Links with the jobless

DR CONNOLLY of DEET claims (AFR, November 9) that the existing level of wage dispersion did not stop Australian employment from growing faster than in some OECD countries between 1983 and 1993.  While acknowledging the difficulty of establishing a link between unemployment and active labour market programs (ALMPs) -- because of "the many other factors influencing unemployment" -- he also claims (rather inconsistently) the OECD has presented international evidence that such programs do reduce unemployment.

In fact, Dr Connolly's analysis needs heavily qualification:

• 1983 was the "bottom" for employment in Australia but not in most other OECD countries.
• 1993 was the bottom for employment in most OECD countries but not in Australia.
• Apart from those more favourable start and end points, Australia's faster growth in employment also reflected its faster growth in population (and workforce).
• A more effective test of labour market performance is how well Australia's faster growth in working-age population has been absorbed into the workforce.  Australia's (OECD standardised) unemployment rate increased between 1983 and 1993 from 9.9 per cent to 10.8 per cent while the OECD average rate fell from 8.5 per cent to 7.9 per cent.  Moreover, the 1995 OECD Survey of Australia suggested that our NAIRU increased from 6.6 per cent in 1987 to 7.4 per cent in 1994 -- a damning indictment of the over-regulation of the labour market.
• Those EC countries which have been most involved in labor market programs also experienced an increase in unemployment between 1983 and 1993, hardly a good recommendation.
• The OECD's Employment Outlook is produced by a section of the OECD that is generally sympathetic towards the use of ALMPs.

Of course, insufficient wage dispersion is not the only factor holding unemployment up in Australia.

There is also a whole raft of unnecessary regulations and union restrictive practices.  Even so, to the extent that the present award system is resulting in the payment of some higher wages than is justified by productivity performance, that is maintaining higher unemployment than is necessary.  The fact that CRA is reportedly prepared to pay a large amount a year per employee to move its employees out of the system indicates its cost.

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