Labor or Liberal - which side is best at job creation?

Thu, 19 Mar 2015  |  

It is almost beyond argument that the best thing a government can do with its economic policy agenda is to create jobs in a sustainable manner. The reasons are obvious.

Both sides of Australia's political scene reckon they are the best at it, so I looked at the facts over the last 40 years or so (roughly 19 years of Labor and 20 years of the Coalition in office) to see who is right.

Rather than look at raw employment numbers which would bias the results against the Coalition, I thought it best to examine average monthly employment growth. The reason for this is simple - a 10,000 increase in employment today is much less impressive than creating 10,000 jobs in the 1970s when the population and labour force were roughly half the size of today. In other words, 5,000 jobs in the Fraser years is roughly the same at 10,000 jobs today, simply because the economy and the labour market are bigger now.

Here are the results:

Recall, this is the average monthly per cent increase in employment for each government:

Abbott             0.09%
Rudd/Gillard     0.12%
Howard            0.17%
Hawke/Keating 0.18%
Fraser*            0.08%

*Monthly employment data are not available prior to February 1978. I have used the 3-monthly data prior to that and interpolated the results.

Of course immigration levels, the business cycle, wages and a bunch of other issues can influence these results but that is probably best left for someones PhD thesis to explore. Suffice to say, Labor governments seem to be pretty good at delivering increases in employment over a long time-frame.

Of course, I averaged the data for Labor (Hawke, Keating, Rudd, Gillard) as a whole, and did the same for the Coalition as a whole (Fraser, Howard, Abbott).

The results for average monthly employment increases were:

Labor             0.16%
Coalition         0.13%

To three decimal places, average monthly job creation under Labor governments was 0.034 per cent higher than under Coalition governments, month in, month out over several decades.

And it you think 0.034 per cent is small beer, in today's labour market terms, that is a difference of 4,000 jobs – and remember this is for each month which means, quite clearly, around 50,000 jobs a year on average.

All of which means that the long run benchmark for monthly job creation is 0.15 per cent growth, which given the size of today's labour force is around 17,500 jobs. Have this in the back of your mind when you see each monthly employment result.

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