What happens if you apply standard economic consultancy “modelling” techniques to the other side of the productivity debate? This document — which fell off the back of a truck — helps explain.
I recently wondered aloud on Twitter about what would happen if now-standard “independent modelling” techniques so favoured by business organisations pushing their productivity agenda were reversed and used by those on the other side of the debate — those who argue that worker entitlements should not be pared back further. My Twitter musings resulted in Crikey obtaining the following correspondence from a whistleblower at a hitherto-unknown Canberra economics consultancy …
Thank you for choosing Credulous Consulting for your project. It has been our pleasure to work with you to produce this important contribution to public policy in relation to industrial relations reform and workplace productivity.
As per your brief in preparing independent modelling of the impact on Australian economic growth of adopting WorkChoices versus the current Fair Work Act industrial relations framework, we have followed a series of careful steps.
1. As requested, we examined private sector ABS labour productivity data under Labor’s industrial relations reforms from 2008, and compared it to that under WorkChoices. This gives us annual market sector labour productivity growth of 1.6% under Labor versus 1.2% under WorkChoices. Other productivity data, if appropriately cherry-picked, would have provided a greater difference between the two, but we noted the request in your brief for “data with a little rigour” (once we had looked up what the word “rigour” meant).
2. In order to provide an indicator of potential economic impacts of a return to WorkChoices, we have used our bespoke general equilibrium model of the Australian economy (CREDUL) to meaninglessly extrapolate this data over a number of years using current GDP levels. This gives us relative levels of GDP in future years based solely on the differences between the respective rates of labour productivity growth.
I am therefore pleased to advise that in 2025, GDP under Labor’s productivity growth would be $83.7 billion greater than if we returned to productivity levels obtained under WorkChoices. However, we understand that you may have found this figure insufficiently large. We are in a position to also advise that in 2050, GDP would be $347 billion higher under Labor productivity levels.
3. In order to provide you with media-friendly numbers, we have also calculated the difference in 2050 GDP between the scenarios per capita based on current population. Accordingly, we are pleased to advise that our independent modelling demonstrates that a move back to WorkChoices-style industrial relations laws will “cost” each man, woman and child in Australia $15,082 in lost economic growth.
However, we strongly recommend you instead divide the total GDP number by the number of households in Australia, a smaller number. This enables you to state with confidence that each family in Australia will suffer $38,120 in lost economic growth with a return to WorkChoices policies. This is, as you can see, a major cost for Aussie families doing it tough. We recommend you round this down to $38,000, a figure which you may then call “conservative”.
An alternative approach is to calculate the impact on Australia’s children. The comparable figure is $79,000 for each child in Australia, enabling you to ask that someone please think of the children when it comes to industrial relations reform.
Further, to assist journalists in enabling readers to comprehend a figure of this size, we recommend some form of comparison for this figure that, while entirely meaningless because of the different bases involved, gives readers some indication of scale involved. It would be correct, for example, to note that the 2050 figure of $347 billion, in 2012 dollars, would be the equivalent of losing the mining industry altogether right now. We suggest this is accompanied by an exclamation mark.
4. As discussed, our polling arm, Credulous Marketing, has also conducted an extensive survey of union leaders on the need for a return to WorkChoices. We recommend for media purposes that you refer to “senior executives of HR and labour organisations” instead of the potentially misleading term “union leaders”. Our survey reveals that 100% of senior executives surveyed believe it would be counter-productive and economically damaging to return to WorkChoices.
In order to strengthen the authoritativeness of this result we have converted it into a scale from one to seven. This yields a key metric that a return to WorkChoices is rated an average of seven on our scale, indicating severe economic damage. We look forward to conducting follow-up surveys using the Credulous Consulting Economic Outcomes Scale to provide you with a time-series analysis of changing attitudes on this issue. We anticipate this will become an important addition to the schedule of economic data releases every quarter.
5. We have also commissioned our auditing arm (recently rebranded Credulous By The Numbers! after market research revealed opportunities in developing a social media “buzz” around the excitement of auditing) to check that we have added everything up correctly. Credulous By The Numbers! has signed off on the documents and you are accordingly able to refer to the results as “independently audited”.
We trust this independent, independently audited, conservative modelling fulfils your brief. We anticipate seeing the results of our work selectively dropped on friendly newspaper journalists and then carefully placed on a page on your website that will be almost impossible to find without a direct URL.