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Full employment is a policy choice Scott Morrison must make

We can have full employment again. We can future-proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come

We can have full employment again. We can future-proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come.
By WILLIAM MITCHELL

Japan is the world’s first post-­neoliberal economy. It has been a prime case study in Modern Monetary Theory for three decades. Let me explain.

Like developed nations across the world, Japan drank the neo­liberal Kool-Aid of the 1980s. In 1991, excessive private debt caused a massive commercial property collapse. The government’s response, thankfully, did not follow the neoliberal playbook. Instead, the Japanese pushed economic policies to the extreme of conventional limits: continuously high deficits, high public debt, with the Bank of Japan buying much of it.

Most economists recycled predictions of high interest rates, ­accelerating inflation and bond market revolts. None came to pass. Instead, Japan maintained low unemployment, low inflation, zero interest rates and strong demand for government debt. For three decades now.

Undeterred, these economists continue to promote a fictional economics that keeps citizens in the dark about the true capacity of government and the consequences of using that capacity to sustain full employment.

They manufacture fear about public debt and deficits, predict government insolvency, invoking these names — Weimar, Zimbabwe or Venezuela — to provoke fears of hyperinflation. They rehearse moral arguments about today’s government spending burdening our grandchildren.

None of their predictions has materialised.

READ MORE:The case for a government jobs guarantee

Which is why we are hearing more about MMT. It has an impeccable record of prediction and offers answers that the economic orthodoxy fails to provide.

Renowned British economics journalist Martin Wolf, commenting on MMT, recently wrote: “In my view, it is right and wrong. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.”

The Australian’s Alan Kohler has made the same observation.

MMT exposes these fictions. But even those central bankers and economists who understand the fictions on which the orthodox view relies think it is better for their political masters and the general public to be kept ignorant.

In the real world, currency-issuing governments have no ­intrinsic financial spending constraint. They can purchase whatever is for sale in their own currency, including all unemployed labour desiring work.

Mass unemployment is a ­political choice. Imagine if all Australians understood that, rather than labouring under the current deception.

It was not too long ago when full employment was official government policy.

The 1945 government white paper on full employment begins with a fundamental commitment to the Australian people. “Full employment is a fundamental aim of the commonwealth government. The government believes that the people of Australia will demand and are entitled to expect full employment,” it states. This commitment was abandoned in the mid-70s.

Australians knew it was government’s responsibility to maintain spending sufficient to sustain full employment. The purpose of fiscal policy was not to achieve a surplus or deficit. Rather, they judged government on how low unemployment was.

Unemployment was a policy target, not a policy tool.

Recall that Menzies nearly lost the 1961 election because unemployment rose above 2 per cent.

Recall, also, that Australia maintained a buffer of public sector jobs that always provided easy employment access to our least-skilled workers.

So when and why did Australians become so tolerant of systemic unemployment and its attendant ills — the accumulated human wreckage, to use indigenous leader Noel Pearson’s description — that goes with it?

The answer lies in the political and economic developments we now call neoliberalism. They were supported by a series of powerful but interconnected economic myths about money, the capacity of government and our economy.

Politicians on both sides now claim that employability (preparing people for jobs) rather than full employment is the proper role for government. They claim the market will take care of jobs.

The past 30 years have not supported their assertions. We have endured elevated levels of unemployment and underemployment, suppressed wages growth, ballooning household debt and rising inequality.

The waste of human potential is staggering.

The unemployed are “managed” within Australia’s newest “industry” — the unemployment industry — and churned through pointless training programs divorced from paid work. They receive below-poverty-line income support and are coerced by pernicious work tests when it is obvious that there are not enough jobs to go around. The robodebt scandal obliges.

The victims of this policy failure are scarred with accusative nomenclature — cruisers, bludgers, job snobs, lifters and leaners — when in truth governments made a policy choice to deny them the chance of employment.

In May, unfilled job vacancies declined by 43.4 per cent. In February, there were three people for each unfilled vacancy. Now it is 7.2. Adding in the 600,000-odd that “left” the labour force after giving up looking as employment opportunities collapsed gives us 12 seekers per job vacancy. Any reasonable person knows this is a systemic lack of jobs.

MMT exposes the fictions that have underpinned our tolerance for such unnecessary labour wastage for too long.

