Prologue and Overview
The maintenance of conditions which will make full employment possible is an obligation owed to the people of Australia by Commonwealth and State Governments. Australian governments will have to accept new responsi-
bilities and to exercise new functions, and there will need to be the closest collaboration between them. Unemployment is an evil from the effects of which no class in the community and no State in the Commonwealth can hope to escape, unless concerted action is taken.
Full Employment in Australia (White Paper, 1945)
Australia is experiencing the most damaging crisis since World War II. .About one and three-quarters of a million people who would like to work are unable to do so, causing a huge loss of national income and immeasurable, traumatic damage to individuals and society. Yet public discourse does not reflect the seriousness of this disaster. The purpose of this book is to focus attention on unemployment, to describe the nature of the crisis, to analyse its causes and to advocate solutions. The book is both analytical and prescriptive.
Episodic increases in unemployment to ever higher levels have been a defining feature of the past two decades. From early in World War II until the mid-seventies the number of people who were unemployed was normally well below 100 000, and quite commonly lower than the number of jobs available. Since 1975 a minimum of 300 000 people have always been unemployed and for most of that period the total has been much higher. Early in 1993 the terrible total of over one million was reached. As well, over a million more
people would like employment but are not actively looking for work--although three-quarters of those say they would be ready to start within four weeks. This makes the actual total of those unemployed around one and three-quarter million.
The human, economic and social costs of this tragedy are enormous and far surpass any other feature of contemporary Australian society. The trauma experienced by the unemployed and their families from loss of income and economic security is obvious (chapter 2). The human costs of this poverty are terrible: the destruction of personal dignity and self-confidence; the loss of hope and personal identity; the damage to health and family life; the denial of the opportunity to contribute to the community; the severe constraint on social life; and the anger and frustration which can lead to violence, substance abuse and sometimes to suicide.
The economic cost to the nation is intuitively clear, but the enormity of that loss is less well known (chapter 3). National income is around $35 billion a year lower than it would be if unemployment were only about three per cent--a rate close to full employment. This massive waste reduces the living standard of every Australian, and dwarfs the costs of other inefficiencies. The direct budget cost of unemployment from increased outlays on income support and loss of revenue is at least $20 billion. The persistence of high unemployment is largely responsible for the severe pressure on government budgets.
Yet there are still a few people who blame the victims, who criticise 'dole bludgers'. More importantly there are still many policy advisers and commentators who are so blinded by their doctrinaire theories that they are unwilling to make growth of employment their highest priority. Most tragically of all, many people of goodwill have lost hope and regard high levels of unemployment as inevitable. During the 1993 election campaign commentators frequently remarked that voters didn't believe that any party knew how to achieve full employment. In fact they commonly wrote that whatever happened unemployment would still be around eight per cent by the end of the decade. There is widespread fatalism about unemployment.
This book addresses each of these issues. Just a brief look at the evidence shows that most current unemployment is involuntary, for there are thirty-three people actively looking for work for each job vacancy. Chapter 3 demonstrates this and also presents a comprehensive analysis of the dimensions of unemployment and the injustice it causes. Chapters 4, 5 and 6 discuss the history and causes of the crisis and the economic theories and other national and international influences which have led to the current disaster.
The balance of the book describes strategies, policies and changes in management and union practice which would increase employment. There are no panaceas. Scores if not hundreds of initiatives are required, but several are essential. This prologue outlines some of these central requirements.
The first and principal condition is the will, in government, business, unions and every part of the community to aim for full employment until there is 'work for all'. This goal, the title of this book, is ambitious. Some would consider it utopian. Yet no society can be satisfied when many of those who want to work are perpetually denied the opportunity to do so. Participation in the labour force is both a right and a duty for those who are able. Australia cannot endure a situation of permanent and inevitable rejection and dependency for hundreds of thousands of its citizens. Ending unemployment is the most important means of ensuring economic security for all, of reducing poverty and of achieving a more equitable, harmonious and productive society.
The issues involved in achieving the goal of work for all cover many aspects of economic, social and political life. But success will not be achieved without a growth in the strength of reasonable hope. That hope was unquestioned in the first stage of post-war Australian life, the fifties and sixties, when the goal of full employment was central to economic and social policy. In the second stage, for the last twenty years, other goals, notably reduction of the rate of inflation, have been pre-eminent in the minds of economic policy
makers. That was always unbalanced, but now that inflation is so low it is completely misplaced. As we enter a third stage, more encompassing goals are needed, which must also be clearly focused.
