Auspol, Economics, Political failure, Uncategorized

How effective are Australia’s retraining policies in an era when robots and neoliberalism is devouring jobs.

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According to the BBC, the Artificial Intelligence (AI) revolution could lead to around 800 million jobs being lost by 2030. And it’s not as if this is a threat of the far distant future. It’s already here. We have already lost many jobs as part of the AI revolution.

Because of this uncertainty, we are told if we want to remain employable then we must upskill and upgrade.

Unfortunately, there’s one huge problem with this argument: Australians aren’t being provided with proper career guidance. Many Australian graduates are still being loaded up to the eyeballs, with skills and debt—all for fields scheduled for the scrapheap or changes within around a decade. This includes ‘up to 60% of graduates who are studying for jobs that are highly likely to be automated ‘ says Dr Andrew Charlton of AlphaBeta.

Jan Owen, CEO of the Foundation for Young Australians, has also noted that Australian young people arent being prepared for the new world of work. She says ‘new pathways are needed. ‘ Owen’s says: ‘the four most significant factors that can speed up the transition from full-time education to full-time work, including an education that builds enterprise skills, being able to undertake relevant paid work experience, finding paid employment in a sector which is growing and an optimistic mindset.’

A range of industry players has issued warnings about Australia’s lack of AI preparedness. Microsoft’s managing director, Steve Worrall, and Telstra’s executive, Michael Ebeid, have both warned that Australia is unprepared for the AI revolution for the major loss of jobs because of AI.

McKinsey & Company has also warned of large-scale job losses of between 3 and 6 million in the next decade.

Artificial Intelligence Strategist Michael Evans, formerly at QUT, has also sounded the alarm about Australia’s lack of AI preparedness. He’s compiled a comprehensive analysis of Australia’s slow AI progress. He warns:

‘ It should also be clear that Australia requires this AI strategy and shift in prioritisation and thinking immediately, as we are already falling behind and there is no overnight solution. ‘

Michael Evans, Wake Up Australia, Medium

 Evans argues that money was allocated in the 2018 federal budget, for AI, but it’s unclear how this will bring us up to speed. Instead, he says Canberra has ‘hit the snooze button…’ And alarmingly many of our competitors like Canada are already way ahead.

Given the sheer impact that the AI revolution will have on everyone’s jobs, its an important challenge to face. Some news reports have predicted that 40% of jobs face the scrapheap.

However, this job elimination process has started and is shaping the future of many younger and older Australians alike. This process will continue to shape many working lives, particularly in regional areas. These are often lower-income areas, where robotics has already affected jobs. Robotics will also severely hit states like South Australia more than New South Wales.

Historical

In the post-war era, there were fears about automation’s impact on jobs.

Alas, many of these fears were premature. Unemployment was low in the 1960s. By the 1970s, while unemployment started to creep up, the fears about automation remained on the fringes.

But… this time it is different!

Just as the world breathed a sigh of relief, new factors emerged, such as the elite increasingly embracing neoliberalism. The global economy’s structure tilted in favour of a wealthy elite who earned their money via outsourcing. Other changes that have tilted the economy in the elites’ favour include:

· De-coupling of productivity and wages: The ‘value of workers labour’ started to decline during the 1970s and has continued to fall, according to Ford in The Rise of the Robots: Technology and the threat of a jobless future.

· Financialisation: Financial services accounts have accumulated a greater amount of national income. Here, the focus is on profit extraction, not on giving people jobs, and on handsomely rewarding CEOs beyond the dreams of avarice. Hence, money sucked out of the economy and hoarded by a wealthy few, says Nicholas Shaxson, author of The Finance Curse: How Global Finance is Making Us All Poorer.

· Demise of social norms: Prior to the 1980s, it wasn’t appropriate to hoard a large slice of the profits. Now, hoarding profits is commonplace.

· Research & development tax deductions and grants incentivised the increased use of robotics and mechanisation.

· Outsourcing: Skilled overseas labour can be employed more cheaply, altering the capital/labour ratio, and resulting in the virtual absence of entry-level jobs. It also means that workers are now competing with an industrial reserve army running into the billions.

· The increased casualisation of workers has resulted in fewer unions and disempowered workers.

