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Tuesday, 3 May 1994
Page: 53

  The ACTING DEPUTY PRESIDENT (Senator Colston)—Pursuant to the resolution of the Senate of 13 February 1991, on behalf of the President I present the government's response to the report of the Standing Committee on Employment, Education and Training entitled Wanted: our future, a report into the implications of sustained high levels of unemployment on young people, which was presented to the President on 27 April 1994. With the concurrence of the Senate, the response will be incorporated in Hansard.

  The response read as follows





APRIL 1994


The Senate Committee's Report examines many aspects of youth unemployment. In doing so, it considers problems and policy issues which are relevant to all unemployed people, such as income support arrangements, the role of education and training and the effectiveness of labour market programs. The Report also discusses more fundamental matters such as the changing nature of unemployment and how society should respond to this as a long term problem.

Many of the issues which are raised in the Senate Committee's Report are also being considered by the Committee on Employment Opportunities which was established by the Prime Minister in May 1993. The Committee's terms of reference are broad and include the following points:

the outlook for the Australian economy and labour market,

changes in the labour market since the 1960s including demographic trends, changes in participation, the types of jobs produced by economic activity, characteristics of the unemployed and the effect of such changes on income distribution and living standards,

labour market trends and policy responses in other OECD countries,

the efficiency and effectiveness of current measures to assist the unemployed, and

policy options for response to labour market changes and ways of financing future support for the unemployed.

The Committee has been asked to give special attention to the problem of long term unemployment.

In December last year, the Committee released a discussion paper Restoring Full Unemployment, and has conducted community consultations about the ideas and options raised in this paper. The Government will respond to the Discussion Paper in a White Paper dealing with employment and industry issues to be released on 4 May.

The White Paper will address many of the issues raised in Wanted: Our Future by the Senate Committee.


1. The Committee recommends that the issue of the labour market prospects of graduates and the general implications for Australia of increasing the level of tertiary qualifications in the community be referred to either the House of Representatives Committee on Long Term Strategies or the Senate Standing Committee on Employment, Education and Training. (Page 24)(1)

Response: Not supported

In recent years, the Commonwealth Government has funded significant growth in higher education places. The economic objective of this policy is to enhance the skill base of the population to meet changing labour market needs and to support industry restructuring and microeconomic reform.

Just as importantly, the social objective is to open up access to higher education to a wider cross-section of the community. The expansion of the number of student places, improved income support for students, targeted equity programs and the provision of more flexible delivery of courses and entry arrangements have all encouraged greater participation by those groups traditionally under-represented in higher education. In the 1993-94 Budget, the Government announced more highly targeted public funding of higher education to ensure a balance between those undertaking further study and those seeking to enter for the first time. To improve access and equity in higher education, better targeting arrangements for HECS and student assistance under AUSTUDY and the introduction of HECS style repayment arrangements for eligible students under Open Learning will be introduced.

Levels of educational attainment among the unemployed have risen as part of a long term trend which is also evident in the labour force. More recently, the current labour market downturn has seen unemployment rates increase for those with post school qualifications along with the rest of the labour force. Nevertheless, the possession of post school qualifications, especially a degree, still greatly reduces one's chances of being unemployed. According to the ABS survey Labour Force Status and Educational Attainment conducted in February 1993, the unemployment rate among graduates was 6.2% compared with 12.1% for the total labour force. Those holding any form of post-school qualification, including a trades certificate, had an unemployment rate of 9.1%.

While possession of post school qualifications does not guarantee immunity from unemployment, those of the unemployed who are better qualified should be well placed to benefit from future job growth as the recovery gathers pace. The Government considers that a specific inquiry into unemployment among graduates is not warranted.

The Committee on Employment Opportunities has examined the relationship between growth in higher education places and the needs of the labour market. In its discussion paper, Restoring Full Employment, the Committee argues that those with post school qualifications are likely to be more successful in the labour market than those without. However, the Committee cautions that without job growth, expanding the number of higher education places may stimulate credentialism instead of reducing unemployment.

2. The Committee recommends that the Skills Formation Council of the National Board of Employment, Education and Training prepare a report to the Government on the provision, under the Australian Vocational Certificate training system, of places for work-based training for young people, and on the mechanisms through which business and industry will fulfil their AVC responsibilities.(Page 33)

Response: Action under way

In June 1992 the Australian Education Council (AEC) and Ministers of Vocational Education, Employment and Training (MOVEET) endorsed, in general terms, a strategy for the introduction of the Australian Vocational Certificate (AVC) training system. The AVC training system is to subsume the existing apprenticeship and traineeship systems and to extend structured entry-level training into areas that currently do not have such training.

The Ministers agreed that all aspects of the AVC training system would be tested through a series of pilot projects over a period of two years before commencement of the changeover to the new system from 1995. Among the issues to be addressed by the pilots is improving access to training for groups such as women, Aboriginal and Torres Strait Islander People and those from Non-English Speaking Backgrounds. These groups have been under-represented in traditional training arrangements.

