Auspol, Economics, Political failure, Politics

Why Australia needs a Job Guarantee Scheme

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Introduction

Jobs or lack thereof are at crisis point in Australia – it has been for years. However, many people in employment remain unaware of the problem.

Buried beneath the snow storm of PR headlines for over a decade were an unseen group of workers. These included, the unemployed, underemployed, migrants, students, and experienced workers. They haven’t disappeared, they’re still there, untouched by over 20 years of growth. Their bulging ranks are continuing to swell with new labor-market entrants and the precariat.

For each available job, 8 people are competing for one job. According to David Shoebridge, MLC it’s 16 job seekers applying for one job. For some jobs, the level of competition spiked in the 1990s.

Given the centrality of work to life sustenance, what is transpiring here is a crisis. Yet the major parties are offering no solutions. It’s the same old stuff penalties, demonisation and debt slavery.

The old let the market rip won’t work (it never did).

What is a job guarantee?

Enter a job guarantee scheme. A job guarantee scheme would guarantee job seekers real work. A job guarantee is also not a punitive, populist workfare scheme.

Those employed within the Job Guarantee Scheme would be paid a living wage. They would also be entitled to leave, including award wages, sick leave and overtime.

Workers would not be employees of the Australian Public Service, but part of a new publicly funded service. Government would not need to acquire businesses. All jobs created would be new jobs, no existing employees would be displaced. Job Guarantee participants like support workers would work for agencies. Hence, the Commonwealth is the payer and the agency the service provider.

Some may ask, isn’t creating new jobs just reinventing the wheel? No actually it isn’t because the data clearly shows that the private sector has not delivered the jobs for the unemployed.

Furthermore, since the ’70s inflation has been prioritised over unemployment by policy-makers. According to Professor John Buchanan ” years on, it’s… clear that has been an ineffectual strategy for really doing something serious about unemployment — and, basically, triggered a significant rise in underemployment.”

How would a Job Guarantee Scheme work?

So, let’s say a recent graduate or a mature job seeker is seeking employment, as a a Job Guarantee Scheme participant. They would see a job counsellor at a local organisation (preferably newly re-established CES, more on that later). The JSG counsellor would interview and match the JGS participant to a federally-funded job. This job might be in environmental work, community, child care or caring work.

Under a job guarantee, JGS workers engaged in their communities would spend more within their communities. They would pay more tax, which results in more GST revenue and also improved business tax revenue. All up, the cost is approx $25 billion. This money would kickstart an ailing economy, as happened during the GFC with Kevin Rudd’s stimulus package.

Furthermore, to implement a Job Guarantee Scheme, Australia must re-establish the CES. This is imperative. It’s not profit driven, so it would be focused on job-seekers ,unlike the Job Services Network, which even Coalition stalwart Peter Strong at the Small Business Council says “government-funded employment services (such as Job Active and Australian Apprenticeship Centres) are a woeful waste of money and do not meet the needs of local employers or employees.”

Payments

All workers under a job guarantee would be paid at a minimum or living wage. These would be financed “out of general government revenue, not income tax“, as current social security payments are, according to Professor Peter Whiteford of the ANU Crawford School of Public Policy.

When social security can be financed from the government revenue, why does the government not choose to finance employment from there instead?

Spending decisions made by government impacts on levels of employment. In fact, unemployment is a government policy choice. This is a point agreed on by progressive economists, some academics, and some bureaucrats.

The political giants of the twentieth century – Franklin D Roosevelt, Clement Attlee, John Curtin and Ben Chifley and their immediate successors understood this. They knew that only government had the capacity to implement genuine full-employment. When any form of crisis is apparent, the onus is on government to act, arguments about affordability are bunkum.

The cost to the taxpayer

A Job Guarantee Scheme could be financed through government borrowing. Under borrowing arrangements, taxpayers don’t finance the expenditure. Investors (often super funds) lend the money to government. Taxpayers would repay that debt.

Furthermore, government debt isn’t a laden weight on future generations. Quite the reverse.

People will only be worse off if the government cuts spending and increases unemployment, according to Warwick Smith, an economist at Percapita. Reduced consumer spending hits the whole economy. It also reduces the taxation returned to the government.

How do we pay for it?

Paying for a Job Guarantee Scheme is easy. Is affordability for JGS participation is an issue for cash-strapped households? Absolutely! However, affordability isn’t an issue for governments, who can easily finance expenditure in a crisis.

Parliament would pass an appropriation bill, and the Reserve Bank of Australia would clear the payment.

Government bonds could finance a job guarantee.

Alternatively, Modern Monetary Theorists (MMTs) advocate that while spare capacity exists in the economy, a currency-issuing government should use targeted expenditure. The main constraint on spending is inflation, not taxation or borrowing.

The Overall obstacle to a Job Guarantee Scheme

There are two obstacles to a Job Guarantee Scheme. The first is the mindless neo-liberal mantra of low government debt. Neither high or low government debt proves economic competence – it’s what the money is spent on.

