The Politics of Full Employment

Australian unions have not always been this meek. In the decades following World War II, left-wing unions campaigned vigorously against unemployment. Led by a group of radical unions linked to the Communist Party of Australia (CPA), these “right to work” campaigns helped pave the way for an unprecedented three-decade period of effectively full employment, in which the unemployment rate rarely exceeded 2 percent. Although the ACTU’s then-long-serving president Albert Monk was a known anti-communist, the size and influence of the CPA-led unions forced the ACTU to either join the fight or get out of the way.

Australia was not the only country to have experienced sustained full employment following World War II. With the notable exception of the United States, most OECD countries adopted Keynesian-style economic policies geared toward maintaining full employment. Today, mainstream historians explain away this period as exceptional, claiming it was the  product of an extraordinary “golden age” of capitalism, involving a range of factors that stemmed ultimately from postwar reconstruction.

This view, however, ignores an important aspect of the mid-twentieth-century political reality: unions played a crucial role fighting for — and winning — full employment.

Big business, for its part, was bitterly opposed to full employment. Like the unions, employers understood that low unemployment threatens bosses’ interests by strengthening workers’ bargaining power. As Marxist economist Michał Kalecki argued in 1943:

The maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, “the sack” would cease to play its role as a disciplinary measure. The social position of the boss would be undermined and the self-assurance and class consciousness of the working class would grow.

In line with Kalecki’s prediction, full-employment policy became a critical, although often concealed, battleground in the class struggle throughout the postwar period.

The Right to Work Radicals

In Australia, radical unions were keenly aware of the need to defend full employment. Their response to Robert Menzies’s Coalition government’s pro-business “horror budget” of 1951–52 is a case in point.

In October 1952, as the unemployment rate increased to the unacceptably high rate of 3 percent, CPA and Waterside Workers’ Federation leader Jim Healy led a deputation of six hundred rank-and-file unionists to Canberra. The delegation — representing more than half a million workers — presented the governor-general Sir William McKell with a petition demanding that he dismiss the Menzies government for presiding over “budgets of misery and war.”

During the rally, the protesters “took charge” of  King’s Hall, part of Old Parliament House and, for the first time in Australian history, held an impromptu mass meeting on the steps of Parliament. The CPA newspaper Tribune reported that

Liberal, Labor or Country Party‚ it made no difference — once a politician showed his face he was grabbed and hauled into a circle of delegates and grimly asked what he intended to do about unemployment, war and the gathering crisis.

Buoyed by the size of the Australian union movement — at that time, six out of ten workers were in a union — the campaign went from strength to strength. In March 1953, more than 1,400 workers representing ninety-six organizations marched to Canberra to again demand Menzies’s resignation. While the radicals enjoyed little support from a suspicious ACTU leadership, the campaign was a success. Fearing an electoral backlash, the Menzies government not only restored full employment, but also doubled the unemployment benefit.

The peak of the unions’ fight for full employment came in the wake of the Menzies Coalition government’s infamous “credit squeeze” of 1961, in which the government restricted credit in an attempt to slow the economy and curb rising inflation — the same policy Labor is implementing today. As the unemployment rate once again crept above 3 percent, the CPA-led unions kicked into action. In June 1961, Tribune outlined steps ordinary workers could take to get involved in the struggle:

We suggest that if you are threatened with the sack, meetings on the job should be held demanding that the employer guarantee the right to work, followed by a deputation to members of Parliament . . . Try to arrange a meeting with other unemployed, demanding a social security payment of not less than the Basic Wage.

Radical unionists heeded the call. In July alone, Tribune published over forty news articles detailing the unprecedented wave of “right to work” actions sweeping the country. Under pressure from below, both the ACTU and the Labor Party formally pledged to join the “fight” for full employment.

The 1961 federal election, held in December, was a stunning success for the labor movement. Buoyed by the radicals’ full-employment campaign, Labor achieved a major step forward with a swing of over 5 percent, helping to gain the party fifteen seats, just two short of the seventeen it needed to form government. Confronted with the growing power of the right to work movement, the Menzies government retreated, once again restoring full employment and increasing the unemployment benefit.

Accepting Unemployment

The unions’ staunch defense of full employment collapsed shortly after the election of Gough Whitlam’s Labor government in 1972. Spooked by the “stagflation” crisis of the mid-1970s, which combined high inflation and rising unemployment, left-wing union leaders proclaimed that maintaining full employment was no longer possible under capitalism.

“No matter how well intentioned a government may be,” declared the powerful CPA-led Amalgamated Metal Workers’ Union (AMWU) in 1975, “the system in which we live, a private enterprise or capitalist system, makes it impossible to guarantee full employment or security.” The growing power of multinational capital had, in the words of AMWU and CPA leader Laurie Carmichael, “reduced to a shambles the previous Keynesian formulas for limiting the effects of the capitalist business cycle.”

As a consequence, when Labor treasurer Bill Hayden introduced an austerity budget in 1975, it went largely unchallenged. By late 1975, unemployment had almost tripled to 5.4 percent. Full employment never returned.

