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A new agenda for our union movement

I was in Sydney today doing various things (see below). It was an interesting day but this morning’s activity gave me some hope that there are community leaders out there who want to fight back and jettison the neo-liberal garbage that is constraining their ability to deliver social equity and job security for their members. My input to the discussion was to tie this in to the macroeconomic debate. These macroeconomic matters – which I write hundreds of thousands of words every year about – really lie at the heart of the problems facing low wage workers and the unemployed. Unless we successfully counter the orthodoxy then tinkering around the edges will be all that we can do. I realise the macroeconomic concepts are difficult to talk about in an accessible way. I also realise that the neo-liberal orthodoxy has been incredibly successful in inculcating notions that the Federal budget is akin to a household budget. Readers of this blog will know it can never be that way. So the challenge for our community leaders is to develop a macro narrative which can permeate the public debate and slowly redefine how we see government; what goals we want the government to pursue (full employment) and how they do business with employers. That is an interesting challenge and I like things like that.

First, a brief excursion into the daily press. I don’t normally agree with Ross Gittins but in his article Budget blues: Labor’s economic inferiority complex which was in the Melbourne Age today he makes one correct observation.

IN LAST week’s spin-laden federal budget we saw Labor parading its economic inferiority complex for all to see … Peter Costello and the Liberals have been so successful in reinforcing the public’s instinctive belief that Labor isn’t good at managing the economy that Labor itself has begun to suspect it’s true.

I agree with this. All the stupid denials leading up to the Budget day – the abhorrence with actually using the R-word. Then the T-word obsession and then the willingness to allow spurious structural budget deficit analysis to be launched onto the public and paraded as “authoritative knowledge” – see my blog Structural deficits – the great con job! – were all signs to me that they are ashamed of being in this state.

I am sure they would be happier parading a huge surplus as if it was a “big achievement”.

While I also agree that their failure to mention the “size of the deficit” in the Budget speech is also an example of this inferiority I actually would not have mentioned it either if I had been writing the speech. As I have said there is no validity in creating a debate around the nominal size of the deficit as some sort of policy target.

Is $58 billion a big deficit? Maybe it is small? What are we going to judge it against? The simple answer is that a $58 billion dollar deficit tells you very little other than accounting information relating to the relationship between the government and non-government sector in the period under scrutiny. And that is really just an accounting record. Since when has accounting been an interesting pursuit?

The real policy target should be to underwrite high levels of employment and low unemployment (only frictional). Then the deficit will be whatever that takes and that will be determined by the desired levels of net saving in the non-government sector. How many times have you heard a discussion or debate about this in the media or public life lately. On this blog and about no-where else!

That is something that leaders who wish to overthrow this destructive neo-liberal paradigm that attacks the basic lifestyles of the poor and low-waged workers need to start addressing. Stop worrying about conversations about the size of the deficit and continually hector the Government for a full employment commitment.

It also is true that the Government cannot really target the size of the deficit anyway. The automatic stabilisers will always confound their ambitions to run budget balances which deviate from that net spending necessary to fill the spending gap. If they try to run surpluses when the private sector is saving then the spending gap will widen. Output and national income will fall and the budget will move into deficits as the unemployment rate rises.

With the drop in income, total saving falls (it is a direct function of GDP) and eventually the net government spending (deficit) will equal the private net saving in the currency of issue. By hook or by crook you end up with a deficit. In this case however, the economic situation is dire – stagnant growth, lost incomes, and high unemployment.

Where is the leadership in that outcome?

Our community leaders have to step up and address this agenda and start demanding answers to those questions. The first questions I would ask Wayne “Unemployment is the very core of why I’m in politics” Swan are these:

1. What do you think will sustain your surpluses if you manage to choke the hell out of government spending and increase tax revenue?

2. What do you think this will do to private saving?

3. How can an economy grow when the government is running surpluses and the private sector is saving?

These questions go to the basic heart of their misunderstanding of the way the monetary macroeconomy works. The only way the surpluses could be sustained for a time would be if the private sector dissaved (unless we get a huge external boost like Norway’ oil revenues). We won’t achieve that so growth would only be possible if the private sector became increasingly indebted.

That is unsustainable as we have seen. So the economy cannot grow if the government runs surpluses and the domestic private sector saves unless we get bankrolled by a huge net export boom. Not foreseeable in the future. Nor has it happened in the past.

