Bruce Chapman - "Curing Unemployment: Viruses to avoid."

Professor and Director
Centre for Economic Policy Research
Australian National University

Avoiding just a very few number of poor employment growth years is a major key to the unemployment puzzle. The paper illustrates this point though the construction of various counter-factuals related to the past 35 years of Australian labour market experience. Better employment scenarios are associated with markedly lower long-term unemployment levels, with different ranges being presented for the recent past and for the period up to 2030.

Long-term unemployment should be understood the be a critical part of the policy debate and, in this context, the debate surrounding the role of earned income tax credits is argued to be somewhat misdirected.

John Ferguson - "Long-term Unemployment and the Employment Services System: Value-added Commodities or Damaged Stock."

Australian Catholic Social Welfare Commission

Not all job seekers have benefited from recent falls in national unemployment. Long-term and disadvantaged job seekers remain particularly vulnerable to the social and economic consequences of prolonged exclusion from an increasingly competitive labour market.

This paper reflects on the needs of job seekers facing severe barriers to employment and the ability of the reformed employment services system to enhance their opportunity for work. Over recent years there has been a massive shift towards a competitive employment services market with the rationalisation of the public employment service and the outsourcing of the bulk of its programs and functions on a competitive tender basis. This system is more focussed and efficient in the placement of job-ready clients into vacancies and the reduction of mismatches in supply and demand in the market. However, serious questions have been raised regarding the ability of this new system to adequately address the needs of disadvantaged and long-term unemployed clients where access to intensive assistance is constrained and where its capacity to add value to the client as a commodity in the market place is deficient.

A case is made for a greater and more targeted level of assistance through the Job Network system that addresses the compounded disadvantage of job seekers, provides the level of training and skills necessary to make them competitive in the market, and extends beyond the current focus on the supply of labour to one which enhances employer demand for long-term unemployed people. It is argued that much more can be done to reverse the human injustice and social disruption caused by long-term unemployment.

L. Randall Wray - "Buckaroos: The Community Service Hours Program at UMKC."

Professor of Economics
University of Missouri-Kansas City, USA

In this paper we will explore a new community service program that is being implemented at the University of Missouri-Kansas City. In the United States, there is a growing movement on college campuses to increase student involvement in their communities, particularly through what is known as "service-learning" in which students participate in community service activities organized by local community groups. This paper will not summarize existing programs nor the rationale behind the movement. Rather, we will take this opportunity to explore a novel method for implementing, organizing, and administering a community service program. We will then analyze the implications of such a program for developing an understanding of what I have called "modern money"-that is, of the way that money operates in the modern capitalist economy. This, then, leads to a discussion of an alternative view of monetary and fiscal policy in the modern economy.

Tony Aspromourgos - "Is Labour Cheapening a Means to Reducing Involuntary Unemployment?"

Department of Economics
The University of Sydney

The idea that a cheapening of labour would induce an increase in the demand for it has had great resilience in modern economics, since the late nineteenth century - even in the absence of any very strong theoretical foundation for such a conviction. This paper summarises a body of theoretical developments which clarify why this view is implausible. The main lines of the argument draw on Keynesian and Sraffian themes. If the conviction about labour cheapening has no compelling rationale, one might conclude that its resilience has extra-scientific causes.

John Burgess and Doug Biddle - "Policy on Youth Unemployment in Australia."

Centre of Full Employment and Equity
Department of Economics
The University of Newcastle.

Coming!

Bill Mitchell - "The Buffer Stock Employment Model - Inflation Control and the Future of Work"

Professor of Economics
Director, Centre of Full Employment and Equity research
The University of Newcastle, New South Wales, 2308

This paper analyses three major aspects of the Buffer Stock Employment (BSE) policy proposed by Mitchell (1996, 1998).

• The inflation control mechanisms
• The deficit implications
• The environmental imperative

The BSE approach to full employment is counter the current policy direction of governments in the OECD economies. Economies that avoided the plunge into high unemployment after the oil shocks in the 1970s effectively maintained a sector of the economy which functions as an employer of the last resort, which absorbs the shocks which occur from time to time. The BSE policy fulfills this absorption function. The BSE approach will cure unemployment. But it also delivers price stability.

