By Frank Enright
When the Labor Party won federal government in 1983, unemployment was on the doorstep of 10%. With the active participation of the ACTU, the Hawke government embarked upon a Robin Hood-in-reverse scheme to transfer a greater share of national earnings to profits in order to promote business investment and counter the boom-bust cycle. Increased investment, ran the story, would create general economic growth; this would, in turn, reduce unemployment and fund socially desirable projects. The instrument to put this into practice was the ALP-ACTU Prices and Incomes Accord.
The role of the ACTU in this project has been crucial. The policing role of the union movement can be gauged by the fact that over the past decade, at a time of falling real income, industrial disputes have declined dramatically.
And the result of this socioeconomic engineering? A massive redistribution of income from wages to profits to counter "real wage overhang".
But, investment levels are locked in at a 30-year low.
This is not all past tense; management consultants Wyatt Company have found that this year wage increases in Australia will be the lowest in the Asia-Pacific region relative to price rises.
Yet the Business Review Weekly American Express Top 500 survey reported extraordinary profits across the board: "Most sectors shared in the rise. Investment and financial services had a 371% increase, insurance sector profits were up 310% and there were some outstanding individual performances. National Australia Bank lifted its profit by 130.6%. Even in the middle of the list, airborne surveyors Aerodata increased its profit by 335.8%". So where are the jobs?
These super profits were not created by increased sales revenue (which grew by 3.4% compared to a leap in average profits of 75% in the December 1993 half year). Ironically for the trade union movement, the big profits came not only from wage cuts, company tax cuts and lower interest rates, but considerably from "restructuring" — which during the recession has been synonymous with job shedding by the largest firms.
The government's white paper titled Working Nation — surely black humour with a million people unemployed — and the ACTU's endorsement of it are an implicit confession of the failure of the Accord strategy. After a decade of transferring wages to profits, unemployment is higher today than when Labor assumed office.
In a generally favourable response to the white paper, Financial Review columnist Stephen Ellis commented, "Behind the big-ticket headline spending in today's White Paper will be a package which, stripped of rhetoric, is an orthodox economic rationalist response to ... high unemployment".
Government business enterprises have in many cases led the way in retrenchments. In the three years to June 1993, government business enterprises slashed 100,000 workers from their payrolls. Telecom alone shed 20,000 jobs in that period. Although these reductions in staff numbers have been achieved largely through attrition, the jobs have gone and they ain't coming back.
Full-time employment peaked at 4.7 million in November 1989, but has declined to 4.1 million. A partial offset came in the form of part-time work, which increased by 100,000 to 1.6 million. But a survey has found that at least 10% of those on part-time want full-time jobs.
In March, Keating — in the face of a flat refusal by business to lift investment levels — warned employers to "get off their tails and start investing" or workers would "claim some of the profits back in wages". Taking Keating's lead, several prominent trade union leaders growled unconvincingly. George Campbell, senior ACTU vice-president, said workers would not "accept moderate wage outcomes if the employers are simply fleecing them to line their own pockets". This is precisely what has been happening for the past decade.
Like many economists, David Clarke from the University of New South Wales, writing in his book Economic Update 1994, claims the reason for the sharp increase in unemployment is a fall in demand for goods and services. This is putting the wreck before the tow truck. The recession is caused by overproduction of commodities; that is, more goods have been produced than can profitably be sold. Purchasing power lags behind available goods and services. As a result, workers are laid off and then demand drops, exacerbating the problem.
Consequently, employers in general are not going to invest more money in production when they already have an over-capacity of 21%. If they do invest, it will be to increase new technology to replace workers and boost profits.
A large proportion of the money transferred from wages to profits ($400 billion over 10 years), and obtained through financial deregulation — courtesy of the Labor government and the ministers-in-waiting in the union movement — has been gambled on the stock exchange or paid out to directors and in shareholder dividends.
The strategy of Labor and the labour movement has failed. More than that, the Accord policy can be said to have deepened and prolonged high unemployment by reducing the purchasing power of the majority.
In the end, investment is too important to be left to the "animal spirits" of investors.