Compared to you and me, the feudal serfs had it easy

Back at work yet, or still enjoying your summer break? Either way, you probably wish you had more annual leave. I could tell you to count your blessings, that today’s full-time workers get much longer holidays than workers have ever had.

But maybe that isn't true. It’s certainly true that we get longer holidays and work fewer hours than workers did in the 19th century but, according to the sociologist Juliet Schor, the 19th century – not long after the end of the Industrial Revolution – was an aberration in the history of human labour.

Indeed, if we’re to believe Dr Lynn Parramore, senior research analyst at the Institute for New Economic Thinking, we’re working a lot harder than medieval peasants did. “Ploughing and harvesting were backbreaking toil,” she says, “but the peasant enjoyed anywhere from eight weeks to half the year off.”

The church, mindful of how to keep a population from rebelling, enforced frequent holy-days. Weddings, wakes and births might mean a week off, quaffing ale to celebrate, and when wandering jugglers or sporting events came to town, the peasant expected time off for entertainment, she says.

There was no work on Sundays, and when ploughing and harvesting seasons were over, peasants got time to rest, too. In fact, according to Schor, during periods of particularly high wages, such as 14th century England, peasants might put in no more than 150 days a year.

I’m not sure every scholar would agree with this assessment, and the 14th century was the tail end of England’s feudal system, which began after the French Norman Conquest of England in 1066.

So if you’re not sure you’d have been happier as a serf – good thinking.

Feudalism was the system of political and economic organisation that preceded England’s Agricultural Revolution and Industrial Revolution, before we got to a capitalist or market economy approximating what we have today.

According to the father of modern economics, Adam Smith, feudalism was a social and economic system defined by inherited social ranks, each of which possessed social and economic privileges and obligations. Wealth derived from agriculture, which was arranged not according to market forces but on the basis of customary labour service owed by serfs to landowning nobles.

The king owned all the country’s land, but leased much of it to nobles, often called barons. The barons ran the decentralised, feudal system. These “lords of the manor” were in complete control of their manor, meting out justice, minting their own money and setting their own taxes.

The barons divided some of their land between their knights. The knights, in turn, distributed some of their land to the serfs, also known as villeins or peasants.

That covers people’s privileges, now their obligations. In return for their land, the barons paid rent to the king and provided him with knights to fight his battles when required. In return for their land, the knights provided their baron with personal protection and military service to the king.

In return for their land, the serfs paid their master with maybe a third of the food they grew, as well as being compelled to work on his own land. They couldn’t leave the manor and needed their lord’s permission to marry. They were often charged a fee for use of any of the improvements on the manor – roads, bridges, mills and bakehouses. And sometimes they had to fight in the baron’s battles.

Serfs lived with their animals in one-room homes they built themselves with wattle-and-daub (woven twigs daubed with mud). Their clothes were self-made, mainly of wool and very scratchy. They grew rye, wheat and other grains, grazed sheep on the common, had a kitchen garden and a few apple and pear trees.

Most of what they ate they grew themselves: little meat, but lots of rye bread and a stew of peas, beans and onions, called pottage. Berries, nuts and honey were gathered from the woods.

The feudal system fell into decline for many reasons. One was that the military became full-time professionals. Another was the Black Death (bubonic plague) of 1348, which killed many of the serfs. Landowners desperate for workers to harvest their crops had to do the unthinkable: pay actual wages to anyone who’d work their land – and the wages were high. Thus did the lords lose their hold over the serfs.

But Professor Richard Grabowski, of Southern Illinois University, has advanced a more economic theory. Manorial agriculture wasn’t very efficient, even though productivity could have been improved by such measures as removing stones from fields, adding mineral fertilisers and making greater use of fodder crops.

But the system of forced labour precluded use of these techniques because they required more care and skill than the serfs had any incentive to apply when working in the lord’s fields rather than their own.

Creating this incentive would have required shifting to paid labour, but this would cost the lord the ability to order his serfs to help fight a rival lord trying to grab his land. The first lord to free his serfs would lose his land to the others.

So the lack of national enforcement of property rights was another barrier to greater productivity. As the feudal system gradually broke down, the basis for power shifted from how many serfs you controlled to how good you were at using your land to generate more income.

England’s long Agricultural Revolution involved moving to market relationships between land owners and labourers, and almost all rural production being sold in markets, as well as huge improvements in agricultural productivity, making the nation much more prosperous.

People may have worked more hours on more days in the year, but they were much better paid to do it.

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Does gift-giving make sense? Silly question

It’s the season of the year when the bylaws of the economists’ union require me to issue the stern admonition that the medieval practice of gift-giving should cease and desist forthwith. And the fact that I’m a bit late won’t stop me.

Perhaps more people - recipients of socks and handkerchiefs and other wondrous surprises - will be receptive to the profession’s utterly disinterested (look it up) advice and see the wisdom of my words.

Gift-giving is an irrational act, one where sentiment and emotion triumph over good sense. Since it’s hardly possible for the giftor better to know what the giftee would like to be given than the giftee themself, the success rate of the practice is abysmally low.

So low, in fact, as to justify economists using one of their worst pejoratives to brand the practice as involving a “deadweight loss” – one where the benefit to the giver and the benefit to the receiver are insufficient to justify the cost of the transaction, thereby creating a loss to the community.

(And please, please don’t ruin my Boxing Day by arguing that the commercialisation of Christmas at least creates jobs. The economists’ union’s Christmastide message is that any mug can create jobs, all you have to do is spend money – your own or someone else’s. The whole point of economics is to help the community spend money in ways that yield it greater benefit than other ways.)

But fear not. Go back to eating your leftovers in peace (and goodwill). I’m not actually a member of the economists’ union, but an adherent to a dissident sect known as behavioural economists (people who, too late in life, realised psychology made more sense than economics).

This bunch of heretics delights in pointing to the glaring weaknesses in the oversimplified model conventional economists carry in their heads.

But you need only to have gone to Sunday school to see the weakness in all the nonsense about the deadweight loss of Christmas. I think it was the little chap himself who said it was more blessed to give than receive.

And there is, in fact, plenty of what a deranged economist would call “giver’s surplus”. How do I know? Because psychological experiments have demonstrated it – many of them conducted by Professor Elizabeth Dunn, a psychologist at the University of British Columbia.

But just last week came new research by Ed O’Brien, of the University of Chicago Booth School of Business, and Samantha Kassirer, of Northwestern University Kellogg School of Management, showing that “the joy of giving lasts longer than the joy of getting”.

One of the great limitations of human nature is “hedonic adaptation”. The happiness we feel after a particular activity or event diminishes each time it’s repeated. It’s likely this phenomenon is “adaptive” – we’ve evolved to react that way because it increases our ability to survive and reproduce; it keeps us striving.

But the researchers find that giving to others may be an exception to the rule. In two studies they found that participants’ happiness did not decline, or declined more slowly, if they repeatedly bestowed gifts on others versus repeatedly receiving those same gifts themselves.

Separate research by Dr Vera te Velde, a lecturer in economics at the University of Queensland, has found evidence for the existence of “beliefs-based altruism” – concern about other people’s emotions and other psychological experiences, beyond any material measure of their wellbeing.

This means “we don’t give gifts only because we want people to have something that they want; we also give gifts because we want them to feel cared about, experience joy or a pleasant surprise when receiving it. Or to prevent them from feeling disappointed if we fail to give anything,” she says.

This kind of altruism can apply in many other situations. “When girl guides come to our doors to sell cookies, we buy them not only to support the group and because we like cookies, but also because we want the girls to feel successful and valued,” she says.

But how can we be sure that a pure concern for others’ feelings is the motivation for these behaviours, instead of – or maybe, as well as – concern about our own reputations? After all, I may not only want girl guides to feel good, I may also want to be known as someone who supports them.

To help answer this question Velde experimented with a sharing game. One person is asked to share $10 with another person. But the bank handling the transfer occasionally makes a mistake and transfers exactly $1 to the other person. So if that person receives $1, they don’t know if it’s a bank mistake or the first person’s selfishness.

Asked whether they thought the recipients would prefer to know about giver’s true intentions, many participants thought they would. Even so, when they played the game themselves, the participants were more likely to give either exactly $1 (thereby hiding their selfishness) or exactly $5 (thereby revealing themselves to be perfectly fair).

