I am writing several formal academic papers at present with various presentations coming up as the target and so blogs in the near future might reflect that sort of mission. Today I present some results of some work I am doing with my co-author Joan Muysken, which stems in part from theoretical work we outlined in our 2008 book – Full Employment abandoned. The current work formalises the influence of unemployment duration and underemployment on the inflation process. Initially, we are focusing on Australia (for a December presentation) but the scope of the work will generalise to a broader OECD dataset. A motivation is that underemployment has became an increasingly significant component of labour underutilisation in many nations over the last two decades. In some nations, such as Australia, the rise in underemployment outstripped the fall in official unemployment in the period leading up to the financial crisis. Underemployment is now higher than unemployment in Australia. There is now excellent data available for underemployment from national statistical agencies, which makes it easier to examine its macroeconomic impacts.

There was an article in the UK Guardian (Australian) edition last week (September 27, 2013) which carried the title – Can Labor be blamed for rising unemployment?. The Labor government, which was tossed out of office in Australia on September 14, had been in power since late 2007. They inherited an unemployment rate of 4.4 per cent (which dropped 3 months later to 4 per cent on the tail end of the growth phase), an underemployment rate of 6.2 per cent (total labour underutilisation rate of 10.7 per cent), a participation rate of 65.6 per cent and an employment-population rate of 62.7 per cent. By the time we got sick of them, the unemployment rate was 5.8 per cent and rising, the underemployment rate was 7.8 per cent and rising (total wastage was 13.7 per cent and rising), the participation rate had dropped to 65 per cent (some 114 thousand workers exiting the labour force because of the lack of jobs), and the employment-population ratio had dropped to 61.2 per cent (a loss of 285 thousand relative jobs). The labour force increased by 1147 thousand over this time but employment only rose by 934 thousand, which meant that unemployment rose by 161 thousand more than if the relative scales had been maintained from November 2007. So is Labor to blame for this? Of-course it is – it was the currency-issuing government for 6 years or so. Any rise in the unemployment rate is the fault of the national government because it alone as the complete capacity to offset any reductions in employment arising from other sources such as global financial crisis, the slowdown in the Chinese economy, an appreciated Australian dollar and whatever else. The author of the Guardian article, while mounting a reasonable fight against the conservative view of the changing labour market, feels unable to admit that basic truth. So the Labor Party is obviously to blame because it was in government and could have prevented the rise in the unemployment rate.

There is a popular segment (that is, I assume it to be popular) on the national ABC television news in Australia each night. the Finance Report presents one or more graphs which motivate the presenters so-called insights into what is going on in the Australian economy. I rarely see it and when I do I tend to ignore it because the presenter is infuriating to say the least. But last night, he presented to charts which were of interest although the conclusions he drew left the “elephant” that was standing in the room unnoticed. The conclusions he drew were facile and he ignored the most obvious conclusion – that the Australian economy could only maintain growth into the future if the budget deficit was larger and on-going. That would have been a bridge too far for him to cross but that is what his data and all the other related data that he didn’t present tells us. Us – in this context – being those who understand how the macroeconomy works. So today’s blog is a reprise of the graphs (or my versions of them) with the essential commentary that might have been presented last evening and would have helped the viewers appreciate the current economic situation more fully and understand why deficits are essential in these situations.

Metaphors! They are more than a fancy way of emphasising some point – that is, their power goes beyond meagre linguistic construction. The research suggests they are part of our deep mental or neural capacity, which we draw on to sort out facts and ideas. They are conceptual devices intrinsically linked to the way we think abstractly. Metaphorical language reinforces our ideology (worldview) and so it is no surprise that political parties have become very interested in framing their messages using simple and common metaphors which resonate with the way we feel about things. George Lakoff, a cognitive linguist, considers we do not make our political choices on the basis of rational dissection of competing facts and arguments but rather respond to central (or grand) metaphors with reinforce our worldview. We thus consider facts or argument within that framework of thought. I am doing a bit of work in this area as a way of understanding why central Modern Monetary Theory (MMT) propositions (which are so patently obvious and have strong explanatory capacity) evade acceptance among people, even those who express liberal perspectives (in this context meaning – are open to new ideas).