Why the West is riding for a fallThe AustralianFebruary 12 2005By George MegalogenisIT'S the dirty secret of deregulation. The more women enter the workforce, the easier it is for businesses to keep a lid on wages, while pushing profits and executive salaries to new record highs. This is not the official explanation for the economy's 14-year winning streak. But that's only because it doesn't suit the Howard Government or Beazley Opposition to think of sexism as an economic variable.
The clue that it is can be seen in the share of the nation's income cake that is going to wages. Over the past two decades the wages share has fallen in sync with the rise of working women.In 1982, on the eve of the recession that would destroy the old order of protection, men held 63.2 per cent of all jobs in the economy and wages were 63.1 per cent of gross domestic product.
The latest triumphal employment data released on Thursday had men with 55.2 per cent of all jobs in January. The wages share was 54.3 per cent in the September quarter. This is no mere coincidence.
The pay gap between men and women that persists at each rung of the income ladder has underwritten the boom. It has helped business collect a further bonus to go with the one it was presented, but wasted, in the 1980s, when the reforms of the Hawke-Keating Labor government secured the first historic shift from wages to profits.
The good news story that voters are familiar with in this boom when compared with the '80s version is of real incomes rising and house prices doubling. Both elements are true, of course. But the material gains for workers conceal a more substantial win for business. The wages share is 1.5 points lower than it was nine years ago when John Howard came to power. This translates to a $12 billion shift in income from labour to capital on the Coalition's watch.
Yet this week the Government and the Reserve Bank warned workers not to spoil the party with inflationary pay claims as the economy approaches what Peter Costello describes as near "full employment". Irony does not even begin to describe the present situation. After two decades of belt-tightening, workers are being told they are just a breath away from destroying the economy. They could be forgiven for sneering.
Where women come into the equation has as much to do with social trends as the Keating-Howard economic reforms of the past two decades. Women have been leaving the kitchen in numbers too big to ignore since the '70s. But deregulation, and the more recent surge in house prices, have accelerated the process. Call it the fusing of feminism and economic rationalism. Women are cheaper to employ, more likely to work part-time and are less likely to join trade unions than men. They are the star recruits of the open economy.
The way to appreciate this is through a measure of employment that politicians don't like to mention - the share of the adult population with jobs. It is a better bullshit detector than either the number of jobs created or the unemployment rate in any month because it takes account of those people who have long since given up the search for work.
Australia has 500,000 fewer men and 1.1 million more women in jobs in real terms today than it did 25 years ago.
In January 1980, the last good year of the old economy, almost three out of every four men had work - 74.4 per cent. Last month, the male employment rate was 68.2 per cent, which represents 500,000 less jobs overall.
Women, by contrast, have seen their worker ranks surge from 40.8 per cent to 53.6 per cent over the same 25-year period, which translates to 1.1 million more positions. As it happens, neither of the last two recessions interrupted their progress. Nor has the family-friendly Howard Government, which is responsible for almost a third of the 1.1 million extra women with work.
Do the maths. The economy has swapped 1.6 million places in a generation. This doesn't mean women have taken the jobs of men. The blue-collar jobs have disappeared for good.
Here's how the feminisation of the workforce spells extra profits for business. The curse of the protected economy in the '70s and early '80s was the so-called "wages overhang", a male phenomenon. Gough Whitlam and then Malcolm Fraser allowed wages to take as much as two-thirds of GDP.
The history of Australia behind the tariff wall showed that every time the wages share crossed 62 per cent of GDP, recession would follow. The last recession of the old economy was in 1982-83, when Howard was treasurer in Fraser's government and metal workers were allowed to claim a 20 per cent pay rise that helped bankrupt the economy.
Enter the Hawke-Keating government. It used the accord to bring the wages share down from the 60s to the mid-50s. But this was only a temporary fix, a policy tool of necessity while trade unions still held some sway over the economy. Under the accord, workers accepted wage rises below the inflation rate in exchange for a higher social wage through tax cuts and increased government payments.
The deal stuck, despite the temptation of the late '80s boom. That a recession still occurred in 1991 is one of the cruellest jokes of the open economy. Workers had no role in the crash, but the men were rewarded for their restraint with the sack.
The wages share has remained in the mid-50s ever since. The Coalition did not seek the co-operation of workers to achieve this because it did not need to. Market forces - and sexism - were doing the job all by themselves.
The punchline now is the Howard Government is starting to sound like the Hawke-Keating regime did at the end of the '80s, urging workers to behave. But the problem today is the overkill of business, not the greed of workers. Business has captured most of the productivity gains of the past decade, through fatter profits and obscene executive salaries. In short, a "profits overhang".
Something has to give and in the coming months it will probably be the Government's election promise to keep interest rates low. In the longer run, though, business will need to rethink how it treats women.
The adaptable workers of the open economy embody the nation's mixed emotions. The feeling that families are stretched at a time of unprecedented prosperity can be sourced to this calculation: two incomes are required to fund the typical mortgage in each capital city in Australia.
Business is unlikely to redress the salary gap between women and men. In fact, the logic of deregulation cuts the other way. As the economy becomes more services-oriented, it will demand even more underpaid women, from lawyers to checkout staff. These women will eventually wake up to the rip-off. But they won't organise in trade unions as the men did behind the tariff wall.
Once children arrive, they will simply take their labour to those employers who give them a more family-friendly workplace. The real correction the economy has to have over the coming years is in working conditions, not wages
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