COMMON Wealth No. 2 of Volume 7
Regional Unemployment and the Indirect Employer
Beyond the Principle of Self-Reliance
It often happens that in one and the same country citizens enjoy different degrees of wealth and social advancement. This especially happens because they dwell in areas which, economically speaking, have grown at different rates. Where such is the case, justice and equity demand that the government make efforts either to remove or to minimise imbalances of this sort. (Mater et magistra, n150)
In disadvantaged urban and non-metropolitan communities around Australia there is a heightened awareness of the inequitable impact of global economic forces and the economic reform agenda being implemented at all levels of government. Current evidence reveals the unequal geographic distribution of unemployment resulting in increased social and economic inequality in the life of the nation. High unemployment and poor job growth reflects the deeper social and economic malaise of industry restructuring or decline, lost skills in the available labour supply and, a range of disadvantage that results from the denial of a living wage and employment opportunity.
These communities will not share in national improvements in economic performance and job growth without the direct intervention of Australian governments. Our politicians seem content to portray the inequitable impact of global economic forces and economic policy as being inevitable and largely beyond their control. The overwhelming focus of economic policy continues to reduce the role of governments to `getting the fundamentals right' while communities with a reduced capacity to benefit from improvements in national economic performance are being asked to become more `self-reliant' as public funding, programs and services are withdrawn. The principle of self-reliance is shown to be a central theme underpinning the non-interventionist stance of governments towards major national issues such as regional unemployment.
This document highlights major deficiencies of the current non-interventionist stance of Australian governments. It proposes a national strategy of regional economic and employment development as being the only effective alternative to addressing the needs of disadvantaged communities. A national strategy for regional development needs to comprise four key initiatives: increased public investment in regions displaying signs of labour market depression; increased employment and training support integrated with regional and industry assistance; protection of minimum wage levels and income support entitlements for unemployed and vulnerable workers; and, promotion of local community ownership of regional development initiatives.
The proposed national strategy represents a preventative and planned response to the needs of disadvantaged communities who are not sharing in the distribution of national wealth and opportunity generated by Australia's uneven economic performance at the regional level. A national strategy for regional development would be an important step in enlisting the support of prosperous communities to assist their neighbours in disadvantaged communities.
This document puts forward principles that are premised on the collective responsibility of the national community to address the needs of disadvantaged communities. These principles differ significantly from those underpinning the Federal Government's concept of `self-reliance'. According to a central principle of Catholic social teaching on the role of the State to act as the `indirect employer', governments at all levels have a responsibility to intervene in a wide variety of economic affairs to remove or reduce imbalances in the distribution of wealth, employment and social advancement between different regions. It is argued the Federal Government has a special responsibility to ensure future economic policies cushion the impact of economic change and to provide access to jobs to all Australians regardless of where they live.
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Message from Bishop Patrick Power, Chairman of the Bishops' Committee for Social Welfare That many regional communities around Australia are hurting has been painfully obvious to me as I have travelled around the Archdiocese of Canberra and Goulburn. Goulburn has ceased to be a wool sales centre, has seen the closure of the Woodlawn mine and has experienced the effects of being by-passed by the Hume Highway. Eden has lost its tuna cannery and, along with towns like Bombala, has had to cope with changes to the timber industry. Cooma fought unsuccessfully to keep the prison operational. Generally, country people have experienced loss of jobs, community services, a dwindling population, and higher prices for basic goods and services. The rural crisis has affected all country towns and districts, some more severely than others. The impact of economic change and the impact of reform policies on industry and labour markets have also been felt in many urban communities. While not experiencing the level of unemployment that many disadvantaged communities around Australia endure, Canberra has nevertheless felt the impact of savage funding and staff cuts across the public service over recent years and continues to experience high levels of youth unemployment. I imagine this picture, which portrays most clearly the disadvantage associated with high levels of unemployment and the loss of social and economic opportunity among certain sections of the community, is not terribly different to what is happening in the rest of Australia. As we prepare to enter a new millennium, we must offer some hope to these people and communities who are hurting so badly. The Australian Catholic Social Welfare Commission is proposing a national strategy for regional employment and economic development, targeting resources and support to disadvantaged communities and focused on the needs of vulnerable and unemployed workers. Such measures respect the dignity of the people involved, enabling them to use their God-given skills in a productive manner. Furthermore, these initiatives seek to redress some of the imbalance caused by economic rationalist policies which have had a particularly harsh effect on the poorer members of our community. Finally, such a national strategy for regional development will clearly demonstrate that Australia has a genuine concern for its most vulnerable citizens. |
The Emergence of Regional Unemployment
The combined impact of economic recessions, the subsequent decline and restructuring of industries, the globalisation of local markets and public policies promoting open competition complemented by reduced government intervention have had a devastating impact on vulnerable communities in Australia over the past two decades. Labour market reform and industry restructuring, while almost doubling national productivity since 1975, have resulted in labour-shedding, job insecurity and the casualisation and contraction of the labour market. These pressures have contributed to a rise in the level of unemployment from two to 7% and an increase in the average duration of unemployment from two months to more than 12 months (Melbourne Institute, 1998).
The impact of economic recession and economic reform has been uneven. Unemployment among discrete groups of job seekers (e.g. school-leavers, young adults, Indigenous Australians and people of non-English speaking backgrounds) may be as high as five times the national average (ABS, 1999; DEWRSB, 1999). The entrenched structural nature of unemployment, coupled with the failure of periods of economic growth to improve the employment outlook for these groups, has resulted in a rise in long-term unemployment (`LTU') from around 20% of all unemployed people in the early 1980s to around 30% today. Currently, more than 80% of LTU job seekers live in poverty (ACOSS, 1998; Gregory & Sheehan, 1998).
Similarly, the incidence of underemployment and the increasingly precarious nature of work for vulnerable groups is evidenced by a doubling of the proportion of workers in casual work which has risen from 13% to 26% of the labour force over the last 20 years and the increase in the number of adult workers living in families below the poverty line which has risen from 3% to 7.4% over the same period (Campbell & Burgess, 1998; Eardley, 1998). These groups are particularly vulnerable to redundancy and other inequities that have resulted from the restructuring and the operation of modern labour markets.
