I LI.. PRIM MINSTE
STATEMEN4T DY THE PRIME MINISTER, THE HON P. J. KEATING MIP
ECONOMIC PLANNING ADVISORY COMMITTEE
CANBERRA, 28 KAY 1993
INTRODUCTION
U~ nemployment is unacceptable for the hardship and anxiety
it causes individuals and families who directly
experience it. But the effects of unemployment of the
kind and extent presently existing in Australia go well
beyond the victims. Because it creates acute and long
lasting social problems and involves economic costs which
prevent Australia from fulfilling its potential as a
prosperous and fair society, unemployment affects us all.
Unemployment is a phenomenon of our age. It is presently
a significant problem in most if not all of the developed
Western countries. But there is no comfort to be taken
in knowing that we are not alone in this, nor any in
spreading the blame. We cannot be complacent about high
unemployment. I have said that reducing unemployment and
assisting the long term unemployed is the Government's
first priority. it must also be the nation's first
priority. If we do not do all we can to mitigate the
extent and the effects of unemployment, we betray large
numbers of our fellow Australians, our children and our
own ideals.
BACKGROUND TO THE PROBLEM OF UNEMPLOYM4ENT
The recession has been the most important recent cause of
unemployment. In the course of it many companies learned
to operate with a smaller workforce, and they are
continuing to operate with fewer employees even as the
economy -r. covers.-
But while the recession has been substantially
responsible for high unemployment, it is wrong to assume
that the current problem is only a cyclical one.
Australia experienced a sharp rise in unemployment in the
mid 1970s,. associated with the first oil price shock.
Since then the unemployment rate has moved upward in a
series of large steps. ai. may. vo va, 14 mu. vvz r. V4
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Since the mid 1970s unemployment has increased sharply
but fallen slowly. After the 1982-83 recession,
Australia had seven years of very strong employment
growth. However the unemployment rate in 1990 was still
just above the rate in 1982. Between June 1983 and June
1990 well over one and a half million jobs were created,
yet the number of unemployed fell by 150,000.
Associated with these developments has been the emergence
of long term unemployment. Currently more than one-third
of all unemployed persons ( 371,000) have been unemployed
for more than 12 months. About half of this number have
been out of a job for more than 24 months. Experience
from the 1980a shows us that strong employment growth
alone will not be sufficient to reduce long term
unemployment. Special measures are needed to ensure that
the long term unemployed are able to compete successfully
for the jobs which will be generated during the recovery.
The Australian economy is currently growing faster than
most other major economies and we expect the recovery to
strengthen further through 1993 and 1994. However, the
pace of economic recovery in the short term Is receiving
little assistance from world growth. But Australia is
well placed to benefit from the higher growth rates
expected in the Asia-Pacific region. In addition, recent
history shows that we can achieve higher market shares in
this part of the world. Hence, it is possible for
Australia to grow faster than other industrialised
countries, provided our policies further integrate
Australia into the world economy.
ChannAR in Am2nlom~ nf gatterng
In the same way as the level and nature of unemployment
have been undergoing fundamental changes, employment
patterns and labour force participation behaviour have
also altered substantially over the last three decades.
In particular, the distribution of amp. aQment between
males and females, part time and full time jobs,
permanent and casual jobs, as well as the distribution of
jobs between industries, occupations and skill levels
have all altered appreciably.
These factors undoubtedly help to explain why strong
employment growth has not resulted in an equivalent fall
in unemployment and we need to better understand them if
we are to begin to solve the problem.
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Sinc, the 1960s the industrial structure of
employment has changed markedly. The proportion of
jobs generated by manufacturing industries has
fallen from 25 per cent to 15 per cent. The
absolute number of manufacturing jobs has also
fallen. Employment growth has been strongest in the
service industries. Their share of employment has
increased from 54 per cent to 71 per cent. This
long term trend has been accentuated by the recent
recession as manufacturing employment has been among
the hardest hit.
