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Author's Name: Lisa Magnani
Date: Tue 04 May 2021

Lisa Magnani

Professor Lisa Magnani

Elisabetta (Lisa) is Professor of Economics at Macquarie University, Sydney. Her education includes a Doctorate in Political Economy from the University of Bologna (1993) and a PhD in Economics from Yale University (1996). Her academic work has focused on understanding how capitalist economies create and retain jobs, support wages, promote good working conditions and pursue technological innovation in globalised settings. Over the years, she has developed an interdisciplinary research agenda centred on the exploration of the ways work conditions and labour market institutions impact societal resilience and ecological sustainability. Her current and past service roles include Head of the Department of Economics at Macquarie University, Macquarie University Business School Gender, Equity and Inclusion Committee, Vice-President (Academic) of the Economic Society of Australia-NSW Branch, Member of the Academic Reference Panel for Treasury's Participation Modelling Project, Australian Federal Government.


Responses (4)


Promoting vaccination uptake in Australia

Poll 49

"What measures should Australian governments adopt to promote demand for vaccination once supply is no longer a constraint?"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

National advertising campaigns;Vaccine passports for higher-risk settings (eg. flights, restaurants, major events)

Despite having historically experienced very high vaccination rates, Australia is now facing a significant and growing anti-vax movement. These events, combined with the rapid spread of highly infectious variants of the virus threaten Australia's response to the COVID-19 pandemic. In addressing the need for a high vaccination rate, public health policies aim to strike a balance between individual rights and community needs. In some cases, achieving a high vaccination rate may need to rely on existing laws, which many States and Territories already have in place--for example, South Australia?s Work Health and Safety Act. These laws require staff in specific workplaces to be vaccinated against diseases like influenza, hepatitis A and B, and now COVID-19. More generally, addressing obstacles to achieving high vaccination rates requires an understanding and respect for various social and cultural perspectives on vaccination. The growth of the anti-vax movement in Australia has been explained by a variety of factors, including misinformation spread by social media as well as some TV stations and newspapers. In this sense, the growth of vaccination hesitancy and resistance forces an evaluation of the services provided by public/private information and media systems. The situation also highlights the need to regulate social media platforms and the media?s ability to spread misinformation. Importantly, misinformation breeds vaccination hesitancy and resistance. For some individuals and communities, suspicion and apprehension with respect to the COVID-19 vaccination may be best understood in a social and historical context of inequality and mistrust with respect to political leadership. Addressing these issues require more than paying people to get vaccinated. Rather it starts from a recognition of the problem and from reflection on how we got here and how to restore social cohesion by addressing the key sources of the problem. Vaccine hesitancy and resistance do not happen in a vacuum. We know from past campaigns encouraging vaccination for children, that vaccination hesitancy tends to cluster in regions. Furthermore, low vaccination rates are also associated with low confidence in the efficacy of the vaccine or its risk. Vaccine confidence is often a degree in a spectrum ranging from absolute to nil. A recent study by Edwards et al. (2021) based on a large nationally representative survey of Australians? vaccination intentions indicates that 13% of the Australian population may experience or be about to experience high levels of hesitancy or resistance to vaccination. Individuals who live in disadvantaged areas, those who tend to have more populist views or have higher levels of religiosity or lower levels of household income, and those individuals who display less confidence in their state or territory government, are less likely to get vaccinated. As pointed out in the study by Edwards et al., a targeted public health campaign directed to address these groups? beliefs and concerns is required. These groups need to receive the information they need, so to be reassured and confident of their decision to vaccinate. Any public communication campaign should emphasize that delaying vaccination is a threat to both individuals? and public health, and it may lead to extended lockdown, which threatens livelihoods. What we need to avoid is a public conversation that becomes aggressive and labels individuals and groups in false binary categories (e.g., responsible/irresponsible, pro/anti-social). In this context, measures aimed to increase the personal (monetary) advantage of vaccination decisions are unlikely to be effective. We already know about the limited effectiveness of monetary incentives from domestic and international research. In fact, I believe that given the broader challenges that the COVID-19 pandemic has unveiled, monetary incentives including lotteries, could be harmful. In displaying a lack of ability/willingness to properly address individuals? and communities? concerns, monetary incentives could validate mistrust with respect to collective institutions. Ultimately, crises don?t happen in a vacuum. The crisis triggered by this pandemic is an opportunity to start addressing the challenges that Australia is facing, primarily inequality, mistrust in our political system and erosion of the quality of our social fabric.


Policies to deliver higher wage growth

Poll 48

Our panellists were asked

"Higher wages growth is now a top priority of the RBA in its efforts to sustain stronger economic growth. Please identify the three of these government policies you think would best help deliver higher wages growth".  

