The Costs of Unemployment in Australia

The unemployment rate has been consistently above 5 per cent in Australia since the first oil shock in the early 1970s. The current Coalition Government and the previous Labor Government have not pursued coherent employment policies. Further the persistently high unemployment has imposed an unequal burden across members of Australian society. Consequently the unemployment rate cannot be construed as the optimal outcome of the pursuit of a collective goal, such as low inflation. In this paper it is demonstrated that the measurable costs of the sustained high rate of unemployment in Australia are substantially higher than the alleged gains from neo-liberal (microeconomic) reforms. In addition, significant individual and social costs are documented. Consequently macroeconomic intervention to reduce unemployment should be viewed as a priority, rather than the imposition of market reform with its uncertain impact. The paper concludes with a brief outline of a Job Guarantee Program, advocated by Mitchell (1998), that utilises the principles of the buffer stock mechanism to reduce unemployment. These jobs would be designed to increase per capita social welfare by satisfying social needs that are not met by the private sector in areas including the environment, social services and health. It is shown that the net increase in government outlays is modest and would be offset by a reduction of annual corporate welfare.