Coalition launches world war on youth

By Leith van Onselen

As reported today in Farfax, the Abbott Government has cited cuts to unemployment benefits, particularly for those aged under-30, as one of the key structural reforms that will increase economic activity by 2%:

“Employment welfare reforms” is ranked as the No 2 commitment, and notes that the changes will “strengthen participation and activation strategies”.

By cutting payments entirely to some unemployed and requiring jobseekers to search for more jobs to qualify for payments, the government argues it will spur the unemployed to look for work rather than live on welfare, thereby boosting economic activity..

The fundamental problem with the Government’s approach is that it does absolutely nothing to solve the demand-side of job equation. That is, unemployment is high because the domestic economy is weak and labour demand is low, particularly for Australia’s youth, where underutilisation is running at a whopping 30% and jobs have been lost since the GFC (see below graphics).

ScreenHunter_4232 Sep. 16 11.07
ScreenHunter_4838 Nov. 06 16.15

Amazingly, the Coalition still seems to believe that if Australia’s youth simply ask for work, the jobs will magically appear, as articulated earlier this year by employment minister, Eric Abetz:

“When jobs are sparse, it means that you’ve got to apply for more jobs to get a job… What it actually means is that you’ve got to double and redouble your efforts to be able to attract the attention of an employer to obtain the job that is so beneficial to the job seeker.”

Moreover, not only has the one detailed study into the Coalition’s Work-for-the-Dole scheme found it to be highly ineffective, but it was also revealed in June that the Government announced the scheme without undertaking any modelling or analysis of its impact:

In senate estimates in June, Job Services Australia general manager Moya Drayton was asked by Greens senator Rachel Siewert if the government had any estimates of the proportion of unemployed participants that could expect to find a job within three months after finishing the Abbott government’s new work-for-the-dole program.

”The department does not have estimates on the number of job seekers for the under-30 measure expected to be in full or part-time employment three months after participation in work for the dole,” the department said.

The department also said it had no idea how many people it expected would move off income support as a consequence of being referred to the government’s work-for-the-dole program.

About the only boost to economic activity arising from the Coalition’s employment welfare changes would be the extra bureaucrats required in Centrelink offices to oversee compliance. So much for reducing red tape!

What we are witnessing here from the Abbott Government is a complete and utter absence of evidence-based policy making, whereby its welfare reforms have been devised for political purposes and/or based on ideology, increasing risks of adverse outcomes for taxpayers and the community in the process.

If the Coalition was truly interested in supporting growth it would look to unwind the highly distorting taxation regime that mis-allocates national savings into mortgages, along with the myriad of other tax concessions – which represent 8% of GDP, the highest of their kind in the OECD – that drive the politico-housing complex economic model.

While they are at it, why not argue to unwind the public guarantees for the nation’s banks that have prevented markets from-restoring balance to the system; the state government restrictions on housing supply; the record high immigration levels (including unfettered use of 457 visas) and un-policed foreign buying activity of existing real estate. Together, these policies explicitly degrade our national political economy and future standards of living for the expressed purpose of boosting baby-boomer dominated property-owner wealth.

In the Budget we had no attempt to address these failings of the economic model for young Australians. Instead, all we have received is draconian cuts to unemployment benefits and a radical overhaul of education funding that will dramatically increase the cost of higher education for future students.

It is generational war writ large, which the Coalition is now seeking to export to other G20 nations.

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Leith van Onselen

Comments

  1. Here’s what it will do, and why productivity will benefit. It will cause wages to fall as employers are swamped by a hoard of freshly un-benefited Australians in desperate need of any work at any wage to feed and cloth and, God forbid, house themselves with. And it will cause a trickle-up effect, as anyone without a job will bid for work for less than anyone else who is above them doing the same job on the employment ladder. This, was always going to happen anyway. It’s just a matter of what caused it…..

    • What you are describing is just increasing the level of competition for existing jobs. This doesn’t solve the underlying issue, which is the supply of jobs.

      Yes, productivity will technically go up as the competition results in lower wages, but they are hitting the bulls eye on the wrong target.

      • Yes…and No. I’d wager that many employers would at least consider taking 2 employees on for the same, or slightly higher, wage of their current 1? I know it works in reverse when wages rise and ‘synergies’ etc then come into play

      • @Janet,
        my experience is the employer will take on the one employee and expect them to work harder, longer hours and do the work of 3 people if they want to keep the job.

      • Probably right!
        I come from an era though when I paid my people more than they thought they were worth and by and large, they lived up to that wage. If they didn’t I always figured it was my error in employing the wrong person.
        In the debt soaked world of today, I don’t see any other alternative to wage falls – nominal ones at that. But time will tell.

