Friday, November 27, 2020
News for workers, rebels and the disenfranchised


‘Horrific’ underemployment but the worst is yet to come

Underemployment is at the highest level since records began following an unprecedented drop in working hours, and these numbers will worsen as the government insists on cutting spending and ignoring pleas by economists to pursue a “full employment” agenda.


Over 2.7 million Australians either left employment or had their hours reduced between March and April, while over half of young workers are out of work, don’t have enough work, or have stopped looking for work altogether.

But as terrible as these figures are, they’re expected to further deterioriate in the coming months, and the federal government has made it clear it will be pursuing policies that economists say guarantee a long and painful depression.

Elizabeth Humphrys, political economist at the University of Technology Sydney, told Voice of Action that rather than leaving people to the mercy of the markets when the Jobseeker and Jobkeeper payments are cut in September, it was “feasible and advisable” for the government to directly employ people for nation building projects.

This is similar to what the US government did in the aftermath of the 1930s Great Depression as part of the New Deal, employing millions of jobseekers (mostly unskilled men) to carry out public works projects under an agency called the Works Progress Administration.

“Keynes suggests in a recession that governments should pump money into the economy to achieve full employment because it restores economic stability at a macro level and prevents the waste of potential skill and labour, as well as avoids the social disaster that is the impoverishment of the unemployed,” said Humphrys, who is an associate at Australia Institute’s Centre for Future Work.

While Australian federal and state governments say they will return to a tired ideological agenda of tax cuts for the wealthy, privatisation, deregulation and watering down industrial relations protections, other countries such as Finland have successfully trialled a universal basic income with positive economic and social results.

The ABS’s Labour Force figures for the month to April 20, released on Thursday, are devastating:

  • 53.85% of young workers (15-24) are out of work, don’t have enough work, or have stopped looking for work altogether (source: Per Capita).
  • 2.7 million people (about 1 in 5 people employed in March) either left employment or had their hours reduced between March and April
  • Employment decreased by 594,300 people (-4.6%) between March and April 2020
  • The overall underutilisation rate increased from 14.1% to 19.9%
  • Working hours fell by a record 163.9 million hours (previous largest monthly decline was 36 million hours in 2007).
  • Underemployment rate (those who have a job but want to work more hours) jumped from 8.8% to 13.7%, the highest since records began in the late 1970s.
  • 489,800 Australians left the labour market; participation rate dropped from 66% to 63.5%, the lowest since 2004.
  • Had the labour force not fallen by 490,000 in April, the unemployment rate would have jumped to 9.6% rather than the official 6.2%.

As bad as this data is, it is largely focused on the first two weeks of April, and the next round of figures are expected to show an even further deterioration of conditions.

This is indicated by the fact that there were still over 315,000 Jobseeker and Youth Allowance “claims on hand” waiting to be processed as at April 24, data released by the Department of Social Services shows.

The unemployment data also understates the true impact of the crisis because the six million people receiving the Jobkeeper wage subsidies are classified as employed even if they are not working, while nearly half a million people left the labour force altogether.

“About 2.7 million people out of a labour force of 13.7 million people lost their job or lost hours in just a few weeks,” said Grattan Institute senior associate Matt Cowgill, who described the underemployment levels as “horrific”.

Hours worked fell off a cliff in April

Jim Stanford, the director of the Centre for Future Work, said a “more meaningful” unemployment rate would be 20%, not the official 6.2%, if one factored in the number of people who left the labour force, people who were employed but did not work a single hour and the drop in the average number of hours worked.

The government says it will turn the Jobkeeper wage subsidies off in September or potentially even earlier, while the temporarily doubled Jobseeker dole payments, now supporting 1.6 million people, would be reduced back to poverty levels of $40 a day.

“There’s a real risk the government doesn’t put in the additional stimulus necessary to get the economy onto a sustainable recovery … it could be quite dire for a while,” Steven Hamilton, assistant professor of economics at George Washington University, told Voice of Action.

Hamilton said the impact on young people was particularly worrying as evidence from the US showed “it can essentially lead to a whole cohort that never reenters the workforce”.

Even before the pandemic youth unemployment reached a record high of 12.4% in October, more than double the broader unemployment rate, while Hamilton said policies such as franking credits and negative gearing created an “intergenerational disadvantage against the young”.

When asked this week about youth unemployment, Prime Minister Scott Morrison did not accept that youth unemployment was an issue (“I don’t agree with the premise in your question”).

Despite economists and policy think tanks imploring the government to ramp up its stimulus spending and adopt a “full employment” strategy – where the public sector employs laid off workers for nation building projects – the federal government has remained firm on cutting back stimulus spending as soon as possible.

“Our system is finite … the clock is ticking when it comes to how far and how much can be done,” said Morrison on Friday.

Treasurer Josh Frydenberg: “Australians know there is no money tree. What we borrow today we must repay in the future.”

