A word from our CEO

Now that the carbon tax has made its way through the lower house and the expected to passing of the senate and into law, there is a heightened frenzy of debate about the impact of the new tax on the domestic economy. Christian Kerr from The Australian reports that research by the Australian Trade Industry Trade Alliance states that nine out of ten manufacturing jobs will feel the full impact of the carbon tax with the likely result being 950,000 domestic jobs coming under threat as employer’s battle increased costs. This is concerning given that employment, while still at low levels is starting to show signs of slowing. Proponents of the tax point to the creation of green jobs as an offset to the proposed job losses and the transition to a low carbon economy. However there is evidence showing that the creation of green jobs is not enough to offset the losses.

Economist Gabriel Calzada examined the effect of green energy mandates in Spain. Gabriel discovered that for every green job created there were 2.2 jobs lost (Forbes, 2011). This being the case there is a significant short fall in jobs due to a migration to a low carbon economy. As few people understand how a carbon tax works, I have briefly outlines the basics of its operation. A carbon tax is simply a pigouvian tax named after the English economist Arthur Pigou. Market pricing often does not capture the negative externalities (pollution) generated in its operation therefore, the social cost is not captured in the products private cost. The application of a pigouvain tax seeks to capture this cost, faced with this cost increase producers have an incentive to reduce production to a socially optimal level. Reduced production levels will also result in a decrease in demand for human capital resulting in job losses.

Structural changes in the economy often results in certain industries being impacted at greater levels than others. This was the case when the then Prime Minister Gough Whitlam significantly reduced the tariff level applied to imports. This impacted the Manufacturing, agricultural and textile industries. These industries are often classified as low skill. Australia has been moving to a higher skilled economy for some time now, and the impost of a Carbon tax is likely to speed this transition up.

The creation of green jobs will require higher skilled workers; those that are displaced due to the move to a low carbon economy will also require retraining into higher skill areas. Jobs data shows that the jobs growth is in high skilled areas, therefore, those who do not continue to develop and educate themselves will find it difficult to gain alternative employment should they be the victim of job displacement. Regardless if a Carbon tax makes it though the parliament or not the fact still remains the Australia is rapidly moving to a high skilled economy and must do so to remain competitive and maintain our living standard. Emerging economies are able to provide labour at a much cheaper rate than Australia causing low skill labour intensive industries move off shore.

Again, this highlights the importance of education and training and its relationship to the level of life earnings an individual can achieve. I would suggest that everyone regularly audit their skill levels to ensure they are up to date. Furthermore, your level of educational attainment needs to keep increasing; this will ensure you remain competitive in the job market. Remember, you never stop learning, if you do you may find you’ll stop earning.