The Costs of Unemployment

The unemployment rate has been consistently above 5 per cent in Australia since the first oil shock in the early 1970s. The current Coalition Government and the previous Labor Government have not pursued efficient employment policies. Further the persistently high unemployment has imposed an unequal burden across members of Australian society. Consequently the unemployment rate cannot be construed as the optimal outcome of the pursuit of a collective goal, such as low inflation. In this paper Martin Watts and William Mitchell demonstrate that the measurable costs of the sustained high rate of unemployment in Australia are substantially higher than the alleged gains from neo-liberal (microeconomic) reforms. In addition, significant individual and social costs can be identified. Consequently macroeconomic intervention to reduce unemployment should be viewed as a priority, rather than the imposition of market reform with its uncertain impact.