Posted: March 19, 2005

Government and the JG Part 2

This is Part 2 of a series of blogs I am writing which are examining the letter from Federal Minister for Employment and Workplace Relations to the ALGA outlining why the Federal Government is afraid to give the most disadavantaged workers in Australia a job at federal minimum award wages (FMW) and why they instead deliberately keep them in a state of unemployment and then torment them with nonsensical compliance activity. It reveals a deep paranoia in the Government about the capacity of the private sector to compete.

As brief background, recall that CofFEE's Job Guarantee plan has been endorsed by the Australian Local Government Association in a resolution carried last year. The wording of the carried resolution reads:

The National General Assembly of Local Government authorise the Local Government Association (LGA) to enter into discussions with the Minister for Employment, Mr Abbott and his counterpart in the Federal Opposition, concerning proposals developed by the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, for a Community Job Guarantee (CD-JG) which proposes a Job Guarantee for all long-term unemployed people and a Youth Guarantee providing education, training and employment for young unemployed people.

Action taken:

ALGA has written to Minister Andrews and Ms Macklin seeking their positions in relation to this proposition.

The ALGA received a reply from the Federal Minister for Employment and Workplace Relations Kevin Andrews on August 13, 2004 outlining why the Government rejects the Job Guarantee - now published by the ALGA HERE.

We take up the next argument in the letter. The Minister continues ...

Offering guaranteed jobs at the FMW can also have perverse impacts on incentives. Although you suggest that CD-JG jobs would not substitute private sector jobs, once on a Government funded guaranteed job for unlimited duration that pays the FMW, a person may not see the advantage in seeking or taking up a private sector job. Furthermore, although both the Government subsidised workers would earning wages similar to some private sector workers, it is unlikely that they would have the same attendance and work performance requirements as in a mainstream job. A CD-JG type job guarantee may also act as a disincentive for some short-term unemployed people (eg those unemployed for 9-12 months) to take up mainstream minimum wage jobs because of the guarantee of a job if they remain unemployed for a short while longer.

In terms of the full Job Guarantee, the final point is not applicable. Recall, the Minister was commenting on the reduced plan to provide a Job Guarantee to 15-19 year olds and all the long-term unemployed (above 12 months). However, even in the reduced plan the comment is somewhat surprising. Those who have been unemployed for between 9-12 (statistically, short-term) still occupy an extremely disadvantaged position in the labour market. Why would they turn down a legitimate job offer from a private employer paying FMW or above?

More telling is the Government's attitude towards the unemployed exposed in their argument. So the workers who have been unable to find work because the economy has failed as a result of ill-conceived macroeconomic policy to produce enough jobs might actually enjoy working for the safety net wage. Wouldn't that be something to regret! It is better to keep them unemployed doing nothing and feeling the various social stigmas that are continually placed on them by Government and the media than to give them a job that is adding value to our communities and get them off the welfare rolls! Why is it better? Because they might like the jobs! But it is more sinister than that.

There are two types of competition in the labour market. When there is excess supply (unemployment), the demand side (employers) have the power and can pick and choose at will (and are under no pressure to offer structured training with each paid employment offer). Unemployed workers, facing low probabilities of successfully gaining a job are then forced into costly search processes which demoralise them not the least because they are generally futile. Alternatively, when there is true full employment (and excess demand - vacancies above the unemployed - as was the case in the 1950s, 1960s and early 1970s), employers have to compete among each other for workers. Anyone who is unemployed has a strong chance of immediately finding another job. Employers are also motivated to provide on-the-job training with each paid employment offer to ensure that the skill base of the workforce coincides with current production requirements. Employers do not have the luxury of engaging in discrimination or prejudice (or 'cultural selection' which is the new 'euphenism' to describe employers indulging in their irrational prejudices) - anyway, call it what you will ... to influence their hiring decisions. If they start 'selectively sorting' the available labour for too long their competitors will soon take the labour from them. This is a very dynamic environment where firms are forced to seek ways to enhance productivity and maintain the skill levels of their workforces. Clearly, in this neo-liberal period, we have allowed the Government to choose the former approach - maintain a pool of unemployed, manage them to ensure they are being 'churned' through a relentless set of relatively meaningless and unproductive 'training' programs, and then allow the employers to pick and choose at will and evade their own responsibilities to provide training to those who might have obsolete or depreciated skill levels. This is a low wage, low productivity approach which produces an underclass of disadvantaged workers and ultimately, stagnant productivity growth and economic growth.

Successive governments have maintained this excess supply of labour for around 30 years now, and the employers, who previously had to structure jobs to attract workers who were in short supply, now seem to have forgotten that period. They have had the upper-hand for so long that competing for workers and providing them with suitable training it is now a cultural artifact - something of a bygone era. The results are obvious. But the Government clearly does not want the private sector to have to be in a position where it has to offer wage and conditions packages to workers to attract them to their workplaces. What a shock that would be to them! This is why the Government says the Job Guarantee would be bad for the private sector. It is also sending a message that the private sector is so incapable of structuring their job offers so that they would be attractive to a Job Guarantee worker on a FMW that they need 'protection'. The persistent unemployment that the Government is forcing workers to endure is now seen in this light - it is protection to lazy employers who are content to offer low pay unattractive jobs and do not want to invest in technology to create high productivity, high wage and challenging jobs. Any decent private sector employer should realise that a strategy of wallowing in a low wage, low productivity segment of the market is ultimately doomed by the forces of international trade. So the Government is really not doing the private sector a favour by protecting them in this way. It would be far better to introduce the Job Guarantee at the FMW and then the private sector has a pool to hire out of which is already working and maintaining essential labour market skills (punctuality, teamwork, etc). The private sector only needs to offer marginally more attractive conditions and most of the Job Guarantee workers will move into those jobs. For those who choose to stay in the Job Guarantee positions then we should be happy that they are making a productive contribution to society and are no longer welfare dependent and have found some sense of satisfaction with their working lives. What is so wrong with that?

As to attendance and performance standards ... is the current public service operating with poor attendance and performance? Why would the Job Guarantee workers not be expected to perform up to the required standard and attend their work place like anyone else? The Job Guarantee is not a proposal to put on a party and break out the drinks!. Under CofFEE's plan, the Job Guarantee would provide productive jobs in the community and workers would be expected to work according to normal standards operating throughout the economy. Nothing more, nothing less!

In the next blog I will challenge the claims by the Government that the Job Guarantee would undermine the volition of 15-19 year-olds to stay in education.

Blog entry posted by bill