Jsut a quick point, perhaps we should also need to take into account public sector / private sector jobs ratio when unemployment is discussed. Nordic countries have very large public sector, runs large deficit budget (whihc of course is not sustainable).

Also, the potential economic growth that has to be sacrified also needs to be taken into account. 100% employment with $1 per person per day earning gives perfect equality, 100% employment but no one will be happy.

USSR has no problem achieving 100% unemployment and near equality either.. A GINI of close to 0.

I think comparing equality against a set living standard is better than comparing it relative to other countryman/women.

If one is predominantly concerned about inequality, then it is impossible to define effectiveness without invoking values. But if a policy is effective in raising employment but it also increases inequality, there is a trade-off which needs to be recognised. After all higher employment is as much a social good as an economic good. The trade-off I might opt for would differ from Andrew’s. Again, if one can achieve roughly the same employment results through two different policy routes (one involving higher taxes than the other), I would opt for the one which delivered the lowest level of inequality because that is where my values lie. But perhaps someone like Andrew Norton might choose the other option because it involves lower taxation and more ‘economic freedom’. I don’t think one can objectively decide between the two sets of values.

Is that any better or am I getting deeper into confusion?

Word is that he’s lurking by the fringes, silently concurring with Don.

I’m sure that if Andrew Leigh was here he’d say that welfare to work policy ought to be guided by the evaluation evidence. So if anyone knows of well designed study that shows that simply cutting off income support is more effective than the kind of approaches Fred is suggesting (which I’m assuming include sanctions), then maybe it is the best option. But if all you’ve got is time series data on US TANF caseloads then I don’t think the argument is settled yet.

Fred – I’m a bit confused about your idea that values only kick in after the argument about effectiveness is over. It seems to me that it’s impossible to come up with a definition of ‘effectiveness’ without invoking values.

Depression can look a lot like (a). A person who’s depressed can often feel worthless — “what employer would want to hire someone like me?” And if you believe that you’re so useless that nobody would want you, why would you bother trying to find work?

It’s easy to look at someone in that state and accuse them of having no motivation — of not wanting to work. But I’m not aware of any research that shows that depriving mothers of income is the most effective treatment for the problem.

This issue has received some attention in the US:

http://www.financeproject.org/Publications/engagingandservingdepressionRN.htm

I think many on the right would say that (c) and (d) lead to (a), but once established (a) can be hard to break, particularly when so many members of a community are out of the productive population that social norms in favour of work over welfare break down.

The assumption underlying many of the views expressed – and indeed government employment policy – is that most of the joblessness is due to either (a) a lack of work ethic (a welfare culture) or (b) wage rigidities. These are significant barriers and I do nt under-estimate them and they can be reduced by welfare sanctions and wage flexibility (within the bounds allowed by community values).

But there are three other causes of joblessness (c) a lack of sufficient financial incentive; this applies principally to the inactive jobless (those not subject to work or activity tests) such as many single parents and disability recipients, (d) a structural mismatch (occupational and spatial) between job vacancies and job seekers and (e) the lack of job readiness of many jobless persons due to physical and mental handicaps (mental health in particular is a major factor identified by the Department of Families and Community Services). I have argued (in an article in Economic Papers March 2005) that these last three factors do not lend themselves to facile neo-liberal solutions. Yet they are more important than the first two.

NB Sven Steinmo has the best treatment of this topic I know, from a taxation perspective.

But what of the other 85%? They are the victims of a structural imbalance in the labour market (partly due to wage rigidities but caused more by unavoidable occupational and geographical immobility and personal characteristics that have nothing to do with immorality). These people do have a strong work ethic but cannot fit easily into the jobs available. If the Left is too inclined to “blame the victim” (and it is a fair criticism Andrew makes) you people on the Right are much too inclined to blame it all on moral irresponsibility and a welfare culture.

The real change on the left is the recognition that the structural causes of problems like unemployment might include government interference in the economy.

This brings the mainstream left and right much closer on this issue. For example, when David Kemp introduced Work for the Dole he said, “The government recognises that the particular disadvantages young people face in getting jobs are structural”.

As I think we have discussed before, the general tendency of the left is to blame structural causes for social problems, and suggestions that people could help themselves are dismissed as ‘blaming the victim’.

Daniel Moynihan tells the history of Friedman’s NIT proposal during the 60s and 70s. He says that Johnson was hostile to the idea. The president didn’t want to hand out money to people who weren’t working. “What I am seeking” he said “is the abolition of relief altogether. I cannot say so out loud yet, but I hope to be able to substitute work for relief.” And he wasn’t talking about freeing up the economy.

According to Moynihan, during the 1960s “the left adopted almost wholesale the arguments of the right.” Part of this transformation was that the left adopted some of the libertarian ideas of the right. When it came to welfare, the old left sounded a lot like Lawrence Mead. They wanted the government to tell the lumpen proletariat how to live their lives. But by the 1970s these kinds of ideas had become ‘neoconservative.’

Unlike the old right, the neocons didn’t want to abolish the welfare state. What they wanted to do was reshape it so that it reflected the moral values of the American republican tradition. Neocons care more about reinforcing the Protestant Ethic through administrative reform than they do about EMTRs and economic efficiency.

