Two or three years ago, it seemed reasonable to
be optimistic about unemployment. Around the world, the plague of mass
unemployment, like that of the Albert Camus novel La
Peste, seemed to be disappearing as mysteriously as it had
Unemployment rates were below five per cent in the United States and a
number of European countries. Rates were falling in the core European
countries like Germany and France, where recovery from the slump following
German reunification had been painfully slow. Even in Australia, where
nothing serious had been done about unemployment since the Labor
government scaled down Working Nation in 1995, a rate of five per
cent seemed within reach.
There were to be sure, some negative signs. Many of the 'success
stories' turned out to have their dark sides. In the Netherlands, for
example, unemployment rates had fallen to around 3 per cent, but as much
as 10 per cent of the working-age population was receiving disability
benefits. In the United States, around 2 million of the least-employable
members of the population were in prison. Nevertheless, both overt
unemployment and many forms of disguised unemployment were falling in most
Three years later, there is much less cause for optimism. The poor
performance of the US labour market has undermined claims that reform and
flexibility provide the route to full employment. The official
unemployment rate has risen to nearly six per cent, and there has been
rapid growth in disguised forms of unemployment such as disability
benefits. The increase over the 1990s is equivalent to around four per
cent of the workforce, suggesting that the true rate of unemployment in
the US is at least 10 per cent, and probably higher for men. Meanwhile,
the decline in European unemployment has stalled, with rates stuck around
8 per cent.
Taking both official unemployment and disability support into account,
Australia's current performance on unemployment is best described as
'mediocre to poor'. Official rates of six per cent unemployment, bad as
they are, do not tell the whole story. Around 300 000 Australian men of
working age are currently receiving disability or sickness benefits. This
is about six per cent of the working-age population, compared to less than
two per cent the late 1960s.
Since health has generally improved over that time, it is reasonable to
treat the entire increase as disguised unemployment, reflecting the fact
that, particularly for men over 40, even a mild disability is sufficient
to render one unemployable. Rather than take any action to remedy this
situation, the government has confined its efforts to harassment of the
victims, whom it is trying to force onto unemployment benefits with the
associated breaching regimes and the spurious system of 'mutual
obligation'. The obligation would really be mutual only if the government
took responsibility for its failure to generate any real growth in
Adding the 300 000 extra disability beneficiaries to the official count
of 370 000 unemployed, we get an unemployment rate of around 12 per cent
for males. And this does not count those who have taken advantage of early
access to the age pension, or have no income at all.
An even more disturbing way to look at the problem is to observe that
only 70 per cent of males aged between 20 and 64 now hold full-time jobs.
In the 1960s, the figure was close to 100 per cent. A little of the
decline can be attributed to university students and voluntary early
retirement. But as much as 20 per cent of the male working-age population
is unemployed or underemployed. Because of the more complex life choices
they face, the unemployment situation for women is harder to assess, but
it does not seem to be much better.
Taking all the evidence into account it seems reasonable to conclude
that unemployment in Australia is worse than at any time since World War
II, except for the trough of 'the recession we had to have'. This dismal
outcome has been recorded at a time when our economic performance is
routinely touted as 'miraculous' and 'worldbeating'.
But miracles do not last forever. Sooner or later the current
housing-driven boom will end, with a whimper if we are lucky and a bang if
we are not. Having wasted the last 10 relatively benign years, our
political leaders will bear the full responsibility for the inevitable
upward ratchet in the unemployment rate in the next economic downturn.
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