Our Position on Unemployment
Unemployment is caused by Australian workers having to compete with low paid workers in Asia. Australian workers get paid $16 an hour or more, while Asian workers get 50 cents an hour. If employers have a choice of paying workers $16 an hour or paying them 50 cents an hour, of course, they will pay them 50 cents. Companies like Telstra and Qantas are shifting every job they can from Australia to Asia.
Politicians claim that this kind of competition only causes unemployment for unskilled workers. But even doctors and lawyers in Asia are paid peanuts, not just unskilled workers. There was much disgust when it was discovered that the judge who convicted Shapelle Corby of drug trafficking was earning less than someone on the unemployment benefit in Australia. Competition can occur between Australian doctors and Asian doctors. For example, increasingly Australians are travelling to countries like Malaysia for surgery, so it is only a matter of time before Australian doctors start to feel the downward pressure on their incomes.
But what about these wealthy Asian students who come over to Australia? Their parents typically have hereditary wealth. The wealthy people in Asian countries are typically those who have inherited land from their parents. If we continue down the current path, the only well-to-do people in Australia will be the descendants of executives of companies like Telstra and Qantas, who get paid absurd amounts in the region of $20 million a year.
The unemployment rate is much greater than people imagine. Officially the unemployment rate is 5 percent. But the official unemployment rate only includes people who are applying for jobs. Most unemployed people have given up applying for jobs, since it is a waste of time. A better indication of unemployment is what is called the “participation rate”. This is the proportion of the labour force who have jobs or who are applying for jobs.
As an exercise, let us calculate a better estimate of the unemployment rate in Australia. The following are statistics from the Australian Bureau of Statistics web site:
Population = 22,720,000 Total Employed = 11,518,000 Officially Unemployed = 632,000 Participation Rate = 65.2% Official Unemployment = 5.2%
From this, we can make the following calculations:
Official Labour Force = 11,518,000 + 632,000 = 12,150,000 Real Labour Force = 12,150,000 ÷ 65.2% = 18,635,000 Real Unemployed = 18,635,000 − 11,518,000 = 7,117,000 Real Unemployment Rate = (7,117,000 ÷ 18,635,000) × 100% = 38%
So, unemployment is really 38 percent! More than one-third of the labour force, or seven million Australians, are out of work!
The solution of the major parties is that Australian workers will be retrained to performed skilled work. But this does not alter the fact that the skilled workers will cost much more than skilled workers in Asia, so the work will end up being done in Asian countries. Take the case of chemical engineers employed in oil refineries. Engineers in Asia earn much less than engineers in Australia, so the oil companies are closing down their oil refineries in Australia, and moving their refining operations to Asian countries. Bad luck for all those guys who thought an engineering degree would be a meal ticket!
The real cause of unemployment is “free trade”, that is, the political policy of not having high taxes on cheap foreign imports. Up until the 1970s, Australia had very high taxes on cheap foreign imports. As a result, we had full employment. Anyone living in an Australian city who wanted a job could get a job.
The Labor Party advocated a policy of “free trade”. In support of this policy, they pointed out that imported goods such as cars would be very cheap. This is certainly true. The two-thirds of the labour force who still have jobs can buy imported cars much more cheaply. Of course they are constantly under the threat of losing their jobs and joining the other one-third of the labour force on the scrap heap.
Economics courses point out that, by Australia engaging in “free trade” with countries like China, the efficiency of our economy increases. Overall we have more wealth than if we did not engage in “free trade”. This is called the “theory of comparative advantage”.
Naturally it would be good if there was some way that we could have the benefits of increased efficiency without the disadvantage of massive unemployment. All scenarios which involve “free trade” however also involve significant unemployment, and a need for expensive government programmes to support and retrain the unemployed.
It comes down to this. Either we can have “free trade”, massive and increasing unemployment, and massive welfare dependency. Alternatively we can have high taxes on imports, no unemployment, and no welfare dependency. Really, the choice is easy.
The increase in economic output through engaging in “free trade” with Asian countries is not all that great. If a small town was entirely self-sufficient, it would gain greatly by trading with the rest of Australia. But the Australian economy is so large that we will not gain significantly by trading with the rest of the world.
An argument is made that, if we discourage cheap foreign imports with high taxes, countries like China will block our exports. But this does not matter, since we do not need to export to them, except for things like coal and iron ore. Asian countries will not block our exports of coal and iron ore, since there are not many countries where they can get these things.
In the 1970s, most of the goods used in Australia were made in Australia. As a result, if we were involved in a war or economic sanctions, it would not have affected us all that much. But now, because most of the goods we use are made overseas, we would be badly affected by a war or economic sanctions. So from the point of view of security, “free trade” is a bad idea.
People like Tony Abbott imagine that “free trade” is a recent hi-tech invention. “Free trade” was actually invented in 1817 by David Ricardo, the guy who inspired Karl Marx to become an economist. People have known for two hundred years that “free trade” is a really bad idea.
People like Tony Abbott imagine that conditions are just like in the 1970s, and anyone who wants to get a job can get one. According to Tony Abbott, anyone who is unemployed is just too lazy to find a job. But as we have seen, a third of the labour force are unemployed.
Tony Abbott urges us to vote to stop people bludging off the government. The first bludger we should vote out is Tony Abbott himself. Abbott gets hundreds of thousands of dollars from the government without doing anything useful in return. Abbott is no better than a welfare cheat who is defrauding large amounts from the government, and Gillard and Rudd are just as bad.