Our Long-Term Unemployed Need Less Blaming and More Training

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Australians tend to agree that it is better to give a hand up than a hand out to those in need. Yet given its rate of success, the Commonwealth Government’s ‘mutual obligation’ policy is more appropriately described as a backhander to Australia’s most disadvantaged jobseekers.

The problem with Australia’s approach to reducing unemployment among this group is simple: the ‘mutual obligation’ policy employed by the Commonwealth Government oblige long-term income support recipients to ‘give something back to the community’ through compulsory work activities unrelated to finding them a job. With one eye on electoral sentiment and the other on the budget bottom line, the Government has pursued an ideologically inspired ‘welfare to work’ policy on the cheap.

This has failed those most in need of labour market assistance. Despite a decade of record economic and employment growth, the number of people who have been on unemployment benefits for more than five years grew by 68 per cent, from 75,000 to almost 127,000 people, between 1999 and 2004.

The Government’s policy places the responsibility upon low-skilled and unskilled jobseekers to solve their own unemployment crisis through a ‘work first’ approach that largely ignores vocational training. However, such individuals have often left school early without ever having obtained a vocational skill, or are the formerly retrenched workers of Australia’s rusting manufacturing industries. In every case, they face multiple barriers to finding and keeping work — barriers that are not overcome by the politics of blame. What they need is access to education and training.

Cartoon by Sean Leahy

Thanks to Sean Leahy

Government investment in education and training are crucial in assisting modern economies to keep pace with the changing skill demands of a changing world. Unfortunately it is chronically underfunded in Australia: of the 30 Organisation for Economic Co-operation and Development (OECD) members, only Poland and the Czech Republic spent proportionally less on labour market training than Australia.

The Government’s current attitude reflects the neo-liberal philosophy that education and training are primarily an individual responsibility: that since benefits accrue to those who gain a vocational qualification, individuals — not the state — should be primarily responsible for meeting their cost. This argument has some merit; however, there are no education loans — such as those provided under HECS — available to those looking to attain a qualification at TAFE. Rather, the ‘mutual obligation’ for disadvantaged jobseekers to pay for their own vocational training up front has helped inflate both Australia’s skills crisis and the ranks of the permanently unemployed.

Australia ‘s ‘mutual obligation’ approach to moving the unemployed off income support is perhaps best illustrated by Work for the Dole’s compulsory work projects for unsuccessful jobseekers. One criticism frequently levelled by the Job Network providers who manage Work for the Dole’s projects is that the Department of Employment and Workplace Relations limits the amount of money community work coordinators can spend on training participants to no more than 12 per cent of project funding. In addition, the requirement that Work for the Dole projects must not compete with paid employment in the private sector remains a problem as it encourages the diversion of jobseekers into unskilled work that provides little practical work experience. This impedes the transition of the unemployed into employment. Consequently, only 14 per cent of Work for the Dole participants end up in full-time jobs.

Rather than emulate the US ‘workfare’ approach to reducing unemployment amongst the unskilled, Australia needs to look further abroad. Countries such as Denmark have invested heavily in active labour market policies, such as supported vocational education programs, to address entrenched long-term unemployment and skills shortages. After comparing a number of the ‘welfare to work’ strategies in my recent paper Training for Work is more effective than Working for the Dole, it is clear that Denmark’s model has been the most effective, amongst OECD nations, at reducing welfare dependence and increasing labour market participation. The Danish example shows that an education and training model, accompanied by strong incentives to move back to work, can achieve both significant rates of mobility (moving the unemployed back into work) as well as reductions in welfare dependence and poverty.

Two things remain certain: firstly, while the low-skilled unemployed are expected to fund their own retraining, unemployment amongst those out of work for five years or more will continue to grow. Secondly, as long as the Job Network program is precluded from offering unskilled jobseekers real work experience, this Commonwealth program will continue to fail those most in need of help.

Job Network providers need additional funding per participant if they are to achieve better employment outcomes amongst the low-skilled unemployed. The present rate of $4400, plus $2200 after the individual remains in employment, is not enough to provide the right mix of training, education and ongoing assistance.

Supportive pre-vocational training, which combines work skills and personal development skills exercises, is a crucial first step in assisting the disadvantaged long-term unemployed; in addition, traineeships and work experience help to build confidence and practical experience of work. Finally, post-placement support is also crucial to job retention. A Brotherhood of Saint Laurence program that successfully moved 100 extremely disadvantaged, long-term unemployed back to work, estimated that the cost per person over the course of their 18-month program was approximately $10,000. However the savings passed on to taxpayers by moving these individuals off welfare greatly outweighs the additional cost ($3400) per outcome.

We also need the Government to fund education and training loans for those applying for TAFE. Providing HECS-like loans that are only repayable once an individual is in employment and earning above a benchmark rate provides an incentive for the low-skill unemployed and underemployed to improve their employment prospects, without having to supply thousands of dollars in up front fees. By making this scheme widely available, the Commonwealth Government will also go some way to filling the skills gaps in the labour market.

A greater financial commitment from the Commonwealth is required to invest in the skills of those excluded from the labour market. While the short-term expenditure may be hard for a cost-cutting Government to swallow, the long-term costs of the welfare dependence of the unskilled, in addition to our ongoing skills shortage, are far more unpalatable options.