Bill Mitchell — A 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure

It’s Wednesday, and a quiet day for writing blog posts for me. But I want to comment briefly on the latest economic news that sees the IMF claiming the Australian economy will contract by 6.7 per cent in 2020 and the Treasury estimates that the unemployment rate will rise to 10 per cent (double) by June this year. While this all sounds shocking, the emerging narrative in the media and among politicians is that this is sort of inevitable given the health crisis and the Government’s Job Keeper wage subsidy, which the Treasury claims will constrain the unemployment rate rise to 10 per cent rather than 15 per cent without it is a jolly decent thing for the politicians to have done and keeping the unemployment rate down to 10 per cent is a “tremendous achievement”. Well, apart from the wage subsidy leaving a million workers outside of any benefit and cutting wages for thousands who will receive the support, I fail to see why the unemployment rate should rise at all. The government has options: (a) wax lyrical about achieving a disaster – 10 per cent unemployment; or (b) create jobs via a Job Guarantee and see the unemployment rate fall to 2 per cent or so. For the neoliberals who run the place and their media supporters, a 10 per cent as a “remarkable achievement” and that is the TINA narrative they are pumping out to assuage the population. For the likes of yours truly, a 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure. The government can always intervene and create sufficient jobs that will be of benefit to the society, can be designed to be safe in the current health context, and maintain the connection for most of us with paid work? Even if some of them would require the workers stay at home while being paid. For me that is a no-brainer....

To play the devil's advocate here, while implementating a JG would achieve "full employment" defined as a job offer fitted to every applicant at a wage that would set a floor under other wages, ostensibly at a "living wage" including benefits, this doesn't address the depth and breadth of the current crisis.

In the current context, the real danger in the dismal employment numbers is debt deflation as millions of people cannot meet their obligations and loans become "non-performing," that is, in default. Being at the minimum wage, an MMT JG is not going to prevent this. Governments need to do more.

Governments could declare the situation force majeure and suspend the terms of debt repayment, or, do what would be more effective — step in to make the payments. Or even better, foot the wage bill sot the conditions remain stable across the economy.

Bill has already considered this issue:

If you recall, a few weeks ago I did some rough modelling of my own which I presented in these blog posts:
1. “We need the state to bail out the entire nation” (March 26, 2020).
2. The government should pay the workers 100 per cent, not rely on wage subsidies (March 30, 2020).

But, but,  …what about the deficit and debt? If numbers bother, use "creative accounting," or just change the rules. This is the government, after all, and government accounting follows different rules anyway.

Bill Mitchell – billy blog

A 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia