Tackling long-term unemployment in the 2018 Budget

By Dr Parvinder Kler, Program Director, Bachelor of Commerce, Griffith Business School

Long-term unemployment in Australia has increased since the Global Financial Crisis, ticking up from 14.8% of the total unemployed in January 2008 to 23.8% in March 2018 (Australian Bureau of Statistics). These figures mask (i) geographical variations whereby long-term unemployment is more pronounced in regional areas, (ii) age profiles, with older unemployed Australians finding it harder to gain employment, both of which are partially attributed to (iii) structural change within the Australian economy that has eschewed manufacturing and more labour-intensive jobs requiring less formal education to a more services-oriented economy that increasingly favours the educated and indeed female labour market entrants, not to mention the arrival of the so-called fourth industrial revolution driven by technology that has swept quickly through the global economy, creating havoc on jobs and employment.

Thus, governmental response needs to be multi-faceted. Re-training programs have been a global staple of government intervention in equipping the longer-term unemployed to find work but it is a policy that has evinced very mixed results. A more holistic package of ‘re-inventing’ the long-term unemployed is needed, one which provides the recipient with a host of options to choose from.

A holistic package could include measures that subsidise formal education, incentives to employers to re-train recipients, special government assistance grants to those in regional areas who may need to relocate to urban centres, more tailored education and training strategies for those structurally unemployed (mainly older Australians trained for an increasingly outdated economic model) and even gender-sensitive options, given Australia’s highly gender-segregated labour market.

Finally, it should also acknowledge the significant change in the economy by assisting willing recipients become entrepreneurs given the ease at which technology adoption allows individuals to buy and sell products and services by-passing the usual channels of retail shops. A ‘one-stop centre’ should be created specifically to cater for long-term unemployed where all their queries and assistance afforded to them can be made in a manner that maximises positives at minimal cost.

All of this, of course, requires funding, and recent governmental protestations of better times ahead notwithstanding, budgetary commentaries have been heavily laced with arguments of fiscal restraint. This is an opportune time then to remind everyone that policies to improve employment outcomes should be viewed as providing benefits above and beyond the costs of such policy implementations. Indeed, this will also reduce the associated and indirect costs of long-term unemployment such as increased mental stress, overall deleterious health outcomes and negative societal outcomes that further exacerbate the cost of unemployment on families, communities, the economy and ultimately the budget.

It is imperative that governments at all levels view this as an investment with a short-term up front cost, but one that brings about longer-term returns to investment. A caveat to this is that ‘it’s the economy, stupid’ reminder. No amount of good policies on the amelioration of long-term unemployment will work if the economy itself does not improve, and this is especially true of regional Australia, which is often ignored in such debates.

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