Thursday, August 25, 2016

Is Harassing the Unemployed Justified


A key feature of the government’s approach to unemployment is the constant vilifying and harassing of the unemployed.  It may be a good strategy for diverting attention from government stuff-ups and appealing to voters darker side but there are no signs that it is reducing real unemployment , creating jobs, preparing people for more productive work or helping to share the available work in a fairer way.

This post asks whether there are smarter, fairer ways of dealing with unemployment.  It also presents some useful employment and unemployment welfare system data.
How many dole recipients aren’t trying to find work?
Long term unemployment might be used as a rough guide to the upper limit on how many unemployed people aren’t trying to get work.  For financial years 06/07 to 10/11  only 14 to 19% of the unemployed had been unemployed for over one year with  50 to 58% being unemployed for less 13 weeks*.  This suggests that thevast majority of the unemployed are actively seeking work and would find the government’s vilification and harassment a distraction. Keep in mind that many of those who have been unemployed for over one year will still be actively seeking workbut finding it hard to get jobs because they have the wrong skills, poor health, live in the wrong place etc.
(*NOTE: See the data set at the end of this post for links to quoted data.)
Is there really is a work shortage?
Hassling the unemployed might make a bit of sense if there was a surplus of jobs that the unemployed could do. However, the facts strongly suggest that there is a real and significant shortage of work and that this has been the norm for a long time.  For example, in June 2014 there was a total of 783,000 people unemployed compared with job vacancies of 146.100.  (Over 5 unemployed people per job vacancy.)
In addition, many people with a job want to work longer hours.  August 2010 data  indicated that total hours worked would have increased by 3.0% if all people with jobs had been able to work the hours they wanted to.  This adds to the real shortage of work.
Conclusion: There is a real and significant shortage of work.  Worse still, this shortage has lasted for over 30 years and shows no signs of ending in the foreseeable future.  Implications:
  1. The vilification of people on the dole is based on a work ethic that says that  people on the dole are bludging on those who have work.  However, the ethics should change while there is a shortage of work. The ethical thing for  someone who is happy to live on the dole is to not to compete for jobs against people who really need the work. 
  2. The really unethical people during a work shortage are the “work hogs” whose long hours help reduce the number of people their employer needs to employ.  Ditto employers that insist on work rosters that lock in long working hours.  Ditto also employers that pressure people to work longer hours by moving employees from hourly wages to salaries. (If you are on a salary when there is a shortage of work you work long hours in the hope that you won’t be the one who loses your job.)
  3. Work shortages create opportunities to provide work for people who really need a job by supporting others who are willing to leave their jobs and live on the dole while they attempt to start a business, get more education or pursue some other dream.  With luck, the result may be a new job creating business, a better educated person or perhaps a stunning book of poetry.
What about unfilled vacancies?
It is inevitable that some vacancies will be difficult to fill even if a lot of unemployed people could do the job.  There is nothing in the current rules that says unemployed people have to apply for a particular job.  Many vacancies won’t attract applicants because of issues such as location, the nature of the work, employer reputation or simply a failure of the employer to notify potential applicants of the vacancy.
Some government rules make it harder to fill these problem vacancies.  For example:
Waiting periods.  These are the delay between when the dole is applied for and when the payments start. They can vary from one week upwards depending on circumstances. For example, a single person will have to wait an extra week for every $460 of fluid assets held compared with someone with no fluid assets. Maximum of 13 weeks wait .  (NOTE: There are some provisions for exemptions and hardship payments.)
Waiting periods may make the unemployed be more cautious about applying for a job.  They are spooked by the risk of being trapped in what turns out to be a rotten job in a rotten place until they can save enough to survive the waiting period.
Claw back
Claw back is the amount the dole is reduced when the recipient obtains other income.  The claw back is very punitive. For example, the payments to a single person will be reduced by 60 cents for every extra dollar earned above $125 per week.  In some cases income tax will have to paid as well.  Someone who moves from the dole to earning the minimum hourly wage ($16.87/hr) will have no more than $6.75/hr left to pay the extra costs of  going to work.
What claw back and waiting really mean is that an unemployed person who goes fruit picking can easily end up out of pocket because of the cost of travel, accommodation costs etc.
Micro business:
Small business often means that expenses and income are erratic even if the annual income is fairly steady.  Friends of mine who have micro business’s to boost the pension find that Center-link hasn’t got a clue about what these types of business are like and how to deal with variable expenses and income.  Some of these friends have decided that it is not worth the hassle and shut the business down.