Community leaders who meet the Treasurer should just keep demanding answers to those questions realising that he is incapable of answering them in any other way than I have answered above. This is not my theory or my opinion – it is the way the system we live in operates. Sorry that is it!

For the rest of Gittins article we read the usual stuff. He asks:

The other was: what’s the Government doing to halt the appalling growth in the budget deficit and the debt we’ll be leaving for our grandchildren?

Our grandchildren will congratulate us on creating high employment levels. They will not feel one cent of burden. Apart from the fact, though, that I would not be issuing the debt in the first place. Why would a government that is not revenue-constrained do that? I have explained often it is for monetary policy reasons – to defend a given positive short-term interest rate. Well I would let that go to zero and let the investments rates price at risk of that base. No debt is needed then. There would be no constraint on the net spending though.

Anyway, Gittins then says:

… Only once the recession is behind us will it be sensible to look at the size of the deficit we’re left with and work out what it will take to get the budget back into surplus.

Please see my argument above to see why this sort of journalism is just meaningless pap. They will be idiots if they plot a course back to surplus while the private sector remains debt shy and desiring net saving. I doubt we will see a return to the debt binge days for many years to come. I think households will adopt a more cautious approach to debt in the future especially as unemployment rises over the next 18 months to 2 years. This will effectively stop the Government realising any surpluses and if it does attempt to realise them the economy will deteriorate further.

I was thinking about these matters today – again – when do I not! – because I have been in Sydney (for foreign readers I live in Newcastle – 140 kms north on the coast with the beautiful rolling waves!).

I went there for two purposes: (a) to provide some input into a discussion that a major trade union is having about how to defend the interests of low pay workers. I have done quite a bit of work on low pay over the years and regularly did modelling etc for the ACTU and other unions in various wage determination cases; and (b) to present a paper at Sydney University on the Causes of the Global Financial Crisis. Both interactions were productive and interesting for me.

The first discussion this morning was very illuminating. Without going into too much detail or disclosing any particular union matters what the discussion revealed to me is that the union movement is in crisis at this point in time. The successive anti-union laws and regulations coupled with the shifting macroeconomic dialogue – the embrace of neo-liberalism – has strait-jacketed them almost to the point of extinction. Their coverage has dropped across the board and in low wage industries the dominance of casualised job creation has made their task even more difficult.

But the smart union leaders and their staff are thinking ahead and trying to work on strategic approaches to restructure the overall public debate as well as attend to the “micro” concerns of their members on a daily basis. I think there is a great leadership role the smart unions can play in the future to build collaborations with true progressive thinkers – not those who say they are progressive but then talk about budget blowouts or “taxpayer funded spending” or “debt burdens” or all that neo-liberal macro that has caused most of the problems we are in now.

I mentioned in my input to them that if they could re-establish a community debate about “collective will” and the virtues of full employment – that is, true full employment – repeat – 2 per cent official unemployment – no underemployment – no hidden unemployment.

There is plenty of scope to also challenge the neo-liberal budget mantra that government surpluses are good and deficits are evil. Leaders who want to organise the community debate around social equity agendas which do not mean social inclusion agendas will have to develop a narrative to challenge the macro orthodoxy.

It is this orthodoxy that places the constraints on the entire economy and stops progressive social policy from being initiated.

I also think we have to have a dialogue on what we mean by work and what we mean by productive employment. I have covered these topics several times in earlier blogs. A productive contribution has to be seen in terms of how well “society” benefits not how well the private profit line is enhanced. In general, the two aims won’t be counter to each other but sometimes they will.

For example, in determining what a minimum wage should be I noted that capacity to pay considerations are irrelevant in my opinion. We have to calibrate the wage structure by setting a floor that means something in terms of our aspirations for a decent life. If the capitalist cannot profitably organise production at that wage then we don’t want them operating in this country.

Finally, (although I could go on for hours on this topic) I think the dynamics of the debates would change if a Job Guarantee was in place. This sets the wage floor and provides income security for low wage and otherwise disadvantaged workers. They all would know they could get meaningful and useful work in the Job Guarantee without the threats that arise from low pay and precarious risky work.

Private employers would then have to restructure their own workplaces to ensure they provided superior conditions to the Job Guarantee if they wanted to attract work. The dialogue that the union would then have with those employers would be conditioned by this new reality and would lead to new dynamic efficiencies which would benefit the low paid workers but also the economy in general.

And if some workers preferred to remain in the Job Guarantee workforce then we should be happy that they have income security and a sense of social value and purpose.