The emergence of sustained high levels of regional unemployment during the 1990s provides the clearest indication of growing social and economic inequality in contemporary Australia. Despite recent improvements in national employment performance, evidenced by a fall in the official unemployment rate from over 10% to around 7% since 1996, disadvantaged communities have generally not shared in the jobs growth. Studies examining the geographic distribution of unemployment reveal areas of low socio-economic status continue to have the highest concentrations of unemployment. Almost 25% of all unemployed people and 30% of people who are LTU live in the poorest 20% of Australian communities. This contrasts with the wealthiest 20% of communities in which only 16% of unemployed and 9% of LTU live (Harding & Richardson, 1998).
Moreover, the unequal impact of unemployment is most evident in those regions experiencing the highest levels of unemployment relative to the national average. During the 1990s, at any one time, around 30 to 40 local areas experienced levels of unemployment between two to four times higher than the average. Many more areas remain vulnerable to these very high levels of unemployment (ABS, 1998a; DEET/YA, DEWRSB, 1993-99). These local areas are of a diverse size and structure. They are situated within a range of disadvantaged industrial suburban regions and non-metropolitan cities and towns with limited industrial bases centred on declining manufacturing and primary industries, and rural and remote communities with agricultural hinterland vulnerable to falls in commodity prices and declining terms of trade.
The Dimensions of the Problem
These communities have endured higher levels of unemployment as a consequence of recession and as a result of increased exposure to global competition and external market forces. International pressures, largely outside the control of national governments, have forced nations and their constituent communities to run more efficient economies or to risk economic and social decline. These pressures have often entailed massive job loss through industry restructuring, downsizing of work forces among traditional employers, investment in labour-saving technology and the expansion of the services sector.
| The decline of traditional production-based industries over the last 20 years is reflected in conservative estimates of job losses of over 200,000 positions in manufacturing and agriculture which has been the major contributing factor to employment decline in the poorest regions of Australia (Gregory & Hunter, 1995; Hunter, 1994). Over the same period, the output of the services sector has dramatically increased contributing an additional 1.8 million positions. While this expansion more than offsets job losses in other sectors, the effects of these changes have not been even. Many disadvantaged communities have experienced a slow or negligible growth in the service industries resulting in poor employment performance (Productivity Commission, 1999). Additionally, the shift in employment from full-year full-time positions in traditional industries to short-term irregular employment in rural industries, unskilled urban trades or personal and service industries highlights an increasing incidence of low-skilled vulnerable workers being trapped in repeated bouts of unemployment punctuated by low-paid jobs (Campbell & Burgess, 1998:12, 26; Harding & Richardson, 1998:27). |
The emergence of sustained high levels of regional unemployment during the 1990s provides the clearest indication of growing social and economic inequality in contemporary Australia. Despite recent improvements in national employment performance...disdvantaged communities have generally not shared in the jobs growth. |
High unemployment and low, or negative, jobs growth are symptomatic of the limited employment capacity of these regions and give rise to a loss of skills in the available work force required by employers in periods of economic recovery and growth. In the worst affected regions, higher levels of job discouragement and withdrawal from the labour market are evidenced by labour market participation rates that are approximately 20% lower than the national average (ABS, 1998a). Loss of skills and competitiveness in labour markets hinders job creation which effectively renders unskilled and disadvantaged job seekers `unemployable' during periods of economic growth. One of the most pressing issues faced by disadvantaged regions is the narrowing of the skills-base of their economies. Many groups residing in disadvantaged regions are not completing basic education nor accessing training or work experience that provide the basic competencies and skills to make them attractive to potential employers. Non-compulsory school retention rates are around 20% lower than the national average and the proportion of the working age population with a degree or higher qualification is approximately 50% lower than the national average (ABS, 1998a).
The lack of skills among the unemployed people especially is symptomatic of the deterioration of knowledge and labour market networks essential for improved economic performance and the future prosperity of communities. Skilled residents often emigrate from declining regions in search of work that meets their standards of pay and qualification. School leavers and young adults relocate and settle in larger centres for employment and education-related reasons. Disadvantaged urban and non-metropolitan regions report that under-skilled residents, who are unlikely to win jobs in an expanding service or technology-based industry sector are being replaced by those from outside the area who bring the required qualifications and skills. These trends illustrate how the loss of skills in a depressed region reduces its ability to minimise job-loss and create alternative employment during periods of restructuring.
The lower levels of employment opportunity in disadvantaged regions and a subsequent higher proportion of their working age populations relying on income support reveals just how these communities have borne a disproportionate burden of the nation's economic reform.
Broader Social Consequences in Disadvantaged Regions
There are broader consequences than simply the economic costs associated with the wasted potential of productive labour, foregone tax revenue and increases in the demand for income support and family and community services. The concentration of unemployment in distinct regions throughout Australia reveals how the individual consequences of being denied the social and economic benefits of work effect a deeper social and economic malaise among the broader community. Personal costs including the loss of skills, low self-esteem, poorer physical health and other personal costs have wider ramifications in the form of social isolation, family breakdown and loss of community cohesion. (Mathers, 1994; National Health Strategy, 1992)
The lack of access to stable market income in communities experiencing the highest levels of unemployment is illustrated in levels of household income per capita which are 25% lower than the national average. The relative disadvantage of these communities compared to performing communities is further illustrated by the Census-based index of socio-economic status measuring standards of living according to income levels, employment, occupation skills levels and household characteristics (ABS, 1998a). These indicators are a measure of the ability of individuals to establish families, purchase or rent accommodation, undertake education, save for retirement and generally participate and contribute to community life. In a society that prizes the value of work, it is not only the purchasing power of a market wage but the social status of holding employment that affords individuals full social and economic citizenship.
| It is no coincidence that unemployment concentrated in geographical locations impoverishes both the social life and the long-term economic potential of entire communities. High levels of unemployment and the intractable social problems associated with the lack of market income is an indictment on public policies of economic reform, the non-interventionist stance of governments and the withdrawal of funding, programs and services from communities. The current wave of vilification by some Parliamentary representatives of unemployed persons as `job-snobs' who are predisposed to `taxpayer funded idleness' does nothing to address or to improve the circumstances of communities enduring high levels of unemployment. Such statements only serve to aggravate the existing segregation of communities according to the employment-status of its residents. | The current wave of vilification by some Parliamentary representatives of unemployed persons as `job-snobs' who are predisposed to `taxpayer funded idleness'...only serves to aggravate the existing segregation of communities according to the employment-status of its residents. |
Unemployment and the lack of employment opportunities deny community members their entitlement to a living wage and to social and economic security. The existence of these two factors are a sign that the economy is not serving the needs of its community.
