Australia, we are told, has achieved “full employment.” According to the Reserve Bank of Australia (RBA), this is achieved whenever the unemployment rate sits between the “low 4s and high 3s.” Today, the official unemployment rate is 3.4 percent, the lowest since 1974. The RBA predicts that full employment will persist until at least 2024.
There is, however, one slight problem. Despite having achieved full employment, there are a total of 1.3 million job seekers, of whom 840,000 are underemployed and 473,600 are entirely without paid work. They are competing for 480,000 listed job vacancies. If you add “potential workers” — those who want work but aren’t counted as unemployed or underemployed — the number of job seekers almost doubles.
How can we be at full employment when there are more than five unemployed or underemployed people competing for every job vacancy? Further, if we’re at full employment, why do unemployed workers spend on average over two years receiving the JobSeeker unemployment benefit, a payment that brings its receivers roughly halfway to the poverty line? Today, just under 900,000 people are dependent on unemployment benefits, a higher number than before the pandemic, when the unemployment rate was 5.1 percent.
Neither side of politics wants to answer these questions. And to their great relief, the media and commentariat are not asking them to. Instead, they have unquestioningly accepted the fiction that Australia is at full employment. For the nearly 2 million workers who are unemployed or underemployed, the reality of sometimes abject poverty can’t be brushed under the rug.
Jobs and Skills Summit
Last week’s Jobs and Skills Summit reflected this myopic approach. Anthony Albanese’s Labor government went into the summit focused on “maintaining full employment” while simultaneously stressing the need to address Australia’s “skills crisis” and labor shortages. To address the latter problem, Labor has committed to increasing Australia’s permanent intake of skilled migrants from 160,000 to 195,000 and maintaining the “uncapped” temporary migration system to at least 2023. The government has also promised to expand the vocational education and training sector. Business and unions have backed these changes.
Meanwhile, the summit failed to address — or even acknowledge — the glaring contradiction. How can there be labor shortages when there are still so many job seekers looking for work?
Part of the answer is Australia’s multibillion-dollar privatized employment services system. Today, more than 750,000 job seekers are required to participate in this system, now called Workforce Australia, which is ostensibly designed to help them prepare for and find employment.
Since the privatization of the Commonwealth Employment Service (CES) in 1998, employment services in Australia have ceased to help people find or prepare for work. Instead, the system harasses and penalizes them, every year imposing more than two million financial penalties on unemployed workers for not meeting their “mutual obligation” requirements. These typically include attending dangerous work-for-the-dole activities, pointless appointments, and demeaning “employability skills training” activities.
Indeed, a 2019 Senate inquiry labeled the employment services system “punitive and paternalistic,” noting that it subjects unemployed workers to a “harsh bureaucratic nightmare” that is “grossly unfair.” The inquiry concluded that if unemployed workers did manage find work, it was “in spite of JobActive [as the system was then named], not because of it.” The inquiry called for greater government spending on employment services, which today remains roughly half of the OECD average. The inquiry’s report was quietly shelved and none of its key recommendations implemented.
The new Labor government steered the summit away from any discussion of this problem, and business and union representatives went along with it. Instead, in the lead-up to the summit, the Australian Council of Trade Unions (ACTU) and business groups released a joint press statement detailing their “common interests on skills and training.” They did not make one reference to long-term unemployment, the JobSeeker poverty payment, or the failed employment services system. The ACTU’s four discussion papers prepared for the summit made only one passing reference to privatized employment services, ambiguously requesting the “maximization” of the sector.
The outcomes of the Jobs and Skills Summit reflected this pact of silence. Of thirty-six “outcomes,” not one meaningfully addressed the current plight of unemployed workers. Conveniently, no unemployed-worker representatives were invited to the summit. Rather, when the Australian Unemployed Workers Union and the Antipoverty Centre tried to call a rally at Parliament House in protest, summit organizers refused them permission.
There was a time when Labor took the interests of unemployed workers seriously. In 1945, John Curtin’s Labor government announced that creating genuine full employment would be its central objective. It stated that
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.
