The case for a government jobs guarantee

The case for a government jobs guarantee

Published in The Australian newspaper – 4 July 2020

This is a year few Australians could have predicted. The combined impact of severe bushfires and COVID19 has resulted in significant suffering for many Australians. In such times, we look to our political leaders for a way forward.

The problem is the “actions we now take can only be good as the ideas we produce” and for the past decade the country’s political class have had few ideas. Instead Australia has been stuck in a long reform drought that has failed to ready our imagination for what is now needed.

This ideas deficit makes the recovery task difficult for the Prime Minister, who declares he wants to build a fairer, stronger and more resilient Australia. But what is to be done and how?

One of the most imaginative and compelling answers to this question is Bill Mitchell’s longstanding idea for government to fund real jobs, at the minimum wage, to all unemployed Australians.

In practice this would mean that the Commonwealth Government would provide those who are unemployed with a meaningful job through which they can build their skills and capabilities while growing the productive potential of the Australian economy. Remaining ready for the day the private sector picks up and can take workers out of the job guarantee into new jobs.

Mitchell is the Australian economist who invented Modern Monetary Theory with his American collaborators over the past two and a half decades, whose Centre for Full Employment and Equity at the University of Newcastle has been the last holdout for full employment long after the Labor Party abandoned Ben Chifley’s light on the hill.

Mitchell’s fundamental insight on the government job guarantee came to him as a student studying agricultural economics at the University of Melbourne in the late 70s, learning the logic of the one-time Wool Stabilisation Scheme. To stabilise the income of producers through the seasonal heights and troughs of the wool clip, and to minimise inflationary prices, the scheme provided for the government to buy the surplus and store it in those ubiquitous redbrick woolsheds near the country’s wharves. Releasing the retained surplus in the years when the clip was poor.

The anguished memory of his working class father’s descent into unemployment had become the young student’s life-defining purpose, and he asked himself: if the government could buy up idle wool from producers and release it to the market when demand picked up, why could not the same be done with idle labour? This was Mitchell’s Eureka moment, and he dedicated his life as an economist to the pursuit of full employment and the concept of a government funded job guarantee.

The crucial breakthrough Mitchell made with his job guarantee is that its design would mean that full employment with government as employer would be non-inflationary. Mitchell argues there are two ways to manage inflation in employment policy: the first is to use unemployment as a buffer stock against inflationary pressures, and the second is to use employment as a buffer stock.

Provided the job guarantee is priced at the minimum wage, a universally available full employment scheme will not be inflationary.

Mitchell’s point is that whether or not unemployment or employment is used as a buffer stock against inflation is a public policy choice. It is a political choice. And the choice that has been made in Australia, as it was around the world since unemployment ceased being frictional and became prevalent and entrenched – was to use unemployment as a buffer against inflation.

For people relatively untroubled by these 50 years of history of the unemployed being used as the fodder of macroeconomic policy, when according to Mitchell, employment through a job guarantee could have produced the same inflationary management purpose, it is hard to fully convey to them how appalling this thought is to me. My people, consigned to welfare and structural exclusion from the real economy in the post-1960s era of growing unemployment, have been victims of a public policy choice for which there existed a better and more humane alternative.

These past 20 years I have railed against the effects of the fateful policy decision to abandon the commitment to full employment, and for governments to fail to provide a job for every citizen that stood in need of it. Including my local butcher father in the last decade of his hard-working life.

The bitter harvest of passive welfare is there for us to lament in all of its dimensions: social problems, broken families, intergenerational poverty, lower life expectancy, egregious rates of out of home care for children, juvenile detention and adult incarceration. Quite frankly, the very things underlying the struggle for Black Lives in America.

The social breakdown consequent upon economic exclusion and unemployment is never a racial problem, it is a human problem, affecting white fellas, black and brindle, whoever and wherever they are.

The problems of passive welfare were never a choice of the people and communities who have borne the injuries and strife that comes with inter-generational dependency. They are the consequence of the public policy choice to abandon full employment.
It is time for the right choice to be made. The wrong choice has prevailed for too long. Every Australian that stands in need of a job must have the opportunity of a job.

