In August 1999, 653,000 Australians were officially unemployed, with an unemployment rate of seven per cent after eight years of sustained economic growth. Almost 30 per cent or 192,000 people had been unemployed for a year or more: of these, 113,000 had been unemployed for two years or more.
This represents a tremendous waste of human potential and lost production. It also increases costs to taxpayers and imposes great strains on the welfare system and community services.
It fosters a sense of hopelessness and alienation, particularly in the long term or chronically unemployed. Unemployed people have increased levels of sickness and mental illness, and there is also a high level of correlation between young male unemployment and young male suicide.
The average duration of unemployment has steadily increased in Australia since the early 1970s when it was as low as seven weeks.
Economic growth does increase employment, but has not been sufficient. Since the early 1970s, Australia has been experiencing what might be called the "rising mountain" pattern of unemployment, where each business cycle has seen unemployment peak at a higher level than the previous one.
Finding the Factors
The deteriorating performance of the Australian labour market is the result of a range of factors:
- governments have loaded more and more regulations on employment, raising the costs and risks of hiring;
- youth wage rates have continued to rise towards adult rates, disadvantaging young people against those with greater experience, productivity and proven track records (almost 40 per cent of the unemployed are aged 15 to 24 years);
- The award system's complex series of minimum wages, making illegal a whole series of potentially successful bids for employment by the unemployed, has a range of effects, including ensuring the results of the wage "break-outs" of the Whitlam and late Fraser years remained embedded in the system, retarding employment recovery. It also inhibits the ability of regions hit by economic changes to adjust, resulting in higher structural unemployment.
Regaining full employment
Ultimately the best protection for workers is full employment, the ability to easily change jobs to a more satisfactory one. It is precisely the most disadvantaged workers, such as people with a disability, who most benefit from full employment, and who are most hurt by entrenched unemployment, since they are the ones most likely to fall by the wayside as the threshold of employment is raised.
So the greatest step to improving the employment prospects for the disabled is to lower the threshold at which workers and employers can reach mutually satisfactory employment exchanges. This sets in train a virtuous circle of higher employment leading to higher production and incomes, feeding back into more jobs being offered and so it goes on.
Legitimate concerns that some people may thereby fall below an acceptable benchmark of income can be met by devices such as an "earned income tax credit", where the government tops up employment income. Such an arrangement could be extended to provide various forms of extra assistance to those, such as the disabled, with extra needs.
Even that may not be enough for some people who have become so divorced from the employment experience that their productivity is not sufficient to interest any likely employer without extra assistance even in a de-regulated labour market. In such cases, wage subsidies are a rational policy response. Work-for-the-dole can also have particular value in keeping people in touch with the employment experience.
Setting the policy direction
So the appropriate policy thrust is clear:
- government should stop intervening in labour markets in way which discourage employment;
- an earned income tax credit or similar mechanism should be used to "top up" labour incomes to an acceptable standard rather than regulation of wages,
- such "top-ups" should include adjustments for specific disadvantages,
- extension of reciprocal obligation via such programs as work-for-the-dole and
- use of bridging wage subsidies for those whose productivity is insufficient to interest any likely employer.
The income "top up" mechanism would raise issues of effective tax rates and it, along with the wage subsidies, would have involve significant expenditures.
Such expenditures would be offset by reductions in unemployment benefits and increased tax receipts.
Consider the opposition
Most of the government interventions in the labour market ostentatiously give benefits to the employed majority, with the costs being hidden and largely carried by the unemployed minority.
They are also justified on the basis of grand social values, like equity, social justice, stopping exploitation and so forth. Unemployment is also a risk confined to a relatively small percentage of the population, if the young and the long-term unemployed are excluded, unemployment rates over the last 25 years have been in the range of two to four per cent.
This explains why persistent mass unemployment has been so tolerated and why it becomes salient as a political issue only when unemployment is rising rapidly, that is, when there is suddenly a much larger pool of people threatened by unemployment: either themselves or a member of their close family.
There is also a range of special interests fostered by the current arrangements, particularly all those employed in or around the arbitration system, lawyers, union and employer organisers, industrial relations specialists.
For more than 25 years, this conjunction of factors has been sufficient to keep Australia's labour market institutions in place: resulting in entrenched mass unemployment and consequent waste and human suffering. Like other disadvantaged workers, the disabled suffer particularly badly from this failure.
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