When a Labor minister takes advice from a neo-liberal clown like this, you know that there is no more Labor party as such.

Isn't that just a delicious concept? Non Accelerating Inflation Rate of Unemployment - the idea that it is highly desirable that a certain percentage of the otherwise willing workforce can never find a job and is destined to languish in unemployemnt in the belief that this is an admirable approach to controlling inflation.

Strangley, the author conveniently neglects to mention that for over 30 years, we had close to REAL full employment (average of 2.5% unemployment over the period and no underemployment) and miraculously, inflation did not run away and eat everyone's babies. This would be the Keynsian period from WW2 to the early 1970's.

This is all a matter of public record people - I urge you to check it out because this jerk is simply lying by omission.

So.......2.5% average unemployment in the previous period vs 7.6% unemployment (not counting underemployment) in the current period and the author is trying to sell this as a glowing success.

With friends like this giving policy advice to the "workers party" - oh muwahahahaha - workers hardly need enemies now do they?

I would not p%ss on this bloke if he was on fire.

Typical rightwing capitalist spiv. Thinks unemployment is just a number not real people suffering in poverty.

<<According to Treasury figures, labour utilisation rates rose nearly nine per cent from 1978 to 2006 with most of the dividend achieved through higher participation and more hours being worked, as the unemployment rate in 1978 was similar to that in 2006.>>

Yeah but who got the dividend? Certainly not the workers. Made to work harder and longer so the boss makes bigger profits. How very 19th century.

If it wasnt for capitalisms vile need to have an underclass of the unemployed to keep employees disciplined there could be full employment and less, as you put it "labour under-utilisation".

Get your head out of your economic holy books (and out of your arse) and listen to what real people want which is not your mumbo jumbo jargon and "flexibility" of minimum wage slaves but less fat cats making billions off the sweat of their employees and their "falling real wages". All your talk of "hard won gains" is just a poke in the eye for all the workers that suffered the restructuring and pain of the last few decades only to see your "hard won gains" flow inexorably to the top end of town and never to those who slaved to produce them.

An excellent article which is grounded in economic reality, unlike some of the hysterical comments which have followed it.

Take this one for example:

"Yeah but who got the dividend? Certainly not the workers. Made to work harder and longer so the boss makes bigger profits. How very 19th century."

That's incorrect. While profits rose, so did wages, in real terms., Furthermore, lower unemployment means that more people within the workforce have jobs which give them a solid income and hence a better standards of living.

"So.......2.5% average unemployment in the previous period vs 7.6% unemployment (not counting underemployment) in the current period"

The last I heard, unemployment was just over 5%. That's a lot lower than it was throughout the 1980's and 1990's. This figure of 5% is a miracle considering the GFC and its negative effects on the economy.

Its about the facts people. Over regulation lowers the economy's productive capacity, which means higher inflation, higher unemployment and lower wages growth

It is indeed about facts AJFA.

And the facts are that unemployment over the Keynsian period AVERAGED around 2.5% while in this period that has followed, they AVERAGED around 7.6%. This is not my opinion.

It is a huge difference and one that the author has indicated that he finds desirable. He fails to mention though that although the unemployment rate was consistently below the supposed NAIRU in those decades, inflation did not run wildly and destructively away (I am aware that Friedman did not consider the NAIRU to be a permanently fixed figure. In fact, 8% was considered NAIRU at one stage. Imagine that - we need to sacrifice 8% of the workforce to the dole queue to gaurd against inflation. It has since been revised down to 5%, prompting Howard to claim that we had reached full employment. We had nothing of the sort and do not have it now).

In the current downturn, the stimulus packages have staved off what would otherwise be a significantly more serious rise in unemployment. However, UNDERemployment has risen quite sharply. Total hours worked have continued to fall as many full time jobs ahve become part time.

I think we need a third package. This one should be aimed squarely at direct job creation.

The author would not approve of the idea that everyone who wants a job should be able to get one. His veiw requires a percentage of the workforce to be sacrificial lambs.

I wonder if he would willingly apply this to himself?

Silly question really.

