Sometimes the real news is that nothing has changed, nor is likely to.
Australia's unemployment rate has been stuck between six and eight per
cent for the best part of a decade, with almost no net movement over the
past two years.
The figures are not bad enough to provoke any sense of crisis, and
people have gradually got used to them. On the other hand, no economy with
such a poor performance on this crucial measure can be described as
booming or even performing adequately. And the prospects for the coming
year do not look good. The Australian Chamber of Commerce and Industry has
already predicted a decline in new hiring.
Australia's macroeconomic performance has been good by world standards.
We have managed a decade without a recession, or even a serious slowdown.
Of course, the combination of good macroeconomic performance with poor
outcomes on unemployment implies there must be even more serious failures
somewhere else in the system.
The first problem is the restructuring of the labour market, with the
steady erosion of long-term full-time employment. Not only has the number
of 'full-time' jobs declined, or at best stagnated, job security has been
eroded and the length and variability of the working week has risen.
This restructuring has been the deliberate product of two decades of
microeconomic reform. The entire program of microeconomic reform could be
summed up simply by saying that the core objective is to ensure that no
one should have a safe job, or, if you prefer, that everyone should be
exposed to the full force of competition. In principle, this applies as
much to bosses as to workers. In practice, however, those at the top have
proved remarkably adept at protecting themselves from any downside, even
in cases of gross incompetence or dishonesty.
Continuous exposure to remorseless competition is, no doubt, good for
productivity in the short run, but it has adverse long-term consequences.
Many of those pushed out of the full-time workforce 'to encourage the
others' never return. Moreover, many who remain are eager to retire as
soon as it becomes financially possible. Not surprisingly, male
participation in the full-time labour force (those who have a full-time
job or want one) is at a record low. Even for women, the long-term
historical trend towards full-time participation has halted and started to
By its very nature, a casualised labour market based on short-term
contracts or employment-at-will is bound to be associated with more
frequent spells of unemployment. And every episode of unemployment carries
with it the risk of permanent withdrawal from the labour force and, sooner
or later, reliance on the social security system.
Labour market programs directed at the unemployed are supposed to help
in resolving these problems. Under the present government, however, the
two primary policy goals in this area have been saving money and scoring
The replacement of the Commonwealth Employment Service by the Job
Network was supposed to introduce a brave new world of individually
tailored services for the unemployed, leading to greatly improved
outcomes. Even the government's own reports, such as that issued by the
Department of Employment and Industrial Relations in September, now admit
that the Job Network has been almost totally ineffective in assisting the
long-term unemployed. The only defence offered is that, based on
statistical measures, the previous government's programs were equally
ineffective and cost more to run.
The problem, which is finally receiving partial acknowledgement, is
that an incentive-based system like the Job Network is perfectly designed
to produce statistical outcomes at minimum cost. Service providers have
strong incentives to focus resources on the easy cases in any given
category and to adopt strategies that produce the measured outcomes
required by government rather than those that meet the needs of their
More important than any of these specific failures is simple lack of
interest. At no time since the election of the current government has
unemployment been an issue of real concern. Second-order trivia like the
GST and waterfront reform have had far more attention. And, sadly, the
Australian public has become inured to chronic mass unemployment. In the
absence of a severe economic downturn, the government will pay no real
political price for its worst policy failure.