Last week, the peak body representing small business in Australia, the Australian Chamber of Commerce and Industry (ACCI) called on the Federal Government to hand over free labour under the guise that “making coffee” will enhance the skills of the workers. The free labour they want to get their hands on are the unemployed on income support. They want the Government to continue to pay the below-poverty income support but force the recipients to work in small and medium-size businesses “making coffee or serving customers” as a solution to youth unemployment. This is the same group that thinks the pay of the lowest-paid workers (like kitchen hands, cleaners etc) should be cut. They also claim that rising unemployment in Australia is being caused by structural rigidities in the workplace (job protection, occupational health requirements etc). There is a wide-ranging attack on workers going on at the moment. This is just one aspect of this attack. Austerity is forcing more onto the unemployment pile. Once there they are being increasingly subjected to pernicious policy requirements (see yesterday’s blog – Job Services Australia – ineffective and rife with corruption – scrap it!). Then employer groups lobby government to cut wages and conditions and scrap regulative environments that protect workers. It is an important era for social democrats. Either we regain some political equanimity and coherence or we continue to call parties Socialist that impose austerity and talk about being ‘pro-business’, while attacking pensions, wages, and employment.
They claim in the press release (February 12, 2015) – Rising unemployment shows workplace reform cannot wait – that:
… all sides of politics that we must engage in serious discussion on how to make it easier for businesses to employ. There are rigidities in the system that are leaving businesses, particularly small and medium enterprises, reluctant to hire new staff.
I have advice for any small and medium business.
If you have sales that justify adding an extra worker, put an advertisement in the usual place (Employment column) with a closing date for applications. Sift through the hundreds of applications and choose several that appear to be the most suited abandoning any pre-conceived ideas of which socio-economic area the applicant went to school in and ignoring their gender, age, ethnicity etc.
Interview them and choose the best candidate and put them on the payroll.
And … stop trying to undermine the socio-economic conditions associated with work that people fought for years to obtain.
If they follow that advice – everyone will be happy (except those who do not get the job offer).
ACCI was at it a few days later (February 17, 2015) – Everyone but unions can see penalty rates have impact on employment.
They claimed that:
It is common sense that when employers in services industries such as retail, restaurants, pharmacy and fast food are forced to pay high penalty rates on Sundays and public holidays they are less able to hire staff or in some cases even open their businesses.
This is a case when common sense fails. Please read my blog – When common sense fails – for more discussion on this point.
Common sense that only focuses on the supply impact of wages (costs) does not make much sense at all. Wages are an important part of income which is, in turn, spent to make sales and buy the dinners in the restaurants.
I have done a lot of work in the National Wage Tribunals on this issue as a defender of penalty rates for non-standard hours of the working week.
The Tribunal judges (in Australia) typically reject the argument that employment would boom if these rates were scrapped.
They note that the labour supply would shift (people would not supply labour to cafes etc that cut their wages), that spending might fall, and overall employment would unlikely rise.
When total spending growth was strong – prior to the imposition of fiscal austerity and the decline in private investment associated with the slowdown in mining – there was strong growth in employment in the sectors that are most vulnerable to penalty rates.
With slower growth and more subdued spending patterns, some firms are finding they cannot sell enough meals etc. That means that the sector is over-supplied relative to demand. Cutting wages will lower demand even further and do nothing to improve sales.
The myopia of this “common sense” is stunning really.
And now the latest stunt from ACCI is to demand that the Federal government provide their membership – small and medium businesses with free labour – yes, you read it correctly.
The Fairfax media article (February 20, 2014) – Work for the dole needs to be in the private sector: ACCI – outlines the case that the CEO of ACCI has made to the Government.
The plan would be for the Government:
… to expand the work for the dole scheme, allowing the private sector to use young unemployed workers who would be paid for from the public purse as a way of addressing youth unemployment.
First, the – Work-for-the-Dole scheme (WfD) is a particularly nasty policy that forces certain unemployed workers to undertake coerced work for 25 hours a week at below the legal mininum wages in return for the income support the Government provides which is, itself, below any acceptable poverty line.
So to reinforce:
1. The unemployment benefit in Australia is already below the poverty line and neither side of politics will lift it. The gap is getting worse over time.
