Checkpoint Charlie: A Submission to the House of Representatives Standing Committee on Youth Unemployment
"Mr Gorbachev, tear down this wall!"
US President, Ronald Reagan
Berlin, Germany, 12 June 1987
Barbed wire, land mines, fortifications and armed guards. Most
people remember the Berlin Wall and that notorious border crossing
which stood between East and West Germany called "Checkpoint
Charlie". For nearly 50 years the Berlin Wall partitioned
Germany and cut off the people of Eastern Europe from the liberty
and prosperity of the West. Checkpoint Charlie came to symbolise
governmental regulation and control of traffic which had once
Walls and checkpoints are apt metaphors for the barriers which
Australian governments have erected---and continue to maintain,
which exclude the young unemployed from the experience of work.
They were erected in the name of an ideology just as blinkered
to the best interests of the people they were said to be "protecting".
It is time they too were torn down.
12 June 1997
The bleakness of our news with its recurring themes of community
fragmentation, suicide, and lost hope for our youth can be addressed
by positive public policy and inspiring stories of community engagements.
This is such a story.
I was deeply impressed by both the video and the booklet, and
challenged to rethink my own level of personal commitment to the
young unemployed. Not everyone will agree with Bob Day's arguments,
but they encompass clear-sightedness and compassion.
The loss of public space and safe places in the housing area
has demanded new projects to house those who are most vulnerable
and at risk. Bob Day understands these needs and has acted. I
commend his work to your thinking.
Rev Tim Costello
Collins Street Baptist Church
Melbourne, August 1997
I am sure that you will all have seen the attached graph which
plots suicide and unemployment rate proportions for young men
between 20 and 24 years of age. There is a marked correlation
between the two lines, in their lock-step, relentless rise. They
lend a sense of urgency to the debate over the role of Government
in the youth labour market, an area where many of its previous
interventions, however well-intentioned, have been catastrophic.
I want to put a case for deregulation. The economic arguments
in its favour are compelling enough but the moral and philosophical
arguments seem to me quite overwhelming.
Historically, Australia developed a centralised wage-fixing
system as a result of the political consensus which also gave
us tariff protection. It's safe to say that without the one we
would never have had the other. High tariff walls led to what's
been called "the cost-plus mentality." Whatever goods
cost to manufacture---including the cost of labour, the manufacturer
would simply add his margin to arrive at a price.
The policy decision to lower and eventually abolish tariff
barriers was taken in principle long ago, but the implications
of that decision, as it impacts on the labour market, have not
been thought through and articulated adequately. Lip-service is
pretty generally paid to the notion that youth and trainee wages
and conditions ought to have a degree of flexibility, since these
are the categories in which employees are making the transition
to optimum usefulness. But in practice Industrial Relations Commissions,
unions and even, I regret to say, governments are far from flexible.
There are still many companies large enough and profitable
enough to work on a version of "cost plus" when it comes
to employing young people. But in the small business sector, for
companies employing 20 staff or less it is no longer the case.
There are something like 900,000 small businesses in Australia
(812,000 non-agricultural and 95,000 agricultural---AFR 20/8/96)
and most of the owners work 10-12 hour days, 6-7 days a week.
Each and every one of them would, I'm sure, love some help. The
fact is however, as far as small business is concerned employing
people is no longer an option. It is complicated, expensive and
fraught with danger. Yet, as it has become something of a commonplace
to observe, small business is the sector in which there is most
scope for generating new jobs. And there is simply no point in
looking to big business to solve the problem---they are actually
spending big on new technology so they can reduce their workforce
The main question in Australian politics, for the foreseeable
future, is how long the old, cosy Industrial Relations Club is
going to insist on pricing most young people out of the job market.
We've built a huge brick wall across the road to employment and
every rule, every regulation, every Award is just another brick
in the wall. And all our job subsidies and training schemes and
labour market programmes are just feeble attempts to scale the
wall. Getting just one young person over the wall is hard enough---trying
to get 200,000 over is fighting a losing battle.
The conventional wisdom of a decade ago was that any erosion
of the artificially high youth wages could only conceivably have
one motivation and one outcome---namely to put pressure on wages
more generally. It fits in nicely with the demonological view
of employers as a class, but has very little to do with the way
successful small businesses work now and have done for a long
time. In fact it's one of the 'givens' of contemporary industrial
relations that the smaller the business the more it depends on
a co-operative rather than a confrontational model.
Another 'given' within small business, which the Industrial
Relations Club has so far failed to grasp, is that a business
can only pay wages commensurate with the value of the work done.
It's a fundamental proposition, logically and ethically unassailable,
unlike the present expectation that---in the interests of an anachronistic
regulatory model or furthering a dimly conceived notion of "social
justice"---employers should pay inflated youth wages or pay
none at all and do without the services of a young worker.