The second reason why money isn’t going to the neediest is because it’s been stuffed into the already swollen pockets of fat plutocrats. Want examples of this lavish government spending? Here’s just two: with money from the job services program and the Cashless welfare card alone, the government could finance a Job Guarantee Scheme.

Conclusion

In the past, Australia would have opted for a market solution. At present, Australia is confronted by skyrocketing levels of inequality. Hence, the ‘hands- off, let the market solve the problem’ attitude is no longer fit for the purpose (it never really was). Furthermore, the challenges of the 21st century require nation-building solutions. They do not require tone-deaf chants about fiscal responsibility and budget repair. The history books will condemn those politicians who ignored the most significant problems.

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Auspol, Economics, Politics

An uncertain labour-market means it’s time to make Australian higher education free again

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Photo by Logan Isbell on Unsplash

The world of work has been transformed. At one time, there was secure employment for all and you trained for an occupation. Furthermore, whether you had good credentials, or were an unqualified or experienced worker, you still have avenues to secure employment.

Due to today’s much more fluid labour market, workers need to consider changing careers more often.  Therefore, in an environment where, let’s face it, neither policymakers, commentators, students nor academics have a crystal ball, we need a system that enables rapid career change.

The changed employment landscape has been shaped by a few factors:

· Automation

· The downsizing of the public and private sectors

· Outsourcing under free trade agreements

· The large-scale disappearance of graduate and entry-level jobs

In this environment, it’s little wonder that newly qualified graduates struggle.

Around 30 years ago, it took most graduates about a year to find employment. Fast-forward three decades and many graduates, school leavers and vocational graduates take 4.7 years to find full-time work, according to Holly Ransom.

It’s important to note that Ransom’s claim stacks up.  Her figure has been verified by the ABC.  The figure originally came from research performed by National Centre for Vocation Education Research (NCVER). NCVER conducted research for the Foundation for Young Australians.  They based their statistical data on ABS figures.

Many students, like these, have to juggle competing responsibilities to secure employment. Many take unpaid internships which are possibly illegal by Fair Work Australia guidelines in order to achieve their objective. 

The struggle of graduates seem to be backed up by a drop in full-time employment to within four months of graduation from 85.9% in 2008 to 72.9%.  It’s important to note that many in work were in some form of employment, other than the area for which they were trained.

In addition, the graduates surveyed didn’t come from the entire graduate population for a given year; rather, for instance, the 2017 survey only included under 45 % of people who graduated, according to Charis Chang. While this may seem of little concern, the higher the participation rate, the more statistically accurate the survey. In addition, the survey has a self-selection bias because it’s up to the sample population to respond.

 In addition, behind this overall figure lies thousands of stories. Some of them are joyful stories of graduates embracing the challenge of university and reaping the rewards. Others lament that they ever attended university, particularly those who qualified in a saturated market. Further, overall figures offer no insight into individual graduate experiences. Some graduate from courses where many can’t secure employment because of a long-standing oversupply of graduates and a lacklustre labour-market.

While a university degree no doubt improves a graduates chance of employment, a degree is no longer the iron-clad guarantee it once was.Further, because of the sheer numbers of students graduating, many are settling for part-time employment.

Let’s stop and put this into context. Australia is a country where politicians love to boast about 27 years of economic growth. Clearly, the benefits of this growth have not flowed to everyone.

Hence, [continuing with a system that allows students to rack up sizeable debts ignores the burden of private debt and the uncertainty of employment prospects.

Instead of taking off their blindfolds, policymakers conveniently assume that a degree equals employment. Sure, some people get good jobs upon graduation.  Many though, take time to secure suited work, some don’t succeed at all and struggle to obtain low-paid roles as they are deemed over-qualified.

While we can’t guarantee every graduate a job in their desired field, we can do better than we are at the moment. Currently, graduates are spilling out of universities when there’s little demand for some of them in the workplace. Even a rudimentary check made by policymakers would confirm this.

Yet, the Commonwealth government hasn’t investigated graduate destinations thoroughly. A standard survey is emailed to graduates within four months of them finishing university. However, there’s no long-term follow-up, say five years after graduation.

If the government is really interested in training people for the future, then why has no attempt been made to investigate graduates’ career trajectories?

Anyone familiar with the rapid changes seen in the workplace should be aware of why it’s necessary. It’s because, in short, even the most farsighted of public servants, university administrators, academics, labour-market experts or students simply can’t predict the future. It doesn’t matter how switched on or strategic they are. The only certainty in the job market of the future is uncertainty.

That’s why locking people into expensive degree programs may not be worthwhile for some students. Some students complete courses and find out that they don’t want to work in that field; others try out fields and see that the market is uninterested in graduates; many find that there isn’t enough work.

Therefore, people need to be able to make swift career changes. However, for some people, fees are a barrier to retraining. That’s why Victorian Labor and the NSW Labor opposition have proposed free technical and further education (TAFE).

