Policies/Job Guarantee Policy

Preamble
After the second world war, governments around the world concluded that the full employment achieved in wartime could be maintained through peacetime. The Australian Government made a commitment to the resulting Article 23(1) of the Universal Declaration of Human Rights: "Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment." The 1945 White Paper on Full Employment outlined how elimination of involuntary unemployment in Australia would be achieved, using a buffer stock of jobs in the public sector for those who could not find work in the private sector.

In the mid-1970s, this commitment was abandoned and now involuntary unemployment (and increasingly underemployment) levels far greater than the previous 2-3% are tolerated as a mere fact of life. The Pirate Party considers this to be a waste of Australians’ potential.

Involuntary unemployment has both social costs for the individual and wider economic costs for us all. The unemployed suffer mentally and socially as well as financially, with their families and communities impacted too. Further, for every worker involuntarily unemployed or underemployed, we lose a significant amount of potential contribution. A vast amount of community and environmental work — public goods and services — is squandered as a result.

In recent years these costs have taken new forms. With growing casualisation, we are seeing a ‘precariat’ of workers with insecure and unstable jobs and income, as well as increasing worker exploitation in these sectors. The consequences of reduced access to stable jobs are now being felt, with delayed home ownership and family formation, rising mental illness, lower productivity and loss of superannuation entitlements. These young workers will be responsible for providing for our ageing populations. By forcing them into involuntary unemployment and underemployment, we are undermining the future productivity we will need these workers to achieve in order to keep living standards rising.

Symptoms, causes and solutions
Since the abandonment of Full Employment, the Australian Government has shifted to an Employability framework. As a result, existing policy focuses on the individual employability of unemployed workers, rather than the systemic deficiency of jobs available. From 2009 - 2017 in Australia there was an average of 170,000 job vacancies for a (conservative) total of 1,700,000 job seekers seeking additional work - a ratio of 10 job seekers for every 1 job vacancy. “Dole bludger” rhetoric adds insult to injury.

Unemployment is also a deliberate policy tool, to suppress wage demands and maintain price stability. Australia now uses a buffer stock of unemployed and underemployed workers to maintain stable inflation, called the Non-Accelerating Inflation Rate of Unemployment (NAIRU). This policy is both detrimental and self-defeating: over time the unemployed lose their skills and cease to become an effective buffer stock.

Involuntary unemployment and underemployment is a collectively created problem, and thus requires a collective solution. More training programs and punitive measures cannot solve the problem alone; the unemployed can’t take up jobs which aren't there! Unemployment policy needs to return to a framework which works: a government guarantee of the right to work. This is not a new idea, because it was core to Australian unemployment policy from 1945-1974. Since that time new models for implementing this idea have been developed, with the most promising being a federally funded Job Guarantee (Employer of Last Resort) Program.

The Job Guarantee Program would see the federal government fund an unconditional job offer at the National Minimum Wage, with local communities directing job creation to meet societal and environmental needs. As a result, involuntary unemployment, underemployment, hidden unemployment and worker exploitation would be virtually eliminated through a buffer stock of minimum wage jobs.

The program could be a superior alternative to the existing unemployed buffer stock NAIRU approach for maintaining price stability , as it would allow for both additional training and skill maintenance, improving private-sector employability. Structural unemployment is largely a result of skills mismatch; created jobs could integrate vocational training in skills that are in demand locally. This would mitigate the systemic private-sector underinvestment in worker training.

The program would act in a fiscally countercyclical fashion by automatically expanding during busts and contracting during booms. This would help stabilise the business cycle and act as an inflation anchor.

Decentralisation is a natural outcome, resulting from creating jobs in regional and rural areas. This will enable the development of stronger local private labour markets and help to take pressure off metropolitan land affordability.

A Job Guarantee and Basic Income are complementary
A Job Guarantee (JG) and a Basic Income (BI) are not conflicting proposals. Rather, they set out to accomplish different yet complementary objectives.

