By Peter Boyle
If leaks about the coming federal mini-budget are correct, it seems the ALP left and union and welfare lobbies have got a lot of what they wanted in the form of a $3 billion spending package, largely on railways and other infrastructure. When Paul Keating makes his economic statement on February 26, most people will be hoping for relief on the job front with unemployment officially estimated at 10.3% and expected to rise to at least 10.75% sometime this year.
Victoria, the state which has suffered the biggest rise in unemployment in this recession, has been the source of several calls for the federal government to spend at least $3 billion to stimulate the economy. The state government, the Victorian Trades Hall Council (VTHC) and the Victorian Council of Social Services (VCOSS) have all made submissions of this order to Keating.
These calls echo earlier statements by the federal Labor parliamentary left and the Australian Council of Social Services (ACOSS). They bid up the $2 billion figure proposed in most corporate submissions to Keating, although at least one submission from that quarter, by economist Dr Chris Caton of Bankers Trust, urged a $3 billion injection.
Estimates vary wildly as to what $3 billion would do to bring down unemployment. On the optimistic side, the VTHC claims $3 billion could buy 495,000 jobs, halving the official unemployment figure. This is based on calculations by the Employment Studies Centre in the Economics Department at the University of Newcastle, claiming that an initial budget outlay of $1 billion could create 165,000 jobs on the minimum adult skilled wage for one year.
The Newcastle centre says 118,000 of these jobs would be directly created and a further 47,000 would be generated in the private sector through the multiplier effect. In the second year, it would take only $437 million in net government spending to sustain the 165,000 jobs because of increased government tax revenue and reduced unemployment payments.
According to this estimate, full employment could be achieved with $6 billion, but the VTHC says this would be too much to ask for in one year because it would increase the foreign debt. However, a much more detailed VCOSS submission estimates that only 125,546 jobs would be created by a $4 billion injection ($1 billion to come from the issue of controversial new "equity bonds" for public housing), mainly into social services and public works.
The Victorian government's submission estimates that $3 billion spent in nominated "infrastructure" projects in Victoria would create about 120,000 jobs.
The one clear conclusion of all this is that $3 billion won't give most of the unemployed a job. Resigned to this, the VTHC and VCOSS call for some amelioration of the plight of the unemployed through slightly increased dole payments and shorter waiting periods for the dole.
Given this approach, it is not surprising that the "Jobs for Justice" campaign initiated by these bodies has not won great support. Recent VTHC suburban public meetings drew between 15 and 40 people, and some of the unemployed workers who turned up attacked the union officials for having "sold us out". Public rallies by unionists and the unemployed are to take place in the week ending February 22, but there has been little organisation for this among the union ranks.
Of course, the number of jobs created is not determined simply by how much is spent, but also by how it is spent. Submissions by the Labor left, trade unions and welfare bodies have placed greater emphasis on public works, health, education and welfare, while big business has focussed on tax concessions and subsidies.
In particular, big business has called for accelerated depreciation allowances — a tax concession briefly introduced and then withdrawn by the Hawke government in 1988. This would allow companies to claim big deductions for new plant or machinery.
VCOSS and the VTHC also support accelerated depreciation allowances, but want them targeted only to certain projects rather than across the board. VCOSS wants the allowance to be available only for firms that:
- invest $20 million or more;
- add value to primary products;
- export 70% or more of their output;
- agree to introduce "new workplace culture";
- apply workforce training plans and conform with equal opportunity legislation.
VCOSS estimates that this would cost $500 million in the first year of operation, though it notes an estimate by Dr Peter Brain of the National Institute of Economic and Industry Research that every $1 million spent on an accelerated depreciation allowance would create only 18 jobs, compared to 30 jobs for every million spent on housing, community services or infrastructure.
The VTHC wants the allowance to be available to firms using a certain proportion of Australian-made plant and equipment. It sees this as part of a new protectionist policy framing its employment strategy.
It also supports other protectionist measures, including:
- "... preventing imports into Australia from overseas companies that do not observe International Labour Organisation minimum labor standards" or at least a modified version of the US system of trade preference "whereby favoured nation status can be affected by a nation's labour practices". The VTHC doesn't mention that some Australian law contravenes ILO conventions.
- "Preferential treatment for Australian-based companies."
- Another "Buy Australian" campaign.
- An end to tariff cuts for the textile, clothing, footwear and vehicle manufacturing industries.
- A ban on importing second-hand tyres, following a recent move on this by the US government.
The VTHC's aim in calling for more protection is to expose the "level playing field" myth in international trade. This has been the point around which the Labor left, trade union officials, peak welfare bodies, Australian Democrats and a section of the corporate sector have rallied to challenge the "free trade" posture of the federal government, the federal opposition and most big business.
But will more protectionist armour stop the soaring unemployment, which the VTHC correctly identifies as a result not only of the recession but also of capitalist international restructuring and technological change?
If the Australian government were to do its best to help "Australian industry" (however this may be defined in this age of transnational capital), its main effect would be to support a steady reduction in the costs of big business in Australia. This means, in practice, ever downward pressure on wages and social services, and a steady reduction in jobs as more and more labour-saving technology is introduced. In fact, such a process is already under way, under the title of "micro-economic reform".
Over the past decade, trade union officialdom and the welfare lobby have tried with little success to insert their claims for a little bit more into the framework of "micro-economic reform". For every token gain in the form of a tripartite committee or a training scheme or career path, much more has been lost in wages, conditions and welfare. Unemployment has risen from a plateau of 7% in the boom years of the 1980s to nearly 11% in what is now the longest recession since the Great Depression.
The union-welfare-Labor left submissions on the coming mini-budget fail to break with this misplaced strategy, and hence offer little long-term hope to the growing army of unemployed.