The Budget’s package to help young jobseekers is a step on the right direction, yet it misses the opportunity to introduce more effective breakthrough measures. In short, Australia still lacks a coordinated evidence-based youth employment strategy.
The 2015 Budget provides more than $331 million in targeted spending on new job initiatives aimed at employers and young job seekers to support the transition to work. The spending will be divided into $212 million for the Youth Transition to Work (YTW) scheme; $14 million for Early School Leavers; and, $106 million for intensive support trials for vulnerable jobseekers.
The YTW program targets young people who have disengaged from work and study, leaving them at risk of long-term welfare dependence. This group is often called NEETs: i.e. not in employment, education or training. In Australia, there are more than half a million of them. And worse, two-thirds of Australian NEETs are considered to be inactive — that is, not even looking for a job any more, which prevent them to be classified as unemployed.
Under the YTW, local community-based organisations will be contracted to help young people prepare for work or undertake an apprenticeship or traineeship. Among many services, these organisations will attempt to offer intensive case management to overcome any personal barriers to education or employment. Strategies will include: one-on-one mentoring; literacy and numeracy training; communication skills development; confidence building and addressing other personal issues.
As an ancillary measure, the Early School Leavers initiative, for those who have not completed Year 12, will introduce activity requirements to undertake 25 hours per week of education — or a combination of education and part time work — to access regular government payments.
Increasing the level of education is a vital part of a national strategy to lift the productivity of our workers, saving them from a lifetime of damaging wage effects due to lower educational credentials. According to the Australian Bureau of Statistics, the rate of attainment of Year 12 or an equivalent school or non-school qualification has increased over the past decades, from 78% in 2001 to 85% in 2011. However, the proportions vary considerably across the states and territories with the ACT having the highest proportion (91%) and the Northern Territory the lowest (64%).
The third leg of the Youth Employment Strategy regards the intensive support trials for vulnerable jobseekers, including disadvantaged young people with mental health concerns and some young migrants. This is an important step to cater for the most vulnerable youngster with severe social and psychological disadvantages.
On the downside, the government is still convinced that a waiting period for the dole is the best way to nudge young people to find a job, while research consistently suggests the opposite.
In an optimal unemployment insurance system, like any form of insurance, one needs to weigh the best trade-off between the benefits of insurance (e.g. time and amount of the dole) and the costs of moral hazard (i.e. the forgone wage opportunities for not maximising the effort to find a job). If benefits are too high, it creates an incentive for jobseekers to shirk employment. If assistance is too little, unemployed living is too difficult.
A seminal paper on the issue already lays a sensible starting ground for an optimal unemployment insurance policy, where benefits like the dole decrease over time. That is, the duration of unemployment is used as an approximate gauge for a person’s effort to find a job. So, the longer the unemployment period, the lower the dole. This scheme penalises shirking without the harsh decision to entirely cut off welfare, with resultant negative social costs — and contrary to Australia’s compassionate grounds.
The four-week waiting period for the dole for under 25 year olds, down from a six-month period for under 30 year olds proposed in last year’s Budget, still misses the point.
The government would have been done better to eliminate any form of waiting period, but implement a decreasing dole value as the unemployment period extends.
Such a scheme would have produced the most effective incentives to find a job, and still provide a safety net when jobseekers most need. The first 30 days of unemployment are the most unsettling. And few jobseekers, no matter their effort or capacity, are able to effectively find and start a job in that short time.
Overall, some welfare measures in this Budget are in the right direction, but they fall short of achieving a clever scenario. Indeed, much more could have been achieved by altering the current workplace regulations that stifle job creation.
In the end, there is no better welfare program than freeing job access for the most vulnerable in our society.
Home > Commentary > Opinion > Hits and misses in the youth employment plan
Hits and misses in the youth employment plan
The Budget’s package to help young jobseekers is a step on the right direction, yet it misses the opportunity to introduce more effective breakthrough measures. In short, Australia still lacks a coordinated evidence-based youth employment strategy.
The 2015 Budget provides more than $331 million in targeted spending on new job initiatives aimed at employers and young job seekers to support the transition to work. The spending will be divided into $212 million for the Youth Transition to Work (YTW) scheme; $14 million for Early School Leavers; and, $106 million for intensive support trials for vulnerable jobseekers.
The YTW program targets young people who have disengaged from work and study, leaving them at risk of long-term welfare dependence. This group is often called NEETs: i.e. not in employment, education or training. In Australia, there are more than half a million of them. And worse, two-thirds of Australian NEETs are considered to be inactive — that is, not even looking for a job any more, which prevent them to be classified as unemployed.
Under the YTW, local community-based organisations will be contracted to help young people prepare for work or undertake an apprenticeship or traineeship. Among many services, these organisations will attempt to offer intensive case management to overcome any personal barriers to education or employment. Strategies will include: one-on-one mentoring; literacy and numeracy training; communication skills development; confidence building and addressing other personal issues.
As an ancillary measure, the Early School Leavers initiative, for those who have not completed Year 12, will introduce activity requirements to undertake 25 hours per week of education — or a combination of education and part time work — to access regular government payments.
Increasing the level of education is a vital part of a national strategy to lift the productivity of our workers, saving them from a lifetime of damaging wage effects due to lower educational credentials. According to the Australian Bureau of Statistics, the rate of attainment of Year 12 or an equivalent school or non-school qualification has increased over the past decades, from 78% in 2001 to 85% in 2011. However, the proportions vary considerably across the states and territories with the ACT having the highest proportion (91%) and the Northern Territory the lowest (64%).
The third leg of the Youth Employment Strategy regards the intensive support trials for vulnerable jobseekers, including disadvantaged young people with mental health concerns and some young migrants. This is an important step to cater for the most vulnerable youngster with severe social and psychological disadvantages.
On the downside, the government is still convinced that a waiting period for the dole is the best way to nudge young people to find a job, while research consistently suggests the opposite.
In an optimal unemployment insurance system, like any form of insurance, one needs to weigh the best trade-off between the benefits of insurance (e.g. time and amount of the dole) and the costs of moral hazard (i.e. the forgone wage opportunities for not maximising the effort to find a job). If benefits are too high, it creates an incentive for jobseekers to shirk employment. If assistance is too little, unemployed living is too difficult.
A seminal paper on the issue already lays a sensible starting ground for an optimal unemployment insurance policy, where benefits like the dole decrease over time. That is, the duration of unemployment is used as an approximate gauge for a person’s effort to find a job. So, the longer the unemployment period, the lower the dole. This scheme penalises shirking without the harsh decision to entirely cut off welfare, with resultant negative social costs — and contrary to Australia’s compassionate grounds.
The four-week waiting period for the dole for under 25 year olds, down from a six-month period for under 30 year olds proposed in last year’s Budget, still misses the point.
The government would have been done better to eliminate any form of waiting period, but implement a decreasing dole value as the unemployment period extends.
Such a scheme would have produced the most effective incentives to find a job, and still provide a safety net when jobseekers most need. The first 30 days of unemployment are the most unsettling. And few jobseekers, no matter their effort or capacity, are able to effectively find and start a job in that short time.
Overall, some welfare measures in this Budget are in the right direction, but they fall short of achieving a clever scenario. Indeed, much more could have been achieved by altering the current workplace regulations that stifle job creation.
In the end, there is no better welfare program than freeing job access for the most vulnerable in our society.
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