Yesterday (21 February 2024), on ABC Radio National, the South Australian Premier Peter Malinauskas told the country that we have full employment in the state. It is a claim I have heard him make before. Given that I think that full employment is a historical myth, at best an unstable temporary state, and probably unattainable in the long term, I did a quick fact check on the Premier’s statement.

The latest data from the ABS shows that in January 2024, the unemployment rate in South Australia was 3.9%, equating to around 40,000 unemployed people. The underemployment rate was 7.6% of the labour force, which means that there were an additional 75,000 people who were less than fully employed. Further, the proportion of the state’s population who were employed was significantly below the national average, so we probably have an unknown number of unregistered unemployed people.

So, on its face, the Premier’s claim is simply wrong. There are clearly unemployed and underemployed people in SA looking for jobs. We do not have full employment.

At this point a populist would bemoan “lying politicians”, but the Premier was probably relying on the infamous NAIRU, the Non-Accelerating Inflation Rate of Unemployment, to define full employment. The NAIRU is basically the minimum level of unemployment that is not expected to trigger supply constraints and inflation. It is a definition of “desirable” rather than “full” employment, but Malinauskas is not alone in using this as the definition full employment. In fact, such definitions are crucial to current federal policy debates.

The latest review of the Reserve Bank was celebrated for giving the goal of full employment equal status with its inflation management goal – a radical departure from its inflation-focused recent history. However, the RBA’s December 2023 Statement on the Conduct of Monetary Policy makes clear that this full employment is the “maximum level of employment that is consistent with low and stable inflation” (the NAIRU).

As Mike Beggs argued in a recent JAPE article, when the RBA defines full employment as the NAIRU, then the change is essentially meaningless. Economic growth and the existing inflation target will deliver the NAIRU “full employment” (almost by definition) – while actual unemployment will continue.

The Federal Treasurer Jim Chalmers also notes the problem of using the NAIRU as a measure of full employment, saying of the NAIRU:

“While it’s a useful measure, it doesn’t capture the full potential of our workforce and it shouldn’t – and doesn’t – limit the Government’s ambitions for getting more Australians into work.”

Chalmers’ White Paper on future work defines full employment as where anyone who wants a job can get a job without searching for too long.

This is a more common-sense definition, but it is hard to see how we will achieve this full employment if State Premiers and economic institutions like the Reserve Bank use a language which renders unemployed people invisible. Unemployed people simply cease to exist when the NAIRU is translated as full employment.

As a general rule, if you actually want to get unemployed people into work, you probably need first to acknowledge that they exist.

Alternatively, if the reality is that you don’t want or can’t have full employment (in the sense of everyone being able to get a good job), then you might want to find other ways of ensuring unemployed people have access to a dignified life (rather than pretending they don’t exist, or trying to starve them into work with conditional welfare at below-poverty-line levels).

Either way, pretending that unemployment does not exist by adopting a NAIRU definition of full employment is dangerous. It misdirects political debate and shuts down policy options that would deliver better outcomes for unemployed people and the community more broadly.