Any monetary sovereign government can address unemployment through social and political means, giving the working class a functional financial safety net. What stands in the way, however, is the political establishment’s lack of will and refusal to renounce neo-liberal ideology, which uses the unemployed as a bargaining chip for the capitalist class.
The concerns about getting a job, keeping or leaving a job, and the anxiety of finding another generate concerns in the working class. This is not merely because of the issue of mismatches between skills and job vacancies. Skills mismatch or underutilization (e.g., an engineering graduate working as a waiter) is not as well measured in the USA, as it is in Canada, Australia, and the EU (Sullivan, 2014; Ch 4 Pg 49-51). Lack of access to employment is an additional problem because, as basic statistics consistently show, there are more unemployed people than vacancies. Federal job guarantees are proposed by economists who hope in vain that the political class will minimally support full employment policies. The political class seldom do and haven’t in Australia in over half a decade.
There are numerous solutions to achieve full employment, but confusion about how to define “full”. Although Australia had 3.7% unemployment late in 2023, the Reserve Bank of Australia (RBA) claims we have gone beyond “full” employment (Grudnoff, 2023). Neo-classical economists define “full” as the moment before a “NAIRU” inflation point (Reserve Bank of Australia, 2023). Some economic disciplines have long criticised the NAIRU’s description (Sawyer, 1997). Other post-Keynesian economists have proposed that to bridge the gap between a “NAIRU” version of “full employment” and real full employment. We should look to a Federal Job Guarantee to address any inflation risks that arise when labour is fully consumed (Mitchell, 2020). This employs the “non-accelerating inflation buffer employment ratio” – NAIBER (Madi, 2019). This is a systemic idea for an internal inflation control mechanism conceived of by economists Warren Mosler and Bill Mitchell, amongst others (Mosler, 1997) (Mitchell, 2016).
The counterfeit NAIRU
To address this issue, some points need to be made about the NAIRU. The RBA’s conception of the NAIRU, which proposes a trade-off between inflation and unemployment is one representation (Hutchens, 2023). This will be referred to as the “counterfeit NAIRU”. It presumes that monetary policy can by itself alleviate cost-push inflation (which current global inflation most certainly is). Under its own precepts, monetary policy is only presumed capable of dealing with demand-pull inflation (Grothe, Weber, & Nikiforos, 2024). My second representation is a “legitimate/efficient NAIRU” (to the extent that NAIRU is legitimate) this is refferred to as a “Mismatched Unemployment Inflationary Rate” (MUIR). The phrase “legitimate NAIRU” is applied with caution about labour mismatch-induced inflation, when labour is the economy’s limiting factor of production. MUIR is the point at which mismatches between skills and job vacancies would generate inflationary effects in the absence of a federal job guarantee (Mitchell, 2021). The difference between these approaches is that the NAIRU uses unemployed humans as a buffer stock, whereas a job guarantee uses employed humans as a buffer stock (Sanderson, 2019). The MUIR is the point at which other barriers to unemployment are eliminated. No Western government has made any serious effort to achieve this. All Western governments use the unemployed as a buffer stock (Smith, 2017).
Job Guarantee
“The general idea of a Job Guarantee (JG) is that the government offers employment to everybody ready, willing, and able to work for a living wage in the last instance as an Employer of Last Resort” (Tcherneva, 2018a). Prof. Bill Mitchell, Pavlina Tcherneva, and other heterodox economists have elaborated on that idea in order to close the inflation risk gap between not-quite-full employment and full employment (Tcherneva, 2020. Pg 116-118). This would leave frictional unemployment as the sole economic concern (Kagan, 2022). With no job guarantee, the path to full employment is susceptible to inflation after the MUIR point. However, as ecological economist Prof’ Phillip Lawn has demonstrated, it looks nothing like a Phillip’s Curve model. (See Figure 1)
Regardless of whether the Reserve Bank of Australia (or the Fed in the United States) believes an economy has passed a legitimate “NAIRU” inflation point (MUIR), very few economies, if any, actually have. Claiming that unemployment should be 4.5% when there was no rampant inflation at 2% unemployment ignores 25 years of history (Karp, 2023). Beyond real unemployment not being as low as claimed, current post-pandemic inflation was initially driven by supply-shocks and then by corporate price-gouging decisions, rather than any evident demand or low unemployment (Haly, 2022); (Haly, 2023).
