Business warns on Work for the Dole

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ScreenHunter_10 Mar. 29 12.46

By Leith van Onselen

Business groups have raised concern that the Abbott Government’s planned expansion to its “Work for the Dole” program (outlined yesterday) could create a deluge of sham job applications. Under the beefed-up scheme, the unemployed would be required to apply for 40 jobs a month in order to continue to receive benefits.

According to The Guardian:

The Australian Chamber of Commerce and Industry’s director of employment, education and training, Jenny Lambert, said she understood the government had set the job search target to encourage activity.

“[But] what we don’t want to do is to flood the business community with a whole range of job applications just for the sake of people fulfilling their requirements. That would not be a good outcome for anybody; we’ve got to get the balance right between getting job seekers more proactive about their applications and ensuring employers receive good quality applications about what the person brings to the job.”

The Business Council of Australia also welcomed aspects of the employment services plan, but said it was “concerned about the practicality of asking people to apply for 40 jobs each month in the current softening labour market”.

“It would be better to allow jobseekers to concentrate their efforts towards applying for the jobs they have the best chance of acquiring,” said the group’s chief executive, Jennifer Westacott…

“We need a job services system built on evidence about what really works. The ‘work for the dole’ scheme needs to avoid the well-known risks that such participation actually makes people less likely to move off welfare and must lead to meaningful jobs for people.”

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Meanwhile, one of Australia’s most respected labour economists, professor Jeff Borland, has once again warned that there is no empirical evidence that work for the dole schemes actually work and suggested that the Abbott Government is pursuing the program for political purposes. From the Canberra Times:

Professor Jeff Borland from the University of Melbourne – who conducted the only empirical study of the Howard government’s work for the dole scheme – says years of research show such schemes are unlikely to help people find jobs.

”The international evidence is overwhelming,” he said. ”It’s hard to believe that the government couldn’t understand that this isn’t the best way to improve people’s employability.

”I guess you have to conclude that there are other reasons for wanting to expand the program, and the title of the scheme [work for the dole] suggests it’s being done for political reasons.”

As I noted yesterday, the level of payments under the dole are pitifully low, and it is hard to believe that widespread rorting is occurring and there are an army of dole bludgers deliberately trying to avoid paid work:

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Youth Allowance and Newstart are pitiful, paying a single person with no kids just $414.40 and $510.50 per fortnight respectively ($10,774 per year and $13,273 per year). This compares to the single aged pension, which pays a relatively generous $842.80 per fortnight ($21,913 per year) when the various supplements are included, in addition to providing a raft of other discounts to medicines and the like.

Moreover, unemployment is high because the domestic economy is weak, and penalising the unemployed for being out of work will do absolutely nothing to boost overall labour demand and lower unemployment.

Indeed, we should not lose sight of the fact that the Government’s own employment department recently forecast that only 838,476 jobs would be created in the five years to November 2018, equating to just 13,975 jobs each month. Given that jobs growth of around 15,000 per month is required to keep unemployment constant (assuming a steady participation rate), there is a good chance that Australia’s unemployment rate would continue to rise under the Department of Employment’s forecasts.

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If the Government was truly concerned about the unemployed, it would channel its efforts into structural (micro-economic) reforms that aim to improve the economy’s competitiveness, productivity and employment growth. Not implement politically motivated schemes that have been proven not to work.

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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.