The Abbott Government is set to expand its controversial “Work for the Dole” program to include all job seekers between the ages of 18 and 49 years of age.
Under the new program, which is set to begin from 1 July 2015, those aged 18 to 30 will be required to work 25 hours per week for six months out of 12, while people aged 31 to 49 will have to work 15 hours for six months out of 12. Those between 50 and 60 will be required to participate in an approved activity for 15 hours per week for six months every 12 months, but will have the option of participating in the Work for the Dole program.
The beefed-up program will replace the existing scheme which applies only to job seekers aged up to 30 that been unemployed for a year, and requires them to work 15 hours per week for six months to receive benefits.
While such changes will no doubt play well on talkback radio, one has to ask whether tightening access to the dole is justified and whether it will actually improve labour market outcomes?
First, we should not lose sight of the fact that 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.
Given benefits are so low, you have to suspend disbelief to believe that widespread rorting is going on, and that there are an army of dole bludgers deliberately trying to avoid paid work.
Second, evidence suggests that Work for the Dole does little to boost the employment prospects of the unemployed. As argued by Melbourne University professor, Jeff Borland:
A study I carried out with my University of Melbourne colleague Yi-Ping Tseng on the pilot phase of Work for the Dole, found that participants in the program were no more likely to move off welfare payments in the 12 months than a comparable group of payment recipients who did not participate in the program.
Our finding is consistent with a large body of international evidence on the effects of public sector job programs. The majority of those studies find zero or negative effects on labour market outcomes for participants…
There are good reasons why public sector job programs such as Work for the Dole do not have a positive effect on employment outcomes. First, the programs do not increase the long-term availability of jobs. It is only when extra jobs become available that people who are unemployed can move into sustainable employment. But these programs are only providing a limited period of employment.
Second, the programs are not providing a sufficient opportunity for skill development to make a big difference to employment prospects for the unemployed. Many people who are unemployed have low education and skills, as well as other sources of disadvantage, and hence require a substantial increase in skills to be able to obtain and retain employment.
If the Government truly wants to help the long-term unemployed, it should channel its efforts into structural (micro-economic) reforms that will improve the economy’s competitiveness, in the process boosting productivity and employment growth.
Unemployment is high because the domestic economy is weak. And further penalising the unemployed will do nothing to change this or boost overall labour demand.
As an aside, one also wonders why the Government is seeking to relax 457 visa rules so that employers can hire an unlimited number of foreign workers under a temporary working visa, potentially opening the system to widespread rorting and depriving locals – particularly the young and less-skilled – of employment opportunities.
