While there is bipartisan support for improving Indigenous economic outcomes, there is still debate about the best way to achieve this, particularly when it comes to unemployment.
This diversity of opinion was thrown into sharp relief with Labor and the Greens recently opposing a bill to amend the Community Development Program (CDP) — a consultation paper on the changes to the CDP was released this week.
The amendment aims to provide stronger incentives to work by penalising jobseekers who fail to meet their activity requirements.
Not surprisingly there is concern about the impact that removing the welfare ‘safety net’ could have on people. There is also a belief that you need to first address the social issues in Indigenous communities —such as alcohol and drug abuse — before you have any hope of improving education and employment outcomes.
The converse argument is that if you get people working, most of the social problems in a community will go away.
Expecting employment to fix society’s ills is perhaps a tad too optimistic, but focusing only on addressing social problems is not necessarily the best approach either. People need a sense of purpose and it’s hard to get that when you don’t have a job.
Despite all the time and effort spent trying to fix the social problems in Indigenous communities, few results have been achieved because people have ignored one of the basics of economics — the need for individual incentives.
The insidious and perverse incentives of ‘passive welfare’ are well documented and have led to policy responses such as the Welfare Reform Trials in Cape York and the activity requirements of CDP, but less attention has been given to actually creating an enabling environment for economic development to occur and for employment opportunities to be created.
The factors that support Indigenous economic development are the same as the factors that contribute to any economic development initiatives —human capital, an authorising environment, private property rights, and access to capital and markets.
To improve Indigenous social and economic outcomes, we need to look at both the cultural context and the economic environment.
Unfortunately the historical focus on the communal nature of Indigenous culture has meant less attention has been given to individual economic development models – such as private enterprise.
As a result, the dominant economic development model on Indigenous land is community owned, not-for-profit organisations known as ‘Indigenous corporations’. Yet Indigenous communities, like other small towns of a similar size, could support some private businesses — such as a mechanic, café, or hairdresser.
Those who doubt this is possible on Indigenous land should look to Canada for inspiration. The Osoyoos Indian Band is one of the most successful First Nations communities in Canada, with virtually all of its 520 members employed and people from neighbouring communities working in the band’s businesses. In 2013 the band’s businesses had a revenue of $26 million and made $2.5 million in net profits.
It wasn’t always this way. Up until about 20 years ago, the Osoyoos reserve had the same issues of poverty, crime and family violence common to other First Nations across Canada. However, when Clarence Louie became the chief in the late 1980s he set the community on an ambitious economic development plan of total economic self-sufficiency by 2005. He has achieved this through a mixture of joint venture partnerships and strict financial controls and accountability measures.
According to Chief Louie: “People talk about running native businesses the Indian way, but there is only one way to do business and that is the business way.”
In Australia, we need to adopt a similar strategy and investigate the opportunities joint venture partnerships could provide Indigenous communities. There are positive signs this is starting to happen. For example, in the Cape York, Kalan Enterprises went into a partnership with a civil works company and won a contract to work on the Peninsula Development Road. In just four months, 35 local people have gained employment.
Social change can occur in Indigenous communities when there are the right economic opportunities and incentives.
Sara Hudson is a Research Fellow at the Centre for Independent Studies – her research program The Prosperity Project is focused on identifying strategies for Indigenous Economic Development
Home > Commentary > Opinion > The right economic incentives will lead to social change in Indigenous communities
The right economic incentives will lead to social change in Indigenous communities
This diversity of opinion was thrown into sharp relief with Labor and the Greens recently opposing a bill to amend the Community Development Program (CDP) — a consultation paper on the changes to the CDP was released this week.
The amendment aims to provide stronger incentives to work by penalising jobseekers who fail to meet their activity requirements.
Not surprisingly there is concern about the impact that removing the welfare ‘safety net’ could have on people. There is also a belief that you need to first address the social issues in Indigenous communities —such as alcohol and drug abuse — before you have any hope of improving education and employment outcomes.
The converse argument is that if you get people working, most of the social problems in a community will go away.
Expecting employment to fix society’s ills is perhaps a tad too optimistic, but focusing only on addressing social problems is not necessarily the best approach either. People need a sense of purpose and it’s hard to get that when you don’t have a job.
Despite all the time and effort spent trying to fix the social problems in Indigenous communities, few results have been achieved because people have ignored one of the basics of economics — the need for individual incentives.
The insidious and perverse incentives of ‘passive welfare’ are well documented and have led to policy responses such as the Welfare Reform Trials in Cape York and the activity requirements of CDP, but less attention has been given to actually creating an enabling environment for economic development to occur and for employment opportunities to be created.
The factors that support Indigenous economic development are the same as the factors that contribute to any economic development initiatives —human capital, an authorising environment, private property rights, and access to capital and markets.
To improve Indigenous social and economic outcomes, we need to look at both the cultural context and the economic environment.
Unfortunately the historical focus on the communal nature of Indigenous culture has meant less attention has been given to individual economic development models – such as private enterprise.
As a result, the dominant economic development model on Indigenous land is community owned, not-for-profit organisations known as ‘Indigenous corporations’. Yet Indigenous communities, like other small towns of a similar size, could support some private businesses — such as a mechanic, café, or hairdresser.
Those who doubt this is possible on Indigenous land should look to Canada for inspiration. The Osoyoos Indian Band is one of the most successful First Nations communities in Canada, with virtually all of its 520 members employed and people from neighbouring communities working in the band’s businesses. In 2013 the band’s businesses had a revenue of $26 million and made $2.5 million in net profits.
It wasn’t always this way. Up until about 20 years ago, the Osoyoos reserve had the same issues of poverty, crime and family violence common to other First Nations across Canada. However, when Clarence Louie became the chief in the late 1980s he set the community on an ambitious economic development plan of total economic self-sufficiency by 2005. He has achieved this through a mixture of joint venture partnerships and strict financial controls and accountability measures.
According to Chief Louie: “People talk about running native businesses the Indian way, but there is only one way to do business and that is the business way.”
In Australia, we need to adopt a similar strategy and investigate the opportunities joint venture partnerships could provide Indigenous communities. There are positive signs this is starting to happen. For example, in the Cape York, Kalan Enterprises went into a partnership with a civil works company and won a contract to work on the Peninsula Development Road. In just four months, 35 local people have gained employment.
Social change can occur in Indigenous communities when there are the right economic opportunities and incentives.
Sara Hudson is a Research Fellow at the Centre for Independent Studies – her research program The Prosperity Project is focused on identifying strategies for Indigenous Economic Development
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