· AI has enabled multi-nationals to reposition aspects of service and production within a virtual world, maximising profit by avoiding tax centres, and removing the need for employees altogether. Also, according to Martin Ford, author of The Rise of the Robots: Technology and the Threat of Mass Unemployment companies have less need to rehire when business picks upinformation technology advances mean that they can operate without laid-off workers.

There’s nothing to suggest this pace will let up!

The collective impact of these policies has shaped everyones working life. These policies mean there is no steady path from full-time education to work, not even a circuitous route.

For a few decades between the 1940s and the 1990s, things were rosier for people. That the average Western citizen could attain an affluent lifestyle became so compelling, so deeply rooted, it was as though this option had always existed throughout human history.

Workers with a low or relatively low level of education could achieve job security. They didn’t need degrees or diplomas. This was when workplace training received greater respect from job agencies that weren’t Job Service Providers with ties to the training institutes selling those diplomas and degrees.

Workers’ protection came via a global economy that was structured to provide economic security. According to economist Robert Kuttner, this structure included a legislative architecture that sought to protect workplace rights, large proactive regulators, and trade unions.

Contemporary job seekers face a hostile environment tilted in the employers’ favour, with few rights, under-resourced or unconcerned regulators and weakened trade unions. It is also true that contemporary workers have much better levels of education, but they have inferior work prospects relative to previous generations.

But…But… this time it is different!

So how do we know that there will be substantial job losses in the automation era?  

‘The job losses today are effecting more and more workers in the white collar services industries and creeping into the middle and higher income brackets.’

says Dr Andrew Charlton of AlphaBeta.

For example, they increasingly use automation in areas like the law. It can answer sometimes ‘seconds to do what used to take a law clerk hours…’, says journalist Mark Willacy.  AI can also undertake document discovery faster than a team of junior lawyers says Chystia Freeland in her book Plutocrats: The Rise of the New Global Super- Rich and the Fall of Everyone Else

Can’t we just retrain?

According to Ellen Ruppel Shell, a professor of science journalism at Boston University, policymakers continue to pretend that we can educate our way out of this crisis by upgrading our skills:

There are several reasons why retraining doesn’t work:

· Training is premised on an expanding economy. Prior to the GFC or the Great Recession, companies normally rehired people when the economy picked up, according to Jerry Selingo. However, increasingly, developments like financialisation mean that companies are making do with less staff and making more money per staff member than prior to the recession. Also, some companies are using automation to replace middle-level staff, says Martin Ford, author of The Rise of the Robots.

· Another common problem is that retraining focuses on the perceived shortcomings of job seekers (lack of skills); it doesn’t focus on employers’ behaviour. It doesn’t ask if they’re hiring.

· This leads to another critical issue. Many programs ignore one fundamental consideration: There’s no point in retraining if graduates can’t get a job. Workers need, at the very least, good graduation prospects to make doing a degree worthwhile.

· Unfortunately, many universities are still training students in degrees that will become obsolete, says Dr Andrew Charlton

There’s always Freelancing!

· Another common misconception is that multiple skills and income streams will replace secure full-time employment. There’s five big problems with this argument: many businesses, at least initially, make little money. Many freelancers, like employees, rely at least partly on contacts for work; and many a business has tanked because of cash flow issues and a declining economy.

Another overlooked issue is the fact that it takes times to acquire skills and sometimes family and caring commitments can make this process seem more like snakes and ladders and less like a traditional linear trajectory.

A further crucial problem with casual/contract work is that it lacks stability. Even workers with extensive skills may only pick up crumbs of work in the global gig-economy workplace.

Casual/ contract work is well-known as a cause of low consumer spending. And you don’t have to be an economist to know that low consumer spending is not good for the economy.

But there’s always steady employment!

· Finally, the most powerful indicator that there won’t be enough jobs is that there aren’t enough jobs now!

“ The debate is done, the evidence is in…we’re already at the state, where we don’t have enough jobs… Significant number of [job seekers] have just given up.”

Charles Brass, Futurist, ABC Four Corners.

· How do we know this? Look at both the ABS and Roy Morgan figures. While they use different methodologies, these figures both show a tragic tale of underutilised or excluded labour.

A recent Roy Morgan survey of the Australian labour force in January 2019 showed that around 2 million Australians are either unemployed or underemployed.

This presents a real story of pathos, yet as a society, we continue to ignore the mounting cost of ignoring the vulnerable.