The Pirate Party’s Basic Income proposal confers a number of advantages. A consistent and fair Effective Marginal Tax Rate (EMTR) will improve workforce participation rates for welfare recipients currently facing very high EMTRs, including younger mothers on moderate incomes. A safety net is required even with a Job Guarantee; coercing people to work for the government is not a solution. The Basic Income also offers benefits in fostering entrepreneurism and in helping students achieve a better work-life-study balance. Finally, the principal principle of the BI is to ensure that all Australians have a share in our growing prosperity and Commonwealth, a principle that would be vital in a future post-employment society.

The Pirate Party’s Job Guarantee proposal provides benefits that a Basic Income cannot. The guaranteed opportunity of work for all who want it provides “a hand up and not just a handout”. This helps address the social costs of unemployment that go beyond income loss. Studies on unemployment and life satisfaction:

Blanchflower, David. 2007. “Is Unemployment More Costly than Inflation?” NBER Working Paper No. 13505. http://www.nber.org/papers/w13505 (accessed 15 June, 2018) Blanchflower, David and A.J. Oswald. 2004. “Wellbeing over time in Britain and the USA.” Journal of Public Economics 88: 1359– 1386. Clark, Andrew E. 2006. “A Note on Unhappiness and Unemployment Duration.” Applied Economics Quarterly 52, no.4: 291-308. Clark, Andrew E. 2010. “Work, Jobs and Well-Being Across the Millennium”. In E. Diener, J.Helliwell, and D. Kahneman eds. International Differences in Well-Being. Oxford: Oxford University Press. Clark, Andrew. E. and Andrew Oswald. 1994. “Unhappiness and Unemployment.” Economic Journal 104: 648-659. Clark, Andrew E, Yannis Georgellis and Peter Sanfey. 2001. “Scarring: The psychological impact of past unemployment.” Economica vol. 68, no. 270: 221-241. De Neve, Jan-Emmanuel and George Ward. 2017. Happiness at Work. Said Business School Working Paper 2017-07. University of Oxford. http://cep.lse.ac.uk/pubs/download/dp1474.pdf (accessed 15 June, 2018) Lucas, Richard, Andrew Clark, Yiannis Georgellis & Ed Diener. 2004. “Unemployment Alters the Set Point for Life Satisfaction.” Psychological Science 15, no. 1: 8-13. Nordt, Carlos, Ingeborg Warnke, Erich Seifritz and Wolfram Kawohl. 2015. “Modelling Suicide and Unemployment: a longitudinal analysis covering 63 countries, 2000-11.” The Lancet, Psychiatry 2, no. 3: 239-245. McDonald, Ian. (2012). "Disadvantage and life-satisfaction." Insights (Faculty of Business and Economics, University of Melbourne). archive available at: http://web.archive.org/web/20171002005403/https://insights.unimelb.edu.au/vol11/05_Mcdonald.html Sadava, Stanley, Roisin O’Connor and Don McCreary. 2000. “Employment Status and Health in Young Adults: Economic and Behavioural Mediators?” Journal of Health Psychology, 5, no. 4: 549–560. Van der Meer, Peter & Rudi Weilers. 2013. “What makes workers happy?” Applied Economics 45, no. 3: 357-368. Winkelmann, Liliana and Rainer Winkelmann. 1998. “Why are the unemployed so unhappy? Evidence from panel data.” Economica 65: 1-16. Young, Cristobel. 2012. “Losing a Job: The Non-Pecuniary Cost of Unemployment in the United States.” Social Forces 91, no. 2: 609:634 Groups facing disadvantage in Australia, such as people with disabilities, youth, older Australians, long term unemployed, single parents, indigenous Australians, and refugees will be empowered with employment and development opportunities. The JG will enable an orderly transition to a post-employment society, by facilitating a changing conception and social institution of work.