The Call for Communities to Be Self-Reliant
The impact on employment of recessions and global competition have been presented to the community by politicians as forces that are largely beyond the control of Australian governments. The Federal Government continues to promote policies of national competition and economic reform that entail the withdrawal of public resources and services from disadvantaged areas while calling on these communities to be more `self-reliant'.
The principle of self-reliance is a basic tenet of neo-liberal economic theory and conservative social policy which has been pursued strongly by the current Federal Government. It promotes the free-market values of individual choice, personal responsibility, economic independence and the withdrawal of government intervention. The principle is evidenced by policies promoting market deregulation and unfettered competition, the removal of wage, industry and social protections and the broad reduction of public investment in the social and economic life of communities.
To combat `welfare dependence' and increase `self-reliance', individuals and families are forced to draw on their own financial reserves and seek their own employment before asking for support from the government (Howard 1999a; Newman, 1996). To increase the prospects of employment, long-term and disadvantaged job seekers are being required to discount their wages and exempt employers of basic award conditions (Reith, 1999). Industries and regional economies are being asked to restructure, diversify and become more efficient producers with less in the way of government `handouts' (Howard, 1999b; Anderson, 1996).
The overwhelming focus of Government policy continues to minimise the role of governments to `getting the fundamentals right' in terms of macro-economic settings that create a climate conducive to growth and investment and micro-economic policies that aim to raise the productivity of a region or reduce the costs of production (PC, 1999:326, 343). The Federal Government's program of fiscal consolidation has established the setting for lower-interest rates, low inflation, reduced Commonwealth debt with some success in aggregate job growth, higher productivity and investment. However, disadvantaged regional communities experiencing high levels of unemployment have not been the beneficiaries of adequate shares of improved national prosperity and have been further disadvantaged by massive cuts to public spending across a range social and economic assistance initiatives.
| The scandal of entire communities that continue to be crippled by high levels of unemployment is not only that there seems to be an overwhelming lack of political will to address the consequences of recession and reform. It is that the architects and adherents of free-market reform have effectively unleashed devastation on many vulnerable groups and communities with little regard to monitoring and addressing the foreseeable inequitable social consequences. Unemployment has been portrayed as being one of a range of `transitional costs' of economic reform and, in some instances, as being a worthy development signifying improved labour productivity resulting in reduced production costs and lower prices for goods and services in affected communities (PC, 1999:79, 116; Industry Commission, 1993). Those bearing the so-called transitional costs recognise the folly of such a proposition that masquerades unemployment as an economic opportunity and they, almost alone, continue to question a national reform agenda that has failed to address the plight of their local communities and undermined any potential for self-reliance. | ...disadvantaged regional communities experiencing high levels of unemployment have not been the beneficiaries of adequate shares of improved national prosperity and have been further disadvantaged by massive cuts to public spending across a range social and economic assistance initiatives. |
The Government is now responding to their plight by intensifying the free-market reform approach by further promoting labour-saving and wage-reduction strategies as the key ingredients of structural adjustment. Specific adjustment assistance measures which would slow the pace of reform and target resources and programs to disadvantaged regions are likely to be considered only in extreme circumstance or on a case-by-case basis. It is more likely that the needs of disadvantaged communities will be met with a smorgasbord of repackaged general assistance and safety-net initiatives that emphasise the individual responsibility or mutual obligation of community members to adjust to change (PC, 1999:343). Such initiatives are inadequate to arrest the decline and maintain disadvantaged regional communities.
There are in fact many policy initiatives that can be implemented to ameliorate the sustained impact of these forces on regional communities. Pro-active strategies which address deficiencies in the supply of labour through education, training and labour market programs which are integrated with adequate levels of regional development, industry assistance and public infrastructure investment so as to attract private investment and enhance employer demand have been repeatedly identified by industry and community representatives as fundamental for the social and economic rejuvenation of disadvantaged regions (Argy, 1998; Burgess & Green, 1997; Houghton, 1997; McKinsey, 1994; Taskforce on Regional Development, 1993).
A Strategic Approach to Regional Development
There will be no lasting solutions to the problem of high unemployment and the associated costs of structural change if Australian governments continue to simply confirm the unequal impact of economic change and intensify policies that minimise government intervention, that withhold or withdraw public assistance and services or that seek to undermine the value and security of income offered through the market and the income support system. The issue of unemployment has to be re-established as the key focus of regional development rather than being one of a range of `transitional costs' of economic reform to be endured in the expectation of better times.
There is an urgent need for a concerted and a sustained national strategy for regional development that coordinates and blends traditional policy responses with innovative initiatives geared to job creation, skills development, labour-intensive industry restructuring and economic reform in communities displaying signs of labour market depression and economic restructuring fatigue.
An increased commitment to job creation and employment and training support integrated with complimentary initiatives of regional and industry assistance will lift economies out of stagnation, increase employer demand and improve the employment prospects of job seekers. This would constitute a more planned, preventative response to the needs of disadvantaged regions than current strategies that take little account of regional disparities in the distribution of wealth and opportunity in the drive for improved national economic performance.
A national strategy for regional development would provide a framework for action geared to achieving sustainable job creation and must include:
(i) Public Investment in Regions;
(ii) Integrated Employment and Training Initiatives;
(iii) Maintenance of Adequate Market Wages; and,
(iv) Promotion of Local Ownership and Support of Regional Development Initiatives.
