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Social Security Legislation Amendment (Youth Jobs Path: Prepare, Trial, Hire) Bill 2016



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BILLS DIGEST NO. 37, 2016-17 10 NOVEMBER 2016

Social Security Legislation Amendment (Youth Jobs Path: Prepare, Trial, Hire) Bill 2016 Matthew Thomas Social Policy Section

Contents

Purpose of the Bill ............................................................... 2

Background ......................................................................... 2

The Youth Jobs PaTH program ................................................ 2

Committee consideration .................................................... 3

Senate Standing Committee for the Scrutiny of Bills .............. 3

Policy position of non-government parties/independents ..... 3

Australian Labor Party (Labor) ................................................. 3

The Australian Greens (the Greens) ........................................ 4

Position of major interest groups ......................................... 4

Australian Council of Trade Unions (ACTU) ............................. 4

Australian Council of Social Service (ACOSS) ........................... 5

Financial implications .......................................................... 5

Statement of Compatibility with Human Rights .................... 5

Parliamentary Joint Committee on Human Rights .................. 5

Key issues and provisions..................................................... 5

Youth unemployment .............................................................. 6

Displacement effects and exploitation of young workers ....... 7

Internship payments ................................................................ 8

Participation—voluntary or not? ........................................... 10

Work cover ............................................................................ 10

Will the Youth Jobs PaTH program work? ............................. 11

Australian work experience programs ................................ 11

Ireland’s JobBridge internship scheme ............................... 11

Concluding comments ....................................................... 13

Date introduced: 13 October 2016

House: House of Representatives

Portfolio: Employment

Commencement: Schedule 1 commences on the later of Royal Assent and 1 April 2017. Schedule 2 commences on the later of Royal Assent and 1 January 2017.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

November 2016.

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Purpose of the Bill The purpose of the Social Security Legislation Amendment (Youth Jobs Path: Prepare, Trial, Hire) Bill 2016 is to amend the Social Security Act 1991, the Social Security (Administration) Act 1999 and the Veterans’ Entitlements Act 1986 to allow for:

• internship payments made under the Youth Jobs PaTH program to be excluded from the income test for social security payments and thus not affect recipients’ payments and entitlements and

• the suspension for up to 26 weeks of a person’s social security payment where they are employed by a business that is eligible to receive a Youth Bonus wage subsidy in relation to them under the Youth Jobs PaTH program.

Background The Bill seeks to give effect to the Youth Jobs PaTH program that was announced as part of the 2016-17 Budget.1

The program forms part of a broader Youth Employment Package, which includes: the expansion of the New Enterprise Incentive Scheme (NEIS) and initiatives to encourage and assist young people into self-employment; reform of wage subsidies to make them more flexible and better suited to the demands of businesses; and, reform of Work for the Dole arrangements to require the most job-ready job seekers (Stream A job seekers) to participate in jobactive for 12 months rather than the current six months before moving to Work for the Dole.2

The Youth Employment Package augments a number of measures that were introduced as a part of the 2015-16 Budget in a bid to tackle the problem of youth unemployment.3

The Youth Jobs PaTH program The following description is based on publicly available information. In the absence of program guidelines, some aspects of the program remain unclear.

The Youth Jobs PaTH program is intended to provide job seekers aged 17 to 24 years who have been in receipt of jobactive services for six months with work experience, and to maximise their prospects of subsequently gaining employment.4

Under the program, which is to commence from 1 April 2017, young people are first provided with pre-employment training of up to six weeks in basic employability skills. The first three week block of training is intended to help job seekers to understand and develop the skills that employers are looking for, such as teamwork, communication, personal presentation, reliability and digital literacy. This training will be delivered by training providers appointed to an Employability Skills Training Panel.5

In order to try to ensure the relevance and efficacy of the employability skills training provided under the program, the Department of Employment sought stakeholders’ views via a consultation paper.6 In particular, the training is being developed with business and employment service providers to make sure that it is tailored and will meet the requirements of employers. The Department has responded to the feedback and made some adjustments to the design of the program in line with the comments.7

It should be noted that it is not just Youth Jobs PaTH program participants who will be undertaking the first three weeks of training. All 15 to 24 year olds who have been receiving jobactive services for five months will be required to complete the employability skills training.8

1. See Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2016-17, p. 85. 2. Ibid., p. 86.

3. For a brief description and analysis of the measures see M Thomas, ‘Workforce participation measures’, Budget review 2015-16, Research paper series, 2015-16, Parliamentary Library, Canberra, 2015, pp. 154-156. 4. Australian Government, ‘Part 2: expense measures’, op. cit., p. 85. For further details on the program see Department of Employment, ‘Youth Jobs PaTH’, Department of Employment website, last modified 25 October 2016. 5. Department of Employment, ‘Youth Jobs PaTH’, op. cit. 6. Department of Employment, Employability skills training, Consultation paper, Department of Employment, Canberra, 2016. 7. Department of Employment, Employability skills training: response to stakeholder feedback, Department of Employment, Canberra, 2016. 8. Senate Education and Employment Legislation Committee, Official committee Hansard, 6 May 2016, p. 18.

