L. Randall Wray What A Long, Strange Trip It's Been: Can We Muddle Through Without Fiscal Policy?
Center for Full Employment and Price Stability (C-FEPS)
University of Missouri-Kansas City, US

In this paper it is argued that the notion that government "saving" (that is, budget surpluses) can add to "national saving" and thereby provide for future retirees is flawed. The wide-spread idea that Social Security ought to run surpluses (with the rest of the budget in balance) in order to build a Trust Fund out of which retirement benefits can be paid later misunderstands the nature of government spending and results in a budget that prevents full employment growth. If anything, this hinders society's ability to provide for future retirees. Indeed, in the specific case of the US today, not only is a cyclical deficit required so that we might "muddle through" our recession, but a long-term budget stance biased toward structural deficits at full employment is required.

Greg Smith The Relevance of Policies on Pay to the Pursuit of Full Employment
School of Economics
University of New England

The context of the discussion is Australian macroeconomic experience since 1975. One strand of the discussion is to explore the role of macroeconomic paradigms as an influence on policy. Thus, for instance, a NAIRU can be generated in relation to a vertical long run aggregate supply schedule, or in relation to the intersection of a workforce-based target real wage schedule and a real wage schedule based on what firms are prepared to pay. The imperative to eliminate excess aggregate demand in the former scenario is very different to the orientation to negotiate over income claims in the second. The other main strand of the discussion is to explore changes in the bargaining environment over the period, with particular focus on the deliberations in national wage cases. The early Accord was one type of incomes policy. Wage-setting now has an enterprise productivity focus. The Commission has attempted to assert the safety net role of the award via "living wage" cases, but the "constraint" represented by a real wage which is "too high" continues to be asserted. Budgetary settings remain tight. The realities associated with the real wage are a diminution of labour's share from recent historical levels and an increasing degree of wage dispersion. A policy on pay would seek to address these issues of income distribution. The aim would be to achieve an overall modification of claims on income that would support government induced expansion of aggregate demand to generate more jobs.

William Mitchell and Warren Mosler Public Debt Management and Australia's Macroeconomic Priorities
CofFEE, University of Newcastle and
AVM L.P. Funds Management, Florida

The financial industry has expressed concern about on-going viability of the Commonwealth Government Securities (CGS) market as the Government retires debt. The industry purports that CGS perform a number of 'public good' roles in addition to financing budget deficits. We show that these roles are not public goods and conclude that their case amounts to special pleading by an industry sector for public assistance. Governments should only intervene into financial markets to maintain financial stability and to ensure that macroeconomic priorities including full employment are attained. We show that private markets will find alternative ways of fulfilling the roles outlined for CGS. The costs of CGS issuance do not justify the minor benefits we identify. We then examine the fallacy that Government requires funding to net spend. We argue that the pursuit of budget surpluses is self-defeating and that government should understand that deficits are required to ensure full employment is sustained.

Raja Junankar and Jakob Madsen Unemployment in the OECD: Models and Mysteries
Economics, University of Western Sydney
and
Brunel University, United Kingdom

This paper compares models used to explain OECD unemployment. The models suggest that the "natural rate of unemployment" has been driven up mainly by wage push factors. Panel data on twenty-two OECD countries are used to investigate the explanatory power of these models over the past two decades. Our estimates reveal that coefficients on key variables often turn out with signs which are at odds with the theories or are insignificant and that a second order autoregressive model performs nearly as well as all the other models. The conclusion offers some directions for future research.

Luke Reedman and William Mitchell Fiscal Policy and Financial Fragility: Why Macroeconomic Policy is Failing
CofFEE, University of Newcastle, Australia

Several high profile companies in Australia and abroad have failed recently due to poor management and unsustainable debt levels. Household debt in Australia is at record levels and private debt/income ratios have grown alarmingly. Economic growth in Australia since 1992, while insufficient to restore full employment has been driven by increasing private deficits, necessitated by the obsessive pursuit of fiscal surpluses. We examine these trends in terms of Minsky's financial fragility hypothesis, which posits that capitalist expansion endogenously generates increasingly fragile private portfolios and ultimately crisis. Unplanned public deficits follow as activity stagnates and unemployment increases. By failing to understand the crucial role that budget deficits should play in maintaining full employment, the Government has not only consigned thousands to unemployment and/or underemployment, but has also underpinned an unsustainable growth path. A return to full employment requires a federally-funded Job Guarantee and thus an endogenous budget outcome determined by private spending.