There is a corollary to wages commensurate with the value of
the work. Small business employers have a much better understanding
of the value of that work to them than remote arbitral bodies
can ever expect to develop. Let me give an example from the building
trade. When I started in the home-building industry in 1973, Australia
was building over 100,000 homes a year. Building apprentices'
wages at that time were extremely low and were, for all intents
and purposes "deregulated". As a result, just about
every tradesman had an apprentice and because the wages were so
low (less than 15% of an adult wage), most (but not all) lads
came from lower socio-economic areas. Those lads have now long
forgotten their lean times as apprentices and are doing well.
Australia is still building over 100,000 homes and yet you would
be lucky to find an apprentice anywhere. A first-year plumbing
apprentice, for example costs an employer (with all the add-ons)
$301 a week---nearly 40% of an adult wage. A second-year apprentice
costs $420 a week. No tradesman could possibly pay wages like
that. And they don't. And all the lads are unemployed. There are
parallels to this in every area of small business, and the effect
on national productivity is painfully obvious.
Even more painful, and not quite so obvious, are the effects
that diminishing expectations of employment have on young people.
Those who have spent any time in the workforce tend to forget
the sense of self-worth and self-assurance that comes with it
and the enhanced sense of autonomy that comes with promotion,
successfully negotiating with an employer or changing to a better
job. We take for granted too the pleasure of exhaustion at the
end of a hard task done well, the thanks as well as material recognition
from a satisfied boss, the feeling of money in your pocket that
is well-earned. The philosopher Galen did not overstate the case
when he said "Employment is Nature's physician and is essential
to human happiness." At no time is that truer than in the
transition from school to adulthood when, as Elbert Hubbard said
"we work to become---not to acquire."
That process of becoming, through the experience of work, used
to be taken for granted, along with a number of assumptions about
the process which it's as well to remember. First and foremost,
the rate of pay that went with that work was discounted because
of the value to the employee of the experience generally and the
particular skills acquired in the course of work. An explicit
understanding at least as old as the medieval guild system was
that the young, in accepting low wages, were investing in their
own education, and that it was a rational and in no way demeaning
To a traditional trade unionist mindset, concerned with the
terms and conditions of members' employment and only notionally
concerned about the flow-on effects on unemployment, deregulating
the youth employment market for the small business sector may
look like a form of class war. Those who take that view should
remember that for every 10% increase in minimum wages there is
a corresponding rise in unemployment of between 1.4 and 1.8%.
For young people without formal school certificates, for example
Year Twelve students, it means a rise of unemployment of between
3.4 and 3.8% (Maloney, 1994). By contrast, in New Zealand, which
had an unemployed rate of 11% in 1991, a partial deregulation
of the labour market has resulted in an unemployment rate of 6%,
a figure that we aim for as an almost unattainable, distant goal.
One consequence of deregulation which has not been widely understood
is its effect on age-based pay levels. They should become an anachronism
when people are free to make their own arrangements. If 17 or
18 year-olds are capable of doing the work then they ought not
to be discriminated against on the basis of their age. Training
wages ought not to have any intrinsic connection with the age
of the trainee, but only with their relative skill level. Deregulation
is also the best medium and long term solution to another major
economic problem---the shortage of skilled workers in Australia.
That employers should be having to import them at a time of high
unemployment is a national disgrace. But, when you consider the
institutional solutions provided by TAFE and the like it is scarcely
If a teenager decides to enter the hospitality business, say
as a waiter, there are basically two ways of going about it. The
first is to attend a TAFE course, with a weekly Austudy allowance
of around $72 a week or the other option is to get a job in a
restaurant, which involves making contact with real customers
and the real economy. The only problem is that at the moment the
restaurant will have to pay wages of around $300 a week. I just
can't see the sense in saying to young people you are allowed
to collect $72 a week to do nothing or attend TAFE but you're
not allowed to collect $72 a week to learn a trade.
This bizarre form of price-fixing---and that is the most useful
way of conceiving the process---does little more than guarantee
the continuation of endless Mickey Mouse courses in an infinite
variety of subjects which few would otherwise take. Yet most young
people would, I'm sure, rather be out in the workforce than in
a classroom. It's perfectly understandable when you think about
the sort of "practical" instruction they receive there.
TAFE colleges do have a place in the scheme of things but not
when they serve merely as child-minding centres. Moves to raise
the age of compulsory school attendance should likewise be seen
as a manipulation of the young by those most anxious to conceal
the true level of unemployment.
One of the saddest things about the debate on youth unemployment
in Australia is that most of the people directly affected by it,
and their parents, have at least an intuitive understanding of
these home truths. They know the difference between a real job
with real prospects and a make-work exercise designed to allow
government to reclassify them as "short-term unemployed"
for the purposes of ABS statistics and political window-dressing
generally. Those of them who haven't had their belief in the work
ethic utterly eroded, at a social cost that scarcely bears thinking
about (crime, drugs, teenage pregnancy, violence, poor health
and sheer boredom) talk enviously about the apprenticeship schemes
that gave their parents' generation a place in the workforce.
We owe them no lesser start in life.
Why HR Nicholls?