Chart 1: Australia’s unemployment rate, 1945-46 to 2003-04
The increase in the structural rate of unemployment since the mid-1970s likely reflected a range of factors. In the 1970s, poor macroeconomic policy management (especially in the face of the first oil price shock), combined with rigid institutional arrangements in the labour market and strong union influence, resulted in much higher inflation and a sharp increase in real wages relative to underlying trends in productivity. The resultant real wage ‘overhang’ resulted in a reduction in employment opportunities and rising unemployment as businesses reacted to the increased cost of labour.
Says it all really. I loved Gough at the time as we suddenly got an extra weeks holiday and leave loading.
I wonder now how many people lost their jobs because of it.