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Unemployment - one size fits some

Simon Cowan | 01 August 2014

cowan-simon This week we have seen several ambitious welfare reform plans. First, the federal government attracted negative attention for its proposal to make the unemployed apply for 40 jobs a month and complete 25 hours a week of community service.

Second, Andrew Forrest proposed a raft of changes including compulsory extension of the welfare basics card to everyone bar pensioners and veterans, linking welfare to school attendance and more closely linking training and employment.

While there may be merit in elements of the proposed reforms, the biggest drawback to both is that they wrongly treat the unemployed as a homogenous mass.

Most people (70%) cycle off unemployment within 12 months, and primarily need short term income assistance. Forcing these people into training or work for the dole, while quarantining their income, might prolong unemployment.

Some unemployed people don't have job search requirements at all, so it is unclear how this scheme applies to them, while others form a core of long term unemployed who frequently face additional barriers to finding jobs. They may need the more intensive intervention that Forrest proposes.

We also cannot ignore the significant barriers to employment created by government itself; from high company taxes, to high minimum wages, to restrictive dismissal protections. These workplace protections may benefit some workers but they also keep others out of employment.

There is a further undeniable truth that some people have rendered themselves unemployable through substance abuse or simply choose not to work, though there's a tendency by some to overstate the number of unemployed people to whom this applies.

Critics of the government's plan have suggested that there are just too few job vacancies with too many unemployed people to fill them, and that simply forcing the unemployed to apply for more jobs won't have any impact on the chances of employment.

To an extent these criticisms are valid. For some job seekers simply applying for more jobs without addressing the barriers they face to employment will have little effect. But critics of the government have inadvertently hit on another problem. If someone is simply going through the motions of applying for jobs so they can get the dole, then employers are unlikely to offer them a job.

In the end successful management of unemployment issues is tough for government, simply because they can't give jobseekers the attitude that would make them attractive to employers and their blunt tools struggle to deal with the different reasons why people are unemployed. Costly, intensive income management might help some jobseekers but rolling it out to everyone is likely to be a waste of money.

The best thing that government can do is limit the negative impacts it has on the labour market and the economy, and enable business to generate sustainable economic growth. This will not only increase national income but also increase the options available for job seekers.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.