“An unemployment rate of at least 4-6% is unavoidable”
It is often said by leading economists and government figures in Australia that an unemployment rate of 4-6% is unavoidable. Recently the Organisation for Economic Co-operation and Development (OECD) even went as far to say that they consider full-employment to be when the unemployment rate is somewhere between 4 to 6.4%. Using the OECD’s analysis, today Australia would be considered to have full-employment. Try telling that to the 750,000+ out of work!
This push towards naturalising high rates of unemployment is an important part of neo-liberal economics. Under this highly influential economic doctrine, governments must withdraw from the economy as much as possible and allow business complete freedom to do as they wish. This is why the current Coalition Government refuses to create jobs to fix our unemployment crisis and instead repeats again and again that “businesses are the real job creators in the economy”. A quick look through Australian history demonstrates how wrong this belief is.
Between 1945-1974, the unemployment rate in Australia averaged around 2%. During this time, successive Australian governments – even Liberal governments! – ran extensive job creation schemes to ensure that unemployment stayed at these low levels. This was part of a world wide economic trend that made sure most citizens had the opportunity to work, known as Keynesians Economics.
However, beginning in the mid to late 1970s, there was global shift away from this economic model . As neo-liberal economics became dominant, Governments around the world gradually withdrew from their role as the primary job-creator. Australia was no different. It was only after then that it became politically acceptable in Australia for the unemployment rate to reach levels in excess of 6%.
Clearly, if the Coalition government was serious about reducing unemployment, it would merely have to resort to the previous economic model and once again become the primary job-creator.
According to Australian economist Bill Mitchell, there is a simple way to completely obliterate unemployment. Bill Mitchell calls this plan the ‘job guarantee’. Under this proposal, all unemployed people would be offered a full-time, minimum wage job at their local council. Today, if 750,000 unemployed people hired under this scheme, at a minimum wage of $33,000 per year, it would cost roughly $24.7 billion. In 2012-2013, unemployment assistance was $8.5 billion, most of which would no longer be needed to be spent. This means the Job Guarantee would require an increase in government spending of approximately $16.2 billion per year, or around 3.8% of GDP. Considering that the Abbott government recently spent $24 billion on 58 fighter jets, it is not a case of lack of money available. Ignoring for the moment that this policy would go some way to obliterating poverty in Australia, economically speaking it would also be a massive boost. The increased economic activity coming out of 750,000 newly created full-time positions would be significant and would lift the entire Australian economy.
There is more to this story? The businesses don’t like to be taxed and believe that they earned this wealth via their own brilliance. Now , with all this wealth, what do they do with it? Instead of using it altruistically they use it to undo government policies that favor equality. They use it fund injustice and a society where there is socialism for corporations and wealthy because they can buy the politicians.
If you want to chance this and stop it from occuring you need to stop inequality. You need to capture the state. How? Well who decides on the profits on the businesses owns the state because they will spew forth biased arguments that seem plausible when look at in a vacuum.
We have to democratize the workplace. No more centrally planned workplaces. That is the best possible solution to stop concentrations of power that will be used to abuse the system in the favor of the few.
How? Self directed employee owned businesses styled on Mondragon. This is the important aspect because now the wealth is controlled by employees who actually produce something rather then manage it.
There are obviously more aspects to discuss but a great resource is Dr. R. Wolff. We can do better then the current system that puts 1.5 million Australians in the too hard basket.
The idea from Bill Mitchell sounds interesting. One thing that would reduce the direct cost even further is the income tax that would be collected by the government from all these formerly unemployed workers.
Seriously, why can’t the government just directly create jobs? Why the indirect approach of such and such economic policy and this and that measure – why can’t they just literally create jobs, directly, for unemployed people? Why can’t they sit down with each unemployed person for several hours and find out what that persons skills, abilities, and general attributes are, and then come back in a few weeks and assign that person a newly created custom made government job for them?
The only thing that I would add is that I do think as part of the employment condition for such ‘custom made’ government jobs, that the employee should have to look for other jobs as well – perhaps 80% of the job should be spent on the job itself and the other 20% of the job should be spent on looking for other work (and looking mostly in the private sector). But if they can’t find other work at least they have a secure job. Not only would the formerly unemployed person benefit from the economic benefit of the job, but they would have higher self-esteem etc.
Seriously, why are governments hesitant to directly create jobs? Why do they insist on relying on indirect means?