Helping the long-term unemployed

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ScreenHunter_1870 Apr. 01 08.55

By Leith van Onselen

The Business Council of Australia (BCA) has provided a pre-Budget submission calling on the Federal Government to reform its Work-for-the-Dole program to include a structured training component in order to equip the jobless with the skills they need to hold-down a job. From The Australian:

ACCI argues that work for the dole should be built around a traineeship model, which effectively subsidises the trainee wages of young people who have been unemployed for a long time.

“Work for the dole will be more successful if combined with structured training to provide the skills needed to stay in the workforce longer,” the chamber says…

“Our position is that work for the dole of itself is not nearly as ­effective unless it has structured training attached to it.”

Evidence suggests that Work-for-the-Dole has not had a positive impact on employment for two main reasons.

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First, the programs do not increase the long-term availability of jobs. Second, the program, under its current structure, does not provide the long-term unemployed with sufficient skills to become more employable.

It is on the second point where the BCA’s reform proposals have merit. If, through structured training, the long-term unemployed can gain formal skills in areas where labour shortages exist, then there are likely to be positive employment spin-offs.

However, for such a scheme to be effective, employers would need to be willing to provide the necessary training. It is here where I foresee problems. The Government’s planned loosening of 457 visa rules will undermine employer incentives to train the long-term unemployed, given that it would in many cases be easier and cheaper to employ a foreigner, rather than training a local.

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Long-term unemployment is likely to become a growing issue in the event that the labour market deteriorates as the mining investment boom unwinds and the car industry shutters. However, any plans to assist the long-term unemployed could be undermined by the proposed loosening of 457 visa requirements, which is entirely the wrong prescription at this time.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.