Such an approach would address the preconditions to disadvantage in these communities and form the basis for a more equitable process of economic reform and structural adjustment to occur within these regions. It would place the issues of regional unemployment and economic decline firmly within the core of any national policy framework for economic reform.
(i) Public Investment in Regions
Since the 1996/97 Federal Budget, the role of the Federal Government in rejuvenating the economic and social infrastructure of disadvantaged communities has been reduced through cuts to urban and regional development programs ($340m) and to programs directly assisting trade and industry, research and development and export-oriented initiatives (over $1.5b). (Commonwealth of Australia, 1996)
The ability of depressed economies to attract private sector investment and increase economic development has been frustrated by ongoing reductions in infrastructure spending. The restraint of capital investment by successive Labor and Coalition Governments since the late 1980s has seen a spectacular fall in capital outlays from 7.7% to 2% of Commonwealth expenditure in the decade to 1995. The 1996/97 Federal Budget reduced total capital outlays by over $13 billion, bringing a dramatic reduction in the proportion of capital outlays to -6% of total outlays by 1997/98. (Commonwealth of Australia, 1997; SEETRC, 1995:109)
The crucial impact of inadequate levels of public capital and infrastructure investment to stimulate higher demand and improved economic performance in regions where public capital is degraded, challenges the current obsession of Australian governments to reign in debt before considering any new spending initiatives. Governments' assumptions that public spending `crowds out' the market and that reduced public spending will be replaced by increased private sector investment must be questioned since it has become increasingly evident that the latter condition relies on public investment in basic infrastructure necessary to underpin a favourable business environment. (Mathews & Grewal, 1997; Evatt Foundation, 1996; Otto & Voss, 1994)
Furthermore, the loss of economic infrastructure investment combined with the effects of mass redundancies resulting in a 13%, or 114,000 positions, downsizing of public sector employment (across the electricity, gas, water, transport and communications industries) over the last decade has impacted most heavily on those regions with minimal capacity to absorb employment losses (PC, 1999:250). Private sector rationalisations, public sector reform at federal and state levels and the application of competitive tendering to local government and the non-government social service sectors has also seen a loss of infrastructure in poorer regions. The social cohesion and economic wellbeing of disadvantaged regions have suffered due to the decline or loss of banking services, postal services, public transport, the public employment service, other employment and training services, health, education and social services. Increasingly, it seems that a high quality of life in these communities is reserved for those relatively well-off individuals and families who are in stable and adequately paid employment, have good health and have little need of family or community support services.
Against this background it is apparent that public investment in disadvantaged regional communities is the key to their future economic and social prosperity. Moreover, it is the collective responsibility and willingness of Australian governments to equitably distribute the opportunities that are generated from national economic reform to communities unable to generate sufficient levels of economic activity that will draw private investment, wealth and jobs into these regions.
| The public investment of regional development and industry assistance programs and the maintenance of economic and social infrastructure must be seen as a significant driver of national economic reform and development. It must be recognised that the role of public sector investment is of greater immediate importance than private investment to the economic and social development of disadvantaged communities. Despite this fact, Federal and state governments have continued to reduced investment and spending in infrastructure, industry assistance, regional development, public services and other programs which assist disadvantaged communities. The Federal Government's continued drive for budget surpluses through fiscal restraint and reduced public sector borrowings worsens the plight of disadvantaged regions through the continued withholding of assistance vital to arrest decline and to support recovery. | ...it is the collective responsibility and willingness of Australian governments to equitably distribute the opportunities that are generated from national economic reform to communities unable to generate sufficient levels of economic activity that will draw private investment, wealth and jobs into these regions. |
Australian governments are currently less interested in assisting regions become more attractive to investment through long-term strategies involving public infrastructure and capital investment. The trend is increasingly to sponsor investment from large international interests in Australia on a selective case-by-case basis. While the Commonwealth does provide a limited range of investment assistance to small-medium size enterprises through the Innovative Investment Fund, TradeStart and limited amounts of targeted Regional Assistance Programme funding, direct access to small packages of venture capital and start-up funds by small enterprises has been impeded by the loss of programs such as AusIndustry which successfully fostered and actively assisted the establishment of innovative small businesses in disadvantaged communities.
The emerging approach of the Federal Government, through its Strategic Investment Project, is to attract private investment projects in excess of $40 million into Australia through targeted cash grants, infrastructure spending, industry assistance and tax breaks (Brenchley, 1999; Howard, 1997). These projects will only benefit economic growth nationally and in particular regions lucky enough to host the development if there is a significant growth in jobs and flow-on benefits in terms of the growth and employment generated among support industries in the broader community. It is unlikely that the selective sponsorship of one-off investment initiatives (e.g. the Visy pulp mill at Tumut and the Comalco aluminium refinery in Gladstone) has had a primary focus on maximising the job creation potential of investments. Nor do such investment initiatives amount to a systematic approach to rejuvenating depressed regional economies that remain unattractive to private investment. It is no surprise that many small to medium size enterprises, recognised as the engine room for future employment growth, cannot access financial support from governments and have to rely on risk averse lending bodies (SEETRC, 1998).
The Federal Government has a responsibility to actively address the challenge of economic stagnation and high unemployment among disadvantaged regional communities at three policy levels. First, given that many communities continue to rely on depleted sources of public investment to ensure a basic level of economic activity where private investment is inadequate, the Commonwealth must initiate strategies that support or restore increased outlays into infrastructure, public services and program-based assistance to stimulate local economies, promote job-growth and attract outside capital to generate opportunity in regional communities. All Australian governments should temper the withdrawal, downsizing and free-market reform of social infrastructure and public services associated with policies of fiscal restraint and national competition. Recent Federal initiatives such as the Rural Transaction Centre Programme, Agriculture-Advancing Australia, and the establishment of 30 Regional Health Service Centres, which are welcomed as important forms of selective assistance to disadvantaged regions, risk being assessed as little more than piecemeal or `catch up' responses to regional disadvantage without a stronger overall commitment to increasing public investment in regions.
