Chris Bowen can’t fix inequality without fixing immigration

By Leith van Onselen

Shadow Treasurer Chris Bowen delivered the Chifley Oration in Melbourne on Monday, whereby he argued that economic growth is too low, more than a million Australians are under-employed, and “far too many” workers are being underpaid:

Under the Liberals, the economy is not working for working people…

Too many Australians are being pushed to the margins, ignored by the Liberals in the suburbs, let down by the Nationals in the regions. Squeezed out of the middle class, cut-off from the fair go, denied the chance to fulfil their potential.

Not because they’ve been forgotten – but because they’ve been deliberately excluded. Not just left behind, locked-out.

…the employment situation in Australia is nowhere near as good as the incumbent government would have us believe. Australia’s unemployment rate was better than in comparable countries during the GFC and immediate aftermath.  Now, we are underperformers compared to similar countries such as the United States, United Kingdom and New Zealand.

But more concerning than the headline unemployment rate is the fact that it masks deep and persistent underemployment.  There are 1.1 million under-employed people in Australia and another 666,700 who are unemployed, meaning there are 1.8 million Australians who want more work.

Simply put, the economy isn’t delivering for ordinary people.

  • Growth is underperforming.
  • 1.1 million people are under-employed.
  • And far too many working Australians are underpaid.
The cost of living is rising but living standards themselves are stagnating…
Australians are reminded of this every time they get paid, with wages growth at record lows…

The government might actually be the last people in Australia to realise this.

Because in every single Hockey and Morrison budget, the wages growth forecasts have had to be downgraded.

And in this April’s Budget, we will inevitably see last year’s Budget wages growth forecast downgraded again, because yet again, wages aren’t growing as fast as they promised.

Wrong 5 years running.

And as Bill has said so many times, everything is going up except people’s wages.

However, while Chris Bowen has done a good job identifying the problem, he also went to great lengths defending Australia’s mass immigration ‘Big Australia’ policy:

We need to reflect on that for a minute. At a time of undeniably rising income inequality, of stagnant wages growth, at a time when the covenant of the post war settlement: that the fruits of increasing productivity are shared with the workers who help create it through wage rises, has been broken.  It hasn’t been the parties that stand for fairness and redistribution that have benefited, it has been the sirens of closing off: closing off trade, closing off immigration.

Parties that haven’t had clear plans to deal with the concerns of the community have been beaten by movements and individuals who offer no coherent policy solutions but at least pay lip service to real and genuine concerns in the community that not everyone is getting a fair go.

Chifley would not have approved.

After all, Chifley was the leader who insisted – in the face of opposition from his own Cabinet – that Australia be part of the international economic and trading system, joining the World Bank and the IMF.  The man who believed that post war immigration was so important to building a better country would not have had any truck with the populists, with the nativists…

He dreamed of universally affordable medicine, the PBS, a massive home building scheme and an immigration program previously unimaginable.

What Chris Bowen really has espoused is the recipe for a one-term government.

A slowing China necessarily means falling terms-of-trade for Australia. This means less national income to redistribute, and with it ongoing wage pressure.

In this climate, the last thing any incoming government should do is raise expectations for increased wages or living standards. This will only breed disappointment when wages fail to improve.

Successive governments have used mass immigration to disguise the post-China adjustment at the headline level. Massive people inflows supports aggregate demand while individual living standards decline.

Bowen’s vision is more of the same, only he plans to handle the inflows a little better than the Coalition via more investment in infrastructure, negative gearing reform to lower house prices, and industrial relations tightening to mitigate the wages fallout from the endless flood of cheap foreign labour.

But Bowen’s policy prescription won’t work.

Simplistically promising wage gains in the circumstance of declining national income is to repeat the same mistake that every government has made since 2011, raising expectations that it can’t meet. Especially so when, as we have seen for years, sustained high immigration crushes wages, no matter what industrial relations reform you propose. There simply won’t be any extra money to share. Add to that income scarcity shrinking wealth as house prices keep falling thanks to negative gearing reform.