The current government response to the crises is inadequate. I estimate that Australia has more than 25 per cent of available labour underused in some way — a massive daily loss of income growth and harm to the unemployed and their families.

There was no reason for unemployment to rise. The government should introduce what I call a job guarantee by making an unconditional job offer at a socially ­inclusive minimum wage to anyone willing and able to work.

The buffer of jobs would normally be small and would shrink as private sector activity recovers. No inflationary pressures arise because government would not be competing for labour at market prices. There is no market bid for the unemployed.

Treasury said JobKeeper required an investment of $70bn across six months to reduce the ­unemployment rate by five points (585,000 jobs). Our modelling shows that a job guarantee that reduced the unemployment rate by six points would require net investment of $53bn over a year.

The scale of this disaster is so large that Australians will have to get used to very large fiscal deficits for a decade or more to support ­income and employment growth, so that households can reduce their astronomical and unsustainable debt levels.

Any attempt at “paying down the public debt” or “getting into surplus” will be catastrophic and undermine the opportunities of our generation and those that follow.

I am working with Pearson on a proposition for a job guarantee. We can have full employment again. We can future-proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come.

William Mitchell is professor of economics and director, Centre of Full Employment and Equity, University of Newcastle. He is also docent professor in global political economy, University of Helsinki. He is a co-founder of Modern Monetary Theory.

Government should guarantee jobs as the employer of last resort

Alan Kohler, The Australian

 

Stephanie Kelton professor of economics and public policy at Stony Brook University, New York. Picture: John Staines.

Stephanie Kelton professor of economics and public policy at Stony Brook University, New York. Picture: John Staines.

 

Instead of thrashing about trying to figure out what to do with the JobKeeper allowance and JobSeeker supplement after September, the Morrison government should turn them into a permanent federal job guarantee.

Scott Morrison should go down in history as the first leader in the world to implement the great economist Hyman Minsky’s vision of the government being “employer of last resort”, as a better way of dealing with poverty than welfare.

He wouldn’t be the last if he did: we are moving inexorably into a world of Modern Monetary Theory (MMT) and much greater government involvement in the economy. It’s just a matter how much of a mess there is before the political classes actually do what’s necessary.

Qantas raised the prospect this week that high unemployment is going to be problem for years, and that even if the $10bn per month JobKeeper is continued it won’t help — potentially to the point where the health crisis turns into a financial crisis because of a wave of mortgage defaults.

That’s because JobKeeper relies on the company continuing to exist and needing the same number of employees as before. What Qantas showed is that companies will make their own judgments about staff numbers based on their own long-term business plans and prospects, independent of the government support.

In any case, if JobKeeper continues, even if it’s just focused on a few hardest-hit industry sectors, it will simply prop up zombie companies that are no longer viable and never will be. It already is doing that. For recovery to take place, non-viable companies need to stop trading.

And what is the government going to do about the five million people currently getting JobKeeper and the JobSeeker supplement after September? Simply hope they get a job, and if not just shrug and pay them the dole, and let the banks pick up the pieces, selling their houses, causing a housing collapse and financial crisis?

It happens that the JobKeeper Allowance is about the same as the minimum wage — $750 per week versus $740.80 — presumably on purpose.

The obvious thing to do is for the government to become employer of last resort at the minimum wage. Those who can get a better paying job in the private sector do so, but those who can’t have a guaranteed job with the government at $740.80 per week.

Doing what? Well, this week I spoke to one of the world’s leading proponents of MMT as well as the idea of a federal job guarantee, Dr Stephanie Kelton of Stony Brook University in New York. She told me: “There’s so much work that needs to be done and a lot of it is an ageing society as well, and should be oriented around care.

“We’ve got an ageing population, we have a climate crisis. We have unmet needs across almost every community in this country.

“The idea would be for the federal government to provide the funding, but for the local communities themselves to weigh in and to design and call for the types of jobs that would bring the most value to those communities.”

In her book published this month about MMT, called The Deficit Myth, Kelton writes that an employer of last resort policy would “effectively establish a public option in the labour market, with the government fixing an hourly wage and allowing the quantity of workers hired in the program to float.

“Since the market price of an unemployed worker is zero — that is, no one is currently bidding on them — the government can create a market for those workers by setting the price it is willing to pay to hire them. Once it does, involuntary unemployment disappears.”

The reason the proposal has become part of the MMT is that it relies on the fact that a government can’t run out of money.

The money created to pay the people employed under a job guarantee can’t cause inflation or debase the currency because by definition it involves mopping up slack in the economy — it generates both the wages to be spent on goods and services, and the goods and services themselves.

A flint-eyed Treasury official would no doubt protest that a job guarantee at the minimum wage would simply involve increasing the unemployment benefit from $565.70 per fortnight (pre-the $550 coronavirus supplement) to $1481.60 (the minimum wage).

Yes, but instead of requiring the recipient simply to look for work, the job guarantee would actually be work — after all, as Scott Morrison often says, the best form of welfare is a job.

Obviously, there would have to be some effort put into making the work useful, but there is so much important unpaid work done at the moment that it shouldn’t be too difficult, and as Kelton says, that could be left to local communities to figure out.

Of course, doing this would require an acceptance that deficits and debt are not a burden on future generations and do not have to be repaid as quickly as possibly through lower spending and higher taxes — that is, that MMT is correct, and Milton Friedman’s dictum that excess money causes inflation was a gigantic mistake.

We are still a long way from that acceptance, particularly among conservative politicians, but MMT is gaining momentum around the world as the only logical way forward.

As Kelton told me: “It turns out (inflation is) much more complicated than (Friedman thought) … you can get too much money in concert with too few goods, but it’s really the too few goods part that people are missing. It’s your supply, your productive capacity has been undermined, and you couldn’t produce the output and that led to hyperinflation.”

In any case, it comes back to the question of what the Morrison government is going to do come September: sit back and allow high unemployment to cause a financial crisis, or do something truly creative?

Alan Kohler is the editor in chief of Eureka Report

EDITOR-AT-LARGE, THE AUSTRALIAN BUSINESS REVIEW

AUWU Speaks Your Language! Interpreters Now Available

The AUWU is proud to announce that we have secured the services of the Australian government’s Translation and Interpreting Service (TIS).

This means that we will be able to arrange for an interpreters for members who do not speak English.

If you would like to arrange for an interpreter to speak to one of our advocates, please fill in our job agency advocacy inquiry form here.

If you need help in relation to a DSP issue, please fill out our DSP inquiry form here.

AUWU Speaks Your Language! Interpreters Now Available

The AUWU is proud to announce that we have secured the services of the Australian government’s Translation and Interpreting Service (TIS).

This means that we will be able to arrange for an interpreters for members who do not speak English.

If you would like to arrange for an interpreter to speak to one of our advocates, please fill in our job agency advocacy inquiry form here.

If you need help in relation to a DSP issue, please fill out our DSP inquiry form here.

Advice on choosing an (un)employment service provider

Remember, they have obligations to you.  Under this system, you are the ‘customer’.

The government pays jobactive providers $377.30 for initial appointments with under-30s and $269.50 for over 30s. Providers also receive outcome fees of $1515 when their client finds work again.

They need you, more than you need them.

The COVID-19 pandemic has given providers an estimated $210 MILLION WINDFALL

  1. Check this to find all the providers in your local area.

All of them have a Dept of Employment “star rating” from 1-5. In theory this is an indication of how many people they get into jobs but the Senate review of Australian employment services (Parliament of Australia, 2019) reported that many providers game this system.

  1. Ring every provider in your local area before deciding which one is going to get the $$ the Dept gives them when you walk in the door
  2. Ask (write down the answers. Take your written down answers to every meeting and ask for an update to Q1 every time):
    • Approximately how many of your clients started work last week?
    • Can you give me some examples of employers in [your location] that you have links with.
    • What training providers in [your location] do you work with?
    • Does your company ever ask for feedback from your clients? (How is that used?)
    • What is your company’s policy on bullying?

    Any reasonable provider will be able to provide satisfactory answers every one of these questions.

  3. If you need to change providers – here is the guideline.

https://docs.employment.gov.au/documents/transfers-guideline

You can request a transfer by calling the Department’s Customer Service Line 0n 1800 805 260

Remember: you must have a provider that you are transferring TO, you can’t just transfer FROM. See previous step for deciding.

You can transfer by mutual agreement between providers but if this is not possible you can initiate a transfer. The two main reasons are for “relationship breakdown” or “if a change in service provider would be beneficial”. You will need to be able to explain either of these and you will need to be persistent. It might take a few phone calls to the Department’s hotline before anything happens. You can also contact your local MP to help with this.