Employment growth has been concentrated in high and
average skill level jobs. Conversely, the demand
for low skill and unskilled jobs has fallen.
The nature of Ak~ llq required has also changed.
Problem solving, interpersonal skills and the
ability to work within a team are becoming more
important as a result of changes in technology and
work organisation. As multiskilling becomes more
prevalent, an individual is also expected to be able
to perform a wider range of tasks than was the case
in the past.
The nature of-york has changed. Part time
employment has grown much more strongly than full
time, and now accounts for almost one-quarter of all
jobs, compared to 17 per cent in 1978. Part time
workers now account for one-tenth of all hours
worked. While most part time work involves low
skill and offers little in terms of job advancement,
the skill level of part time work has increased over
the 1980s, at least for females.
Married females, young people attending schools or
universities and older workers account for nearly
per cent of all part time workers.
Three-quarters are female. Most part time workers
are employed on a casual basis.
Full time male employment as a percentage of the
working age male population has been falling since
1970. Clearly some of this is due-to early
retirement and the longer periods which young people
spend in education. However, even for males in the
25-54 year old age group there was still a
16 percentage point decline over the same period.
A number of commentators have noted that the
distribution of earnings has become more polarised.
Employment is growing most rapidly among high and
low pay jobs and middle pay jobs are growing only
slowly, if not falling. This phenomenon appears to
be particularly evident among full time, male jobs.
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Significant changes have occurred in labour force
participation behaviour. The proportion of the
female population who are participating in the
labour force has increased from 36 per cent in the
mid 1960s, to almost 52 per cent today. On the other
hand, participation rates have fallen among young
people and older males. In part, these changes are
in response to the changing nature of employment
demand. But they also reflect changing social
attitudes and expectations.
It would be tempting to explain the stronger growth in
part time and female employment and the loss in middle
pay jobs in terms of the changes in the industrial
structure of the economy. However, while this has
undoubtedly been important, the story is much more
complex. The incidence of part time employment has
increased in all industries, not just in the service
sector. Similarly, the notion that middle pay jobs are
disappearing appears to be common to all industries.
Furthermore, because developments have occurred in many
industrialised countries any explanation must be based on
more than purely Australian factors.
Part of the explanation must lie in the changes in
technology in recent decades. So radical and pervasive
have these changes been, comparisons might be made with
changes wrought by the Industrial revolution.
Occupations have disappeared, others have merged and new
occupations have been created. In virtually all oases
the skills required to perform a job have changed. The
number of workers required to perform a task or produce a
certain level of output has fallen, while the skills and
flexibility required from workers have increased.
At the same time the shrinking global economy means that
firms are better able to locate different parts of their
production process in different countries. They are also
changing their management structures and their corporate
services are increasingly likely to be contracted out.
All this has consequences for the amount and type of
labour which employers wish to hire.
We do not yet fully understand all these changes. Nor
can we do much to alter the trends. But we cannot turn
our back on them. We have to respond to these
challenges. Governments, like modern companies, modern
~.. economies -and modern workers -have -to be f lexible and
adaptable. They have to be creative and pragmatic as
well as compassionate.
THE GOVERNMENT'S RESPONSE
In order to respond effectively to both the cyclical and
the structural nature of unemployment, we need;
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high but sustainable economic growth. This will
require appropriate macroeconomic policies as well
as a continued push for microeconomic and industrial
relations reform;
a skilled and adaptable workforce to respond
positively to changing technology and industry
demands and to be a source of competitive advantage;
effective measures to assist the unemployed, and
particularly the long term unemployed, so that they
can obtain jobs during the recovery; and
a better understanding of the long term developments
in the labour market, their implications for
unemployment and how best to respond.
The Aconomic policy context
High economic growth and strong employment demand are
essential to reducing unemployment. But high economic
growth must be sustainable over the long term. High
rates of growth cannot be sustained if they lead to a
blow-out in our current account deficit and a resurgence
in inflation.
