Classical economics/monetarism is a market-oriented point of view. It revolves around the assumption that macroeconomic growth will trickle down to the masses via the market mechanism. However, market economies are, of course, imperfect and the trickle-down effect does not normally occur. This means that equity issues are unlikely to be resolved under the classical/monetarist approach unless the market is near, if not fully, perfect.
On the other hand, direct
employment of people is already a wealth (re)allocation measure which effects
and ensures socio-economic equity, and this is something that can not be
guaranteed in monetarism.
Going back to GNP, the
increase in that economic indicator
may not necessarily mean that all
or majority of the people benefited from
the growth of the economy. It is possible that,
under a monetarist system, rich will get richer and the poor, poorer and
the income disparity between economic classes will continue to widen.
In addition to the above, it
should be worth noting that when the shift towards monetarism was made by the
above-cited governments, they ignored the structural problems which rendered
Keynesian economics ineffective. For instance,
Australia, as a welfare state, provide welfare benefits to the
unemployed which may cause apathy for people to get jobs. The expectation that they will somehow still
have a source of income make people indifferent towards earning their own
money. The teenagers may even have the same notion such that more and more may
probably be dropping out of school. According to the definition of (un)employment by Baddock (1992) as presented
earlier, this type of unemployment may not be included in the statistics
because the element of willingness to
work is not present and therefore, must not be taken against Keynesian
economics.
Another structural problem
that should have been contended with is
the immobility of jobs and people. It is possible that there are oversupply of
goods and labor in one area or region but a corresponding undersupply may exist in other areas. The immobility of people to seek jobs where
there are available may be caused by transport disadvantages, rigidity of wages
and hiring systems and erroneous land-use decisions. This is where the role of planners may
actually come in.
As cited by Kalachek (1973,
in Rasmussen and Haworth, 1973), there were central cities in the United States
in the mid-60s which experienced massive unemployment rates even though at that
time, the overall demand for labor was
strong and hiring standards were consequently relaxed. “ Inferior quality of
education, poor health, low motivation and racial discrimination (applicable to
unemployed blacks) are traditional explanations” (Kalachek, 1973). However, an
additional idea was advanced suggesting that the physical location of jobs and
workers and the existing transportation network within labor markets may also
play a culprit role. Kalachek (1973) further explained that this problem was and is the result of the suburbanization
of industries, primary reliance on privately-owned vehicles, and residential
segregation. To this list, lack of information about job availability and lack of
social support services e.g.
housing may be added.
The cause of suburbanization
are, among others, retail trade following customers outside the inner cities,
technologies allowing manufacturers to operated in a more cost-effective manner
in the fringes (Hall, 1991), and other reasons
which may be related to deagglomeration forces (McConnell, 1988).
Suburbanization itself,
which created the cross-commuting
patterns of residents and workers, is not an impediment to employment. It is
the mobility of the labor force that may inhibit them to be employed where job
is available.
Note also that the whole problem of structural unemployment may actually be looked at in the regional development angle because the structural problems as mentioned by Kalachek (1973) are the same employment-related problems which may impede regional development (BIE, 1994):
“ In relation to market-based
impediments,...the labor market adjustments may be impaired
by a) lack of information about
employment and accommodation prospects in different
locations; and b) inadequate opportunities for training and retraining. “
Relatedly, the BIE (1994)
further cited the Australian Industry commission’s 1993 Report which identified
a large number of institutional and government-related impediments to regional
adjustments, to cite, verbatim, Australia’s existing wage fixing arrangements
limit the scope for wage flexibility which constraints adjustment options
available to regions with consequent adverse effects on employment
opportunities; Greater flexibility in wages (enabling firms to pay “training
wages”) and work practices would provide greater potential for training and
retraining by employers. This would help increase the regional employment
opportunities; Social security
arrangements in conjunction with the tax system are exacerbating problems of
regional unemployment. Consideration needs to be given to policy options which
deals with poverty traps and the employment disincentive effects of social security
payments, particularly for those facing low wage alternatives; Current
arrangements relating to superannuation guarantee charge for causal and
itinerant employees impose high cost on employers of this type of labor; The mobility of labor is adversely affected
by a number of impediments including the use of stamp duties on conveyances as
a state revenue raising measure, the use of public housing as a manner which
ties disadvantaged groups to particular
locations, occupational licensing restrictions that limit people from undertaking
employment in different states, and limitations on the portability of entitlements
and superannuations; Rigidities,
inefficiencies and lack of flexibility
in land-use regulations covering land-use zoning, site clean-ups regulations,
development approved processes and environmental regulations impact adversely
on the adjustment capacities of regions; and inefficiencies in the pricing of
public infrastructure and the regulation
of transport and communications increase the cost of these services and act as
tax to regional development, in general, or disadvantage particular regions relative
to others.
Well-structured regional development policies can be the answer to the structural problems
mentioned above. As regional
development is attained, structural
defects in the economy may likewise be
straightened out, which means that the
Keynesian approach may be again used
effectively.
The structural problems
cannot be ignored by simply changing the macroeconomic approach. Keynesian or
classical, the structural problems of
unemployment will have to be contended with
as it can be an economic time bomb.
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