A National Evaluation Strategy for the AVC training system and Career Start Traineeships (CST) has been developed and agreed in principle with the States and Territories. The evaluation will have three phases:

  an implementation review;

  ongoing monitoring of projects and trainee outcomes; and

  an independent systemic review and case study analysis.

The monitoring system to allow for the discrete identification of AVC and CST trainees and their employers is now in place.

The first phase of the evaluation began in April 1993. Responsibility for monitoring and evaluation of the AVC pilots will rest with the Commonwealth and will be undertaken by consultants and DEET. The evaluation is being conducted in full consultation with the States and Territories through a reference group. Included in the evaluation will be an examination of the success of the pilots in dealing with the needs of the target groups identified above.

Because the Commonwealth and State Governments are already collaborating to conduct these evaluations, the proposed review by the National Board of Employment, Education and Training (NBEET) is unnecessary.

3. The Committee recommends that the Australian National Training Authority be reviewed at the end of two years of operation. (Page 33)

Response: Supported

In July 1992, Heads of Government agreed to establish a National Vocational Education and Training System, including the Australian National Training Authority (ANTA). The agreed statement on the new National System is a schedule to the Australian National Training Authority Act 1992. Paragraph 40 of the statement provides that the agreement is to be reviewed before the end of 1995. ANTA became operational on 1 January 1994. ANTA will, therefore, be reviewed within two years of full operation as part of the review of the Heads of Government agreement.

4. The Committee recommends that the Australian National Training Authority, as a matter of urgency, (a) examines the question of education and training re-entry points for young people who have already left school and (b) develops strategies to include young people aged 20-24 in the Australian Vocational Certificate system. (Page 37)

Response: Not supported

The Government considers that, in the first instance, the question of conducting the two proposed inquiries should be referred for consideration to a meeting of the recently established Ministerial Council on Employment, Education, Training and Youth Affairs (MCEETYA).

In relation to part (b) of this recommendation, young people aged 20-24 are not excluded from the AVC pilot process. Career Start Traineeships are open to all age levels.

The problem of lack of access to training by young unemployed people has been examined by the Government's Committee on Employment Opportunities in its discussion paper Restoring Full Employment. The Committee identifies a number of possible solutions including,

expansion of traineeship numbers to 65,000 as proposed by the ACTU,

provision of a training place to all unemployed young people below a certain age, who would be required to accept a place or lose entitlement to income support, and

establishment of group and other co-operative schemes among employers to provide training to the unemployed.

As the issues raised in the Senate Committee's recommendation are being addressed by the Committee on Employment Opportunities and through the development of the AVC training system, it is not appropriate for the ANTA to take responsibility for them.

5. The Committee recommends that greater flexibility be introduced into existing provisions regarding the opportunities for, and support of, JSA recipients who wish to engage in volunteer work. This flexibility should enable decisions to be made at the local level on a case by case basis regarding the extent to which participation in voluntary work unduly restricts a recipient's ability to seek employment. (Page 43)

Response: Supported in principle

The Government recognises that volunteer work with community organizations can help job seekers, especially the long-term unemployed, to gain work experience, maintain or update their skills and make useful contacts with employers, thereby improving their employment prospects.

Relaxation of restrictions on volunteer work was announced in the 1992-93 Budget. Job Search Allowance (JSA) beneficiaries under 18 years old who have been unemployed for at least 3 months and 18-49 year olds who have been unemployed for at least 6 months may undertake full-time volunteer work to a maximum of 30 days a year (increased from 20 days a year in March 1993) while for clients aged 50-64 the maximum is 65 days. Continuing part-time volunteer work of up to 20 hours a week may be allowed, provided it does not interfere with job search activity. To ensure consistency, provisions for volunteer work are made at the local level within the framework provided by national guidelines.

In the 1993-94 Budget, the Government announced the establishment of the Community Activity Program (CAP) which will help 7,000 unemployed people in 1993-94 to maintain work habits and widen their experience through voluntary participation in community services, at a cost of $3 million.

The Committee on Employment Opportunities has argued that consideration should be given to expanding the range of activities, including voluntary work, which can be undertaken by recipients of unemployment allowances. However, the Committee cautioned that such expansion should be compatible with community expectations that unemployment payments will be made to those who are actively seeking paid employment.

6. The Committee recommends that consideration be given by Commonwealth and State education authorities to extending the TRAC model of work experience and school-work transition at both local and national levels. (Page 49)

Response: Supported in principle

The TRAC model has operated in the Hunter region for some years and is, through the system of AVC pilots, being piloted in the Casuarina/Darwin area of the Northern Territory. TRAC is also operating in the ACT. As with all pilots undertaken, this model needs to be evaluated to determine its overall effectiveness, including cost effectiveness. This will take account of other retail models which are currently being developed through the AVC pilot process.

7. The Committee recommends that training targeted at young people be designed to incorporate personal support which is available for the duration of the training and beyond. (Page 51)

Response: Supported, action under way

The Government agrees that personal support should be an important component of training programs targeting unemployed young people and this is recognised in measures to assist young people.