It’s not so much that they believe there’s a real difference between right and wrong. It’s more the idea that society will collapse if ordinary people start thinking like economists.

On the condition that the negative income tax would be combined with the abolition of the minimum wage and most industrial relations laws, and that the NIT would do away with the ridiculously high effective marginal tax rates on part-time work.

We believe that the primary reason most income support reciepients don’t want to work is that it’s a waste of time with the current EMTR. You can work zero hours per week and take home $190, or you can work 20 hours per weeks and take home $250. Why would anyone do that?

You wouldn’t need behavioural requirements with a NIT because the incentives are already present. Currently there is no incentive at all for someone on the dole to take a low-paying job, because they won’t be any better off if they do. The only incentive present is to do just enough to not get your dole payments cut off.

As Fred says, the Swedish system has always been strong on work. Unemployment insurance has been time limited and continued support dependent of participation in government schemes. Classical liberals always objected to the cost of these schemes and argued that they concealed the true level of unemployment. Were the Swedish labour market policies of the 1960s and 70s right wing?

A large section of the Australian union movement has looked towards countries like Sweden, Norway and Austria for policy ideas. Australia Reconstructed isn’t exactly a conservative or libertarian document. Its authors regarded the dole as the least acceptable response to unemployment. Is ‘active labour market policy’ (complete with big government) really a right wing idea?

In the mid 1980s Bob Hawke had to be talked out of creating a work for the dole scheme. His government ended up making the income support system tougher than it had been under Fraser by introducing the concept of ‘reciprocal obligation’ and policies like Newstart. The British Labour Party were so impressed by Hawke’s policy ideas that they adopted many of them themselves.

In the 1990s the Keating government adopted an ’18 months and then you have to work’approach under the Job Compact — the centrepiece of Working Nation. The policy relied heavily on job creation/training schemes like New Work Opportunties (too heavily because they overestimated the effectiveness of wage subsidies). Blair and his colleagues liked this kind of approach and ended up introducing it for young people as the New Deal. Was Working Nation a right wing policy?

Of course there have always been activists/academics like John Tomlinson who thought that Hawke and Keating were part of a neoliberal conspiracy. But then, some American socialists thought that FDR was conspiring to rescue capitalism from its inevitable collapse.

You don’t need to support a Basic Income or Guaranteed Minimum Income scheme to be on the left. If you did you’d exclude old-fashioned Bellamy socialists, most communists, a large chunk of the union movemen. And, of course, many libertarians support a Negative Income Tax with no behavioural requirements at all.

Andrew thinks that this gets to the heart of left/right differences and that the public agree with the right on welfare. It’s not so.

Australians, like people in most countries, don’t like the idea of handing out money to people who refuse to help themselves or won’t do anything in return. And as Fred says, few people complain about payments to the aged and genuinely disabled.

Throughout history vicious right wingers like Franklin D Roosevelt have condemned passive welfare as a ‘narcotic’ and insisted that able bodied people ought to work for a living.

But at the same time, bleeding heart left wingers like… Franklin D Roosevelt have asked taxpayers to help create jobs to make it easier for unemployed people to work for living instead of rotting in poverty or collecting the dole.

This seems to be the combination that the public supports. In Australia, the public’s support for job creation has often taken the form of industry protection. It can also take the form of government job creation schemes — particularly during recessions.

Twenty years ago — when America’s right wingers were pretending to be public opinion’s best friend — Mickey Kaus put this theory to the test in an essay titled ‘The Work Ethic State’. Kaus suggested abolishing welfare and replacing with low wage government-created jobs.

It was just what many of the public had been asking for and naturally the right didn’t any part of it. They even started backing away from workfare. Policies like that mean increasing the size and cost of government. Their preferred solution was to argue that if illegal immigrants from El Salvador could find work then this was proof welfare recipients were out of work by choice.

Nobody in government wants to give the public the policies it says it wants. This is because they’re convinced that the public don’t understand economics and can’t figure out the effect of their favourite policies on tax rates and deficits. Voters, they say, might like the policy but they wouldn’t like the results.

Occasionally a politician WILL promise to give the public exactly what it wants. This is known as ‘third way’ politics and generally ends once the candidate wins office. That’s because nobody in government…

Scott, my brand of egalitarianism is really all about equality of opportunity not equal outcomes (you should read my discussion paper on the subject).So our values are not that different. But I do not accept that free markets ALONE do a terrific job of rewarding talent. I believe they are a necessary but not sufficient condition for equality of opportunity. Free markets must be supplemented by a lot of social investment (as defined in my paper) and that is why I see a bigger role for government than you or Andrew.

I myself do not WANT to have an ‘egalitarian’ economy because I want to see a society that rewards and encourages risk-taking and talent; we need more billionares, not less.

As of June 2005 the unemployment rate was 7.1%. “

It may not be Sweden, but it would be a better kind of society than we have now. Particularly for men, having a job, any job, is better than having no role at all.

I never thought you would not be proud to be a lefty! (You may have noticed my theories about how lefties take politics to be an issue of character.)