Labour Force Participation, Taxes, Transfers, and Basic Income

8 December 2021

As we approach full employment, increasing labour force participation becomes an important focus, if achieving sustained economic growth – especially with our immigration program having been affected by COVID-19.

This raises questions about whether changes to labour supply incentives in the form of adjusting taxes and transfers, reducing effective marginal tax rates and increasing support for childcare, should be a priority for government in upcoming budgets.

During the COVID-19 pandemic there has also been a renewed debate about providing financial security to Australians. This debate dates back many decades. Early discussion of a universal basic income can be traced back to the early to mid-1970s.  Several groups – including academics, business organisations and the government – noted the value of a universal basic income to support both strong economic growth and better living standards.

During the first part of the Howard Government era in the 1990s, a group known as the Five Economists advocated using an earned income tax credit to enable better income security alongside wage restraint to help achieve full employment. The five were: Peter Dawkins, Ross Garnaut, John Freebairn, Michael Keating, and Chris Richardson. 

As raised in his recent book, Reset: Restoring Australia after the Pandemic Recession, Ross Garnaut has asked the question whether it is time to think hard about a better plan to support income security in Australia. This Melbourne Economic Forum will provide a set of presentations to foster a robust discussion of ideas that various researchers are pursuing.  Following the forum, we will have a small reception to celebrate the MEF founders and to thank them for the work they have undertaken to build the forum.

Professor Ross Garnaut AC, The University of Melbourne

The importance of raising labour force participation and an idea about how to do that

Professor Peter Dawkins AO, Victoria University

The work of the Melbourne Institute and the Five Economists on these issues, and the creation of the MITTS model, in the late 1990s.

Professor Guyonne Kalb – Melbourne Institute: Applied Economics & Social Research, The University of Melbourne

Childcare and labour supply using previous and potential future research including, adapting the MITTS model to analyse this.

Associate Professor Janine Dixon – Centre of Policy Studies, Victoria University

The potential economic impact of increased support for childcare and how to combine MITTS modelling with CoPS CGE modelling.

Professor A. Abigail Payne – Director and Ronald Henderson Professor, Melbourne Institute: Applied Economics & Social Research, The University of Melbourne

Is a universal/basic income support program too big?  What if we focus on one dimension of potential needs tied to income security – supporting families and young child development through income security provisions.