One way of expressing goals which is likely to be widely acceptable is to aim for Australian society to become more secure, free, just and creative. These are goals for which governments and all sections of the community can aim (chapter 7). Employment opportunities for all who want them are a central element of economic security, as is a fair income, the right to own property, community solidarity, peaceful conflict resolution, national economic viability and ecological sustainability. Freedom involves the opportunity for all to look after themselves, to have a fulfilling life, and to participate in all forms of organisational and national government. Social justice includes equity in the distribution of income, wealth and power and respect for the dignity of all people. And a creative society enables everyone to enjoy enlivening relaxation, exciting sport and entertainment and cultural, intellectual, scientific and spiri-tual enrichment. In this new stage of Australian life more attention must be given to growth of a civic community.
Adoption of these goals will involve displacing the extreme individualism of the economic fundamentalists. The assumptions they make of income-
maximising individuals and perfectly competitive markets are simplistic and misleading, and have been proven wrong because their policies have failed.
Misjudged policies such as wholesale financial deregulation which cre-ated the conditions for the explosion of overseas debt, high interest rates and excessively tight budgets which were the precipitating cause for the early onset of the recession, were certainly amongst the causes of the rapid growth of unemployment. Wiser and better modulated macro-economic policies are part of the answer, but much more is clearly required. Well-judged national economic policies will stimulate economic development, but even steady econ-omic growth of four or five per cent would reduce unemployment by only around one per cent a year. Clearly many changes to policy and practice are essential.
A key feature of an employment-generating and sustainable development strategy must be in improvements to community services. Future employment growth is likely to be concentrated in human services. Unless these are allowed to grow with population and improve to meet community aspirations, the quality and accessibility of services will not only be unsatisfactory, but the employment which they could provide would be withheld. A large proportion of community services are in the public sector, and therefore continuation of rapid employment growth depends on expanding public outlays. One reason for the growth of unemployment during the last two decades has been the severe restrictions on public outlays. Total Commonwealth funding for the states--which are the main providers of community services--has fallen from 9.5 per cent of Gross Domestic Product 'GDP' in the mid-seventies to 5.4 per cent now. This massive reduction is the main reason for the cutbacks to services which all state and territory governments have been forced to make.
Funding increases are required to upgrade the quality of schools, institutes of technology (from which 150,000 applicants were denied entry in 1993), vocational and adult education, and universities; health services; and services for the aged, the very young, the abused, the disabled and the deprived. This would make Australian society more humane. To become a more civilised country, support should be increased for the arts and for the establishment and management of a comprehensive, representative system of protected parks, adequate to ensure the survival of Australia's unique
Education and health expenditure is also an effective investment in econ-omic development. Physical investment is vital, but like human services it too has been deliberately run down. Spending on the national infrastructure of roads and railways, ports and airports, electricity and gas, water and sewerage, and telecommunications and broadcasting has fallen from about ten per cent of GDP in the early fifties to less than five per cent now. The perversity of the economic fundamentalists has even extended to slashing funding for research, development and demonstration. The vitality of the economy and of the scientific community must be renewed by improved funding, which would also directly and indirectly stimulate employment. With the end of the Cold War the international strategic environment has improved. Defence expenditure could be responsibly reduced to make way for some of the much higher priority services described above.
A number of revenue initiatives are feasible and desirable not only to raise funds to improve community services, but also to increase equity and demonstrate fiscal probity (chapter 9). The overall impact of changes to taxation during the last couple of decades has been regressive. Many people in the community would accept some increase in revenue collections in the interests of expanding employment and sharing the costs of unemployment more
Chapter 9 outlines several suggested revenue options. Progressive tax changes which should be introduced include an employment levy; reforming the tax treatment of superannuation; halving dividend imputation and restraining executive incomes through removing high salaries as a deductible expense for corporate tax purposes. Others which should be considered include increasing the top marginal tax rates; introducing a millionaires' tax on inheritance; and ending negative gearing. Abolishing payroll tax and replacing it with an non-renewable energy use tax could simultaneously increase employment and reduce carbon emissions. Investment should be financed through borrowing.
The long-term unemployed experience the most destructive effects of unemployment (chapter 10). The tightening of the definition from six to twelve months in the mid-eighties makes the situation appear less serious, but has no impact on the reality. A month of constantly looking for work is debilitating--three months is traumatic. The original definition must be restored. Labour market programs for the unemployed are now well targeted but under-funded. Substantial increases would not only provide additional jobs but also more training--and in ways in which the net cost is far less than the total because of the reduction in income support and the increase in revenue. This is also true of the special employment programs for Aborigines, migrants and the disabled. The conditions for receiving job search allowance are too restrictive and should be relaxed.
