Opinion & Commentary
Suitable jobs better for HECS debtors
Of all the suggestions coming out of the 2020 Summit's productivity stream, a community corps financed from HECS-HELP attracted most attention. In his closing speech, Kevin Rudd singled it out, to applause from summit participants. The media liked the proposal, too, giving it wide coverage.
The community corps plan is to ``allow community service to reduce a person's HECS-HELP debt''. Though I took part in the summit's 100-person productivity stream, I cannot provide any more detail. We never discussed it in the productivity plenary session. The scheme appeared mysteriously as a ``top idea'' in a stream summary document on Sunday morning. In the ensuing rush of participants trying to incorporate their concerns into the stream's concluding statement, the community corps escaped critical scrutiny.
Though the proposal's summit origins remain obscure, it may be inspired by the US AmeriCorps program. This community service initiative includes environmental projects, education, public safety and disaster-relief programs.
In exchange for a full term of service of at least 1700 hours, participants are entitled to an education award of $US4725 ($5000). They can use this to pay for educational expenses or repay a student loan.
So the basic idea is to pay people for community service, though at low hourly rates, if AmeriCorps is a guide. Whether this is done directly with cash payments or indirectly by reducing student debt owed to the government, the ultimate effect is similar: taxpayers are spending more to achieve some community purpose.
There is nothing remarkable about this. Billions of dollars are spent on community service activities every year.
But in focusing on one group of people, those with HECS-HELP debts, this community service program could have a range of unintended consequences.
By being midway between volunteers and employees, community corps workers could displace both. Employers may prefer them to pure volunteers because the HECS-HELP debtors have an incentive to put in longer hours. So a program aimed at encouraging community service could reduce opportunities for genuine volunteers.
Because community corps workers are paid in part by government, employers may prefer them to employees. Yet longer-term employees, with experience and an incentive to invest in human capital specific to the field, are likely to do the job to a higher standard than people whose incentive is to move on to something else once their debt is reduced or cleared. An added risk is that graduates will push less well-educated workers out of the community service labour market or into less fulfilling jobs.
Not all those seeking HECS-HELP debt reductions will have a short-term commitment to community service activity. Indeed, I expect this scheme would be most attractive to people who are already involved in community service. Yet if this is the case, the added community service effort from the community corps will be modest. We will just be paying people to do what they would have done for free.
If the HECS-HELP debtors are graduates, their productivity potential (this was an idea that arose in the productivity stream, after all) is greatest if employed in jobs that match their education and skills. Productivity will not be maximised by steering graduates to jobs that may not use their abilities. And by diverting graduates from work that could generate tax revenue to work that spends tax revenue, the cost of community corps would rise well beyond forgone HECS-HELP repayments.
The community corps proposal mixes two unrelated policy concerns: community service and student debt. Without any inherent relationship between the two, this scheme lacks synergies. Most HECS-HELP debtors are better off working full time. They need increased present income more than reduced future repayments, so the community corps won't help them. And if the community tasks are genuinely important, we should find the most suitable workers for them rather than drawing on the limited pool of people with student debt.
Like many 2020 Summit suggestions, the community corps idea looks much better as a dot point than it would as a program.
Andrew Norton is a research fellow at the Centre for Independent Studies.
