Worker bargaining power must match employer power.

https://www.google.com.au/amp/s/www.washingtonpost.com/amphtml/news/wonk/wp/2018/01/26/why-cant-conservatives-just-admit-they-were-wrong-about-inflation/

Re: my (or rather the IMF's) previous work linking stubbornly low inflation in the developed world to weakening worker bargaining power (here and here). 

Unions were stronger in the 1970s, so the oil price shocks that happened then translated directly into higher wages and inflation.

Now, with less worker bargaining power, neither the oil shocks of 2008 or 2011, nor the massive monetary stimulus following the GFC, nor the current (subsequent) economic recovery and strong profit growth, has translated into strong inflation (despite the doomsday predictions of many conservative economists who perhaps were intellectually influenced by the 1970s a little too much).

Another way to look at it is that when worker bargaining power is too strong or too weak, it has made central banks' jobs harder - harder to keep price shocks from driving inflation too high in the 1970s and harder to allow positive recovery to drive wages and inflation now.

Worker bargaining power must MATCH employer power, not exceed it and not fall short. 

Education as the new engine of growth

Growth in Victorian education exports is picking up again after the downturn of the GFC, driven especially by Chinese and Indian students.

As the ‘education state’, there are plenty of existing and new international markets on which Victoria could focus.

Recently I wrote about a speech by RBA Assistant Governor (Economic) Luci Ellis regarding Australia’s search for a new ‘engine of growth’ following the demise of the mining and resources sector, and the similarly inherently temporary nature of the residential housing market boom, the increasing labour force participation rate, and the government transport infrastructure boom.

One such area Luci mentioned (even though her point was that there needn’t be just one engine of growth) was education exports. And there are numerous interesting insights that can be gleaned from the data as to the increasing number of international students purchasing Australian education services.

VICTORIA'S EDUCATION EXPORTS ARE GROWING

Victoria saw a rapid increase in international student enrolments and commencements leading up to the GFC, increasing more than 2.5-fold between 2002 and 2009. The Australian dollar dropped suddenly in the wake of the GFC, which should have cushioned our education exports, but the impact of the GFC on other countries was so great that international enrolments and commencements in Australia still dropped (particularly in Victoria, causing its national share to fall). And the subsequently strong Australian dollar would not have helped either.

But numbers have recovered in line with a falling Australian dollar, exceeding their pre-GFC levels by 2015. And note that the numbers for 2017 only go up to October, so the continuing upward trend should look even more impressive than it appears below.

International Student Enrolments and Commencements, Victoria, 2002-17
Source: Department of Education and Training, 2017
Note: 2017 only goes to the end of October

Australian Dollar vs US Dollar and Trade-Weighted Index, 2002-17
Source: Reserve Bank of Australia, 2017

CHINA AND INDIA FOR THE WIN

China by far provides the largest share of Victoria’s international student enrolments (almost one-third), followed by India, Malaysia and Vietnam. 

Top 20 International Student Enrolment Source Markets, Victoria, 2017
Source: Department of Education and Training, 2017

The graph below shows that this Chinese share has been increasing steadily since 2002, in line with China’s continued economic growth, but India’s share is yet to recover from the slump following the GFC.

Top 4 International Student Enrolment Sources, Victoria, 2002-17
Source: Department of Education and Training, 2017

WHERE DO THE OPPORTUNITIES LIE?

Compared to Australia though, Victoria has a significant advantage over the rest of Australia in terms of both Chinese and Indian students, with Victoria’s share being 5.0% and 2.6% greater than Australia respectively. In fact, Victoria used to have an advantage of almost 12% in terms of Indian students. Perhaps this is a market Victoria can recapture in the coming years, as well as maintaining its new advantage with Chinese students.

Other countries where Victoria has an advantage it may be able to maintain or improve include Malaysia, Sri Lanka and Vietnam.

However, these advantages may indicate these markets may only have limited unexploited potential remaining. Alternatively then, Victoria may wish to focus more so on countries where its share of international students is less than Australia as a whole. Brazil for example, has been deteriorating as a source market for Victoria since at least 2002, now 2.9% below Australia’s share. Nepal too has deteriorated in recent years to 2.0% below Australia, and Korea – despite recovering recently – is still 1.6% below Australia’s share.

Japan and the US recovered nicely from earlier shortfalls and are now less than 1% below Australia’s share. These countries may offer insight into how to attract students (back) to Victoria.

Most Significant Gaps in Victoria’s Share of International Student Enrolments vs. Australia, 2002-17
Source: Department of Education and Training, 2017

THE IMPLICATIONS ALSO EXTEND TO ACCOMMODATING THESE STUDENTS

This blog provides just a bit of background to the issue. A far more data-intensive analysis is required, that illustrates trends in student living arrangements across Melbourne, and the forces behind these trends. Students tend to demand a specific kind of housing compared to professionals, families or retirees. So to be able to identify growth in international student numbers, where they are coming from, and where they are living, will have significant implications for meeting housing needs throughout Melbourne and Victoria.

