo Campanella, Project Syndicate, June 3, 2016.

 

[4] “Global elites must heed the warning of populist rage”, Financial Times, July 19, 2016.

 

[5] “Job mobility in Australia”, McCrindle blog, Wednesday, June 18, 2014.




























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