Secondly, measures that establish explicit conditions of job creation and regional development to be met by global and domestic industries receiving tax breaks, rebates, infrastructure support, subsidised training, research and development support and other various forms of assistance must be introduced. To date, few conditions have been placed on the recipients of `corporate welfare' to maximise sustainable job creation and the economic and social development of host communities (Evatt Foundation, 1996:67; Disney, 1992:8).
Thirdly, the reluctance of banks, financiers and superannuation funds to provide relatively small amounts of investment capital to `high risk' areas must be addressed. A greater proportion of the national wealth must be directed away from listed stocks towards regions and ventures that provide a lower rate of return but enhance social cohesion. Compulsory superannuation contributions have produced superannuation fund assets to over $300 billion - set to increase dramatically over the next 20 years. Currently these funds invest around one third of their portfolios in the top 50 listed companies that generally have a poor record in terms of job creation (Mathews, 1998). These savings represent an opportunity to finance the infrastructure and the capital needs of ventures capable of reviving the economic and employment capacity of disadvantaged regions if funds are willing to accept lower return rates.
(ii) Integrated Regional Employment and Training Initiatives
The first half of the 1990s saw a strong national commitment to developing employment and training strategies, with an emphasis on skills development, in order to equip sectors and regions facing restructuring to cope with periods of high unemployment and low labour market demand. The skills development provided through labour market programs, the vocational education and training (`VET') and apprenticeships systems has largely been responsible for filling gaps in the skills base of disadvantaged regions, particularly those unemployed populations experiencing significant educational disadvantage.
| Where employment and training support has been linked with public investment that increases employer demand and creates sustainable jobs, the welfare of the whole community has been supported by increased market income and reduced reliance on redundancy-based income and income support payments. Additionally, it has been shown that education and training assistance integrated with initiatives that contribute to the growth of regions and their capacity to develop new industries and enterprises can be a determining influence on the decision of potential investors to establish or expand businesses. (Freeland, 1997; Manning, 1997; DEET, 1995; McKinsey, 1994). | ...the skills development provided through labour market programs, the vocational education and training and apprenticeships systems has largely been responsible for filling gaps in the skills base of disadvantaged regions, particularly those unemployed populations experiencing significant educational disadvantage. |
Since 1996 many policy developments aimed at creating a nationally integrated employment and training system have been halted. Over $1.8 billion has been cut from labour market programs including the loss of over 200,000 training program places. There have been reductions in the projected funding of VET and the uniform and nationally coordinated training and apprenticeships systems have been increasingly deregulated and devolved to industry and workplace management. The price competitive Job Network employment system has been introduced to replace the Commonwealth Employment Service (`CES'). While the heightened emphasis on competition in new employment and training arrangements has induced increased efficiencies in the provision of assistance and increased the job-matching role of these systems through an emphasis on `real-job' outcomes, there have been significant concerns about the quality of support being provided through these arrangements. Overall, the new environment operates with a significantly restrained capacity to place unemployed workers into available positions in the labour market and has less potential for job creation.
In the course of recent national inquiries into regional unemployment and the impact of competition policy reforms on rural and regional Australia, disadvantaged communities have complained about the loss of access to employment and training through the demise of the CES and the failure of the new Job Network to ensure available federal monies are appropriately used to reskill clients (PC, 1999; SEETRC, 1998). It is yet to be seen if recent measures introduced to ensure a more equitable distribution of funding to rural and regional communities coupled with the regulation of provider expenditure on clients will improve the level and quality of skills training provided by these services.
These communities have also complained about inadequate levels of VET support through Technical and Further Education, Training Colleges and other providers. The 1997 VET participation rates in regional and remote communities were around 20% higher than in capital cities (PC, 1999) revealing the important role of this type of training in compensating for low levels of qualification and skill in regional areas. However, recent evidence from many disadvantaged regions notes a high unmet demand for VET and repeated requests to increase expenditure in this area (SEETRC, 1998). Despite significant increases in the number of trainees and apprentices under the Coalition's new apprenticeships system, the number of places provided by traditional trades has not increased and training expenditure and hours of training per employee has fallen across many industries largely as a result of the suspension and subsequent abolition in 1996 of the Training Guarantee Levy (ABS, 1998b; Freeland, 1997). While initiatives such as the Apprenticeship Incentive Scheme have been introduced to increase vacancies and address skills shortages in rural and regional areas, more needs to be done to improve the availability, quality and security of training in these disadvantaged communities.
The Federal Government should introduce tailored packages of intensive employment and training support integrated with enterprise and industry adjustment assistance to those regions displaying vital signs of regional depression as identified above. Other considerations to determine those regions in need of assistance might include the general skill levels in the regional labour force, the industry composition of the regional economy, the condition of regional economic and social infrastructure and, the broader demographic features of the community (IC, 1993). Importantly, the coordination and linking of employment and training policies with investments in infrastructure, industry and regional assistance initiatives will expand their role beyond simply smoothing mismatches in the supply and demand of the market thus providing an integrated approach to regional job creation and economic development.
(iii) Maintaining Adequate Market Wages in Regional Australia
A market income which meets the costs of the daily living and the longer-term life-cycle commitments of individuals and families remains the surest means of preventing poverty (ACSWC, 1996; Cass, 1996; Laborem exercens, n19). Access to jobs that provide a living wage and opportunities for advancement should be a central plank in any national strategy for regional development.
Policies that spur employer demand, jobs growth and access to stable, adequately remunerated job opportunities benefit entire communities by reducing high levels of reliance on income support payments as a primary source of income, increasing the purchasing power of the community and increasing average household incomes which is a key determinant of living standards for the majority of citizens. Complimentary interventionist strategies of enhanced public investment and education and training support which promote economic and employment growth and increase access to market incomes are vital to addressing the broader consequences of social dislocation and the disintegration of community networks that results from unemployment and loss of income.
