Strong on Policy Suggestions, but Weak on Analytical Framework: A Review of the Green Paper on Restoring Full Employment

Article excerpt

1. Introduction

The Green Paper, Restoring Full Employment (1) begins with an unequivocal statement on the importance of its subject matter. It declares that

"the nation's number one priority is to find jobs for unemployed Australians,...[that] the loss of production through unemployment is the single greatest source of inefficiency in our economy [and that] unemployment is also the most important cause of inequality and alienation for individuals families and communities." (p.l)

All three things need to be said, and to be remembered by all who discuss economic policy in Australia. The Green Paper starts at the right point.

It then goes on in the first chapter to describe not only the labour market as it is at present, but also how it has changed over the last fifteen to twenty years. It brings out many well known facts such as the increasing participation of women in the labour market, the fact that unemployment is neither gender, nor age, nor race neutral, bearing more heavily on men, on young people, on migrants from non-English speaking countries and on Aboriginal and Torres Strait Islander peoples. It also points to less well known facts, for example that older men as well as teenagers are being squeezed out of the labour market, that there has been a switch from part-time to fulltime jobs by women in the 25-34 age group and that the Community Development Employment Scheme has been successful in reducing unemployment rates among Aboriginal and Torres Strait Islander people.

Drawing on this descriptive material the Green Paper identifies correctly the two steps necessary to restore full employment, namely substantially increasing the rate of growth (to between 4.5 and 5 percent a year according to Green Paper estimates) and also implementing specific government policies to reduce the number of long term unemployed. The first chapter also draws on the survey of labour market trends to point out the importance of entry level education and training in reducing teenage unemployment and the need to reform the social security system to bring it into line with the labour market of the 1990s where the increased participation of women and the growth of part-time and casual employment have undermined the assumptions on which the social security system is based.

After such a good start it is disappointing that the Green Paper sidesteps the next logical point: the size and nature of the cost to the rest of us of taking the steps necessary to provide jobs for the unemployed and restore full employment. The Green Paper challenges all Australians with the questions:

"Do we want to change or are we prepared to live with high unemployment? In other words how important to you is sharing the burden-a "fair go for all"? (p.15)

But, because it does not indicate the cost to the rest of us of giving the unemployed a "fair go", it removes the bite from the question.

The last chapter of the Green Paper does have a section of a bit over half a page entitled "Costs of Proposals". This, however, deals with the budgetary costs of proposals to expand labour market programs so that the ranks of the long term unemployed are reduced, of the proposals to reform the social security system and of other minor proposals. The total cost is estimated to be from 1.6 to 2 billion a year in 1993-94 dollars. The Green Paper discusses ways of meeting these costs, including a job levy. It does not point out that if the economy grew at the faster rate advocated by the Green Paper the extra revenue generated would soon amount to more than 2 billion dollars a year. Thus, a reader with enough economic knowledge to realize this will be led to the conclusion that restoring full employment is costless, because the more rapid economic growth, which is part of doing this, in the words of the Green Paper itself

"increases the scope for fiscal flexibility while still maintaining the Government's medium term budget targets and can provide a substantial fillup to living standards benefiting both the unemployed and the wider community. …