From guaranteed jobs for all to doleful days

New Zealanders were once all but guaranteed a job. MATHEW DEARNALEY and SIMON COLLINS ask what happened to full employment.

Young New Zealanders are often surprised when told this nation once stood head and shoulders above all others in providing jobs for virtually everyone who wanted work.

Certainly nobody now under 30 has been lucky enough to live in such a blessed country.

Perhaps those for whom 1967 is not such a distant memory should keep quiet about New Zealand's former state of grace, for shame at not having bequeathed it to their young.

From 1938 to when a crash in wool prices prompted a devaluation and loosening of import controls, New Zealand stood apart from the rest of the Western world in achieving full employment.

It was untainted by the blight of unemployment which subsequently turned the land of the long white cloud into one of gloom for hundreds of thousands of its people.

As for that tall-sounding tale about being able to count unemployment beneficiaries on the fingers of one hand, it's true.

A search through musty yearbooks confirms that on March 31, 1956, just five souls were drawing the dole.

The unemployment register was never a very reliable measure of joblessness, though, and the census conducted the same month found 7936 people wanting paid work.

Even so, the Holyoake Government's Minister of Labour, Tom Shand, still felt entitled to boast some years later that there were fewer than "a hundred genuinely unemployed people - and I know the file on every one of them."

Now unemployment remains stubbornly above 6 per cent, after reaching 11.1 per cent in December 1991 when measured by the Household Labour Force Survey's exacting definition of people actively seeking work, or being immediately available. Auckland economic historian Keith Rankin has analysed census and other official data back to 1867 to produce a measure of those he terms workless and wanting work, peaking on the graph at 19.7 per cent of the workforce - 350,500 people - in March 1993.

That was after National set about completing the economic restructuring begun in 1984 by Labour under Finance Minister Sir Roger Douglas, while at the same time promising to halve within three years the official unemployment rate of 7.7 per cent it inherited in 1990.

Mr Rankin notes that the household survey also contains a category of "residual" people - neither employed, students, retired nor caregivers - recording even higher numbers than his measure and in 1993 equalling 22.7 per cent of the potential workforce.

And the survey does not list as unemployed anyone who is paid for working an hour or more a week even if he or she is registered as unemployed while looking for a more substantial job.

Official unemployment among Pacific Islanders reached 30.6 per cent of their labour force in September 1991, while Maori were not much better off at 27.3 per cent six months later.

This followed the loss of 98,000 jobs from 1985, including 40,000 axed in the corporatisation or sale of state enterprises such Railways, Telecom, New Zealand Post and the Forest Service.

The 1987 stockmarket crash brought unemployment to the main cities and the toll kept rising through 1991 when benefit cuts by the incoming National Government, left holding a $5 billion deficit, crushed consumption demand.

Although 303,000 jobs were created under the Employment Contracts Act, these included 97,900 part-time posts. Many wanted to work more hours to put food on the table, and productivity growth has been disappointing.

According to Massey University research, 8900 fewer men held full-time jobs last year than in 1987, although there were 52,000 more male part-timers.

But women gained ground from an increase in services sector employment at the expense of manufacturing.

They stepped into 48,100 more full-time and 88,300 part-time jobs to end up comprising 45 per cent of the workforce.

Despite the Government's avowed intent to help businesses to create more jobs, it is shy of announcing specific targets.

And it has left the Reserve Bank with a mandate to hit the monetary-supply brakes again if Governor Don Brash perceives too many pay packets for too little productivity.

Some banking economists believe unemployment is already low enough, pointing to 4 per cent in the United States as the nearest an open, globally oriented economy is likely to get to creating jobs for all.

But Switzerland and the Netherlands are attracting enough investment to drive their unemployment levels below 3 per cent.

And it is sobering to consider that New Zealand paid just £4247 to 68 jobless people in 1955-56. Last year, we spent $1.538 billion on 162,000 dole accounts, a sum that does not begin accounting for horrendous social costs.

Full employment was first achieved at the outbreak of the Second World War, after the mass joblessness of the Depression left enduring memories of spartan relief work camps which preceded Labour's creation of the welfare state.

Few expected full employment to survive the return of almost 150,000 soldiers, despite the stimulation of manufacturing industries from import and foreign exchange controls imposed in 1938.

These were to dampen demand for goods after a critical rundown of foreign exchange, but an agreement was signed with a wary Britain not to use import licensing to foster what might be deemed uneconomic industries.

Even some union leaders, whose members later benefited from jobs created by import-substituting industries, opposed the controls on the basis that they would stop workers gaining the cheapest goods.

The reintegration of soldiers to civilian life was aided by a massive training drive, and thousands were granted farm loans, or funds and import licences for new businesses.

Mr Rankin says a single-minded determination by successive Governments to avoid another recessionary spell of unemployment was aided by demographic factors.

More people began retiring on new pension schemes and the baby boom took many women out of the workforce in the early postwar years.

Fear of unemployment remained the number one public concern, despite booming economic times buoyed by high export prices, and deterred National from any wholesale dismantling of Labour's import controls.

Full employment was not to everyone's liking, though.

International observers suggested Kiwi statisticians had misplaced the decimal point in registered unemployment rates as low as 0.005 per cent, and grizzled that an efficient economy could not power ahead on "overfull" employment.