Furthermore, there are an undocumented number of Australian’s who avoid claiming their social security entitlements by living off of their savings, relying on family or juggling multiple low-paid jobs.

In addition, we see politicians rolling out hollow promises of job creation schemes, and indentured slave labour (disguised as populist work fare), yet there is no outrage at the fact that they know schemes are failures. These wrecks, says Ellen Ruppel Shell, are legislated years after they think everyone has forgotten how badly the last lot ‘crashed and burned‘.

And sadly, a succession of failed retraining policies doesn’t stop politicians from making more hollow promises. One person who knows this better than just about anyone is Gordon Lafer. Lafer authored The Job Training Charade. In the early1980s, he worked as an economic policy analyst for the then-mayor of New York, Mayor Ed Koch. Lafer was a believer in job retraining. Then the penny dropped.

So, what changed Lafer’s mind? An executive who spoke to the mayor apparently told the mayor that there were jobs going for $10 per hour, which he couldn’t find staff for. The mayor trumpeted the availability of these jobs. Sounded great, but did any of the job seekers secure work? No. But plenty of letters flooded into the mayor’s office from people desperately seeking work!

So, what was the problem? The biggest problem was that these jobs were below the minimum wage. Another problem was that job centres wouldn’t do much to help job seekers secure decent paid work.

And it’s a similar story in 21st-century Australia. The media regularly publishes or broadcasts stories about so-called ‘job snobs’ refusing to apply for jobs. In other words, an employer’s clear inability to recruit staff is attributed to lazy workers.

A chief culprit at this game is politicians. They love to tell us it’s these so-called ‘job snobs’ that are at fault. The main problem with this narrative is that it just isn’t true. In fact, many employers in regional Australia are well-known to prefer backpackers to locals. Why? Backpackers are cheaper.

Alternatively, politicians resort to other lazy job creation slogans like ‘small business is the engine room of the economy’, according to Professor Richard Holden at the UNSW. However, according to Ellen Ruppel Shell in her book, The Job: Work and Its Future in a Time of Radical Change, there is little evidence to support this claim. In the late 1970s, an MIT academic, David L. Birch, first proposed the idea that small businesses are job creators. Interestingly, over a decade later, he debunked his own theory.

Look at the lies told by politicians about job creation, and it should be clear why the economy is struggling.

What else is causing the economy to splutter? Open the bonnet of the economy and you get not only a sense of how the engine works but just how badly that engine is struggling and spluttering.

So, why is the economy spluttering so badly? Consider the fact that policymakers have reconfigured the economy into a narrow range of sectors. We have services employment, which is low paid. Otherwise, most politicians see us as a quarry or an opportunity to flog expensive real estate.

Some economists, like Alison Pennington at the Australia Institute, argue that the economy has been ‘eroding or white-anting over time…’ Pennington continued:

‘Most Australians work in services work in education, health, etc. what characterises services work is a strong human service labour output…If you have an economy where most of the jobs are in low-wage, particularly low-wage, human intense work, it means that you lose a stable base for innovation, for research and development, for expansion of businesses…’

The economy is spluttering because many people who already have jobs are taking on second or third jobs. The hourly rates of their primary jobs have failed to keep pace with cost-of-living increases, and the number of working hours has also been reduced.

Those on social security are financial write offs after almost 25 years of stalled increases.

All Australian’s are bearing bank fees and the costs of privatised utilities, amongst many other things. Once you’ve considered these factors, you get a sense of why the Australian economy is not delivering just and fair employment outcomes. You also grasp why it won’t do so.

All Australians are well-aware that the labour market templates ruptured years ago. Instead, we seem impervious to change in the wider economy, unless perhaps we fear a deterioration in personal circumstances.

Nevertheless, we’d prefer to remain living in a dated bubble world. In this world, our prospects remain robust despite evidence to the contrary. In our world, our prospects (if we’re employed) are good because we made all the right choices and worked hard. We say to ourselves, we aren’t work-shy bludgers scrounging off the taxpayer dollar (social security is funded via consolidated revenue, not income tax).

We continually discount the hand that fate may offer us. We forget that we all need Lady Luck sometimes.

Professor Amy Wrzesniewski summed up this cognitive dissonance so eloquently in her collection of essays,Habits of the Heart (cited in Ellen Ruppell Shell):.

