Scottish-born economist - Angus Deaton - recently published his new book - An Immigrant Economist…
The recent policy decisions of the Federal government appears to be in line with those of the previous (insidious) regime when it comes to the unemployed. In expansion packages which have so far totalled more than $A50 billion, there has been an allocation of $650 million for a Jobs Plan and renewed funding for the privatised and failed Jobs Network. You might think that odd given that the unemployed bear the brunt of any economic downturn. I find it obscene. And with the May budget coming up, there will be increasing claims that there is “not enough fiscal room” to do anything more. After all, the Federal Employment Minister has told us “there is no quick fix” despite knowing full well they have the capacity to offer minimum wage public sector jobs to anyone who wanted one. We might take lessons from more enlightened
I have been doing some work on how different countries deal with deteriorating labour markets. Norway is a country that has always interested me in this respect. Several things stand out when you compare it with Australia – all in their favour.
First, consider the history of the unemployment rate which is shown in the following graph. The data is quarterly and is taken from the ABS (September 1959 to March 2009) and Statistics Norway (March 1972 to March 2009). You can clearly see that even though Norway experienced the same cycles in 1982 and 1991 as Australia, the severity of the effect was much lower. In fact, in the 1991 recession the Norwegian high-point unemployment rate barely made it above the level that we started that recession with. They considered that a major downturn and a large public works programme followed including the fast-tracking of the new Oslo international airport at Gardermoen.
There has not been a single quarter where our unemployment rate has been lower than the rate in Norway. The next chart shows the difference between the Australian and the Norwegian unemployment rates in percentage points over the period from March 1972 to March 2009. You can see that the periods after each of the recessions, when employment growth had returned, that we failed badly to quickly bring our rates down again.
Second, a significant aspect of this failure has been the role of our public sector vis-a-vis that of Norway. Consider the following table which shows the percentage of public sector employment in total employment in each country. The data is hard to get but comes from OECD Historical Statistics (the 2005 proportions are guesses based on a chart rather than hard numbers for Norway).
The public sector in Norway is a major contributor of employment in their economy. It has often been stated by neo-liberals that the reason our unemployment rate rose over the last three decades was because of the increased participation of women and the rise of the service sector. There were many spurious arguments used to justify these claims which I won’t rehearse here (I have written many words in academic papers about this in the past). But Norway had one of the highest rises in female participation rates since the mid-1970s and also faced the decline in manufacturing and related industries as their service sector grew.
The big difference is that while our service sector is expressed by the growth in “burger flipping” employment – casualised, low-skill, low-pay and going nowhere, in Norway, the public sector was a major source of service sector employment growth. These jobs were in personal care services, health, education and the like. Typically secure, well-paid skilled jobs that allowed that country to absorb these structural changes without the significant increases in unemployment or inequality that have marked Australia’s industrial shifts since the 1970s.
Further, by increasing the share of public employment in total employment, the Norwegian government has been able to use the public sector as a means to keep unemployment low and absorb the structural and cyclical shocks much better than us.
Third, in Norway long-term unemployment is defined as being unemployed for more than 26 weeks whereas in Australia we consider spells of unemployment greater than one year to represent long-term unemployment. This means that more intensive assistance is given to the LTU worker in Norway much sooner.
Fourth, Norway, like most Scandinavian countries considers its youth to be the future. In Australia, we allow our youth to wallow in high states of unemployment accompanied by no formal schooling/training requirements. In Norway, they targetted youth specifically with their Youth Guarantee which ensures that all youth between 20 and 24 years of age will be either employed; participating in formal education or receiving trade training.
Further, the Norwegian Government guarantees all youth below 20 years of age support for 3 years of upper secondary education. All those who leave upper secondary school and who are unemployed are immediately subsumed by the Youth Guarantee into a paid job (typically public sector) or a skills development program (which could be in the context of paid employment).
Fifth, unlike Australia which privatised the provision of labour market services and fragmented job matching, intensive assistance, training, welfare support etc, Norway retained these functions within the public sector. They do not seek to make profit or create an industry from the unemployment as has been the case in Australia.
Recent reforms in Norway established the Norwegian Labour and Welfare Administration (NAV) in 2006 by integrating the Public Employment Services, the National Insurance Services and the municipal social assistance services into one public body. It is a decentralised public sector organisation accessible to all Norwegians (by 2010 it will be available to all at their local level). The NAV is responsible for providing services to the unemployed; it runs labour market programmes (training etc); it conducts job placements and administers the unemployment benefits system.
It is truly a public sector “one stop shop” covering employment, welfare and skill development. The NAV also offers services to sick leave and disability recipients and other pensioners.
Compare this to what we currently have in Australia and the reforms currently being proposed by the Federal government and you just shake your head in disbelief.
I could also go into differences in their regional development and education policies and more but I think you get the message. Its cold over there in Norway but life is better for the fact that the Government actually acts to improve standards of living. A case can be made that in Australia successive federal governments since the mid-1970s have actually undermined broad standards of living by running budget surpluses and refusing to deal with the unemployment problem.
When asked by people how I judge public policy I say in terms of not how rich it makes the country overall but in how rich it makes the poor. Unemployment is one of the major causes of entrenched poverty and has insidious inter-generational effects such that the children of the unemployed inherit the disadvantage of their parents. In this respect, I consider public policy in Australia over the last thirty years or more has categorically failed us and we are now are verging on being a failed state.
We need a fundamental shift in policy in Australia and a renewed commitment by our public sector to create employment buffers to allow our economy to achieve the sort of outcomes that Norway provides to its residents.
Postscript on crime rates
Apropos of the comment made by Graham (see below), my initial inclination would have been just to say – well Norway has much lower crime rates than Australia but then my curiosity was pricked and so I decided to briefly do some research (which is what I do!). Computing crime rates is quite difficult not the least because of data limitations. But there is official data and here is what I quickly was able to assemble.
In 2007 (latest Norwegian data available from Statistics Norway shows that the crime rate per 1000 people was 85.1. For interest, I broke that down into the categories to come up with something that was comparable to the data available from the ABS. For Australia the latest data appears to be 2005. The population in Norway was 4,644,457 (2007) compared to the June 30, 2005 Australian population of 20,328,600.
The first table is for Australia using the ABS data while the second is for Norway. The net result for Norway excludes the (a) crimes which do not appear in the Australian statistics. While this analysis may be improved (it took a few minutes), the gap between Australia and Norway is likely to remain substantial. We seem to be much more violent towards each other than the Norwegians.
Second postscript on crime rates – Norway – April 13, 2009
Well despite the lower crime rates in Norway, it seems there is some interesting “criminal” behaviour. A report from Agence France-Presse today tells a story about a couple (a 28-year-old man driving with a 22-year-old woman passenger) who were caught having sex while doing 133km/h in a 100 zone near Oslo. The arresting cop said that the car was “veering from one side to the other because the woman was sitting on the man’s lap while he was driving and doing the act, shall we say.”