It's become a distant memory that our unemployment rate was less than 1 per cent from the late 1930s to 1976. Photo / Warren Buckland
It's become a distant memory that our unemployment rate was less than 1 per cent from the late 1930s to 1976. Photo / Warren Buckland
Full employment is an abstract theory for most countries, not New Zealand.
From the late 1930s to 1976, our unemployment rate was less than 1 per cent. Both main political parties supported the policy; and that everyone had a right to a life with dignity.
And then, Rogernomics, 1985, changedeverything. "For people who don't want the government in their lives … this [Rogernomics] has been a bonanza. For people who are disabled, limited, resourceless, uneducated, it has been a tragedy." David Lange, Prime Minister at the time, perhaps a reluctant participant, agonised many years later.
State enterprises were gutted and sold. Layoffs were massive in government departments, state-owned corporations, postal service, telecommunications, state banks, coal mines. More than 98,000 jobs were axed. Unemployment soared. In South Auckland, it reached 40 per cent, in some rural towns, 80 per cent.
Now, even when the economy is booming, more than 110,000 of us are unemployed; 60,000 are underemployed. Our unemployment rate rarely dips below 4 per cent, and for Māori/Pasifika, 8 per cent.
The youth unemployment rate for Pakeha is typically more than double the overall rate. For Māori and Pasifika youth, it is four times, one in six or 16 per cent out of work at all times, females fare even worse.
The social issues caused are staggering. Twenty-seven per cent of our suicides are unemployed, 2000 lives lost between 2008 and 2020. The Canadian Mental Health Association considers unemployment a shock similar to a divorce or severe injury.
Unemployment is quickly followed by a drastic reduction in living standards, financial hardship, loss of contact with colleagues and social networks. Then come rejections to job applications, anxiety about a potentially long period of joblessness, the stigma and loss of self-esteem.
Depression and mental health issues follow, especially if the period of unemployment is long and deprivations deepen. Many deteriorate into risky behaviours, binge drinking, drugs, junk food. Also, physical health issues like heart diseases, hypertension, premature mortality.
Unemployment leads to poverty and breeds crime; crime leads to prolonged periods of joblessness, a vicious cycle. Two-fifths of individuals who participate in crime state that being out of work was the main reason. Areas with high unemployment have high crime rates and gangs.
Unemployment strains relationships, the scars are often permanent. Sometimes it's the money, sometimes the change in one's personality, the irritability, the violence, the alcohol. Divorces often follow.
The proposed unemployment insurance scheme will alleviate some money-related issues, especially for middle to high-income earners. It is unlikely to help the young, those yet to find their first job.
We pay two billion dollars in direct unemployment benefits every year, even with one of the lowest benefit levels in the OECD. This is just the tip of the financial iceberg. Lost productivity; reduced demand for consumer goods; loss of tax revenue; costs on healthcare, the criminal justice system, etc; and loss of skills, perhaps permanently, as people look for better pastures overseas.
So, what is the case for 4 per cent unemployment being as good as it gets?
Kuslan Sugathapala. Photo / Supplied
Many economists argue that low unemployment correlates to high inflation - the Philips Curve. If this ever worked, it certainly doesn't anymore. Loss of union power, technology and globalisation has broken any link. From 2010 to 2019 post-GFC, inflation averaged just 1.5 per cent (2.6 per cent in the preceding decade).
The current Reserve Bank mandate was conceived when inflation was a massive problem; that's no longer the case. Even if we don't follow a full employment policy, we should flip the RBNZ mandate – to target unemployment below 2 per cent while maintaining low inflation.
The current mandate gives primacy to inflation, a non-existent problem and ignores the human miseries of unemployment.
Another argument is that it leads to skills shortages. Aren't skills shortages more likely to be caused by rusting skills while unemployed, mental and addiction issues, and loss of morale?
Pavlina Tchernava, Associate Professor of Economics at Bard University, argues that the right to work should be a universal benefit similar to food and housing, superannuation, education and health.
Our national suicide prevention strategy calls for stable employment. The Green New Deal in the US calls for a public option for the unemployed. And it should be an option, something positive, not a forced to work scheme. A choice for the jobseekers to earn a wage, maintain mental well being and for our youth to gain skills.
What should be the nature of work? The options on the table often are care work, supporting non-profits struggling for resources. Environmental work and Climate Action to support the transition to a green economy. Perhaps something akin to an internal Peace Corps with a local and community focus.
It's for us to design a programme that will work for New Zealand.
Times of massive upheavals like the Spanish Flu, the 1930s Great Depression and World War II led to significantly better societies. It's an opportunity for us to make that change.
Recapture some of the soul we lost in the mid-1980s and design a kinder, more caring society for the future.
• Kushlan Sugathapala is a researcher and writer on social justice issues.