William Mitchell and Joan Muysken Investment Asymmetries, Inflation and Unemployment
CofFEE, University of Newcastle, Australia
and
CofFEE-Europe, University of Maastricht, The Netherlands

In this paper we outline five stylised facts concerning the performance of the Australian economy over the last 25 years, especially in terms of the labour market. We argue that the standard NAIRU model, upon which macroeconomic policy is based, is unable to explain these facts in a consistent or embracing manner. We develop an alternative Post Keynesian model, emphasising investment asymmetries driven by product market shocks, which interact with a segmented labour market. Asymmetries arise due to irreversibilities in capital outlays in an environment of endemic uncertainty. This model embraces demand deficiency and explains the other stylised facts more easily. It also allows us to reconcile two 'curious' facts: (a) that short-term and long-term unemployment behave similarly over the cycle, yet (b) that only short-term unemployment appears to discipline the inflation process. We conclude that the supply-side emphasis of the NAIRU approach is misplaced and that no valid case exists against using demand expansion to reduce unemployment.

Phil Lawn Reconciling the policy goals of full employment and ecological sustainability
School of Economics
Flinders University of South Australia

Ecological sustainability requires economic systems to operate within the regenerative and waste assimilative capacities of the natural environment. As such, a steady-state economy is a long-run necessity. While a steady-state economy would limit the growth of real GDP, sustainable economic welfare can still be increased if a constant but evolving stock of physical goods is qualitatively improved over time. The problem with non-increasing real GDP is that, under current institutional arrangements, a growth rate of around two to three perecent is required to prevent an escalating unemployment rate. This raises the question of how to achieve full employment in a low-growth or steady-state economy? First and foremost, there is a need to sever the GDP-employment link. Second, a judicious combination of supply-side and demand-side policies is required. Central to this policy approach would be the use of ecological tax reform ¾ a revenue-neutral tax package involving a reduction in taxes on such "goods" as labour, income, wages, and profits and an increase in taxes and charges on such "bads" as resource depletion and pollution. To absorb any remaining unemployed workers, a Job Guarantee scheme currently being promoted by some economists should be used in conjunction with an ecological tax reform package.

Miriam Buchhorn Making employment by avoiding waste
Nature Conservation Council of NSW
Sydney

This paper covers key thoughts on the relationship between economic growth and environmental sustainability. It describes and explores the potential of locally based "cyclical economies" and their contribution to full employment. Case studies are presented to illustrate the role recycling enterprise can play in social, economic and environmental solution building.
The author is a Churchill Fellow who has recently returned from an extensive tour of "wise resource use" enterprises and organisations in the US and Europe. Many of enterprises link the environmental aim of waste reduction with social aims including training and employment creation.

André Sammartino, Janine O'Flynn and Stephen Nicholas Demand side issues in the indigenous employment equation
Australian Centre for International Business
University of Melbourne

This paper reports the findings of a survey of 227 CEOs and senior managers of primarily private sector Australian organisations the employment of Indigenous Australians. The survey revealed a large number of the organisations had no Indigenous employees and no policies in place to increase the numbers. The data is disaggregated by industry and employer size. Only a minority of firms employed significant numbers of Aboriginal workers, usually in the mining sector. CEOs perceptions were that level of education, level of skills and commitment constrained the employment of Aboriginal workers. Other factors included absenteeism and difficulties in retaining Aboriginal workers. CEOs believed that there was a shortage of Aboriginal job seekers. A number of policy implications are identified that may shift these demand-side attitudes and improve the employment levels of Indigenous Australians. These include better job matching mechanisms, greater pre-employment mentoring, and more effective articulation of a business case for Indigenous employment.