NSW treasurer Dominic Perrottet also this week said he was pushing forward with tax cuts and a privatisation agenda (“governments should get out of the way”).

There is near universal agreement that slowing spending and cutting programs too soon will prolong the economic pain, as was seen in the early 1990s recession and, overseas, in the austerity responses of the US and UK to the 2008 global financial crisis.

Deloitte Access Economics released a report showing national income next financial year could fall nearly $200 billion short of predictions in the previous budget update, but cautioned that further higher deficits to fund more infrastructure and other spending would be necessary and a rapid move towards budget repair was “misguided”.

The report said Jobkeeper wage subsidies may need to continue even after the scheme is scheduled to end in September while there was an “obvious case” to permanently increased Jobseeker.

CommSec chief economist Craig James agreed that the government might have to extend Jobkeeper to keep people afloat “and there may be scope for ‘top up’ cash handouts by the government”.

The Reserve Bank of Australia (RBA) is all but asking the government to abandon its small government trickle down approach in favour of increased government spending.

The RBA’s quarterly statement on monetary policy released earlier this month said it was “quite plausible that the current economic disruption will have some long-lasting effects” due to the time taken to restore workforces and re-establish businesses as well as the impact of the crisis on the mindset of consumers and businesses.

The RBA expected the underutilisation rate to sharply increase and was “likely to take a few years to unwind” as “businesses are likely to delay rehiring workers until the uncertainty around the outlook has subsided”.

Economist Stephen Koukoulas said: “This is about as bad as the weakest point for the economy during the 1930s Great Depression where the unemployment rate peaked just below 20 per cent.”

Former treasurer Wayne Swan, credited with getting Australia through the 2008 global financial crisis in better shape than most other similar countries, said the huge pool of unemployed and underemployed workers would further weaken the bargaining power of labour and undermine wages.

“Australia should embrace fiscal policy, that is demand management, as the first means of eliminating spare capacity and achieving full employment,” Swan wrote in The Guardian.

“With the government only prepared to spend on bailouts, not traditional stimulus, a V-shaped recovery will be a pipedream and a bathtub-shaped recovery much more likely.”

Some economists told Voice of Action they were sceptical about the idea of a New Deal-style public works scheme where unemployed people would be hired by the government to construct things like public buildings and roads, likening it to work for the dole or former prime minister Tony Abbott’s “green army”.

But Jeremy Poxon, spokesman for the Australian Unemployed Workers Union, said a government job guarantee was nothing like work for the dole because it was a guarantee of paid work and people weren’t forced to work for free under the threat of benefit withdrawals.

“It’s a very ignorant conflation … I’ve done work for the dole, I was forced to work 50 hours a fortnight for 40 cents an hour,” Poxon told Voice of Action.

“It was the most horrible, humiliating experience of my life.”

Poxon said a job guarantee should be accompanied by a lift of all income support so people had a real choice to take the job or not, but either way could live comfortably. He pointed to examples such as Argentina’s Jefes program and India’s rural job guarantee.

Opposition leader Anthony Albanese sees a big role for government spending

Labor leader Anthony Albanese is promoting a stronger role of government investment in people, technology and infrastructure, warning that now is no time to snap back “to the Liberal agenda of cutting services, suppressing wages and undermining job security”. He wants to see increased spending on social housing, heavy manufacturing and high speed rail.

“The contracting out of essential public services is not in the national interest and must stop,” said Albanese.

“The basics of life, such as early childhood education, should be nurtured and made affordable.”

Labor has been applying pressure to the government to expand its Jobkeeper program so that it does not continue to leave out 1 million casuals and 1.1 million temporary visa workers.

The ACTU released an economic blueprint calling for the government to create two million new permanent jobs and get rid of forced casualisation, outsourcing, offshoring, continuous rolling contracts and over-use of labour hire.

Even before the virus hit the economy was not doing well, with the ABS’ March quarter wage price index showing overall wage growth was down to 2.1%.

“We cannot allow the economy to go back to the way it was before: rising inequality, record low wage growth, a gutted social safety-net and public services, and too many people in insecure employment or without enough work,” said ACTU president Michele O’Neil.

Over $11.7 billion in claims for early access to superannuation have been processed. Industry Super Australia CEO Matthew Linden told the House Economics Committee that early release of super would cost a 30 year old $97,000 in retirement.

Frank Bongiorno, professor of history at ANU, said the historical responses to economic crises in Australia showed that a move towards a more equal and fairer society would not happen on its own. A regressive, “ugly” politics could result instead.

“The federal government today has a deep and principled commitment to inequality, and no crisis is going to cure it of that,” Bongiorno wrote in Inside Story.

“It is backed by business that would like nothing better than to be offered a few free kicks at a time when many industries will struggle for profitability, and that will be looking for relief from the tax office, the consumer and its own workforce.”

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