I said many Australians who have largely avoided being used as permanent fodder for the country’s macroeconomic policy management, will not appreciate how bitter it feels to contemplate the sheer scale of human suffering and misery that has been visited upon people who have suffered from long-term and intergenerational unemployment.

Today, more than ever, mainstream Australians will understand something of the uncertainty and fear that those who have been structurally excluded from employment have felt in increasing numbers over the past half century. COVID19 has brought to the front of all of our minds the need for the Commonwealth Parliament to underwrite full employment opportunity.

My Cape York Institute has been working with Mitchell’s Centre for Full Employment and Equity on a proposition to the Morrison government to seize the opportunity we now have to completely overhaul Australian employment and welfare policy by introducing a comprehensive national jobs scheme, that will make welfare redundant for all those who are willing and able to work. We propose legislation to establish a Job Opportunity Buffer Scheme to take over from the JobSeeker and JobKeeper programs.

We propose such a scheme would be administered through local governments across the country, which would allocate job hosting functions to organisations within their communities. States and the Commonwealth would need to fully support local government councils to work with host organisations to develop useful and productive jobs in social services, community amenity and environmental care.

Now is the time to abandon redundant alternative policies. Let me identify some of them.

Firstly, this is a better way for Australia than a Universal Basic Income. The UBI would be a costly disaster, it would not increase the income of participants and would compound the problems of passivity that have already accumulated in our welfare system.

Secondly, this is not work for the dole. It’s a fulltime, minimum wage job, that will provide employees with the income they need to live and all of the non-material benefits that come from employment as opposed to unemployment. Whether an employee works fulltime or part-time would be their choice, but they would be paid for the time they work. No work, no pay. The days of work for the dole and CDEP – the program that used to run in indigenous communities – are well and truly over, and must be put behind us.

Thirdly, unemployment benefits would become history in Australia. The job guarantee would replace it. No-one would miss out. Everyone who is willing and able will have a job opportunity and safety net provisions for the disabled and carers would constitute a marginal part of our income support system. The argument for increasing Newstart payments would be idle.

Fourthly, welfare to work policies would fall by the wayside. The problem with these policies is they only ever succeeded in reordering those standing in the unemployment queues, and only the work-ready had the opportunity to take jobs as they became available while the work-needy languished. The churning of hapless clients through welfare to work programs that never really led to jobs, will become history. Instead the hosting and management of real jobs will replace this depressing system of churning the unemployed through mutual obligation rituals.

The transition of the Job Keeper and Job Seeker programs to a full employment scheme would effect the most profound change to the country’s employment and welfare system since the creation of the Australian welfare system after the second world war. The imperative for this change long preceded COVID19: the sheer inequity and tragedy associated with long-term unemployment and how it leads to the problems of passive welfare has been apparent for decades now. Australia now has the opportunity to make the large reform that is needed.

A job guarantee provided by government is not a new idea.

It was after all the policy of John Curtin’s Labor government in the 1945 White Paper on Full Employment.

It was central to the agenda pushed by Dr Martin Luther King Jnr in his life’s last campaign: the campaign for jobs that underpinned The Freedom Budget of 1967, together with Civil Rights leaders – and trade unionists – A. Phillip Randolph and Bayard Rustin. Those seeking racial justice as part of the Black Lives Matter movement in 2020, should reflect on King’s conviction that racial justice would require economic justice.

King wrote: “The long journey ahead requires that we emphasize the needs of all America’s poor, for there is no way merely to find work, or adequate housing, or quality-integrated schools for Negroes alone. We shall eliminate slums for Negroes when we destroy ghettos and build new cities for all. We shall eliminate unemployment for Negroes when we demand full and fair employment for all. We shall produce an educated and skilled Negro mass when we achieve a twentieth century educational system for all.”

More than 50 years later Australia can honour the just and rightful claim Martin Luther King Jnr was making of the United States. I dare say we would become a beacon in these troubled times of racial and economic injustice and turmoil. We would go a long way to solving the problem of racial injustice with the solution of universal, colour-blind, economic justice.

Noel Pearson is a director of the Cape York Partnership and co-chair of Good to Great Schools Australia.


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