James Juniper Regional Innovation Policies and Guaranteed Employment Strategies
University of South Australia

The main objective of this paper is to identify ways that regional innovation policies can be combined with Employer of Last Resort (ELR) or Jobs Guarantee (JG) programmes to overcome certain constraints that would otherwise impede effective implementation. Here we focus on the potential for mismatches between capacity impediments to achieving environmental sustainability, concerns over the "Balance of Payments constraint", financial instability and social inclusion objectives. While advocates of JG programmes have already discussed many of the above issues in some detail, this paper makes a unique contribution through its focus on innovation policy and inter-firm relations, which are viewed from a competency-based perspective.

Paul Flatau, Matt Forbes, Gavin Wood, Patric H. Hendershott and Lisel O'Dwyer Home Ownership and Unemployment: Does the Oswald Thesis Hold for Australian Regions?
Murdoch University, Aberdeen University and Flinders University

In a series of papers in the late 1990s, Andrew Oswald explored the relationship between unemployment and home ownership. Oswald's conclusion was that a statistically significant positive relationship exists between changes in home ownership and the rate of unemployment. As a rough approximation, Oswald concludes that a 5-percentage point increase in the rate of home ownership is associated with a one percentage point higher unemployment rate. Oswald's principal explanation for this result is that homeowners are less willing than private renters to move when they become unemployed as a result of high transaction costs. In this paper, we test the Oswald Hypothesis for Australian sub-regions using Australian Bureau of Statistics Census data for the period 1986 to 2001.

Tom Stehlik Employment Outcomes for Indigenous Participants of Vocational Education and Training Programs - A Comparison Between Urban, Regional and Remote Locations in South Australia
School of Education
University of South Australia

This paper is based on the initial outcomes of a project undertaken for the National Research and Evaluation Committee (NREC) which established that employment outcomes for Indigenous participants in VET programs are limited by a range of factors including access and choice in relation to accredited programs, accessibility and remoteness, cultural processes of learning and community contexts for supporting and encouraging learner aspirations and outcomes. In rural and remote areas the Community Development Employment Projects program (CDEP) has the potential to increase the development of skills necessary for participants to undertake work, but with additional funding could also provide training and individual case management required to secure mainstream employment. The paper also explores the finding that outcomes valued by Indigenous adult learners are not necessarily defined in terms of employment or further training, but include improved literacy and study skills and contributing to community building by being able to support other Indigenous learners and providing positive role models for Indigenous youth.

David Harvie, Bruce Philp and Gary Slater Working Hours, Productivity, Participation and Unemployment: A Regional Investigation of the UK
Political Economy Research Unit, Department of Economics and Politics
Nottingham Trent University
UK

Conventional macroeconomic indicators of the wealth of nations tend to concentrate on per capita GDP. Yet, an emphasis on this measure alone hides differences in factors such as working hours, unemployment and participation, all of which have an important bearing on individual economic and social well-being. Following a number of studies of international differences, this paper shifts the focus from international differences to intra-national variations. Using Labour Force Survey data we examine the degree to which disparities in per capita GDP for UK regions are due to various labour-market and demographic variables, such as hourly labour productivity, working hours and unemployment rates. Since empirical evidence suggests long working hours and unemployment have an adverse effect on well-being, explicit consideration of these factors is required if policy-makers are to gain a more accurate picture of regional patterns of welfare.

John Burgess More Jobs and Better Jobs?
School of Policy
University of Newcastle
Australia

The issue of job quality is one that the ILO is urging countries to address. For many countries there is not only a jobs deficit but there is a shortage of quality jobs. What are the components of job quality? How operational is the job quality concept? One problem is that jobs are often regarded as being homogenous in quality and that so long as the unemployed are placed into jobs then policy makers have achieved success. However, the issue of job quality forces us to address not only the nature and characteristics of existing jobs but the nature and characteristics of new jobs. Any policy developed for reducing unemployment should be aware of the quality of the jobs generated. In 1996 the Federal coalition parties promised more jobs and better jobs. This article examines the second part of this promise.

