Unemployment is a Political Choice

I read this article on SBS news today. It is to do with our pernicious system of ‘mutual obligations’ needed to be performed in order to receive the below poverty line unemployment benefit of $46 a day. The ALP is ‘wiping’ the demerits accrued under the previous government and ‘tweaking’ the points based system. The advocacy of the Australian Unemployed Workers Union (AUWU) is highlighted in the article.

But Unemployed Workers Union spokesperson Jeremy Poxon said it was “incredibly disappointing” the new government had maintained its support for mutual obligations, and not removed them completely. ***
“The problem is this new system will just immediately start forcing people to accrue demerits again in huge numbers.” 

The commentary from the AUWU is juxtaposed against the Australian Council of Trade Unions who said

ACTU assistant secretary Scott Connolly said the union welcomed the Albanese government’s new approach to “helping people get back to work.”

The commentary from the ACTU is more than disappointing. It ignores the frame that unemployment is systemic, a political choice and chosen by the government of the day and places the fault of the unemployment onto the individual who needs ‘help to get back to work’

I don’t deny there are those who need assistance in getting back to work. However, a system that cuts people from a below poverty line payment for not seeking work that doesn’t exist in enough numbers is a sad reflection on how we treat some of the most vulnerable people in society. There is little change in the new governments attitude to the unemployed.

Counting the Unemployed under a Policy of Full Employment

I’ve ordered a copy of Inventing Unemployment by Anthony O’Donnell. Unemployment as we know it is a relatively new concept. In his conversation piece he says;

As I outline in my book, Inventing Unemployment, before the second world war censuses tended to divide the population differently – into breadwinners and dependants. 

A breadwinner who wasn’t employed would be recorded as a breadwinner rather than unemployed (with their usual occupation noted). 

That’s probably because until the 20th century, irregular work was the norm.


The way we conceive unemployment and count it started in 1947 in Australia and a quarterly survey counting a labour force and dividing it into ’employed’ and ‘unemployed’ started in the September quarter 1959.

It was the post war consensus that gave rise to full employment policies, and albeit under a ‘male breadwinner’ model aimed to ensure

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.


The quote above is from the Australian 1945 tax white paper written by H.C Coombs who would later become Governor of the Commonwealth Bank and serve a variety of roles within the Australian public service. His essay From Curtin to Keating is well worth a read to see his views on the demise of full employment policies.

The way the framework for counting the unemployed was devised operated under different policy settings where the Government would ensure spending in aggregate would aim to ensure there were more jobs than needed to match the workforce preferences. Menzies in 1961 match the then opposition ALP promise to increase the deficit and bring the unemployment rate back below two percent.

I have included a historical graph of the participation rate going back to August 1966. The participation rate rate is the number of people employed or seeking work. You can see under full employment policies (and male breadwinner model) the participation rate for males was higher. The rise in female participation rate is a result of changing social attitudes towards women in the workforce. It used to be the case for instance women were no longer allowed to work once they were married. That is why the female rate is lower in August 1966 than 2022.


The way we count the unemployed hasn’t changed but a policy of ensuring more hours of work available than those seeking work isn’t in place today. That change of policy has to do with the way economists view the role of fiscal policy. Within the public discourse today you will hear aims of ‘reducing the deficit’ and needing to ‘pay down debt’. Over the full employment era government ‘budgets’ were referred to as full employment or high employment budgets. The fiscal position was not an aim of itself. I’ve wrote what fiscal policy *should* be about in the below posts and the demise of Full Employment here.
Budgets Should Target Socioeconomic Well-Being.
What is the purpose of fiscal policy?

What Causes Unemployment?

When economist speak about spending needing to increase they are referring to several aggregates that make up Gross Domestic Product. These are Government Spending (G), Investment (I), Consumption (C), and Exports (X). Reasons are given for why one sector can/ can not increase or what incentives should be made to increase one aggregate over another. However, spending in aggregate is the aggregate of G, I, C, and X and whether it is sufficient with Full Employment.

Depending on your theory of macroeconomics there are different ways of thinking about Government Spending. These are a bit like religions and economists pick and choose different aspects from different schools of thoughts.