But get this: even the people who tried to hide their selfishness were demonstrating their concern about the emotions of the other person. Economics makes a lot more sense with a bit of psychology thrown in.

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There are delusions for young and old

There are things oldies tell young people that the youngsters should believe, and things they shouldn’t. One thing I wouldn’t believe is the confident predictions about the huge number of different jobs and careers they’re likely to have.

One thing I would believe is that eligibility for the age pension is likely to have risen to 70 by the time they get there, whatever Prime Minister Scott Morrison says about it being off the table.

I’ve lost count of the number of times I’ve heard adults – usually teachers - assuring school kids they’ll end up having 17 changes in employer across five different careers.

It sounds as if it’s the conclusion of some careful scientific study by experts. But as far as I can tell, if there is such a study it’s been lost in the annals of time.

Which is a pity because other experts need to go back to such a study and tell us just how careful and scientific the study was. Doesn’t sound it to me.

Rather, the line’s become an urban myth – widely repeated and accepted as true because it’s so often repeated.

Those who peer into the “future of work” are always telling us the rising generation needs to be endowed with “21st century skills” such creativity, team work and critical thinking. True.

And our youth could start by applying some critical thinking to the prediction of exactly how many jobs and careers they’ll be having in a working life that hasn’t even started. More critical thinking than the silly adults who keep repeating a finding of whose origin and authority they know nothing.

A key critical-thinking question is: how on earth would you know? How could anyone, no matter how expert, look 45 or 55 years into the future and count the number of jobs and careers young people will end up having, even on average?

We can’t forecast with any confidence what the next five years will hold, let alone the next 55. Any genuine expert would hedge any guess they made with a dozen caveats and qualifications. Anyone who can be as certain as 17 and five is more entertainer than expert.

Do you remember when Julia Gillard dispatched Kevin Rudd in 2010? She had a to-do list of problems inherited from Rudd – including his mining tax and emissions trading scheme - that needed to be dispatched forthwith in readiness for an election.

Malcolm Turnbull’s successor seems to have a similar to-do list. Actually, the plan to raise the age pension age to 70 is inherited from Tony Abbott. It’s one of the few cost-saving measures remaining from the many included, but since abandoned, in Abbott’s first budget in 2014 – a budget so politically disastrous it has blighted the Coalition government throughout its life.

The higher pension age proposal was implacably opposed by Labor and Senate crossbenchers alike. It was already a dead letter and it’s no surprise Morrison has dumped it.

You can believe that, should Morrison be elected, he’ll stick to his promise. But the eligibility age wasn’t to reach 70 until July 2035, and a lot could change between now and then. Say, 17 prime ministers and five changes of ruling party.

We’ve been raising the pension age since the early 1990s and we still are. This has raised little controversy. So it’s not hard to believe that, by the time today’s school students are approaching 70, the age pension age will have drifted up from 67 to 70.

In 1993, the Keating government decided to increase the pension age for women from 60 to 65, phased in over 20 years.

In 2009, the Rudd government decided to phase up the pension age for men and women from 65 to 67, starting six years later. At present we’re up to 65 and six months, and it will rise by six months every two years until it reaches 67 in 2023.

Abbott’s plan was to wait a further two years then, from July 2025, raise the age by six months every two years until it reached 70 by 2035.

A point to ponder is that it was Labor governments that are getting us up to 67, even though Labor has so righteously opposed adding a further three years. Maybe it’s OK if they do it.

There’s no age at which people must retire. The rationale for raising the age at which we become eligible for retirement assistance from the taxpayer is we’re living ever longer, healthier lives.

That’s a good thing. But it comes at a cost to the community – particularly to younger taxpayers – if we insist that those extra years of healthy life must be spent in longer years of retirement rather than work, thus raising the proportion of non-workers to workers.

As I’ve noted recently, one way we’ve used to slow the ageing of our population is high levels of younger immigrants – but this too carries costs many people don’t want to pay.

The notion that retirement beats working is the great delusion of middle age. If the ever-diminishing minority of workers doing hard physical labour fear their bodies won’t last the extra few years, that’s partly why we have the disability support pension. We should stop stigmatising it.

If it’s too hard for older workers to find jobs, that’s an attitudinal problem among employers we should be – and are – reducing.

If workers find their jobs so unpleasant they can’t wait to retire, that’s a communitywide problem of misguided employers we should be correcting directly, to the benefit of all wage slaves.

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The taxes we pay come back to us - now or later

As we roll on to the federal election, there’s a surprising number of economic problems we should be discussing, but probably won’t.

For the longer term, the most important problem is the likelihood we’re not doing enough to meet our Paris commitment to reduce greenhouse gas emissions - which is, in any case, inadequate.

Linked with this is the appalling mess we’ve made of privatising electricity. Despite (and partly because of) Tony Abbott’s wrong-headed abolition of the carbon tax, this has left us paying power prices far higher than they need to be.

Linked with soaring electricity prices are soaring gas prices, caused by the gas companies’ gross overestimate of the amount of gas available for export through the many liquefaction plants they built. Absurdly, it would now be cheaper for local users to import gas from the world market.

The most pressing problem we should be discussing is the causes of the four-year-long run of weak growth in wages, which is not just crimping living standards but is by far the greatest threat to the holiest of holies: Jobs and Growth.

Then there are such minor matters as the way the burden of our years of weak growth has fallen mainly on youth leaving education, the way the “gig economy” threatens to undermine decent working conditions, the appalling run of seemingly respectable firms accused of cheating their employees and the terrible hash federal and state governments have made of TAFE.

The misbehaviour of the banks is being following by growing evidence of the misbehaviour of for-profit providers of childcare, aged care and before long, no doubt, disability services. What makes these people think they can mistreat their government-supported clients with impunity?

But if few of these problems are likely to get much attention from our campaigning politicians, what will? They’ll be arguing about their tax cuts being better than the other crowd’s.

With the budget still in deficit and the public debt still rising a decade after the global financial crisis, you’d think a decade of tax cuts is the last thing we could afford, but let’s do it anyway.

Why the obsession with tax? Partly because a government behind in the polls is trying to buy some popularity, partly because the more we obsess about tax the more our attention is drawn away from problems the government can’t or won't fix, but also because a lot of powerful and highly paid men (and I do mean mainly men) will not rest until tax has been “reformed” in a way that means they pay less and others more.

These well-off men are convinced they’re asked to pay far too much. They convince themselves of this by focusing on income tax and seeing it as a “burden” we have to bear without anything coming back our way.

In truth, we pay plenty of other federal and state taxes, which usually fall more heavily on the poor than the rich. And the taxes we pay come back to us as government benefits in cash (pensions, the dole, family allowances) and kind - particularly healthcare (subsidised doctors and pharmaceuticals, free public hospitals, subsidised private insurance), subsidised aged care and childcare, plus pre-school, school, technical and university education.

Every six years the Australia Bureau of Statistics conducts a “fiscal incidence study” in which it allocates the federal and state taxes we pay between the nation’s 8 million households, then allocates federal and state government spending to those households. (Some taxes, such as company tax, it can’t attribute to particular households. Nor some classes of government spending, such as on defence and law and order. But these omissions should roughly cancel out.)

The bureau published its study for 2015-16 last month. It found that, on average, households received $76 a week more in government benefits than they paid in taxes.

Break the households up by life stage, however, and you get a very different picture. For our 1.3 million single-person households aged under 65, the taxes paid by those under 35 exceeded benefits received by $171 a week. For those aged 35 to 54, this increased to $204 a week.

Why? Because most of them had jobs and were in good health, but none had children, meaning they got no family payments nor government spending on school education.

Our 1.4 million couple-only households aged under 65 are the big net contributors. For those under 35, their taxes exceeded their benefits by $480 a week. For those 35 to 54, it rose to $618 a week.

Our 2.5 million couples with dependent children paid a lot of tax, but also got back a lot of benefits, particularly family allowance, a lot of education spending and a fair bit of healthcare. All told, they paid just $42 a week more than they got back.

Skipping half a million single-parent households with dependent children (big net gainers) and a further half million couple households with non-dependent children (modest net payers), we come to the 1.8 million single or couple households aged 65 and over.

The couples got back $452 a week more in benefits than they paid in tax. That’s because they pay little tax, get a lot in pensions and get huge spending on health and aged care. Single retirees get back a net $576 a week, thanks to even greater spending on health and aged care.