In other words, the government would ensure a right to work for all (predominantly male) workers. In the years to follow, this became bipartisan policy. Both Labor and the Liberals upheld John Maynard Keynes’s famous dictum, “Look after the unemployment, and the budget will look after itself.” The unemployment rate averaged under 2 percent for the next three decades.
The Commonwealth Employment Service was integral to maintaining genuine full employment. Established in 1946, the CES was a public labor exchange responsible for matching unemployed workers with job vacancies and overcoming labor shortages. It pursued its objective with assisted migration programs, creating jobs, and offering education and training as well as mobility grants and wage subsidies.
Reflecting on the CES’s success, academic Elizabeth Webster argues that
in the three decades following the war, labor market programs did a complete turn-around from their established tradition of “doing something” with the unemployed to doing something about labour shortages.
Between 1946 and 1977, the CES placed a yearly average of 388,000 unemployed workers into employment and referred almost twice as many to potential employers. It was a triumph of public policy by any measure.
The Sacrificial Unemployed
It was not the conservatives who ditched full employment but Labor.
By the late 1960s, the strong profit rates that characterized the postwar full-employment period began to decline rapidly. From the 1950s to the mid-1970s, the average annual rate of profit fell approximately 20 percent. By the late 1960s and early 1970s, Australian capital began a concerted campaign to undermine the Keynesian full-employment framework, precipitating a shift in the political consensus.
This came to a head in 1975, when Gough Whitlam’s Labor government abandoned full employment with ruthless efficiency. The unemployment rate tripled within two years. Backed up by employers and the opposition, Labor argued that a “pool of unemployment” was needed to dampen real wage growth, reduce inflation, and increase profits to a level acceptable to capital. The unions, chiefly concerned with maintaining real wage levels, accepted Labor’s abandonment of full employment.
As neoliberal economic policies became dominant during the late 1970s, its ideologues attempted to conceal the human consequences of this approach behind bloodless jargon. Instead of a “pool of unemployment,” they started talking about the “natural rate of unemployment.” Later, this became the “non-accelerating inflation rate of unemployment. The result was that they redefined full employment as an unemployment rate as high as 6 percent.
This shift created political problems. What if the public refused to accept mass unemployment? To guard against a backlash, both sides of politics began to shift responsibility for unemployment away from the government, instead blaming unemployed workers themselves. Politicians, backed by employers and the media, increasingly labeled the burgeoning number of unemployed workers “dole bludgers.” This cynical ploy proved effective in pitting employed workers against the unemployed.
A Punitive Purpose
In the wake of the “dole bludger” hysteria, governments shifted their focus from the problem of unemployment to the problem of the unemployed. The Fraser Coalition government tightened eligibility requirements for the unemployment benefit and allowed the real value of welfare payments to go into free fall. As unemployment averaged 8 percent between 1975 and 1998, the CES found itself unable to cope.
At the same time, a consensus developed in Canberra that the CES needed to be overhauled to bring it into line with the mass unemployment era. Bob Hawke’s Labor government began this process in the mid-1980s, when it commissioned a review that criticized the CES for lacking a “punitive purpose.”
The result was Labor’s Active Employment Strategy. Introduced in 1988, it tightened eligibility requirements for claimants, rebranding them as “reciprocal obligations.” Labor also increased the number and severity of financial penalties for noncompliance.
While the ACTU broadly supported this strategy, the powerful CES workers’ union resisted, leading to a bitter dispute with the Hawke and Keating Labor governments. The government, however, held the trump card. In the mid-1990s, Labor contracted out two-thirds of CES functions to the private sector, gutting the power of the CES union. Meanwhile, the number of job vacancies registered with the CES more than halved.
In 1998, John Howard’s Liberal government completed the process of privatizing the CES. Since then, successive governments have handed private companies tens of billions of dollars to harass and persecute unemployed workers under the guise of providing employment services. Between 1989 and 1995, the number of financial penalties imposed on unemployed workers each year increased from 12,500 to 78,000, before hitting 350,000 in 2001.