The Disadvantaged Young People Services Program, for example, was established in 1990 as part of the Federal Government's Youth Social Justice Strategy. The Program recognises that young people may experience difficulties which inhibit their ability to secure and maintain employment. Assistance is provided through mentor/broker services.

The aim of the program is to assist the most disadvantaged unemployed young people who are currently not attracted to, and are not competitive in, mainstream programs to secure and maintain employment by providing assistance tailored to their particular needs. Assistance provided includes:

open access services including personal development and counselling;

pre-training to provide skills required to participate in mainstream labour market programs;

referral to employment and training programs; and

support in employment and training programs once placed.

Other Government initiatives, such as the Accredited Training for Youth Program and the Landcare and Environment Action Program, also have significant elements of support services for young people. Youth services offered through SkillShare can provide continuing post-program support for young people for up to three months after they cease formal participation in the program.

The provision of support services for young people, including mentor arrangements, will also be included in the AVC piloting process.

8. The Committee recommends that the matter of exploitative employment practices be referred to the Council of Ministers of Industrial Relations. (Page 58)

Response: Supported in principle

The Government recognises that young workers can be particularly vulnerable to exploitation from unscrupulous employers, both in the award and non-award areas. Through the Department of Industrial Relations, it has put in place an active program of information and education on rights and obligations under awards and, where necessary, enforcement of those rights and obligations.

The Government has also ensured that workplace bargaining cannot be used to exploit workers, by including a `no disadvantage' test in provisions for certified work agreements. This test ensures that workplace agreements do not reduce the total package of an employee's award wages and conditions.

In addition, the Government has implemented legislation to provide minimum entitlements for all workers, including workers not covered by awards, regarding minimum wages, equal pay for work of equal value, unfair dismissal and unpaid parental leave. The Government has also amended the Industrial Relations Act to give the Australian Industrial Relations Commission jurisdiction to review certain unfair contracts involving independent contractors.

Government policy is that casual employment should be restricted to employment which is short-term, irregular or seasonal. The Government fully supports moves to extend access to permanent part-time employment through changes to award provisions. The referral of the issue of exploitative employment practices to the Ministers of Labour Advisory Council (MOLAC) to develop complementary Commonwealth-State approaches is supported. MOLAC's consideration of this issue would build on its earlier consideration of how permanent part-time work can be encouraged.

9. The Committee recommends that the National Labour Consultative Council develop proposals and devise strategies for the rapid expansion of job-sharing, modified work schedules and other measures with a view to achieving higher levels of participation in employment across the community. (Page 61)

Response: To be examined

The Government believes that the best method of dealing with the current unemployment situation is to achieve a sustained economic recovery. It has put in place policies to achieve sustainable long-term employment growth. Labour market programs for unemployed job seekers have been expanded to provide them with the skills necessary to gain employment.

There are potential benefits from job sharing and related measures, especially if it is voluntary and fits in with agreed work arrangements. However, there are additional administrative and training costs involved in having more staff doing the same amount of work. Productivity is likely to be lower when currently unemployed people undertake some of the work normally done by fully qualified people.

If people involuntarily work shorter hours on average, there may be more pressure for wage rises as people attempt to maintain current living standards. If weekly wages are maintained but average hours worked fall, labour costs faced by business will rise. This is likely to lead to a lower level of employment and an increase in inflation.

After reviewing evidence from Australia and overseas, the Committee on Employment Opportunities has concluded that a general reduction in working hours is likely to lower national output and increase unemployment. However, the Committee also argued that arrangements which give individuals greater choice about working hours could have a beneficial effect on employment.

The current industrial relations system allows considerable flexibility for job sharing, part-time work, modified work schedules and other measures, while requiring that, taken as a whole, agreements do not disadvantage workers. Innovative working time arrangements introduced through award restructuring, and more recently workplace bargaining, provide the opportunity to develop work arrangements tailored to the needs of both employers and employees.

The Government is involved in activities to encourage the implementation of more flexible labour market strategies. For example, the Work and Family Unit in the Department of Industrial Relations is examining flexible working arrangements such as job sharing and permanent part time work to facilitate more flexible work practices.

The National Labour Consultative Council (NLCC) is already considering flexible work practices in other contexts; for example, the recommendations of the Inquiry into Equal Opportunity and Equal Status for Women in Australia, Half Way to Equal. However, the NLCC could play a useful role in developing additional strategies to expand the opportunities for job sharing, part time work and modified work schedules.

It is important to access the benefits available through workplace bargaining by developing innovative agreements that produce the best and fairest outcomes for both management and workers, including the achievement of higher levels of participation in employment across the entire community.

10. The Committee recommends that current proposals to move away from age-based to skill-based wages be encouraged among all parties to any wage determination process. (Page 68)

Response: Supported, action under way

The Government is piloting the implementation of the AVC training system which will involve a form of remuneration where pay is based on competency achieved and applied rather than age of the trainee. The pilots will test a variety of wage arrangements.

In November 1990 MOLAC endorsed the Principles and Guidelines for Handling Change to Youth and Training Wages in the Context of Award Restructuring. These principles recommend a move away from age-based to competency-based wages for youth.