‘[U]nderlying our anxiety is the realisation that for most Americans, growth of the global economy no longer means opportunity, downsizing, re-engineering jobs and the pink slip of dismissal. Yet through all these wrenching threats to prosperity, there has been curiously little public protest about the changing rules of the economic game’.

No more buts!

Australia should start retraining workers before they lose their existing jobs.

The retraining story is similar here in Australia. Considering the level of change over the course of the 1990s and beyond, there was little in the way of genuine critical analysis concerning retraining. Instead, Australia, especially post’90s, consumed marketing about career options dressed up as labour market forecasting.

For instance, they frequently tell us that Australians need to train more and improve their skills for in-demand areas. This advice is true, but Australia doesn’t offer a pathway for the employed or for those who are unemployed. Many Australians are employed in jobs that require long working hours, which precludes retraining in another field.

For instance, let’s consider the prospects for truckers. Loads of jobs for truckers will be automated, yet the prospects for truckers who want to transition are poor. It isn’t only because they are working long hours that they cannot transition to fields like big data, robotics, or STEM.

Furthermore, the jobs market has never been more ferociously competitive. Employees are not only competing with one another but also with a global army of skilled workers.

There are other factors. For example, they may lack confidence in their learning abilities or, if they are like many people, they don’t feel confident with numbers. And they require a solid grasp of Maths to code.

Even if they embark on university studies, there are many opportunities to get distracted. Lack of money, competing pressures, extensive commuting times, or even circadian rhythms can make juggling work and study difficult. And according to ABC, the statistics show that many university dropouts occur in courses where there are many mature-aged students.

Pursuing further education through nascent ecosystems, like online MOOCs assists those with significant material resources, not stressed career changers.

There are other reasons you can’t ‘educate your way out of the problem’, according to Ellen Shell who was interviewed on Recode decode. How do they know that the jobs will be available at the end of their retraining journey? According to Ellen Ruppel Shell, a journalism academic, some jobs identified as most under threat from AI in the US are middle-level jobs. These are the professional jobs that universities prepared graduates for.

At the same time, AI will leave in place some lower-level jobs, like burgerflipping, where it’s cheaper to employ a human.

There are more reasons why the pathway is difficult. Just look at the statistics for graduates in the US and the UK. Many STEM graduates ‘can’t secure employment in their field’, says Tom Ford, author of The Rise of the Robots: Technology and the Threat of Mass Unemployment. This difficulty may be partly because lots of jobs for coders have been outsourced overseas.

It’s a similar story here in Australia, despite the rosy statistics that show many graduates secure work, such statistics are based on a self-selecting sample population, an approach that is well known to distort statistical outcomes.

Furthermore, the path of a trucker retraining would be made difficult by lack of internships. Sadly, without both the degree and work experience, prospects are poor.

The situation quickly evolves into job polarisation, where workers are locked out of better-paid employment by their inability to secure a graduate-level position. That undermines the whole basis for retraining.

According to Union Learn, data from the UK shows that it is better to train people while they are still working. Because of the long hours that truckers work, this would be difficult to do. Australia should change industrial laws to introduce a four-day workweek, which would allow workers to retrain.

The reality is Australia does a very ‘poor’job transitioning workers to other jobs, according to the economists Dr Andrew Charlton and Dr Jim Chalmers.

This leads us to a grim truth: some displaced workers will never be re-engaged in new occupations. The current crop of policymakers must accept this reality. That’s why we need to adopt a Guaranteed Basic Income and not a Universal Basic Income.

Conclusion

It’s time for voters to demand radical reform to Australia’s failed education and training agenda. The AI revolution is not some distant event – it’s here now.  Sadly, Australia’s preparation for this AI revolution is woeful.  This lack of preparation disadvantages us now and in the future.

A revolution of this magnitude isn’t something that individuals can’t fix without a plan. Why? This is because AI will eliminate many jobs. It will create many other jobs, but for job seekers to enter these new fields requires government to direct job seekers into areas of demand.

There are two compelling reasons why government must offer greater guidance to job seekers. Australia has high levels of skills mismatch, that is people trained for occupations where personnel outnumber opportunities.

A second compelling argument for government intervention is when automation kills jobs, new one’s don’t automatically pop up, say Douglas Copland. Why? This is because it takes time to create new jobs. Much more critically, the jobs lost through automation will vastly outweigh those created.