The ACTU, no longer under pressure from the Left to fight for full employment, overhauled its approach. In line with a global shift toward monetarist economist Milton Freidman’s “natural rate of unemployment” thesis, the ACTU dumped Keynesian orthodoxy in favor of Labor’s “economic rationalist” agenda, which accepted that higher rates of unemployment were necessary to reduce inflation and restore profitability. Indeed, by May 1976, the ACTU went as far as to formally warn Malcolm Fraser’s Coalition government against introducing a “budget deficit sufficiently large to restore full employment,” for fear that it would fuel inflationary pressures.

At the same time, a new ideology became hegemonic that blamed the unemployment crisis on “job-shy” unemployed workers, dubbed “dole bludgers.” Over subsequent decades, punishing unemployed workers became something of a bipartisan obsession within Canberra.

The union movement entrenched its acceptance of mass unemployment during the Accords, a series of “social contracts” made between the Labor government and the ACTU between 1983 and 1996. Under the Accords — which were backed by the CPA and the radical unions — the average unemployment rate increased to 9 percent. Simultaneously, unions entered a long period of decline.

But there was nothing inevitable about the collapse of full employment in Australia. Indeed, over the same period, other OECD countries achieved far lower rates of unemployment.

Consider the example of Sweden. Under pressure from a strong labor movement wholly committed to full employment, during the 1970s and ’80s, successive Swedish governments refused to accept the dominant monetarist position that higher unemployment was the only way to tackle stagflation. Between 1975 and the early 1990s, the Swedish unemployment rate averaged just over 3 percent, one of the lowest in the capitalist West. Japan, Austria, Norway, and Switzerland offer similar success stories.

A Return to Full Employment?

During the COVID-19 pandemic, there were signs that the Australian labor movement might ditch its long-standing acceptance of mass unemployment. In June 2020, a few months after the first COVID-19 lockdowns came into place, the ACTU called on Scott Morrison’s Coalition government to ensure that “all willing Australians are able to work.” Pointing to Australia’s postwar history of full employment, the ACTU argued that the “core goal of that earlier post-war reconstruction . . . is as valid and timely now, as it was then.” It seemed like a major turnaround.

A year later, under increased pressure from the unions, Labor opposition leader Anthony Albanese pledged that if elected, he would commission a white paper on full employment. While Albanese failed to define exactly what he meant by full employment, he pointedly evoked the memory of the John Curtin Labor government’s 1945 white paper of the same name, which helped pave the way for postwar full employment.

The labor movement’s shift was, in part, prompted by the Morrison government’s surprise decision in March 2020 to temporarily double the unemployment benefit and guarantee the wages of millions of workers through its $130 billion “JobKeeper” package. In stark contrast to the dominant narrative, these measures showed that governments can and should use macroeconomic levers to protect workers against unemployment.

Unlike during the postwar period, the labor movement failed to press the issue. As a result, within a few months of winning the May 2022 election, Labor reneged on its election promise. The Albanese government quietly removed the reference to full employment from the title of its white paper, instead renaming it the “White Paper on Jobs and Opportunities.” While the ACTU formally opposed this shift, it refused to make it a political issue. Michele O’Neil’s March 2023 address to the National Press Club failed to mention either unemployment or full employment.

The ACTU’s retreat from its demand for “true full employment” became crystal clear after the Albanese government handed down its Jobs and Opportunities white paper in September 2023. Branded “a flop” by Australian Broadcasting Corporation journalist Gareth Hutchens, the white paper reaffirmed Labor’s commitment to monetarist orthodoxy, albeit with minor qualifications. As Hutchens explained, it failed to propose the “muscular set of policies” required to “drive involuntary unemployment out of the system quickly.” The ACTU released a statement unreservedly praising Labor’s plan.

Pushing Up Unemployment

The total lack of union opposition has allowed the Albanese government to hastily retreat from anything resembling a full-employment agenda. Even Reserve Bank of Australia (RBA) governor Michele Bullock’s controversial June 2023 announcement that the bank would tackle inflation by increasing the unemployment rate to at least 4.5 percent was defended by Labor treasurer Jim Chalmers as “relatively uncontroversial.”

At the time, Labor sought to deflect blame by citing the RBA’s “independence.” Under the RBA Act of 1959, however, the government has the power to immediately suspend the bank’s decision-making power. Of course, this is somewhat beside the point. To overturn the RBA’s policy, Labor would first have to disagree with it.

As left-wing economist Bill Mitchell recently noted, it’s a strategy guaranteed to result in higher unemployment and, potentially, a recession. Labor’s vague and uninspired Future Made in Australia Act — announced in the budget with strong ACTU backing — does nothing to alter this reality.

A few Labor MPs have voiced opposition to Albanese’s austerity agenda. Last March, there was a short-lived revolt of Labor ministers frustrated that the government had blocked spending related to their departments, leading to a sharp rebuke from Chalmers.

The unions, however, have remained aloof from these debates. The ACTU, for its part, has focused its criticisms on the RBA. “The RBA should be looking to cut rates, not increase unemployment,” declared ACTU president Sally McManus in March.

This approach is like blaming the executioner for carrying out the death sentence — without taking aim at the Labor government or its commitment to austerity, it’s next to useless. With the federal election expected to be held in the middle of next year, it appears the unions are once again closing ranks behind Labor’s small-target high-unemployment strategy.