On the demand side of the labour market, the Australian economy has not been generating sufficient unskilled jobs over the last three decades. Under these circumstances, Indigenous Australians have found it difficult to receive job offers. In other words, there has been a strong demand side influence on Indigenous employment outcomes.

Here the policy stance is clear. Government is of the view that wages are too high for the unskilled and that something should be done, over time, to reduce the relative living standards of the group. To facilitate this process, the government has introduced a Fair Pay Commission to attempt to prevent significant pay increases for the low paid. This role has not been explicitly announced, except to say that employment considerations will play a larger role in wage-setting than in the past. In a situation where there is heavy unemployment and a lack of job opportunities among the unskilled, this must mean that unskilled pay levels will fall, at least in relative terms.

It is important that we have a firm view as to the relative importance of demand and supply side influences. If the main problem is the demand side, then reducing welfare incomes to change supply side incentives will have weak employment effects and mainly reduce incomes. Similarly, if the supply side is the problem, attempting to create additional jobs for Indigenous people by lower wages will also be relatively ineffective. Lower wages will just reduce the income of those employed without the beneficial effect of extra jobs. So, we should ask, ‘What can we learn about the relative importance of demand and supply influences from the NATSSIS data?’. I think the answer is that we can learn very little. We need more direct information on the rate of job offers to Indigenous people and the rate at which Indigenous people fail to search for jobs and the reasons why.