The ALP Plays Around: Boot camp, Unemployment and the dole

With the announcement for a proposed ‘boot camp’ for unemployed youth coming out of the Education and Employment Government ministries this week, youth unemployment policy looks set to be a major election issue this September.

Yet the ‘boot camp’ initiative has been overshadowed by a report published on Wednesday by Andrew Baker at the Centre of Independent Studies that accuses the Government of manipulating unemployment figures for political gain with serious macroeconomic consequences.

How exactly Baker suggests the Government has done so is simply to shift more people out of the labor force by putting them on welfare or further education and training and changing their status from being ‘job seekers’ to ‘non-job seekers’. This lowers the participation ratio of people either working or seeking employment as a proportion of the entire population, but importantly depresses the official unemployment rate (which currently stands at 5.7%).

There is a political side, and a practical side to this policy.

Politically, there is great advantage to be had from tweaking unemployment figures, which have fallen by 0.2% to 0.5% since policy implementation in July 2009. In doing so, Labor can try to salvage its image as responsible economic manager.

To be eligible for Newstart or Youth Allowance, the Government removed the requirement for recipients to look for work while on welfare, and replaced it with a compulsory return to education or further training, which unsurprisingly resulted in a massive increase in people seeking welfare.

Numbers from the Australian Bureau of Statistics show that the number of people claiming unemployment benefits had increased from 613,000 in 2009 to 632,000 in June 2012. Tellingly, of those on welfare the number of jobseekers to non-jobseekers had fallen by 22%, while those in the non-jobseeker category had risen by 62%.

According to the ABS, anybody receiving welfare, education or further training under federal government initiatives (who are not required to look for work) is not included in the labour force and hence excluded from unemployment figure estimations.

This may misrepresent the true unemployment conditions in Australia and certainly puts a portion of the Australian population at risk of increased welfare dependency.

However Peter Whiteford from the ANU Crawford School of Public Policy thinks that while the accuracy of unemployment rate has been compromised, it should not be viewed as manipulation of official statistics.

In other words, it is unlikely that political philandering is the reason behind the policy. The marginal decrease in unemployment rate would not be worth such a hike in welfare costs, which brings us to the more practical reason behind the policy change: increased education and skill levels.

It may be that more people are unemployed now instead of continuing to search for work, but now they go back to school, enroll in TAFE or enter into work experience activities. Indeed the number of people on unemployment benefits undertaking education and training has swollen by 138% in the past three years.

Kate Ellis, Minister for Employment Participation said of the real higher unemployment rate on Q&A: “They’re not working because we’re keeping them in school – 15 year olds!” (Though we should not be led to believe that the unemployed undertaking further studies are all 15 years old).

An oft-cited edict from Minister for Skills and Training Brendan O’Connor maintains that “[he does] not apologise for this government’s efforts to support young people so they can reach their full potential”. The training and skills provided should guarantee unemployed youth a “much greater opportunity” to seek and maintain employment.

Enter Baker’s chief counterargument: “the claim that more education is always better for everyone is false.”

He argues that reskilling and up-skilling to suit new labour market conditions is generally beneficial, but for some, they pose marginal diminishing returns. “If you haven’t learned to read, write or count after 10 years of school, another two aren’t going to do you much good. That time would be better spent working or at least looking for work.”

The underlying implication is that more people who spend their time pursuing further study instead of being economically productive will hurt the economy.

It is true that more education and training, which is mostly seen as an exponential investment of some kind may not benefit everyone. While it will mean a more highly skilled working sector overall and hopefully a more wholesome, educated society, this does not necessarily translate into a higher employment rate. But it could, with the right macroeconomic policies to increase investment and deregulate the labour market.

The increase in welfare dependency from converting should-be jobseekers to non-jobseekers comes at a significant economic price. Delaying full time employment for a skills boost will pay off only if the retrained workers find and maintain employment.

The verdict? Public provision of education and skills training must be matched by investment in the private sector to boost labour demand. If not, all the additional education and training will amount to is a bunch of useless qualifications and framed diplomas hanging on people’s walls.