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AUSTRALIAN
MARXIST
REVIEW

Journal of the Communist Party of Australia

ISSUE 33DECEMBER 1994

A critique by the Socialist Party of Australia of the Federal Government's Green Paper "Restoring Full Employment"

This statement was submitted to the Prime Minister's Committee which prepared the Government's Green Paper on unemployment late last year.

To give the Green Paper the title "Restoring Full Employment" is to misname it. The Committee's own estimate suggests that unemployment will remain at around five per cent by the year 2000. No account is taken in the official figures of those unemployed of the increasing numbers on casual or in part-time jobs. Many of these want full-time employment.

Although the Green Paper lists a number of causes of unemployment the list is incomplete and, in any case, it does not give any particular weight to the causes – increases in population including immigration; an increase in the participation of women in the workforce; the limited scope for further reductions in the participation rate of young and older workers; an increase in output without an increase in employment; reduced investment by companies; wage restraint and an increase in part time work leading to a downturn in demand.

There is a statement in the Green Paper that "the major problem has been insufficient demand", however, an assessment of this backed up with figures and the causes of "insufficient demand" are not gone into which one might expect if it is "the major problem”.

We can add to the list of causes the consequences of privatisation in the name of "efficiency" and "competition" both of which are achieved by cutting jobs. Another cause is the flow of capital overseas, resulting in the export of jobs to other, almost invariably, low wage countries.

The paper presents as a "difficulty" the fact that a fall of real earnings by low paid workers has narrowed the gap between unemployment benefits and wages, creating a disincentive to look for work. It is indicative of the Committee's thinking that it does not propose that the gap should be widened by increasing the wages of low paid workers.

The whole purpose of the Committee's work is to provide justification for the continuation of economic rationalist policies in the context of the need to be seen to be responding to mass unemployment.

This is confirmed by the following revealing quotes from the Committee's report:

"The Committee does see merit in allowing the longer term unemployed to be employed for less than the present award wages ... " a course that reduces demand.

"A major conclusion is the importance of output growth and wage restraint in generating employment growth." "The objective of real wage cuts is to increase the labour intensity of production ... "

"This is not to say that lower wages or lower wage costs to employers do not have a place in expanding job opportunities for particular groups."

Although a direct reduction of wages is rejected by the Committee one gets the impression that this conclusion arises out of fear of the social backlash rather than out of any consideration of social or economic equity.

The above statements also contradict the statement already quoted above that "the major problem has been insufficient demand".

While the Committee concentrates on the wages of those who work it gives no attention whatever to company profits and dividends, (the wages of those who do not work). There are no references to profits being too high. There are no references to profits at all.

The Committee is starry-eyed about productivity and seems to imagine that this will, in a way that is not explained, lead to more employment. The essential objective of increased productivity is for each worker to produce more per hour worked. In a number of industries, the increase in productivity has resulted in a dramatic reduction in jobs. There is no analysis of this.

The paper refers to globalisation, the opening up of the economy, reduction of tariff and non-tariff barriers and being more competitive. Increased competition is seen as a means to keep wages down. It does not seem to worry the Committee that companies go "offshore" to Indonesia, Malaysia, Hong Kong, etc, because the "combined impact of greater choice of location (the option of going off-shore) and increased competition reduces the likelihood of a repeat of the 1974 large wage increases in manufacturing which flowed on to the rest of the workforce".

This statement reveals the cynical anti-worker attitude of the Committee as well as its lack of real concern for Australia's national interests. The Committee hopes that the "benefits from productivity growth be shared between firms, their employees and their customers (through lower prices)". While some who have retained jobs have benefited to some extent by way of wages and improved working conditions, the pool of one million unemployed created by the consequential sackings are the losers.

The Government's Training Program

We support efforts to provide opportunities for all who want to work to have the opportunity for skills training although warning against a narrow approach to the objectives of education.

Education for citizenship and in the humanities is not mentioned. Instead, the stated purpose of the proposed training of the workforce is to meet employer needs for technical and vocational training so that Australian companies can compete on the world market. The training programs focus narrowly on work-related skills.

The proposal to ensure national recognition of skills and qualifications is a highly desirable development as are intentions to give disadvantaged groups greater access to training.

In this field there comes through the great emphasis on "competition" as the means to solve all problems. Greater competition between TAFE and private institutions is advocated, and given the push to privatisation in the educational field it is likely that the government will make greater use of commercial educational institutions.

Again, training is linked to a reduction in award wages. The report suggests that people up to 25 years should be eligible for Traineeships and that there should be a special training wage for those out of work for long periods.

This wage would start at less than the award rate which would be phased in over a period of, perhaps 18 months, and there would be an obligation on the employer to provide training.