The current unemployment benefit payment is $510.50 per fortnight for a single person. At present, the Poverty line for a single, unemployed person is $A408.44 per week. So the current income support payment is only 62 per cent of the poverty line, which means that the unemployed are living in third-world conditions in one of the richest (and most expensive) nations in the world.
2. To receive that poverty payment, the Government forces some unemployed groups to undertake 25 hours of work per week (or 50 hours a fortnight) at an hourly rate (implied from unemployment benefit) of $A10.21 per hour.
Fair Work Australia, which sets the National minimum wage, says:
From 1 July 2014, the national minimum wage for a full-time employee aged 21 or over will be $640.90 per week or $16.87 per hour.
So a person aged 21 or over, for example, will be forced to work for 60 per cent of the legal minimum wage in Australia to keep their income support payments.
This part of the policy means the Government is breaching the rule of law – it is enforcing people to work below its own Federal minimum wage. The Government gets around this by excising the work done under the Work-for-the-Dole scheme from industrial law governing employment.
Please read my blog – Changes to unemployment benefit entitlements – the work of sociopaths – for more discussion on this point.
Second, currently the private sector is precluded from engaging with Work-for-the-Dole projects. Not-for-profit community groups, universities etc can propose WfD projects. I know of one major public employer that did away with its gardening workforce and replaced them with WfD persons.
Imagine what will happen if the mainstream private sector gets access to the program.
Third, the Government admitted some years ago that the Scheme was a ‘compliance’ approach – forcing the unemployed to jump through hoops in return for their measly, poverty-level unemployment benefit. They were able to politically get away with this human rights abuse by turning the employed citizens against those that were unemployed.
That was a concerted campaign involving sensationalising single cases of people who might not want to work, by introducing vile nomenclature (dole bludger, job snobs etc) to engender the view that ‘we’ are paying for these lazy ingrates.
And to our eternal shame – it worked. ‘We’ (the employed) were stupid enough to believe the claims that the unemployed were idle because they were lazy and playing us for suckers. Well we were suckers but it was the government and the right-wing think tanks that were playing us.
Progressive political parties also fell into the trap and now talk about training relentlessly as if that will cure a major aggregate demand failure which leads the economy to generate insufficient jobs.
Fourth, ACCI claim that extending WfD to the small and medium businesses will teach our youth “some skills”. The CEO said:
Even if it’s just learning how to make a coffee or serving customers, that would make them more employable. We think that could be a real win for young people.
So I guess she (the CEO) wants someone to bring her coffee!
If the private sector has demand for their products at the current cost and regulative structure then they will employ. It is a total smokescreen to claim that rigidities (like sensible job protections etc) constrain employment.
These regulations and pay structures are where a sophisticated society is different from a jungle. They are designed to redress the incredible imbalance within Capitalism where one firm can choose from thousands/millions of workers. They are to provide some balance in the unequal Labour-Capital exchange.
If there is productive work to be performed in these small and medium businesses that adds value (which means it can be realised through sales) then the firms will employ.
What audacity to think the Government should give these workers over to firms to help advance their profit-making for free.
But there is another point that goes to the usefulness of WfD positions. Recent research (and we should always be guided by knowledge rather than simple-minded profit greed) casts doubt on Workfare type programs generally.
The August 2008 Report – A comparative review of workfare programmes in the United States, Canada and Australia – does not provide a glowing testimony.
It studied the effectiveness of workfare in “reducing welfare caseloads”; in “improving employment outcomes”; and in improving the lot of “clients with multiple barriers”.
In relation to the first objective, it found that:
1. The “dramatic reductions in welfare caseloads” (in the US and Canada) “cannot be attributed to workfare alone”. They found that harsher rules regarding time limits and claim eligibility as well as stronger economic growth which “enabled recipients to find work” were instrumental in the falling caseloads.
Which is what we expect. First, reduce the caseload by forcing people out of the eligible category in any way you can. Second, create employment growth which allows people to get jobs and reduces hiring standards because employers are forced to be less choosy in who they recruit.
2. People were forced off income support “before the workfare phase” became mandatory, which of-course reduces the caseload.
In relation to “improving employment outcomes” it found that:
– There is little evidence that workfare increases the likelihood of finding work. It can even reduce employment chances by limiting the time available for job search and by failing to provide the skills and experience valued by employers.
– Subsidised (‘transitional’) job schemes that pay a wage can be more effective in raising employment levels than ‘work for benefit’ programmes.