Auspol, Economics, Political failure

Guaranteed Basic Income: it’s more important than you think

Debora Cardenas on Unsplash

Income support provides routine sport for today’s tabloids. Some media relish labelling people who receive entitled social security as “dole bludgers” or “welfare cheats.” Headlines regularly portray them as “bleeding the taxpayers” dry.

The stories may attract initial clickbait and a stream of petty-minded comments. Unfortunately, they’re a cover story for a social security system that is failing the most vulnerable in our community.

Why income support needs a reset

For those with no experience in Australia’s income support system, the idea that it’s failing would be a surprise. After all, we have a system of support for those going through tough times, so why reinvent the wheel?

The reason is that our existing social payment safety net no longer fits its purpose. It’s costly, it benefits rent-seekers rather than job-seekers (and other social security recipients), and it is based on a workplace model that no longer exists for many people.

Contrary to a widespread pernicious community myth, social security isn’t accessed by a minority of Australians. At one time or another, many Australians of working age rely on some form of income support, according to Professor Whiteford at the ANU Crawford School of Public Policy.

For a system so critical to so many Australians’ lives, increasingly, our income support system is resulting in genuine claimants not getting life sustaining payments processed promptly. Some claimants are waiting for weeks, usually months, to access their social security entitlements.

However, this doesn’t even fully describe the significant problems in income support. Even more heart wrenching is that the people stricken with cancer (and other medical conditions) don’t qualify for the Disability Support Pension (DSP). Many potential claimants miss out because DSP rules classify serious conditions like cancer as possibly curable and therefore episodic, so only people who have a permanent severe disability can qualify for DSP.

This leaves many people in a terrible bind. They’re in the awkward situation of looking at whether they have another illness that could qualify them for DSP, or battling a medical condition while subsisting on the grossly inadequate Newstart allowance, which means they usually go for days without food or essential medication or medical equipment.

Receiving inadequate allowances or payments are only part of the social security horror show. There’s also the near impossibility of income support recipients locating affordable housing.

Sick people on income support are also at increased risk of homelessness. Their conditions may cause relocation to residential regions near medical care where rents are at a premium rate.  They have the added burden of the cost of unsupported expensive packing and moving.  This is due to decades of inaction by both political parties.

And homelessness can happen to anyone. Prior to become homeless due to illness Colleen was a school teacher. “Before the cancer I was a prolific painter, I was an art teacher at a primary school, I was a prolific bush walker. I was a very healthy person, a very happy person”

Tragically her story is becoming all too common here in Australia.

For one of the wealthiest countries in the world, this isn’t okay – not even by a long shot.

It’s not as if the government can’t afford to do better – they could do much better, but they fixate on so-called economic management, which is code for hacking away at social security benefits.

Further reasons for a major re-think on social policy

There is a more pressing reason for revising income support policy. Put simply, the ranks of redundant workers are likely to swell, including those rendered unemployed through outsourcing of Artificial Intelligence (AI). These ranks may also include freelancers whose work has been superseded by robotics.

These people face a grim future that is dependent on Centrelink – a fate many people strive to avoid.

Why is income support failing the most vulnerable?

Failure to look after the most vulnerable has been an entrenched problem for decades. It started particularly after the ’70s oil shocks caused the skyrocketing of inflation and unemployment. This fostered the perfect environment to breed prejudice against those out of work.

Governmental belt-tightening became fashionable, and by the end of the ’70s, it became gospel that governments preferably needed to run surpluses.

This obsession with belt-tightening and surpluses has meant that, that successive governments have taken an increasingly fiscally tight-fisted approach to income support. This has all been under the guise of using taxpayers’ money frugally.

It is because of the surplus and expenditure-cutting mania that recipients are classified as a burden. Basically, adequate social spending makes it harder for the government to cut expenditure.

Hence, all recipients, no matter how ill, are stamped as bludgers (scroungers). Stricken with cancer, the parent of a young child, or a student? Whatever your circumstances – no matter how trying – your worth is assessed by one question: Do you work?

Governments intend this question as a dog whistle. When many people hear: “Do you work”, what they also hear is are you contributing to the revenue. If not, if then you’re living off benefits, then you’re a scrounger (bludger) living off my taxes.