Keynesians/Post Keynesians – budget deficit are warranted to maintain full employment but should be balanced over the business cycle. Governments invest in productive infrastructure and grow GDP to shrink debt:GDP ratio over time.

Monetarist/New Keynesians – aims for budget surpluses, strong incentives for private enterprises, governments should eliminate debt, remove fiscal policy as primary tool of economic management, focus on monetary policy.

Modern Monetary Theorist – Governments that issue their own currency face no insolvency constraint. They can purchase whatever is for sale. Fiscal positions are outcomes and shouldn’t be targets. Monetary policy is a poor tool for controlling aggregate spending.

While there is different thinking with the role of government spending and the definition of what constitutes full employment, there is consensus unemployment arises as a lack of insufficient spending.

Enter the MMT Money Story

MMT places the tax liability as the foremost thing a currency issuing government needs to do to have its currency accepted. The tax liability causes unemployment and government spending alleviates the unemployment. It is always within the governments power to increase its spending and purchase what is for sale, including idle labour. Thus unemployment is a political choice.

That is what is meant by ‘tax liability’ creating a demand for a governments unit of account. It is a coercive mechanism.

(2002) where she describes Colonial Africa as an illustration of a tax driven currency.

“Historians of the African colonial experience have often remarked on the manner in which the European colonizers were able to establish new currencies, to give those currencies value, and to compel Africans to provide goods and services in exchange for those currencies.”

Tcherneva cites Sticher (1985) [In Malawi there was an] imposition of a Sh.3 annual hut tax over the whole colony in 1896. This was a high figure for the northern areas. And undoubtedly stimulated further labor migration [to find work paying shillings].

Tcherneva, P., Monopoly Money: The State as a Price Setter, Oeconomics Volume V, winter 2002

Further evidence of taxation driving a currency can be found during the colonisation of Nyasaland.

It is sometimes forgotten that the plantation sector in Nyasaland dates from as early as the 1890s. During the early years of colonial occupation, most officials shared the opinion of Sir Harry Johnston, the first Commissioner and Consul General, that “the one hope of this, country lies in plantation work and in the cultivation of coffee, tobacco, sugar, etc., for which cheap labour is necessary”.3 Some 800,000 acres were alienated to settlers in the Shire Highlands, the most fertile and densely populated area in the country; hut tax was introduced from 1891 as a means of introducing “the native labourer to the European capitalist”4 and coffee was grown with such success that in 1900 a thousand to exported worth 62,00 making Nyasaland the centre of European agricultural enterprise in Central Africa”

McCracken, J.,Peasants Planters and The Colonial State: The Case of Malawi, 1905-1940; Journal of Eastern African Research & Development, Vol. 12, 1982, pp. 21-35


Unemployment is caused by a lack of spending in aggregate. Currency issuing governments can always hire the unemployed, thus making unemployment a political choice. If the vast majority of the population understood that we could begin to dismantle pernicious unemployment system that punishes people for a failure of our governments to create enough work for all.

Comments from ACTU on ‘helping people get back to work’ are not helpful unless they are backed by a call to abandon targeting of fiscal positions and have a full employment policy. There seems to be little understanding from the ACTU leadership unemployment and underemployment is one of the largest factors that act as wage suppression. As there are more people seeking work, employers have their pick of employees. It is a disservice to the workers they represent. Though workers have come harder to find for some sectors, there are still just under 1.4million under-utilised workers in Australia.

Solidarity with under-utilised workers would call for an end to mutual obligations, an abandoning of fiscal targets, lifting the unemployment rate to at least $88 a day, a full employment policy that guaranteed more hours of work available than demanded and the implementation of a Job Guarantee.

Jobless still out number Job Vacancies

Below is an article I wrote in attempts to get published in various media outlets. Obviously that has been unsuccessful. Most journalist look at the incorrect indicators in assessing ‘economic’ performance. Things like the underlying inflation rate (which harps back to fight inflation first over unemployment), the decreasing or less than expected government spending (as if the government is like a household and can run out) and perhaps the improving employment data/job vacancies. Yet almost always there isn’t discussion on the overall un and unemployed. This is one aspect of what causes wage suppression, poverty and an individuals physical and mental well-being.

