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Employment policy and job creation – some practical solutions

Where will the new jobs come from? le Haricot/Flickr. Artist credit: George Segal, CC BY-NC-SA


In the lead up to last year’s federal election, the government promised two million new jobs within 10 years. Its focus was on the “five pillar economy” of manufacturing, agriculture, services, education and research, and mining.

With the focus currently on finding ways to get unemployed people into work, we asked the experts for their views on what role the government can play in job creation - and the things it could be doing now to make a difference in the medium term.

Jeff Borland, Professor of Economics at University of Melbourne

Solutions: Distinguish between short-term and long-term unemployed with policy solutions, provide private sector wage subsidies, and consider tailored intervention for those that need reskilling.

Unemployment in Australia will only be reduced when there is an increased rate of growth in the number of jobs. Higher growth in employment in turn requires a faster growth in economic activity. It follows that the main way the government can promote employment growth is by using macroeconomic policy to facilitate high rates of growth in GDP. This is the demand-side of policy.

The other way to address unemployment is via supply-side policies. These policies seek to improve the job readiness of people who are unemployed or are making the transition from education to work, thereby making them more prepared to move into a job (or into a wider variety of jobs) when there is a faster rate of growth in employment. The key elements of these policies should be to ensure participants’ skill levels are raised to make them viable job applicants and to provide pathways for them into permanent employment. Supply-side policies also need to address the diversity of backgrounds of people who are unemployed.

For short-term unemployed the best policy is to promote job search. For those who do not obtain employment within four to six months there should be screening to distinguish between people who may be relative job ready and those who have more substantial impediments to employment.

Programs such as private sector wage subsidies can provide an effective means of promoting employment opportunities for people who are relatively job ready. For those with substantial impediments there needs to be more focus on provision of skills – this is best done when it is targeted at and tied to an employment opportunity. It is likely to involve tailored intervention and may be relatively expensive. But it is important to remember in doing the benefit-cost calculation that the payoff may be to create a productive worker for the next 45 years.

Finally, government funding of services for the unemployed needs to allow decentralised and local solutions – elsewhere I have proposed the idea of an Australian Research Council type scheme as one way of funding these programs.

Eva Cox, Professorial Fellow at University of Sydney

Solutions: Job creation options for socially useful projects, fewer public service cuts and ensure employers recruit and train locally before importing labour.

Job creation isn’t easy for governments, particularly when they are actually reducing their role as direct employers. There are scheduled and actual cuts in most public services. There are other jobs being created and we still have so called ‘shortages’ which are being filled by temporary residents, some of these jobs may be suitable for those who are unemployed. However, no one seems to be in charge of checking whether employers are making a serious effort to recruit locals, whether they are offering appropriate training or whether job agencies are liaising effectively with employers to promote possible candidates etc.

We have had job creation funding in the past and some serious funding of NGOs etcetera to establish socially and economically useful projects, such as REDS in 1970s and similar projects in the eighties recession. These project-based options could be revisited as an effective alternative to Work for the Dole, as they would be proper jobs for up to 12 months with training where necessary and useful outcomes. Good projects take time and energy, but some could be funded as social enterprises, with the assumption that they become self sustaining in an agreed period.

There is work to do in the community that creates benefits for all, e.g. via local government in rural areas, but these need proper planning and funding so the workers have the skills and appropriate infrastructure. Some funding in these types of projects may well create much wider benefits that justify more public spending! Similarly, the creative industries have many project options that create both employment and enjoyment.

Relying just on the private market fails as they will recycle the people already in work, or just out of it, not those out of the system who need more support, even if they have skills. Being unemployed is already stressful financially and personally and is likely to be more damaging if budget and current unemployment policy plans go ahead.

Jenny Green, Senior Lecturer, School of Management, UTS

Solutions: Make it easier for people with a disability to contribute.

  1. Increased flexibility in the disability support pension regulations in relation to employment.

  2. Funding of Disabled People’s Organisations for its significant role as an employer of people with disability in paid and unpaid work. This role is at risk with the funding changes proposed for the National Disability Insurance Scheme, yet research demonstrates these organisations are the common scaffold in successful career building for people with disability.

  3. Demonstrated government commitment to changing the status and perception of people with disability in our community through the reinstatement of a Parliamentary Secretary for Disability, the retention of a Human Rights Commissioner for Disability and a conscious shift in language, for example from “welfare rorters” to highly valuable, skilled and under utilised human capital.

Richard Holden, Professor of Economics at the Australian School of Business, UNSW

Solutions: Get out of the way of job creators, but remember the externalities.

It is always a terrible idea for the government to try and pick winners. History tells us that governments of all stripes, in all places, at all times are terrible at picking winners and that political concerns inevitably triumph over economic concerns. Central planning in the USSR failed because markets are better at aggregating and communicating information than governments can ever hope to be.

What the government can do is provide a stable and hospitable environment, and basically “get out of the way” of job creators. That doesn’t mean no regulations— the government plays an important role in internalising all sorts of externalities. But it certainly does not mean favouring one industry over another.

David Peetz, Professor of Employment Relations at Griffith University

Solutions: Concentrate on genuine skills development, not trying to match the skills demanded.

That fateful combination of politics and ideology means politicians push a lot of ideas that won’t create jobs. Making job seekers apply for more jobs won’t create any jobs. Nor will taking the dole of the unemployed or cutting their benefits. ‘Work for the dole’ creates satisfied politicians, not jobs or credible CVs. Cutting minimum wages has pretty ambiguous effects on employment - it makes low paid workers even cheaper but it means even less is invested in training for them, and comparisons across countries don’t suggest that it works on any large scale. Austerity budgets that cut the growth of public spending also cut opportunities for employment growth don’t help.

What does help? A decent rate of economic growth is the biggest single factor to resolve demand-induced unemployment. Some unemployment is “structural” in the labour market - people’s skills not matching the skills demanded, or straight out discrimination (against people with disabilities, or older workers, for example). Genuine skills-development helps (ie training for jobs, not training for the sake of keeping people busy) - not punishment - as do wage subsidies for those who are discriminated against or otherwise disadvantaged in the labour market.

Professor Peetz’s comments have been added since first publication

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