Institute for Private Enterprise

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7 May 1999

Australian Financial Review


Low-paid jobs the answer

Buchanan and Watson (B&W) correctly argue (29 April) that the US labour market is not an appropriate model for Australia. We should have a lower unemployment rate and a higher employment rate than the US, which has a higher proportion with the lowest literacy and numeracy levels. We have no comparable minority groups to the over 60 million people of black or hispanic origin in the US and it is a remarkable tribute to the flexibility of the US labour market that it has done so well.

The combined effects of this flexibility and lower earnings capacity are major reasons why the US proportion of low paid jobs is much higher than in Australia and almost all other OECD countries. That fact and the lower earning capacity also help explain the higher proportion that appear to get "stuck" in such jobs in the US (although a US study shows higher mobility than the limited OECD study quoted by B&W).

But it is surely better to be employed than unemployed. If we increased our employment by raising the proportion of low paid to US levels that would add well over one million to our employment level. Does B&W's ideological opposition to deregulation mean that they would forego this opportunity that a deregulated market here would open up because they don't like low paid jobs?

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