In this paper, the inflation control mechanisms of the BSE model are examined in detail to show that price stability requires full employment contrary to the reverse approach taken by the central bank in Australia. The Reserve Bank argues that they must fight inflation first via a positive NAIRU as a pre-condition for full employment. The BSE concept of the Non-Accelerating Inflation Buffer Employment Share (NAIBER) first developed in Mitchell (1998) is further explained. The worries raised by writers like Kalecki (1943) about the reaction of capitalists to full employment policies are put in the context of globalised financial markets and other constraints imposed by the biosystem.

The BSE model is then placed in a longer-term framework to address questions associated with the future of work. In this context, the BSE is the first step to a new system of work and distribution. It is argued that the distributional conflict inherent in a system of production under capitalist social relations is not a sufficient reason to negate the effectiveness of the BSE in improving welfare. But further, the environmental exigencies will require schemes of work allocation like the BSE to change the composition of output towards sustainable mixes.

Peter Kriesler and Joseph Halevi - "Political Aspects of Buffer Stock Employment."

Department of Economics
UNSW, Sydney

In an extremely important and prescient paper, published in 1943 titled "Political aspects of full employment" Kalecki displayed skepticism about the political possibility of maintaining full employment. He argued that full employment was incompatible with the institutions of capitalism, and that, unless there was some fundamental institutional changes, then, although the system could reach full employment through the appropriate economic policies, it could not maintain adequate levels of employment for long periods.

This paper evaluates the buffer stock employment model in the light of Kalecki's observations. According to this model, the government acts as an employer of the last resort absorbing cyclical variations in unemployment. This has been suggested as a long term solution to the problem of unemployment. However, we argue that the proposed solution does not lead to the sorts of institutional changes which will allow the maintenance of full employment. It does nothing to change the underlying class relations which are at the heart of the incompatibility of full employment with capitalism. Rather, it acts as a bandage, attempting to treat the symptoms, namely unemployment. However, because the proposal in no way effects the underlying antagonisms, it is unlikely to provide an acceptable solution to the problem of unemployment.

Geoff Dow - "The legacy of orthodoxy: political causes of unemployment."

Department of Government
The University of Queensland

Based on data presented in a recent book "Room to manoeuvre: political aspects of full employment" (by Paul Boreham, Geoff Dow & Martin Leet, MUP 1999), this paper develops the argument that important insights into the nature of the Australian polity can be gleaned from an understanding of the precise ways in which the empirical experience of unemployment since 1974 has disconfirmed the expectations of orthodox economics.

Focussing on economic growth, inflation and labour market conditions, the paper shows the causal connections between orthodox policy preferences and economic policies that have exacerbated unemployment and recession in Australia. By inference, it can be shown that the role accorded to government by conventional wisdom is seriously complicit in Australia's bad performance over the past quarter-century. A concomitant intellectual task is therefore to reconstruct the case for more active public efforts to assert democratic and national control over the economic changes that constitute contemporary economies. Non-orthodox traditions of analysis in political economy have been far more prescient in this respect than is generally acknowledged.

Stephanie Bell - "How to Pay for Full Employment"

University of Missouri-Kansas City, USA
PhD Candidate, New School of Social Research, USA

The almost universal belief that the federal government uses the financial resources that it acquires (mainly) from the private sector in order to pay for the goods and services it purchases seriously misunderstands the manner in which public finance is undertaken. Moreover, it implies that if the government wants to pay for something, it must first secure the necessary (financial) resources, typically through the collection of taxes or the sale of bonds. The purpose of this paper is fourfold: (1) to argue that the basis for the misconception is (at least in part) the observed coordination of the government's taxing and spending operations; (2) to show that the government coordinates these operations for pragmatic, rather than financial, reasons; (3) to demonstrate that the collection of taxes and the sale of bonds leads (ultimately) to the destruction of the money the government receives, while government spending is financed by the creation of new money; and (4) to suggest that because of the nature of their monetary systems, most modern governments have the financial power (even if they currently lack the political will) to pay for an on-going, large-scale job assurance program, such as an Employer of Last Resort.