How can that not be better than casting them off onto the scrapheap of unemployment and then using the same excess supply of labour to invoke fear into the daily lives of the remaining marginal workers who might from time to time (via their union reps) bob their heads up asking for some pay equity or better conditions? It is a no-brainer.

I hope this dialogue with the unions continues. Today was very productive and some key thoughts were generated by the people that attended the meeting. They are thoughts that a new paradigm can be built on. One that places social equity and full employment at the centre of the debate and lets the budget deficit be whatever it takes to get there.

This Post Has 21 Comments

  1. Dear Bill,

    As far as governments are concerned the key to a capitalist system is the ability to pidgeon hole individuals and discriminate against them as best you can.

    Without a pool of unemployed or underemployed persons the governments ability to discriminate declines rapidly.

    The best solution is to impliment programs such as work for the dole whereby a government can keep people in poverty, and degrade them publically by forcing them to work for less than minimum wage.

    Unfortunately the unions have done little of anything to end work for the dole so I can only assume they support the notion that people should be forced to work for below minimum wages.

    Moreover, I could never see Unions advocating a jobs guarentee because if the government became an employer of of last resort then the Union movement becomes even less necessary than it is already.

    Cheers, Alan

  2. I think it’s drawing a bit of a long bow to suggest that unions in general are in favour of people being forced to work for below minimum wages Alan. Have you yourself done anything to address the appalling state of people’s health in many of our indiginous communities? If not, then I take it that you must be in favour of high rates of infant mortality, alcoholism, glaucoma and all the rest of it.

    Suggesting that they would not support the government becoming employer of last resort because this would somehow make them less necessary is ludicrous. The unemployed cannot be members of a workers union because they have become just that – unemployed. Government offering a job gaurantee to workers who have been made redundant is in no way a threat to the unions because the unemployed are not in a position to be members of a workers union.

  3. Furthermore, as employees of the commonwealth, I can’t see why all job gaurantee workers would not be entitled to become CPSU members if they desired.

  4. Dear Lefty

    All Job Guarantee workers would be able to join a union. However, the pay would be fixed at the federal minimum wage to enforce the nominal anchor which maintains the price stability characteristics of the scheme.

    best wishes

  5. Yes, it would not be legal in Australia to prevent employees from joining a union if they so desired. I understand the necessity of fixing the wage at the federal minimum so that the private sector may bid them back out as conditions improve.

  6. Dear Lefty,

    I have never extracted millions of dollars from people via membership fees and as such your comparison of myself to the unions is rather strange.

    The fact that I have only limited experience in the fields of health, medicine, or aboriginal affairs would better explain my not addressing aboriginal health issues.

    The facts are I don’t support Unions, I don’t support government, and I certainly don’t advocate dragging the aboriginal community into a debate to put spin on an argument.

    Cheers, Alan

  7. Hi Bill

    I reckon the conditions are right for a campaign to bring back full employment as a policy objective. Has the community welfare sector ever expressed an interest or have you had discussions with them? I mean organisations like ACOSS. I would have thought they would see the benefits.

    For all the reasons you articulate so well, I really think this is an idea that has to be driven from the bottom up. It has to be forced on to the government. The other big interest group is the half a million new unemployed and the half a million already unemployed people. And I’m sure the community would go for it.

    There’s a lot in your article so I need to read it again – I agree that the low wages thing is really a problem and that the cost of living should be the benchmark. That’s what triggered me to mention ACOSS as they are proposing a standard adult payment based on cost of living basics to replace the different classes of payments now. It would make sense that their benchmark minimum be a proportion of a higher minimum wage based on the cost of living. There is some alignment with their preferred direction and yours.

  8. You can support who you like or not Alan, but when you said ” I can only assume they support the notion that people should be forced to work for below minimum wages”, you’ve made a broad accusation with no evidence to back it up. Hence my comparing it to the health issue.

    I doubt that several million union members would appreciate your dragging them into debate and spinning that they support people being forced to work for below minimum wages – it is the antithesis of what unions stand for.

    And once again, the job gaurantee is meant to provide employment for those made redundant. How do you propose that unions might veiw this as a threat?

    By the way, I am quite happy to voluntarily part with a modest membership fee. My union has supported me in a dark and difficult time when I most needed help and has won several other concessions as well, relatively small though they are. The position comes with very limited bargaining power – without the union, there would be none at all.

  9. Dear Lefty,

    The jobs guarentee is not only for those recently made redundant. It is for anyone willing to accept one of its available positions which includes those that are long term unemployed, and those that are underemplyed.

