Opinion & Commentary
Results are in and jobs come first
What is surprising is that the Rudd government, which claims to support ‘evidence based’ policy, chose to implement this type of program in the first place.
A wealth of evidence shows, quite overwhelmingly, that large scale, ‘one-size-fits-all’ types of training programs such as the Productivity Places Program don’t work.
The Productivity Places Program, along with the ‘learn or earn’ youth jobs policy, the ‘jobs compact’ and the now discredited ’50,000 Green Jobs’ announcement, shows that the government’s labour market policies are now skewed decisively towards providing training for the unemployed.
This training focussed approach relies on providing skills and vocational training to unskilled jobseekers. This, the reasoning goes, will then enable them to fill skilled job vacancies, where there is often high unmet demand.
This seems perfectly logical. The only problem is that most indicators are that it actually doesn’t work very well.
Australian and international experience illustrates that, on the whole, education and training programs do very little to increase the employment chances or earning capacity of low-skilled workers.
The only group of jobseeker to consistently benefit from government training programs are mature aged women returning to the workforce after having children.
With the exception of basic literacy and numeracy, training programs for the young unemployed, the long-term unemployed, and those on Disability Support Pension do not result in improved employment outcomes.
For some young jobseekers for whom school was particularly difficult, forcing them into classroom training can actually be counterproductive: a point that was made by ACOSS in The Australian this week.
A comprehensive review of active labour market policies across the OECD tells a similar story.
It found that public training programs have a mixed track record: the results for adult women were fairly good, the results for adult men were mixed, and the results for youth were universally “dismal”.
A new OECD report on youth unemployment in Australia also cautions that results from similar training programs for young unemployed people in the US and Europe are not encouraging.
The strategy that does work is a ‘work-first’ approach, which emphasises getting jobseekers into a job, any job, as quickly as possible. The longer someone is out of work, the more their skills and confidence deteriorate and the harder they will find it to move back into work.
This approach relies on the notion that it is the ‘on-the-job’ training and experience provided by a lower-skilled job which will enable someone to move to a more highly-skilled, rewarding and better paid job.
This principle underpinned the Howard government’s ‘mutual obligation’ agenda, which was remarkably successful in helping lower both the unemployment rate, and the overall rate of welfare dependency.
While it is hard to disentangle the effects of this policy with the good economic conditions experienced during the last decade, most commentators agree that at least some of the positive results were due to the Howard government’s welfare to work reforms.
What is required for the Rudd government now is a return to the ‘work-first’ approach which characterised the previous government’s policy.
Labour market economist Bill Mitchell suggested in Wednesday’s Australian that the answer is for the government to create jobs for unemployed people. But this approach is expensive and doesn’t have a good track record in leading to sustainable and long term private sector employment.
Instead of focusing on expensive and unproven training or job creation programs, the Rudd government would do better to address the structural impediments that low-skilled people face when they enter the workforce.
Rather than subsidizing jobs, the next step for employment policy should be to support private sector employment growth. Allowing the real minimum wage to fall will make hiring low-skilled workers more affordable and therefore increase the supply of jobs available.
We can then use the tax-transfer system to top up the incomes of the low paid, to maintain the living standards of them and their families.
This sort of far-reaching approach is clearly required. The dismal results of the Productivity Places Program demonstrate that the government’s expensive investment in training is not working.
Jessica Brown is a Policy Analyst with The Centre for Independent Studies.
