Unemployment rate is partly a policy choice – cut regulation to create jobs

Upon the retirement of Treasury Secretary Ted Evans in 2001, then Prime Minister John Howard noted:

Ted…has been a leading contributor to public debate, particularly issues of structural reform, such as the functioning of the labour market. He highlighted the importance of labour market reform in improving economic growth and productivity, with flow on benefits to real wages and living standards.

Ted will be forever associated with that memorable phrase; in one sense, we can choose the level of unemployment which we are willing to bear; when discussing economic and social constraints on reducing unemployment. (from the transcript)

As unemployment continues to rise during this period of below-trend economic growth, it’s timely to remember Ted Evans’s observation that, in one sense, we choose the level of unemployment through the policy settings and regulations we impose on the economy. Since unemployment started rising again, I’ve been writing about the need to vigorously pursue reforms that will reduce the cost of hiring people and eliminate regulations that prevent people from pursuing economic opportunities:

Reduce youth unemployment through improved regulation – e.g. of penalty rates, taxis

Minimum wage reduces retail jobs available for young people

After yesterday’s disappointing employment data, it’s imperative that we refocus our efforts on reducing regulations that make it costly or difficult to hire people.

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