Interim industrial relations principles for AVC pilots have been agreed by the peak industrial councils. These principles will assist in ensuring that trainees involved in AVC pilots are treated equitably while protecting their competitive position in the market.

The Government is consulting through the NLCC and MOLAC to develop final principles to guide the implementation of competency-based wages for the AVC training system.

11. The Committee recommends

(a) that, as a matter of urgency, the Industry Commission prepare a report to the Commonwealth Government on impediments to small business employment,

(b) that the Government consider a 150 percent tax deduction (at the company tax rate) on new employment of people who have been unemployed for six months or more. This should remain in effect until the end of 1995 or until the present unemployment rate is halved, whichever is the sooner. (Page 70)

Response: Not supported

The Government recognises the important role of small and medium businesses in generating employment and economic growth and has been actively reviewing and refining its policy settings to assist this sector of the economy.

There is a considerable amount of information on the major impediments to small business employment. Among those already identified are the unintended consequences of various Government regulations, general management skills and access to services and information on which to base management and investment decisions.

Research by the Bureau of Industry Economics which is reported in its publication Small Business Review (1992) shows the growing importance of small business for employment. In Australia and other countries, there has been a small but persistent increase in the share of wage and salary earners represented by small business over the last two decades.

A conference on small business employment, sponsored by the Organization for Economic Cooperation and Development (OECD), was held in Sydney in December 1993. The conference examined Australian and international case studies which illustrated issues affecting small business employment as well as possible policy responses.

While the Government would welcome further information on impediments to small business, it is not clear that an Industry Commission Inquiry would add significantly to the current stock of knowledge or efforts currently under way. The Government considers that its resources are most usefully employed by responding to those impediments to small business efficiency and employment that have already been identified.

On part (b) of the recommendation, the Government currently assists the long-term unemployed to return to the workforce through direct expenditure on labour market programs. This approach has a number of advantages over tax incentives in terms of equity and effectiveness.

Labour market programs can be tailored and interlinked to suit client needs. For example, training through JOBTRAIN can be followed up with a wage subsidy under JOBSTART to achieve a more effective outcome than under a single program.

The use of labour market programs enables funding to be targeted to the most disadvantaged.

A tax incentive to employ more workers would be limited to profitable enterprises since businesses which were not making profits (or which were carrying forward past losses) would be unable to access the taxation concession immediately (for example, some 60% of companies currently pay no tax). Even then, the benefit of the tax concession would not be available to the tax paying enterprise until the year following the year of income. That is, depending on when the returns are lodged with the Taxation Office, the cash flow benefits could be delayed by a year or more following the employment of the additional worker. In comparison, a wage subsidy is paid at the time of employment and so assists in meeting the cash flow of the business.

12. The Committee recommends that the Government commission an independent evaluation of the effectiveness of wage subsidy schemes over the past decade, including where possible the subsequent employment history of subsidised young people for at least 12 months from the expiry of the subsidy. Further, the Committee recommends that the Government commission an independent evaluation of the recently introduced Career Start Traineeships. (Page 74)

Response: Action under way

The issue of wage subsidies was referred to the Employment and Skills Formation Council of NBEET as part of the terms of reference in the preparation of advice for the AEC and MOVEET on the introduction of the AVC training system. The recommendations of the Council have been taken into account in the development of the AVC training system. The AEC and MOVEET, in endorsing the strategy for the introduction of the AVC training system, noted that the detailed consideration of the issue of wage subsidies is a matter for the Commonwealth to pursue in consultation with the States. Ministers also noted that the policy on employer subsidies could be adjusted in the light of experience in the running of the AVC pilots referred to under recommendation 2 above.

The issue of wage subsidies was also addressed in the Report on the Training Costs of Award Restructuring (Deveson, 1990) and these recommendations have been taken into account in the development of the AVC training system.

It is proposed that wage subsidies associated with Career Start Traineeships, which serve as a bridge between current training arrangements and the introduction of the AVC training system, be evaluated through a separate evaluation process rather than being undertaken within the national AVC training evaluation. As with the AVC training evaluation, the report of which is expected to be available by July 1994, the results will be made publicly available.

DEET has recently conducted an evaluation of the JOBSTART program which provides wage subsidies of various amounts and durations for the employment of long term and disadvantaged youth and older jobseekers. The aim of the evaluation was to examine the overall effectiveness of the program and to identify any measures that may improve its effectiveness.

The evaluation methodology included surveys to identify the impact of JOBSTART on the chances of the long term unemployed finding and retaining employment. These included a survey of a sample of JOBSTART participants. The survey collected data on their outcomes in the six months after ceasing JOBSTART. The experience of JOBSTART clients was compared with that of similar CES registrants who were not assisted by JOBSTART and of former participants in other labour market programs who subsequently gained unsubsidised employment. The evaluation found that JOBSTART has a positive impact on the chances of the unemployed, and particularly the long-term unemployed, securing employment. The final report of the evaluation is being prepared.

