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Unemployment in Australia has risen to 5.9%, but that doesn't come close to telling the full story... (Image via ftense.com)

A universal basic income is an admission of defeat, says Dr Steven Hail, who proposes a plan for genuine full employment.

AUSTRALIA HAS HAD a virtual political consensus for more than 30 years that Federal budgets need to be balanced, market solutions are always best, any type of free trade agreement with anyone will always by definition improve social welfare, and that growing household debt is inevitable and even something to be encouraged. Full employment has been ruled out as an impossibility, or absurdly defined to be the same thing as 15% unemployment or underemployment. This has been the case under both Coalition and Labor governments, as they have periodically swapped places in the parliamentary duopoly that has passed for democracy here, as in so many other countries.

There is trouble again now in the Coalition. The pendulum is apparently swinging away from the Liberals and the Nationals and back towards the ALP. Many will welcome this and it will certainly lead to a change of emphasis in the government of Australia, but it still seems unlikely anything very fundamental will change. Unlikely, but not impossible. Perhaps there are some tentative green (and red) shoots of change just beginning to emerge.

Richard di Natale, the leader of the Australian Greens, has in the past few days tried to start a "national conversation" on shorter working hours, a move to a four day week and even hinted at some form of guaranteed basic income (albeit not at a level people could live on). The usual suspects, including economist Saul Eslake, have been quick to condemn his ideas as unwise if not unworkable, blaming French economic malaise on its 35 hour week (and not mentioning the real French problem, which is its monetary union with Germany).

However, it can be argued that di Natale is looking for change in the wrong direction and adopting the wrong focus. He is not calling for full employment, not calling for a green job guarantee, not advocating for the abolition of involuntary unemployment and of insecure employment, not calling for an extension in the variety of activities deemed worthy of recognition with pay, and not challenging the balance budget myth.

Wayne Swan, the former ALP treasurer, has gone so far as to advocate greater public sector employment. He seems to be moving towards a job guarantee. But even Swan, who was at least prepared in office to allow the fiscal balance to go substantially into deficit to avoid recession in 2009, is not challenging the balance budget myth.

The myth that government budgets need to be balanced – or, on average, can be balanced – is something I have discussed before. A government deficit is everybody else’s surplus, and a government surplus withdraws purchasing power from the rest of us. What’s more, our government cannot and never will be insolvent. This is impossible, given our financial system.

The supposed impossibility of genuine full employment in the modern world is another myth.

You even see government ministers sometimes taking credit for what they fraudulently describe as full employment. The official unemployment rate in Australia is "only 5.9%" and that has got to be close to full employment — hasn’t it? After all, in 1992, the official unemployment rate was about twice this level.

Australia is, in reality, very far from full employment, and has been so since the late 1970s. No government since the early 1970s has taken a commitment to full employment seriously and, in a sense, Australians have not been offered a genuinely equitable approach by a major party since 1972. Both sides of politics – in Australia, as in so many other countries – have trod the neoliberal path based on the idea that "there is no alternative".

And yet there is, but apart from Wayne Swan‘s intervention, it isn’t being discussed — at least not in Australia. Our politicians are for the most part fighting yesterday’s battles and using yesterday’s indicators, while the Greens are ignoring underemployment.

When Robert Menzies was prime minister in the 1950s and '60s – and even after him, until as late as the mid-1970s – the official unemployment rate was a reasonable guide to the state of the labour market, and the ease of finding secure and long term employment. And we shouldn’t forget that Menzies almost lost an election in the early 1960s because this rate went just above 2% of the labour force.

But the official unemployment statistic today is almost a joke. The world has changed. Almost a third of those in employment are now employed part-time, and although they are not officially recorded as unemployed, a significant proportion of them would like more paid work than they are currently able to find, and so are underemployed. The underemployment rate is above 8%, whereas in the 1970s and before there was negligible underemployment. Let’s not forget that even a single hour of paid employment each week is enough for you not to count as unemployed. That 5.7% figure is a false one, in our modern "flexible labour market" economy. I maintain it is a fraud.