The question of fees is seen as a deterrent to unemployed people taking up study. However, there is no proposal to give them free education, only to allow them to defer their fees and repay them over a period of time when eventually in employment.

The Green Paper proposes that expenditure on labour market programs is to be increased by $1.3 billion for which unemployed people are to be given advice, receive training and job experience and help in looking for jobs. What the Green Paper does not do is put forward any program to create jobs.

This reality is confirmed in the changes taking place in usage of funds. When training programs first started in 1975, 43 per cent of funding went into job creation. Now this sector receives only 16 per cent. The bulk is going into wage subsidies (28 per cent) and training (38 per cent).

Wage subsidies are a means of providing employers with a pool of cheap labour, the bulk of the wage tab being picked up out of taxpayer's money. The products produced by such labour remain the property of the employer to market for its full return. The government hopes to recoup a certain proportion by way of PAYE tax payments but, in effect, government revenue is transferred directly into the pockets of employers.

Labour market programs play a critical role in keeping unemployed workers attached to the workforce and make a contribution to reducing long term unemployment but only if they are directly related to economic policies which actually create jobs.

The Job Compact

In presenting the idea of a Job Compact, the Committee does little more than recycle and revamp measures which have already been used by governments. It calls for more money to be spent on various labour market programs than is already the case. It also specifically targets the long term unemployed who, it seems, have not benefited so far from existing programs.

It strongly pushes "community effort" and "obligations" but as we see from the specific proposals, the effort is one-sided and effectively exempts private employers from any serious efforts or obligations – except to employ trainees at subsidised wages!

The unemployed are to undergo an activity test to show that they have sought work and will accept any "reasonable offer" of a job, job training or other labour market program. If an unemployed person breaches a commitment he or she may be removed from payment of benefits for a specified period. As the length of unemployment increases the unemployed person would be required "to take more steps to find work".

The intention is to increase the pressure and harassment of those with the longest period of unemployment. There are no similar measures directed at employers who fail to take "reasonable" steps to create employment.

The Jobs Levy

The Committee says that "A primary test of community acceptance would be the willingness of Australians already in secure employment to accept a financial responsibility of meeting the additional costs of the Compact". Put simply this means the imposition of a special tax on wage and salary earners to fund the Compact. For wage workers it amounts to a wage cut. Past experience shows that once levied such special taxes are never removed.

There is no proposal to impose any special tax on company profits. Yet it is companies that lay off workers, it is companies that are to get the benefit of cheap, subsidised labour, it is company profits that are running at record levels. Despite all this, the Committee expects the victims of increased exploitation and lowered real wages to pay.

For its part the Government's "obligations" are increased by the extension of the various schemes which already exist and more money to fund them. In 1993-94 an estimated $1.3 billion is to be spent on what are called Labour Market Programs.

The hidden agenda

The restoration of an unemployed person's self-esteem is a worthy objective but the real aim of the Committee's policies is to increase the "attractiveness" of long term unemployed persons to potential employers by training and removing the tag attached to them and by increasing the "competition" for jobs among the pool of unemployed persons.

This hidden agenda is clearly revealed in the following statement:

"If the mismatch between vacancies and the unemployed remains as the economy recovers, wage pressures surface earlier because the many long term unemployed people do not compete effectively for jobs".

The Prime Minister's Committee wants a larger pool competing for the limited number of jobs to prevent "wage pressures emerging". One is entitled to ask whether the Committee's first priority is finding jobs for those unemployed or keeping wages down.

There is another interesting point. As an indication of the real origin of this and other ideas put forward by the Committee it is worth quoting from a 1988 report issued by the Organisation of Economic Co-operation and Development (OECD) which, on the problem of long term unemployed in other "developed" countries, said:

"Unemployment above the level necessary to search effectively for new work represents a waste of economic and human resources. This waste, according to some schools of thought, may be warranted if it leads to a more 51 efficient and productive economy in the longer term. For instance, if it helps achieve economic objectives such as reducing the rate of inflation. However, such justifications do not fully apply to the long-term unemployed because they have little competitive edge over other job seekers. Their impact on wage settings is probably negligible".

The remarkable similarity in meaning is inescapable.

Subsidised wages

The centrepiece of the Job Compact is an extension of the already existing Jobstart scheme by which the Federal Government subsidises employers to employ unemployed workers.

This is the second major way by which employers are given tax payers money and are permitted to employ cheap labour. Their "obligation" is merely to make up the difference between the Jobstart allowance and the award wage. Even that level of pay is to be reduced if the Committee has its way and "training wages" are introduced.

It is interesting to note that wage subsidies under Job Search and other programs have been concentrated in three areas of employment – retailing, manufacturing and hospitality – where workers are already low paid, highly exploited and often experience shocking working conditions.

