Unemployed – To Be or Not To Be

As I and fellow Victorians hunker down during the current lockdown, I have more time to watch and consider the attempts by our political leaders to — well – lead. As the days and weeks roll by, it is becoming clear that they are making it up as they go. I don’t blame them (much). Would you want to be in their shoes? The choices are stark and universally unappealing, for whoever currently holds the reins of power, here and overseas. The emerging strategic policy debate is now suppression or elimination. But it’s not clear if either is possible. The former, tried in our big states seems to entail a see-saw ride of opening and lock down of life and the economy. The latter would probably break down as significant numbers of citizens rebel against the requirements of stage 4 (or 5?) lockdown. I don’t just or even mainly mean the right-wing libertarians in our midst, who claim the unrestrained right to ‘personal freedom’. I refer to the millions of people who have lost their jobs and hence their incomes, especially those who have fallen and continue to fall through the gaps in the government’s income and job support programs, currently delivering tens of billions of ‘taxpayers’ dollars’ to eligible recipients.

This, it is becoming clear, in the shadow of Victoria’s second wave, is the root cause of the strategic bind we find ourselves in. Too many Australians simply can’t survive, can’t put a roof over their heads and feed their families as the double-crisis continues. Many of us, me included, are fine. Owning our houses, with savings tucked away (providing the stock market doesn’t crash and super funds dive), we can tough it out. It’s not so tough, actually – if you are fortunate enough, like politicians, to have well-paid continuing jobs and secure housing. But if you are an unemployed casual worker in the hospitality, retail, tourism and care sectors, you know what ‘tough’ is, especially if you are currently arguing with or been evicted by your landlord from your rental dwelling. Covid-19 was a pandemic waiting to happen in the globalised world of the twenty-first century. We had early warnings, rumblings like the San Andreas fault. It was only time before the big one struck. Why were we so unprepared?

Hindsight is perfect. We were unprepared, first, because we are always unprepared. The future exists behind a veil of ignorance. In another sphere – climate change – the same myopic condition afflicts us; except the pandemic is like an earthquake, while climate catastrophe is more like the slow boil of a frog. We have also as a global patsy fallen for the nostrums of neoliberalism, imposed by both conservative and nominally centre-left governments in Australia and elsewhere. The bill is being delivered and the first down-payments made.

In an emergency, the first response, a very human one, is to look after oneself, especially if you feel alone, thrown over by civil society and the government. Put yourself in the place of a sacked café worker with children and a mortgage or insecure rental. You have been working hand to mouth on a series of zero-hours contracts for multiple employers for years. So, you have missed out on job-keeper. You are just getting by on jobseeker and a motley mix of social security benefits.  Against all odds, you score a new zero hour contract. You know jobseeker will be cut back in a couple of months, so you take the contract and begin to get some hours. But you are aware, the media has been blasting the news, that there are thirteen applicants for every job. So, knocking back the next gig is out of the question. You wake up one morning with a sore throat and a sniffle, say on the day the rent or mortgage is due. Would you phone in sick and self-isolate before dashing off for a test?

Or, suppose you were a casual worker at an aged-care home and woke with the same symptoms. And, so on. The point is clear. By the end of the second decade of the twenty-first century our economy has progressively and aggressively replaced permanent with temporary or casual jobs for a majority of the working population. Too many people are working and living at the margin of subsistence, over-indebted and with no or very limited capacity to meet the ‘unprecedented’ (a word much loved by politicians keen to avoid blame for the onset of crisis) threat to their existence. As long as a significant number of people are precariously (un)employed, the capacity to fight unexpected pandemics will be radically handicapped.

In a recent survey of prominent Australian economists, more than 90 per cent responded in favour of governments unleashing their fiscal powers. The governor of the Reserve Bank of Australia led the pack.  And yet, orthodox teaching in our universities is still shot though with the models of new classical economics for which involuntary unemployment doesn’t exist. All unemployment, in this view, is ‘voluntary’, a matter of individuals choosing ‘leisure’ over labour. The five or six per cent of people officially classified as unemployed in ‘normal times’, are those who are temporarily ‘resting’ or in the process of finding new jobs. More seriously, some can’t find jobs quickly because they have the wrong skills; technological changes are leaving them behind. The first group are held to be ‘frictionally’ unemployed and hence of no concern since they will soon be re-employed. The second group suffer from structural unemployment due to their personal skill inadequacies. There is a policy imperative for the latter group; government should help them upskill. If they don’t, it’s their fault and they are ‘choosing’ to remain without gainful employment. Of course, this assumes that government and the private sector is adequately investing in the means of vocational training required for mass up-skilling, a big assumption in the light of recent debacles in this sector.

