The 'Five Economists' Plan: the original idea and further developments

Abstract

Peter Dawkins was one of five economists who wrote a letter to the Prime Minister in 1998 suggesting a suite of policies that could help to substantially reduce the unemployment rate to around 5 per cent. 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. Show more