All employers are asked to do is to make "work opportunities available for long term unemployed people". But there is no "obligation" on employers to find work, and it is no sacrifice under circumstances in which the Government pays for about two thirds of their wages.

Trade unions would be asked to accept that long term unemployed be employed at wage rates less than those paid to other workers. The Committee coyly says, "that rates of pay would need to be negotiated for places provided under the Job Compact". One can be sure that the Committee does not have higher rates of pay in mind.

In another place the Committee says "under no circumstances should the work itself under the Job Compact be treated differently from other employment". But if the wages paid are less than the standard, that is obviously a point of difference.

The report speaks of "clients (current academic jargon for workers) who still believe they have something to offer employers ... ", but it does not ask about employers who believe they have something to offer the unemployed.

The fact that training programs in themselves do not create jobs is confirmed by the fact that expenditure by the Federal Government on labour market programs rose by four times from 1990-91 to 1993-94 when it reached $1.3 billion. Despite this expenditure, unemployment has remained at a high level and has increased overall.

Some history

The current Green Paper bravely calling itself "Restoring Full Employment" is not the first occasion on which the present Government has declared this to be its aim.

When the Hawke Government came to office in 1983 it was even more emphatic. The ALP-ACTU Accord adopted at the time said that "the continuance of widespread unemployment is abhorrent" and the "prime objective" is full employment.

At that time it blamed "conservative economic theories" for the severity of unemployment and declared that "monetarism proved disastrous". It was attacking the economic policies of the Liberal-National Party Government of Malcolm Fraser.

It said that "a reduction in demand, through severely reduced real incomes for most of the population, is bound to accentuate economic recession and unemployment".

Only a few months later the Labor Government and the ACTU leaders changed their policies and began to use the same language as the defeated Fraser Government. Monetarist econmic policies (now called "economic rationalism") were adopted.

Bill Kelty, ACTU Secretary said, "We recognise that increased employment demands an increase in the economic fortunes of a substantial number of corporations ... we accept that enterprises need to make a profit and, in the current environment, may require profit increases to establish increased employment".

And this is the nub of the matter. False economic theories have been followed. Simply put, the Government's policies were based on the idea that:

  • Reduced real wages and an increase in productivity would lead to increased profits. This would result in increased investments leading to more jobs.

The policies formerly pursued by the labour movement called for:

  • The maintenance of real wages based on increases in the cost of living and improvements in productivity, resulting in greater consumer demand with this greater demand resulting in more investments in both capital and consumer production, resulting in more jobs.

There has been a ten year test of the "economic rationalist" policies. Companies did make more profits but this did not lead to the expected restoration of full employment – quite the reverse. Unemployment has increased steadily. Surely, we can draw some lessons from this experience.

The Committee has no program to create jobs The Committee fails to offer a program for job creation although one of the terms of reference of the Committee was to look at measures to "increase employment opportunities". This vital question is overlooked. Increased spending on training the long term unemployed workers may prepare them for work but it does not mean they will find work.

For that, more far-reaching policy changes are necessary. The causes of unemployment have to be overcome.

Policies which result in a steady decline in purchasing power, the export of jobs overseas, the de-regulation of the economy, reducing the social responsibilities of businesses, privatisation, the unplanned introduction of job destroying technology and other causes need to be replaced if real and lasting jobs are to be found.

A program of immediate measures to prevent further job losses:

The working week should be reduced to 32 hours without loss of pay at the same time as imposing strict limits on the amount of overtime worked. As the Government's Green Paper reveals, the number of hours being worked in industry by full-time workers are increasing, not going down, despite sharply increased productivity.

Putting a stop to privatisation is another immediate measure. Sackings and cut-backs in conditions of work are measures being taken by governments to make public enterprises attractive for privatisation.

This process is going on in communications and transport, in hospitals, water and energy supply, education and the postal services. The preservation of jobs not privatisation should be the priority objective.

The slashing of tariffs has led to the virtual destruction of a number of industries. The pursuit of fairy-tale "free trade" and a never existing "level playing field" should be abandoned in favour of realism and a policy of "mutual benefit" in trade relations with other countries.

Tariff cuts in the future must only be undertaken on condition that they do not result in sackings.

Micro-economic reforms, "flexible" work practices and so-called workplace reforms have as their main aim the reduction of the numbers of workers employed. They have to be reconsidered if a genuine approach to overcoming unemployment is to be introduced.

Stimulatory measures to increase demand:

Because a cause of unemployment is the reduction of purchasing power, employment can be stimulated by reversing this trend and increasing purchasing power in the pockets of consumers.

A real wage increase is necessary to overcome the steady reduction of real wages that has taken place. In the first place, a real wage increase should go to low wage earners who spend almost all of their income on consumption goods.

We support the call of welfare organisations for an increase of pensions and unemployment benefits to 35 per cent of average male weekly earnings, significantly increasing domestic demand.