As the ‘education state’, Victoria has a reputation to uphold. And growth in this sector is something Victoria must properly identify and define if it is to capitalise upon it as it should.

Mining made WA more multicultural

The mining and resources boom drove migration to WA over the last decade, particularly to Perth and particularly those of South-East Asian and Sub-Saharan African ancestry.

The implications of this greater multiculturalism are significant in terms of both government planning and private sector opportunities.

Having grown up in WA, it’s perhaps not surprising that the topic of this blog is WA and its changing ethnic profile over the last 10 years.

THE BOOM OF THE CENTURY AND THE DATA TO MEET IT

Specifically, the last 10 years in WA saw the largest boom in Australia’s history in the mining and resources sector – upswing, peak, downswing and trough, all contained in this decade. This boom saw a significant level of interstate and international migration into WA. In fact, most of WA’s skills shortfalls during the boom were actually met by international migration, not interstate.

The boom peaked in 2012. It therefore was almost perfect that we now have access to three relevant Census databases – 2006, 2011 and 2016 – where we can assess the ethnic mix of the WA population before, during and after the boom. Did WA become more multicultural? How did trends compare to the rest of Australia?

Interested? Read on.

THE MIGRATION BOOM AND CRASH

As illustrated below, both interstate and international migration in WA peaked in 2012: net interstate migration of 10,800 in 2012 was greater than any other State or Territory. And net overseas migration peaked at 24% of Australia’s total, compared to WA’s 11% share of Australia’s total population.

So WA was taking in a disproportionately large amount of migrants during the boom.

And after the boom, we can see the opposite, with WA losing a net 10,820 interstate migrants in 2016, and accounting for just 7.1% of Australia’s net overseas migration.

WA Net Interstate Migration, 1997-2016

ABS, 2017

WA Net Overseas Migration, 2004-2015

ABS, 2017

WHERE WERE THESE PEOPLE FROM?

Using basic Census data, we can break down WA’s population into different ethnic groups over this decade, gaining insight into the composition of the above overseas migration numbers.

For the sake of our analysis, I have split WA’s population into two ethnic groups – traditional ancestry (North-West European and Oceanian) and non-traditional ancestry (Asian, African, Middle Eastern, Southern and Eastern European, and the Americas)[1].

Here were some of our key findings:

	2006	2011	2016
METROPOLITAN PERTH
Central Metro	25.8%	29.4%	32.5%
South East Metro	16.1%	21.2%	29.0%
North East Metro	17.1%	18.7%	22.3%
North West Metro	18.0%	20.1%	22.1%
South West Metro	16.2%	17.9%	20.7%
REGIONAL WA
Gascoyne	11.6%	12.0%	13.1%
Pilbara and Kimberley	8.8%	10.7%	12.6%
South West	9.3%	10.5%	11.4%
Goldfields-Esperance	8.5%	10.0%	11.1%
Peel	7.3%	8.8%	10.5%
Mid West	7.1%	8.3%	9.7%
Great Southern	7.5%	8.5%	9.5%
Wheatbelt	5.7%	6.7%	7.4%
Other	11.2%	12.1%	13.6%
Perth Metro	21.1%	23.9%	27.1%
Regional WA	8.1%	9.4%	10.6%
WA	17.7%	20.1%	23.0%

Share of Non-Traditional Ancestry, by Sub-Region, 2016

ABS, 2017

Within WA

From 2006-16, WA’s share of non-traditional ancestry increased from 17.7% to 23.0%.

Metropolitan Perth had a greater share of non-traditional ancestry than regional WA, and also appeared to absorb proportionally more of the growth. This is unsurprising to suggest that migrants are more likely to locate to capital cities than the regions.

The South East Metropolitan sub-region (Armadale, Gosnells and Serpentine-Jarrahdale LGAs) had the fastest growth in non-traditional ancestry, followed by the Central sub-region. The Central sub-region is unsurprising, given the proximity to employment opportunities, but the South East sub-region is more interesting – possibly driven by the affordability of housing, and the new urban growth corridors opening up within, while still being well connected to the CBD.

Sources of migration

Of this growth in non-traditional ancestry across WA, the strongest growth came from China and India – almost 50,000 new ‘arrivals’ each since 2006, accounting for almost a quarter of all those who identified as having non-traditional ancestry. And combined with the Philippines (26,196 new arrivals), Italy (20,918), South Africa (12,887) and Vietnam (9,880), this accounts for over half of all those who identified as having non-traditional ancestry in WA in 2016.

