Saturday, 15 July 2017

More Working, Less Paid

Low unemployment with low/no wage gains is confusing, and happening right now in the U.S., and Australia.

The unemployment rate does not paint a full picture of the labour market. Low participation rates imply that workers on the sidelines can be brought in to fill gaps without the enticement of better conditions.

Japan indicates that this may persist for some time. It has had lower unemployment and meager wage gains for longer.
Data Unemployment Wage Increase Inflation
Australia 5.5% (May ‘17) 1.9% (Year to Mar ‘17) 2.1% (Jan-Mar ‘17)
Japan 3.1% (May ‘17) 0.7% (Year to May ‘17) 0.4% (May ‘17)
U.S.A. 4.4% (Jun ‘17) 2.95% (Year to May ‘17) 1.9% (May ‘17)

However, Japanese workers are only now beginning to change jobs, raising wages slightly. Apart from traditions of seniority-based-pay, jobs-for-life, and a culture of guilt surrounding letting the 'team' down by leaving, there are very large differences between the wages and conditions of permanent employees and temporary staff. The premium employers place on familiarity with often byzantine bureaucracies mean that newcomers - despite transferable skills - lose the sunk costs of a tortuous recruitment and start from the bottom. A new vine must truly be sturdy for a candidate to let go of their old one.

Worker mobility seems to be a missed factor in US/Australia analyses, or otherwise mixed in with job insecurity. I think it - and by this proxy, the psychology behind job-hopping - deserves greater attention.

Simply asking for a raise - as RBA Governor Lowe hopes for - is unlikely. Following expert advice on 'how to ask for a raise' (as I have a number of times) will likely get knocked back, the conversation often ending with, 'the firm cannot afford it'. This potentially introduces a lingering malaise over the rest of your tenure. You will have called your hand in revealing your willingness to jump ship. In my experience, you need a competitive offer to signal - in behavioural terms: 'anchor' - your market worth and to fall back on should you fail.

Key to mobility is the quality of alternatives. Few would pull the trigger on a bluff to quit a permanent white-collar role if it meant a future bouncing from one arubeito (アルバイト) position to the next, even though a surplus of low-paid casual vacancies is enough to depress aggregate unemployment figures.*

Low unemployment and stagnant wages can be explained at the micro, not macro, level. The U.S. and Australia do not have the barriers to job mobility that Japan does, but unemployment may need to drop further before workers feel secure enough to walk into a better job if they do not get the raise they ask for.

*Though that alternative may be more attractive if it rebalances time away from work, towards video games.

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