Why Work for the Dole won't work

The sharp rise in youth unemployment represents a lack of opportunity rather than laziness. Reintroducing Work for the Dole will do little to improve the situation and may make matters worse.

Is a kick up the butt all that is needed to help fix Australia’s youth unemployment problem? A sharp decline in benefits and the return of ‘Work for the Dole’ is set to dramatically change the welfare state for young Australians. But although the Work for the Dole scheme might sound like a good idea, the evidence is damning: it may, in fact, make it more difficult to find a job.

Under budget proposals announced on Tuesday, unemployed people under the age of 25 years will no longer quality for the Newstart allowance of $510 a fortnight and instead will have to apply for the lower Youth Allowance of $414 a fortnight, representing an almost 20 per cent cut to benefits.

In addition, people under 30 years will be subject to a six-month waiting period before they can receive the Newstart allowance. The waiting period will depend on their work history, with discounts of one month for each year of work – and pro-rata discounts for part-time or casual work.

But it is the planned re-introduction of the ‘Work for the Dole’ scheme that warrants further discussion. Intuitively, the scheme seems like a good idea. How can gaining work experience and skills in return for your welfare cheque be a bad thing?

Certainly, that was my general view on the topic. But upon further consideration and wider reading, my views have since shifted. Unfortunately the evidence suggests that the scheme will not work and could instead increase the length of joblessness.

Research in 2004 by Jeff Borland and Yi-Ping Tseng of Melbourne University suggests that “there appear to be quite large significant adverse effects of participation in [Work for the Dole]”. The main reason is that participation in the program diverts participants from job seeking activity towards Work for the Dole activity. Research on similar programs internationally has come up with comparable findings.

The government’s program will require jobseekers to undertake 25 hours a week of work -- at sub-minimum wage.

Anyone who has spent time out of the workforce understands how long it can take to put together a high-quality application. Anyone looking to shift jobs understands how difficult it is to write applications while also working.

Rather than make it easier to find a job, the program actually makes it more difficult to get off benefits. Unfortunately, it is not a program that promotes employment, but a program that creates temporary subsidised employment for various groups across the economy.

On Tuesday, Minister for Employment Eric Abetz promoted the benefits of the scheme.

"We sell our young people short if we allow them to drift into welfare dependency," Abetz said. "The new Work for the Dole program will help young jobseekers gain the skills and experience they need to move from welfare to work as soon as possible, while also making a positive contribution to their local community."

The government may have the best intentions with this scheme but policy recommendations should be based on evidence rather than pure belief. On that basis, the Work for the Dole scheme would be better left forgotten.

We cannot understate the problem that youth unemployment poses for the Australian economy. The sharp rise in youth unemployment and decline in participation represents a lack of opportunity rather than laziness. Participation is at its lowest level in over 35 years.

It’d be nice to think that giving them a kick up the butt is all it takes to fix the problem, but that should not be the basis of a policy recommendation. High youth unemployment creates a long-term problem and unless we face up to it now we run the risk of creating a generation of Australians who will be less skilled and experienced than the generation that precedes it. Policies like Work for the Dole will do little to rectify the issue and may in fact make it worse.