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Battle lines drawn on wages theories
By IAN HENDERSON,
Economics Writer
WE REPORTED a fort-
night ago that ANU eco-
nomics professor Bob
Gregory had recently confirmed
his earlier discovery that "there
had been strong jobs growth at
both the upper and the lower
ends of the income scale — but
job losses in the middle, the
"hollowingout" or "disappearing
middle" hypothesis of changes to
the labour market. That report
attracted some comment, includ-
ing from ACTU sources. They be-
lieve Gregory's finding is an er-
ror caused by his method of
calculation, and that it falsely
gives some comfort to extremist
labour-market deregulators.
Based on research conducted
by ACTU senior research officer
Grant Belchamber, the ACTU re-
jects Gregory's finding on empiri-
cal grounds. It also repudiates
any conclusion drawn from it
that labour-market regulation —
specifically, the role of trade-
unions — has failed job seekers.
This controversy is interesting.
Gregory's research does not lead
him to condemn the regulation of
the labour market which has held
the minimum wage above what
purist deregulators would de-
scribe as a market-clearing price.
Rather, his findings are based
on comparing the employment
creation experience of the United
States, where no wage minimum
operates, with that in Australia
where award minimums do re-
strain employers from offering
jobs at very low rates of pay.
As Gregory says, "The exist-
ence of a high minimum wage in
Australia does not seem to be as-
sociated with less full-time em-
ployment at low earnings, rela-
tive to total full-time employment
growth. Indeed, Australian
full-time job growth is more con-
centrated among low-paying jobs
than job growth in the US."
Roth the Australian and the US
labour markets, says Gregory,
have experienced similar widen-
ings in the dispersion of earnings
distribution among full-time
workers. What's more, it would
be difficult to argue on the basis
of his study that the failure of
low earnings to fall was the cause
of the low employment growth
until 1991 in Australia.
Recalculating the data used by
Gregory. Belchamber finds what
"looks not like a disappearing
middle, but rather . . . a disap-
pearing bottom".
"If the 'middle-shrinking' global
imperatives of technology and or
ganisational 'efficiency' were
present in Australia through the
late 1980s this analysis would
suggest that the institutional sys-
tem here has reduced their im-
pact," Belchamber says.
In a recent paper. Belchamber
focused on the distribution of
Australian employment by earn-
ings.
He argued that the distribution
of job growth over 1985-91 had
changed the median income in
the earnings distribution, and as
a result had caused an error in
Gregory's calculations.
Belchamber reworked Grego-
ry's analysis using two methods
which he believes take into ac-
count the changes in the distribu-
tion of employment over the peri-
od.
The outcome of that analysis,
he says, is no hollowing-out of
the jobs growth which would
have left low-earning jobs and
high-earning jobs growing so fast
that middle-income jobs shrank.
Indeed, in the nine lowest-in-
come groups of 21, Belchamber
found a fall in the number of jobs
between 1985-91. In the others,
there was a clear increase.
He says, "If the analysis of this
paper proves sound, it would
seem that regular, moderate, pre-
dictable adjustments to minimum
wage rates have been a beneficial
adjunct to economic and social
policy in Australia under the
prices and incomes Accord, in
terms of the quality of job growth
achieved."
Labour-market regulation, says
the ACTU, has been used to em-
brace change in Australia to the
national economic benefit, with
out the adverse social conse-
quences of the Thatcherite and
Reaganite attacks on minimum
wages.
Belchamber's analysis, though
technical, deserves careful consid-
eration for its empirical and its
policy consequences.
What is clearly missing from
his research, as it is from Grego-
ry's, is a detailed examination of
the occupations and industries
where jobs growth (and decline)
have taken place.
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