Job Creation: From Public Works to a Job Compact

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1. Introduction

Labour market programs have come a long way since the days when relief work was the only option that governments could offer the unemployed. Like most other countries, Australia has tried, discarded, modified, extended and developed a very wide range of programs with the result that there is now a bewildering array of labour market programs at the government's disposal. In the process not only the content but also the form of these programs have changed. The programs have to be labelled and packaged to be attractive to both clients and the community at large. Thus, when the Committee on Employment Opportunities suggest a Job Compact, the suggestion should not be dismissed as old wine in new bottles. It is a well developed and imaginative concept which provides a focus for the debate that is now under way.

Much has also been learned in this process. It is fairly widely accepted that the main issue is not the number of additional jobs created by job creation or any other form of assistance to the unemployed. It is the ability of labour market programs to redress the inequalities that unemployment give rise to that matters, and to ensure that the future efficiency of the market is not impaired by the virtual disappearance from the effective labour supply of those who have been unemployed for a long time.

If we accept this proposition it is almost inevitable that the cost of assistance, on a per person basis, increases with the severity of the unemployment. As the unemployment queue lengthens, the queue becomes more diverse in terms of the type of assistance required, and those at the bottom are increasingly disadvantaged by the length of their unemployment. It follows that to redress this disadvantage, a wider range of programs are required, and increasingly costly forms of assistance, like job creation, have to be used.

Generally speaking, international evidence also indicates that the mix of labour market programs shifts towards job creation during a prolonged or severe recession. The Australian program mix has also followed this principle in the past, particularly during and in the aftermath of the 1982-83 recession. However, so far job creation has played a relatively minor part in the expansion of labour market programs to deal with the current unemployment.

A major reason for this seems to be that the Australian experience with job creation is not judged to have …