It matters little that many recipients, such as those with chronic medical conditions, carers, full-time students and the unemployed (particularly in higher unemployment areas) can’t work full-time.

It also matters little (to commentators and members of the public) that social security — isn’t funded by the taxpayer.

Despite these hardships – and often heartbreaking stories – the overwhelming picture of social security recipients in political and media circles is one of freeloading.

It was never intended to be that way. In 1943-6, the Chifley government established the National Welfare Fund to provide social security for such circumstances as advanced age, invalidity, child endowment, unemployment, or sickness. The fund started with a humble 30 million pounds. By the 1950s, the substantial proceeds were transferred to consolidated revenue from a trust account. In 1985 (at a time of high interest rates), legislated changes attempted to remove the fund forever from memory.

The founders of the National Wealth Fund had the best of intentions; they made sure the scheme was well secured in a Trust Account.  By 1950 it was clear the difference between revenue and expenditure from the fund was showing it to be financially sound and showing immense residual growth. The move to the Consolidated Revenue Account which is a general interest-bearing account assured it would grow even more.  Social Security should have existed for perpetuity.

Our current stock of retail politicians’, by contrast, routinely makes recipients’ the target of cuts to get the books back in the black.

Guaranteed Basic Income (GBI)

Enter the need for a Guaranteed Basic Income. It would provide a social safety net and would be pitched above the poverty line.

The UNSW Minimum Healthy living index would determine payments. This index looks at what households require to live comfortably. Hence, payments – for all Guaranteed Basic Income recipients – must be significantly higher than current payments. (see the section on how to pay for GBI).

A Guaranteed Basic Income would be available to those unable to work due to a medical condition, caring or full-time study.

Although individual recipients would receive more equitable income support (via a healthy living minimum standard), overall, the Government would have fewer social security recipients overall as many former recipients would be engaged in a Federal Jobs Guarantee (See the section on Job Guarantee).

Why is a Guaranteed Basic Income (GBI) better than a UBI?

Over the last four years, Universal Basic Income has established itself in the public’s consciousness. Driven in part by silicon valley, this replacement for income support is widely seen as a panacea for inequality.

Unfortunately, like with many other worthy ideas, there are roadblocks, the biggest of which is a national obsession with affordability.

What do I mean by this? For a start, there is the cost. A UBI would be double the cost of our current social security system (around $170 billion per annum). When politicians are obsessed with affordability, are they likely to want to double the money spent on social security?

However, there is an even more formidable stumbling block: raising the taxes on the rich. As a UBI is double the cost of the current system, it would probably require increasing charges on big targets. Legislatures find it challenging to increase taxes on corporations due to the formidable bargaining power of the rich.

Why would a Guaranteed Basic Income be better than a UBI?

Funding a Guaranteed Basic Income is much more affordable than a UBI for five reasons.

First, funds could be drawn from consolidated revenue. (This is where current social security funding comes from, not income tax.) or

Second, the government could issue bonds;

Third, the government could use targeted fiscal expenditure and Australia’s fiat currency to address to the problem;

Fourth, the government could terminate existing contracts and re-purpose expenditures; or

Fifth, they could establish a purpose specific general social security account operating separate from the Consolidated Revenue Account).

However, fewer people would need to claim GBI because many social security recipients would be engaged in a Job Guarantee Scheme. This scheme would guarantee real public sector employment in a range of occupations, child care, caring, environmental work, and community work.

It would employ scheme participants as part of a new service and not part of the APS.

These jobs are real jobs, not welfare like Work for the Dole. The government needs only to use contract management arrangements with providers – there is no requirement to nationalise private businesses.

Conclusion

John Maynard Keynes once said, ” Look after the unemployment and the economy will look after itself.” By this, he seems to have been saying that if policy-makers tackle unemployment, the benefits will flow to the broader economy. Tragically our, contemporary politicians and the media never seem to have got the memo on this one, instead, they tell us that all social security recipients are a burden.

Furthermore,they also sell us a model of capitalism that doesn’t reflect reality. Often, politicians like to give the impression that small and large businesses are opportunity creators – this is a lie. It is everyday people – whether or not employed – who are the most significant opportunity creators of all.

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.


Economics

Gross Domestic Product (GDP): Is all that it’s cracked up to be?

What is GDP? 

GDP is treated as the holy grail of economic management.  Its status is like a deified being – ethereal, airy, and untouchable.  You may be able to photograph it, but you may not benefit from it that much.