To achieve high sustainable growth, national production
has to grow strongly and faster than growth in
consumption. Rigidities that constrain productivity and
cause inflationary pressures must be reduced. The
Government's policies therefore make up a coherent
strategy to:
improve our international competitiveness through
higher productivity and lower inflation;
improve our productive capacity through higher
investment performance; and
increase national saving to finance investment
domestically without excessive recourse to foreign
borrowing.
The strategy comprises complementary monetary, fiscal and
wages policies together with a continued push for
microeconomic reform, including reform of the industrial
relations system.
-Wages policy -and industrial -relations reform under the
Acoro wafeo usedonwokplcebaganng that
increasingly links wage increases to productivity
improvements, and on achieving wage outcom . es that
maintain our inflation rate comparable to that of our
major trading partners. This will help prospects for
high employment growth, improve competitiveness and
increase productive capacity.
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In addition to these macroeconomic policies, the
Government has introduced specific measures to encourage
investment, and hence employment growth.
The company tax rate is being reduced to 33 per cent
which, together with our policy of dividend imputation,
makes returns to investors very attractive in Australia
compared with many other countries and gives a highly
competitive tax regime. A development allowance of
per cent has been introduced for major projects which
meet certain conditions. And an investment allowance of
per cent will apply to investment in eligible plant
and equipment ordered before July 1994 and installed
before July 1995.
Continued microeconomic reform, including competition
policy, will help to remove impediments to greater
flexibility and productivity and lower costs. We are
already seeing the results, in terms of a highly
creditable export performance in recent years, often from
small and medium-sized firms in industries which have not
been traditional exporters. The success of small to
medium sized business is crucial to economic recovery and
employment. A ski] Ied andI flexiblA workforce.
Education and training play an important role in the
development of competitive industries and hence
employment growth. A skilled and innovative workforce
committed to producing high quality products and services
can be an important source of competitive advantage. It
also minimises the risk of bottlenecks to growth
resulting from skill shortages.
A major task for governments is to improve the general
education system, to improve the links between education
and industry and to encourage industry's own efforts at
training its workforce.
Since the Labor Goverrnent came to office in 1983, there
has been significant expansion and improvement in the
area of post-compulsory schooling and hhr education.
In 1980 only 34 per cent of young people continued in
school to the equivalent of Year 12. By 1992 this
proportion had risen to 77 per cent. Similarly, there
-were .58-per-cent more Austra-lran -students enroled in
universities in 1992 than in 1982. Over the decade to
1992, the proportion of high school entrants who proceed
directly to university increased from 15 per cent to
per cent.
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Modern competitive economies demand high levels of
technical skills right across their workforce. Both
State and Commonwealth Governments have recognised the
need for a national approach in-this area and the
recently established Australian N~ ational Training
Authority ( ANTA), chaired by Mr Brian Finn OA, will have
an important role in advising governments on planning and
policy for vocational education and training. ANTA will
have substantial industry representation, to ensure the
system is more responsive to the needs of industry.
The Government remains committed to major reforms to
entry level training and is currently funding pilot
projects to test the Introduction of the Australian
Vocational Certificate, which will provide more flexible
routes for young people to acquire skills and training
necessary for successful transition into their chosen
vocations. The system will cover a broader range of
occupations and industries, and competency-based training
will mean that study programs can be tailored towards
individual needs and take account of prior learning.
Our experience of the 1980s shows that strong employment
growth, of itself, will not be sufficient to reduce
quickly unemployment and particularly long term
unemployment. Specific measures are also needed which ensure that many
of the new jobs created are filled by the long term
unemployed. The Government has a range of labour market
programs which provide this assistance. Evidence from
the last few years also shows that labour market programs
can be successful in getting the long term unemployed
into jobs.
Between 1990-91 and 1992-93 there has been almost a fourfold
increase in expenditure on labour market programs
from around $ 300 million to over $ 1200 million. Over the
same period the number of program commencements has
increased from 227,500 to an estimated 490,000.