So, younger working singles and childless couples are big net payers, couples with children roughly break even, and oldies really clean up. Just as well we all get old.

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A bigger, better public sector will secure our future

There are important lessons to be learnt from the latest news about where our strong growth in employment is coming from. But if we listen to the nostrums of the Smaller Government brigade, we'll get them exactly wrong.

The (trend) figures we got from the Australian Bureau of Statistics last week showed employment growth of 370,000 – or 3.1 per cent – over the year to November. More than 80 per cent of the new jobs were full-time.

Great news.

But my esteemed colleague Peter Martin delved deeper and came upon a bigger story: the strong growth in employment has not been spread evenly across the economy, but is heavily concentrated in just two industries: "healthcare and social assistance" and construction.

It's also concentrated disproportionately in Victoria and NSW, and among women workers.

Why? Because, though employment in health and aged care has been growing strongly for years, the latest bout can be attributed mainly to the delayed rollout of the national disability insurance scheme initiated by Julia Gillard. Most of these extra workers would be female.

And because the strong growth in construction employment can be attributed mainly to a boom in infrastructure spending by the Victorian and NSW governments, much of it induced by Joe Hockey's incentive payment to state governments which engaged in "asset recycling" by using the proceeds from privatisation to build new infrastructure.

Oh no! You mean the growth in employment isn't the real deal? It's just some kind of temporary budget stimulus? It's not coming from the productive private sector, just from the unproductive, parasitical public sector, which wouldn't exist without the private sector's blood to suck upon?

Remember what I said last week about neoliberalism being ideology masquerading as economics? That last paragraph was a classic case.

It's true that, in some sense, the disability scheme and state infrastructure projects are instances of fiscal (budget) stimulus. But the notion that government deficit spending "crowds out" private sector spending is true only when the economy is booming and already at full employment – which we clearly aren't at present.

Just imagine how much weaker the economy would be now if government spending hadn't caused full-time employment to grow by up to 300,000 jobs over the past year.

The news that so much of the past year's employment growth has come from public deficit spending is actually vindication of the Reserve Bank's longstanding call for monetary policy (interest-rate) stimulus to be backed up by fiscal stimulus.

Note, too, that while even all full-time construction jobs are temporary in the sense that all projects end, employment associated with the disability scheme will continue indefinitely.

And, since governments tend to outsource both their construction projects and their disability care packages, most of the new jobs would actually be classed as in the private sector.

Of course, the notion that the private sector is productive but the public sector isn't is sheer economic illiteracy. We've long lived in a "mixed economy" in which most goods and services are produced by the private sector but, for good reason, some services are produced (or, at least, funded) by the public sector.

As I also wrote last week, economists are doing battle against the misapprehension scaring our youth that robots will reduce the amount of work needing to be done – the latest incarnation of what economists have long called the (fixed) "lump of labour fallacy".

While it's true new technology has been destroying jobs since the start of the Industrial Revolution, it's equally true that in those two centuries we've never yet run out of other jobs we'd like to pay someone to do for us.

Since the 1960s, a large share of these green-fields jobs has gone to women, facilitating their (continuing) mass movement back into the paid workforce after child-bearing.

But here's the most important lesson to learn from the news that most of the growth in good, full-time jobs in recent times has come from the government: much of the new demand for people to do new things for us will involve new jobs delivering services in, or funded by, the public sector.

That's because almost all the services best provided or funded by the public sector are "superior goods" – things we want more of as we get richer: education and training, healthcare, aged care, disability care and much else, even law and order.

So the greatest threat to continued growth in the "lump of labour" comes not from robots, but from those wanting to put some arbitrary cap on the size of government – and, of course, on the amount of tax we pay.

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Robots won't reduce the amount of work we need to do

For me, one of the most significant economic developments of this year was realising how pessimistic many of our youth have become about their prospects of ever landing a decent full-time job.

To be sure, some degree of frustration on their part is understandable. Although it's true we avoided a severe recession following the global financial crisis of 2008, it's equally true that, until recently, employment growth has been weaker than usual in the years since then.

And the burden of this weaker growth has fallen disproportionately on young people leaving education to look for their first full-time job.

What's less understandable is the way older, and supposedly more knowledgeable, people have sought to demonstrate how with-it and future-focused they are by spreading wildly exaggerated predictions about how many jobs will be taken by robots, scaring the pants off our youth and convincing them they're doomed to a life of "precarious employment" in the "gig economy".

I'm sorry to say that the otherwise-worthy Committee for Economic Development of Australia was responsible for writing on many young minds the near certitude that 40 per cent of jobs in Australia are likely to be automated in the next 10 to 15 years.

The good news, however, is that, for once, economists were moved by all the amateur analysis they were hearing to join the debate about the future of work. Dr Alexandra Heath, of the Reserve Bank, dug out the hard evidence about how the nature of work is changing and Dr David Gruen, of the Department of Prime Minister and Cabinet, put worries about the shrinking number of jobs into their historical context.

But the charge has been led by Professor Jeff Borland, of the University of Melbourne, one of our top labour-market economists.

With a colleague, Dr Michael Coelli, Borland examined the papers behind the claim of 40 per cent of jobs being lost to robots, and found it built on questionable foundations. In their figuring, the 40 per cent was likely to be nearer 9 per cent.

And last week Gruen rejoined the fray, giving a big speech about it in, of all places, Jakarta.

Predictions about what will happen in the economy can be based on the belief that it will respond to new developments in much the same way it responded in the past to similar developments, or on the belief that "this time is different".

People who know little economic history are always tempted, as many people are now, to assume this time is different.

But economists have learnt the hard way that this time is rarely very different. The fact is, people have been predicting that the latest technology would reduce the number of jobs since the Luddites at the start of the Industrial Revolution.

Gruen reminds us that, in 1953, the great Russian-American economist Wassily Leontief wrote that "labour will become less and less important ... More and more workers will be replaced by machines."

Borland notes that, in the 1960s, Lyndon Johnson established a presidential commission to investigate fears that automation was permanently reducing the amount of work available.

In 1978, Monash University held a symposium on the implications of new technologies, with the convenor predicting that, by 1988, at least a quarter of the Australian workforce would be made redundant by technological change.

Then there was Labor legend Barry Jones' prediction in his best-selling Sleepers Wake! that "in the 1980s, new technologies can decimate labour force in the goods producing sectors of the economy".

Gruen admits that "there is no doubt that, over the past two centuries, waves of technological change have eliminated jobs, and rendered some occupations obsolete.

"But they have also facilitated the creation of new jobs to take their place – either directly, or indirectly as a result of rising standards of living generating new demands."

There are two processes at work, he says. One is that technology takes jobs away – this is the bit we can all see. What we can't see is the second process, the invention of new complex tasks, leading to new jobs.

The history of technological advance over the past 200 years has shown the second process has broadly kept pace with the first.

Computers have been changing the way businesses do their business – and destroying jobs – since the early 1980s. If that's all there was to it, there ought to be far fewer jobs today.

But the number of Australians with jobs has increased by a factor of 2.7 since the mid-1960s, while the average number of hours worked per person has remained broadly stable. Fact.

Like the economists, I find it hard to believe this relationship is about to break down because "this time is different".

What's true is that the nature of work has been changing – slowly – for the past 30 years or so, and this trend is likely to continue. It may accelerate, but it hasn't yet.

Using research by Heath, Gruen says routine cognitive jobs (such as office assistants, sales agents, brokers and drivers) and routine manual jobs (factory workers, construction, mechanics) are in less demand, whereas non-routine manual jobs (nurses, waiters, security staff) and non-routine cognitive jobs (engineers, management, healthcare, designers) are in increasing demand.

It's the changing nature of work, not a fall in the amount of it, we should be preparing for.

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Our bulldust detectors are on the blink

The world has always been full of bulldust, which is why everyone should come equipped with a bulldust detector.

Trouble is, we're living in a time of bulldust inflation. Some of the things we're being told are harder and harder to believe. But a lot of people's detectors seem to be on the blink.

Part of the reason for the step-up may be that there are so many people shouting that anyone else hoping to be heard has to start shouting too.

These thoughts are prompted by the runaway success of the claim that 40 per cent of jobs in Australia are likely to be automated in the next 10 to 15 years.