13. The Committee recommends that the matter of overlapping wage subsidy schemes at State and Commonwealth level be referred to the Council of Ministers of Vocational Education, Employment and Training (MOVEET). (Page 75)

Response: Supported in principle

In August 1991, Commonwealth and State Ministers of Employment Education and Training agreed to institute joint planning and consultative arrangements. Premiers and Chief Ministers, at their November 1991 meeting, agreed to "progressively withdraw" from the field of labour market programs generally. This acknowledged the primacy of Commonwealth interests in this area in view of its income support as well as its counter-cyclical responsibilities. Enactment of this agreement would remove the risk of "double-dipping" and duplication of effort. However, progress in rationalizing government services in the labour market programs area has been slow.

14. The Committee recommends the establishment of a national employment corps, funded by the States and the Commonwealth on a dollar for dollar basis, and managed by local or regional corps committees with input from young people, to provide paid employment in ventures relevant to local, regional or national needs and conditions. (Page 77)

Response: To be examined

The Government examined employment and training options for unemployed young people as part of the development of the National Employment and Training Plan for Young Australians. One of the options considered was similar to that proposed by the Committee. The Government concluded that it was preferable to develop a package of assistance which tightly linked employment with formal training opportunities.

Consequently, the Government initiated the Landcare and Environment Action Program (LEAP) which provides a combination of formal training and practical experience for young unemployed people. The program is delivered through projects of community benefit involving landcare, environment, cultural heritage or conservation activities.

In 1993-94, the Commonwealth will provide $65.3 million to fund some 10,000 participant places. Brokers who administer projects, including State and Local Governments and community groups, may provide some additional funding which will vary from project to project.

15. The Committee recommends an expansion of the Commonwealth's Disadvantaged Schools Program and the Students at Risk (STAR) Program. (Page 97)

Response: Supported, action under way in relation to STAR; Not supported in relation to Disadvantaged Schools Program

Following an evaluation of the Students at Risk (STAR) Program, in July 1992 the Government announced the continuation of the Program for a further two years, 1993 and 1994, and its extension to the non-government sector with an additional $2 million a year. In the 1993-94 Budget the Government continued the Program to 1996 with funding of $13.6 million over 1995 and 1996.

On present outlays the Program targets around 5,000 students. The total number of students leaving school before completing Year 12 (the Finn target group) is around 63,000 each year and they are 8-10 times more likely to become long-term unemployed than those who completed Year 12. The 1992 evaluation of the STAR Program pointed to its success as an early intervention strategy. STAR targets and reduces this feeder group by keeping the students at school. It has important labour market as well as educational impacts.

In light of the success of the Program in achieving its objectives and in view of its broader labour market as well as educational impacts, the Government has already announced the extension of the STAR Program to 1996.

A major reform of Commonwealth equity programs for schools was introduced in 1994. The National Equity Program for Schools (NEPS) will be a coherent equity program containing elements or components of the previous, disparate programs but drawn together more strategically to address national objectives and targets.

Under the NEPS structure, the Disadvantaged Schools Program (DSP) becomes the Disadvantaged Schools Component of the Equity Element and will be subject to broad banding of funds with other components within that element. STAR will become part of the National Priorities Element which will continue to be managed at the national level and, therefore, will not be subject to broad banding.

In light of the new arrangements for the NEPS and the Disadvantaged Schools Component, it would not be appropriate for the Government to implement the Committee's recommendation in relation to the Disadvantaged Schools Program at this stage.

16. The Committee recommends that the Australian Housing Council develop strategies for assisting homeless young people to acquire medium and long term accommodation. (Page 105)

Response: Action under way

The Australian Housing Council has not met since October 1991 and no meeting is currently planned.

The Government has undertaken a number of initiatives to address the plight of homeless young people. The Supported Accommodation Assistance Program and the Youth Social Justice Strategy, in particular, provide assistance to homeless young people including, in some cases, access to medium to long term accommodation to help them move towards independent living.

The Commonwealth has secured an agreement with State Welfare Ministers to implement a Protocol between Commonwealth Departments and State/Territory Welfare Authorities on case management and referral procedures for unsupported young people under 16 years. The Protocol, implemented since 1 September 1993, aims to improve co-ordination of, and referral between, Commonwealth and State services for this group. Subject to privacy obligations, young people under 16 years who claim the Youth Homeless Allowance or the Student Homeless Rate of AUSTUDY will be referred by social workers in DSS and DEET to State welfare agencies for an assessment of their need for protective services and attendant support, including accommodation.

The Government is also aware of the need for better targeting of Commonwealth programs in the area of youth housing. It will review the options for young people living independently on low incomes in its National Youth Housing Strategy. The Strategy will cover issues such as the interaction of young people with the private rental market, student housing, the needs of homeless young people and the effects of income support policies and programs on housing options for young people.

17. The Committee recommends that income support should be increased to a level commensurate with the revised Henderson Poverty Line in the first instance. This is to be funded from savings arising from the 150 percent tax deduction initiative for new employment recommended above. (Page 143)

Response: Not supported

There are limitations on the use of poverty lines such as the Henderson Poverty Line as a basis for policy formulation. For instance, such devices measure poverty relative to average community income rather than providing an absolute measure of need.