When labour is the limiting factor of production, inflation follows. Labour mismatches induce inefficiency. It affects economic productivity when an economy is near full employment, since, contrary to conventional economic beliefs, labour skills are not interchangeable. The only way they are interchangeable is if they are identical positions. Capacity, experience, and abilities matter. Accountants, labourers, or nurses cannot, for example, fill a deficit of electrical engineers. Mismatches increase when labour skill and experience deficiencies restrict productivity. People may be unable to fill employment openings, resulting in idle or unproductive labour, and therefore increasing the cost of production. This partly explains why job openings in a poorly constituted labour market (without full employment policies) go unfilled month after month, even while unemployment numbers are more significant (Haly, 2024b). (see Figure 2)
Labour costs become problematic when a mismatch occurs (not to be confused with the government’s failure to implement full employment policies). As labour becomes scarcer, efforts to produce unmatchable substitutes may cause cost-push inflation. Mismatches between labour supply and demand appear at the MUIR point (“legitimate NAIRU”). When mechanical engineers are scarce, you may employ an electrical engineer at either a higher mechanical engineering fee or as an inefficient factor of production. As full employment approaches, labour productivity declines, and expenses increase. This causes businesses costs to rise. According to business surveys, rising costs are more likely to occur near production limits. (See Figure. 3) As a firm approaches that labour limit, your average total expenses grow since each extra hour of labour is less productive. (Figure. 1) Consequently, to maintain profit margins, businesses raise prices, as they are never ones to miss an opportunity to price gouge (Prof. William Mitchell, 2024). That is from where real inflation originates as a pricing decision!
The MUIR
The MUIR point exists in the gap between employment mismatch and true full employment. However, while it is difficult to measure, if full-employment policies are in place, it should be less than 2% (as it was for 25 years in Australia). Figure 1 shows how it looks regarding its effects on average total costs. It should be noted that this is not the standard Phillips Curve used for counterfeit NAIRU. At this point, the federal Job Guarantee for a minimum wage should be used to consume excess idle labour without “mismatch” inflation. If not at the MUIR point, the government should hire at the award wage. You avoid cost-push inflation by consuming idle labour at the point where the event horizon of the MUIR actually exists and doing so at a minimum wage. This is where a Federal Job Guarantee, as defined above, comes into play to compensate for the inefficient excess cost of idle labour. This is just the tip of the iceberg when it comes to the concept of an Employer-of-Last-Resort (Tcherneva, 2018b).
Current ideas of fighting NAIRU inflation through monetary rather than fiscal policy have raised recessionary concerns (Emerson, 2023). Few countries, other than Australia, have implemented full employment policies that have achieved around 2% unemployment (for 25 years with negligible inflation!) through fiscal policies. If these countries were experiencing demand-pull inflation — as opposed to cost-push inflation. It would be due to a failure to implement full employment policies in education, public employment, and mission-based economies (Kibasi, 2021). In Western democracies, full employment policies are not part of the dominant neoliberal agenda. As a result, counterfeit NAIRU employment mismatches happen much sooner than they should. Neoliberalism institutionalises governments’ inability to provide jobs for their citizens.
When governments do facilitate a full employment approach, it is appropriate to implement an employer-of-last-resort policy. A Job Guarantee can address the inflationary risk that may arise as unemployment falls below 2%. The Job Guarantee can also address educational lag-time (the time it takes to train someone). Instead, in the decades since the advent of proto-neoliberalism in the 1970s, the neoliberal agenda has decimated unions, fragmented labour markets, and deprived workers of agency, rights, skills, engagement, and purpose (Humphrys, 2019. Pg 76-77). The dysfunctionality of the modern capitalist workforce is outlined in David Graeber’s book “Bullshit Jobs” (Graeber, 2019).
Focusing on a regionally driven Job Guarantee should not precede Western economies failure to resolve to labour market wastage. Currently western economies have not even approached the point where the MUIR point is reached (Richardson, 2019). To achieve sustainable employment, we must expand job opportunities in the labour market to the point where the MUIR point is relevant. To understand the actual size of unemployment, we must first measure true internal domestic unemployment in ways other than the subset represented by International Labour Organisation (ILO) guidelines (Haly, 2022).
To achieve employment sustainability and equity, governments must prioritise employment options that meet the needs of individuals and the labour market. Then, when unemployment is low, we address mismatches between individuals and jobs. There will be an inevitable education lag as we retrain people to fill vacancies. Government intervention in the private and public job markets to maximise participation opportunities ensures that the “gap” filled by a job guarantee is quite small. While providing work at a minimum wage for a job guarantee is still required, otherwise misallocated people must continue to be served with pathways to better job opportunities. The Job Guarantee works well when everyone else is fully invested in the labour market’s long-run potential.
