Posted: February 23, 2005

A Note to the PM: Found 'em!

Dear Prime Minister,

When I opened my Sydney Morning Herald (SMH) yesterday I was alarmed to read PM's plea to the nation's lost workers and that you believe we are "running out of workers". I hope this letter comes as some comfort as CofFEE has found the lost ones! While I'm providing the audit, I hope you might also be receptive to some policy lessons that flow from the 'skills shortage' charade. But first to the 'missing' ones...

(1) In January 2005, 533,300 Australians were unemployed. Most of these people will have been through a number of Work for the Dole programs and/or have received Intensive Assistance through the Job Network to get them 'job ready'. So they should be ready to rock unless, of course, your focus on 'employability' has been highly ineffective and the unemployed would have been better assisted by 'true' (as opposed to 'new') apprenticeships in the public and private sectors or a Job Guarantee. If you aren't convinced of the ineffectiveness of your Active Labour Market Programs feel free to consult my blog of January 10, 2005 for evidence of poor labour market outcomes or read the Productivity Commission's Independent Review of the Job Network, especially those sections dealing with the 'parking' and 'churning' of our most disadvantaged job seekers.

(2) You will also be relieved to hear that when you examine CofFEE's Labour Market Indicators for August 2004 our labour underutilisation rate is 10.6 per cent (a measure of willing labour resources wasted through unemployment, underemployment and hidden unemployment). Huge daily GDP, income and skill losses flow from this wastage so you have a strong pool of labour resources to employ and train.

(3) And don't forget those willing workers who are trapped on the Disability Support Pension (DSP)! In June 2004 there were 697,000 DSP recipients. I know you and your cabinet colleagues are thinking about this group at the moment but you will need to be particularly careful in your thinking and recognise both the heterogeneity of the group and how poorly your Disability Employment Reforms have worked for them. You might like to read a Working Paper CofFEE has recently completed on Creating Effective Employment Opportunities for People with Psychiatric Disabilities. While ever we are a judgemental society that also runs macroeconomic policy which fails to deliver full employment (we are nowhere near it), people with disability will be pushed to the back of the unemployment queue. So I trust your cabinet discussions will focus on the quantum of public sector jobs you can provide for this group and that your consultation process will determine how you can design jobs that are flexible enough to meet the heterogeneous and variable support needs of workers. This will require effective integration of these new jobs with health, rehabilitation and employment support services in order to maintain continuity of care. Of course many people on DSP or a Carer's Payment are not able to work and these groups require much better access to health and support services, and respite care. I trust this will also be on the agenda.

I suspect that the employers' groups are beating a path to your door bleating about 'skill shortages'. The best thing I can advise is to give them a big kick up the bum (the type you generally reserve the unemployed) and ask them what they have been doing (in coalition with your Government and the Labor Governments before you). The profit share of GDP has continued to rise in the past decade yet employers haven't invested in serious training and apprenticeships. This is despite data provided by DEWR to enable the identification of emerging skill shortages. We know that the bulk of the returns to skill-specific and industry-specific training are captured by employers and employees so what have the industry types and their public sector counterparts (previously a key provider of apprenticeships and traineeships) been doing? 'Nothing much' is the basic answer. But while ever your macro policy settings provide them with a huge pool of unemployed and underemployed workers they have been able to access skilled labour without any concern for investment to accomodate future skill needs. You can't take your eyes off these buggers for a moment!

However, if your macro settings delivered a high-growth, fully-employed economy then you will find that the private and public sectors willingly invest in training. Their only alternative is to forgo profits and the shareholders and the body politic won't like that! You will also find that the oft-quoted distinction between 'structural' and 'cyclical' unemployment disappears with a bit of macro magic!

As an aside, if you happen to bump into the CEO of Master Builders Australia who (in yesterday's SMH) attributes the shortage of skilled tradespeople to an ageing population and earlier retirement from trades as "knees and arms and legs give way and people just don't have the physical strength to keep working" you might make a couple of points. First, the youth unemployment rate in Australia is currently 17 per cent so he needs to hook up with our young unemployed and offer them a skilled career path based on 'True Apprenticeships'. I really think this slogan could work - it rhymes with David Kemp's 'New Apprenticeships' but the nature of the training is much more serious and much more sensible. Second, you might get him on the job to preserve strict occupational health and safety measures in any industrial relations reforms you and your colleagues are contemplating. People shouldn't be forced to retire in their late 40s and early 50s when their arms and legs "give way" due to work stresses and accidents.

Before I sign off, could I just stress that the key lesson for your Government, the Reserve Bank and the Federal Treasury, from what I earlier described as the 'skills shortage charade' relates to the conduct of macroeconomic policy. The conduct of fiscal and monetary policy since the mid 1970s has undermined the capacity of our economy to produce full employment outcomes. What we need now is expansionary fiscal policy to fund investment in essential public infrastructure and the introduction of a Job Guarantee (JG). As my colleague Bill pointed out in an earlier blog, the JG provides an excellent environment in which we can maintain jobs for all and JG jobs can be designed in a way that provides for skill development, and can be integrated with any supports required by workers with disabilities. What we don't need now is a rise in interest rates which in Bill's words will "not only slow the growth of GDP but also the potential GDP growth path by reducing capital formation".

With thanks for your time and interest,

Sally

Blog entry posted by Sally