‘Full employment’ will be redefined to reflect modern labor markets, employment white paper reveals
The Federal Government intends to put ‘full employment’ at the heart of Australia’s policy framework and institutions to reduce structural unemployment and keep unemployment rates as low as possible over the long term.
Key Point:
- New definition of “full employment” must include underemployment
- Government says new definition will complement monetary policy
- Reserve Bank independence remains unaffected
The employment white paper published on Monday says the current definition of full employment is too narrow.
The report says policymakers need to recognize the reality of underemployment and underutilization in the economy and the impact they have on communities across the country.
In the document, the government plans to use available policy tools to remove barriers to work, help Australians acquire the skills they need and ensure people have secure jobs with fair pay. It has said.
That would contribute to lower structural unemployment, help the economy maintain labor market underutilization for longer periods of time, and help the Reserve Bank maintain much lower unemployment rates, the report said. Says.
RBA Governor Michelle Bullock backed the government’s new definition.
What is full employment?
The White Paper states that how full employment is defined, measured and pursued has a significant impact on people.
And when we talk about full employment, we need to take into account the reality of underemployment and underutilization in the economy.
It found that for every Australian classified as unemployed in labor force statistics, there are four others who either want to work but aren’t working, or want to work more.
Currently in Australia,
- Half a million people are officially classified as unemployed. That means they want to work, are actively looking for work, and are available to work.
- However, an additional 1.3 million people want to work but are not actively looking for work or are not immediately available for a variety of reasons. Along with the unemployed, these workers are classified as ‘potential workers’.
- And a million workers would like to work more hours, but they don’t have the opportunity. These workers are classified as underemployed.
The total number of hours these people are willing to work equates to 1.4 million full-time jobs.
You can see what that says in the graph below.
In February, around 500,000 people were officially classified as unemployed (dark blue column), but a further 1.3 million people were out of work and not included in the unemployment rate (light blue column). The Bureau of Statistics says they are “potential workers”.
The government has made clear in its white paper that it wants to expand the concept of full employment to include the reality that the labor market is underutilized.
The group says discussions about full employment too often focus narrowly on statistical estimates such as the non-accelerating unemployment rate inflation rate (NAIRU).
NAIRU is a technical estimate of the maximum level of employment that can be sustained in the short term without increasing inflationary pressures, but does not capture the full range of the economy’s space capacity and the full potential of Australia’s workforce. It is said that there are no such cases. .
For example, the unemployment rate has hovered near a 50-year low for the past 12 months (currently 3.7%), and some economists have pointed to current NAIRU estimates as suggesting the unemployment rate is too high. are doing. He said it would need to rise to 4.5% to actually reach full employment.
But that definition of full employment ignores the reality happening on the ground.
“Policy objectives towards full employment are therefore broader than achieving low unemployment and need to have a higher level of ambition than statistical indicators such as NAIRU suggest,” the white paper says. .
“NAIRU should not be confused with or constrained by long-term policy goals,” the paper said.
What is the new definition of full employment?
The government says its goal is “sustainable and inclusive full employment”.
It says everyone who wants a job should be able to find one without having to look for too long, and that people need decent jobs that are safe and pay a fair wage. We recognize that quality of work and sufficient working hours are important to people.
The “goal” for full employment has two parts.
- 1.Continuation of full employment: This refers to the use of a variety of policies to reduce business cycle volatility and maintain employment as close as possible to current maximum sustainable employment levels consistent with low and stable inflation.
- 2.Inclusive full employment: It is about expanding labor market opportunities, lowering barriers to work, reducing structural underutilization and increasing the level of employment that can be sustained in the economy over the long term.
“This is a broader and longer-term objective than achieving current maximum sustainable employment levels consistent with low and stable inflation,” the White Paper states.
“The first step to operationalizing this definition of full employment is to understand and measure the underlying concepts.
The report states: “Significant misjudgment of the current maximum sustainable employment level or failure to take proper account of short-term constraints could lead to serious policy errors that lead to higher levels of economic underutilization.” “History shows that there is a gender.”
How is that achieved?
In fact, the government wants to understand more clearly the pressures faced by workers by expanding the modern concept of full employment to include recognition of labor market underutilization.
But we don’t want to disrupt the way the RBA does things.
It acknowledges that the RBA uses the narrower concept of full employment, or NAIRU, to make decisions about monetary policy.
Therefore, using the tools available to governments to lower barriers to employment for “potential workers” and lowering structural unemployment over the long term, NAIRU’s technical estimates We want to be able to maintain it at a low level. They’ve been like that for the last few decades.
That way, the RBA’s “independence” will not be compromised. It would be free to continue raising or lowering interest rates to control inflation throughout the cycle.
However, the RBA’s work will be complemented by government policies aimed at reducing underutilization over time.
The government says it has “a range of fiscal policy tools” available to do so.
“Governments have a role to play in supporting people throughout their lifecycle to ensure they have the skills they need and reduce the barriers they face to finding and keeping employment and decent work,” the paper said. “It has said.
“Despite the many successes the Australian economy has had, it has rarely achieved full employment for long periods of time and has experienced long periods of time when the available labor force is far more underutilized than it is today.” .”
List of upcoming policy changes
The government says there will be a number of policy reforms based on the new goal of full employment.
The document sets out 31 future reform directions to guide government policy-making as well as the work of industry, trade unions, the education sector and civil society.
Finance Minister Jim Chalmers said on Monday the government would take nine immediate steps:
- Accelerate the recruitment of advanced apprentices in priority areas such as net zero (renewable energy), the care economy and digitalisation.
- Permanently extend work bonus measures for older pensioners and eligible veterans, allowing them to earn more by working without reducing their pension.
- Smooth the transition to work for many income support recipients by doubling the amount of time they can receive the benefit. This allows them to maintain access to Social Security benefits, such as discount cards, long after they return to their first job.
- Supporting social enterprises to combat persistent labor market disadvantage in certain regions of the country.
- In consultation with employers, trade unions, higher education institutions and governments, develop a ‘scoping exercise’ for a national skills passport to enable workers to demonstrate and promote their qualifications and for businesses to find more skilled workers. support.
From January 1, 2024 — pending passage of legislation — all new pensioners and eligible veterans over superannuation age will have a starting work bonus income bank balance of $4,000 instead of $0. existing and new beneficiaries will maintain their current increased maximum work. Bonus balance limit is $11,800 instead of $7,800.
But the government’s long-term project will include even more significant changes.
Ms Chalmers will put gender equality and job security at the heart of the fair work system and update the bargaining system to ensure all workers and businesses can negotiate deals that benefit them in good faith. He said there had been recent changes to Australia’s workplace relations regime. Part of it.
He said the government was also reforming the disability employment service model, Parents Next and community development programmes.
Employment and Workplace Relations Minister Tony Burke said it was also time to rethink the country’s employment services in the wake of the Robo-Debt Royal Commission.
He said the system required “strong governance by Australia’s public services” and that services must protect the dignity and rights of the individuals who use them.
Overall, the White Paper states that government departments and agencies need to work together to achieve sustainable, inclusive and full employment.
This will require improved migration and regional planning systems, improved education, affordable and accessible child care, and more housing stock.
And policy reforms must be designed to absorb the major changes already underway in the economy that will shape our lives for decades to come. These include increasing demand for quality care and support services, increased use of digital and advanced technology, climate change and net zero transformation.
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