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.

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


Christian By Name, Not By Nature: Porter Punches Down On The Poor


By Jeremy Poxon on December 2, 2017

Christian Porter is commending his government for ‘taking risks’ with the lives of vulnerable people, writes Jeremy Poxon from the Australian Unemployed Workers’ Union.

Last week, Social Services Minister Christian Porter lauded his government’s increasingly punitive and evidence-deficient policies (see: drug-testing welfare recipients) as “bold” and “innovative” strategies that will continue to deliver savings to the Federal budget.

In a speech at the National Press Club on Wednesday, Minister Porter said that while some of the welfare reforms may be “controversial,” he was proud that his government is “willing to take risks” when it comes to programs that significantly affect the lives of the vulnerable.

The minister heaped praise on the notorious Welfare Reform Bill, amid stiff opposition from advocacy groups and health experts who say it would push already vulnerable people further into poverty and homelessness. For these groups, government proposals to drug test welfare recipients and control their income feel a lot more “cruel” and “unusual” than “bold” and “innovative.”

Ignoring the views of these organisations, Porter made a specific plea to Senate crossbenchers, asking them to consider the Coalition’s success in reducing the welfare budget, when sizing up whether or not to support the drug-testing scheme. Effectively, Porter told Senators to prioritise the health of the budget above the health of drug-afflicted Australians on welfare.

The Minister’s speech largely focused on what he described as the Coalition’s fiscal “successes” compared to Labor, in reducing expenditure on social security and welfare dependency. He said that spending grew over 9% a year for six years under Labor, compared with 2% under the Coalition.

While it is true that the rate of welfare spending has slowed significantly under the Coalition, Porter neglected to mention that spending grew under Labour, mostly because of a tiny spanner in the works called The Global Financial Crisis. Between Rudd’s election in November 2007 and the middle of 2009, the number of unemployed people jumped from 470,000 to 660,000. Accordingly, the Labor government increased spending to look after those extra claimants needing welfare support during this difficult time. It doesn’t bear thinking about what would’ve happened to these people had someone like Porter been in charge of their payments.

Even though Australia already has one of the toughest compliance systems in the OECD, Minister Porter, whose background is in legal justice, continues to make impassioned pleas for even tougher welfare programs. In front of the packed room of journalists, he said he has actually seen drug-testing measures work first-hand: “I first became attracted to the idea of compelling people to seek treatment via drug testing when I was a crown solicitor in drug court.”

Alarmingly enough, he sees absolutely no reason why this testing can’t also work on welfare recipients. In the Minister’s mind, there appears to be little distinction between those under immediate prosecution, and those struggling to survive on $244/week Newstart payments.

He believes that mandated testing and strict restrictions actually have “a strong behavioural effect” on welfare recipients; however, it remains unclear what the Minister is basing this claim on.

Currently, there exists no evidence, here or overseas, that shows mandatory testing will help drug-addicted people receive treatment and find work.

Eventually, the focus of the Minister’s speech turned to jobs. (A motto for this government could be: ‘when it doubt, start beating your chest about job creation.’) He boasted that more than 370,000 jobs (mostly full-time) have been created over the past year – seemingly implying, again without evidence, that the 140,000 people his government has moved off welfare are predominately landing these newly created gigs.

Not even his Department’s own reports can verify how many of these 140,000 people have actually gained employment, and how many have simply stopped making claims for payments. If anything, the data suggests that (due to increasingly stringent requirements) the latter scenario is more likely. After all (to give Porter his due), the government’s policies have proven to be quite adept at denying welfare to those who most need it.

Although he’s right to claim good full-time employment growth, the labour force data released last week shows that, overall, labour participation is actually going down. This is because there’s been significant growth in the number of discouraged workers: people who are completely removed and alienated from the labour market.

It’s incredibly concerning that more and more Australians are simply giving up looking for work – yet, these “hidden unemployed” are barely acknowledged by pollies or pundits.

When there are 17 job seekers for every position currently available, you can understand why these unemployed workers feel completely disillusioned, demoralised and forgotten.

As it stands, labour under-utilisation (unemployment and underemployment) remains at a lofty 13.3%. In the latest batch of data, prospects for young people appear particularly grim: the teenage unemployment rate has now hit 28%, when factoring in hidden unemployment.

The Coalition does not have a viable plan for those locked out of the labour market and meaningful income through no fault of their own. Instead, it’s committed to implementing arduous welfare obligations, in order to ‘modify’ behaviours and disincentivise ‘bludging.’

For those ‘lucky’ unemployed workers who manage to clear the welfare hurdles, Newstart hardly delivers relief from the depredations of poverty. Minister Porter again dismissed suggestions that he needed to raise the Newstart allowance, even though the payment has remained the same in real terms for the last 23 years. Under his watch, 55% of people on the payment now live below the poverty line.

In lieu of all this, it’s staggering that Minister Porter continues to pronounce the government’s welfare reforms such a resounding success. There are far too many disadvantaged Australians locked out of the labour market, and falling into extreme poverty, for these claims to be remotely convincing.

