Opposition Leader Kim Beazley has committed the ALP to a 5 per cent or better unemployment target. In one of his pathway speeches, Mr Beazley said Australia could do better on employment. He said the ALP would revamp its tax credits plan and employment incentives, and would focus on economic growth and better education to drive down unemployment.
Mr Beazley is right to focus on education and economic growth and the policy he took to the last election on tax credits had much merit. But employment-incentive schemes have dubious benefits. Labor and the Coalition have fundamentally different approaches on employment and have had for some time. The first difference is that Labor thinks government action on employment program can affect the employment rate. The Coalition is more sceptical. Its view has been that if you get the economic fundamentals right – inflation, interest rates and government spending — the employment rate will fall of itself. Experience over the past 10 years indicates that the Coalition’s position has more merit. Labor’s Working Nation program did not help much. The Coalition’s concentration on economic fundamentals has arrested increases in unemployment and turned it down slightly. Unemployment is running at 7.2 per cent — the lowest level since 1990. Moreover, Treasury now says that unemployment rate could fall well below 7 per cent without igniting inflationary pressure. Those figures are good evidence for the Coalition’s view on employment.
That said, Mr Beazley is right to concentrate on education. It is a fundamental of employment, just like economic conditions are. But it would be a mistake to channel too much effort into vocational-specific education, other than of a short-term nature. It is likely that many young people in school today will go into a job that has not been invented today. It is more important to concentrate of good general education. Skills from that are more adaptable to new forms of employment. There is no substitute for on-the-job training and the experience of employment.
Mr Beazley is also right to focus on the jump from welfare to work. Even after recent government reforms, people moving from welfare to work often have very high rates of marginal taxation as welfare cuts out and new income is taxed. Before the last election, Labor presented a plan that would ease the transition by rebating tax.
The critical point, though, is Labor’s recognition that welfare payments and tax can act as a significant disincentive to work. That philosophy should be applied more widely.
The great majority of people out of work, do not like being out of work. However, part of the 7.2 per cent out of work have enough money on the dole to act as a disincentive for active pursuit of work.
Mr Beazley made no mention of impediments to employment: payroll taxes; the bureaucratic requirements of occupational health and safety regulations; various allowances and penalties that exist in the unreconstructed award system; and unfair dismissal laws. Indeed, he suggested that unemployment targets could be achieved without cutting what he called workers’ rights.
It is salient that the largest employment growth in Australia has come in fields where unions and awards are weak and individual contracting is high (hospitality and IT) and employment has contracted in areas where unions and awards are strong (the public sector and big manufacturing).
Some Australians have priced themselves out of a job and no government program is going to get it back for them. Only good basic education and a sound economy can so that.