Nine years of long-term unemployment

In 1996, when the Howard government came to power, unemployment in Australia was above 8 per cent.

Nine years later it is 5.1 per cent.

So, the government should be congratulated on its success with unemployment, should it not?

No, it should be condemned.

Whaaaat, you say.

Consider this.

From 1999 to 2004, very long-term unemployment “ those on unemployment benefits for more than five years “ increased by a huge 68 per cent to 126 650!

How on earth has this happened?

First a bit of history.

Prior to the recession of 1974, unemployment was less than 2 per cent. When it crept over 2 per cent Bob Hawke (then the ACTU President) released a statement urging the government to take strong action to prevent an unemployment crisis.

Unemployment in that recession went above 5 per cent and was slow to fall back. It has not been lower than 5 per cent since 1976.

The recession of 1982-83 led to employment exceeding 10 per cent by the time Labor came to power in March 1983. Once again the reduction of unemployment after the economy rebounded was depressingly slow and it only dipped below 6 per cent briefly in 1989.

Cathy Wilcox

Long-term unemployment “ those unemployed for more than twelve months “ peaked in the 1982-83 recession at 231 000, substantially higher than the equivalent in the 1970s recession. Again in the recession of the early 1990s long-term unemployment ratcheted up again and at its peak was 366 000.

It is clear that the cyclical component of unemployment (that is, caused by recessions) was worsening with each recession.

The slow decline in unemployment after these recessions pointed to another aspect of the problem “ structural unemployment. This results from unemployed people not having the skills necessary to take up the new jobs being created. Those jobs more often go to new entrants to the job market with the displaced workers left jobless.

In 1994 the Keating government, which had already substantially increased spending on various unemployment relief schemes, decided to do something about this. Looking to the Swedish experience, where unemployment had been kept well down during the 1980s by the expenditure of large sums of money on labour market programs, the government announced its ‘Working Nation’ plan to reduce long-term unemployment.

The Swedish labour market programs involved a range of measures including improved staffing levels in employment offices, recruitment subsidies, shared temporary public employment and intensive job training programs.

As a result, Swedish unemployment was kept below 5 per cent in their recession of the 1990s and had been approximately 2 per cent throughout the 1980s. In Working Nation, announced in May 1994, the Keating government committed $1.7 billion for the 1994-95 year and $6.5 billion over four years to similar programs. Most of the jobs were expected to come from the private sector but employment would also be found in environmental, community service, education and other projects. The ACTU agreed to a training wage, a Youth Training Initiative provided case management for young unemployed and training was to be integrated with the needs of employers and with regions.

There was a focus on regional unemployment tailored to meet the needs of particular regions which varied widely in their susceptibility to increased unemployment.

Working Nation was an innovative, complex and expensive program which had its critics. However, it was praised internationally and became recognised as a substantial and successful initiative.

Working Nation

In the 1996 election campaign, John Howard specifically promised not to cut funds to assist the long-term unemployed. However, the new government announced a massive 44 per cent cut in funding for those programs $1 billion per year! The government then abolished the Commonwealth Employment Service (CES) and later abolished its successor, Employment National.

(Of course, we should have known what the Liberals would do. In John Hewson’s ‘Fightback’ document announced prior to the 1993 elections, funding of labour market programs was to be cut back to $350 million per year, 70 per cent less than the inadequate pre-Working Nation funding.)

The Howard government then privatised the whole of Federal employment assistance into what is now the Job Network in which private operators (often quite small) perform the same tasks which the Keating government entrusted to the CES and a broad section of community agencies and business, working co-operatively.

A particular problem with the Job Network is that it is city-focussed with very little assistance being available at all in regional and rural areas.

Inevitably, the Job Network focussed on ‘job matching’ being the placement of the short term jobless. That was easy, but there was little incentive to attend to the needs of long-term unemployed and with the economic boom continuing and the overall rate of unemployment coming down, the long-term unemployed were soon forgotten.

Unemployment generally has fallen by more than 35 per cent since 1996 but the very long-term component has increased. There is no doubt that the Job Network has comprehensively failed longer term unemployed people. If, as the Reserve Bank predicts, economic growth will be less than 2.5 per cent in the next few years, unemployment will begin to rise and the problem will get much worse.

Of course, apart from humanitarian reasons, there were very good economic reasons for using labour market programs to attempt to make a large impact on long-term unemployment.

Currently there are 358 000 Australians unemployed for more than twelve months and eligible for unemployment benefits. Such individuals are highly likely to lose their job skills, lose self-esteem and become unemployable. Labour market programs directed to getting them back to work perform the crucial function of ensuring an increase in the supply of employable labour which helps to prevent labour shortages, a key constraint on the length of an economic boom.

These policy chickens are now coming home to roost. Not only do we now have labour shortages, particularly in traditional trades, but long-term unemployment remains high and very long-term unemployment is increasing despite those shortages. As such, previous government inaction on this issue is now hurting the economy.

In the past few years, many people have become concerned at the treatment of asylum seekers and other groups disadvantaged by Howard government policies. However, even at the height of the refugee influx into Australia several years ago, there were never more than 2000-3000 asylum seekers to be dealt with. Compare that figure to 358 000 depressed, isolated, idle, financially deprived, unemployed people, 127 000 of whom have been in that condition for at least five years. Admittedly they are not in detention, but the plight of these forgotten Australians has nevertheless been cruelly neglected.

Is the Howard government likely ever to do anything constructive to assist our very long-term unemployed? On its record so far, you’d have to say no. Even assuming the economy remains buoyant, if the government stays in office for an extended period, one can expect the ranks of the very long-term unemployed to swell considerably as many unemployed become unemployable.

In these circumstances, a primary task for Beazley Labor is to reignite public interest in, and concern for, the victims of this massive social problem. Unless something is done, we can expect more Macquarie Fields incidents and a generational effect as a sub-class of unemployed takes root in our community. There will be an increasing division in this country between prospering employed people and a forgotten and suffering underclass.

The sad thing about this issue is that it should not be the subject of partisan political debate. There is absolutely no reason why a Coalition party member should not be just as concerned about the economic and social effects of long-term unemployment as an ALP member.

Some Liberals and Nationals respond to this by alleging that the long-term unemployed are just workshy. Study after study has proven this to be false but if this argument is sincerely put, why are the conservatives so keen to continue paying large sums of tax-payers’ money in unemployment (Newstart and Youth Allowance) benefits?

If you think this is just a biased Labor tragic talking, I invite you to pick a fault in the argument. I suspect, on reflection, you will agree that the Howard Government has done nothing effective in this area for nine years, whichever way you look at it.

The Labor party has had a full employment aim throughout its 114 year history. Kim Beazley must ensure it both remains the supreme objective of Labor and informs a high priority criticism of the government on this issue.

As N.K.Wran said “ the three important issues in politics are: 1. Jobs. 2. Jobs. 3. Jobs.

Facing the music, by Evan Thornley, 13 October 2004, New Matilda