Anyway it would be a shame to waste the simple articles I’ve written so I’ll just post it here.

Unsuccessfully published article – that is better than the crap you read on most Australian media sites.

Towards the end of the month the Australian Bureau of Statics releases their Labour Force Survey. This is the data that shows us the unemployment statics. It isn’t an indicator of where we are headed as it is similar to looking at a distance star light years away. The data you are observing has already taken place. Nevertheless, it is a useful guide that shows policy makers trends and should help decide fiscal policy (Government spending) 

This year as a result of COVID-19 we have had some rather drastic swings in the employment data for obvious reasons.  The health measures took precedence as the Australian Government implemented a range of income support measures to protect those that would’ve otherwise lost incomes.  Notwithstanding some issues of the support measures flowing to some senior executives, the JobKeeper program delivered $750 per week to eligible employees and the rate of our unemployment benefit, which hadn’t risen in real terms since the nineties increased $550 a fortnight to reach a total at the poverty line.   

The last available data for job advertisements saw a 23.4 per cent increase between August to November of 2020 for a total of 254,400 jobs advertised. The unemployment rate continues to drop from its peak of 7.5 percent. The underemployment rate decreased as well from a high of 13.8% to its current level of 8.5%. The monthly change in hours worked was 2million hours. These are all positive developments.

However, when we compare the data from a similar period last year we can see the yearly change in hours worked fall by 26 million hours or a drop of 1.5%. When we look at the total number of people seeking work, that numbers 912,000 competing for around 254,400 jobs.  This doesn’t factor in the underemployed who desire more hours of work. The numbers don’t look so rosy when you compare them from this perspective. 

The question we should be asking is can we do better? Can we as a society ensure enough employment for all? Not only should we be seeking more jobs advertised than demanded but can we also ensure matching peoples skills sets with employment. 

This isn’t some ‘radical’ idea. It was Australian Government policy between 1945-1975 that was maintained by both sides of politics. In a similar sense to the United States ‘New Deal’ and Britain’s ‘Full Employment in a Free Society’, Australia had the rather blandly titled 1945 Tax White Paper on Full Employment.  The policy itself stated;

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.

It was understood that unemployment was a systemic issue and the collective will of our society ensured unemployment remained below 2 percent. In the same way the pressure on our political class ensured we had lockdowns and prioritised health over profits, despite some business interests to the contrary, with enough collective will we have the power to ensure that the number of job vacancies exceed the number of job seekers. 

The covid pandemic has highlighted one thing very clearly. That is the Australian Government always has the financial resources to deal with spending collapses.  The questions we need to be asking aren’t how to fund public expenditure but questions about available real resources.  The shortage of masks at the beginning of the pandemic being a good example.  There was something we needed and didn’t produce so we organised the labour and the factories to manufacture what we needed.  

This same concept can apply to organising our labour and tackling the dual crisis we face, climate change and systemic inequality.  Last year we experienced one of the hottest years on record which resulted in the catastrophic bushfires that lined the east coast.  We have so much work to do in terms of constructing alternate forms of energy, other than fossil fuels and in rehabilitating ecological ecosystems that have been destroyed because of our land management practices.

We have an idle labour force of hundreds of thousands of people. Millions when you include the underemployed and hidden unemployed.  During the ‘full employment era’ the Commonwealth Employment Service would match those seeking work to relevant roles.

Modern Monetary Theory has been mentioned in numerous articles over the past year. At its most elemental level it says a currency is a social and legal construct. Currency issuers spend via an appropriation bill and are not financially constrained, though they are constrained by real resources. A monopolist of a currency can purchase whatever is for sale in the currency it issues, including idle labour. Thus unemployment is a political choice. 

We have witnessed the Australian Government spend some $200 billion and we observed a deflationary period. The numbers of those that desire more work indicate we can be spending a lot more and putting people to work on socially useful projects.  It is a question on what we want society to be working towards.  Which certainly puts a different perspective on the unemployment figures.