The current structure of income support for young people attempts to balance competing objectives and pressures including:

the principle that parents should, where possible, retain primary responsibility for supporting their children under the age of 18;

the recognition that young people living with their parents generally have lower costs of living than those living independently; and

the need to take into account prevailing differentials between adult and youth wages to ensure that young unemployed people have sufficient financial incentive to take up full-time work.

The Government assists young people to continue in education and training and to make the transition from school to work through specifically targeted labour market, student assistance and training initiatives. Targeting of these is necessary to ensure that within the resources available those who most need the help receive it.

In considering this recommendation, the total amount of support available to those who rely on income support needs to be taken into account:

Job Search Allowance (JSA) recipients under 18 who are in receipt of the homeless/independent rates of allowance are eligible for rent assistance of up to $34 a week. Job Search Allowance/Newstart Allowance (JSA/NSA) recipients over 18 who are living away from home are also eligible for rent assistance;

students on AUSTUDY/ABSTUDY may supplement their income through earnings by up to $115 a week ($6,000 a year) before the rate of allowance is affected; and

the introduction of the AUSTUDY/ABSTUDY supplement has given eligible tertiary students (although not secondary students or the unemployed) access to additional income of up to $57 a week in 1994. The supplement is intended to increase the incomes of those AUSTUDY/ ABSTUDY recipients who have difficulty in supplementing their income in other ways and to give additional assistance to those students who face higher costs.

18. The Committee recommends that the Government commission research, possibly through the Institute of Family Studies, into the comparative costs of living of young people aged 16 and 17 and those aged 18 and above, and into the relationship between levels of income support and young people's decisions to leave home. (Page 147)

Response: Supported, action under way

On behalf of the Department of Social Security the Social Policy Research Centre (SPRC) recently undertook research into the relative living costs of young unemployed people of different ages and in different living arrangements.

DEET presently conducts a longitudinal survey of young people on their education, employment, housing (including housing costs) and income (including types and amounts of income support received). The current survey does not collect information about other living costs or about `leave home' decisions. Inclusion of such questions in the survey will be considered.

19. The Committee recommends that waiting periods for benefits be reduced. (Page 149)

Response: Not supported

Waiting periods assist in targeting income support by requiring those with available funds to be more self reliant and encouraging close contact with the labour market during the initial period of unemployment. These principles remain relevant during times of high unemployment.

The education leaver waiting period encourages young people to continue in education by generally denying them access to income support during the long summer vacation. The waiting period also provides a clear signal to school leavers that income support will not normally be available until other options regarding education, training and employment have been explored.

Recognising that many school leavers, particularly those from low income families, suffer a variety of difficulties during the immediate period after leaving school, the Government introduced a number of changes to waiting requirements in November 1992. Young people leaving secondary education are now eligible for Job Search Allowance/Sickness Allowance (JSA/SA) 13 weeks from the date they leave school or from 15 February in the subsequent year, whichever is earlier. This prevents young people who fail to register with the CES as soon as they leave education from experiencing an extended period without income support.

The waiting period is now waived for any education leavers who have been on income support within the previous 12 months. This reduces disincentives for unemployed people to undertake education/training courses of six months or longer duration.

Young people who would otherwise qualify for special benefit because of financial hardship also have the waiting period waived and gain immediate access to JSA/SA.

Education leavers required to serve the full 13-week waiting period from date of claim (primarily those leaving tertiary education) may now have periods of part-time work, as well as full-time work, taken into account in assessing a reduction in the waiting period. This recognises that many of the job opportunities available to young people are now part-time or casual.

In recognition of the need for young people living without parental support to access secure accommodation, the 18 week rent assistance waiting period for homeless and independent young people under 18 was abolished on 20 March 1994. Waiting periods for all other eligible clients were abolished from March 1992.

Regarding those previously on income support, provisions for waiving the waiting period for clients reclaiming allowance after short periods of work have been simplified. Since September 1993, any claimant who has been in receipt of income support within the previous 13 weeks will not be required to serve a waiting period before becoming eligible for payment.

20. The Committee recommends that CES and DEET introduce greater flexibility into activity/work test arrangements, at least while unemployment levels remain high. (Page 150)

Response: Requires further investigation

To receive Job Search or Newstart allowance, all clients must show that they are taking reasonable steps to find suitable work or to improve their employment prospects. This may include applying for suitable jobs, contacting employers about possible vacancies, accepting reasonable offers of work or a place on a suitable training course.

The Government's Committee on Employment Opportunities has supported the use of activity testing to ensure that the reciprocal obligations between the Government and the unemployed are maintained. In return for ongoing income support and job search assistance provided by the Government, the unemployed are expected to actively seek work. The Committee notes that even during downturns, some unemployed people do find jobs.