SO WHAT MIGHT WE DO?
  1. Accept that there is a real and significant shortage of work.
  2. Start talking about work hogs, the employers that encourage people to be work hogs and the importance of sharing the available work.
  3. Levy the employers that allow/force people to be work hogs.  (Using the levy to pay the cost of our unemployment system.  Seems fair to me.)
  4. Stop vilifying the unemployed and get rid of policies that are all about punishing the unemployed for government and business failure.
  5. Set priorities.
    • Get at least one breadwinner employed  for families with dependant children.
    • Get the young employed.
    • Then worry about people who are close to retirement.
    • Those who don’t really need the income (or who would be happy on the dole) and could get the social benefits of working by volunteering, trying to start a new business or…
  6. Accept that people who are happy to be unemployed are an asset at times when there is a shortage of work.  (These people may make significant contributions to society as unpaid volunteers, micro business developers etc.)
  7. By all means encourage unemployed people to volunteer for community etc. work.  (However, don’t use these unpaid volunteers as a replacement for paid employees.)
  8. Understand why some jobs are hard to fill and try and do something about it.
  9. Understand what it is like to be on the minimum wage
  10. Make the waiting rules much less harsh.  People need to be encouraged to save when they are working instead of being punished for it.  A person who starts unemployment with savings has a much better chance of staying employable than someone who hasn’t.
  11. Find some way of making the claw back less extreme.  This might mean continueing the dole for a while after someone reaches the minimum wage or ????
  12. Seriously consider adding unemployment benefits the HECS loan.  There are a number of attractions to this approach:
    • It always seemed ridiculous to me that someone has to take out a loan to study full time while someone who was doing nothing got a welfare gift.
    • It would help reduce costs.  Clive Palmer isn’t the only well off person who was on the dole at one stage of his life and could afford to repay later.
    • It helps get rid of the idea that unemployed people are bludging off taxpayers.
    • It makes it easier to increase the amount paid to people when they really need it.
    • It reduces the claw back disincentive because, in theory, it has to be paid back at some time in the future.
The thing that really got to me was Joe Hockey’s smartarse reply when asked what he would do if he was unemployed.  All his reply of “I would get a job.” did was convince me that he was an unfeeling bastard who didn’t have a clue how the other half lived.
USEFUL DATA SET
  • Unemployed 783,000 (5.9% – some of these will be willing and able to work)
  • Employed 11.582 m
  • Participation rate 64.7%
  • Aggregate monthly hours worked 1,613 million  (=25.32 per employed person per week)
  • Disability support pension recipients 2010 792,581
  • 857,000  (Some of these would prefer to work if they could get a reasonable job.)
  • 146100
  • $640.90 a week ($16.87 an hour)=38 hr week
  • Will affect people on the minimum wage and award-rate workers, including Australia’s lowest-paid cleaners, retail and hospitality staff, childcare workers, farm labourers and factory workers.”
Newstart allowance income test (The newstart allowance is $250/week for a single adult.)
  • Income above $50 and up to $125 per week reduces payment by 50 cents in the dollar.
  • Income above $125 per week reduces payment by 60 cents in the dollar. Leaves $6.75/hr for someone getting the basic hourly rate.  Keep in mind that someone who has worked part of the year may be paying tax on top of this! (Imagine how the entitled rich would scream lack of incentive if they were taxed 60 cents in the dollar?)
Newstart allowance waiting periods  Waiting periods before the payments start will be at least a week and often much more.  For example:
  • Base waiting period – One week.
  • Liquid assets (accessible money) based waiting period can range up to 13 weeks depending on liquid assets.  For a single adult the 13 week wait will be reached if liquid assets exceed $5500.  (The government saving from the 13 week wait is 55% of $5500!)
  • The Seasonal Work Exclusion Waiting Period may apply “If you or your partner have finished doing seasonal, contract or casual work in the 6 months before you claim, you may need to wait for a period of time before you can receive your payment.  The Seasonal Work Preclusion Period will depend on how much you earned from your work and how long you were working for. The duration is based on how long it would take an average wage earner to earn the same amount as a person engaged in contract, seasonal or casual work. 
ABS 1301.0 Year Book 2012 was a mine of useful information.  In particular:
Table 8.30 provided information on the duration of unemployment from financial years 06/07  to 10/11.  Key figures:
  • Less than 13 weeks – 50 to 58%
  • Less than 26 weeks – 67 to 74 weeks
  • Over 52 weeks – 14 to 19%
Table 8.32 provided information on the the difficulties in finding work.  Note that there were some important differences between men and women.
8.32 Unemployed persons, main difficulty in finding work–July 2010
Subsequent pages in this workbook cover topics such as underutilization and reasons why some people are not classified as being in the workforce.
8.33 LABOUR UNDERUTILISATION