This is a fantastic claim in the original, dictionary sense: imaginative or fanciful; remote from reality.

And yet it seems many thousands of people have accepted its likelihood without question.

Similar predictions have been made about America, and are just as widely believed.

As I've written before, two economists, Jeff Borland and Michael Coelli, of Melbourne University, who didn't believe it – because they could find no evidence to support it – traced the origins of the claim and the flimsy assumptions on which it was based.

Which led them to ask the question I'm asking: why do people so readily believe propositions they should find hard to believe?

The authors found a quote from a leading American economist, Alan Blinder, of Princeton University, in his book, After the Music Stopped.

"The consequences of adverse economic events are typically exaggerated by the Armageddonists​ – a sensation-seeking herd of pundits, seers and journalists who make a living by predicting the worst.

"Prognostications of impending doom draw lots of attention, get you on TV, and sometimes even lead to best-selling books . . .

"But the Armageddonists are almost always wrong," Blinder concludes.

What? Journalists? Bad news?

Blinder is right in concluding we take a lot more notice of bad news than good. Borland and Coelli observe that "You are likely to sell a lot more books writing about the future of work if your title is 'The end of work' rather than 'Everything is the same'.

"If you are a not-for-profit organisation wanting to attract funds to support programs for the unemployed, it helps to be able to argue that the problems you are facing are on a different scale to what has been experienced before.

"Or if you are a consulting firm, suggesting that there are new problems that businesses need to address, might be seen as a way to attract extra clients.

"For politicians as well, it makes good sense to inflate the difficulty of the task faced in policy-making; or to be able to say that there are new problems that only you have identified and can solve," the authors say.

I'd add that if you're a think tank churning out earnest reports you hope will be noticed – if only so your generous funders see you making an impact – it's tempting to lay it on a bit thicker than you should.

By now, however, it's better known that there are evolutionary reasons why the human animal – maybe all animals – takes more interest in bad news than good news.

It's because we've evolved to be continually searching our environment for signs of threat to our wellbeing.

All of us are this way because we've descended from members of our species who were pretty nervy, cautious, suspicious types. We know that must be true because those of our species who weren't so cautious didn't survive long enough to have offspring.

In ancient days, the threats we were most conscious of were to life and limb – being eaten by a wild animal. These days we keep well away from wild animals, but there are still plenty of less spectacular, more psychological threats – real or imagined – to our wellbeing.

This instinctive concern for our own safety is no bad thing. It helps keep us safe. It's an example of the scientists' "precautionary principle" – the dire prediction may not come to pass, but better to be on the safe side and take out some insurance, so to speak.

By contrast, failing to take notice of good news is less likely to carry a cost.

Except that, like many good things, it can be overdone. If we're too jumpy, reacting to every little thing that comes along, we're unlikely to be terribly happy. And unremitting stress can take its toll on our health.

Which brings us to the media. Journalists didn't need evolutionary psychologists to tell them the customers find bad news more interesting. Bad news has always received a higher weighting in the assessment of "newsworthiness".

But I have a theory that the news media have responded to greater competition – not just between them but, more importantly, with the ever-increasing number of other ways of spending leisure time – by turning up the volume on bad news.

This can create a feedback loop. People wanting their messages to be broadcast by a media that's become ever-more obsessed by bad news respond by making those messages more terrible.

I'm not sure the media have done themselves a favour by making the news they're trying to sell more depressing, BTW.

But Borland and Coelli offer a further possible explanation of why we're inclined to believe that the technological change which has been reshaping the jobs market for two centuries without great conflagration is about to turn disastrous: the cognitive bias that causes people to feel "we live in special times" – also known as "this time is different".

"An absence of knowledge of history, the greater intensity of feeling about events which we experience first-hand, and perhaps a desire to attribute significance to the times in which we live, all contribute to this bias," they say.

If so, a lot of people will continue believing stuff they should doubt.

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Seeking the truth about the extent of unemployment

So, the Australian Bureau of Statistics told us this week, the rate of unemployment fell a tick to 5.6 per cent in July. Trouble is, most people know the official unemployment rate understates the extent of the problem.

What many people don't know, however, is that when you take the rate of unemployment and add the rate of under-employment, which in May took us up to 14.5 per cent, you overstate the extent of the problem.

It's well known by now that the official definition of unemployment is a very narrow one because you only have to do one hour's work in a week to be classed as employed.

A lot of people also know – or think they know - that this amazing definition was introduced by the government some years ago to stop the figures looking so bad.

Labor voters know it was a Coalition government that fudged the figures; Liberal voters know the villain was a Labor government.

Sorry, this is an urban myth. It is just not true. The bureau would never allow any bunch of politicians to fiddle with the definitions it uses.

As it has explained many times, the bureau uses internationally agreed standards to define unemployment, which are set by the International Labour Organisation, part of the United Nations.

They had to draw the dividing line between unemployed and employed somewhere, and they chose one hour – a choice that was easier to make in the days when almost all the jobs were full-time.

Even today, there'd be very few people actually working just an hour or two a week. Most would work at least one shift of seven or eight hours.

Even so, there's no denying that such a narrow definition understates the extent of joblessness. This is why the bureau also publishes a measure of underemployment.

The underemployed consist of all those people who are working part-time – defined as less than 35 hours a week – but would prefer to be working more hours.

When you take the rate of underemployment and add it to the rate of unemployment (with both unemployment and underemployment expressed as proportions of the labour force) you get what the bureau calls the "labour underutilisation rate", which we can think of as a broader measure of unemployment.

If you look over the years, the rate of unemployment tends to go higher and lower in line with the downs and ups in the business cycle.

You can also see the business cycle reflected in the rate of underemployment, but it has a much clearer underlying upward trend. It was 2.6 per cent in 1978, but 8.3 per cent in November 2015 and 8.8 per cent this May.

Until early 2003, the unemployment rate was higher than the underemployment rate, but since then the underemployment rate has been higher, with a growing gap.

Between February 2015 and this May, the unemployment rate fell by 0.5 percentage points, whereas the underemployment rate rose by 0.3 points.

The underemployment rate is a lot higher for females, 11 per cent, than for males, 6.9 per cent.

It's also greatest among people in lower-skilled occupations and lowest among people in higher-skilled occupations. (Uni students please note.)

Now get this: although workers of all ages suffer underemployment, it's much more a problem for the young. More than a third of the underemployed are aged 15 to 24, and their rate is 18.5 per cent.

But why has the trend rate of underemployment been rising steadily since the late 1970s?

Since underemployment is an affliction of part-time workers, the steady rise in part-time employment over that time – so that it now accounts for about a third of all jobs – does much to explain why there's more part-timers who happen to be saying they'd prefer to be working more hours.

Professor Jeff Borland, of the University of Melbourne, adds that "younger workers appear to have experienced the largest increase in underemployment because they have had the largest growth in part-time employment".

He reminds us that more young people have part-time work because more of them are in full-time education and needing a part-time job.

But here's my punchline: although the official unemployment rate understates the size of the problem, just adding the underemployment rate goes to the other extreme of exaggerating it.

Why? Because it adds apples to oranges. We worry most about underemployment because we assume it involves people who need full-time jobs but have had to settle for part-time.

It does. But it also includes people who are happy to stay part-time but, even so, would prefer to work an extra shift or maybe just a few more hours.

It doesn't make sense to add people with such a small problem to people with the much bigger problem of needing a full-time job but not being able to find one, as though they were similar.

Remember, too, that almost a third of the people included in the official unemployment rate are looking only for part-time work.

This is why, if you search very deep on the bureau's website (clue: catalogue no. 6291.0.55.003, table 23b) you find that, as well as just counting heads, it also does a more accurate measure of underemployment that counts the hours people are looking for – meaning part-timers needing a full-time job count for a lot more than those just wanting a few more hours.

This "volume" measure shows that, in May, the underemployment rate was 3.2 per cent of all the potential hours the whole labour force could work, and the unemployment rate was 4.3 per cent, giving an hours-based measure of labour underutilisation of 7.5 per cent.

Which is closer to the truth of the matter.

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Why the growth in wages is so slow

Economists may not be much chop at forecasting how fast the economy will grow in the next year or two, but that doesn't mean they haven't learnt a few things about how economies work that the rest of us could benefit from knowing.