Labor’s infrastructure agenda also won’t be nearly enough. For multiple reasons Australia’s system of government simply cannot build the new Canberra every year needed to offset current immigration flows, let alone catch up on the infrastructure deficit. A decade-plus of empirical evidence confirms this fact, as does Infrastructure Australia’s modelling for Sydney and Melbourne, which projects worsening crush-loading across roads, public transport, schools, hospitals and green space:

The reality is that mass immigration helps drive inequality via: 1) reducing the wages growth of workers; 2) raising their cost of living via housing; and 3) fattening the profits of the owners of capital (who benefit the most from mass immigration while ordinary residents bear the costs).

Lower immigration would result in stronger wages growth (other things equal), as there would be less competition for jobs and workers’ bargaining power would be increased.

Lower immigration would also mean less youth unemployment, as employers are incentivised to hire and train young workers and graduates rather than taking the easy route of importing a migrant.

Australia’s economic growth and job creation would also become more broad-based and less concentrated in inner Sydney and Melbourne. Lower population growth would take pressure off interest rates and the currency. Thus, the Australian dollar would fall more quickly than otherwise helping to cushion the post mining-boom adjustment as tradable sectors become more competitive more quickly. This would spread benefits much more widely than just the “citizenship export” sectors of education, as well as simply piling more unproductive consumers into Sydney and Melbourne (blowing the current account deficit and increasing debt).

Lower population growth would also lift productivity and income by decongesting cities and, over the long run, shares the depleting Australia’s fixed national endowment of resources over fewer people, also ensuring higher income per capita.

Specifically on wages, Chris Bowen would do well to read the book: The Wages Crisis in Australia, released late last year by a group of academics. Two chapters dealt specifically with the great Australian migrant wage rort (summary here), with the below paragraphs capturing the essence:

Scarcely a day goes by without another headline of wage theft involving temporary migrant workers…

Put simply, temporary demand for migrant workers often creates a permanent need for them in the labour market. Research shows that in industries where employers have turned to temporary migrants en masse, it erodes wages and conditions in these industries over time, making them less attractive to locals…

…It is the third point concerning underpayments and predatory business models that seems richest in implications. This point suggests, first and most obviously, added drag on wages growth in sectors where such underpayments and predatory business models have become embedded. If they become more widely practised, underpayments pull down average hourly wages. If a substantial number of firms in a specific labour market intensify strategies of labour cost minimisation by pushing wage rates below the legal floor, it can unleash a dynamic of competition around wage rates that foreshadows wage decline rather than wage growth for employees…

Increases in labour supply allow employers in sectors already oriented to flexible and low-wage employment, such as horticulture and food services, to sustain and extend strategies of labour cost minimisation… The arguments and evidence cited above suggest a spread of predatory business models within low-wage industries. They suggest an unfolding process of degradation in these labour markets…

That’s a key driver of Australia’s low wages growth right there: the systemic rorting of Australia’s visa system, which is undercutting local workers’ bargaining power, pay and conditions.

Think about it from an employer’s perspective: why would you grant a pay rise when you can easily replace a local worker with a migrant willing to work for less? You wouldn’t. Nor would you bother to train-up a local.

The problem of low wages growth won’t be solved until the avenue for cheap foreign labour is closed-off via restricting immigration – both temporary and permanent.

Chris Bowen and Labor needs to address the immigration elephant in the room.

Otherwise Labor will rule over further declines in living standards in the crush-loaded major cities even as they sells the electorate the opposite message and appears to favour everyone but Australians.

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Comments

  1. Chris Bowen is a part of the problem. he is a pack em in, pack em high man. Scum from the corrupt NSW Right.

    There are also some nice photos of ‘asianist’ Chris Bowen chumming up with CCP United Front figures floating around on the internet. He may well be even more dangerous in government than many expect.

    If nothing else however, I’ll take the Labor policy for temp workers. It is a start.

    • Of course, he’s the one responsible for opening the FIRB floodgates. Good for his mates’ house prices and donors seeking entry into the great money washing machine, terrible for local Gen Ys trying to start families.

      Crocodile tears, all this.

    • “He may well be even more dangerous in government than many expect.”
      While Bowen is a massive cvnt, it’s not only him, Tanya, Penny and ‘co will be just as terrible.
      While the current gov’t is just terrible on all accounts, I fear that changing to Labor will be way worse.

    • All part of our education slave trade:

      https://www.abc.net.au/news/2019-01-31/international-students-cheating/10753072

      “”There are some cities in particular countries where students prefer to go where you can pay a couple thousand dollars and get someone else to sit your test,” Mr Pratik said.

