In 1931 James Truslow Adams suggested the American Dream meant “life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement” regardless of social class or circumstances of birth. Whilst many in the USA lived that dream in the 20th century and millions in advanced nations around the world still do it is increasingly becoming just that for too many others – a dream.
In Australia this is due to the rise in inequality that characterises modern economies. I was reminded of this as I stood outside the Apple store on the corner of George Street and King Street in Sydney. On all four corners were people begging. It shocked me.
Is this the type of society we are creating?
The Abbott Government is behind the wheel of a Bugatti Veyron knowingly and recklessly driving Australia towards a society that would be defined by a user-pays model of preventative healthcare and a market-based undergraduate higher education system. A future where the distance between the haves and the have-nots would be permanent.
Whilst the Great Depression and both world wars led to socially progressive nations developing systems to share wealth the Global Financial Crisis (GFC) did the opposite.
The next generation
Whilst Australia’s economy was largely unscathed by the GFC due to the stimulus packages of former Treasurer Wayne Swan, one of the lasting effects has been the structural rise in youth unemployment. Currently sitting at 13.1 per cent, the highest levels since 2002 and well above the national average of 6.1 per cent.
The UK has experienced a similar problem with unemployment rate for 16 to 24-year-olds remaining historically high at 16.9 per cent, down from 21.4 per cent a year ago, but way above pre-downturn levels of 13.8 per cent.
Both the UK and Australia since the onset of the GFC has witnessed wages decline in real terms resulting in a structural change in wages and conditions for young people.
While it is positive to see UK joblessness continue to fall, what is striking has been the record levels of self-employment. It’s refreshing and laudable to see so many young people being innovative and entrepreneurial – but the rapid rise in self-employment isn’t solely because of some newfound desire to be the next Richard Branson or Alan Sugar. Too many are being driven to self-employment simply because they have no alternative.
The reality is young people entering the workforce have little bargaining power. Self-employment only enhances this power imbalance. The rise of precarious work emphasises wage insecurity, meaning young people are missing out on superannuation, sick leave and annual leave.
Today’s labor market failures has long-term consequences for unemployed youth. A growing body of academic literature on the “scarring” effects of launching a career without a job suggests that young people who endure early spells of unemployment are likely to have lower wages and greater odds of future unemployment than those who don’t. Studies indicate a 10 to 15 per cent wage “scar” from early unemployment, and those earnings losses persist for up to 20 years.
In Australia we’re currently experiencing wages deflation. The latest wage price index from the Bureau of Statistics shows an average increase of 2.6 per cent in the year to June, well below the inflation rate of 3 per cent. The increase is the lowest since records began in 1997.
As Glenn Dyer and Bernard Keane recently reported in Crikey, the argument of those complaining about the Fair Work Act and penalty rates “becomes impossible to sustain when you look at how real wage levels have responded to the softer economic growth and rising unemployment that has characterised the last 12 months.”
This will only be exacerbated by the present Government “earn or learn” scheme that threatens to force young jobseekers off unemployment benefits for even longer than 6 months. This is despite overseas evidence showing similar schemes have failed to deliver the sought for outcomes. Australian Council of Social Services chief executive officer, Cassandra Goldie has said similar work-for-the-dole program in the UK had a negligible impact on the job prospects of participants.
The Abbott Government’s refusal to take effective action to tackle this challenge is the result of the political benefit it seeks to gain amongst the older employed by demonising young unemployed people. Worst of all is the betrayal of the future economic growth and prosperity of Australia. It ignores more constructive and innovative ways to reduce unemployment.
There is another way and some of the smarter and more thoughtful mandarins of the international finance world, like Christine Lagarde, realise that it needs to be taken seriously. The economic troika at the head of the Abbott Government – the PM, Joe Hockey and Mathias Cormann – have shown no propensity to be swayed by the weight of evidence. We cannot allow them to get away with their outdated neoliberal claptrap.
We don’t want to read of cases like David Clapson in Australia. David was a 59-year old British man found dead last year after his benefits were stopped on the grounds that he wasn’t taking the search for work seriously. He had an empty stomach, and just £3.44 to his name.
David Clapson was a former soldier who was actively searching for work when he died. A pile of CVs he had just printed out was found a few metres from his body.