The current approach of the Federal Government to increasing the demand for labour represents a move away from the strategy of increasing productivity through training and reskilling toward increasing the functional flexibility of labour - evidenced by the rapid growth of part-time and casual employment - and reducing the cost of labour particularly for low-skilled and unemployed workers. This approach derives from the neo-classical economic valuation of labour that holds the price of labour (i.e. wages) must be unrestricted and allowed to move downwards in order to clear the market of excess labour (i.e. unemployment). It is premised on a treatment of the worker as just another commodity subject to the standard laws of the market. This approach requires a reduction of the minimum wages floor and the introduction of associated restrictions on income support as the primary means to address unemployment nationally and in depressed regional communities. (PC,1999:61, 347)
The Minister for Employment, Workplace Relations and Small Business, has foreshadowed the introduction of a national employment strategy, as part of a second wave of labour market deregulation, which would be based on reduced wages and increased conditionality on employment-related transfer payments and program-based support. Included among these proposals are:
- further workplace reforms to reduce or eliminate unfair dismissal and no-disadvantage provisions, union representation and the powers of industrial tribunals;
- the establishment of a separate stream within the workplace relations system promoting the employment of mid- to long-term unemployed people through reduced employer obligations, discounted wages and a strengthening of the `mutual obligation' principles in the income support system;
- the extension of the mutual obligations framework associated with the Work for the Dole Scheme to all adults after short periods of receiving unemployment benefits as a means of re-educating the public's notion of indefinite entitlement and increasing the incentive for job search through tougher compliance; and,
- the extension of the Work for the Dole Scheme and other community employment schemes to meet private and public sector needs with the establishment of an employer-employee relationship that will see allowance payments redirected through employers, thereby artificially reducing recorded levels of unemployment. (Reith, 1999)
These proposals coincide with recommendations from a range of sources including the Labour Ministers' Council, the `Five Economists' and the Business Council of Australia for reductions in unit labour costs through a minimum wage freeze as the primary means to increase employment among LTU and other vulnerable groups (BCA, 1999; Moore, 1998). The Government seems unwilling to consider the recommendation for a system of earned income tax credits which would compensate low paid employees for income foregone, reduce the work disincentive of high effective marginal tax rates, and prevent falling standards of living under such proposals (Reith, 1999). Advocates of free-market wages and industrial relations reform do not concern themselves with the worsened position of low-skilled and vulnerable workers or the impact a reduced minimum wages floor will have on disadvantaged communities. From their perspective, "it is clearly better from both an economic and a social viewpoint if they are `working poor' rather than `unemployed poor'" (Moore, 1998:41).
| While low-wages might be effective in increasing job vacancies and the transition from redundancy to market-based incomes, they are unlikely to prevent poverty. This is particularly so in regional and some depressed urban areas of Australia where average household incomes are already significantly lower than the national average. Census data over the 15 year period to 1996, reveals an increase from 3 to 10 regional statistical divisions with average household incomes that were 25 to 50% below the national average (PC, 1999:31). |
While low-wages might be effective in increasing job vacancies and the transition from redundancy to market-based incomes, they are unlikely to prevent poverty. This is particularly so in regional and some depressed urban areas of Australia... |
The desired narrowing of the gap between market and social security incomes will produce further pressure on the Federal Government to lower the level and the accessibility of employment benefits as a means to reduce any remaining potential for work disincentive. The high levels of reliance (67%) of unemployed and LTU on public cash social security benefits as a principle source of income, coupled with the fact that these groups are highly represented in the poorest 20% of communities (Harding & Richardson, 1998), means any attempt to maintain work incentives in the income support system by reducing levels of payment or increasing the conditionality of support via toughened activity tests and compliance crackdowns will have a disproportionate impact on these communities.
Stubbornly high rates of regional unemployment together with a complex range of economic and social issues associated with economic reform and low labour demand are unlikely to be addressed by allowing lower wages and the targeting of punitive Work for the Dole-like initiatives to these regions. However, the Federal Government's commitment to addressing unemployment does not appear to extend in any substantial way to directly assist the demand side of regionally depressed markets beyond cheapening labour and utilising the employment and income support systems to drive individuals into a low demand markets and low paid jobs.
The strategy most clearly demanded of the Federal Government is maintenance of minimum wage protection linked to quality employment and training assistance for low-skilled and unemployed workers. Incentives to potential employers through training wages and direct subsidies offers an alternative for a more highly skilled, efficient work force which would preserve the value of work and standards of living in regional communities (Laborem exercens, nn18,19). It would also enable employers to reduce their costs of production through increased worker productivity rather than through lowering wages. This alterative, value-adding, high-wage, high-skills approach to developing economic and social potential holds the real solutions to the problems faced by regional communities.
(iv) Promoting Local Ownership and Support of Regional Development Initiatives
Major national inquiries, reviews and research into the plight of Australia's disadvantaged regions undertaken by governments, academics, business and community representatives over the last decade have emphasised the pivotal importance of community participation in the formulation and implementation of policies concerning their economic and social development (PC, 1999; Walsh, 1999; Burgess & Green, 1997; Houghton, 1997; Taskforce on Regional Development, 1993). National strategies are important in establishing policy frameworks for development, but the ultimate achievement of policy goals depends upon local control and initiative as well as the degree to which governments support the development process (Mater et magistra, nn151-2; Centesimus annus, n48).
Currently, the potential for regional communities to exercise greater power and autonomy in developing their economic and social potential is limited by reductions in public investment into the social and economic life of these communities.
The restoration of these resources, services and opportunities is a precondition to the success of strategies which seek to empower disadvantaged communities to realising their potential. A positive feature in the Federal Government's approach to regional economic growth is the continued development of the Area Consultative Committee (`ACC') network which was established in 1994.
The recent expansion of the role and importance of the ACC network follows the defunding of previous regional development initiatives including the Regional Development Program, Regional Economic Development Organisations (`REDO'), the Office of Labour Market Adjustment and the redirection of funds cut from the employment services system to the Regional Assistance Program. Unfortunately, the funding of the ACC network to the tune of $10 million (an increase of only $1 million on previous levels) has not been commensurate to its recently expanded role. The new role has grown from one of promoting regional training and employment opportunities to now include the responsibilities of: acting as the key regional consultation and information forum for the Federal Government; developing strategic regional economic and employment growth plans; facilitating the Job Network; coordinating employment, training and regional development activities across governments and between governments, business and communities; and, being a mentor for small business development and establishing small business incubators.