Edward Nell - "An ELR for the United States."

Malcolm B. Smith Professor of Economics
Director, Program on Transformational Growth and Full Employment
New School for Social Research, USA

Simple diagrams are presented to demonstrate the benefits of an ELR. Such a plan has historical precedents in the countercyclical Federal Budget, but would be much larger. Unlike the countercyclical budget, it would also contribute to controlling inflation. A design for an ELR is then developed, suggesting an institutional format. This is related to the historical experience of CETA. Estimates of how much it would cost are made. There are many practical and political difficulties, but none seem overwhelming.

Warren Mosler - "BSE, Free Trade, and Foreign Exchange."

Director, III Finance, USA

This paper focuses on the process by which a Buffer Stock Employment (BSE) policy might serve as a stabilizing influence in the value of the Australian currency, while at the same time maximizing the benefits of both domestic production and foreign trade for Australia.

John Nevile - "Evidence or Assumptions? The Basis of the Five Economists' Case for Real Wage Cuts."

University of New South Wales

The five economists, led by Peter Dawkins, have recommended that award wage rates be frozen so that real wages fall when the rate of inflation is positive. In papers supporting their recommendations they claim that work by Debelle and Vickery shows that a cut in real wages of 2 percent will reduce the unemployment rate by one percentage point. A careful reading of Debelle and Vickery's work reveals that one could equally well argue that, even taken at face value, their work supports the claim that the unemployment rate will only fall by 0.4 of a percentage point if real wages fall by 2 percent. Moreover, a critical analysis of Debelle and Vickery's work casts further doubt on the value of freezing award wage rates. In this model, reducing real wages reduces unemployment in two ways. The first is through the substitution of labour for capital. The second is through a reduction in the NAIRU. Only the second can have a large effect. Freezing award wage rates is an ineffectual way of reducing real wages, which increases inefficiency in the economy and inequity in society.

Richard Denniss and Martin Watts - "Regional labour markets: naturally less efficient."

Centre of Full Employment and Equity
University of Newcastle

The concepts of the natural rate of unemployment, and subsequently the more agnostic NAIRU, have had a profound effect on economic policy in Australia over the last 25 years. The high rate of unemployment in recent years has been attributed to a high NAIRU that is a consequence of deficiencies on the supply side, including labour market rigidities (requiring institutional reform), high replacement ratios (necessitating less generous welfare payments) and skills mismatch caused by rapid structural change (requiring re-training programs). Other economists argue that these apparent structural rigidities are the outcome of insufficient aggregate demand and hence that high unemployment results from government demand management policy having low inflation, rather than low unemployment, as its primary objective.

This paper considers a feature of the Australian labour market that is not typically considered in the NAIRU/NATURAL rate literature, namely the substantial differences in both unemployment rates and employment growth rates across regions. Can the dominant paradigm explain these disparities when the institutional framework is uniform across urban and country areas within states?

The importance of this issue for regional development lies in the policy prescriptions that flow from the 'natural rate' theory. This paper argues that a focus on institutional reform, such as unfair dismissal legislation and increased labour market flexibility, will be of little assistance to regional economies with high unemployment rates. It is argued that policies which attempt to directly create employment in areas of high unemployment, potentially through a Buffer Stock Employment framework, would yield better employment creation results. Furthermore, such targeted employment growth would contribute to the ongoing economic viability of rural centres and reduce the demands on infrastructure, resulting from rural populations continuing to relocate to urban centres.

Joan Muysken and G. Nekkers - "Skilled-unskilled wage differentials, unemployment and hours of work: the case of America and Europe."

Joan Muysken is Professor of Economics
University of Maastricht
The Netherlands

This paper follows on from Davis's 1998 AER article and his 1998 European Economic Review article where he explains the large skilled-unskilled wage differentials and large unemployment in Europe from trade and a minmum wage in Europe. It extends his analysis to allow for wage bargaining and endogenous skill formation.