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

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Reforming industrial relations to increase the use of enterprise bargaining;Reforming industrial rel

Wages support consumption, the largest component of aggregate demand. Consequently wage stagnation endangers one key economic channel for economic stability. Wage stagnation can also contribute to rising income inequality in Australia. Understandably, the RBA has recently emphasized the need to multiply efforts to support higher wage growth. We know that market factors have been the primary drivers of income inequality in Australia over the past few decades. Policy factors have the largest impact in reducing this inequality, especially for lower income earners (Li et al., 2021, Review of Income and Wealth, 67(1), 196-221). Labour supply measures such as those involving restraints on migration are not appropriate to support wage growth. As pointed out by numerous economists in Australia and overseas, migration operates at two levels, namely labour supply and aggregate demand. These two channels have divergent effects on the potential for wage growth, one negative and one positive. Economists tend to agree that in the aggregate the net effect of migration on a recipient economy is positive. Temporary migration, for example by international students, may affect the wage growth for specific groups, for example young people, females or senior labour market participants. However, these effects are likely to be small, as recently argued by Brell and Dustmann (2019). Furthermore, international students contribute to funding the university system, which is central to Australia?s research and innovation strategy. Given the labour market effects of temporary migration are likely to be small and limited to some groups, and recognising the importance of this type of migration for aggregate demand and for specific sectors such as tertiary education, the overall effect of temporary migration is large and positive. Wage growth measures that rely on restraining growth in labour supply by holding back growth in female and older worker participation would contradict the large and beneficial economic effects of female employment that have been experienced in the OECD. These measures would also run the risk of engendering discrimination in our labour markets and betray our commitments to workplace inclusion and diversity. The identification of the right set of policies to support wage growth requires an understanding of which wages are stagnant and which wages are growing (Coelli and Borland, 2015). The last few decades have seen the decline of wages received by the bottom deciles of the wage distribution and the rapid growth of the top deciles, relative to the median. Many labour economists have stressed the role of market factors including changes in the structure of trade and technology changes to explain these long term dynamics. Many advanced economies have experienced lower wage growth in the period since the global financial crisis (GFC) than in the years beforehand (Australian Government, the Treasury, 2017). Underemployment is a key feature of the Australian labour market and has been increasing since the GFC (Treasury, 2017). Support to wage growth also needs to identify the sectors and firms that pay low and stagnant wages and the reasons why this is the case. For example, labour productivity and Total Factor Productivity growth, the main drivers of labour demand, vary significantly across sectors (Productivity Commission 2019). Micro and small enterprises often address the challenges of market competition in way quite different to medium-size enterprises or large corporations. The Bank of England has recently suggested that trends towards self-employment and the prevalence of micro and small enterprises may affect wage growth. This includes employment in the growing gig economy. These considerations invite us to think of what targeted policy measures would be best to support wage growth. If government spending, tax cuts or business investment boost wages to highly skilled workers whose wages are already growing, policies targeting business investment would only affect wage growth in the aggregate, failing to boost wage growth prospects for those workers whose wages are stagnant. Policies designed to boost productivity growth might be effective only if there is a demand for what these workplaces produce. If there is a reasonable expectation that the market demand for such products is shrinking, there is little point to boost productivity growth in these sectors. Rather, this situation suggests the need to help workers? transition to sectors where their wages can grow, conditional on their finding employment in these sectors. Industrial relations reforms to boost workers? bargaining power can have the desired outcomes--e.g., by supporting trade union operations or the actions of state and federal industrial relations commissions. These measures can target the wages of specific groups of workers--e.g., unskilled workers, workers in declining industries, workers with low bargaining power, and those in industries with prevalent casual and underemployed workers.


Transition to electric cars

Poll 47

This month, our panellists were asked whether Australia should take action to speed the transition to electric cars.

"As part of efforts to reduce carbon emissions, Australian governments should take action to accelerate the take up, or take no action to accelerate the take up of electric cars"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

