creating effective employment solutions for regional australia

Creating effective employment solutions for regional Australia

Professor Bill MitchellCentre of Full Employment and Equity

University of NewcastleNSW, Australia

“The Northern Territory is a vast wild land, full of huge possibilities, but, up to now, a colossal failure.”

THE BANJOSource:http://trove.nla.gov.au/ndp/del/page/826234

“The Northern Territory is a vast wild land, full of huge possibilities

http://e1.newcastle.edu.au/coffeeCentre of Full Employment and Equity

The Davos mindset

Alcatel CEO Ben Verwaayen said:- the concept of a nation was disappearing and being replaced

by direct relationships between local regions and global markets.

- The problem is that policymakers are still operating as if there was a national prerogative that policy could service.

“New regionalism” – is part of the overall neo-liberal mindset that has blighted regional development theory and practice.


Outline of talk

Policy makers get captured by dominant paradigms – “mindsets”, “ideologies”.

Regional development theory and policy exemplifies this.

We need to re-think the role of the state and the region – to garner those “huge possibilities”.

A new policy framework is required if we are to create effective employment opportunities and inclusive regions.


The purpose of regional development

The goal of economic activity should be to advance the well-being of all – to maximise public purpose.

The sustainable goal should be the zero waste of people! We don’t want new industries or firms for their own

sake. Our goals have to be focused on people and the natural

environment that sustains us. The goal of regional development should begin with that

presumption.


Goal of regional development

This goal requires – at least – that the state to maximise employment which sustains both our material and non-material needs.

Once the private sector has made its spending decision based on its expectations of the future, the government has to render those private decisions consistent with the objective of full employment.

Non-government sector typically desires to save over the business cycle. What does this imply?

A macroeconomic imperative! Typical and atypical spending behaviour.


Evidence of policy failure

Despite political rhetoric to the contrary Australia has never gone close to full employment during the long growth period since the mid-1970s.

Australia does not produce enough jobs nor hours of work.

The work opportunities are spatially concentrated – two-or-more-speed economy!

There is a constant tension between social settlement and economic settlement.

Regional development strategies have largely failed. Why?


The full employment era

The Post WW2 settlement was mediated by the full employment framework.

Coherent macroeconomic policy supported full employment.

A national skills development created dynamic efficiency – firms had to offer skills and jobs.

Coherent regional development policies meant there were jobs and infrastructure where people lived.

Inclusive redistributive approaches.


Neo-liberal era …

The neo-liberal era began – around mid-1970s. Promotion of the idea that private markets self-regulate and

deliver optimal outcomes – wealth maximisation. Features:

- Abandoned government commitment to full employment – fiscal surpluses.

- Accelerated deregulation of labour market and financial markets.- Massive unsupervised growth of financial sector.- Privatisation – loss of training capacity in public sector.- “Individual” promoted - “collective” eschewed.- Abandonment of explicit regional strategies – “market would fix”- Intergenerational myths.


Flawed neo-liberal agendas

Several “new” ways of thinking emerged to flesh out the neo-liberal agenda at the regional and community level.

New regionalism – the “state” is irrelevant – promotion of the individual – abandoned notion of systemic crisis.

Social entrepreneurship – built on the “market” model. ABCD – further accentuated the individual construction.


Failure of neo-liberal approach

The current crisis is the direct result of this approach. Real wages failed to keep pace with productivity and

national income was redistributed towards profits. Consumption driven by credit not real wages growth. Private indebtedness became unsustainable - collapse. Pursuit of surpluses degraded public infrastructure

especially in regions. Spatial inequality rose. “Market” failed to drive appropriate net migration and

commuting patterns.


Failure of neo-liberal approach

High rates of labour underutilisation especially among 15-24 year olds and older workers.

Poorly structured training framework – waste of funds. Welfare system has become a pernicious compliance

mechanism.


Starting point - macroeconomics

Policy must refocus on full employment, higher rates of participation and dynamic skills development.

Even with the major shifts in patterns of trade and production, the national state remains relevant.

Regions dance to the tune of the macroeconomy. Regional development must be supported by a strong

macroeconomic environment. Deregulated markets fail.


Macroeconomic reality

Australian government issues its own currency and can never run out of money.

Unemployment is always a choice of government. Government can always maintain full employment by

ensuring its net spending fills private spending gap. Budget deficits are NORMAL if private sector saves.


Faux issues ...

Fiscal consolidation. National saving. Intergenerational debate – ageing society. Primacy of bond markets. Governments living beyond their means. The fear of hyperinflation. Household budget analogy. Ricardian agents. Cutting spending leads to more spending! The “fiscal

contraction expansion” myth.