Anil Kumar and John De Maio Welfare Dynamics of Mature Age Customers: An Analysis using the FaCS Longitudinal Data Set
Analysis Branch
Australian Bureau of Statistics

This paper examines the welfare dynamics of a subgroup of income support customers aged between 50 to 60 years using FaCS fortnightly longitudinal data covering the period June 1995 - March 2000. It analyses this subgroup's socioeconomic characteristics, duration, spells and pathways on welfare over the sample period. It also explores the factors that influence churning and exit from welfare.

It is found that mature age customers experience longer average duration on benefits relative to prime age customers. Customers on Newstart Allowance (NSA) payments are more likely to exit from welfare compared to non-NSA customers. Some attachment to the labour market substantially increases the likelihood of churning while presence of earned and unearned income, being of ATSI origin, being older, renting and having more children reduce the probability of exit from welfare.

Catherine McDonald, Greg Marston and Amma Buckley Risk Technology in Australia: The Role of the Job Seeker Classification Instrument in Employment Services
School of Social Work and Social Policy, The University of Queensland and
Centre for Social Research, RMIT

Promoted as the key policy response to unemployment, the Job Network constitutes an array of interlocking processes that position unemployed people as 'problems' in need of remediation. Unemployment is presented as a primary risk threatening society, and unemployed people are presented as displaying various degrees of riskiness. The Job Seeker Classification Instrument (JSCI) is a 'technology' employed by Centrelink to assess 'risk' and to determine the type of interaction unemployed people have with the Job Network. In the first instance, we critically examine the development of the JSCI, and expose issues that erode its' credibility and legitimacy. Second, employing the analytical tools of discourse analysis we show how the JSCI both assumes and imposes particular subject identities on unemployed people. The purpose of this latter analysis is to illustrate the consequences of the sorts of technologies and interventions used within the Job Network.

Peter Saunders Working for the Dole: Patterns of Paid and Volunteer Work among Income Support Recipients
Social Policy Research Centre
University of New South Wales

The nature and extent of economic and social participation have received increased attention in recent discussion of welfare reform. Economic participation in the form of paid work is seen as a major source of income, but also of self-esteem. Social participation (including participation in volunteer work and caring for children and adults) strengthens community networks in ways that enable people to participate economically, and is valued both directly and indirectly. This paper uses survey data from 1998 to examine patterns of participation in paid work and volunteer activity among a sub-group of working-age income support recipients. The analysis indicates that just over one-fifth of the sample participated in paid work, contributing an average of 14 hours a week, while the overall participation rate in unpaid volunteer work was slightly less than one-fifth, with the average hours varying between 6 and 9 hours a week. The estimates imply that the amount of paid and voluntary work undertaken by the entire income support population is substantial, in terms of total hours and total economic value. Many income support recipients were thus already participating significantly in various forms of work - albeit often in insecure, poorly-paid and temporary jobs - even before the rhetoric of mutual obligation emerged onto the policy agenda as a response to 'welfare dependency'. Overall, there is no evidence that those receiving income support payments are idle. On the contrary, many of them already appear to be remarkably active.

Tony Eardley Long-term Unemployment in a Time of Economic Growth: Who Gets Left Behind?
Social Policy Research Centre
University of New South Wales

It is well known that in economic recoveries after recessions, long-term unemployment tends not to fall to levels found before the recession. In recent years, long-term unemployment in Australia has fallen along with overall unemployment, but there has been less success in the reduction of very long-term unemployment (two years +). The reduction in unemployment has also been geographically uneven, with some areas experiencing full employment and others with unemployment rates remaining in double figures. Moreover the standard measure of unemployment is also becoming increasingly unrelated to people's experience in a casualised labour market, while estimates of long-term unemployment benefit receipt are substantially higher than those for ABS-measured long-term unemployment. This paper draws on a research project carried out for the Department of Family and Community Services aimed at increasing our understanding of factors contributing to persistent long-tem unemployment and long-term income support receipt in a period of employment growth. The research has a particular focus on NSW, which for much of the recent period has led the fall in unemployment. The study involved a review of data and literature, analysis of the FaCS longitudinal administrative data set (LDS) and qualitative interviews with 27 long-term unemployed people in Western Sydney, plus 17 staff from seven local Job Network agencies.

