Unemployment is a necessary evil?
Updated
The
fact we have an economy that relies on about one in 20 of us being unemployed to
remain stable suggests we haven't yet reached the pinnacle of economic
organisation, writes Michael Janda.
Unemployment
is good.
I
don't personally think it is, but most economists do.
"That's
ridiculous," I hear you say. "Isn't the focus of economic policy to lower
unemployment?"
That's
true, it is. But only so far.
The
limit on how far is quaintly termed NAIRU - not the island where Australia
offloads unfortunate asylum seekers, nor a former Indian prime minister, but the
non-accelerating inflation rate of unemployment.
NAIRU
is the level of unemployment in any particular economy at a given time where
economists feel that wages and prices won't start rising out of control.
Also
often, quite inaccurately, termed "full employment", NAIRU is currently
guesstimated to be about 5 per cent in Australia.
Translated
from the quaint technical acronym, this means that the Reserve Bank, the federal
government (of either Liberal or Labor persuasion) and other policymakers want
at least one-in-20 working age Australians out of work to ensure that wages and
inflation don't get out of hand.
And
that 5 per cent figure is based on the Bureau of Statistics definition of work,
where one hour will suffice to be employed, and where only those actively
looking for, and able to immediately start, a job are considered unemployed.
The
NAIRU is not a fixed percentage, so it may be that the prevalence of
underemployment (currently at a record high 8.6 per cent - much higher than the
6.3 per cent unemployment rate) and increase in part-time, casual and insecure
work is reducing it.
It
may also be that policies such as wage subsidies, or better education and
training to boost the productivity of each worker, may also reduce the
NAIRU.
However,
unless it can be cut down to levels near zero that merely reflect the transition
periods of workers moving between jobs rather than long-term unemployment, there
seems something fundamentally wrong with an economic system that currently
requires large numbers of people fit for work, wanting to work and looking for
work to be denied a job to keep it functioning smoothly.