      • For how long everyone would spread the wrong definition of productivity? If the wages go down that does not mean higher productivity. It means only higher profits. Productivity can be increase only if people produce more per hour or per person. The ratio of wage/profit only show how the existing productivity is distributed between the employees and the employers.

        Genuine increase of productivity without innovation is impossible. Lowering wages is just a way of grabbing the bigger share of the pie

      • Those aged under-30 should be rushing to become real estate agents. No university degree required.

        Selling homes to property investors is the next boom!

      • GunnamattaMEMBER

        @Janet

        ‘ If they didn’t I always figured it was my error in employing the wrong person.’

        Well said. I do often find it bizarre how some employers expect an employee (or putative employee) to bear every last skerrick of responsibility for that decision……

    • Yes, the sledgehammer of unemployment to smash wages by making things even more desperate. Wages have already been sliding in real terms for a while. The youth are just collateral damage.

      I was talking to a life long Liberal voter the other day.who’s now pining for Gillard’s incompetence – his words. Interesting.

    • if by trickle up you mean profits, I would argue that is unlikely to be the case.
      Interest rates are low, inflation is low, unemployment is high, the economy is constrained by demand. Employers are not in a position to increase margins. Any cost reduction gets passed through immediately. Nominal wages will be held down by the governments cruel policy, but real wages will act countercyclically. They won’t fall enough, if at all to clear the labour market.

    • all this does is bring forward the inevitable collapse in asset prices as the younger cohort is unable to leverage and consume

  2. I think this is one of the most myopic misconstrued ideological ideas combined with the open slather on 457 entrants that the liberals will come to rue in time to come. If there is one time that history will look at to decipher the point at which right wing ideology made its political mark to the detriment of social justice and cohesion in this country this will be it.
    I dont think this issue has as yet gained enough traction in the minds of a generation that have not experienced economic hardship as yet. But it will in time to come when they find themselves bidding for limited work opportunities against an influx of foreign workers who will and are accustomed to working for a pittance. The ideological influence and brainwashing of this countries population is still in its early stages and it is hopeful the population wakes up soon and puts these idelouges back in the sin bin where they belong at the next election.

    • http://www.watoday.com.au/federal-politics/political-news/former-mps-submission-to-inquiry-on-gold-pass-removed-from-parliamentary-website-20141110-11jowk.html

      “The Association of Former Members of Parliament of Australia’s submission argued that stripping back their perks would be “unconscionable” and “unconstitutional”

      And then i read crap like this and they wonder why people think politicians are lower than whale SH*T.

      So its ok to target the unemployed with cuts but heaven forbid that you touch the entitlements of the political fat cat leach class with their snouts in the trough. The sheer gall and arrogance of this submission is appalling. And that they request the submission to be kept secret. Why ? Is the public not permitted to see what the political elite are doing these days. Are they not allowed to see how their taxes are being spent.

      Utter utter contemptible people.

      • “The submission was uploaded to the Senate inquiry’s website on Friday and taken down on Monday hours after The West Australian reported its contents.

        The newspaper quotes the report as arguing

        “Parliamentarians’ entitlements should not be the subject of political whim and expediency” and said moves to curb their perks were “symbolic tokenism”

        “not be the subject of political whim and expediency”
        “not be the subject of political whim and expediency”
        “not be the subject of political whim and expediency”

        Do you see the utter utter arrogance of these people. Its ok to subject the most vulnerable in our society to political whim, but not them.

    • I don’t think the current crop of LNP neo-conservative retards will regret anything. They will be safely ensconced on multiple company boards and enjoying their gold plated pensions.

      The signing of the Trans Pacific Partnership and the Trade in Services Agreement will gut the labour market here.

  3. Abbott a political animal first and foremost. Little things like facts, logic and reasoning are not in his, nor this particular faction of the Libs, makeup.

    • How did this clown get his BEc, you should consider doing the right thing and pass your name onto him!

  4. Story in the AFR today called “generation gloom”, painting a pretty gloomy picture for the future of todays kids.

    • It’s not just Australia, and it’s not just conservative governments causing the angst, it’s the ‘Baby Boomer Bomb’ and oldies living longer who are voting for themselves, their benefits, their perks, tax breaks etc., at the expense of (tax paying & uni fee paying) younger generations (while generally blaming ‘foreigners’).

      In Europe the youth of today may never attain such support from the state when older, inter generational warfare?

  5. “The department also said it had no idea how many people it expected would move off income support as a consequence of being referred to the government’s work-for-the-dole program”.

    This is what drives me mad. They have enough surveillance to pick up some guy whose posted pictures of possible explosives on Facebook, but this is in the too hard basket.

    Somebody design them a Freemium app.

  6. I’m not sure I understand any of this:

    IF the Aussie economy is weak the $AUD will fall and unemployment especially youth unemployment will raise….that’s economics 101 and it doesn’t matter which school of economic thought you subscribe to.