Australian people and place

Australia has unique challenges. Proximity to South-East Asia – the new “growth” centre

– major changes in supply chain etc. Reliance on primary commodities for growth – “Dutch

disease” – Two-speed economy - East coast recession. Spatial disadvantage and spill-overs even with growth. Rising inequality. Climate change issues – carbon-based economy. Role of government versus the market.


All development requires a minimal safety net

The Federal Government has to gear its fiscal strategy towards direct job creation.

There should be a Job Guarantee - an unconditional and universal employment guarantee paid the federal minimum wage to any workers who want a job but cannot get one.

Purchasing a resource that has no market demand is not inflationary?

We should start with a Youth Guarantee – 25 per cent of 15-24 years olds who desire work are idle.


3-year ARC-funded regional development study

Surveyed all Australian local governments to assess unmet community and environmental need at local level.

How many low-wage permanent jobs they could offer if funded federally?

Asked quantity engineers to cost the whole plan. Outcomes:

- Massive unmet needs- Hundreds of thousands of jobs can be created – we have a

huge inventory of jobs identified.- 547 thousand FTE jobs would require an investment of $8.3

billion a year.


A renewed investment in skill development …

A renewed investment in human skill development is the most durable investment that a government can make.

The Federal Government in partnership with other levels of government should take responsibility to develop a coherent and integrated national skills development framework.

Concepts like “new apprenticeships” have degraded the concept of skill.

This should be done within the context of a Job Guarantee.


National infrastructure with green focus…

National infrastructure development with a focus on fostering green industry initiatives and the skills that will be required to sustain the new activities.

Green jobs agenda – mostly currently focused on skilled workers.

But perfect vehicle for creation of low-wage, low-skilled jobs with mechanisms for skills development.

Huge regional challenge - land and water restoration, degraded public infrastructure.


12 Pillars of Competitiveness


Industries and economies

The Northern Territory is a regional economy- Depends on a range of industries – extractive, public sector,

services (tourism) etc.- Has high levels of income inequality.- Has climate change challenges.- Has indigenous communities juxtaposed to “economic assets”.- Has growing population – labour-force.


Employment (2000=100)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201190

100

110

120

130

140

150

EFT-NT EFT_AUS EPT_NTEPT_AUS ETOT_NT ETOT_AUS


Rise of Part-time employment


Industry composition of employment - 2011

Agriculture, Forestry and Fishing

Mining

Manufacturing

Electricity, Gas, Water and Waste Services

Construction

Wholesale Trade

Retail Trade

Accommodation and Food Services

Transport, Postal and Warehousing

Information Media and Telecommunications

Financial and Insurance Services

Rental, Hiring and Real Estate Services

Professional, Scientific and Technical Services

Administrative and Support Services

Public Administration and Safety

Education and Training

Health Care and Social Assistance

Arts and Recreation Services

Other Services

0 2 4 6 8 10 12 14 16

Australia NT


Unemployment rate

2

3

4

5

6

7

8

9

10

11

1980 1985 1990 1995 2000 2005 2010

Australia Northern Territory

Per

cent

Unemployment Rate


Underemployment

1

2

3

4

5

6

7

8

1980 1985 1990 1995 2000 2005 2010

Australia Northern Territory

ABS Underemployment RatePe

r ce

nt


Unemployment plus underemployment

4

6

8

10

12

14

16

18

1980 1985 1990 1995 2000 2005 2010

Northern Territory Australia

Per

centABS Broad Labour Underutilisation Rate


Participation rate


Regional and spatial research opportunities

Development of spatial or regional understandings- How is macroeconomic activity spatially distributed?- Clusters of social disadvantage – estimation and explanation.- Spatial econometric models.- Multi-level models and neighbourhood effects.- Development of new geographies in social science.- Labour mobility – migration and commuting patterns.

Concepts of regional development- How do regions grow?- Role of public sector - tied in with buffer stock capacity.- Skill development in regions.


Regions and sustainability …

Industry restructuring – development of renewable industries.

Modelling specific industry change. Concept of spatial social disadvantage. National infrastructure … communications, transport.


Peoples and Societies

Social aspects of economic development in Northern Australia.

Indigenous Australians … Social disadvantage … Rural-urban linkages …


Climate change …

Tropical countries face environmental challenges such as urban air and water pollution, land degradation, deforestation and biodiversity loss

Modelling labour market implications- Industry.- Occupation.

Developing critiques of “market-based” systems to emissions.


Health …

Tropical nations have some of the poorest levels of health worldwide.

Growing mental health issues … How to deal with disabilities at a regional level …

http://bilbo.economicoutlook.net/blog

End of TalkEnd of Talk

creating effective employment solutions for regional australia

Documents

employment framework

australia http

huge possibilities http

regional development

new policy framework

coherent macroeconomic

economic settlement

sustainable goal