China-Australia Free Trade Agreement: The lump of labour fallacy resurges

The China-Australia Free Trade Agreement (ChAFTA) is a landmark victory for Australians, opening up a cornucopia of future export opportunities. Yet unions and industry groups were quick to criticise the free trade deal between Australia and China, claiming the deal will put local jobs at risk.

Let’s be clear from the start: the newly-signed FTA will boost Australian jobs, creating new possibilities and demand in our economy.

In a clearly self-interested criticism, the Australian Council of Trade Unions (ACTU) points to the new agreement opening Australia’s door to more foreign workers, which is claimed could “undermine local jobs and increase unemployment”. Along the same lines, the Electrical Trades Union states “Australian workers will miss out on thousands of job opportunities”.

These arguments do not have any foundation in sound economic theory, nor in most evidenced-based research. China is already Australia’s biggest trading partner, reaching $142bn of bilateral commerce, with Chinese investment in Australia soaring to $64.5bn last year. The ChAFTA will simply add to these numbers.

The misconception that the more workers there are, the less work there for everyone, is not new and can be traced back as far as the nineteen century. It relies on the zero-sum assumption that there is a fixed amount of work to done, and therefore, someone’s gain necessarily means someone’s loss.

The 1,800 or so annual Chinese workers allowed to enter Australian as contractual service suppliers, or those brought for infrastructure projects worth over $150 million, do not constitute a threat to local jobs — as many other jobs will be created in the process. For instance, a recent report on Australia’s FTA with China, Japan and Korea shows it will create almost 200,000 jobs in the next couple of decades.

In economics, the myth of a fixed amount of work to be distributed to whatever amount of existing workers is dubbed the ‘lump of labour’ fallacy, which ignores new possibilities to stimulate growth and job creation. Yet one must look at the economy as a growing pie, not a fixed amount to be carved up in a zero-sum game.

For instance, the same ACTU that criticises the recent FTA with China has long advocated for Australia to clamp down on the number of backpackers and other foreigners receiving working visas (in particular 457 visas) in order to “allow more opportunity for young Australians to enter the workforce”.

When the new Federal Budget proposed to disproportionally hike income tax on holiday visa workers, some commenters had a schadenfreude moment, believing that making things more difficult for those workers would result in more jobs for Australians.

Not surprisingly, a proportion of backpackers and international workers are already turning their backs on Australia with devastating outcomes on some local communities. Most holiday workers tend to spend their (hard) earned money locally in Australia, boosting the community retail industry while at the same time supporting business that struggle to find staff.

Australia must recognise that the past 25 years of uninterrupted economic growth largely draws in our open society. We should not let our public debate be hijacked by vested interests using fear to benefit from a misinformed public opinion. The China-Australia Free Trade Agreement will bring jobs and business opportunities for all Australians committed to hard work and ingenuity.

For the sake of Australia — and Australians — we should hail the agreement as the blueprint for an economic and employment win.