Units
Period
Males
Females
Persons
Labour underutilisation rates
Unemployment rate
%
Aug 11
5.1
5.1
5.1
Long-term unemployment rate
%
Aug 11
1.1
1.0
1.0
Underemployment rate
%
Aug 11
5.1
8.8
6.8
Labour force underutilisation rate
%
Aug 11
10.2
13.9
11.9
Extended labour force underutilisation rate
%
Aug 10
11.3
15.6
13.2

Source: Australian Labour Market Statistics (6105.0); Labour Force, Australia (6202.0); Labour Force, Australia, Detailed – Electronic Delivery (6291.0.55.001).
Table 8.37  gave “volume measures” of labour underutilization for August 2010.   The table shows that hours people worked would have increased by 3.0% if all the people with jobs had been able to work the hours they wanted to.  If all the unemployed and underemployed had been able to work the hours they wanted to this would have added 7.5% to hours worked.
From “The shock of being forced back to work.”  Rob Burgess  Business Spectator. (These graphs are a useful starting point to a discussion re what is happening to  available work):
Graph for The shock of being forced back to work

Graph for The shock of being forced back to work
Manually taking figures off the graphs gave the following:

YEAR
PEOPLE PARTICIPATION
WEEKLY HRS PER PARTICIPATOR
% DROP IN WEEKLY HRS SINCE 2008
Mar 1978
61%
NC
NC
Mar 2008
66%
25.3
0
Mar 2014
65%
24.0
6.5
The unemployment rate was 4.1 % for March 2008 and 5.8% for March 2014
 Comments:
  1. Average hours worked per month dropped by 6.4% between July 08 and Mar 14 despite the unemployment rate staying relatively stable. The good news here is that the decline in hours worked during this period was handled by sharing the available work rather than an increase in unemployment. The bad news is that the available work declined even though this didn’t show up in the unemployment stats.
  2. If we were to do the logical thing and measure productivity in terms of available hours (instead of hours worked) productivity would have dropped dramatically.
  3. Figures would look better if we counted being trained and educated as useful work.
  4.  People participation in the workforce actually rose from 62% to 66% between Feb 78 and Feb 08, dropping to 65% by Feb 14. No signs of a participation crisis here.
Doing things to make life harder for the unemployed or parents spending more time looking after their children is nothing but a cruel joke when the jobs aren’t available.

Disability Support Pension recipient numbers 1990 to 2010

Year
DSP recipients
1990
316 713
2000
602 280
2004
696 742
2005
706 782
2006
712 163
2007
714 156
2008
732 367
2009
757 118
2010
792 581
Note: Years selected track growth over last two decades and show the impact of 2006 reforms.
Source: Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).[2]

2 THOUGHTS ON “IS HARASSING THE UNEMPLOYED JUSTIFIED?”

  1. This Business Spectator article asks whether the cost of the “earn or learn” policy is worth it.
    One aspect of the government’s ‘unfair budget’ that has not received much scrutiny is just who will manage the growing army of unemployed youth back into work or study — that is, press them into the ‘earn or learn’ mould.
    Part of the problem is the private providers that will operate (exploit) this system:
    Fast forward two years, and the youth joblessness crisis is spiralling out of control, and the Abbott government’s response to it is bringing on a political crisis all of its own.
    The characteristically rhyming slogan used to present Abbott’s plan is “earn or learn”, though there is growing concern that this could just as easily mean ‘burn public money to no end’.
    A young Tasmanian on the ABC’s Q&A, for example, recently complained that he’d done plenty of higher education, but lived in a region where there were 16 unemployed for every job being advertised.
    In such an environment, cynics point out that the best way to find a job is to start your own ‘employment provider’ consultancy, and take government money matching these jobless Tasmanians to jobs (fat chance) or, failing that, to approved ‘registered training organisations’.
    Liberal member for Murray, Sharman Stone, faces a similar situation in her electorate around the Shepparton region in Victoria. Stone fears that setting up RTOs might be the only growth industry in town, though training the unemployed for which jobs exactly?
    Read the article.
  2. The ABC reports that Age Discrimination Commissioner Susan Ryan has said that
    bias against older workers is endemic and ‘quite frightening’
    I was retrenched the day after I turned 50 and took some time (and a lot of luck) to get back into employment. Part of my problem was that I was an operating manager at the time and that there was a reluctance for people to offer a job that represented a significant demotion.
    Part of the problem too was that my experience limited the range of jobs that I was competent to do, a common problem with older workers. In other cases, older retrenchees are considered to be less physically, emotionally or mentally able to do jobs or work the hours younger people can live with. I had started to reach a point before my entrenchment where I was starting to wonder how much longer I really wanted to keep working as an operating manager.
    Susan advises older workers to:
    people should get a career check-up to map out at least the next decade of their working life as they approach 50.
    “I think we need a national approach which will involve people in a systematic check-up on their career prospects while they’re still in employment, regardless of what sort of job they work in,”
    “[They] should be saying, ‘well, can I do this job for the next 20 years? Will I be able to? Do I want to? Have I got the physical strength to? And if I need to change what is available to me? How do I find another job?’
    In my case I ended up being lucky in that the retrenchment got me back into technical work that kept me going till I was over 65.
    She also queried
    the need for an influx of foreign workers on 457 or similar working visas, when so many older Australians are still willing to work.
    “I agree if we do have serious skills shortages, and we do have overseas workers who can come in, that’s a sensible thing to do,” she said.
    “But it’s very hard to believe, when you look at the numbers of unemployed people in their 50s and 60s, the numbers of people who are willing to train, who are willing to move for a job.”
    “You have to ask yourself, are employers looking at our local talent pool of mature workers before they decide they need to import labour? I don’t think the answer is yes in every case.”
    For many people over 50 it is a time when travelling Aus, doing a bit of fruit picking, working on jobs that haven’t got great security starts to make a lot of sense.

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