9

In Australia, transport is one of the largest sources of greenhouse gas emissions. Australia must formulate a plan to reduce cars? contribution to emissions if it is serious about meeting its commitments to the Paris agreement. In this sense, taking action to accelerate the take up of electric vehicles (EV) is a no-brainer. In 2019, only 0.6% of new sales were EV, but 56% of surveyed consumers would want to purchase an EV as their next car (Electric Vehicle Council, 2020). Given the presently large price gap between EVs and traditional cars, it is reasonable to expect that a subsidy to all-electric cars will lead to a higher take up of EVs. This will produce a sizeable change in cars? direct greenhouse emissions. To the extent that a subsidy to all EVs benefits households who possibly would purchase an EV without the subsidy, a subsidy to all all-electric cars would be ?regressive? (NBER Working paper 25771, Feb 2021). A subsidy to all non-luxury all-electric cars would avoid this problem and make the subsidy more cost-effective and less regressive. By including alternative subsidy design, for example a plan for the provision and location of charging points in both public and private places, Australia can prepare for the hopefully rapid take up of greener forms of private transportation. The real issue here is whether isolated policies, such as subsidies, can tackle the challenge of greenhouse gas emission reductions to meet international obligations. The answer to this question is not straightforward. EVs are not zero emission vehicles and their indirect contributions to greenhouse emissions depend heavily on how/where we build these EVs as well as how we fuel them. Firstly, the production of EVs requires highly polluting mining and refining activities to produce the rare metals needed for EVs? batteries and magnets. Rare earth refining produces radiation waste. Whether these activities take place in Australia or overseas, is not a minor issue. However, the fact that EVs? production indirectly contributes to a global public bad, namely greenhouse emissions, remains. Secondly, if EVs continue to be powered with energy generated from burning fossil fuels, they still indirectly contribute to greenhouse gas emissions. Coal accounts for about 75 per cent of Australia?s electricity generation, followed by gas (16 per cent), hydro (5 per cent) and wind around (2 per cent) [Geoscience Australia]. That is why a subsidy to support the purchase of EVs should go hand in hand with real efforts to support the phasing out of fossil fuel energy, to support the production of renewable energy and to set deadlines for phasing out conventional cars on our roads. In the end, given that three quarters of our population live in cities and this percentage is projected to grow to over 90% by 2030, meeting international obligations requires us to formulate a green transformation strategy that includes strong support to urban public transportation.


The Federal Budget May 2021

Poll 46

"On May 11, the government delivered a budget designed, in the Treasurer's words, to 'secure Australia's economic recovery and build for the future'.  What grade would you give the budget given that objective, A, B, C, D, E, F?"

Photo credit Wes Mountain/The Conversation, CC BY-ND

 

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C

The government has abandoned the long-standing position of fiscal restraint and budget surplus. This is not surprising although it raises questions about the consistency between short-run and long-run effects of the 2021 Budget, and the vision underlying its long-run effects. The 2021 Budget shows the government's ability to listen to some social groups that have been hurt by the Covid-19 pandemic and by past policies. For example, measures go towards addressing the neglect in many past Budgets of social issues disproportionally impacting women (from child-care and female retirement incomes to adequate housing opportunities for women caught in domestic violence). Another example of the government?s sensitivity to social issues is the Aged Care package of $17.7billion, which addresses many issues raised by the Royal Commission on Australia's aged-care system. There are clear misses though, for example, a strategy to address issues such as the large gender wage gap and the gender-bias in post-retirement financial security. There is also little to address the low wages paid to the many women who work in Aged Care facilities (the Workplace Gender Equality Agency's data indicates that 83.3% of the 'aged care residential services' workforce is female). Australia has demonstrated a remarkable resilience and many indicators have returned to March 2020 levels; e.g., payroll jobs in Australia in March 2021 indexed to payroll jobs in March 2020 (Source ABS), national unemployment rate at 5.6% (although underemployment is still at 7.9%), and employment to population ratios at almost pre-Covid levels. This resilience could have been a springboard for a Budget that supports short-term recovery while also providing a long-run fiscal plan that supports Australia's economic development. A fiscal plan that aligns short-term and long-term strategy is not only desirable, but also needed in some key respects; e.g., tax reforms, climate change and sustainability, and industrial transformation (including the role of universities). Starting from tax reforms, the Australian government?s projected debt reaches $1trillion in 2024-2025. In this respect, the Budget's generosity lacks long-run dimensions as it is unclear what future budget repair measures will entail, the distributional effects of these future budget repair measures, and what current measures will be sustained. The retainment of Stage 3 tax cuts for high income earners, which was designed in a pre-Covid-19 world, adds an important dimension to the source of future budget deficits. There is little in the 2021 Budget about clean energy and green recovery. While the 2021 Budget includes a few entries to support ?low-emission? technology development, it is hard to see the overall strategy as these are embedded in an inconsistent and complex set of measures, some of which ignore the whole idea of green recovery. As for research and innovation, the Budget leaves little hope for the university sector. Industry-support to PhD students will be important, but there is little indication of how universities and industry can work together in a systematic way to support the country's future. Overall, this Budget has a set of good short run measures but lacks a vision and consistent strategy to address long-run challenges.