The ACC model provides significant potential for regionally depressed communities to achieve more successful and sustained outcomes of economic and social development comparative to the unintegrated and often sporadic policy initiatives that have previously been imposed by the central agencies of government (Pusey, 1991:76f). The model recognises that facilitation of economic development is more likely to produce outcomes capable of meeting the needs of local communities because it is informed and guided by an holistic knowledge of the region, the needs of industry and employers, the skills and potential of its work force and, the functioning of formal and informal community networks. The ACC model represents an important step towards answering repeated calls from regional communities for specific, tailored packages of assistance integrated and readily accessible at the point of need.
| The Federal Government's ACC network could be expanded to become the central stakeholder in any national regional development and job creation strategies. The consultative role of these committees must be further utilised to have an influence on the formulation and implementation of all government policy affecting their communities. These committees should be vested with a clear mandate to investigate the impact of national strategies of competition policy, micro-economic reform, fiscal restraint and other relevant areas on their regions and should have responsibility for recommending alteration to policies where these reduce the employment capacity, economic growth or viability of regional communities. |
The Area Consultative Committee model provides significant potential for regionally depressed communities to achieve more successful and sustained outcomes of economic and social development. |
Currently there is a mixed range of regional development organisations including ACCs, surviving REDOs and a range of local government initiatives that could be integrated under an expanded ACC framework. Amalgamation of these bodies would avoid unnecessary duplication for governments, business and communities. Without this expanded, developed and adequately resourced role for the ACC model of regional employment and economic development, it is likely that disadvantaged regions across Australia will continue to endure spasmodic, uncoordinated and second-rate policy responses to problems arising from broad economic forces and national economic policy.
Beyond the Principle of Self-Reliance
Calls for a concerted and sustained national strategy for regional development continue to be answered by prescriptions premised on the market principle of self-reliance. For communities feeling the full negative impact of free-market economic policies, the continued rhetoric of reform and the extolled virtues of self-reliance have a hollow ring. Their own experience contradicts blind assurances from competition policy and micro-economic reform advocates that they will benefit in the longer term. Those who have come to be regarded as `uncompetitive' and ultimately `unviable' are increasingly making the assessment of the promised benefits of trickle-down economic theory as being unbelievable - growth and prosperity is being enjoyed in communities other than their own.
Many living in depressed regional economies feel the narrow appreciation by governments of the economic circumstances of their communities makes them ill-equipped to notice or to respond to the negative impact of current economic reform policies. Policy responses are seen to be ineffective, inappropriate or inadequate. Governments have not moderated the inequitable impact of these policies nor allocated resources in a manner displaying a preferential treatment of disadvantaged areas. The notion of self-reliance as a foundational principle of regional development policy has failed to address or exacerbated the spiral of social and economic decline. It is now synonymous with a pervasive `survival of the fittest' mentality which has overly influenced the policies and prescriptions of the central agencies of government.
An unfortunate feature of this mentality is that all calls for assistance by disadvantaged individuals, industries or regions are likely to be regarded as a drain on the resources of their economically successful counterparts and frowned upon as being overly `dependent'. The false dependence/independence dichotomy emerging from the principle of self-reliance fails to recognise the prior need of those who are disadvantaged in the market for a level of assistance that would ensure their economic viability and social wellbeing. These communities are more likely to be the recipients of advice on the benefits of further market reform rather than the targeted initiatives of job-creation, skills development, labour-intensive industry restructuring and development that are needed. The paradox is they will not receive adequate assistance necessary to foster social and economic independence or `self reliance'.
More holistic and inclusive forms of regional development that recognise the national community's collective responsibility to share the opportunities, costs and benefits of economic reform and the role of governments to promote this interdependence through socially responsible and equitable policies must be fostered.
The Role of Government as `Indirect Employer'
Central to the Catholic Church's understanding of the nature of work is the undeniable facility of employment as the means of realising the inherent dignity of the individual and his/her ability to participate into the life of the community. The need for adequately remunerated work to ensure human fulfilment and the common good of communities highlights the vital role of governments as the `indirect employer' to intervene in the normal processes of the market to promote full employment and the distributive justice of entire economic systems. The indirect employer, as distinct from the `direct employer' with whom an individual worker enters directly into an employment contract, has responsibility "to meet the danger of unemployment and to ensure employment for all through overall planning with regard to the different types of work by which not only the economic life but also the cultural life of a given society is shaped" (Laborem exercens, n18).
In the present context, the indirect employer has a responsibility to intervene in a wide variety of economic affairs and in so doing to remove or reduce imbalances in the distribution of wealth, employment and social advancement between different regions. The relative disadvantage of regions where there is less economic progress requires a reordering and an adjustment of economic structures to meet the basic human needs of community members, to avoid mass unemployment and to promote sustainable economic and social development. Beyond the provision of public services and programs to encourage and stimulate economic growth and to provide useful employment to workers, governments have a duty to coordinate a full range of policies concerning development of worker skills, labour supply, internal migration, wage protection, redistribution of wealth through the tax system and investment in industry that benefits disadvantaged regions. (Mater et magistra, nn54, 150)
| The role of government to directly support the development of disadvantaged communities is regarded as vital for ensuring that greater attention is paid to social progress than that evidenced in non-interventionist strategies promoting economic growth. Development that is simply limited to economic growth, derived from individual initiative and subject to the free play of market forces, is devoid of social concern for the disparities in the distribution of wealth and opportunity that result from such an approach (Populorum progressio, nn14, 33). Governments must ensure the equitable distribution of the costs and benefits of strategies of economic reform and growth. Social justice "explicitly requires that, with the growth of the economy, there occurs a corresponding social development ensuring that all classes of citizens will benefit equitably from an increase in national wealth." (Mater et magistra, n73) |
The `indirect employer' has responsibility to meet the danger of unemployment and to ensure employment for all through overall planning with regard to the different types of work by which not only the economic life but also the cultural life of a given society is shaped. |
The duty of government to promote equitable social and economic development within and between regions supports the need for a concerted and sustained national strategy for regional development that coordinates policies geared to job creation, skills development, labour-intensive industry restructuring and economic reform in all communities displaying signs of labour market depression. Such a strategy to increase the employment and economic potential of disadvantaged communities would satisfy the role of the State "to sustain business activities by creating conditions which will ensure job opportunities, by stimulating those activities where they are lacking or by supporting them in moments of crisis." (Centesimus annus, n48)
All Australian governments therefore have a responsibility to increase the level of skills among the available supply of labour in order to increase the employment opportunities of individuals and to improve the performance and growth of industry. This is supported by the requirement for a suitable system of employment and training "aimed at preparing people specifically for assuming to good advantage an appropriate place in the vast and socially differentiated world of work" (Laborem exercens, n18).