– Workfare is least effective in getting people into jobs in weak labour markets where unemployment is high.
– Levels of non-participation in mandatory activities are high in some workfare programmes.
In relation to the third area of concern – improving the lot of “clients with multiple barriers” it found that:
– Workfare is least effective for individuals with multiple barriers to work.
– Welfare recipients with multiple barriers often find it difficult to meet obligations to take part in unpaid work. This can lead to sanctions and, in the most extreme cases, the complete withdrawal of benefits that leaves some individuals with no work and no income.
– Some states in the US have scaled down large-scale, universal workfare programmes in preference for ‘softer’ and more flexible models that offer greater support to those with the most barriers to work. This includes a greater reliance on subsidised jobs that pay wages rather than benefits to participants.
The lessons are many but some key conclusions are found repeatedly in these types of studies.
Work-for-the-dole is an “ineffective” way to help “participants find sustainable employment”. I have written a number of evaluative papers on this topic in response to Australia’s history of these sort of schemes.
We have consistently found that the poor results for these type of labour market programs beg the question as to why should we expect anything better in the absence of policy measures designed to address the quantum of jobs and issues of job security?
Improving employability does not increase the level of aggregate labour demand.
We found that schemes based on “intensive assistance” of welfare caseloads (attitudinal counselling, training etc) produce poor outcomes. The churning of the unemployed through training programs (usually divorced from the paid-work environment) fail and point to the futility of training the unemployed for jobs that are not there.
Typically, training providers face contractual payments which distort their choices with respect to their caseloads. In Australia, it has been found that such payment structures have led to a substantial proportion of intensive assistance participant being ‘parked’ (held on books but with no assistance being given) while providers concentrate their efforts on job seekers who are easier to place in employment.
We have found that outcomes for the various Work for the Dole programs introduced in Australia are poor with only a small proportion of participants finding full-time work or, indeed, any form of employment.
In isolation, supply side measures merely shuffle the jobless queue. The clear danger of this kind of zero-sum redistribution is that policies achieve tentative reattachments to the labour force at the expense of deepening employment insecurity.
Labour-market instability, poverty and indeed welfare dependency are not solved by such measures; they are simply redistributed amongst the same at risk groups.
Upward mobility and absorption of the long-term unemployed into paid employment is most effective when overall employment growth is strong. Supply-side schemes fail when employment growth is weak or negative.
So-called structural reforms only really work when the fiscal environment is strongly supportive of economic growth. They just compound the costs associated with a weak economy, when the government macroeconomic policy is undermining growth.
It is the demand-side that tells us how many jobs are available, yet these approaches focus on the supply-side while undermining the demand-side through fiscal austerity.
There was a major study from researchers from the University of Melbourne – Does ‘Work for the Dole’ work? – which said that:
The main conclusion is that there appear to be quite large significant adverse effects of participation in WfD.
They noted that the most likely reason for these adverse effects on subsequent capacity to gain employment by participants was the:
Effect on job search activity – Participation in WfD may allow participants to reduce their job search activity, and may adversely affect the type of job search activity undertaken …
A Fairfax article (July 29, 2014) – Work for dole schemes no help in finding jobs, says expert – summarises work done on this question.
They quoted one of the researchers from the University of Melbourne who said:
The international evidence is overwhelming … It’s hard to believe that the government couldn’t understand that this isn’t the best way to improve people’s employability.
I guess you have to conclude that there are other reasons for wanting to expand the program, and the title of the scheme [work for the dole] suggests it’s being done for political reasons.
It is obvious that WfD is a political stunt designed to maintain the sort of scary reasoning that they have implanted in the minds of the general public, which has been calloused towards the unemployed by years of neo-liberal promotion of the idea that they are lazy, have poor attitudes and do not want to work.
None of the research evidence supports the perception that has been promoted. But the real tragedy of this issue is that a majority of Australians now think that way (until they become unemployed). So the government is waging a vicous and pernicious war on the unemployed to garner some political points.
They are willing to engage in psychological torture of the unemployed for a bit of political leverage.
So if the Government conceded to ACCI – they would just be handing free labour over.
The Private Sector firms cheat on wages anyway
The ABC News rean a story yesterday (February 23, 2015) – Thousands of workers underpaid, denied entitlements by Australian employers figures show – which reported that private firms were forced to pay their workforces more than $A23 million in upaid entitlements after the Fair Work Australia (the wage setting tribunal) conducted some surveillance of pay conditions after complaints were received.