      Over the past year, news stories have referred to universities using international students as ‘cash cows’ and allowing them to continue in courses they could not complete.

      Council of International Students of Australia Public Relations Officer, Manfred Mletsin, said fraudulent agents were also lying to students about work and accommodation expectations.

      “We’ve seen news about how six people can live in one room,” Mr Mletsin said.

      “They come here with the expectation of a good payment but when they realise $10-$12 is what you usually get paid, they are required to work more hours to manage their own expenses.”

  2. Your graphic on this one is correct. Immigration is the elephant in the room.

    You can say “Australia can’t fix x without fixing immigration”.

    Where x can be overcrowded schools, hospital wait times, congested roads and trains, water shortages, declining academic standards or even our environment.

    Instead we pretend that high unmanaged immigration is not a problem and apply band-aid solutions to the symptoms, without ever fixing the cause.

    • Immigration is not the cause.

      30-40 years of right wing neoliberalism is the cause (including of high immigration).

      Immigration just makes the problems much more apparent and exacerbates the consequences. We would have the same issues without high immigration, just at a smaller scale or later time.

      Stopping immigration will not fix the problems. It might stop them impacting you, but it will not fix them.

      • The cause is treacherous politicians imposing their ruinous ideologies.
        Massive Third World immigration into Australia is one of those policies, indeed it is the root cause of much of Australia’s problems today.
        Lets reduce the immigration program to zero net overseas migration for a long period of time,say at least 5 years and see how it goes, life will eventually get better for the people, and that should be the purpose of an immigration program and the politicians.
        Ponzi economics driven by immigration flooding is plain dumb.Then there is the imposed social re engineering …

      • That comment really understates the role of open border ideology in this mess. Neoliberalism loves open borders sure, but so does the falsely optimistic open border ideology, and it was a willing participant of the neoliberal growth model.

      • The neoliberals can’t get very far without free movement of goods, capital, and labour. Take away their main weapons and you neutralise them.

      • “It might stop them impacting you, but it will not fix the”

        WTF does that mean?

        If there’s a small group not doing great in Australia it can be addressed. Fill us with 50m and we’re all fked.

      • That comment really understates the role of open border ideology in this mess.
        No it doesn’t. It would be difficult to understand that, since it’s largely a figment of the hysterial right’s imagination used for scare campaigning.
        Actual “no countries, one world, one humanity” types are uncommon, and about as common as rocking horse sh!t in positions of actual power. Their participation in the policies of the last few decades, if it could even be measured, would be insignificant.

        Off the top of my head, here are some problems we are facing not caused by immigration: reduction in public services, privatisation of public services, privatisation of public assets, inadequate welfare, demonization and stigmatisation of welfare recipients, flattening tax structures and decreasing taxation on the rich & wealthy, increasing wealth gaps, undermining of workers rights, shrinking (/dying) unions, divergence of productivity and wages, increasing costs of living, abandonment of full employment policies, wage stagnation and unemployment (immigration makes these worse, but does not cause them), deregulation, lax lending standards, lax building standards, increase in monopolies and oligopolies, increasing(ly blatant) corruption, undermining of democracy, increasingly polarised media, property bubble (in general), dramatic reduction of TAFEs and similar, restructuring of Universities into profit-driven organisations, land clearing, pollution, rural/farmland water mismanagement, the electricity/energy/gas debacle.

        And some problems that are in some part caused by high immigration: capital city property bubbles, capital city crowding, urban water shortages (and arguably only a subset of those – ie: Sydney and Melbourne).

        The point here is that while immigration makes most of the stuff in the first list worse (or happen sooner), that stuff would be happening even without it. Look to places like the US, where wages have been stagnant for forty years, or productivity and wages diverged in the ‘70s. That can’t be blamed on immigration. You could turn the immigration taps off tomorrow and all those problems would still exist. Heck, you could have turned them off a decade ago and they’d still exist. The Sydney/Melbourne bubbles might be a little smaller, but would still be absurd. The banking RC would still have had the same outcome. Wages might be a bit higher but would still be stagnating. Unemployment might be a bit lower but would still be significant. Etc, etc.

      • WTF does that mean?

