Crucial chance to lift all Australians up

My article on full employment in the Sydney Morning Herald, 1 March 2022

Peter Davidson
Adjunct senior lecturer at the Social Policy Research Centre, UNSW
Sydney Morning Herald, March 1, 2022

The econocrats at Treasury and the Reserve Bank threw everything they could at the deepest recession in living memory when COVID arrived. Higher unemployment payments, wage subsidies, infrastructure investment, interest rate cuts and government bond-buying were all deployed to save jobs and incomes.

Now that they expect unemployment will fall this year to its lowest level in 50 years, they now want to keep it there as long as possible.

A similar thing happened after World War II, when unemployment fell in the war economy and governments decided to use the same economic tools to maintain “full employment” in peacetime. They managed their budgets and interest rates to sustain demand for goods and services so the workforce was fully employed.

It worked: for almost 30 years there was no major downturn and prosperity was widely shared as incomes grew and unemployment remained below 3 per cent.

We turned our backs on full employment in the 1970s, forsaking people to the unemployment queues. High unemployment was rationalised as the unavoidable side effect of the fight against inflation and budget deficits.

We have an opportunity to again put people affected by unemployment and inadequate incomes at the heart of economic policy. Will we commit to full employment, or have we lost our ability to imagine a society where practically everyone seeking employment can have a decent job?

Australia’s unemployment rate has fallen from seven per cent to 4.2 per cent, with 90,000 new workers finding jobs during November last year as our economy bounced back faster than expected.

The pull of “return to normal” is strong. We hear dark warnings from bank economists about an upsurge in inflation, employers about labour shortages, and deficit hawks about ballooning public debt.

So let’s take a moment to imagine full employment.

Most importantly, it would lift a million people on unemployment payments out of poverty. Being excluded from paid work is a tragic human experience. For too long, millions have been held hostage to economic policies that deliberately kept unemployment above 5-6 per cent for fear of a breakout in inflation.

For this sacrifice to the nation, they receive the $45-a-day JobSeeker Payment and live in destitution. We’re so conditioned to high unemployment that people affected are routinely blamed for not trying hard enough. The JobSeeker regime is brutal: life-sustaining payments are automatically suspended for minor infractions like missing a job centre appointment.

It won’t be easy to reduce unemployment further because those still on unemployment payments belong to groups that are regularly screened out of job interviews. Four out of five have been on income support over a year, one in three has a disability and four in 10 are over 45 years old. Each is a person, often losing hope, repeatedly rejected. Yet if there are enough vacancies, and we invest in decent employment services, training and wage subsidies, employers will consider people overlooked in the past.

In a modern economy where a third of workers, mainly women, are employed part-time and a quarter are in casual jobs, full employment means adequate and secure working hours as much as having a job.

Many people in retail, hospitality, caring and labouring jobs struggle to survive on a few days of paid work a week. Many don’t know how much they’ll earn next week or whether they’ll still have a job. Low unemployment alone won’t fix this, but it’s heartening to see underemployment decline as unemployment falls.

Australia used to pride itself as a place without rigid class distinctions, where everyone could make a decent living and be equally valued and respected. Now it’s claimed that people refuse some entry-level jobs because “Australians won’t do them”.

That’s become the excuse for widespread abuse of temporary migrant workers in jobs where minimum wages are honoured in the breach. Full employment can help fix this, provided we don’t rush to fill those jobs again with temporary migrants without robust protections against exploitation.

Along with workplace relations reforms, sustained full employment would help restore decent pay increases for most workers. The last time wages grew at a decent clip (over 4 per cent) was in the boom years before the global financial crisis when unemployment hovered around 4-5 per cent.

Full employment and higher incomes, not budget cuts and high interest rates, are the best solutions to the “cost-of-living” problem.

Lower unemployment, adequate working hours, higher pay, decent income support and more reliable demand for the goods and services our businesses sell – what’s not to like?

There are hurdles to overcome. We need a comprehensive system of workforce planning to ensure vacancies don’t go unfilled and employers have the skilled workers they need.

Governments would have to work with employers and unions to avert any future wage-price spiral without recourse to high interest rates. We’ll have to dampen speculation in assets like housing and shares. We’ll need productivity-enhancing public and private investment.

The first, vital step is to reject harsh austerity policies. The budget deficit is declining as unemployment falls and spending cuts would jeopardise this. Public debt is sustainable as long as output, incomes and jobs grow faster than the interest payments, as they did in the post-war period.

The real budget challenge for future governments is to raise the revenue we need to close yawning gaps in essential services like health and aged care and income support safety nets.

In the pandemic, millions of us felt the fear of losing our job. For years before that, our incomes barely kept up with inflation. We owe it to ourselves to seize this opportunity to restore full employment.

Dr Peter Davidson is adjunct senior lecturer at the Social Policy Research Centre, UNSW, and principal adviser at the Australian Council of Social Service.

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