Unemployed workers are tired of being the RBA’s blunt instrument

Apr 14, 2023
job search concept, man browsing work opportunities online using job search computer app. find your career, man looking at online website by laptop computer.

The term ‘jobseeker’ needs to be dropped – it is Orwellian in nature and has no place in a civil society.

It’s fairly standard practice for economists especially of the Left to decry the RBA’s obsession with the nonsense that is the Non-Accelerating Inflationary Rate of Unemployment (NAIRU) – the theoretical concept in macroeconomics that claims there is a level of unemployment below which inflation tends to accelerate, and above which inflation tends to decelerate. The Australia Institute describes the concept as vacuous while others have called it a harmful fairy tale.

I have a few gripes with the NAIRU. One, is that the unemployment rate it’s based upon is undercooked. By using a pea and thimble trick of classifying marginally attached workers as ‘not in the labour force’ the unemployment rate calculation is typically short by six or seven per cent each month. The current labour market is warm, but it is not overheated. The problems of the “Nobody-Wants-to-Work- Anymore” Brigade perhaps have less to do with the unemployment rate and more to do with themselves as employers. Nonetheless, given their ready access to mainstream media and their apparent lack of self-reflection, their regular whining contributes to the overheated labour market buzz.

My second gripe is more serious, and that is, the NAIRU is a blunt instrument while unemployment, and underemployment, are highly differentiated phenomena, which respond in greatly different ways to the same policy levers. Furthermore, we measure these different forms of unemployment (and underemployment) poorly or not at all. For example, we don’t really know how many people are frictionally unemployed (i.e., between jobs) compared with how many are structurally unemployed (i.e., in the wrong place at the wrong time with the wrong skills). Too much of the former can increase inflation, while the latter has little to no effect on inflation. Long-term unemployment is sometimes used as a proxy for structural unemployment but it’s not the same thing. Nonetheless, if you treat everyone as frictionally unemployed, then you don’t have to invest properly in reskilling and retraining the unemployed, for which Australia is one of the lowest spenders in the OECD. Underemployment is only measured in terms of hours worked/wanted but underemployment also refers to skill and income deficits, which are not measured at all. Hint: if you really want to understand underemployment in Australia, have a chat to your next bilingual Uber driver with a commerce degree.

NAIRU is therefore at best a stab in the dark. That would not matter so much if it didn’t drive so much of the RBA’s policy.

However, there is another serious problem with bundling unemployment into one flawed, undifferentiated mess and using it to effect economic policy – some of the most vulnerable people in Australia end up unfairly carrying the burden and the blame. The RBA’s focus on the NAIRU means that it is accepted economic policy for Australia to have a ‘natural’ unemployment rate and if the unemployment rate falls too low, the Bank will raise interest rates until enough poor people lose their jobs to create a pool desperate enough for the Nobody-Wants-to-Work-Anymore Brigade. That’s how supply side economics works in the labour market. Maybe that doesn’t sound like the thing that a civilised society would do. Well, it won’t unless you use some smoke and mirrors.

I don’t remember exactly if it was during the Hawke or the Keating years, but it was well before the full-scale destruction of employment services that began under the Howard years, my ‘clients’ in the former government employment and disability employment agencies, the CES and the CRS, became ‘jobseekers’. I thought the term was stupid then. Now, I see it as just plain evil. Something that Orwell could have created.

The term ‘jobseeker’ serves a crucial purpose. By obscuring its structural antecedents, unemployment can be reframed as an individualised problem rather than the result of a deliberate economic policy, and therefore the individual can be made the target of all interventions, symbolised by the re-designation of unemployed workers as ‘jobseekers’.

Engagement in the work of job searching, as structured by self-help discourses and practices, sees unemployment re-worked into a transitional state to be managed through ‘mutual obligation’, where they are coerced into poor quality services and where the only ‘acceptable’ role of an unemployed worker becomes that of a ‘jobseeker.’ Unemployment benefits have been renamed twice to reinforce this individualist message: first to “Newstart” and more recently to “Jobseeker payment”. This is meant to convey an empowering sense of choice in interpreting their situation to act in the labour market. However, this choice is circumscribed and tells the same deep story – that “unemployment is your fault.” Smoke and mirrors.

This also creates a paradox. If employment services were effective and got every unemployed worker a job, this would trigger the Reserve Bank to effect stringent monetary policy to raise the unemployment rate. The uselessness of employment services therefore performs an economic function to support supply-side economics.

Unemployed workers see this paradox and are tired of being blamed for it.

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