Budget 2016: A Good PaTH for Tackling Entrenched Disadvantage

A surprising thing happened in the 2016 budget. The Coalition included a youth unemployment policy that targeted the most disadvantage people and also got a tick of approval from the opposition.

There were no vestiges of the punitive policy announced in 2014 that punished young people for being unemployed. Instead, the government has come up with a policy that recognises the socioeconomic dimension to youth unemployment.

The new program is called the Youth Jobs PaTH (Prepare-Trial-Hire) and consists of the following stages:

1. Young job seekers (between the ages of 15-24) will be given training in what are called ‘employability skills’. These are the foundational skills needed to get and maintain a job, such; ability to work in a team, suitable presentation, workplace etiquette, and IT skills.

2. 120,000 internship places will be set up over four years for young job seekers after six months in the system. The job seeker will receive an additional $100 a week on top of their regular income support, and the business taking on the intern will receive an up-front payment of $1000.

3. Businesses will be incentivised to employ young job seekers through a wage subsidy between $6,500 and $10,000.

The government has also committed to greater investment in actuarial analyses that better target people at risk of long term welfare dependency.

But it did not take long before the policy was publicly derided. Unions believe it will result in job losses and young workers will be exploited. No doubt this is a possibility, and this will rest on the finer details of the policy when they are drafted into a Bill, but currently there is little evidence to suggest this outcome is inevitable.

Others, such as the journalist Tim Dunlop, believe PaTH is just another policy designed to discipline and punish young people for not finding jobs that don’t exist. Dunlop argues that technology is changing the nature of work, so that in the future there will be far less jobs for people to do. His policy to deal with this, which has now become quite trendy, is for the establishment of a guaranteed basic income.

The basic income idea has plenty of merit, yet Dunlop’s analysis misses an important aspect of the PaTH policy – this program is designed to help young people at risk of long term unemployment get jobs. It is not the same blunt instrument as ‘work for the dole’.

Disadvantaged young people are one of the groups most at risk of long-term welfare dependency. People with lower levels of education are more likely to be welfare dependent, and the longer a person is unemployed the more at risk they are of long-term unemployment. Longitudinal analysis by Francisco Azpitarte and Eve Bodsworth from the Brotherhood of St Laurence Research and Policy Centre, shows that disadvantaged groups are more likely to be unemployed for longer.

There is an alarming number of young Australians between the age of 15 and 24 that are not engaged in employment, education or training, often referred to by the acronym ‘NEET’. In 2015 over 90 thousand 15-19 year olds and 217 thousand 20-24 year olds were identified as NEET in Australian Bureau of Statistics (ABS) Education and Work survey. While this did not vary greatly by gender, when broken down into socioeconomic status (SES) deciles, the proportion of young people that are NEET is heavily skewed toward the lower SES deciles.

There are two ways to look at this.

The first, shown in Figure 1, is to look at all people identified as NEET in the each age group and then find out what the different shares are for each SES decile.

In a state of perfect equality, the proportion will be equal among SES deciles. That is, the lowest and the highest SES decile would each make up 10 per cent of people identified as NEET.

The actual shares are heavily skewed. The share of NEET people for the most disadvantaged young Australians represent more than triple that of the advantaged. The bottom three SES deciles make up over 45 per cent of all NEET 15-24 year olds.

Figure 1: People from disadvantaged backgrounds make up the largest share of NEET between the ages of 15 and 24 years old
Y-axis: SES decile share of all people aged 15-19 and 20-24 that are identified as NEETBeni_Fig1_PaTHSource: ABS (2015) Education and Work, 2015

Second, we can look at what proportion of each SES decile is identified as NEET, as has been done in Figure 2. A high proportion of the most disadvantaged 15 to 19 year olds are identified as NEET, but what is really striking is the 20-24 age bracket. Almost a third of the most disadvantaged 20-24 year olds, 40 thousand young people, are identified as NEET. More than a fifth of 20-24 year olds in the three lowest SES deciles are identified as NEET – more than 100 thousand young people.

This large jump occurs after the common school leaving age, suggesting that a substantial group of young people finish school ill equipped to take the next step into work or study.

Figure 2: People from disadvantaged backgrounds are much more likely to be NEET after school leaving age
Y-axis: Proportion of SES decile identified as NEETBeni_Fig_2Source: ABS (2015) Education and Work, 2015

By focussing on young people unemployed for more than 6 months, PaTH targets the most disadvantaged young people. The strength of the program is that it provides these young people with work experience, and makes it less risky for businesses to give them a chance.

Job training has been available for a long time now, but employability and targeted work experience programs are rare. For some young people from areas of entrenched disadvantage, this policy will give them chances they otherwise would not have. There are likely important debates to be had around the detail of the policy, but it cannot be said to be punitive, and it is certainly not punishing.