Unemployment: Why Governments Create It and How to Eliminate It

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A job-guarantee program, providing unconditional employment to those unable to find work, would solve the serious social and economic problems of unemployment, writes Sam O’Leary.

Unemployment is the biggest economic and social scourge that Australia faces. The existence of unemployment is the cause of unimaginable social ruin. It is the leading cause of poverty in Australia, it is a major cause of family breakdown, of mental and physical illness, of social unrest, of crime, and the list goes on.

The worst part is that as well as being the most socially destructive force in the country, unemployment is also an economic tool used by governments in the misguided pursuit of price stability.

The fiscal and monetary policy pursued by all Australian governments since the 1980s has presented inflation as our biggest problem, and the way to solve it is with unemployment.

Government policy actively seeks to keep Australians unemployed, as their unemployment is said to be the only way to prevent inflation breaking out in the economy. Government policy aims to keep the official unemployment rate at 4-5%, as any lower and we are told we risk serious and destructive inflation.

On one hand we are told that having 750,000 people unemployed and a further million or so underemployed is the equivalent of full-employment, and on the other hand we hear the government demonise the very people they are keeping unemployed as ‘dole bludgers’ and provide only the most meagre of support to them.

This is the great contradiction of Australian social and economic policy, and it is based on defunct economics.

The unemployed in Australia are shamelessly used as sacrificial lambs on the altar price stability in the great church of neoliberalism, but the time has come to question this archaic practice and the zombie economics it is based on.

The fact is that it is possible to achieve both price stability, and true full-employment. A federal job-guarantee program, which provides unconditional employment at the minimum wage to those unable to find work, would solve both the economic problems of unemployment, and also many of the social problems.

The argument against trying to completely eliminate unemployment is that as the supply of available labour falls, wages increase, causing inflation, and we are left with a wage-price spiral. In this sense, a pool of unemployed people acts as a ‘buffer stock’ against inflation.

However the same outcome could be achieved under a job guarantee program, as the pool of people who are employed under it are paid a minimum wage that is not subject to the wage-price spiral, and acts as price anchor for wages.

As job vacancies arise, participants can move out of the job guarantee program into suitable private or public sector employment, but through the job guarantee program, the same buffer stock effect to prevent inflation is achieved.

Australian governments, be they Labor or Liberal both cravenly use and abuse unemployed people for their own agendas. Government economic policy deliberately keeps people without work, and government social welfare policy tells them that their unemployment is their own fault, and pits worker against worker in a relentless battle for the few job vacancies that do exist.

Imagine an Australia where employment was freely available to everyone. The economic and social gains from eliminating unnecessary unemployment are difficult to comprehend.

A job-guarantee would transform our society, it would instil opportunity in entire communities that have been neglected for decades, it would increase social cohesion, and drastically reduce government expenditure in areas such as health and justice, and it would markedly increase our economic output.

Unless more people begin to question the current contradictory system, the injustice will continue. Eliminating unemployment is in all of our interests, and it begins by abandoning the current economic framework that has served the world so poorly.

This article was originally published here.


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