    Unfortunately as long as work for the dole exists a jobs guarentee cannot. Therefore by not destroying work for the dole the unions have left intact one of the key neo-liberal devices which not only is a threat to the long term unemployed but also to any recently redundant Union member.

    Why would anyone want to join a union if the jobs guarentee was in place? There would be no need for collective bargaining because the wage is already determined. There would be no productivity or profit issues either because the government has no budget constraint nor the need to generate super normal profits.

    Again because the government has no budget constraint they would not find it neccessary to cut corners on workplace safety to save a few dollars. Hence, the role of the unions would rapidly be shrinking if a jobs guarentee was implimented.

    The union movement is reactive rather than proactive and just like when the threat of mass casualisation of emplyoment emerged they will once again go missing in action.

    As for the several million union members being against the removal of minimum wages – they were once supposedly against casual labour as well, so I wouldn’t be holding my breath on that one either.

    So here it is in a nutshell. Until work for the dole is dismatled your redundant union mates will be working in work for the dole programs rather than under a jobs guarentee.

    The fact that the union and yourself don’t see any problem with work for the dole pretty much confirms my main gripe with the union movement. Unions are out to get all they can for themselves have little if any regard for the consequences of their actions upon those that are not members.

    cheers, Alan

  10. Dear Alan and Lefty (please ensure the debate remains above the personal level)

    In general, the unions I deal with do support the concept of a Job Guarantee. They realise that if the workers are unemployed then they are lost to the union movement under the current way in which unions only really support those who cast a vote in the union elections. Sad but true. The unions surely realise that if there are more workers facing capital then solidarity is more likely. The JG can also be seen as a “revolutionary” force in the sense that it can help stimulate a debate about what constitutes productive work. So many activities we do not class as work (surfing!) should be included as JG jobs (requiring the surfers to give school kids lessons in personal fitness, dune maintenance, sea awareness, surfing etc – when there were no reasonable waves). This could lead to a fundamental re-appraisal of productive activity and where social investment might go. The unions would have vested interest in that debate.

    We can also not conclude that the Government will always be a reasonable and lawful employer in the JG part of the labour market. There will have to be pressure on the Government to provide safe and reasonable working conditions and adequate leave and superannuation entitlements. Further as the productivity of the economy grows, the fixed JG wage should grow as well, given that productivity growth provides the “room” for real wages growth without inflation. The unions would be very important in making sure the JG wage kept pace with these gains.

    Finally, the JG would be a significant part of a National Skills Development Framework and unions would be part of that process to ensure that skills are properly developed and credited etc.

    In general, though I agree with Alan’s assessment of the role the unions have played in the neo-liberal era – they have been largely co-opted and are now trying to reinvent themselves. I think with solid leadership there is huge scope to carve out a full employment and social equality agenda that will resonate with the population and intimidate the continuing neo-liberal ambitions of our governments.

    They also have to voice out strongly for direct public sector job creation and start caring about the unemployed – the latter being without voice or power.

    best wishes

  11. Alan,

    How is it you propose that an inability to destroy such injustices makes one in favour of them? Refer straight back to my comment about health in indiginous communities. You are obviously in favour by your own analogy.

    Do you have any evidence for your charge that unions support people being forced to work for below minimum wages or not? “They haven’t gotten rid of it so they must be in favour” is conjecture and no more counts as evidence than stating “We haven’t sent troops to depose and free the people of the brutal regime so our government must be in favour”.

    I disagree that simply providing a gaurantee of a job at the minimum wage and conditions allowable by law would automatically shrink the unions. Unless we experience a serious recession or full blown depression, only a smallish minority are likely to end up there anyway. How many people can you see earning any significant amount above the minimum wage voluntarily abandoning their job for the job gaurantee?

    “The fact that the union and yourself don’t see any problem with work for the dole…”. This is a completely baseless personal attack. How do you know that I am in favour of work for the dole? Or my union, individual members or collectively. Conjecture yet again.

    You also neglected to mention that concessions won by the unions flow onto non-union members everywhere. We recently had a small win after which I watched a vocal, anti-union employee shamelessly lap up the proceeds of the unions fight.

    So is there any particular award that partly or primarily underpins your contract Alan? What do you do? Do you ever recieve the benefits of union activity.

    I won’t descend to making unsubstantiated allegations – I’ll leave that to someone else.

