Auctioning Off The Unemployed

Gareth MorganEconomics

Gareth Morgan, Director of Gareth Morgan Investments

The Minister of Labour likes directing the unemployed by personal decree. His decision to send workers forth to help the flood-affected farmers of the Manawatu follows on from earlier examples of direct labour intervention. No doubt gratification accrues from being able to provide resources “free” to those friendly sectors deemed in need, but there’s a more serious issue of whether these Ministerial decrees are of any net benefit to the economy or the unemployed.

The preoccupation of the government with centralised directives on labour allocation- restricted so far, to labour which is either unemployed or working in protected high-cost industries such as shoe-making – detracts from the need to emphasise policies which encourage the private sector to utilise surplus and unsustainably employed labour. Some small solace can be reaped from Mr Birch’s admission at last weekend’s National Party conference, that these are no substitutes for growth policies. His actions speak louder though – fiddling while Rome burns simply thwarts the full employment solution.

Government must speed up the employment effects of any emerging economic recovery. Growth in the OECD over the next several years will not be sufficient to reduce unemployment so if NZ wishes to escape this outcome we need to adopt labour market policies quite different to the OECD average. The Employment Contracts Act is one example, but is by no means sufficient.

The current tired policy responses have been resurrected from old National policy manuals notable for their inability to reverse the secular upward trend in unemployment. Australia’s current regime, like our own, is busy practicing the high profile, populist political stunts of work schemes, inappropriate government- directed training programmes, and airlifting labour to emergency hotspots. Like here, they massage politicians’ egos but leave the real labour problem unsolved.

There’s still a tendency to regard the high unemployment rate as a cyclical event that will magically abate as economic growth arrives. This view is naive. Unemployment of high wage, low skilled labour is a global trend. And it’s wrong to think of the low skilled as ditch diggers. Many of them are redundant male white collar workers, including cast off politicians. Dreaming of a high growth-, high wage for all-economy, while unemployment continues its 30 year upward trend is a national failing.

A more efficient market-orientated method than the Birch directives for getting surplus labour involved in the economy proper, would be to auction off the unemployed, giving all potential employers (not just those the Minister decides as being in need) a chance to bid for their services. New, low wage industries could emerge at no greater cost to the government than the dole. So long as the government “topped up” the value of any wage bid to the dole level the unemployed would be financially no worse off. Computer screen trading could save us the unseemly spectacle of daily auctions in the Town Square.

Auctioning Off The Unemployed was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.