It helps us get a better handle on the future if we remember the macro-economists' rule that economies move in cycles, not straight lines.

So something that's been going down will, one of these days, start going back up, and vice versa.

A related rule is that, at any point in time, what's been happening in the economy will be partly the result of "cyclical" (and thus temporary) factors, and partly the result of "structural" (longer-term, lasting) factors.

At any particular time, the bigger, easier-to-see factor is likely to be cyclical influences; the smaller, harder-to-see factor is the underlying, longer-term structural (or "secular") trend.

Let's use this understanding to look at the present weak rate of growth in wages.

As measured by the Bureau of Statistics' wage price index, wages have usually grown by between 3 and 4 per cent a year in nominal terms, though they got up to 4.3 per cent just before the global financial crisis.

Since their subsequent peak of 3.7 per cent over the year to September 2012, however, their rate of growth has slowed continuously to a pathetic 1.9 per cent over the year to December.

Some people have leapt to the conclusion that employers have finally got the upper hand over workers, so that wage slaves will never get another decent pay rise again and, indeed, will probably see their rises get even more microscopic.

Sorry, it ain't that simple.

The question of what's causing wage growth to be so low is examined in an article by James Bishop and Natasha Cassidy in the latest Reserve Bank Bulletin.

Not surprisingly, they account for much of the weakness as caused by cyclical factors – by the relatively weak state of the labour market.

Note that the fall in the rate of wage growth began after the prices we receive for our exports of coal and iron ore stopped shooting up and started falling rapidly.

When our "terms of trade" – export prices relative to import prices – were improving, the nation's real income was rising strongly (because we could now buy more imports with the same quantity of exports) and it wasn't surprising to see our wages growing strongly, more strongly than consumer prices were growing.

But when our terms of trade began deteriorating, it was equally unsurprising to see wages start growing more slowly, especially relative to consumer prices.

Roughly a year after minerals export prices started falling, the amount of mining construction activity began falling sharply as projects were completed and no new ones were begun.

Thus began a period of weakness in the economy. Mining construction activity contracted and we began the slow transition back to an economy led by the other sectors, which had been held back by the expansion of mining.

Economists expect wage growth to be slower when there's "slack" in the labour market – when unemployment is higher than normal, employers have less trouble finding the workers they need and workers and their unions are less inclined to campaign for big pay rises.

With the actual unemployment rate fairly steady at 5.8 per cent,  but economists having revised their estimate of full employment (known to economists as the non-accelerating-inflation rate of unemployment) down to 4.75 per cent, plus a relatively recent rise in under-employment, there's plenty of reason to expect wage rises to be small.

And, of course, there's less need for big pay rises because consumer price rises have been below the bottom of the Reserve Bank's 2 to 3 per cent inflation target for the past two years.

There's a circular, chicken-and-egg relationship between prices and wages. Wages don't need to rise as much when prices aren't rising much, but prices don't rise much when wages (the biggest cost most businesses face) aren't rising much.

Don't be a victim of what economists call "money illusion". It shouldn't matter to workers how big their wage rises are in nominal terms. What matters is how wages are rising relative to prices – that is, what's happening to real wages.

The good news is that real wage growth has generally been positive in recent years.

The bad news is that real increases have been minuscule, whereas in a normally functioning economy they should grow by a per cent or two most years, as workers get their share of the continuing improvement in the productivity of their labour.

The first point to make is that there are good cyclical reasons for wage growth to be low, meaning that as the economy completes its transition to more normal sources of growth, we can expect a return to more normal rates of consumer price inflation and wage rises.

But here at last is the point: the Reserve's Bishop and Cassidy admit that all the normal cyclical factors we've discussed simply aren't sufficient to fully explain why wage growth is so weak.

That is, there does seem to be some underlying structural change at work. And it's not peculiar to Oz.

"It has been posited in the international literature that low wage growth may reflect a decline in workers' bargaining power," they say.

With all the globalisation of production, all the technological change and digital disruption – plus, in Australia and elsewhere, all the changes to wage-fixing arrangements to shift bargaining power back to employers – that's not hard to believe.

It's a warning to governments that if they want to see their economies return to normal functioning - and workers return to voting for mainstream parties – they should have another think about whether they've got the balance of industrial relations bargaining power right. Doesn't look like it.

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The future of work won't be as bad as we're told

I can't remember when there's been so much speculation about what the future holds for working life. Or when those who imagine they know what the future holds have worked so hard to scare the dickens out of our kids.

Getting on for 100 years ago – 1930, to be precise – the father of macro-economics, John Maynard Keynes, wrote an essay, Economic Possibilities for our Grandchildren, in which he calculated that if technological progress produced real economic growth per person averaging 2 per cent a year for 100 years, by then people would enjoy a comfortable standard of living while needing to work only 15 hours a week.

He was writing during the Great Depression, so I doubt if many people believed him. He was right, however, to predict the Depression would end and growth would resume, powered by continuing advances in technology.

By the 1960s and early '70s it was common for futurologists to predict that more and more labour-saving technology would allow big reductions in the standard 40-hour working week.

What a laugh. Today's futurologists – amateur and professional – are predicting roughly the opposite to what Keynes and the '60s futurologists were.

Thanks to continuing technological advance and the digital disruption it's producing, working life is getting ever tougher and less secure, we're told.

As we learnt last week, all the extra jobs created in Australia over the year to February – a mere net 100,000 – were part-time, with full-time jobs actually falling by 21,000.

So there's the proof we're going to the dogs – and it'll keep getting worse. All those part-time and casual jobs. The growing army of the "under-employed".

We're moving to the "gig economy", where full-time, permanent jobs become the exception and most workers are employed on short-term contracts, many are self-employed like Uber drivers or need a "portfolio" of jobs on different days.

Frightening, eh? I read someone confidently assuring school kids they'd have 10 different jobs – or was it 10 different occupations? – in their working lives. Then I read someone assuring kids they'd have 17 different jobs. Not 16, or 18, but 17.

This growing job insecurity is why there's a renewed push among progressives – including Greens leader Richard Di Natale – for a "universal basic income". It'll be needed because so many people will be earning little or nothing from employment.

Have you detected my scepticism? This is people during a period of weakness in the jobs market predicting – like Keynes's pessimists – it will stay weak forever – and get worse.

That's part of it. The other part is the futurologists who, unlike us mere mortals, can see with perfect clarity what our technological future holds.

If you think economists aren't good at forecasting, futurologists are much worse. Much of what they predict never comes to pass and most of what they correctly predict takes much longer than they expected. Then there's the things they failed to predict.

The only safe prediction is that the future will be different to the present. Any more specific prediction is mere speculation.

The futurologists generally know – or profess to know – a lot more than the rest of us about all the new tricks the latest technology will soon be able to do. What they almost always underestimate is the human factor: whether we'll want it to do those tricks.

If the futurologists had been right, by now most of us would be working from home. We aren't – because it suits neither bosses nor workers.

It's tempting to predict the digital revolution will eliminate many jobs in the services sector, leading to mass unemployment.

Trouble is, employers have been installing labour-saving equipment since the start of the Industrial Revolution, and so far the unemployment rate is hardly up to double figures.

That's because improving the productivity of a nation's labour increases its real income. When that income is spent, jobs are created somewhere in the economy.

Technological advance doesn't destroy jobs, it "displaces" them from one part of the economy to another.

It's possible the digital revolution is so different to all previous technological revolutions that what's been true for 200 years is no longer true. Possible, not probable.

Those predicting our kids will be tossed out of their jobs many times in their working lives forget that market forces involve the interaction of supply and demand.

Their prediction of almost universal job insecurity in the gig economy assumes this will happen because it's what the demanders of labour – employers – want.

This is naive. It assumes all labour is unskilled – so employers don't care who does it and never have trouble recruiting and training a constantly changing workforce – and that there's no such thing as "firm-specific knowledge".

No employer would treat skilled labour in such a cavalier fashion. Employers know the suppliers of labour – employees – wouldn't want to work for such an appalling outfit.

And such an apocalyptic prediction fails to allow for what economists call the "policy reaction function" – if things get too bad for too many workers, governments will step in and legally require employers to treat their staff fairly – just as they already impose paid public holidays, annual leave, minimum wages, penalty payments and much else on unwilling employers.