I terms of the 1960's and low unemployment, there are explanations for this:

"The unemployment rate is influenced by a range of factors. These include the prevailing economic environment, the institutional and policy framework for the labour market, and a range of social factors such as attitudes towards desired hours of work and willingness to move locations or undertake further training in order to secure employment. "

I think what's also often not discussed is the fact that women back then tended to stay at home. Nowadays many women choose not to have children, or decide to delay having children. Further, when they do have children, they use daycare in order to get back into work. The labour market has to have more jobs per 1000 people now than it did then.

Why did it all end in the 1970s?

"The increase in the structural rate of unemployment since the mid-1970s likely reflected a range of factors. In the 1970s, poor macroeconomic policy management (especially in the face of the first oil price shock), combined with rigid institutional arrangements in the labour market and strong union influence, resulted in much higher inflation and a sharp increase in real wages relative to underlying trends in productivity. The resultant real wage ‘overhang’ resulted in a reduction in employment opportunities and rising unemployment as businesses reacted to the increased cost of labour. "

You can see the relevant Budget Paper here: http://www.budget.gov.au/2004-05/bp1/html/bst4-01.htm

AJFA,

“In terms of the 1960’s and low unemployment”

As you yourself can see, very low unemployment begins well before the 60’s and continues for a time after – 1940 to around 1975. I’m sure you are not trying to deliberately play down the fact that low to very low unemployment actually lasted over three decades by summing it up as a single ten year period.

The high unemployment that plagued us for much of the first half of the 20th century ended early in WW2. The classical assumption was that governments should not and could not successfully interfere in this situation. Then out of necessity, government mobilised the country for war – unemployment simply disappeared as all available resources and labour – including that of women – was put towards supporting the war effort.

When the war ended, it was decided that if government could successfully banish unemployment by mobilising for war, then surely it could do so in peacetime. The near full employment we enjoyed for the next 30 years was not a lucky accident – it was the result of deliberate government policy. Labor PM John Curtin issued a white paper titled “Full employment in Australia” which guided economic policy for the next 30 odd years. Governments both left and right presided over near full employment during this period.

Deliberate full employment policy was abandoned in the mid 1970’s. As your own document shows, unemployment quickly rose to heights not seen since before WW2. It has NEVER fallen back to full employment policy levels again.

In fact, the current neo-liberal period much more closely resembles the period before WW2 – sharp booms and busts and entrenched unemployment.

“women tended to stay at home”

I take it you are arguing that the policies that successfully employed nearly all males would have failed simply if females had entered the labour force in larger numbers?

cont

I'm not aware of which policies you are referring to when you assert they were responsible for full employment for three decades.

"I take it you are arguing that the policies that successfully employed nearly all males would have failed simply if females had entered the labour force in larger numbers?"

Not necessarily. Only that this would have presented a challenge to the labour market in those times. Increased supply (employees) in a market (for labour) combined with minimum prices (awards, the minimum wage etc) usually means a shortfall in demand.

"The author would not approve of the idea that everyone who wants a job should be able to get one. His veiw requires a percentage of the workforce to be sacrificial lambs."

I think you misunderstand the author of the article when you write this. In the short term, there is a trade-off between unemployment and inflation which is widely recognised by economists. In the longer term, the Non Accelerating Inflation Rate of Unemployment can be lowered, as it was under the Howard government, through a combination of policies such as work for the dole, labour market liberalisation, increasing job seeking requirements for those on welfare benefits, and other policies which increase the economy's productive capacity.

Even though you disagree with the author, you must agree that increasing the capacity of the economy is a good thing, as that's the source of long term economic growth.

You were apparently unaware of a long period of near full employment as well but you don't seem to have had any trouble finding out that this was a fact although you somehow missed the fact that it existed for much longer than just the 1960's - around 20 years longer in fact - and seem to have decided to dismiss all this as lucky chance, despite the fact that there is no other comparable period in our history.

The "wage overhang" is interesting. Since the end of the Keynsian period in this country, the total wage share as a % of GDP has trended dramatically downward, from roughly 62% to 52%. And yet unemployment has not fallen to anywhere near the very low levels of the last period.

I have not misunderstood the authors intent. He is in reality a mouthpiece for the business lobby and therefore opposed to the notion of full employment or anything else that would increase worker bargaining power. He would not be doing his job if he were not.

But the simple facts are that history proves that we certainly can have true full (or at least near-full) employment and economic stability at the same time. It is also clear that there are vested interests that oppose it.