Many young unemployed people, especially those suffering particular workforce disadvantage such as early school leavers, those with literacy problems, homeless young people and Aboriginal and Torres Strait Islander youth, need early and active assistance if they are not to become long-term unemployed. Activity testing is an integral part of a positive strategy to help young people establish an early attachment to the workforce.

For people aged 18 or above who have been unemployed for 12 months or more, a Newstart agreement needs to be signed in order to move on to Newstart Allowance. The agreement is a plan of action for the client and is negotiated on a one to one basis between the client and a CES officer. The agreement is responsive to the personal circumstances and skills of the client and takes into consideration labour market conditions affecting the individual young person.

While the Government considers that the existing activity/work test arrangements are already very flexible, it is examining alternative forms of activity for unemployed people. For example, the Government established the Community Activity Program in the 1993-94 Budget. A reference group established with the Program is to investigate alternative arrangements including the possibility of unemployed people undertaking work with community organisations as part of their agreement for receipt of JSA/NSA. Such an arrangement would be included as part of the Newstart agreement but would provide another avenue of assistance.

The Government acknowledges comments in the Report that clients could be better informed about what constitutes other approved activity and will be advising clients more fully in improved Newstart brochures and pamphlets.

21. The Committee recommends that the age of independence for AUSTUDY be reduced to 21 over the next four years (rather than to 22 over the next three years as currently planned). (Page 151)

Response: Not supported

The Government recognises that there are arguments for reducing the age of independence for students to 21 and that the parents of some young people might refuse to support their continued study. This must be set against the expectation in the community that in the main parents will support their children until they complete their education.

The majority of young people in continuous education will have completed study by age 22.

There would be significant resource costs in reducing the age of independence to 21. It is estimated that the cost of reducing the age of independence to 21 is about triple that of reducing it to 22 as announced in the 1992-93 Budget. The Government believes these resources are better targeted elsewhere.

22. The Committee recommends that the Australian Education Council of Ministers (AEC) examine means of coordinating eligibility criteria and administrative arrangements associated with payment of income support benefits for young people living along State borders. (Page 155)

Response: To be examined

It is not clear from the report what the major area of concern underlying this recommendation is. AUSTUDY eligibility criteria are the same across Australia. The reference to `concessions' in the text suggests that the concern relates to concessions provided by State Governments to the unemployed which vary between States.

23. The Committee recommends that DEET urgently review the criteria now in place for independent AUSTUDY. (Page 156)

Response: Not supported

The context of the recommendation implies that the criteria referred to are those for eligibility for the Student Homeless Rate of AUSTUDY, rather than the independent criteria based on being married, a parent or in the labour force.

The current criteria for homelessness under AUSTUDY have to cater for people up to age 24 (although this will be reduced to age 23 in 1994 and to age 22 from 1995 onwards). The criteria are intended to ensure assistance is targeted at the most disadvantaged and do not encourage young people to leave home unnecessarily.

24. The Committee recommends the concentration of income support payment arrangements in the Department of Social Security. (Page 156)

Response: Not supported

The Departments of Employment, Education and Training and Social Security are aware that difficulties sometimes arise when individuals, particularly young homeless people, are required to transfer from DSS income support to AUSTUDY allowances. In recent years, administrative arrangements have been made to reduce the incidence of these problems. They include priority processing of JSA/NSA recipients who apply for AUSTUDY, development of a transfer certificate for DSS clients transferring to DEET and a streamlined acceptance process for pensioner clients seeking AUSTUDY.

Additional measures to overcome disincentives for unemployed persons to take up education were announced in the 1993-94 Budget. They included:

allowing JSA/NSA recipients who are undertaking CES approved training and education for up to six months to remain on DSS payments, rather than transferring to AUSTUDY/ABSTUDY;

ensuring that JSA/NSA recipients undertaking AUSTUDY/ABSTUDY courses of longer than 6 months are given priority in the assessment of their entitlement to AUSTUDY/ABSTUDY on the basis of their disadvantaged status; and

continuing to pay JSA/NSA to clients transferring to AUSTUDY/ABSTUDY for 3 weeks, pending determination of entitlement.

DSS and DEET are continuing to monitor the effects of interactions between AUSTUDY and DSS income support arrangements and will be making further improvements as necessary. Cooperation between DSS and DEET has been given further impetus by a protocol signed by the Departments and endorsed by Ministers in May 1993.

25. The Committee recommends a unified youth income support payment for all eligible individuals under 21 whether they are unemployed or in full time study, with different levels for those living at home (for whom a parental means test would apply) and those living independently. (Page 157)

Response: To be examined

The idea of simplifying the system of income support payments to young people is attractive and could overcome some of the complexities in the Common Allowance Structure (CAS).

At present under the CAS the maximum rates of payment for AUSTUDY and JSA are aligned for those aged 16 to 20. However, a fully unified youth payment for people under 21 would need to take account of existing differences, some of which relate to the different purposes and natures of the payments. These include differences in eligibility, relativities and levels, definitions of homelessness and independence and income/assets testing. For instance, there is a more general preparedness to accept a student as dependent whereas entering the labour market is seen as more independent behaviour—consequently the age of independence has been higher for students than for the unemployed. Also tertiary AUSTUDY recipients have the option of increasing their rate of income support through the availability of the AUSTUDY Supplement. Other differences, such as the annual assessment of AUSTUDY eligibility versus the fortnightly assessment basis for JSA/NSA, could be difficult to resolve.