    So IF Australia needs to adjust through a recession THAN Australia needs to have youth unemployment ……QED

    The only alternative seems to be artificial boom with artificial jobs generated by excess capital (like the Sydney housing boom) and we all think that’s a bad idea, so a recession it is!

    News break for those that have never experienced recessions they come hand-in-hand with unemployment.

      • Absolute 457 numbers are falling; in a recession you would expect this trend to continue (subject to skill set demand).

      • If it is true that 457’s are on the increase, its easy to explain because managers running failing businesses will always try to address their cost issues before giving up and just closing their doors, its part of the reason that productivity normally increases after a recession. A recession is a cathartic force which separates the weak from the strong, this statement applies equally to businesses, managers (owners) and employees.

      • I came out of uni in the last recession – with perspective it taught me a love of the value of free time (sailing and riding) an ingrained frugality, a deep sustain for lying politicians, and a health skepticism of the greedy and ruthless boomer sme and corporate classes. Overall not the end of the world.

        It also meant when times were good I understood they might not always be good and payed of my house and saved -recessions are uncomfortable for sure but without them you can see the problems and mis-allocations build up and up.

  7. Whilst I accept that there is a small percentage of people that don’t want to work I find the notion that the majority of people that are unemployed don’t want to work to be an offensive one. This is collective punishment for any under 30’s that are looking for work.

    The 2% increase is in the realms of la la land and just as pointless and meaningless as the idiotic GDP figures. This will have ignored a range of costs that will be incurred such as an increase in crime, the impact of poverty, reduction in demand as people without money can’t consume, etc.

    As others have said these LNP thickheads are not addressing the real problem which is the creation of jobs. The Australian economy needs to be restructured. Trying to compete with Asia on the basis of cost is profoundly stupid. It will result in the impoverishment of Blue and White workers like in the US. They are also burying the opportunity to build new industries (and jobs) around renewables as China, the US and others embrace renewables.

  8. This is quite cruel. There are very few productive jobs left in the economy, the FIRE jobs are really tightly held, all that’s left are unpleasant service jobs.

    In essence they are saying to young people, clean our toilets and look after us in our old age at rates that will forever exclude you from the asset ownership classes.

    Someone needs to run a webpage to explain to these kids it’s not their fault, because to put them in this place and then try and blame them for decades of boomer mismanagement is actually very cruel indeed.

  9. Normally I’d be skeptical of policies like these that appear to be ideologically driven BUT…..

    Chatting to a taxi driver today and he was telling me how good money being a lollipop man was. “You’ve got to pay them more because the job is so boring “….

    Wait, seriously????

    We have to provide incentives to encourage the unemployed into unskilled labour? Ridiculous.

    Another factor that makes this country uncompetitive.

    Yes the left are up in arms over this and yes the right overdo it and are driven by ideology…. but surely there’s a middle ground that’s in the national interest.

    • Yes there is, and the middle ground means fairly taxing wealth as well as labour, ensuring wealthy rentseekers are not crushimg the productive economy, and making sure access to social equalising factors like home ownership and healthcare are products of hard work and not financialisation.

      As for lollipop – that is generally volunteer or work for injury welfare so as usual your cab driver is fos.

    • First. These days traffic management is usually contracted out to specialist firms. Second, round here at least, many of the lollipop people are Irish… So let’s tighten up those visas folks. Third, as a result, the lollipop wages are not that wonderful.

      I would no more take the advice of a taxi driver on industrial matters, than I would on investment management.

      Perhaps the Coalition should start talking to people who know what they are talking about, and rely a bit less on anecdote and ideology.

      Creating policy “because a taxi driver them a brain fart” seems to be how this government works. With all due respect to taxi drivers, that is not a great approach to policy making. In fact, I seriously doubt that many taxi drivers agree with much of what is coming out of the Government in Canberra.

      With all those years in opposition, one would have thought that the Coalition would have had a suite of well thought out policies, ready to go. But no, we have policy making on the run. It is almost as if they do get their stuff from some of the dumber taxi drivers on the way to the airport…and it shows.

      PS, I do agree with the ‘middle ground’ sentiment. The taxi driver reference did seem relevant to the present policy development in Canbra.

    • Need to make the distinction between the ‘lollipop man’ (walking school kids across the street) and the ‘traffic control engineer’ – or whatever he/she is called – that directs traffic around roadworks and building sites. They’re the ones that earn the money…

  10. My understanding is that the going rate for a slow/stop lollipop person is $22 per hour. There is a course that you need to attend in order to qualify which I believe is about $165 for the course and then another $300 for the actual ticket from the RMS or state authority , which does vary from state to state.