Ideas@TheCentre
Tax cuts, mutual obligation and labour force flexibility could make or break jobless
With a nightmare budget looming in view, it’s tempting to take the fatalistic view that all we can do is batten down the hatches and wait for the storm to pass. This view, however, underestimates the real impact that public policy has.
Take jobless families. Australia has the second highest proportion of jobless families in the OECD. In late 2008 almost one in eight Australian children lived in a family where no parent worked. Unbelievably, this figure is actually a marked improvement: family joblessness reached its peak in the mid 1990s when more than one in six children lived in jobless households.
While good economic conditions undoubtedly played a role in the drop, it is certain that policy reforms did too. Now that a recession seems inevitable, it will be public policy decisions which really determine whether these gains are built upon, or lost.
- Reductions in the tax burden faced by workers will provide an incentive for jobless parents to move from welfare into work, as they will get to keep more of their new income. Despite budget pressures, the Rudd government must not abandon its commitment to tax cuts;
- A robust ‘welfare to work’ regime sends the message that everyone who can work should do so, providing assistance for jobless parents to find work and penalising those who don’t. Tougher welfare rules implemented over the past decade have contributed to the drop in family joblessness. The Rudd government should resist winding back mutual obligation requirements, which will inevitably cause the number of jobless families to rise;
- Any attempt to tackle family joblessness must include the continued reform of the labour market. Wage setting and industrial relations policies must be governed by a ‘jobs first’ policy, with a key objective being the continued creation of low-skilled jobs. During a downturn, it is preferable for parents to have the option of lower-paid jobs, rather than simply being forced onto the unemployment queue.
Jessica Brown is a Policy Analyst at CIS, her report Breaking the Cycle of Family Joblessness was released by CIS this week.