26. The Committee recommends that the `poverty trap' and associated disincentives inherent in current income support arrangements be examined by the DSS as a matter of urgency. (Page 162)

Response: To be examined

Poverty traps, or high effective marginal tax rates for people on income support arise from the interaction of the taxation system, withdrawal of fringe benefits available to low income earners and the income tests for income support. The Government acknowledges that they do provide a disincentive, particularly for short-term and casual work.

Reducing the rate at which income support is withdrawn as income increases would raise the level of income at which people are still eligible for payment. This would expand the number of people eligible for payments and increase Government expenditure.

Possible incentives and disincentives arising from income support arrangements are always a consideration in the development of new policy options. However, poverty traps are an unavoidable by-product of a targeted income support system and there are no easy solutions which would not involve significant increases in Government expenditure and some consequent loss of targeting efficiency.

In Restoring Full Employment, the Government's Committee on Employment Opportunities has suggested a number of possible alterations to income support arrangements to encourage the unemployed to engage in part time and/or casual work without discouraging further search for full time work. They include easing the taper for withdrawal of income support as well as suggested changes applying to married couples, such as requiring each spouse to qualify for and receive individual unemployment allowances, subject to some form of joint income test at higher levels. A parenting allowance would be available for one partner of couples with young children.

27. The Committee recommends, as an interim measure, that the current `free' area of earned income before beneficiaries begin to lose benefits be extended to $100 per fortnight (in 1992 dollar terms), with parallel adjustments for income levels at which the dollar for dollar loss in benefits begins to apply and at which the benefit cuts out. (Page 163)

Response: Action under way

The Government recognises that part-time and casual work is becoming increasingly important for unemployed people to supplement their incomes and retain links with the paid workforce. A number of measures have already been implemented to improve incentives for DSS allowance recipients to undertake part-time or casual work. Since September 1993, maximum free areas for allowance recipients have been increased to $90 a fortnight for single persons and $110-160 a fortnight for married couples, depending on whether one or both partners report employment income.

The Government's Committee on Employment Opportunities has argued that the income test could be amended further to provide a greater financial incentive for unemployed to seek part time work. As an example of the kinds of change that could be made, the Committee recommends reduction in the free area coupled with replacement of the 50 per cent and 100 per cent tapers with a single taper rate. The taper refers to the rate at which the unemployment allowance declines with increases in income.

28. The Committee recommends that the earnings credit scheme, which is currently restricted to maximum rate aged pensioners, be extended to JSA/NSA beneficiaries. (Page 163)

Response: Supported, action under way

An earnings credit of up to $500 for allowance recipients was introduced in March 1994 to improve incentives for clients to take up part-time and casual employment opportunities.

29. The Committee recommends that, as a further incentive to participate in casual and part-time work, beneficiaries be allowed to retain fringe benefits for up to six months, as long term unemployed people are now able to do if they move to full time work. (Page 163)

Response: Supported in principle

If an unemployed person takes up part-time work but retains entitlement to some allowance under the income test, he or she retains entitlement to a health care card and associated fringe benefits. Health care card entitlement may also be retained during short periods of more substantial employment (at present up to four weeks) even if allowance entitlement is lost. Currently, those in receipt of income support for 12 months or longer retain entitlement only to a health care card and associated fringe benefits for up to six months after commencing full-time work.

States separately provide concessions to unemployment beneficiaries and new arrangements for those would be a matter for the States to consider.

30. The Committee recommends that the Government commission further research into the social and economic costs of unemployment, possibly through the funding of a researcher on attachment to the Brotherhood of St Laurence. (Page 165)

Response: Already undertaken

The social and economic costs of unemployment were discussed as part of a comprehensive survey of unemployment in an EPAC Council Paper Unemployment in Australia. The Council Paper attributed a number of social problems to unemployment, including loss of self esteem, poor health, marriage breakdown, increased crime and the loss of skill and morale, especially among the long-term unemployed. The Council Paper also drew upon findings from a recent EPAC Discussion Paper (Junankar & Kapuscinski, 1992) The Costs of Unemployment in Australia.

The Brotherhood of St Laurence has recently undertaken some research into long-term unemployment on behalf of the Committee on Employment Opportunities. It has also published a study Children of Immigrants: Issues of Poverty and Disadvantage which focuses on children under 15 years of age.

As part of the ongoing evaluation of the Newstart Strategy, DEET is conducting surveys of long-term unemployed clients. This work will focus on the assistance provided to and required by jobseekers and the impact of unemployment on them.

In view of these initiatives and other research by both academics and community groups on the impact of unemployment, the Government does not consider it necessary to conduct additional research at this stage.


(1 )The recommendation number and the page in which it appears in "Wanted: Our Future" are identified to facilitate reference to the report.