The establishment of an irreducible minimum wage based on the cost of a determined standard of living to be paid as a form of basic wage. All wage rates to be adjusted quarterly, automatically and fully in accordance with movements in the Consumer Price Index.

Attempts to reduce or cancel penalty rates and holiday loadings as a means to reduce costs but, in effect, reducing consumer demand, should also be scrapped.

Full introduction of equal pay for equal work for women would also increase domestic prosperity and hence the demand for goods and services.

Measures to find investment funds for job creation:

The stimulation of economic activity demands that new sources of investment capital be found to enable publicly owned enterprises to expand their activities. Existing pools of private capital should be directed to priority areas.

Specific sources and means by which investment funds in the hands of the government can be increased include superannuation funds, funds released by defence expenditure cuts, by increasing corporate taxes, by selling government bonds to the community.

Superannuation funds are already being invested, but in accordance with the interests of the big superannuation fund administrators. Priorities should be established by government and the fund administrators obliged to abide by the investment priorities decided.

We propose an immediate 10 per cent cut in the $26 million a day military spending and that the corporate profits tax rate be restored to at least 40 per cent. The serious tax avoidance loopholes which result in many large corporations paying little or even no tax to be plugged immediately.

Huge capital resources already exist in the hands of private enterprise and over foreign investors interested in investing in Australia. These investment should be regulated to ensure that maximum social benefit is derived from them, including their use to assist in overcoming unemployment. The successful economies of the so-called "tigers" of Asia are a result of strict government planning and controls over capital investment. These controls have not stifled such private investments but have actually made them more socially worthwhile and productive.

Figures only recently released by the Australian Bureau of Statistics revealed that upwards of $8 billion of Australian capital was invested overseas in December 1993 alone.

Those responsible for such overseas investments indicate by this that they do not care a damn about Australia's national interests – only their corporate profit.

It might be argued that large amounts of capital have also come into Australia, but much of this is used to "buy up the farm" and another high proportion is mere speculative capital seeking an unearned profit in currency or share speculation.

Structural measures and macro-economic controls:

For investment guidance to be effective the government has to possess regulatory macro-economic powers to control the flow of capital and the direction of its investment.

For this purpose a national economic planning authority should be established with power to investigate and propose investment priorities and how to use resources to the best advantage. The authority to have power to regulate the introduction of technology and plan alternative employment.

Employers to be required by law to report to the government planning authority and to trade unions, those technical or economic changes which would lead to workers being laid off.

Economic planning to include estimation of employment needs and provision of appropriate on and off the job vocational and training facilities and opportunities, for example, apprenticeships and traineeships.

Foreign corporations investing in Australia to be guided by the investment priorities and obligations established by Australian authorities. A Foreign Investment Review Board already exists but it does little to seriously regulate the scale and direction of foreign investments.

Areas of economic activity which would create jobs for tens of thousands of the unemployed:

There is great scope for job creating investments by both government and private enterprise to develop infrastructure, roads, railways, housing, water supplies, communications, and services of all kinds.

Public enterprises, however, should not be limited to the provision of infrastructure and services but should establish enterprises which are involved in manufacture of both capital and consumer goods and become involved in domestic and international trade. These areas of the economy should not be seen as the exclusive prerogative of the private sector.

Another priority is investment in country towns to effect decentralisation. By creating secondary industries and grower-processor co-operatives, work opportunities for the large number of unemployed in country towns will be created.

Today, issues of the environment are of enormous importance and if not attended to will have catastrophic consequences for the lives and work opportunities of millions of people.

Huge investments are called for to overcome the salination of land, desertification, to clean up waterways and to plant new forests.

The changes necessary to clean up the land, waterways and the air must be given high priority in national investment planning and as a means of massive job creation.


In our view, unemployment is a direct product of the exploitation of the labour of all workers. Unemployment in the 20 or so developed capitalist countries is now running at 35 to 40 million and is increasing. As in Australia the numbers of long term unemployed are constantly going up. A sub-class of permanently unemployed is being created.

This is coldly accepted by those who talk of the two-thirds society – two thirds who will have jobs and some sort of position in society and the one-third who will never work in the whole of their lives. They will live in poverty, with little or no education, little or no housing and little or no hope.

The present slight improvement in the economic situation in Australia will produce some new jobs for a time but unless the fundamental causes of unemployment ate removed, a new cycle of unemployment will occur when the next recession inevitably hits the economy.

We submit the above even limited program as a start to the process of overcoming a deep-seated but unnecessary social evil which has blighted this continent with huge resources and a very small population on many occasions.

Our program aims to achieve both immediate remedial action and the more fundamental measures needed to bring an end to mass unemployment which is searing the lives of one million workers and their families.

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