Employability vs employment- a serious problem

An excellent summary of why Australia’s ‘two speed’ economy is not easy to manage. While desk-based bureaucrats say it’s easy- let them move to where the jobs are, for real people with families and lives, it’s far from simple.

Employability vs employment- a serious problem.The minefield of a second mining boom http://t.co/SehA8fG via @abcthedrum

In case you didn’t get the picture painted by the budget papers, new treasury secretary Martin Parkinson underlined it last week in a widely reported speech.

The rise of China and India, Parkinson said, constitutes “probably the most significant external shock Australia has ever experienced.”

Mining and resource extraction will grow to dominate Australia’s economy ever more completely – sucking jobs, services, and people to Australia’s boom regions in Western Australia, Queensland and South Australia. But manufacturing and many service industries will wither. Anything that can be directly competed against by cheaper overseas goods or services will struggle in a environment in which the Australian dollar is permanently high.

The implications for the structure of Australia’s economy of historic terms of trade and a persistently high exchange are profound. “Most Australian businesses are well equipped to deal with short-term volatility of the exchange rate,” Parkinson warned. “But what we are dealing with now is a very different type of event — not a temporary appreciation, but a sustained shift. This will challenge a number of existing business models.”

It certainly will – as Australian exporters, particularly in sectors like manufacturing, tourism or education are already finding.

But Parkinson goes on to say that Australia’s economy is now flexible enough to cope with these massive changes. The real problem, he argues, is not in the changing structure of the economy, but that “this analysis can give rise to understandable concerns in significant sections of the Australian community”.

Showing a true technocrat’s inability to understand the lived experience of ordinary wage-earners, Parkinson went on to ask: “Why is there is so much discomfort in the community about this transformation?”

In part, because it involves change,” he decides, “and change is often difficult.”

As Ross Gittins observes, Parkinson is saying to Australians: “get used to it. Adapt.”Change is indeed “often difficult”. Canberra’s top bureaucrats are often accused of a cosseted existence, but there is an undeniable disparity between the likely life fortunes of a top public servant earning hundreds of thousands of dollars a year and the employees of a small exporting business that suddenly finds its business model “challenged”.

Structural change of this nature makes entire industries irrelevant. Just ask small tourist operators, foreign-focused film production suppliers or English-language schools, all of whom have found their customers vanishing as the Aussie dollar climbs. Change means jobs being lost and created – in different industries and in different parts of the country. Inevitably, the people who gain employment from such structural changes are not the same ones that have lost their jobs. Only a few of us have the skills, the were-withal and the life situation that enables us to move to the Pilbara or Gladstone, or even Perth.

As ever, the economic jargon obscures the human face of economic change. “Participation”, to use a word very much in favour with Treasury economists, is a word I suspect few ordinary Australians understand the meaning of.

In this context, it means the number of Australians actively engaged in the workforce, but it has some interesting connotations. One is like the sense that those who are not engaged in the workforce are somehow not participating in the labour of our broader society. Should we really consider those at home caring for infants, or supporting a dependent parent, or simply taking a “gap year” after school to travel, as somehow “non-participants”?

Yes, suggests the economic orthodoxy. These people are potential additions to Australia’s productive workforce. According to Wayne Swan, we need as many of them as possible, because Australia’s resources industries are literally creating more jobs than Australia’s workforce can fill. As a result, Australia is going to have to import hundreds of thousands of workers, even while real pockets of disadvantage in poorer Australian communities persist.

As Budget Paper 1 argues,

“This is not the first time in our history when we have had to make major transitions. For Australia, change has been the norm rather than the exception. The critical determinant for success, past and future, is whether we embrace the need for change or attempt to resist the economic forces at work.”

If we think about the magnitude of change implied by these policies, some of the more puzzling aspects of Australia’s political scene begin to resolve themselves. The so-called “patchwork economy” might be growing strongly in aggregate, but the top-line numbers disguise pockets of misery in industries where businesses are closing and people are losing their jobs. In Western Australia right now, at the very heart of the boom, business insolvencies are running at record highs.