Years later, as waves of cheap overseas goods triggered mass unemployment under the 1984-90 Labour Government, champions of the free market blamed a legacy of protectionism for problems which emerged during the late Sir Robert Muldoon's hands-on governance.

But for veteran left-wing Christchurch economist Wolfgang Rosenberg, the rot began when Sir Robert became Finance Minister in the Holyoake Government in 1967.

While Sir Keith Holyoake had been content to carry on running a protected but arguably internally buoyant domestic economy, it was Sir Robert who began tentatively lowering the drawbridge guarding "Fortress New Zealand" from the global hordes.

According to Mr Rosenberg's book The Magic Square, 1967 marked the end of New Zealand's economic "miracle" of full employment and attendant social stability.

From that point, New Zealand was on a slippery slide to "an ordinary capitalist economy" of fluctuating mass unemployment and dependency on foreign creditors.

He argues that while New Zealand's growth rates were not quite as strong as those of comparable countries, they were nevertheless respectable, and GDP figures which include the cost of destructive activities such as war are poor indicators of national health.

Full employment, on the other hand, is a precious good on which to hang our hats while unemployment is "possibly the worst social cancer society can develop."

The more mainstream Wellington economist Professor Gary Hawke also points to 1967-68 as the year when full employment was first breached.

But he suggests in his economic history The Making of New Zealand that there was no explicit abandonment of the desirability of full employment - just a greater willingness to take some risk to secure higher incomes.

He believes this was reinforced when National's 1969 election victory proved that some level of unemployment was not necessarily fatal to electoral survival.

In mid-1967 the Herald ran a banner headline proclaiming: "25-Year Peak in Total of Jobless - 2303 and more expected."

The news brought Government appeals for calm, with Sir Keith Holyoake saying he did not consider 2300 jobless out of control.

Norm Douglas, Labour MP for Auckland Central and Sir Roger's dad, said it staggered him to see able-bodied men and women queuing for benefits.

Remuera National MP the late Allan Highet challenged prevailing orthodoxy by saying tight employment conditions were the best thing to happen to New Zealand, because they made people work harder.

Sir Robert was more politically sensitive, assuring the nation that he did not want unemployment because "a man out of work is production wasted."

But then he devalued the dollar to stimulate exports, dampening domestic demand and compounding job losses after tentative moves to dismantle import barriers such as departure from a full-employment economy by subsidising farming and business, and imposing price and wages controls, leaving Labour to finish the job.

Despite the practical consequences of their deeds, politicians have always been reluctant to renounce the ideal of full employment.

The Muldoon Government cranked up subsidised work schemes to the point that participants sometimes outnumbered the unemployed - in 1983 there were 47,478 people on such schemes, at a cost of $256 million.

One churchman likened the schemes to inflatable cushions, to be expanded as social discomfort levels rose or enough articulate parents realised what might become of children left to rot on the dole.

National ministers hoped their "Think Big" energy projects and other developments could create 410,000 jobs.

That was before oil prices crashed, denting the economic viability of the projects, which probably slowed diversification into more productive high-tech manufacturing by hogging billions of investment dollars.

Unemployment doubled in the three years to 1984, although pre-election pump-priming left the incoming Labour Government with shorter dole queues until industry restructuring began in earnest in 1986.

Then, in 1990, after presiding over new heights of joblessness, a doomed Labour tried to fend off defeat with promises of a return to full employment, if only the electorate would forgive and forget.

Opposition leader Jim Bolger, who said unemployment not only harmed the nation's social and economic fabric but drove people to kill themselves, accused Labour of insulting voters' intelligence with an empty pledge.

That did not stop him from promising to halve unemployment in his first term as Prime Minister. By 1993, Mr Bolger was telling the legions of unemployed that technology had destroyed far more jobs than economic recession, and they must position themselves through education "to travel our new economic highways."

On the day of that message, a mother pleaded with a parliamentary committee for better protection for young workers after her son committed suicide within hours of losing his job.

Despite being attacked for what Labour called a "smug and self-satisfied" speech, Mr Bolger was receptive to an Alliance proposal for a multiparty response to unemployment through a prime ministerial taskforce.

The taskforce visited 27 centres in 1994 and compiled 120 recommendations aimed at giving every New Zealander the chance of paid work.

It concluded that without concerted Government intervention, unemployment was unlikely to drop below an unacceptable 5-7 per cent, and it would be "criminal" to waste the opportunity of a long-awaited economic recovery to end long-term joblessness.

The Government then allocated $252 million over three years to new subsidised work and training schemes, and other measures.

But this was only a third of the estimated cost of the taskforce's full menu, which included preparations to provide education, work or training to everyone under 20 by 1998, and by this year to everyone registered unemployed for 26 weeks or longer.

After a third of a century of efforts to recreate full employment, there are still 114,000 officially unemployed, of whom 27,300 are under 20 and 35,800 have been out of work for at least six months.

Among them is 54-year-old Richard Quinn, of New Lynn, who introduced himself to the Weekend Herald yesterday as a "former human being" trying to survive with his wife and two children on $47.25c a week after paying the mortgage. He said he had "done more time on the dole heap than I would have for murder."

Herald Online feature: The jobs challenge

We invite your responses to a series of questions such as: what key policies would make it easier for unemployed people to move into and generate jobs?