        To use an obvious example, stopping immigration might help housing affordability if you live in a capital city, but it’s not going to help it in places where immigrants don’t settle – ie: most of the country. Same for unemployment.

      • Open border ideology is the underlying ideology, it sets the idea that any rate of population growth is fine. Of course it manifests itself politically within practical boundaries as a much higher rate of growth than is reasonable. Just like we don’t have pure neoliberalism, we don’t have pure open border ideology but they are significant influencers within the political discourse and policy. Notwithstanding that all these issues were being massively exacerbated by unreasonable growth, it was the underlying ideology that prevented the very simple process of the left winding back the extreme growth.

        We have had our suburbs and cities turned to concrete crap, our urban edges turned to overdeveloped despair while all the fauna and flora has been pushed to the brink. Blame neoliberals if you want but don’t understate population growth apologist’s complicity.

      • Open border ideology is the underlying ideology, it sets the idea that any rate of population growth is fine.

        Not really. Those two things are only tangentially related.

        “Open border” ideology is the idea that everyone should be able to move freely between countries (or “countries” at that point, really, since the underlying implication is that nation-states – and hence borders – don’t need to/shouldn’t exist), no different than driving from one suburb to another. Note that this implies people LEAVING as well as arriving.

        A very small number of particularly libertarian (in the philosophical rather than political sense of the word) people think that borders are entirely arbitrary constraints imposed by an oppressive State (this is why it’s always funny to see people calling themselves “libertarians” arguing against immigration – but the beliefs of libertarians are pretty much always convenient to whatever they’re trying to achieve at a given moment). Regardless of whether they subsequently come at this from the right-ish (the Ubermensch should be free to achieve their maximum potential regardless of where they were born and damn the consequences) or left-ish (we are all one big happy family and should help each other regardless of where we were born and damn the consequences), they are well and truly on the fringe. Though you are going to find a lot more people on the right-ish side of the fence supporting the growth mantra because that aligns with their beliefs around markets and self-regulating systems.

        Notwithstanding that all these issues were being massively exacerbated by unreasonable growth, it was the underlying ideology that prevented the very simple process of the left winding back the extreme growth.

        “The left” haven’t been anywhere near power for decades, so they weren’t going to “wind back” anything.

        Blame neoliberals if you want but don’t understate population growth apologist’s complicity.

        Neoliberals have been running the western world for decades. High immigration is a right-wing, neolibral, market-based, supply-sider policy intended to drive down the cost of labor through good old Economics 101 competition. As is the ‘infinite growth forever and always’ philosophy (it most certainly isn’t a lefty idea).

    • Some good policies but a bit player to the two big parties. Also the general population will be more concerned about who will promise save them as their major asset declines in value (a promise from a politician is worthless).

  3. Here are some words that couldn’t be found in that speech. Environment, biodiversity, extinction, plastic, pollution – as usual the economic growth is a magical thing that can just perpetuate for ever with no downside, it need never be checked, or moderated or investigated.

    The economy, soon to be the only thing (apart from people) growing anywhere.

  4. Labor are just as useless and destructive as the LNP. They are both thoroughly infested with neoliberal economic thinking. They have no idea how to increase the ‘competitiveness’ of the economy and continually spew stupidity. Being ‘competitive’ is a fundamental perquisite to the generation of industrial capacity, jobs and balancing trade. We still have a window to change the trajectory of the economy but the two major parties are a profound liability. When the FIRE sector collapses there won’t be much left.

  5. The treacherous Labor Party will never make any significant cuts to the immigration intake because the immigration program (Immigration Program,Humanitarian Program and Temporary Entrant program) is overwhelmingly a Third World program, indeed an Asianisation program.
    This imposed Asianisation ideology is the major unspoken ideology of the Greens, Labor parties and is the key ingredient for the neo liberals that infest mainly the Liberal Party,
    That is why the main Parties won’t make the urgently needed, massive cuts to the long running massive Third World immigration program – a perfect storm.

  6. Don’t you get it? Labour wants poor immigrants that vote for labour…and more poor Australians that keep voting labour…

  7. Chris Bowen can’t fix inequality without fixing immigration?

    Yes he can. If he puts his fingers in his ears the problem’s gone.

  8. One term of Labor and Australia’s politics implodes.

    People are putting so much faith in these idiots.