Full Employment Demise

I’ve recently been reading a number of different sources on unemployment, its causes and its use as tool of social domination.

Article 23 on the UN declaration of Human rights

(1) Everyone has the right to work to free choice of employment, to just and favourable conditions of work and to protection against unemployment.

Throughout history there has always been opposition to full employment policies. During the post WWII era Australia defined a full employment as;

a society as one in which there are more jobs on offer than people seeking them, so that work providing a secure dignified existence may be easily obtained by all. (Beveridge, 1944, Full Employment in a Free Society)

Our current system of more people chasing fewer jobs than demanded and the pernicious work for the dole (WftD) and community development employment program (CDEP) uses unemployment as a fear to ‘force’ individuals to accept terrible working conditions and lower wages. Our current system punishes people without work because we have made a policy choice to ensure a shortage of jobs.

Our employment system wasn’t always like this. During WWII and the post WWII period unemployment seldom rose above 2%. This policy was guided by the 1945 tax white paper on Full Employment, under a public servant by the name of H.C Coombs. It was a fundamental aim of The Australian Government to ensure enough jobs for all up until its abandonment in the mid nineteen-seventies.

This policy for full employment will maintain such a pressure of demand on resources that for the economy as a whole there will be a tendency towards a shortage of men instead of a shortage of jobs. This does not, of course, mean that at any particular time everybody will be at work: some people will be away from work because of sickness, some will be taking a spell between seasonal or periodical employment, some will be in the process of changing from one employment to another offering better prospects, some will take time to acquire new training to equip them for other employment. These reasons for unavoidable absences from work can gradually be made less important. but in any case there is no need for them to entail poverty, insecurity and the feeling of being unwanted for the individuals concerned. (1945 Tax White Paper on Full Employment)

Our current system justifies high rates of unemployment and underemployment under a concept called the non accelerating inflation rate of unemployment (NAIRU) that determines there is some natural market determined rate of unemployment that if we were to fall below would trigger inflationary pressures.

During the 1970’s the prevailing school of thought became that we needed a pool of unemployed to discipline the rate of inflation. It ignores that for a quarter of a century Australia managed to eliminate involuntary unemployment, matching the labour market to the hours desired. It was an enormously successful policy that kept in place because the public understood that the Government of the day chose the unemployment rate. They witnessed it during WWII when every available resource in the country, including labour, was devoted to the war effort and there was consensus that we could maintain this after the war.

Unemployment is far more costly than inflation. There are physical and psychological costs to unemployment. It is a cause of a loss of skill, the longer you are employed the longer you are unable to participate meaningfully in society. There can be, a sense of isolation, family and relationship breakdowns, a loss of security, homelessness, and our communities are poorer because of it.

The oil shocks of the 1970s caused supply side inflationary shocks throughout most of the world. We had what is termed ‘stagflation’ high unemployment and high inflation and the prevailing school of thought that was emerging was from Milton Friedman. On a tour through Australia The Age newspaper on 11 November 1975 reported “…The inflation rate was caused primarily by an excessive broth in real wages, which led the professor to opine that our long cherished arbitration system ‘seems to be highly unfortunate’ in the way it sets wages…” Despite oil rising over 400% Friedman’s lectures focused only on demand-side pressures.

The primary objective of this era became fight inflation first. In the dying days of the Whitlam Government, The treasurer, Bill Hayden, reversed commitment to Full Employment and caved into the consensus of Treasury who wished to have unemployment remain high until the underlying rate of inflation fell. Whitlam’s embarkment of Swedish style ‘active labour market policies’, principal job creation scheme (Regional Employment Development) and public sector job creation was cut from the 1976/77 budget.

From the Fraser government onwards the political discourse turned to excessive wage growth causing unemployment. It was a message targeted towards unions and an excuse to deunionise the workforce. Attacks on real wages began, the language turned from a full employment economy being able to provide welfare assistance to welfare assistance induced people to be unemployed and used a justification for cutting welfare.

There has always been an understanding amongst the capital class that unemployment is necessary to further their interests. Cabinet meetings from 1951 in the Menzies Cabinet;

McEwan: Inflation results from two things: too much money and too little work. The circumstances of full employment are the greatest single cause of inflation.
Menzies: If we can reduce public spending and private investment we will be attacking that problem.
McEwan: It is a terrible thing to think that the fear of unemployment is the only way that men can be made to work harde

During the proceeding decade both major parties had ‘stop inflation first’ policies by using the unemployed. The Hawke years saw the Prices and Income Accord which saw real wages fall by 7 percent over 5 years. Coombs called this a ‘return to scarcity’ The average duration of unemployment grew from 3 weeks in 1966 to 9 weeks in 1973, 28 weeks in 1978, 47 weeks in 1984 and 49.7 weeks by May 1988.

This increase in the period people were unemployed saw public sector reforms to drive productivity. This included huge changes to the Commonwealth Employment Service such as including activity tests where incomes could be stopped or reduced for non-compliance. It arks back to the philosophy that the fear of unemployment marks people work harder. This was the fundamental idea around theses changes. Public sector job creation was cut and there was emphasis on private sector job creation. By 1991 the Keating Government was saying ‘this is the recession we have to have’ Keating saw unemployment as international, necessary and inevitable. ‘It is the unemployment we had to have’. There was one incidence where he was so animated in discussing the need for the unemployed he was made to promise that he would never perform like that in public.

By 1998, under the Howard Liberal Government the CES was shut and it was outsourced to the Job Network. Despite criticising the policy for twelve years, when the ALP won office in 2007 they maintained it. The Prime Ministers wife had made millions as a Job Network service contractor.


This is a very brief overview of the demise of what was once a bi-partisan policy that worked to ensure jobs for all. Today the policy for unemployment has to be masked behind false sentiment that the government is doing all it can to create jobs. The reality is as a monopolist of The Australian dollar, the Government can purchase whatever is for sale in Australian dollars, including idle labour.

Later I’ll look at Right to work movements in France, Britain and Australia and solutions to ending unemployment and underemployment through public sector job creation and a Job Guarantee (JG). The JG is an alternate to the NAIRU approach mentioned above and rather than using a buffer stock of unemployed, it uses a buffer stock of employed. The idea is then to transition people from the buffer stock of employed people into a public or private sector job.

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