Why do they do it? Because, in a democracy, workers have far more votes than bosses.

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How to get more job satisfaction

How about we take a short break from worrying about the new job Donald Trump has lined up for himself and think about our own jobs.

It surprises me that we spend so much time working – many of us in jobs we don't much enjoy – but are more inclined to seek escape from our work in fiction, or by following the adventures of celebrities such as Trump, than to think about how we could get more satisfaction from all that heads-down time.

It's not a subject of interest to our politicians nor, I fear, many of the bosses we do the work for.

Yet the fact is that psychologists – and even the odd economist – know a lot about what makes some jobs more satisfying than others.

Research published in 2014 by the British Cabinet Office examined the life satisfaction of people working in 274 occupations.

The 10 occupations seeming to yield the greatest satisfaction were, from the top: clergy, chief executives, farm managers, company secretaries, quality assurance regulators, health care practice managers, doctors, farmers, owners and managers of hotels and accommodation, and skilled metal, electrical and electronic trade supervisors.

The 10 occupations seeming to yield the least satisfaction were, from the bottom: plastics process operatives, bar staff, care escorts, sports assistants, telephone sales people, floor and wall tilers, industrial cleaners, debt and rent collectors, low-skilled construction workers and pub owners and managers.

From a quick squiz, it seems the most satisfying jobs tend to be better paid than the least satisfying. (With clergy as an obvious exception. If my dad's pay was any guide, revs aren't rolling in it.)

But if you conclude from this that finding a high-paying job is the best path to a satisfying job you've got the wrong end of the stick.

No, the clearer distinction between the two groups is that the most satisfied tend to be more highly skilled than the least satisfied.

As a rule, work skills tend to be scarce, with employers' demand for them stronger than workers' ability to supply.

So it's reasonable to infer that acquiring skills for which there's strong employer demand is a safe path to a high-paid job.

But there's another distinction between the two groups that does most to explain the satisfaction difference: the most satisfied are nearer the top of the heap, whereas the least satisfied are near the bottom.

It's nice to have status – people treat you with more respect. And it's nicer to do the bossing than to be bossed.

The psychologists will tell you, however, that the most important thing in job satisfaction is personal autonomy: having a degree of freedom in the way you do your job.

Feeling that, at least to some extent, you're controlling the system rather than the system controlling you.

These things take you a long way towards having a sense that you're achieving something. And that's another characteristic of satisfying work the psychologists have identified.

A third characteristic is a degree of complexity and variety. It's obvious enough that we like a bit of variety in our jobs rather than repeating the same tasks day in, day out.

Less obvious is that we like jobs that present us with a challenge – provided it's a challenge we can meet. Jobs that demand the impossible aren't satisfying, but nor is a job that's so easy it's a bore.

One of my favourite websites, PsyBlog, run by the British psychologist Dr Jeremy Dean, nominates a fourth "key to job satisfaction": fair pay.

Note, not high pay, but fair pay. How much is fair? This is the bit so many employers don't get in their fashionable preoccupation with performance pay and bonuses linked to KPIs (if you don't know what those letters stand for, think yourself lucky).

Fair pay is pay that's the same as received by people you consider your equal. We accept that people with more responsibility than us should get more, but we get twitchy when we know or suspect the boss is playing favourites among our peers.

It's clear bosses could do a lot to improve the satisfaction of their troops by avoiding favouritism, giving people at every level a little more freedom and flexibility, treating people lower down with more consideration and respect, and doing more to get individuals into the jobs their personal characteristics make them more suited to.

Dumb bosses live in fear that treating their staff well would allow them to slacken off. The KPI craze is intended to oblige people to work harder, but also to control more narrowly the way they do their jobs.

KPIs should come with a safety warning: careful what you wish for. They invite staff to turn off their brains – just as soon as they've figured out what aspects of their job they can neglect so as to ensure they always hit their targets.

Smart bosses know that treating their workers well, giving them discretion and encouraging them to keep their brains on pays off in greater effort and loyalty, as well as reducing staff turnover, recruitment and initiation costs.

If you don't have the good fortune to work for a smart boss you can use what wriggle room you can manage to make your job more challenging and psychologically rewarding. Failing that, find a better boss.

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Our youth jobs report card: what's up with you people?

It's surprising how many of our politicians, economists and business people fail to see that our preference for looking after high-achieving young people and not worrying too much about the stragglers is a recipe for much more than social injustice and unfulfilled lives.

The earlier we identify and help kids at risk of doing poorly in education, training and employment, the more we help the community as well as the kids.

It's a social and economic investment. Neglect it and we lose much more later, as people spend more of their life on benefits and add little to the productivity of our workforce.

On the face of it, a report card on our performance, Investing in Youth: Australia – to be released by the Organisation for Economic Co-operation and Development at a forum hosted by the Brotherhood of St Laurence in Melbourne on Monday – gives us a pass.

Our education system "performs well overall, and school completion rates have been rising in recent years".

The labour market situation of youth in Australia is "quite favourable by international standards". Our youth unemployment rate is [a bit] "below the OECD average".

But this is not so terrific when you remember that "Australia was hit much less heavily by the Great Recession than most other countries".

"After continuous decline in youth unemployment rates since the early 1990s, rates have started rising again, while youth employment has fallen."

But the report focuses not on youth unemployment, but on NEETs – the share of youth (people aged 15 to 29) who are "not in employment, education or training". And, at 11.8 per cent, the share of NEETs was higher in 2015 than it was before the global financial crisis in 2008.

That's well over half a million young Australians out of education and work. About a third of those are looking for work, but the other two-thirds aren't.

The first factor driving the high proportion of NEETs is low educational attainment. Quelle surprise.

Youth with, at best, a year 10 certificate, account for more than a third of the NEETs. And their risk of being in that state is three times as high as for those with tertiary education.

Worse, "many NEETs lack foundational skills (numeracy and literacy) and non-cognitive skills, which are important prerequisites for labour market success," the report finds.

But there's hope if we bother helping. "Recent research demonstrates, however, that non-cognitive skills, like cognitive skills, remain malleable for young people through special interventions."

Get this: the risk of being NEET is 50 per cent higher for women, and women account for 60 per cent of all NEETs.

So the biggest single explanation of why so many NEETs aren't looking for work is that many of them are young mothers with a child below the age of four. And don't assume they're all sole parents on welfare.

The report adds that NEET rates are substantially higher among Indigenous youth, who represent 3 per cent of the youth population, but 10 per cent of all NEETs.

And the likelihood of being NEET is substantially higher for youth with disabilities.

In case you're tempted by visions of all those lazy loafers out surfing, or with their feet up watching daytime television, the report says NEETs "tend to exhibit higher rates of psychological stress and lower levels of life satisfaction" than other youth.

In its own ever-so-polite way, the report notes our less-than-stellar performance. The completion rate for vocational and educational training certificates and apprenticeships "remains low by international standards".

That's one way to acknowledge the awful stuff-up we've made of VET.

Australia has a wonderful, very flexible, market-based network of employment service providers that "cover, however, only about 60 per cent of NEETs, leaving around 200,000 youth unserviced". Oh.

"Young jobseekers' participation in training programs increased over the last years, but this trend came to a halt with the recent expansion of Work for the Dole", we're told.

"Given strong evidence on positive employment effects of training, including for disadvantaged jobseekers, Australia should continue promoting training program participation as an effective way of moving young jobseekers into stable employment."

Translation: what's up with you people?

The report praises our Youth Connections program and its effectiveness in improving educational attainment for youth at risk of dropping out of school – before noting it was phased out in 2014.

"The recent tightening of eligibility criteria for unemployment benefits may create additional incentives to actively look for work, but it also bears the risk of pushing the most disadvantaged youth into inactivity and possibly poverty," we're told.

Translation: you mean Aussie bastards.

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Why wage growth is so weak

Are we waiting with ever-growing impatience for the economy to get back to normal, or has the economy shifted to a "new normal"?

I think that's the central question in macro-economics today – not just in Oz but throughout the developed world.

To put that question in econospeak, are the changes we see before us "cyclical" – just part of the normal ups and downs of the business cycle – or are they "structural", a lasting change in the way the economy works.

Trouble is, neither I nor anyone else can say with confidence what the answer is.