Compared to the rest of Australia

Ancestry Share of Population, WA vs. Rest of Australia, by Global Region, 2016

ABS, 2017

	WA Share of Non-Traditional			Rest of Australia Share of Non-Traditional			Gap vs. Rest of Australia
	2006	2011	2016	2006	2011	2016	2006	2011	2016
North-West European	50.1%	50.6%	49.7%	46.5%	48.3%	47.5%	3.6%	2.2%	2.2%
Oceanian	32.2%	29.3%	27.2%	33.2%	29.2%	27.1%	-1.1%	0.1%	0.1%
Southern and Eastern European	8.8%	8.4%	8.2%	9.7%	9.4%	9.2%	-0.9%	-1.1%	-1.0%
North-East Asian	2.7%	3.2%	3.9%	3.3%	3.9%	4.9%	-0.7%	-0.8%	-1.1%
Southern and Central Asian	1.6%	2.4%	3.7%	1.8%	2.8%	4.0%	-0.3%	-0.4%	-0.3%
South-East Asian	2.1%	2.8%	3.5%	2.1%	2.5%	3.1%	0.0%	0.2%	0.4%
Sub-Saharan African	1.2%	1.7%	1.9%	0.6%	0.7%	0.8%	0.6%	1.0%	1.1%
North African and Middle Eastern	0.7%	0.9%	1.1%	2.0%	2.2%	2.5%	-1.3%	-1.3%	-1.4%
Peoples of the Americas	0.8%	0.8%	0.9%	0.8%	0.9%	0.9%	0.0%	0.0%	-0.1%
Total	100%	100%	100%	100%	100%	100%
Traditional Ancestry	82.3%	79.9%	76.9%	79.7%	77.6%	74.6%	2.5%	2.3%	2.3%
Non-Traditional Ancestry	17.7%	20.1%	23.1%	20.3%	22.4%	25.4%	-2.5%	-2.3%	-2.3%

WA’s Shares of Non-Traditional Ancestry vs. Rest of Australia, by Global Region, 2006-2016

ABS, 2017

WA still has a bias towards traditional ancestry – in absolute terms and compared to the rest of Australia. Specifically, WA’s share of traditional ancestry was 2.3% higher than the rest of Australia in 2016. However, this did represent a decline from 2.5% in 2006 – a decline which had occurred entirely by 2011. This makes sense, given the mining and resources boom peaked in 2012, so further international migration into WA slowed (and even reversed) to 2016, thereby leaving the traditional/non-traditional ancestry gaps virtually unchanged.

Furthermore, the mining and resources boom arguably had the greatest positive impact on attracting South-East Asian and Sub-Saharan African ancestries to WA, and on retaining those of Oceanian ancestry relative to the rest of Australia[2]. Other non-traditional ancestries, while they did almost consistently grow in share in WA, also grew in share in the rest of Australia, just as much if not more. Southern and Central Asian for example, increased its share in WA by 2.1%, but by 2.2% in the rest of Australia, so is not solely attributable to the mining and resources boom.

How many speak English only?

The following graph also illustrates this point, using a simpler comparison over a longer time series. It shows how in WA and the rest of Australia, the proportion of people who only speak English at home has fallen. There remains a gap where WA is lagging the rest of Australia. In fact, the gap actually widened in the 10 years to 2006. But the course of the mining and resources boom reversed this trend in WA, reducing the gap below its 1996 level.

Share of Population that Speaks English Only, WA vs. Rest of Australia, 1996-2016

ABS, 2017

DID MINING DRIVE MULTICULTURALISM IN WA?

So WA did become a more multicultural society over the course of the mining and resources boom. But this growth in non-traditional ancestries seems to be a national phenomenon (even if WA did accelerate ahead in the last decade), with only certain ancestries (South-East Asian and Sub-Saharan African) being specifically attributable to the mining and resources boom. WA’s proximity to South-East Asia and Sub-Saharan Africa compared to the rest of Australia no doubt also played a role in the growth of these numbers.

Such revelations reinforce the importance of big data. Ideally, the Census would also occur far more frequently, to create a more insightful time series rather than just a snapshot in time once every five years. The implications can be truly significant – not just for public policy in terms of accommodating it with appropriate land use strategies and development, but also for the private sector in terms of capitalising on it. As WA (particularly Perth) becomes more and more like the cosmopolitan cities of Melbourne and Sydney, demands for different goods and services will also change, including food, fashion and festivals.

So the ability to use data to not just observe but also predict such trends represents a significant business opportunity for many players.

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[1] These classifications are not a value judgement, merely a categorisation of the most and least common ancestries in WA and Australia.

Note, these classifications are based on the global regions as a whole. So, for example, while I have classified Southern and Eastern European as non-traditional ancestry, individual countries within such as Italy, accounting for 3.9% of WA’s population, could be considered traditional. Similarly, I have classified Oceanian as traditional, but New Zealand within only accounts for 1.0% of WA’s ancestry.

Therefore, there is scope to reclassify some of these countries, but I do not believe the key findings will be greatly affected.

[2] Even though Oceanian ancestry shares declined in WA, they declined faster in the rest of Australia, suggesting that the mining and resources boom had an impact on retaining them somewhat in WA.