Random Analytics: Abbott’s Promise

by Shane Granger

On the 25th October I posted a blog titled “Romney’s Promise” which detailed some of the history and issues around one of the Republicans key election objectives, that is in their first term they would create 4-million new jobs for Americans.

I was a bit surprised to hear that in the past day Tony Abbott, the Australian Liberal leader made an announcement which stated:

The next Coalition Government will create one million jobs in five years and two million jobs in 10 years,” he said. “This pledge is achievable given our record and policies.

Now I’m all for job creation and the sentiment behind this statement is a positive projection from the leader of opposition but there are a number of issues here, no matter who forms the next Australian government.

Figure 1: Australian Employment gains & losses by month. Data sourced from the Australian Bureau of Statistics.

The first point I would like to make is the outstanding jobs creation journey that Australia has been on since the ABS commenced capturing the data and making it accessible to the public. Of the 416 available months of data only 51 months (12.26%) has reflected an overall employment loss, month-on-month. In fact if you look at Figure 1 you will see that since January 1993 we have actually only had 11-months of negative employment (or just 4.62%).

For Tony Abbott to realise his goal of creating 1,000,000 new jobs in just five years he would first need to serve two back-to-back terms. He would then need to create more than 16,700-jobs per month. If he wanted to do this in one complete term he would need to serve the maximum time (three years and 140-days) which would equate to a job creation program of 25,000 persons in any form of employment per month consecutively over 40-months.

Continuing to look at the data contained in Figure 1 this would be a historic feat. In the past 35-years (or to be exact 416-months) the Australian economy has only ever put on more than 25,000-jobs in a month 82-times (19.71%) and only lost more than 25,000-jobs on 4-occassions (0.96%). The last time we were negative by that amount was March 1991! The longest consecutive gain of more than 25,000-jobs per month were in Sep 1988 – Jul 1989 (11-months and 328,000 jobs) while the most recent was May to Nov 2010 (7-months and 235,000 jobs).

But Tony Abbott didn’t state he wanted to create 1-million jobs in just five years, he actually wants to create 2-million jobs over ten years. So who is he creating these jobs for?

Figure 2: Australian Unemployment 1978 – 2012. Data sourced from the Australian Bureau of Statistics.

Well, it’s not for the unemployed. As shown in Figure 2, we currently only have 652,700 people looking for some form of work at the moment. At the height of the mining boom in March 2008 there were just 465,800 people looking for work and at our worst point in September 1993 around 946,900 of us were looking for a job.

Even if a new Coalition government could employ every currently unemployed person in this country he would still need to fill the 1.35-million new jobs that he wants to create.

Where would he find these numbers?

The answer lies in the Australian working population figures.

Figure 3: Australia’s working population (15 – 67 years of age). Data sourced from the Australian Bureau of Statistics.

In the past 40-years Australia’s working population has increased from 8.48-million to 15.64-million. Traditionalists would only include the 15-65 year age cohort but since our superannuation system is moving officially to the 67-year figure by 2018 I’ve included the extra 396,082 estimated people of that age in my count.

The Rudd/Gillard governments were elected from September 2007 and during their tenure they have added 870,400 jobs to the economy. What they will not say is that over the past 40-years the Australian economy has required, on average, an extra 179,000 new jobs created to employ all of the new entrants into the workforce. So, for the Rudd/Gillard governments to have actually increased the amount of working people in Australia, they would have needed to actually create 895,000 new jobs plus one.

So for Tony Abbot to meet his figure and create new jobs he would need to add 16,667 new roles to meet his promise while also adding 14,916 to keep up with the average amount of new entrants into the workforce.

But Tony didn’t say ‘new’ jobs did he. He said ‘jobs’.

Given that he would first need to find 1,790,000 jobs for new entrants during his first 10-years in power he is only left having to then create 210,000 ‘new’ jobs to decrease the numbers of either unemployed (currently at 652,700) or non-participatory segments of the community. With an Australian participation rate of just 65.1% this would be a potential 7.8-million people you could look to assist back to employment. For those of you who work in this difficult policy area, a much easier thing to say than to accomplish.

In reality the creation of 1-million “new” jobs over the next two parliaments would be almost an impossible figure to achieve. Looking at the history this target has just never been achieved and as the Rudd/Gillard figures demonstrate creating 870,400-jobs during the Global Financial Crisis, although an excellent result compared to other countries such as Greece, did not even keep up with the demand from new entrants let alone increase the overall capacity of all Australians to be employed. Looking at what both sides of politics say about job creation just shows that by being a little bit tricky in language you can say almost anything about job creation because the subject is complex.

Robert McNamara summed it up much better than I when he wrote in One Hundred Countries, Two Billion People (1974) “A treadmill economy tends to emerge, in which the total national effort will exhaust itself by running faster and faster merely to stand still”.

Update 1 (5/12/2012): Greg Jericho (aka @grogsgamut) added a very detailed piece of analysis titled “A million new jobs ain’t what it used to be” via his weekly ABC The Drum blog. It’s good work and definitely worth taking a look at.