But further evidence that things in our economy are looking far from normal came this week with the news that wage growth over the year to March – as measured by the  Bureau of Statistics' wage price index – decelerated to 2.1 per cent, the slowest since this series began in 1997.

Why is wage growth so weak? Because the rise in consumer prices is so weak. Why are prices growing so slowly? Because the rise in wages is so weak.

Yes, there is a circular, chicken-and-egg relationship between wages and prices. When prices rise, workers need a pay rise of at least that much just to preserve the purchasing power of their wages.

But when they have to pay higher wages, firms pass their higher costs on to customers. That's why – in normal times, at least – we always have some degree of inflation.

So don't bother wishing prices were rising faster so wage growth would be higher – that wouldn't get you anywhere.

No, what matters to wage-earners is the difference between the rise in their wages and the rise in consumer prices – that is, the change in their "real" wages. In normal times, wages should be rising comfortably faster than consumer prices.

Why? Because increased business investment in more and better machines increases the productivity of workers' labour (output per hour of labour input), and competition for the services of workers should ensure they receive a share of the improved value of their labour.

Here the news is better, though not great. Although wage growth over the year to March slowed to 2.1 per cent, the rise in consumer prices over the same period slowed to 1.3 per cent, implying real wages grew by about 0.8 per cent.

This is better than for most of the past two years, but the "normal" rate of productivity improvement should be nearer 1.5 per cent a year, even 2 per cent.

So what's going on with wages? This is what Professor Jeff Borland, of the University of Melbourne, tried to discover in a recent paper. He used a different measure of wage growth – average weekly earnings for adult male full-time employees – because the series goes back much further to the early 1980s (when the stats were more sexist than they are today).

He found that the rate of growth in "nominal" wages – that is, before adjusting for the effect of price inflation – is lower than at any time in the past 30 years.

Real wage growth – after allowing for inflation – is also low, but real wage growth has been negative in several periods over the past 30 years.

Borland tests to see how much of the weaker growth in nominal wages over the two years to the end of 2015 can be explained by lower growth in consumer prices and labour productivity, which he does by comparing them with the figures for the five years to 2013.

He finds that weaker prices and productivity growth explain about 70 per cent of the weaker wages growth but, obviously, that leaves 30 per cent of it unexplained.

Next among the usual suspects is weaker growth in employers' demand for labour. It's well established that the strength of wages growth varies to some extent with the business cycle.

Wages should grow faster when demand for goods and services is strong and firms need to attract more workers, but grow more slowly when demand is weak. Indeed, it's common for employers to skip wage rises during recessions, when workers are more worried about hanging on to their jobs.

Economists use the "Phillips curve" (named after the Kiwi economist Bill Phillips) to study the relationship between wage inflation and the demand for labour, using the rate of unemployment as an inverted "proxy" (stand-in) for labour demand. Borland uses a broad definition of unemployment by adding to the official rate the rate of under-employment.

He finds, as expected, that wage growth is lower when unemployment is higher. But he also finds that a structural shift in the relationship between wage growth and broad unemployment occurred in the mid-1990s.

His figuring suggests that any level of demand for labour is now associated with a lower rate of wage growth than it used to be, and that an increase in labour demand now leads to a smaller increase in wages.

He lists various potential explanations for this structural shift, of which I think the most plausible is our move in the early 1990s from centralised wage-fixing to enterprise bargaining.

But a change so long ago can't explain why wage growth has been abnormally low in just the past two years or so – more than can be accounted for by lower inflation and productivity improvement.

Borland's best explanation for this is the weak growth in "output prices" – the prices charged to customers by employers, including the prices of exports. Slower growth in output prices will have constrained employers' capacity to pay higher wages.

So maybe wage growth will return to the post-1990s norm once coal and iron ore prices have stopped falling.

But my suspicion is that other global developments – including digitisation and the greater ability to move businesses to cheap-labour countries – has permanently weakened workers' bargaining power.

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The prospect for workers is brighter than many think

A lot of people are convinced it's just going to get worse and worse for workers in coming years. A lot of oldies think that and, unfortunately, too many youngsters believe them.

Many older people worry that, with the decline of manufacturing in Australia, and the end of the mining boom as well, they just can't see where the jobs will come from.

Young people, on the other hand, believe jobs are getting ever harder to find and, when you do find one, it's likely to be pretty scrappy: casual, part-time, short-term.

What's true is that young people have borne the brunt of the weak economic and hence employment growth since the financial crisis in 2008.

It's taking them longer to find entry-level full-time jobs than it used to and, in the meantime, they've had to get by with casual jobs. More employers have been willing to exploit them by asking them to do unpaid internships.

What's not true is that there's been continuing growth in insecure forms of employment. The proportions of such jobs haven't been increasing.

At a time of "transition" and uncertainty, it's always easy to err on the gloomy side. When you do, be sure the media will broadcast your bad vibes to the world.

But it's not hard to see plausible reasons why things could get better for workers, not worse. And when the ANZ Bank's chief economist unit and the Australian Institute for Business and Economics, at the University of Queensland, peered into the future and ran their best guesses through a model of the economy, that's just what they found.

Everyone loves to dwell on the decline in manufacturing, and the pathetic number of lasting jobs in mining, but few people get excited by the truth that almost all the additional jobs we've created in the past 40 years have been in the services sector.

Nor that most of these jobs have been cleaner, safer, more highly skilled and more rewarding – intellectually as well as monetarily – than most of the jobs no longer being created in manufacturing, farming and mining.

The study makes the highly plausible assumption that this longstanding trend will continue. "Declining material intensity has been observed in all [developed] countries, in part because wealthier consumers buy 'experiences' once their primary material needs are met," it says.

The ageing of the population is almost invariably portrayed as a bad thing, but the study points to a widely ignored way in which it's good news for the younger generation.

With a higher proportion of the population retired (and thus adding to the demand for labour but not to its supply) but low fertility meaning a lower rate of young people entering the workforce from education, demand for the services of young workers will increase.

Here's a tip: employers are chancers​. If they think they can get away with screwing workers (because there are more than enough available) they will. That's what's been happening lately.

But if they don't think they can get away with it (because workers have plenty of other bosses who'd like their services), they don't. And if it gets to the point where bosses have to start sucking up to workers to attract them and hold them, they will.

The study puts it more politely. By their nature, service industries rely less on machines and more on people, particularly highly-skilled workers. So if the services sector's share of the economy continues to grow "this could prove challenging for Australian businesses given our ageing population and changing workforce composition".

A third factor the gloom-mongers neglect is that our continuing move to the "knowledge economy" requires a better-educated, more highly-qualified workforce.

Today, more than half the population has completed the last year of schooling and gained at least a post-school certificate. That's more than twice what it was in 1981.

Since the oldest Australians have the lowest levels of educational attainment, the proportion of people with post-school qualifications could exceed 70 per cent by 2030.

Even so, the study predicts that "the fight to retain skilled workers will intensify", implying that, though the supply of qualified workers will grow, the demand for their services will grow faster.

In such circumstances, employers will be trying to bind their skilled workers to them, not cast them adrift with insecure employment contracts.

If we foresee further growth in the share of the economy accounted for by labour-intensive service industries, employing better qualified and higher-paid workers – over whose bodies employers are fighting – labour's share of national income should rise.

If so, "some of the consequences of a falling labour share, such as growing income inequality, may begin to unwind as well", the study says.

A final factor to remember is that our exports of services are likely to keep growing as Asia's middle class gets bigger and more prosperous.

At present, the goods sector of the economy (agriculture, mining, manufacturing and construction) accounts for 28 per cent of total employment, while the services sector accounts for 72 per cent. The study predicts that, over the next 15 years, the services share will increase by 5 percentage points.

It finds that the industries with the most intensive demand for labour are also those with the strongest growth prospects.

The strongest growing service industries are likely to be healthcare (fed by demand for new medical technologies as well as ageing), education (growing demand for qualifications) and professional services.

These industries are projected to grow by at least 5 per cent a year, on average, over the next 15 years. Demand for labour across the economy is projected to grow by an average of a solid 1.6 per cent a year.

No one – certainly, no economist – knows what the future holds. But don't be led into assuming the only things that could happen are bad.

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Let's 'reform' lack of satisfaction at work

Has it ever occurred to you that, in all our economic striving, most of us – almost all our business people, economists and politicians, but also many normal people – are missing the point?