  • A lot of GDP growth comes from the resources industry;
  • Most GDP growth in generated in Sydney and Melbourne – between them they generate around 70% of the economic growth. In Sydney three key-regions deliver around 24 % of economic growth – the inner northern suburbs, the Ryde area and the Sydney CBD.

What do most people think GDP is?

If you asked many people what GDP is, their explanation they may say: It’s to do with economics or economic growth. However, what it is specifically and what it does, well that response may draw a blank.

GDP is seen as a measure of a government’s economic competence, yet it ignores critical factors.  Loudmouth politicians and commentators megaphone their belief in GDP.  It’s rather like bodybuilders comparing muscle size.

However, what does it tell us about economic performance and progress?  It tells you a lot if you’re a banker or business person but relatively little if you’re an ordinary person.

So what does GDP count and fail to count?

  • It’s a useful tool for central bankers.  It helps them to know whether to hit the interest-rate brakes or press the accelerator;
  • It impacts on interest rates and the cost of borrowing;

Women’s work

It ignores women’s work in the home and leisure;

  • It counts remediation work from natural disasters as a positive;
  • GDP looks backward and not to the future, so it’s not entirely useful for financial markets;

Says nothing about the quality of government services;

  • GDP is tone-deaf to the reality of people’s lives.  For example, it doesn’t consider the costs of withholding education, nor does it consider the quality of government services.
  • Credit Suisse report emphasises that GDP says there’s no value in capturing economic issues faced by the government.  Health, environment, and inequality, issues that would probably be regarded by many as an integral part of the economy, are absent.

So how do I benefit from this economic growth that they talk about?

The answer to this question varies greatly.  It varies depending on your economic circumstances.  Do you run a company that performs remediation work in the event of a natural disaster?  If so, disasters are a financial boon for you.  Moreover, they make economic growth look better!

However, if you are like an increasing number of Australians who have not had a wage rise, you’re not alone.  Many people, on individual contracts, struggle to secure a wage rise for a simple reason: You can’t negotiate with your boss.

Sure, some employees successfully, albeit rarely, negotiate with their employers.  They tend to have extraordinary skills that consequently attract better pay.

However, the reality for many Australians is that income growth is way below GDP growth.  Thus, although the governments spruik it, the reality is the GDP figures sit uncomfortably with the reality of many people’s lives.  Some people are doing very well from the GDP as an economic measure.

What other measures of economic progress exist?

Unfortunately, there is no one replacement measure for GDP.  However, it could be used in conjunction with one of the following alternative measures.

The limited utility of gross domestic product has long been recognised.  Robert Kennedy once said of it: “It measures everything except that which makes life worthwhile.”

So, if its usefulness is so limited, why do we still use it?  We can only change the economic indicators when policymakers prioritise genuine measures of economic performance.

One way to do this is to use different economic indicators.  One of these alternatives is the genuine progress indicator (GPI).  It looks at, rather than ignores, critical aspects missing from Australia’s current economic progress indicator.  Therefore, unlike GDP, it considers the negative effect of income inequality on welfare.  It also considers household work, a gaping hole in the current arrangements.

A GPI would look at the environment, as well as the costs of crime and pollution.  Also, it looks at the contribution of volunteers.

Sadly, GDP concentrates on a bunch of things that of no use to ordinary people.   And like some of Australia’s economic indicators, for example the unemployment rate, GDP gives a partial snapshot.

It’s arguable that to restore confidence in the Australian political process we need to address our us of dated economic indicators.  Otherwise negative feelings with continue to ferment among those who feel as though they’ve been left behind by the economic fast lane.

It’s also not enough to point the finger at the losers.  Blaming others for problems  not of their making, may feel satisfying, but not only does solve any problems, it also dodges the central role of politicians in the political process.  That is, that under the system  of representative democracy – they’re supposed to be there for you.   If something is not working, if something going right – it’s in all our interests to find out what and fix it.

And one of the most important things politicians need to consider fixing first are our economic indicators.  No not just the unemployment that fails to detail the high number of people who’ve given up looking for work.  We also need to find another broader range of indicators, like the Genuine Progress Indicator (GPI) that will give us a clearer vision of how the Australian economy is really performing. This would be more preferable than the massaged picture on offer at the moment.