If you add the official unemployment and underemployment rates together, you get the underutilisation rate. This is a much better guide to the true unemployment rate in Australia today and is the correct figure to compare to the 2% rate of the 1960s. It stands at just over 14%. On this basis, unemployment is about seven times as big a problem now as it was back then. Seven times!

Even this isn’t the full story, as people who are not currently actively seeking employment, because they have become discouraged and (at least temporarily) given up, are excluded from the statistics altogether. These "marginally attached" workers, as they are sometimes called, might raise that corrected unemployment figure as high as 17 or 18%. This should be seen as a national crisis.

And it gets worse when you consider youth unemployment. All the above statistics can be at least doubled for those aged 15-24. We have an epidemic of youth unemployment and exclusion in Australia, with youth underutilisation rates hovering around 30% and almost nobody talking about the issue.

What are the possible progressive responses to this so little discussed problem?

One approach, which is being increasingly widely advocated, including by Senator di Natale, is to accept that the division between the "haves" and "have nots" in the labour market is permanent and inevitable, and to react to resulting relative poverty by introducing a stand-alone and no-conditions "universal basic income" (or UBI). 

I understand the attractions of a UBI, but a stand-alone UBI, to me, is an admission of defeat and problematic on many levels. A UBI which is high enough to live on would require significantly higher taxes on people who don’t see themselves as particularly affluent to avoid it being inflationary. It would be seen as a replacement for welfare programs. It would be portrayed as "the lifters" supporting "the leaners". It would be subject to all the discourse which vilifies people who need support at the moment. These pressures almost certainly mean such a nationwide UBI would be inadequate to live on.

Moreover, the average psychological impact on subjective well-being of involuntary unemployment, which has been shown in a variety of research studies to be significant and permanent, even after controlling for loss of income, would remain. The Australian Greens have as yet not addressed this issue.

In addition, payments of UBI income lack a counter-cyclical element, which means they don’t help to stabilise spending across economic cycles and would not help to limit inflationary pressures in the economy. The Australian Greens have not as yet addressed this issue either.

Another approach, which I believe is much to be preferred, is to provide a basic social income to people by offering paid employment at a just wage with decent working conditions to all who are able to participate in a national job guarantee scheme.

The scheme would be Federally funded, but locally managed, with the variety of work opportunities available in each region to be determined by local authorities. Most of these opportunities would be service sector jobs: working on environmental restoration and protection, support for the aged, and a variety of other roles which are not being performed, but for which there is an obvious need. We aren’t short of ideas. People could also be paid as part of the job guarantee to work in not-for-profit organisations, or while in training, and local authorities could extend job guarantee roles to support artists, writers and musicians. Those providing care for family members could be paid as job guarantee workers. People on the aged pension or disability support could be paid at the job guarantee rate.

We will never run out of work which can be recognised by society as being worthy of paid employment until we run out of useful things for people to do for each other.

We can restore a modern form of genuine full employment. We can permanently eliminate involuntary unemployment, underemployment and insecure employment. By doing so, we can go a long way to eliminating relative poverty, stabilise the economy and greatly reduce a variety of social problems.

We can avoid the division of society into those who have secure jobs (who are at the moment wrongly encouraged to think of themselves as carrying everyone else) and those who have not (who at the moment are often unjustly regarded as shirkers, or as having something wrong with them).

We can certainly afford to do this. The time will come, in my view, when we can’t afford not to do it.

But our politicians, on both sides of Parliament and from all parties, aren’t talking about this yet, and most of them are living in the past and fighting yesterday’s wars.

Over and over again.

As the pendulum swings back and forth.

You can read more by Dr Steven Hail at erablogdotcom, follow him on Twitter @StevenHailAus, as well as on Facebook at Green Modern Monetary Theory and Practice.

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