The costs to society and employers of debt

Many will think: Well, people can retrain, can’t they? Not everyone can retrain. Sometimes, personal circumstances stop people retraining.

Also, student debt can keep students locked into pursuing a particular career path – one that they loathe. It’s also well-known that any form of private debt is a form of control.

Mortgages, personal loans, student debt and payday loans all limit spending. They can also determine people’s future family size options, affecting whether they can afford to rent or, eventually, afford a mortgage.

Also, we need to consider that today’s students need a free education more than some of their predecessors.  There is uncertainty of employment in a rapidly changing environment (mentioned earlier). Further, due to oversupply in the relevant labour marketplaces, wage rises and job permanence guarantees for today’s graduates and workers in general, seem very difficult to come by. The lower wage rises and impermance affects the entire community, with reduced spending and a formidable barrier preventing entry to a still overpriced property market, currently undergoing a major correction. Considering these factors, it’s hard to justify high student fees, even for those who secure employment.

Furthermore, debts can result in costs for both employers and workers: employers may end up with workers who are underperforming at their jobs; workers effectively become well-qualified wage slaves.

Other arguments in favour of university fees

Another less common argument against free education is that financing free tertiary education would bankrupt the government. I’m afraid that’s not right. Currency issuing governments, like Australia, can’t go broke. Why? Because our currency is no longer based on the gold standard.

Another argument in support of fees is the increase in graduate jobs. This argument is difficult to support. Sure, there’s robust demand for healthcare graduates and professionals with several years of experience. But for many graduates, it’s a different story.

An uncommon argument in support of fees, made by the architect of HECS, is that Karl Marx opposed free education. Okay, so maybe he (Marx) did, but what’s the significance of that ad hominem argument?

Okay, so we need to fund a better system, but don’t use my taxpayer dollars

Many people hear the word free and think: Not on my tax dollar thank you – there’s no such thing as free. Some do this unthinkingly, merely reciting what they’ve heard said by a friend or a commentator over the years. Others genuinely believe that all government spending is financed by tax dollars. In fact, bond issuance and proceeds from the future fund also provide a significant revenue source for the government, according to Peter Whiteford, Professor at the ANU Crawford School of Public Policy.

Historically, many governments have used government borrowing (bond issuance) to finance free or lower-cost university education. For example, the Menzies government used this approach to fund low-cost higher education for many under the Menzies Government Commonwealth Scholarships scheme, which covered student tuition fees. Eligible students from lower income backgrounds received a means-tested allowance. The Menzies scheme covered up to 80% of students.

Similarly, Gough Whitlam also provided higher education at a much lower cost, albeit for free.Neither approach loaded future generations with the heavy burden of debt. Beneficiaries of both schemes were and are grateful, and Australian society benefited.

The actual finance, at least in the case of Menzies scheme, came from investors. Taxpayers played their role, paying back money to investors. Students had bright prospects. They weren’t burdened by private debt and society flourished.

This may seem unimportant, but spending is vital in any form of consumer transaction. Capitalist economies are predicated on spending, and if there aren’t enough buyers out there, then that spells trouble.

So, while some people clearly fret about paying for others’ debts, the fact is that if others are weighed down by debt, this impacts on their ability to spend in the broader economy. Hence, what goes around comes around.

What programs can be financed?

In this changed employment environment, policymakers need to start looking at feasible alternatives to lengthy degrees. They could devise degrees, so that students spend some semesters doing a paid internship in their field. These internships should be with government departments, agencies, or small/medium-sized firms. Other semesters they could undertake coursework. This would increase the engagement level of students, otherwise distracted by high costs and fees.

In other instances, a better pathway could be short courses or on-the-job training, rather than four-year degrees. Also, many courses now have a shorter shelf-life, according to Kelly Fawcett, Research and Policy Manager at the Foundation for Young Australian’s.

They (the government) also needs to consider financing a similar program for graduates. Either program would help with equity.

The financial advantage of this approach is obvious: students would pay more tax and more GST, and other taxes would flow back to the government.

For each person who secures a graduate position, another 14 people get work, according to Universities Australia. Far from being a burden, university graduates are a great investment!

The future of higher education funding

Commentators, economists, students and some graduates now recognise that existing higher-education funding models are outdated. Recently, some commentators called for a review and a new funding model for courses.

Yet, our policymakers remain stuck in the past. They are reluctant to engage with the idea that education should be free, which is perhaps unsurprising given that policymakers turned the sector into an industry in the ‘80s.

However, there are many benefits to reembracing free higher education. One is the benefit to the public, according to Professor Bill Mitchell. Another tremendous benefit is that, in the workforce of the future, students need the capacity to adapt and change at short notice. On this basis, the current system of training and education may not be fit for purpose, according to the Foundation for Young People.

It’s time to put the needs of students first. It’s time to consider the real needs of employers. It’s time for the government to consider how to reshape education policy to meet the needs of the 21st century.