Ideas@TheCentre

Why we should support car workers (find new jobs)

Unconfirmed rumours persist that Holden is looking for a massive taxpayer bailout of $265 million. This would be on top of the taxpayer bailout they received last year of $275 million. As I've argued before, corporate welfare is a waste of money and should be abolished as soon as possible.

The notional purpose of industry assistance is to protect jobs. While a strong argument can be made that this is not a proper role for government, protecting jobs is politically very popular (see the lift President Obama got from his auto-industry bailout in key battleground states in Ohio).

However, even if you believe in protecting jobs it is abundantly clear that this strategy is not working. We need to convince government to adopt a different strategy.

Protectionism may be economically irrational, but so are people at times. It's hard to point a camera to the benefits of reducing protectionism, but it's easy to generate sympathy with a crying worker outside a closed factory.

And so, while we absolutely should make the economic arguments against protectionism, we must engage with the emotional arguments as well. With thousands of jobs lost across the car manufacturing industry in the last 18 months, when judged against the criteria of 'protecting jobs,' industry assistance is clearly an expensive failure.

If government wants to help workers they should assist them transition to competitive industries. There are several reasons for doing this but I want to explain why it appeals to the pragmatist in me.

Transition planning (like in Newcastle after BHP Steelworks' closure) is as much about transitioning government away from protectionism as it is about transitioning workers to competitive industries.

Transition planning costs millions instead of billions, has a limited time frame, and distorts the market far less than picking winning industries. It can be focused more on the traditional role of government (for example, providing adequate infrastructure) and it also supports jobs directly rather than through foreign multinationals.

Transition planning involves governments focusing on assisting communities and workers by removing impediments to business and labour mobility (such as stamp duty, inadequate infrastructure or restrictive IR laws) that prevent displaced workers from finding new jobs quickly.

It is a politically saleable message that achieves the goal of shrinking government and reducing waste. It's not a panacea for all problems, and it's not ideologically pure, but at least it's a step in the right direction.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.