The budget projects that, despite the effects of the stimulus package, unemployment in Australia will reach 8.5 per cent next year. It’s striking then, how little the budget contains in terms of measures specifically directed at improving the lot of the unemployed. Most obviously, unemployment benefits have not been increased, further widening the gap between these benefits and other pensions. In an environment where suggestions that unemployment is partially or wholly voluntary can no longer be sustained, it is hard to avoid a feeling of injustice here.
The direct response to unemployment in the budget amounts to $1.5 billion for the Jobs and Training Compact, much of which has already been announced or foreshadowed. The main focus is on training, which is good long term policy, but may not be all that helpful in a recession.
Most of the timing, training is the best way of making people more employable. A lengthy recession strengthens the case for participation in school, university or TAFE diploma courses.
If the labour market is weak, the option of staying in school, or of going back to university or TAFE to enhance your qualifications is more attractive. It’s safe to predict that demand for tertiary education places is going to be quite a bit higher for the next few years. Even with the expansion of places announced in the budget, it is likely that the number of qualified students unable to find a university place will increase in 20101.
On the other hand, short-term training programs directed at those who are already unemployed are of little use in recessions. When few employers are hiring, those who do so can pick and choose from a pool of experienced and qualified candidates. A training course of a few months is unlikely to move an unemployed person to the front of the queue.
In a sustained recession, there is a strong case for direct job creation, targeted at the unemployed. In addition to existing infrastructure projects the government is offering a $650 million Jobs Fund, designed to ‘support local jobs in areas hardest hit by the downturn’.
While welcome, the government’s measures represent a small fraction of the expenditure allocated to the Keating government’s Working Nation program. As with other responses to the 1989-90 recession, Working Nation was not introduced until high unemployment was firmly entrenched. The Rudd government’s limited steps in this respect contrast unfavorably with its rapid, indeed pre-emptive, adoption of fiscal stimulus policies.