Work for the Dole a Band-Aid solution

The Abbott Government’s proposal for a work for the dole scheme is yet another win for economic zealotry over proven policy reform. Work for the dole is an unimaginative and obsolete idea that is wheeled out from time to time when conservative governments pretend to do something about the complex problem of unemployment. Every credible economist knows that the best way to tackle unemployment is with a policy strategy based on a dynamic mix of stronger, productivity-based economic growth; education, skills and training; and an appropriate degree of flexibility in workplace conditions. The work for the dole scheme does not touch on any of these vital inputs to create jobs and lower unemployment, with the possible exception being the small influence of forcing people to gain the most basic of skills from doing something in an unpaid placement while they are still looking for a wage-paying job. For a government that prides itself on reducing red tape, the proposed scheme will lead to an explosion of compliance, regulation and meaningless correspondence. Who, for example, is going to monitor the job application explosion? Who is going to receive the job applications and work through them? (Certainly business is outraged at the prospect of having to deal with what will inevitably be millions of job applications per month for something like 180,000 job vacancies Australia wide.) Then there are some other facts, which make the scheme laughable and cringe-worthy, even for a well-meaning Year 12 economics student. There are currently around 700,000 to 750,000 unemployed people and a further 500,000 people not in the labour force who would like paid work if a job opportunity emerged. This totals around 1.2 million people currently not in work who, by definition, are the potential supply of new labour into the economy as it grows and develops. In other words, there are 1.2 million people competing for 180,000 job vacancies and that does not include people already in a job who are applying for a different role. The framing of the work for the dole scheme fails on another test, and that is its failure to outline its objectives. Why is the government even considering such a scheme? How much will it add to employment while reducing the unemployment rate? It is not even clear more jobs and lower unemployment are the objectives of the scheme, let alone whether the scheme aims to get 500,000 extra people into work or get the unemployment rate down to 4 percent or less. Then there is the overarching shortcoming of the scheme that fails to deal with the issue of creating jobs that are worth doing, with a fair and decent wage paid for that job. Instead of fluffing around with the red tape frenzy that is a work for the dole scheme, the government should be knuckling down to set the economy on a medium- to long-run path of stronger, productivity-based growth. This is where a skilled and educated population is the absolute bedrock of getting unemployment down. In straightforward economic terms, when the economy grows, firms need easy access to suitable workers. The last time Australia recorded a strong growth upswing, many firms were lamenting the fact that there were insufficient workers to allow them to invest and expand. The so-called skills shortage or capacity constraint in business acted as a handbrake on the economy even though there were still around 500,000 unemployed and about the same number underemployed. This is what labour market reform needs to address. Getting workers, those currently unemployed and those wanting to be in a salary-paying job, to have the skills that are needed as the economy continues to grow. A market failure occurs when people miss out on the opportunity to maximise their knowledge, skills and education and therefore their income earning potential which is their potential contribution to a nation’s economy. This is why there is a vital role for government in financing access to education, skills and training. Well-crafted education and skills policy will, in time, do more to address the issue of job creation and unemployment than a cornball work for the dole scheme. This is the policy path that has not only been overlooked by the current government, but has been actively discouraged through cuts to education funding, a slap dash approach to training and the move to a high fee based structure for university places. While this article will long be forgotten in a decade or so, there is a risk that the current policy approach of the government will erode the skill set of the workforce with the work for the dole scheme a non-adhesive Band-Aid for a much larger issue of unemployment. It would be most disappointing to see a skills shortage and a structural increase in the unemployment rate due to this dumbing down of the workforce and if the work for the dole scheme comes to pass and is in place for any length of time, it could be the watershed for such an outcome. Stephen Koukoulas is the Managing Director of Market Economics thekouk.com