The need for improvements in the funding, quality and integration of employment and training policies in regional Australia via initiatives that increase job opportunities from the demand side of the market must be developed to prevent any situation whereby job seekers, having participated in appropriate training and professional development, remain unable to find work and hence enjoy the rights and the responsibilities of economic and social citizenship (Laborem exercens, n18). The integration of employment and training support with packages of industry and regional adjustment assistance will increase the job creation potential of these programs and ensure a more smooth, secure transfer of workers from crisis sectors to those in expansion. (Centesimus annus, n15)
| The maintenance of minimum wage protections linked to quality employment and training support is essential for ensuring the social and economic wellbeing of individuals and families and preventing the potential exploitation of disadvantaged and vulnerable workers (Centesimus annus, n15; Quadragesimo anno, n74). The role of the indirect employer to address unemployment and its broader social consequences hinges upon improving access to jobs that provide a living wage and opportunities for advancement. Fundamentally, it is the minimum wage, fixed and protected according to the laws of justice and equity and underpinned by adequate and unconditional income support arrangements, that provide the concrete means of verifying the justice of economic development strategies. Any system that equates human labour as only one of a complex of the material means of production and that seeks economic growth by undermining the value of work or a fair level of remuneration cannot be seen as a just or equitable course of development (Laborem exercens,nn7,8,17-19; Pacem in terris, n64). |
Fundamentally, it is the minimum wage, fixed and protected according to the laws of justice and equity and underpinned by adequate and unconditional income support arrangements, that provide the concrete means of verifying the justice of economic development strategies. - |
In accordance with the principle of subsidiarity, governments are entrusted with the responsibility of assisting local communities coordinate and advance their social and economic development. This principle advocates the devolution of responsibility to the level of decision making that is most responsive to the aspirations and development of community life. It does not provide a justification for the withdrawal of government intervention to the degree that communities' viability and potential for self-determination is undermined. On the contrary, governments are responsible for establishing the preconditions to develop communities, investment and programs that "favour and help private enterprise... in order to allow private citizens themselves to accomplish as much as is feasible" (Mater et magistra, n152).
The Future for Disadvantaged Regions
The Federal Government's current emphasis on policies based on the notion of self-reliance have not been successful in addressing the social and economic needs of disadvantaged regions in Australia. Often these policies have added to the already unbearable costs visited on regional communities as a result of the successive recessions of recent decades.
The principle of self-reliance is the antithesis of distributive justice which seeks an equitable spread of national resources to enable all citizens, regardless of where they reside, to live with enhanced human dignity and to make an active contribution to the economic and social life of the country. This principle, as espoused in neo-liberal economics and social conservatism, is a myth and cannot be sustained - for no one can be self-reliant. It is in the very nature of individuals, families and communities to live in interdependent relationships that encourage the common good.
To date, inadequate attention has been paid to the total impact of adjustment resulting from economic and policy reform changes on vulnerable communities. These communities have experienced the degradation and loss of infrastructure, the withdrawal of government services and, the loss of essential community services. The most alarming direct impact of these changes is witnessed in higher levels of unemployment and a reduced employment capacity in many communities revealing economies that are failing to serve the needs of their local communities.
Especially in times of social or economic crisis, the more prosperous sections of the community have a responsibility to assist those who are disadvantaged. It is the responsibility of all Australian governments, but especially the Federal Government as the national representative of the citizenry and as the indirect employer, to ensure not only the moral right but the economic and political right of all disadvantaged groups to have a fair share of the prosperity that derives from economic policy and development.
| This document proposes a different set of principles more in accord with Australia's history of egalitarianism, inclusion and support to address the present plight of many regional economies. These principles hold that governments must maintain and progress a traditional role of intervening in the market by developing social and economic policy frameworks that spread the benefits, the burdens and the opportunities of the nation's economic life equitably and among all citizens. These principles and the equity considerations they support should not be regarded as optional extras to be tacked onto policy or given passing reference in political rhetoric. They should be central to the very frameworks and processes of economic reform as they affect individuals, families and communities. Current inadequacies in the economic and social policy responses to fundamental issues of unemployment, poverty, industrial and economic stagnation in depressed regional economies suggests that, as a nation, we are at risk of regarding these communities as disposable or as having problems that are too cumbersome and complex to address. | This document proposes a different set of principles more in accord with Australia's history of egalitarianism...that governments must maintain and progress a traditional role of intervening in the market by developing social and economic policy frameworks that spread the benefits, the burdens and the opportunities of the nation's economic life equitably and among all citizens. |
The development of a concerted and comprehensive national strategy for regional development is the first step to ensuring more sustainable social and economic development across all Australian communities. A national strategy for regional development will: increase public investment in the economic and social potential of regions; provide greater levels of employment and training support which are fully integrated with programs of regional development and industry assistance; maintain and protect market wages and income support entitlements for unemployed and vulnerable workers; and, increase the level of local ownership and support of initiatives and processes of development.
A national strategy comprised of these four key initiatives is a necessary precondition for sustainable regional development and a more healthy and egalitarian nation.
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The Australian Catholic Social Welfare Commission is established by the Australian Catholic Bishops' Conference with a mandate of advocacy, co-ordination, support, research and advice in the field of social welfare. As part of this mandate, the Commission puts out public statements and promotes public discussion, on the understanding that views expressed in the statements are its own.
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