THE impact of the carbon tax on the mining industry will be “trivial” – so small that for practical purposes it will be “invisible,” according to one of Australia’s leading labour market economists.
“Something like 370,000 people every month go from not having a job to having a job, and something like 365,000 people every month do the opposite,” he said. “That’s the change every month. The Minerals Council has projected its change over a period of 10 years.
“The additional outflow would be five people for every 10,000 who would have left in the month anyway. I am happy to call that invisible. I was going to draw it for the report but I couldn’t – you can’t draw a graph because the effect is too tiny.
“What it says is the carbon price debate should have nothing to do with job-loss figures. The labour market issue should be seen to be irrelevant. It is not interesting, it is not something we should spend any further effort analysing.”
I don’t know about that – let’s start off by pointing out that the Australian National University itself only employs 3,639 full-time equivalent employees. On Chapman’s logic the consequence of shutting down the whole university would be trivial too.
This whole argument that the carbon price will have no labour market consequences is something its proponents have tried to avoid. The Treasury modelling on an ETS (but not the actual CPRS) avoided a labour market analysis on the grounds that it couldn’t actually be undertaken! Rather the modelling assumed full employment in the long run and allowed real wages to decline to ensure that occurred. The table below summarises the Treasury modelling of the CPRS impact on the economy relative to a business as usual case.
Real wages decline – quite a lot IMHO – relative to the business as usual outcome and that suggests substantial labour market turmoil and the model is being forced to equilibrate at a no-unemployment equilibrium. As readers know, it is a lot harder for economists to force the real world to comply with their modelling than for those economists to force their modelling to comply with their own pre-conceptions.