The Government has also altered * the mix df programs to
give a greater emphasis to work experience'and to linking
training more directly to employment. The number of
people assisted under the wage subsidy program, JOBSTART,
has increased from around 60,000 in 1991-92 to 150,000
this-year.-Wage -subsidies -reduce.-the -initial cosit of
hiring workers and help to overcome the reluctance of
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New work experience programs have also been introduced.
The Landcare and Environment Action Program ( LEAP), which
was introduced following the Youth Summit lest year, has
been very successful. It provides young people with work
experience in an area in which they are interested and
combines this with structured training. The number of
places in the program has been increased to respond to
the great interest of young people to participate.
On the iobskille program, participants receive work
experience and training over a six month period. While
the program Is relatively expensive, it assists the most
disadvantaged of the unemployed to regain self
confidence, acquire new skills and broaden their work
experience. The Government has also more closely targeted assistance
to the long term unemployed. This year, 62 per cent of
program places went to the long term unemployed, compared
to 51 per cent last year.
The effectiveness of the change in program mix and the
Increased expenditure per place is shown by the improved
program outcomes that have been achieved over the last
year. This improvement is all the more noteworthy given
that employment demand was still weak and an increasing
proportion of those assisted were long term unemployed.
The assistance which labour market programs can provide
to the long term unemployed is also shown by the fact
that nearly 80 per cent of all Newstart Allowance
recipients who obtained a job did so through a labour
market program. Evaluations of programs have shown that
participation in vocational training programs, SkillShare
or JOBSTART increased a participant's chance of obtaining
a job by around 50 per cent.
Even when labour market programs are not successful in
getting an unemployed person into a job, they can still
help to maintain their attachment to the labour market.
Overseas experience suggests that this is an important
element in the long term unemployed gaining jobs.
Labour market programs can also improve the efficiency of
the labour market by alleviating skill shortages that may
arise later in the recovery, and by ensuring that the
long term unemployed remain active and competitive in job
search. Jrhe-Government--is -determined -to-eclosely monitor its
labour market measures to ensure that the mix of
programs, the targeting of programs and the program
parameters continue to provide cost effective assistance
to the unemployed as the recovery gains strength.
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The delivery of labour market programs is closely linked
to the provision of income support to the unemployed
through the Zewutart strategy. The implementation of the
Newstart strategy is Currently being evaluated by the
Government and we wrill be taking this opportunity to seek
improvements in the way in which labour market programs
and income support are delivered.
A Gow-nvamant White Pape? on EmploymAnt andi unamplnymgnt
While the Government currently spends considerable sum's
on labour market programs and our efforts compare well
with other countries experiencing high unemployment, we
recognise we need to do better. We need to understand
the long term~ developments in the labour market and their
implications for reducing unemployment and regaining full
employment. We also need to examine whether existing
measures could be re-arranged or new measures conceived.
To this end the Government has decided to appoint a high
level.-committee to prepare a Government Discussion Paper
to assess current policies on unemployment.
1. am also keen to see the committee examine alternative
approaches, Including policies adopted in other OECD
countries. Our search for solutions should not be confined to our
shores, or to our experience. Most industrialised
countries, like Australia, have begun a profound
examination of unemployment and Its effect on societies.
No country has produced a single, simple answer. Nor
will they. The complexities and magnitude of the problem
defy it.
But in seeing what has been tried elsewhere, and in
taking what is best and most suitable for Australia and
combining it with our own ingenuity, perhaps this
committee may begin to fashion an effective response to
the problem.
As an indication of the importance that I attach to this
exercise, I have asked Dr Michael Keating,. Secretary of
the Department of Prime Minister and Cabinet, to chair
the committee. I am grateful that Professors Bob Gregory,'
Barry Hughes and Jan Carter have agreed to bring their
expertise in labour market and social policy analysis to
the -task. The.-Committee will--also -include Mr
Derek Volker, Secretary of the Department of Employment,
Education and Training, Mr Tony Slunn, Secretary of the
Department of Social Security and Me Mary Ann O'Loughlin,
my Senior Adviser on social policy matters.
