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The 'Five Economists' Plan: The Original Idea and Further Developments

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  • Peter Dawkins

Abstract

In October 1998, I was one of five economists who wrote a letter to the Prime Minister, suggesting a suite of policies that could help to substantially reduce the unemployment rate to around 5 per cent. The other four were John Freebairn, Ross Garnaut, Michael Keating and Chris Richardson. This letter resulted from a period of discussion amongst the five, including at two conferences on unemployment, one hosted by the Melbourne Institute and one by the Reserve Bank and the ANU.2 Subsequent to this letter there has been much public discussion of the so called "five economists plan" and both the Federal Government and the Opposition have taken a considerable interest in the ideas put forward. Further, the Business Council of Australia endorsed the basic ideas its 'New Directions' paper on Rebuilding the Safety Net (Business Council of Australia 1999). There has also been a developing literature on the five economists plan in academia. This paper begins with a re-statement of the main features of the plan. Its main focus, however, is on the most publicised feature of the plan, a proposed wage tax trade-off, and the effect that would have on employment, unemployment and the distribution of income. Another important aim of the paper is to examine the main criticisms that the five economists have confronted. It is argued that having considered these criticisms the plan remains robust. It is conceded that there is a question-mark surrounding the political economy of the wage-tax trade-off proposal whether the institutional structures in Australia could facilitate its implementation. It is concluded that even this concern may be unfounded, but that some reform to the wage setting system may be beneficial.

Suggested Citation

  • Peter Dawkins, 2002. "The 'Five Economists' Plan: The Original Idea and Further Developments," CEPR Discussion Papers 450, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:450
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    File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP450.pdf
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    References listed on IDEAS

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    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    2. David Neumark & William Wascher, 2002. "Do Minimum Wages Fight Poverty?," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 315-333, July.
    3. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
    4. Michael Keating & Simon Lambert, 1998. "Improving Incentives: Changing the Interface of Tax and Social Security," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(3), pages 281-289.
    5. Borland, Jeff, 1999. "Earnings Inequality in Australia: Changes, Causes and Consequences," The Economic Record, The Economic Society of Australia, vol. 75(229), pages 177-202, June.
    6. N. Eissa & H. W. Hoynes, "undated". "The Earned Income Tax Credit and the Labor Supply of Married Couples," Institute for Research on Poverty Discussion Papers 1194-99, University of Wisconsin Institute for Research on Poverty.
    7. Peter B. Dixon & Maureen T. Rimmer, 2001. "A Wage-Tax Policy to Increase Employment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(1), pages 64-80.
    8. Guy Debelle & James Vickery, 1998. "The Macroeconomics of Australian Unemployment," RBA Annual Conference Volume,in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
    9. Peter B. Dixon & Maureen T. Rimmer, 2003. "A New Specification of Labour Supply in the MONASH Model with an Illustrative Application," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(1), pages 22-40.
    10. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 605-637.
    11. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    12. Lewis, Philip E T, 1985. "Substitution between Young and Adult Workers in Australia," Australian Economic Papers, Wiley Blackwell, vol. 24(44), pages 115-126, June.
    13. A.M. Dockery & Elizabeth Webster, 2002. "Long-Term Unemployment and Work Deprived individuals: issues and Policies," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(2), pages 175-193, June.
    14. Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-145, Summer.
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    Cited by:

    1. Robert G. Gregory, 2013. "The Henderson Question? The Melbourne Institute and 50 Years of Welfare Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(2), pages 202-215, June.

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