Due to a lack of a strong skills base, integrated career plans, and ongoing investment in training, Australia is severely disadvantaged compared to other OECD countries facing a green transition (OECD, 2023). We need better Federal and State engagement in developing National Qualifications Frameworks before we even consider locally-based initiatives for work (UNESCO, 2023). This is where future job growth will occur, as the labour force requires extensive STEM (Science, Technology, Engineering, and Math) skill training at both the TAFE and university levels (National Skills Commission, 2022). We must make more drastic changes to ensure our species’ survival in the face of catastrophic climate change, biodiversity loss, water scarcity (except when it floods), land degradation (especially when it burns), pollution, and waste. There are local conservation needs, but we must prioritise larger mission-based projects with local support that are funded by the federal government and ultimately guided by citizens (Gould & Mazzucato, 2021).
Sustainable Full Employment
A sustainable foundation for employment necessitates a focus on the components of a sustainable economy. This means sustainability must be promoted at the national, state, and local levels. Sustainable infrastructure projects are typically implemented at both the federal and state levels. Because of the vast geographical distances between Australian capitals and regions, Australians urgently require functional National Broadband, functional national transportation systems, and mega-projects to generate sustainable renewable energy.
The neoliberal zeitgeist portrays the government as incapable, fallible, and unworthy of investing in new industries (Monbiot, 2016). During the postwar decades, Australian public sector industries produced that critical trade workforce. Deregulation of the financial industry is to blame for the pitifully unstructured job market we now face. It means that businesses in Western democracies are having difficulty obtaining the consistent and long-term financial resources required to fund lifelong employment, integrated career paths, and ongoing training investment. So, the process must begin with re-regulating the finance sector and restoring it to its proper place in society, which is in support of the actual production of goods and services.
Work-for-dole programmes, akin to those used by conservative governments, in which employees are forced to rake leaves in the neighbourhood park or remove playground graffiti, should be abolished (Patty, 2014). To achieve a national economic transition to sustainability, significant investment is needed to develop deep-level skills and integrated career paths. Many people should be encouraged to pursue STEM-related careers, skill development, and public employment as that is where future growth is (Steel, 2021). (see Figure 4)
We’re in this predicament because Western governments have long opposed the establishment of an integrated labour market. Their preference is to foster a fragmented labour market conducive to the “McDonaldisation” of employment (Crossman, 2020). This strategy ensnares young people in low-wage positions in the hospitality and service industries, with minimal opportunity for promotion. In the USA, Australia and the UK, this burden is exacerbated by the specific despair of college debt, which shackles people for decades and severely restricts their economic mobility (Sullivan, Meschede, Shapiro, & Escobar, 2019). We must reverse the “McDonaldisation” and fragmentation of our labour markets. We want to demonstrate to job-seekers how their participation in local, state, or federal-level work can fit within the national qualifications framework that most Western democracies can produce. This improves people’s ability to transfer their skills and credentials to more functional work environments. Without the ability to relocate, people trapped in one local community are more vulnerable to exploitation and nepotism. Even if we meet “fuller” employment targets, incentives must be in place to prevent people from becoming trapped in a local job guarantee and seeking alternative careers. If those connections to the National Qualifications Framework are not articulated, The task of cleaning graffiti off playgrounds is valuable to a community, but without credentialing, it is not portable. Many people seek genuine professional opportunities to improve their chances of success and determine where future job opportunities will exist. Governments must constantly adapt public job markets to skill mismatches and provide unimpeded training where needed to limit the population size of a necessary job guarantee.
We need STEM career paths that are technically oriented and integrated, starting on the shop floor and ending in the boardroom. We should develop a technical common language for labour involvement to increase the chances of successful collaboration. Everyone with similar high-level training can understand each other’s concerns, reduce ignorance and build empathy. This training would also alleviate the marginalisation, alienation, and frustration of technical employees servicing a less skilled population.
An employment programme must be robust and flexible, provide ongoing training and educational benefits, and have no entry or relocation barriers. This is how to address the issue of long-term unemployment and better match skills to opportunities. The programme must offer opportunities for deep and articulated skills along distinct career paths, as well as multiple entry points into an integrated labour market. As evidenced by 25 years of Australian history, the inflation risk for reduced unemployment should be well below 2% – everyone who wants a job, or a different job, should be able to get one. So, the Reserve Bank’s claim that 4.5% represents “full employment” and 3.7% represents “insufficient unemployment” is complete nonsense (Haly, 2024a). Significant infrastructure and energy transition projects require employment and educational opportunities at the state and federal levels. We have so much to do, and with the looming poly-crisis, there is little time for the necessary employment revolution (Whiting, 2023).
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