Sadly, the mainstream media continues to uncritically reproduce his government’s bogus narrative that we must deplete our safety net for the sake of the budget. Alarmingly, we’ve all become accustomed to treating vulnerable people like little more than a financial burden.

No doubt, as the Welfare Reform Bill edges closer to the Senate, Minister Porter will continue spruiking punitive welfare policies that do more to alienate and penalise the vulnerable than provide them with assistance.

It’s up to us to publicly reject his claims, and stand alongside the 44 civil society organisations, who are calling on the Federal Government to stop these “bold,” “innovative” attacks on the three million Australians who currently live in poverty.

This article was originally published on

Jeremy Poxon is an independent journalist and an AUWU Media Officer

Greens Senator Lee Rhiannon backs Australian Unemployed Workers’ Union

Renee Viellaris, The Courier-Mail

Subscriber only

A SOPHISTICATED “bludgers’ club” that coaches dole ­recipients how to fight being pushed into paid work is being financially backed by Greens Senator Lee Rhiannon.

Senator Rhiannon has told The Courier-Mail she wants the Australian Unemployed Workers’ Union (AUWU) membership to increase, raising questions why a parliamentarian would want more jobless Australians to rebel against their mutual obligations to taxpayers.

The union, which is not registered and does not have charity status, has 6500 members across the country, hosts a ­detailed website and a “national advocacy phone” to advise welfare recipients of their “rights” when it comes to Work for the Dole and job searching.

Articulate union president Owen Bennett advocates for the working week to be reduced to 35 hours, increasing Centrelink benefits to $517 a week and the abolition of the Work for the Dole program.

Firebrand Senator Barry O’Sullivan yesterday slammed Senator Rhiannon for bank­rolling the “bludgers’ club”, saying that she should be ashamed of herself for offending “fair-thinking Australians who want to support the genuinely unemployed”.

Senator Lee Rhiannon.

He accused Senator Rhiannon of backing the group in a bid to attract more voters to the Greens.

But Senator Rhiannon said the group provided support and believed it should attract more members.

“I donated $300 to the AUWU as I support the ­important work they do,’’ Senator Rhiannon said. “Considering the high levels of mismanagement by job agencies, and the exploitation of workers when they do find a job, I hope this union gains more members and more support.”

Employment Minister Michaelia Cash said that the organisation had a perverse purpose.

“Mr Bennett would better serve the unemployed if he ran an organisation that aimed to get people off welfare and into work,” she said.

Mr Bennett denied the organisation distracted the jobless from looking for paid work. The website sets out what mutual obligations are fair, how to hit back at job agencies when they do not contact penalised jobseekers who fail to turn up for compulsory activities and rails against the physical danger of Work for the Dole.

Editorial: Admit Centrelink system is broken and then fix it

January 5, 2017 10:00pm
The Government needs to actually admit there are real problems with the new system to catch fraud and overpayments and suspend it.
The Government needs to actually admit there are real problems with the new system to catch fraud and overpayments and suspend it.

WHEN a government agency tasked with assisting some of the most vulnerable Australians is reduced to suggesting on Twitter that clients seek help via Lifeline, perhaps it is time to acknowledge there might be a problem.

In recent weeks Centrelink has been deluged with thousands of angry and frightened social security recipients who received letters informing them they need to repay, in some cases, thousands dollars in alleged overpayments.

This, according to Human Services Minister Alan Tudge, is all about “strengthening the integrity of the welfare system by cracking down on fraud and overpayments”.

That premise is something no reasonable Australian would disagree with. Quite simply, anyone caught rorting the system should be forced to repay money owing, and possibly face additional penalties depending on the scale of any deliberate fraud.

The problem is that there is mounting evidence that thousands of innocent Australians are being informed they are liable for debts that don’t exist due to issues with Centrelink’s now automated compliance system. One key issue relates to a data matching system Centrelink is now using to marry its information with that held by the Australian Taxation Office and other agencies.

In some cases this system is incorrectly concluding a person was working two jobs when they had only declared one, perhaps due to a minor paperwork discrepancy. In others, where a person may have been unemployed for a period and receiving Newstart, the system is then averaging wages earned over the remainder of the year over the whole 12 months – including the period when no or little work was undertaken.

The compliance exercise is sending out tens of thousands of letters a month, and according to Human Services general manager Hank Jongen, has so far found $300 million in overpayments.

While the majority of these assessments may ultimately prove correct, there is still an alarming number of cases where the system appears to have failed completely. For people caught in this position, the situation is made worse by the onus of proof being reversed in terms of demonstrating that they don’t have a liability, as opposed to Centrelink proving that they do.

Clients are also reporting chronic problems with Centrelink’s website and difficulty accessing staff by telephone, all of which can add up to considerable stress and anxiety for people who, in many cases, may be guilty of nothing more than a clerical error or a victim of a Centrelink software oversight.

The whole mess is reminiscent of Queensland Health’s automated payroll debacle a few years ago, a shemozzle that ended up costing about $1.2 billion to fix.

While the affair has been referred to the Commonwealth Ombudsman for investigation, this process will take time.

In the interim the Government needs to actually admit there are real problems with the new system, and suspend it until it can guarantee what are serious flaws have been rectified.