Dr Bruce Chapman, who has already begun work for the
Government on the effectiveness of labdur market
programs, will also consult closely idith the expert
commufittee.
The committee will be serviced by a high level Task Force
established within the Department of Prime Minister and
Cabinet and drawing in expertise from other departments.
The Tosk Force will be headed by Dr Meredith Edwards,
First Assistant Secretary, the Department of Employment,
Education and Training.
The terms of reference which the Government has given to
the expert committee are attached.
I have asked that the Discussion Paper be prepared by
December. This would be followed by extensive
consultations. The Government would respond to the ideas
and options raised in the Discussion Paper and the
consultations in 8 White Paper on Employment and
Unemployment to be prepared in the first half of next
year. I would expect the special. Caucus Employment Task Force
to facilitate the work of the expert committee,
particularly in the public consultations. I have also
asked EPAC to assist, both by acting as a sounding board
for ideas and by the Office preparing background papers
as required.
I expect the committee to ask some fundamental questions
about the future of work in Australia. These questions,
while not new, go to the heart of the way our society
functions.
Questions such as: are we committed to the idea that
everyone who wants to work should have a job? How should
we respond to the rapid changes in technology and the
greater uncertainty in our working lives? How can we
best combine work with our family lives? Should
Australian businesses continue to observe the maxim that
leaner is always meaner, or are there more effective
strategies for ensuring competitiveness?
And if it is reasonable to ask this question of business
and industry, it is also reasonable to ask other
organisations, including trade unions, to examine their
priorities and perceived self-interest to help find the
answers. In short, the committee is being formed to ask if
unemployment is a national responsibility, how best do we
-all -share An-solving it?
My hope is that out of this process, we will better
understand the choices and trade-of fs which need to be
made if we are to regain full employment, how long this
might take, and what more can be done to alleviate the
problems presently facing unemployed Australians and
their families.
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And of course if in looking at the problems facing
Australians going through hard times a certain fellow
feeling is aroused, and the sentiments of fairness and
equity are re-kindled, end the bonds between us a11 are
strengthened, then the process will have served not only
the unemployed but all Australians and the nation.
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TERMS OF REFERENCE FOR A DISCUSSION PAPER ON THE LABOUR
MARKET Having regard to:
the Government's economnic and social objectives, particularly to
increase employment opportunities;
reduce unemployment and particularly long term unemployment;
improve the skills base in Australia; and
promote equity in the labour market; and
the Government's commnitment to reduce the budget deficit by 1996-97;
the Commnittee is asked to assess and report on the state of the labour market and options for
addressing unemployment and improving labour market programs and income and other
support for the unemployed. Special attention should be given to the problem of long-term
unemployment.
2. The Review in particular should consider:
the economic outlook and the implications for the labour market;
developments in the Australian labour market since the 1960s, including:
demographic changes;
changes in the labour force participation, employment and education experiences of
males and females; Aboriginal and Torres Strait Islanders; migrants; sole parents;
people from non-English speaking backgrounds, people with disabilities; and different
age groups;,
changes in employment levels and patterns, including an examination of the strong
growth in part-time employment and regional differences;
changes in the types and location ofjobs being created and lost;
characteristics and location of unemployed, discouraged and underemployed workers;
the emergence of long-term unemployment; and
the effect on income distribution and living standards of the changing patterns of
employment and unemployment;
the medium term outlook for the Australian labour market;
the trends in the labour market in other OECD countries and an examination of policy
responses; the efficiency and effectiveness of:
existing mcasures to assist the unemployed, including labour market, education and
training programs; income support; and other forms of support; and
the delivery of programs and services of assistance for the unemployed;,
policy options to respond to the implications of labour market changes, taking into
account programs and services provided by other sectors; and
options for financing labour market and other support programs for the unemployed. P. 13