In recent times, this figure has exploded. Between 2014 and 2020 — the latest data available — the private employment services system imposed a yearly average of over 2 million penalties on unemployed workers. Thanks to changes introduced in 2018, private providers gained the ability to impose penalties without any government oversight while unemployed workers lost the right to appeal. According to a Guardian Australia report, three-quarters of the times these penalties were imposed, the unemployed worker had done nothing wrong.
Heads on Spikes
The shift to a punitive unemployment regime was the logical extension of the reforms introduced by Labor in the mid-1970s. By the mid-1990s, policymakers agreed that it would take more than a large pool of unemployed workers to discipline wage demands. To ensure that workers would accept poor wages and conditions, they reasoned, it was necessary to make being unemployed unbearably miserable.
In the absence of an unemployed-workers movement or a left-wing opposition, successive governments have had free rein to heap cruel punishments onto the unemployed. Examples of this bureaucratic nightmare include schemes like Work for the Dole, the cashless debit card, and the “basics card,” ParentsNext, PaTH, Robodebt, Employability Skills Training, and the Targeted Compliance Framework.
Although the 2019 Senate inquiry damned the private employment services system, Labor has shown very little interest in implementing its forty-one recommendations, which include “restoring public service delivery.” Despite initially agreeing to the inquiries’ key recommendation that the JobSeeker poverty payment be reviewed, Labor backed away from this commitment in the lead-up to the 2022 federal election.
The latest iteration of the privatized employment services system, introduced last July, retained most of its punitive characteristics. Now renamed Workforce Australia, the system requires unemployment welfare recipients to accumulate one hundred points per month by participating in a labyrinthine array of mutual obligation activities. As a departmental spokesperson explained, the
department’s IT system will calculate whether sufficient points have been reported to meet the participant’s points target. Where insufficient points have been reported, the IT system will notify the participant that they have not met a requirement. . . . They have two business days to resolve the missed a requirement or their payment may go on hold.
In other words, the privatized compliance system is now almost completely automated.
Predictably, within days of the launch of Workforce Australia, it encountered serious technical issues. Labor, which wholeheartedly supported Workforce Australia while in opposition, announced in August that it would establish a parliamentary inquiry to examine the first twelve months of the program.
A Manufactured Shortage
Given this history, it’s unsurprising that the Jobs and Skills Summit completely ignored the ongoing crisis afflicting our privatized employment services. The reality is that employers don’t want a genuine employment services system to address labor shortages. From their perspective, the system is operating as it should. It’s more convenient to fill labor shortages with cheap and expendable temporary migrant workers provided by Australia’s increasingly unregulated working-visa system.
Indeed, over the last few decades, Australia has built a guest-worker economy. From 1982 to 1983, Australia granted roughly 100,000 working visas per year, including 20,000 permanent skilled working visas and 83,000 temporary working visas of different types. In 1996, the Howard government removed caps on the number of temporary migration visas that could be issued, rapidly increasing the number granted.
By 2002–3, the number of working visas expanded to 350,000, including 70,000 permanent and 280,000 temporary. Over the next decade, Australia’s intake of migrant workers rose exponentially, before hitting a peak of 2.1 million in 2019, of which 110,000 were permanent and 2 million temporary. This has made Australia home to the second-largest migrant workforce in the OECD. Indeed, only a few years ago, the Liberals reinforced Australia’s dependence on skilled migration by dismantling and privatizing the vocational training sector.
This shift has been a boon for capital. In addition to significantly reducing employers’ wage bill, it’s also helped reduce their obligation to provide training. By 2015, only one-third of workers received on-the-job training. Today, this has fallen to one-fifth. “Businesses are squealing about skill shortages,” academic John Buchanan noted recently, “but they themselves have been contributing to the drought.”
This reality makes clear the real function of Australia’s privatized employment service system. Despite what the government tells us, it’s not designed to help unemployed workers build skills and enter employment. Even when the pandemic reduced the number of working visas to 1.58 million in 2020 — leading to labor shortages and record-low unemployment figures — neither major party challenged the punitive employment services model. For employers, keeping a large pool of unemployed workers trapped in a bureaucratic nightmare is crucial to keeping wages low and profits high.