16,000 workers were found to be underpaid.
The data shows that:
The industries that generated the most complaints were cafes, restaurants and pubs, followed closely by construction, the retail trade and service industries like contract cleaning.
These are ACCI’s membership and the sectors that are leading the charge to abandon penalty rates for weekend and public holiday work.
The number of abused workers is the tip of the iceberg. The only way the Fair Work Australia investigates is if there is a complaint.
There are thousands of overseas workers on the special 457 Visa (temporary workers) who are exploited relentlessly but who will not mostly complain.
The criminal behaviour is concentrated in the already low-pay sector.
The union representing these low-pay workers said:
Unfortunately what we are seeing is too many employers are taking advantage of people … Either they have poor English skills [or are] just starting the job in hospitality and they’re very fearful for their job security if they make waves.
I suppose if the Federal government extends WfD to the private firms then this problem will go away – the employers won’t have to cheat anymore because they will get the workforce for free!
Job Guarantee is not Workfare (Work-for-the-Dole)
Regular readers will know that a major component of Modern Monetary Theory (MMT) is the recognition that the use of employment buffer stocks rather than unemployment buffers (accompanied by workfare schemes) is a superior way to manage the flux and uncertainty of the economic cycle.
We characterise the employment buffer stock approach as the – Job Guarantee – and show how it directly addresses the cause of unemployment and income inequality by requiring the State to use its power as the issuer of currency to maintain full employment and inflation control.
The Job Guarantee requires the public sector to maintain a ‘buffer stock’ of minimum wage jobs that would be available to anyone willing and able to work.
Under the Job Guarantee model, full employment is attained by the guaranteed provision of a public sector job to all workers unable to find a job in the private sector.
It does not rely on engineering labour supply adjustments by paring back returns for those at the bottom of the earnings distribution.
By setting the Job Guarantee wage rate at the level of the national minimum wage, the private sector wage structure is not disturbed and workers cannot be played off against one another to the detriment of their bargaining position.
In recognising that unemployment is not a behavioural dysfunction, but a failure in the conduct of macroeconomic policy, the State can address the problem at its root cause by maintaining full employment and a decent wage floor.
As its name suggests, the Job Guarantee model delivers employment outcomes rather than relying on real wage cuts to generate an unknown quantum of jobs.
Unlike workfare schemes, the Job Guarantee is a policy approach that does not require us to jettison economic security, social justice and the traditional objectives of wage setting in order to build an efficient and productive economy.
The Job Guarantee is not a more elaborate form of Workfare.
Workfare does not provide secure employment with conditions consistent with norms established in the community with respect to non-wage benefits and the like.
Workfare does not ensure stable living incomes are provided to the workers.
Workfare is a program, where the State extracts a contribution from the unemployed for their welfare payments. The State, however, takes no responsibility for the failure of the economy to generate enough jobs.
In the Job Guarantee, the state assumes this responsibility and pays workers award conditions for their work.
If I was running the Job Guarantee scheme, no workers would work within the private sector and be paid for by the State. All workers would be productivity employed within the public sector advancing societal welfare rather than private profit.
Clearly, if society is in good shape then it is a productive environment for private firms. But that is not the goal of the Job Guarantee, although it might be a positive offshoot.
But there are no end of productive jobs within the public sector that can be performed rather than contemplating audacious free labour schemes for capitalists.
There is a wide-ranging attack on workers going on at the moment. Austerity is forcing more onto the unemployment pile.
Once there they are being increasingly subjected to pernicious policy requirements.
Employer lobby groups are demanding wages and conditions be cut and regulative environments that protect workers scrapped.
And the latest one is that the they want the Government to pay for their labour forces.
It is an important era for social democrats. Either we regain some political equanimity and coherence or we continue to call parties Socialist that impose austerity and talk about being ‘pro-business’, while attacking pensions, wages, and employment.
That is a one-way street to despair.
Guardian Article on the state of the unemployment industry in Australia
For those that haven’t picked up on it yet here is the link to my Guardian article on unemployment, which I wrote about yesterday.
There was a related news story yesterday from the ABC – Government recovers over $41 million worth of false claims after ‘rorting’ of Job Services Australia scheme
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.