Economist urges a new way on jobs

For 20 years or more, Bob Gregory has been the eternal sceptic of Australian economics, questioning the logic of free-marketeers who urged labour market deregulation to solve unemployment. But now he thinks maybe we ought to give it a try.

The doyen of Australian labour economists, former member of the Reserve Bank board and until recently head of economics at the Australian National University Research School says he feels despair that 13 years of strong growth have provided virtually no new full-time jobs for low-skilled men like those he grew up with in Coburg long ago.

Back in 1982, about 500,000 men of working age in Australia were on welfare, he told a labour market conference sponsored by The Age yesterday. Now there are about a million men living on benefits, and the growth in jobs has barely reached them.

In 22 years, he points out, the number of men in full-time work has risen by 658,000 (just 30,000 a year) while the number of working-age men on welfare has risen by 516,000.

Professor Gregory, 65, blames it largely on the decline of manufacturing. But with global manufacturing moving to low-wage countries, we need to try new approaches, he says.

"The last decade has been a disaster for the blue-collar worker," he said.

He was speaking on the opening day of Transitions & Risks, a conference organised by the Centre for Public Policy at Melbourne University, on how to help people from welfare to work.

He is still sceptical about market-based solutions such as the plan by five economists which suggests freezing minimum wages for years to encourage low-income employment while using tax credits to protect workers' real incomes. But he thinks we now ought to try it.

"What's the alternative?" he asked. "Time limits on welfare? Substantial cuts in wages? I really don't see a way out, unless we're prepared to live in a world where there are no new jobs for unskilled men.

"We do have to be tough. It's unavoidable that people with jobs will have to pay, through a freeze in the minimum wage, offset by earned income tax credits, and some tightening of welfare benefits."

These are not views that come easily to Bob Gregory, a sharp mind with a rough working class voice and an empathy with the battlers. But if we don't move now to protect unskilled jobs, he warns, the next economic crisis will wipe away hundreds of thousands of them.

The keynote speaker, Gunther Schmid of the Social Science Research Centre in Berlin, argued for another approach based on intensive retraining for the unemployed. In Denmark, he said, 40 per cent of unemployed people return to work with their former employer after retraining or other support.