Report launch: Unemployment policy in Australia: a brief history

This report was launched at a post-budget event where I was on a discussion panel with Wayne Swan, Stephen Koukoulas and Emma Dawson on May 16.

You can listen to a podcast of the event.

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Executive Summary

Maintaining full employment in Australia was once considered a top priority of state and federal governments. For more than two decades, between the end of World War Two and the early 1970s, unemployment in Australia was around two percent.

Keeping unemployment low was seen as a collective responsibility. There was explicit acknowledgement of the fact that capitalism, by its very nature, produces winners and losers, and that if we want the benefits of a market-based capitalist economy then we must also take responsibility for the casualties.

In the 1970s and 80s all of this changed. Liberal free-market ideas rose to dominance across most of the world in what is now often referred to as neoliberalism. Instead of viewing unemployment as a collective problem, neoliberalism painted unemployment as an individual responsibility. The public focus shifted from ensuring there were enough jobs for all to a dialogue around individual employability. Tellingly, it was in the mid-70s that the term ‘dole-bludger’ entered the Australian lexicon. Ever since then successive governments been increasingly punitive in their treatment of the unemployed.

The focus today is, in effect, on punishing and stigmatising the unemployed for being unemployed even when there are many more job seekers than there are jobs. The mutual obligation framework that currently underpins unemployment benefits rests
on an assumption that the unemployed need to be pushed to look for work and that many would not apply for jobs if they were not forced to. To some extent this may be true, but only because many know that there are no jobs for them. Thus, mutual
obligation activities become pointless and degrading bureaucratic hoop-jumping exercises.

The technocratic justification for the shift away from full employment policy was inflation control. Executive Summary The theory says that there is a natural rate of
unemployment below which wage pressures drive inflation. What’s never stated explicitly is that the decision to prioritise inflation over employment in public policy was a political victory of capital over labour. Inflation is often referred to as a tax on capital
and has always been viewed with much greater fear by the capitalist class. Similarly, the presence of a pool of desperate unemployed people, who are kept at or below the poverty line, undermines the power of labour by making the withdrawal of participation
much costlier. The result has been a substantial shift in power from labour to capital since the 1970s and a corresponding shift in the allocation of national income. The post-war years saw a marked decline in inequality in Australia, a trend that was sharply
reversed from the 1970s onwards.

Australia operates under a theoretical policy framework that makes use of a buffer-stock of unemployed people to maintain price stability. Within this framework there is a strong argument for supporting unemployed people with much higher welfare payments, in recognition of the fact that they are casualties of our public policy decisions.

However, at Per Capita, we believe that an even better approach would be to pay attention to the flaws in our current policy framework and shift our priorities back to creating full employment. It’s much better for everyone if we create employment for the
unemployed rather than compensate them.

You can download the full report here.

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