Claims that the loss of car production jobs will hit manufacturing generally and lead to massive job losses are readily refuted, a special economic report says.
The report estimates direct and indirect job losses to peak in 2018 at 8,800 – much lower than the figures estimated by the State Government.
However, the effect on unemployment in northern Adelaide is predicted to be significant.
“Car assembly plants are no more a driver of innovation than manufacturing generally,” the SA Centre for Economic Studies (SACES) report says.
The December 2013 Economic Briefing report – released to SACES’ corporate members and government agencies today – includes a special focus paper, “Life After Holden”.
The paper says: “The most methodologically sound estimates, based on a scenario of complete closure of the Australian motor vehicle industry over the period 2017 to 2018, indicate that total job losses in South Australia will reach 8,800 in 2018.”
The estimate combines direct reductions in employment in the industry and secondary job losses caused by the resulting fall in domestic demand, partially offset by increased employment in other manufacturing due to the lower dollar.
The pinch will be felt in specific areas of Adelaide, the report predicts, including unemployment levels of more than 20 per cent in Elizabeth.
“Even at the broad regional level the impact on the worst affected region, northern Adelaide, is significant, with an estimated increase in its unemployment rate (as of 2011) from 6.8 per cent to 8.8 percent,” the report estimates.
“The impact at a less aggregated level is even more striking. Elizabeth, the region with the second highest share of motor vehicle manufacturing employment already has a high unemployment rate, 17 per cent in 2011, almost three times higher than the state’s then average rate of 5.7 per cent.
“When GMH (ceases) in 2017, assuming local economic growth has remained subdued, then the unemployment rate in Elizabeth could exceed 20 per cent.”
The report says State and Federal governments have two challenges in addressing the impact on workers.
“One of the most important policy responses should be to remove any impediment to labour market adjustment amongst the affected workers through support for participation in re-skilling and training, assistance with relocation to areas and industries that have high growth in employment and vacancies and assistance with housing.
“The second policy response is to provide regional development assistance, focused explicitly on building and/or diversifying the economic base of a region.
“A key principle in any form of adjustment assistance should be that it is specifically targeted at workers, especially those with skills made obsolete or redundant by structural changes.
“It should also include measures designed to strengthen the capacity of regional businesses and organisations to anticipate and adapt to adjustment pressures in order to build on-going regional resilience.”
In its assessment of previous policies that subsidised the car making sector, the SA Centre for Economic Studies’ researchers said it was hard to justify.
“The rationale for making cars in Australia is non-existent.
“In 2012 vehicle production in Australia, was approximately 180,000 cars per annum in comparison to Thailand, Canada, Mexico and Brazil (in the 2.5 million to 3.5 million range), India, South Korea and Germany (4.1 million to 5.6 million range) and Japan, USA and China (9.9 million to 19.2 million range).
“These numbers underscore the structural change and external forces (e.g. greater investment and production in lower wage economies) in the location and scale of motor vehicle production and consequential changes in the sectoral and locational patterns of employment.
“Nor is there any other advantage to production in Australia which could offset the lack of scale such as a niche brand position or superior access to markets.
“A range of justifications are offered as to why automotive manufacturing, almost alone amongst Australian industries needs extensive on-going assistance.
“Many of the claims are readily refuted.
“The extent to which local assembly plants sustain an ‘ecosystem’ of suppliers, which could then potentially use their local experience to enter the global supply chain is diminishing as local assembly plants are increasingly sourcing components internationally which is itself a function of global production platforms.”
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