In the meantime, prices for many essential goods, like electricity and food, are rising. Australians may indeed be better off, but as any backbencher knows, they don’t feel better off. Many Australians are struggling with absurdly large mortgages, the result of an asset-price boom in housing that only now seems to be bursting. Faced with wrenching economic change, with house prices falling and interest rates rising, it’s not surprising Australians feel anxious.

This anxiety also explains the furore in budget week over the definition of “middle-class welfare”. While a household income of $150,000 will put you comfortably in the top 15 per cent of the Australian population, the growth of government payments to middle- and high-income earners attests to the political potency of the mortgage stress and economic anxiety being felt in the midst of many seemingly prosperous Australian suburbs.

In part, this is a rational reaction to the accelerating rate of change in our society, and to government policies in which the risk of life’s misfortunes such as ill health or unemployment are increasingly seen as a problem for the individual to manage, rather than something for the state to protect against. As Australian economist William Mitchell has argued, the dominant politics of unemployment in Australia now resides in policy measures to address supply-side issues like welfare-to-work transitions, “with an emphasis on the skills, attitudes and motivations of the unemployed themselves.”

As a result, Mitchell writes, “the role for government under this conception is to achieve full employability rather than full employment.”Mitchell wrote this in the early 2000’s, but if anything the policy trend has accelerated.

The “skills, attributes and motivations” of the unemployed was the chief topic of Julia Gillard’s recent speech to a conservative Sydney think-tank.

No wonder there is considerable anxiety in many electorates. We shouldn’t be surprised at this. It’s a constituent factor of modern global capitalism itself.

It sounds rather unfashionable to talk about “capitalism” these days: the idea of an economic system governed by the ruling importance of capital flows has come to seem so self-evident that the phrase we use nowadays is simply “the economy”. In an era in which the teachings of Keynes are increasingly mocked by those more concerned about pain for the holders of government bonds than the misery of those without a job, the unfettered flow of capital is seen not as one particular way of structuring our economic life, but an unalterable law of economics itself.

Early critics of capitalism understood that the dynamic nature of capitalism would inevitably unsettle modern societies in fundamental ways. In a justly famous section of the Communist Manifesto, the dour Marx and his charming a collaborator Engels wrote of “constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation.”

“All that is solid melts into air,” they concluded, a phrase that has become so well known that it has been used by Marshall Berman as the title of a book about the experience of modernity itself.

The scintillating aphorism seems to sum up the unceasing storm of change that modern technology and enterprise repeatedly unleashes on societies. Walter Benjamin called it a “storm blowing from Paradise”; Joseph Schumpeter liked to talk about “gales of creative destruction”.

For the proponents of capitalism, that relentless transformation is the thing itself. “Constant revolutionising of production” – well, that sounds like the Australian Treasury, which is equally convinced that constant, unrelenting change is the very basis of the the Australian economy.

“Over time,” the Treasury tells is in this year’s Budget Paper 1, “Australia has undergone major changes in the structure of its economy, converting its natural advantages into an economy built primarily on the skills, effort and innovation of its people and businesses.”

Of course, the power of change is not the only thing that matters. The power of money matters too. And the sheer wealth of the mining industry in today’s Australia is such that the ongoing restructuring of the Australian economy will continue, with little in the way of political opposition. As last year’s debate over the Resource Super Profits Tax showed, throwing ten or twenty million dollars worth of advertising at a problem like a new mining tax can pay handsome dividends – estimated to be worth perhaps $60 billion in lower taxes over the next decade .

When you consider that those in favour of the unrestricted restructuring of the Australian economy around the mining boom include the key decision makers at Treasury, the billionaires in the mining industry and the fundraisers in both major political parties, it’s not surprising that few in our political system really want to debate the merits of the “mining boom, mark two”.

That role now falls to ordinary citizens such as you and I.

Ben Eltham is a writer, journalist and fellow at the Centre for Policy Development.