Opinion & Commentary
Tough job on employment
The outlook for Queensland’s jobs market is bleak, with industries that the state specialises in, like tourism, set to be the hardest hit by recession. According to the latest ABS figures, 67 000 Queenslanders are now out of work. And the story is being repeated across the country.
By 2011, the federal government predicts that 900,000 Australians will be looking for work – about 8.5% of the workforce. They have also declared that Newstart Allowance, the benefit paid to jobseekers, will not increased. To prevent the newly unemployed from becoming entrenched in long-term welfare dependence, this is a tough but necessary measure.
For welfare campaigners, it represents a fundamental injustice. In the coming years, thousands of Australians will join the dole queue. Made redundant through no fault of their own, many will struggle energetically yet fruitlessly to find work, eking out a meagre existence on $227 a week (plus rent assistance in some cases).
Life will be difficult for jobseekers, but unfortunately necessity dictates that it shouldn’t be comfortable.
Research from the Melbourne Institute shows that taking a job – any job – is the best way out of unemployment. Part-time jobs lead to full-time jobs; low paid jobs lead to higher paid jobs. The OECD has a similar refrain: it is work, not welfare that helps people climb the ladder. Keeping the level of unemployment benefits low and mean ensures that the incentive is there for jobseekers to take whatever comes along.
While difficult to accept for those whose concern is the living standards of the unemployed, this proposition seems intuitive. When working is more attractive than welfare, the incentive will always be to take a job.
Admittedly, this is often easier said than done during a recession. What complicates this story further is that another option is also available – to drop out of the labour force altogether.
In the 2006-07 financial year, more than 700,000 Australians were on Disability Support Pension (DSP). Nearly 550,000 were on Parenting Payment, the benefit paid to sole parents and couple parents whose partner is not in the labour force.
While some of these people work in part-time jobs, it is clear that – recession aside – Australia has a massive problem with workforce participation and working-age welfare dependency.
Australian National University Professor Bob Gregory argues that even at the height of the recent boom ballooning welfare numbers masked ‘hidden’ unemployment rates of ten to twelve percent.
If the government’s predictions about rising unemployment are correct, the number of unemployed will still be less than the number of people on these two payments alone.
Not all recipients of these payments can realistically work, and even those who can tend to suffer disadvantages such as a mild disability or low levels of education. When job vacancies are scarce, many will find it hard to compete.
Rather than attempt to reduce these numbers, the more realistic present challenge is to ensure that they don’t rise dramatically. History shows that when unemployment grows, more people withdraw from the labour force and move onto payments such as DSP.
In a perverse way, this is good for the government because it keeps the unemployment rate artificially low. But the long terms consequences are devastating.
According to Gregory, the full-time male workforce never recovered from the 1990–92 recession, with payments like DSP soaking up laid-off workers. With less-stringent job search requirements and higher payment levels, for most recipients the chances of ever returning to the workforce are slim.
If the same trend continues in this downturn, we could have one person of working age on welfare for every three in the workforce by the time recession ends. Coupled with an aging population, this presents an unsustainable time-bomb.
In line with the general rise in pensions, the level of DSP was increased in this month’s budget. The danger is now that moving onto DSP could become even more attractive for the newly unemployed.
The ‘Harmer Review’ of pensions notes that this incentive exists, and argues that the current ‘passive’ DSP needs to be reformed to provide a ‘much stronger emphasis’ on workforce participation.
The government seems to be aware of this problem. Its’ budget announcements included a tightening of assessment procedures for DSP to ensure that only those who fully meet the eligibility criteria receive it. It estimates that these changes will see an additional 6,500 claimants rejected and moved onto other payments such as Newstart. On top of this an ‘Employment Incentive Pilot’ is designed to encourage bosses to employ DSP recipients.
The test of its success will be the number of DSP recipients at the end of the recession.
As unemployment rises, life will inevitably become tougher for the most marginalised jobseekers. But ensuring the right rules and incentives are in place will stop temporary unemployment from becoming long-term welfare dependency.
Jessica Brown is a policy analyst at The Centre for Independent Studies, and author of Breaking The Cycle of Family Joblessness which was released in May.