The implication of this approach to the diverse mass of unemployed people is that anyone else who is jobless is so either because that’s what they want and freely choose or because they stubbornly refuse to accept lower wages – or are prevented from the opportunity of so choosing by current rigidities in the labour market, especially the perfidious actions of the trade unions. There are only three types of unemployment: frictional, structural and voluntary. The doyen of the new classicals, Robert Lucas, once said that if full employment is defined as the absence of ‘involuntary unemployment’, then it becomes a given and not worth discussing, since involuntary unemployment doesn’t exist. (I’m serious, he did say it – and won a Nobel prize in economics.)

In the real world, even conservative governments are ignoring the academy, whose members are overwhelmingly ignoring Lucas. The only question is, not if but how hard we stimulate and by implication, for hour long? There is a recognition that the real involuntary unemployment rate is already in double figures in Australia and elsewhere; even more so when underemployment of casual and precarious employment is accounted for. The problem is that the answer to both the public health and linked economic crises has been wrong. Unless the pandemic is suppressed until a viable vaccine is rolled out, the economic crisis will roll on in a series of lockdowns and re-openings of the economy. To control the virus requires more than standard public health measures; masks, physical distancing and lock-down won’t suffice. A necessary precondition for these measures to work is for governments to stop trying to finesse their income support policies. The commitment to a temporary guaranteed living wage for every household must come first and foremost. Job-keeper must be supplemented by life-supporter. There must be no gaps in the safety net that would force members of the precariat to breach public health measures until the hoped-for vaccine arrives.

There are, however, worrying signs of premature economic ejaculation. One lesson from the GFC was that the western economies turned from stimulating the economy to austerity measures way too soon, causing the great stagnation that still lives amongst us. The Australian Prime Minister regularly harps on about the need to speed up the move to greater ‘flexibility’ in the labour market, by which he means the old suite of industrial relations reforms held over from an earlier government’s ‘Workchoices’ agenda. In other words, he is looking to reinforce and extend the casualisation of employment that has made dealing with this pandemic so damned difficult this time. Last week federal Treasurer Frydenberg delivered his budget update by announcing a $86 million deficit, on the way to a much bigger deficit in this year. Official unemployment is forecast to rise to almost 10 per cent; meaning that the real figure would be in the twenties, approaching life at the depths of the Great Depression. We are no longer using the r-word; it’s now the D-word. And yet in answer to what the government intends to do after the crisis, the Treasurer replied with a chuckle, well IR reform would be first cab off the rank. He later confessed, with a straight face, that he looked to the policies of Thatcher and Reagan to inspire the government’s next moves. That, frankly, was bizarre. If it wasn’t a brain-snap, it may have been a Freudian slip, an unconscious indication that they are planning to fight the last war. God help us, if the government, with the usual suspects in their ear, actually focuses on playing with the IR system instead of getting us through the next two years and preparing for the next big one.

The current Australian government suffers collectively from an inability to distinguish the household and firm, on the one hand, from the economy as a whole, on the other. There is no shortage of money to properly fight and defeat this enemy. The RBA Governor has pointed out the Bank’s ability and willingness to do what it takes, to hoover up whatever volume of government bonds needed to shock the economy back to life. In the current circumstances of near-zero interest rates, low inflation (in fact we are about to follow some other countries into a deflation that will increase the depressive weight of existing private debt on household consumption and firms’ investment decisions) and anaemic private demand, a massive program of bond-financed government investment and social spending is both wise and viable. One point, often neglected, is that the interest paid by the Feds to the RBA on its government- debt turns up as a profit on the Bank’s accounts and is paid back to the government as a dividend. Neat, eh. You and I and BHP can’t do that, but Josh and Dr. Lowe can.

The one quote from Keynes that any economics undergraduate can sprout, is ‘in the long run we’re all dead’. This is taken to mean, put out the house fire before you worry about rebuilding from what’s left. In the current situation, it means don’t worry too much about the world post-Covid, let’s survive its impact first. In fact, we can and should do both, put in place the policies to get through with the minimum damage and plan for the longer term. The policies required for both start from the same place – institute an adequate universal guaranteed minimum income scheme, supplemented by a longer term program of social investment in health, education and affordable housing, the three ‘merit goods that are chronically undersupplied in neoliberal-land. This is more likely to provide a solid base for consumption and investment to recover, than reinforcing the wage and productivity. stagnation and deflationary spiral that we now confront.

Does our political system have the wit and will to do this – that is the question!