Designing and Trialing a Job Guarantee
Providing all Australians with guaranteed minimum wage employment is an ambitious goal, requiring rigorous development and testing to implement effectively. It is important that a program of such scale be trialled and developed with adequate planning to ensure it does not fail or significantly fall short of its goals. The Pirate Party believes it is important to develop and test a variety of models to achieve the best outcomes; some proposals are available to be trialled immediately.

Make-work must not occur under the program; those waiting to be assigned work are better off receiving their full wage until useful work has been organised. The program must be designed so local communities and JG Workers are empowered to put forward their own projects. Oversight mechanisms must be put in place to prevent cronyism and abuse of JG Workers, potentially via citizen juries made up of local citizens and JG workers. Bureaucracy should be minimised where practical, efficient, and effective. The program must be flexible to ensure JG workers can seamlessly move between the JG and private sector employment. This will require both the creation of temporary cyclical jobs which fluctuate with the business cycle, and more permanent structural jobs to target long term structural unemployment. Similar direct job creation programs will need to be reviewed for potential design issues and recommendations.

Models which enable the integration of the non-profit, charity, social enterprise sectors and the arts should be investigated and trialled. The provision of alternative work for farmers and other communities affected by commodity downturns in land/environmental restoration could be developed. Finally, the program should target the most disadvantaged groups in the private labour market first. Different models will need to be developed and tailored to individual communities. As such the program should be trialled initially in remote/rural/regional areas first, which are suffering from the highest levels of chronic unemployment and underemployment.

Functional Finance
A key component to implementing the 1945 Full Employment White Paper was the use of functional finance for managing the funding of the policy. A forgotten truism is the constraint on the Federal Government's budget is not financial - the Australian Government cannot run out of Australian Dollars it creates. The constraint is real resources (via inflation) - the Australian Government can only buy what resources are available, including unemployed workers. Given the private sector does not want the unemployed (hence why they are unemployed to begin with), the government can buy up this wasted resource with negligible inflationary consequences. A Job Guarantee bufferstock ensures that inflation is automatically kept in check without involuntary unemployment. As was done during 1945-1974, the funding of a Job Guarantee policy will be conducted via fiscal expansion (increasing the deficit) to ensure full employment and price stability are maintained. Estimates for a full national program range between 1.5-2% of GDP p.a on average over the business cycle.

Restoring the Commonwealth Employment Service
In addition to setting up a JG trial, the existing rent-seeking in the employment services sector needs to be addressed. It is clear that the existing Job Active system is a dismal failure which handicaps job seekers more than it helps them, while syphoning off large amounts of public money for private profit. The system has now reached breaking point, while costing $7.3bn per year - half of which is spent on administration. The Commonwealth Employment Service (CES) was a vastly superior model by comparison and produced far better outcomes at much lower cost. At its peak, the CES handled 41% of job vacancies and had various specialised and experienced staff that served the unemployed well, while providing employers with a low cost "one stop shop" for workers. Small business has joined calls for a reinstatement of the CES, which would be more beneficial for them in finding staff. The CES should be reinstated to replace Job Active and resume their previous responsibilities. In addition to this, the CES could be responsible for managing the JG trials and program as it rolls out gradually.

Reinstate the Commonwealth Employment Service (CES)

 * End rent seeking in the employment services industry by replacing Job Active with the CES.
 * Implement a Job Guarantee trial scheme under the new CES.

Trial a Federally Funded Job Guarantee scheme

 * Trials shall commence for residents in remote, rural and regional communities experiencing severe/chronic levels of unemployment and underemployment.
 * Adopt local control in each case, with local communities empowered to find the jobs they need done via citizens juries.
 * Evaluate the program during implementation, with the intention of improving and expanding the program nationally.
 * Employment shall pay the national minimum wage, and contain all of the existing benefits and expectations of private employment, including superannuation, sick leave and annual leave.
 * Incorporate and encourage optional vocational and other training and upskilling of workers into the program, for continuous improvements in employability and to target skill shortages.
 * The program shall be funded through expansionary fiscal policy and run on the principles of functional finance.