Why work for the dole doesn't work

The federal government will be out in force this week spruiking its work for the dole scheme but Australians should ignore the political theatrics and focus on the one unavoidable truth: the proposed scheme will not work. It’s a dud.

Under the proposal, Australians aged 18 to 30 will be required to work 25 hours per week to receive their welfare payments. Those aged between 31 and 49 will have to work 15 hours.

At first glance it seems like a good idea. Surely gaining work experience and skills in return for your welfare cheque is a good thing, right?

Unfortunately such schemes rarely allow the unemployed to gain useful work experience or skills. As a result, work for the dole has consistently failed to provide sustainable work opportunities and evidence suggests that it may in fact increase the length of joblessness.

Rather than a path to success for unlucky (or occasionally lazy) Australians, it represents a subsidy for menial work that the market doesn’t value. Why pay for a job when you can get someone to do it for free?

Research in 2004 by Jeff Borland and Yi-Ping Tseng of Melbourne University found that “there appear to be quite large adverse effects of participation in [work for the dole]”. Those who were not in the program generally found it easier to find active employment.

Participation in these programs mostly diverts participants away from jobseeking activities towards what is often menial and unrewarding work. Some readers might doubt the significance of this effect but we should bear in mind that many candidates will have to write dozens of applications simply to find a single interview, let alone a job.

More importantly, programs such as work for the dole are pretending to find solutions to problems that can more easily be solved through greater economic growth. Harsh and ineffective welfare reform will achieve little more than punishing younger Australians and the long-term unemployed for economic conditions they played no role in creating.

High levels of youth unemployment are a product of the global financial crisis. Outside of the mining sector, opportunities evaporated across the country and younger Australians -- who are more sensitive to the business cycle -- were the ones who paid the price.

Unfortunately, the outlook for employment is far from bright. According to the Department of Employment, based on the 2014-15 budget estimates the Australian economy will fail to generate sufficient jobs to absorb population growth over the next five years.

The federal government is admitting that its policies will be insufficient to keep unemployment in check. On that basis, the only reasonable conclusion is that work for the dole will fail: if the opportunities don’t exist, then it really doesn’t matter how much work someone does for their welfare payments.

The federal government may be serious about tackling youth unemployment but policy recommendations must be based on evidence rather than ideology. The Coalition has decided that giving people a kick up the butt will be sufficient to get them back to work but that’s far too simplistic. Unfortunately they have failed to give due recognition to the most important part of the puzzle: without opportunities it doesn’t matter how harsh your welfare system is, people still won’t find jobs.