Recovery of employment in Australia is being constrained by stagnation in Japan and Western Europe, deterioration in Eastern Europe and slow growth in North America (chapter 11). Only the rapid growth of East Asian countries is providing growing markets for Australian exports. A co-ordinated program of global reflation would benefit all countries and should include a general fiscal stimulus and further reduction in interest rates.
Introduction of a small international, uniform tax on foreign exchange transactions would slow down speculative capital movements, increasing both exchange rate stability and revenue. This crucial policy initiative would constrain the disproportionate influence of the foreign exchange dealers and increase national economic independence. Reforms of international econ-omic institutions are available which would end the deflationary bias of their policies.
Sectorial policies were misconceived during the eighties through being based on a presumption of competitive markets rather than the reality of frequent market failure. So industry and regional policy must be upgraded to offset market failure, by supporting new and small businesses to establish or expand their activities and larger firms to increase exports. The metaphor of the level playing field is discredited. Alternatives to the attitudes and policies of the eighties are available which have intellectual coherence and power. The East Asian economies are potent examples of the success of economic systems where private and public sectors co-operate effectively.
Rapid growth of green jobs in environmental industries is beginning (chapter 12). Employment growth would be stimulated through expansion of industries preventing and reducing pollution; recycling, reprocessing and use of recovered materials; increasing use of energy sources other than those causing carbon emissions; rehabilitating and restoring disturbed and contami-nated sites; environmental management including expansion and more active management of protected areas; and eco-tourism.
Changing our conception of work and its organisation is part of the way forward (chapter 13). Not only should self-sufficient activity such as housework, parenting and house maintenance be recognised as work, but the structures of paid work should be much more flexible. Payment of a more substantial homemaker's allowance would support many parents in their preferred activity and also reduce growth in the number of people seeking paid employment. More people of both genders and all ages would prefer to work part-time than are currently able to, so opportunities must be expanded and constraints removed. For example, older workers should be enabled to move into part-time work after they turn fifty-five and be allowed to continue beyond sixty-five. Although this would increase participation, it would reduce
One of the best prospects for increasing employment may be through negotiating reductions in hours rather than increases in pay, in return for improvements in productivity. If the overworked simply took more leisure rather than higher pay, work could be distributed more equitably. Means for encouraging the crucially important growth of self-employment include easier access to credit and expansion of the local enterprise scheme.
An essential immediate step towards growth of employment is to stop corporate and public sector labour shedding. It is perverse to continue the relentless, destructive and obsessive drive for efficiency when the costs of that drive are ever higher unemployment and when the claimed net benefits commonly don't include estimates for the added cost of even higher unemployment. This change would be easier for business to make if payroll tax were abolished and if the climate for business were kept as conducive to expansion as possible by, for example, improving access to capital and keeping interest rates as low as possible.
The principal requirement for rapid expansion of employment is the will to achieve work for all (chapter 14). Both humanity and self-interest combine to motivate that search. No one can be entirely relaxed about the Dickensian polarisation of Australian society which we are now experiencing. Nor can anyone with imagination fail to foresee at least some of the consequences of the social disintegration which will inevitably occur if a large underclass becomes entrenched. During the last election Australians described unemployment as the issue about which they were more concerned than any other. The Labor government is likely to be judged at the next election more on its success in reducing unemployment over any other factor. Given this electoral reality, growth of employment must be the government's highest priority. Management, unions and community organisations must also recognise these realities in their decisions.
Readers who are familiar with Australian economic debate during the last couple of decades may prefer to move straight to the prescriptive chapters. The seven chapters from 7 to 13 contain proposals for government policy innovation and for changes in business and union practice and community attitudes which would contribute to achieving work for all. Chapter 14 discusses the political feasibility of these ideas. The proposals are summarised in chapter 15.
This book does not attempt to present a grand theory. The world is too complex for general theories, and those who have attempted them recently have been shown to be at least simplistic and often doctrinaire and misleading. The most sensible approach is to be eclectic, drawing on reasonable ideas from wherever they come and from wherever they have worked. The book draws together and attempts to coherently develop these ideas. If these proposals are applied in a sustained way it would be possible for Australia to offer work to all who want it and so become the humane and civilised society in which we would all like to live.