The paper outlines the factors found to be associated with long-term unemployment benefit receipt and examines the clusters of disadvantage and employment barriers found amongst the qualitative interview sample of long-term unemployed job seekers.

Simon Schooneveldt and John Tomlinson Does Receiving A Breach Penalty From Centrelink Coerce Unemployed People To Comply With The Government's Wishes?
Queensland University of Technology

In the past three years, the number of breach penalties applied by Centrelink to welfare recipients have more than trebled, with some 349,000 incidences initially reported for the 2000-2001 year. Based on research undertaken for a Masters Degree in Social Science, this paper examines the reported lived experience of a sample of individuals who have been breached by Centrelink in the Brisbane area. The paper discusses whether those experiences accord with the stated policy expectation and intent of the Howard Coalition Government.

Over its three terms, this Government has increasingly sought to introduce policies that increase surveillance, obligations and breach penalties that can be brought to bear on unemployed people. More recently other welfare recipients, including Disability Support Pensioners and Sole Parents are to be included in this process. This paper compares the Government's stated intentions for its 'Mutual Obligation' policies with the lived experience of a sample of 56 respondents.

Tom van Veen and Joan Muysken Marginal taxes: a discussion in the margin
CofFEE-Europe, University of Maastricht
The Netherlands

The effect of taxes on employment has been subject of some debate. Recently, attention has shifted to the effects of marginal tax rates on employment. This paper seeks to analyse the effect of progressive taxes on employment along two lines of thought. First, high marginal tax rates discipline trade unions in their wage claims and is thus positively related to employment. Second, higher rates can be shown to decrease labour supply and employment. Moreover, high marginal tax rates might have a negative effect on the level of schooling. We analyse and criticise the theoretical and the empirical literature that deals with the abovementioned phenomena. We conclude that the discussion about the decrease of marginal tax rates is a discussion in the margin because the economic impact of changing marginal tax rates, if it exists, is small and ambiguous, as evidence from the OECD area shows.

Kayoko Tsumori Reassessing the Employment Effect of Labour Market Regulation: Employer-Employee Discretion as an Alternative Explanatory Variable
The Centre for Independent Studies
Sydney

This paper reassesses the effect of labour market regulation on unemployment by using an indicator that approximates the degree to which employers and employees can determine the terms of their relationships on their own, that is, without involving third parties. This 'labour market freedom' indicator, derived from an Executive Opinion Survey, consists of four sub-indicators that refer to the minimum wage, hiring and firing practices, centralised collective bargaining and unemployment benefits. Multiple regression models are used to test for correlations between these sub-indicators and labour market performance in 21 OECD countries in 2000. It is found that greater employer-employee discretion, in general, decreased unemployment and increased employment and that such effects were larger for women and young people than for men and older people. There appears, therefore, to be a case for further enhancing employer-employee discretion in Australia's industrial relations system, where third parties continue to exert undue influence.

John Tomlinson How dare we!?
Queensland University of Technology

Australia has experienced almost continuous economic growth throughout the three terms of the Howard Government, yet it has only succeeded in decreasing the officially recognised unemployment level by two percentage points. This Government has attempted to decrease the level of unemployment by continuing to rely on economic growth, imposing labour market flexibility, watering down unfair dismissal legislation and discouraging unemployed people from applying for benefit. The main tactic, which this Government has utilised in 'solving' the unemployment problem, is to attack the social reputation of unemployed people. This paper considers the ethical justifications provided by the Howard Government for the manner in which it handles the unemployment problem.

This paper will conclude by briefly discussing an alternative to the Howard Government's unemployment policy; namely the Government becoming an employer of last resort in association with the provision of a Universal Basic Income.

Kevin Brennan Waiting for the Bus that Never Comes
Unemployed Person's Advocacy
Queensland

The majority of unemployed people are stymied. If the answer to unemployment is employment but that is not coming, and if society is not prepared to pay the price of inclusiveness, then what are they to do while they wait indefinitely, existing on poverty rations?

