COVID-19 and the future of employment
(How to avoid the coming social and economic disaster) by Kim Odgers
There exists now an opportunity for a brave and forward thinking government to change Australia’s outdated management approach to our economy and at the same time create and secure employment for every person who wants employment. Australia’s future depends on this.
In the months and years ahead, our conversations will often refer to the period pre-COVID and the period post-COVID. In fact that may be occurring already.
Our daily lives and commercial enterprises will change with the new normal. Travel, particularly overseas travel, is unlikely to return to earlier patterns at least not for some time. Our own recreational travel is likely to be more local as we now look at international travel with suspicion together with a reluctance to suffer the agonies of growing airport security and health checks. Business travel is already considered a train wreck spelling disaster for the airlines given revenue is driven mostly by front of plane bookings.
Retailing, both for product and services, will not return to the same recognisable mix. It's not a good time to be a retail or commercial landlord, even less for the retailer and other small business owners. Technology (on-line retailing) is already beginning to tear the heart out of inefficient and expensive shopfront discretionary retailing.
The upside is that as things change, over time, most of the services we rely on will continue to be available in some form as providers adjust to new and more efficient operating processes. Much of what we are used to might improve in quality and service, while elsewhere it will not. Where there is a demand, businesses will normally compete to meet that demand, but only when sufficient profits are on offer.
Also missing from the ‘old normal’ will be the availability and type of employment taken for granted for so long. Many of us currently in employment will likely face an unwelcome shift in job security and a shakier career path. Our children, and the generation that follows, will certainly face a workforce unrecognisable from the one we had earlier experienced. Governments traditionally rely on the business sector to forge ahead in this area; to generate work opportunities by competitively producing those goods and services the consumer demands.
But it is difficult for the consumer to spend on goods and services if he/she does not have a job.
Post-COVID, government must change their economic approach from that of pre-COVID. Business is driven by the need for strong profits and the balancing of acceptable risk, but now a smaller workforce and a brake on growth is seen as a safer survival strategy at this time. Reinvestment in business will be hesitant while the future remains uncertain. A return to increased employment will not come from business and must come from government.
We are in a perfect position now for Canberra to be proactive. What needs to change is the tired and outdated attitude governments have of the stale text-book belief that, like a household, government must balance their budget, and to repay debts with revenue sourced from the nation’s taxes. Pre-COVID, our Treasurer was confidently predicting a budget surplus despite the equalising consequence of a corresponding community deficit. The two must balance out. How can we be advantaged if the government produces a surplus by withdrawing more from us than it puts back? Its time, and timely, to break the old economic model and consider an alternative.
Modern Monetary Theory (MMT) is an almost 180 degree variation from the traditional government administration of Australia’s economy. The ‘theory’, although more of an explanation, is partly that the Australian Government does not have to repay its own ‘debt’, if that ‘debt’ is in the form of feeding additional currency into the economy. That is, the creator and owner of the currency does not have to pay it back because it is not owed to anyone. If you accept that small part of MMT for a moment, it then follows that the Government can create whatever additional currency is required to generate new public works and public investment PROVIDED that that expenditure and investment is, or will be, revenue positive. That is, for every $1 spent, more than that $1 is eventually added to the economy. For example, upgraded roadworks or a new generation of internet delivery creates an improved platform for businesses to expand and allows the introduction of newer and more relevant businesses. Even new hospitals leads to a healthier more productive population. More affordable University placings also leads to a more productive population. Government investment in these areas is a positive for the nation because the economic benefit is greater than the investment; and non-inflationary. Private re-investment in business follows the same principle – every $1 sourced and invested in the business is expected to yield a $1+ return. The difference here is that the Government does not need to repay additionally sourced funds (new money printing), but business does.
So, central governments can theoretically, according to MMT, never run out of money. The old government argument that there is never enough money for ‘all desired projects’ is a false and backward-looking argument. There is always sufficient money for the ‘right projects’. These ‘right projects’, government initiated and funded, would be the kick-start at this time for an eventual return to full employment. A guarantee of a job for everyone and confidence of job security. This not necessarily a socialist ideal – it is a government guarantee that, as a right of citizenship, every person who wants a job has access to one. Eventually, of course, in a future and improved business environment that will flow from this initial government enterprise, employment opportunities and type will naturally adjust to the requirements of a changing business and government environment.
COVID-19 pushed the unemployment rate in Australia up to 11.6% - a figure that is considered statistically low given that 165,000 further people were on JobKeeper contributing zero hours to the workforce. As COVID-19 eases many Australians will re-enter the workforce but probably without the earlier security or advancement prospects. Many will find themselves without employment. It will be a return to something less than pre-COVID. Average household debt is high and growing and, unlike the Australian government, individuals need to service that debt. With reduced work opportunities, the average household faces reduced options, and the resulting social and financial consequences will be enormous. Australians will feel the deep effects of a Recession unlike any in recent times.
The opportunity is today with the Australian Government – and also with the electorate to persuade the government of the day to look towards the benefits of more relevant economic management processes and of changing community expectations. Central government ‘debt’ (or money creation) is not a problem, it is the solution. A return to strong consumer demand is the exit path towards a healthier economy and this can only be achieved through secured and full employment.
It is for the Australian Government to act now, and to initiate a range of infrastructure programs that will return, in time, a stronger economy and employment for any Australian seeking work. Funding is there – the Reserve Bank just needs to issue it. No longer can a central government claim that its spending is restricted just to funds collected from the taxpayer.
Interest in the different elements of Modern Monetary Theory (MMT) is growing, particularly in the US and in Australia led by Stephanie Kelton, Bill Mitchell and Warren Mosler. For further reading I recommend the many articles published by these three available on the Net.