It occurred to me years ago, and I've thought about it often, but reading a little book by one of my gurus, Barry Schwartz, a professor of psychology at Swarthmore​ College in the US, has revved me up.

In my job I have to focus mainly on whatever issues everybody else is getting excited about. I've written a lot lately about the budget deficit, mainly because I see the Coalition swinging from exaggerating the size and urgency of the problem while in opposition, to virtually ignoring it now it's in government.

They had one big ill-considered and ill-fated attempt to fix the problem in their first budget, but now they don't even want to think about it.

Of course, getting the budget back to surplus is really just a housekeeping measure. It doesn't advance our cause in any positive sense, it just stops problems building up for the future.

No, the more positive efforts to improve our lot have focused on the need for "reform". The economists have noticed that the rate of productivity improvement has slowed and, since improving our productivity is the main way we keep our material standard of living rising, they're casting around for something we could do to improve matters.

When economic-types look for things to improve, their first thought is to "reform" taxation in a way that does more to encourage people to "work, save and invest".

Sorry, but all this is missing the point. Schwartz's little book is called Why We Work, and he asks us to reconsider the most basic question in economic life: why do we work?

To most people that's a stupid question. We work to make money, which we then use to keep body and soul together and buy the other things we need to give us a happy or satisfying life.

Next question: do we enjoy our work? Answer: sometimes yes, sometimes no. Some people do most of the time; most people don't.

The basic economic model assumes that people don't enjoy work; they do it only for the money. And, except perhaps to the individual, whether they do or they don't isn't of great consequence.

Most employers organise work in ways designed to maximise their employees' productivity – their productiveness. If their workers happen to enjoy their jobs, that's their good luck. If they don't, that's not something a boss needs to worry about.

Schwartz's argument is that we've allowed money – and the economists' way of thinking about work, which goes back to Adam Smith in 1776 – to get us muddled between means and ends.

Money is merely a means, not an end in itself. The end money is meant to be a means to is life satisfaction. But if satisfaction is the object of the exercise, why on earth would we organise the economy on the basis that whether or not people get satisfaction from their jobs doesn't matter?

Why fixate on earning money to buy satisfaction when we could be doing much more to gain satisfaction while we earn?

When you remember how much of our lives we spend working, think what a fabulous "reform" it would be if more of us got more satisfaction from our work.

If we got more satisfaction from our work, economists and politicians wouldn't have to worry quite so much about ensuring our money income kept growing strongly so we could keep attempting to buy more satisfaction. (Tip: the satisfaction you get from enjoying your job and doing it well is more powerful than the satisfaction you get from buying more stuff.)

And if bosses got more satisfaction from their own jobs, maybe they wouldn't be so obsessed by achieving ever faster-growing profits so as to justify ever-bigger bonuses.

You'd think that, with all the status and executive assistants to wait on them and people to boss about, bosses would be rolling in job satisfaction.

But when I see how obsessed they are with pay rises and bonuses, it makes me wonder if they actually hate their jobs more than most of their employees do.

Of all the company's workers, they're the ones showing most sign of only doing it for the money.

By now, I know, many managers will be thinking, if I made making sure my workers had a good time at work an objective, their productivity would suffer.

That's certainly why many jobs have been designed in the soul-destroying way they have been, and the mentality that informs the way many managers manage. Treat 'em mean to keep 'em keen.

But consider the reverse possibility. There's growing evidence that workers who gain satisfaction from their jobs try harder and think more about how they could do their jobs better. Is that so hard to believe?

I'm convinced greater effort to make jobs more satisfying could leave most of us better off with, at worst, no loss of efficiency.

How do employers go about making jobs more satisfying? How can someone with a deadly job make it more emotionally rewarding?

These questions have been well studied by industrial psychologists and Schwartz has lots of useful things to say. But I'll leave that for another day.

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How digital disruption affects jobs and wages

A lot of people worry about the bad economic consequences of the digital revolution. Among the worriers is Dr Andrew Leigh, the shadow assistant treasurer and a former economics professor at the Australian National University.

Leigh made his concern clear in the "distinguished public policy lecture" he delivered this week at Northwestern University in Chicago.

But whereas most people worry that the digital revolution will lead to mass unemployment, Leigh's concern is that it will make our incomes a lot more unequal.

It's not surprising that people observe all the workers whose jobs are taken by computers and worry about widespread joblessness. As Leigh observes, this concern has been around at least since 1811, when disgruntled Nottingham textile workers wrote to factory owners under the pen-name of Ned Ludd, threatening to smash machines if they continued to be used.

But economists soon learnt not to worry. Why not? Speaking to an audience of economists, Leigh regarded it as too obvious to need explaining.

But let me fill you in. New technology leads to increased productivity – more goods and services produced per worker.

This constitutes an increase in the community's real income. When that increased income is spent, more jobs are created.

So whereas non-economists see only all the jobs that have been lost as industries X and Y digitise, economists understand this is just the most visible part of a more complex process in which jobs aren't so much destroyed as "displaced" – taken from some industries and moved to others.

This is why, after 200 years of labour-saving technological advance, we're still only up to having 6 per cent of the labour force unemployed (or about twice that if you add in underemployment).

Of course, this is the economy-wide outcome. The new jobs being created elsewhere in the economy may be very different to the jobs being lost. So this still leaves a problem for those individuals whose skills fitted the old jobs but not the new ones.

This is where Leigh comes in with his concerns about the effects of a newer idea – "skill-biased technological change" – on the unequal distribution of income between workers and, hence, families.

This is the idea that digitally driven technological change tends to disadvantage workers with less skill, and advantage those with more skill. It tends to lower wages for those with less education and raise wages for those with more education.

But the story's a bit trickier than that sounds. Research by David Autor, of the Massachusetts Institute of Technology, suggests jobs can be divided into three categories: manual, routine and abstract.

Abstract jobs – which typically involve problem-solving, creativity and teamwork – tend to be paid a lot more than manual jobs, with routine jobs – occupations such as bookkeeping, administrative support and repetitive manufacturing tasks – in between.

Autor has found that, over the past 30 years in America and the past 20 in Europe, it's routine jobs that have shrunk most. Why? Because they're the jobs that can be done most easily by a computer.

It's turned out that manual jobs – such as cooking, cleaning, being a security guard or providing personal care – are much harder for computers to do. For instance, the problem of shape recognition means that, a best, it takes a robot 90 seconds to fold a towel.

Robot hairdressers do a job similar to what you'd do if you drank a bottle of tequila and tried cut your own hair without a mirror, Leigh says.

He says the job characteristics that are hardest for computers to mimic include those involving communicating clearly with co-workers, showing empathy to clients and adapting to new situations. A lot of manual jobs require these skills.

Many studies – including some Australian ones – show that recent decades have seen a polarising or "hollowing out" of employment. There are a lot more abstract jobs (particularly managers and professionals) and modest growth in the number of manual jobs, but many fewer routine jobs in the middle.

But Leigh says this loss of mid-skill jobs doesn't mean the pain has been greatest for mid-skill workers and middle-income families.

Why not? Because what happens to wages is a product not just of the (declining) demand for mid-skill workers, but also of the supply of workers willing to do low-skilled manual jobs. And as job opportunities have declined for mid-skill workers, more of them have become willing to do manual work rather than be jobless.

So it's been wages at the bottom that have grown most slowly, not wages in the middle. (Because our wage-fixing system is more regulated, this is probably truer in the US than it is in Oz.)

At the top, Leigh says, it's altogether a different tale, with technology actually adding to the skills of the most skilful, making them more productive and so adding to their pay. A top surgeon, for instance, can use technology to do a better job and do more operations per day, thus adding to the demand for his (rarely her) services.

This may partly explain why chief executives' pay is rising, according to Leigh. The biggest firms have got bigger in recent years, and this is partly explained by better technology making it easier to manage larger and more far-flung businesses. As companies get bigger, the boss's pay gets bigger.

This is skill-biased technological change. Technology also helps explain the rise of "winner-takes-all" job markets for such people as actors, pop stars and top sportspeople.

People want to see the very best, much more than the almost-as-good, they'll pay more to do so and technology makes it possible.

At a time when technology is working to make the rich a lot richer and the poor only a little less poor, should we be "reforming" the tax system in ways that add to this income inequality or reduce it?

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