Their powerlessness stems from failure to recognise and deal with the real issues unemployed people face: a failure of policy (whether 'flagship' programs or ideological underpinnings) and a failure of political imagination (e.g. "fight inflation first" and the "economic growth" mantra).

The powerlessness is further exacerbated by published statistics, unhelpful language and the use of terms that desperately need re-definition (employment, job, work, welfare, vacancy, mutual o bligation, full employment, etc.). This signifies a need for:

• a 'paradigm of power': permission and resources; for choices, liberty and dignity; through self-efficacy, self-advocacy and self-help;
• a 'new politics of unemployment': one which embraces a 'politics of meaning' and a 'politics of inclusion' and picks up 'full employment' and infuses it with radicalism, new state institutions, the voices of unemployed people and rights-based thinking;
• a re-definition, re-valuation and re-distribution of 'work';
• policy surgery: radical transplant and re-constructive to deal with the policy failures of 25 years.

Steven Barrett Reality Bites: Employment Policy in a Measurement Vacuum

Centre for Labour Research
Adelaide
The recovery from the recession of the 1990s has been accompanied by continual restructuring of the South Australian economy. Consequently, the South Australian labour market has deteriorated structurally, making it particularly vulnerable to externals shocks. The official unemployment rate in South Australia has ratcheted upwards over the past two business cycles to a cyclical low of 6.6 per cent, compared to 5.8 per cent nationally. Not surprisingly, the South Australian Government has targeted employment growth as a policy priority. However, evidence suggests that the extent of hidden unemployment in South Australia has been substantially underestimated and so the nature of the public policy response to the unemployment problem in South Australia may need to be revised. The aim of this paper is to develop a more appropriate measure of hidden unemployment and then calculate the real unemployment rate in order to provide a more appropriate basis for employment policy.

Ellen Carlson and William Mitchell Labour Underutilisation in Australia
CofFEE, University of Newcastle
Australia

The unemployment rate is often used as a summary comparative measure and captures the attention of the media more often than other labour market indicators. However, it is a narrow concept of underutilisation and ignores many other sources of labour wastage. In this paper, we discuss the limitations of the unemployment rate in this respect and compute a range of measures for Australia which are designed to provide better indication of labour slack. We present two hours-based measures of labour underutilisation for Australia, which quantify the degree of underutilisation and underemployment among the unemployed, the hidden unemployed, and the part-time workers who desire more hours of work. We conclude that the official unemployment significantly understates the degree of underutilisation in Australia. Finally, we examine the presence of cyclical non-linearities in several indicators of underutilisation. We conclude that the asymmetries present impact more significantly on the most disadvantaged in the labour market.

Jim Jose and Victor Quirk Re-engineering and Managerialism: The Tabula Rasa Approach to Policy and Administration
School of Policy and Centre of Full Employment and Equity
University of Newcastle
Australia

This paper examines key aspects of the Twomey Report (1994) to establish what it might tell us about the contemporary managerialist approach to policy and administration. The Report casts an interesting light on policy development processes, in particular, the sources of advice that led to significant changes in Labor government policy. It is our argument that the competition model for the delivery of employment (and other) services that emerged as part of Working Nation derived in large part from the ideas promoted within the Twomey Report. The tabula rasa (ie the blank slate) approach to administration is a striking instance of the inner logic of managerialist instrumentalism.

Sally Cowling and William Mitchell False Promise or False Premise? Evaluating the Job Network
CofFEE, University of Newcastle
Australia

This paper contends that the replacement of the Commonwealth Employment Service with a market-like system for employment services has formed part of a broader set of neo-liberal policy shifts, which have served to replace the goal of full employment with the diminished goal of full employability. While proposed changes to the funding and operation of the Job Network may generate further, and narrowly conceived, efficiency gains, they will not improve aggregate employment outcomes in the absence of a policy commitment to restore full employment. We argue that finessing the roles of the public, private and not-for-profit sectors in the provision of employment services is a second-order issue relative to restoring the role of the public sector as an employer of last resort.

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