  12. Dear Lefty

    I am the only one who can edit anything and I have not altered anything. The only change I made was to add the link you provided the other day for the Norway article into the original comment.

    best wishes

  13. Yes, I realise that Bill. A sentence simply didn’t go through. It was encased in

  14. Dear Lefty,

    I think we might just agree to disagree.

    Cheers, Alan

  15. Actually Alan, I think we might agree on rule 4 of this site’s comments policy.

    “4. I will not allow comments that contain comments likely to be slanderous ( as best as I can judge being a non-lawyer) or which use excessive language that is not necessary for the argument being made”

    Comment by the the poster known as Alan Dunn: “The fact that the union and yourself don’t see any problem with work for the dole..”.

    No Alan. It is NOT a fact that I don’t see any problem with work for the dole and I have not indicated that I approve of it. Your comment fits any reasonable definition of slander.

    Seperately, I also note that you have not responded to any of the comments or questions contained in the last post to which I responded to you. I can think of a number of descriptive terms that might sum up the possible reasons. But some of them might be slanderous so I would never say them here.

  16. So is there any particular award that partly or primarily underpins your contract Alan? What do you do? Do you ever recieve the benefits of union activity.

    I don’t do anything to tell the truth. Basically I left a job I loved because of health reasons and now I’m just waiting to die.

    Thanks for asking.

  17. This nonetheless does not make a slanderous accusation about me true.

  18. Dear lefty,

    My appologies for anything I said that was untrue. It was never my intention.
    I accept that it is unreasonable to equate all union decisions with all unionists.
    It was not my intention to make the Unions out to be the bad guys either. I actually think the unions are victims as much as the unemployed. I do though think that the union movement could perhaps take a more active stand against Work for the Dole – perhaps they will some day.

    Between 1983-1986 Keating, Button, and Hawke planted the seeds for labour market reforms in Australia. While not endorsed by the Unions they were not contested as rigorously as I and perhaps others would have wished.

    According to Hilary Sawyer (2005,p. 19)

    “Prime Minister Hawke suggested that the unemployed had ‘a responsibility to
    undertake some community work’ in return for income support, and proposed that a
    community work scheme be established which might become compulsory.

    She then goes on to explain the Unions opposition to the scheme and how they were able to make the scheme voluntary rather than compulsory.

    My (Alan’s)understanding of the situation is that if the unions had perhaps fought a little harder maybe they could have killed the idea off completely. Unfortunately the Union movement do not appear to have seen that Hawkes little reforms could one day snowball into “Work Choices”. Given Bob Hawkes opposition to work choices perhaps it is a case everyone underestimating what the Coalition were capable of.

    I’m not out to slander the Unions or their members. I just don’t want them to be left high and dry again by politicans who sell them out. The Unions used to be against casual employment but today (and correct me if I am wrong) it appears that there are union members who perhaps work in a casual capacity though would prefer to be full-time.

    Another example (and again I could be wrong) is that some of the persons employed in the Jobs Network (who actually administer work for the dole) are possibly union members.

    Again I’m not blaming the unions or their members for work for the dole I’m just concerned that they don’t realise that it is a findamental component of work choices. And as long as this fundamental component exists in some form the possibility of no minimum wages floor becomes not a fantasy but a fact. It also is a barrier to the JG getting a start as well.

    Cheers, Alan

    Sawyer, H (2005) ”One Fundamental Value’: Work for the Dole participants’ views about mutual obligation, PHd Thesis, RMIT

  19. I am very sorry to hear that you are seriously ill Alan.

    As to the union movement’s lack of fight against casualisation, I think it may have helped if we had all realised how the economy actually functions and that the federal government is not reserve constrained. But this is not common knowledge. Ideas such as Bill’s and Randy Wray’s and Warren Mosler’s have been drowned out by the neo-liberal orthodoxy, made all the harder for the public to understand by the fact that the WRONG idea of how the economy works is also the most logical and easiest to understand for the layperson and consequently, public policy is shaped by a need for encumbants to pander to broadly held public opinion – even if that opinion is mistaken.

    We truly need a revolution in the public’s understanding of economics to occur. I read an article today or yesterday by a high-ranking member of the reserve bank repeating all the same rubbish about deficit spending today stealing growth from the future etc etc. People believe it because it makes logical sense according to their understanding, and when a top dog of the reserve bank confirms it……….this it what we’re up against. But I think that the public is steadily becoming more accepting of deficit spending.

    For what it’s worth, keep up the fight.


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