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The second three week block of training is to focus on advanced job hunting skills, job preparation, career development, interview skills and industry awareness experiences.

The second part of the program, which is also envisaged to commence from 1 April 2017, consists of a work experience placement (also described as internships), under which a job seeker will work for 15 to 25 hours per week for between four and twelve weeks. Participation in this part of the program is to be voluntary. To be eligible for participation, a job seeker must have been registered in jobactive services for at least six months.9

Job seekers who choose to participate will receive an incentive payment of $200 a fortnight in addition to their income support payment. This is a flat-rate payment; that is, a job seeker will receive $200 irrespective of the amount of hours they work between 15 and 25 hours. The amount of hours to be worked by the job seeker is to be agreed between the employment service provider and the employer.10

Businesses that take on a job seeker will receive an up-front payment of $1,000.11

If the host businesses (or any other employers of job seekers aged under 25 years and in receipt of jobactive services for at least six months) offer young job seekers a job, they will be eligible for a Youth Bonus wage subsidy of up to $6,500 for job-ready job seekers and up to $10,000 for disadvantaged job seekers. Under the changed wage subsidy arrangements introduced as a part of the 2016-17 Budget the subsidies will be paid on a flexible basis over a six-month period.12

Committee consideration At the time of writing this Bills Digest the Bill had not been referred to Committee for inquiry and report.

Senate Standing Committee for the Scrutiny of Bills The Committee had no comments on the Bill.13

Policy position of non-government parties/independents Australian Labor Party (Labor) Labor has been highly critical of the Youth Jobs PaTH program, arguing that it will exploit interns, depress wages and displace jobs.14

Because the program is intended to match job seekers with existing or prospective job vacancies, Labor maintains that it will not create additional jobs, but simply substitute subsidised interns for employees:

Well Labor totally opposes using taxpayers’ money to fill existing vacancies. Labour market programs are there to ensure that we add to the labour market.

What should have been the case is employers are provided incentives to add to their workforce and governments willing to provide that support.

We don’t believe you underpay workers in a so called internship using taxpayers’ money which will displace the opportunities for people to have real jobs. That’s what economists call dead weight loss. You are effectively paying employers to do something they would have done anyway—that is fill existing vacancies. Labour market programs must be about adding to the labour market.

15

9. Ibid., p. 19.

10. Ibid., p. 27. 11. Department of Employment, ‘Youth Jobs PaTH’, op. cit. 12. Australian Government, ‘Part 2: expense measures’, op. cit., p. 85, see also The Treasury, Sticking to our national economic plan for jobs and growth in a stronger, new and more diversified economy, Budget statement, The Treasury, Canberra, 2016, p. 22.

13. Senate Standing Committee for the Scrutiny of Bills, Alert digest, 8, 2016, The Senate, 9 November 2016, p. 46. 14. B O’Connor (Shadow Minister for Employment and Workplace Relations) and E Husic (Shadow Minister for Employment Services, Workforce Participation and the Future of Work), Youth Jobs PaTH: six months on and still no answers, joint media release, 20 October 2016. 15. B O’Connor (Shadow Minister for Employment and Workplace Relations) and L Chesters (Member for Bendigo), Doorstop interview: Bendigo,

Victoria, transcript, 6 May 2016.

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In response to concerns about the exploitation of interns that it maintains the program highlights,16 Labor indicated in the lead up to the 2016 federal election that it intended to tackle the problem, should it gain office:

Labor will work with business, employer groups, unions and Interns Australia to develop a definition of what constitutes an internship, ensuring people who are working in real jobs are being paid real wages, whilst retaining real opportunities for on the job training.

Labor will also provide $22.9 million of additional resources to the Fair Work Ombudsman, $2.4 million of which is specifically to the Fair Work Ombudsman’s Young Workers team to ensure young people working as interns are not being ripped off. 17

Labor also proposed an alternative pilot program—Youth Jobs Connect—under which 3,000 young people at risk of life-long employment disadvantage would complete an intensive six month program of employment assistance.18

Employment Minister, Senator Michaelia Cash, is reported to have criticised Labor’s position on the Youth Jobs PaTH program as being hypocritical, given that a number of Labor members have used interns in their own offices.19 Senator Zed Seselja is said to have made similar comments.20

The Australian Greens (the Greens) The Greens have indicated that they do not support the Youth Jobs PaTH program.

Following the announcement of the Youth Jobs PaTH budget measure, Greens employment spokesperson, Adam Bandt indicated that he was concerned the program could breach international labour rights, and would be asking the UN’s International Labour Organisation (ILO) to look at it.21

Subsequently, Senator Rachel Siewert argued that young people should not be working for as little as four dollars an hour, and insisted that the $751.7 million over four years allocated to the program ‘would be better spent on other programs such as community driven employment initiatives that are consultative and play to the strengths of the individual’.22

The independents do not appear to have publicly expressed a position with regard to the Bill.

Position of major interest groups Australian Council of Trade Unions (ACTU) The ACTU is strongly opposed to the Youth Jobs PaTH program.23 It has argued that the program:

… poses a serious risk to young people and inexperienced workers, and could also undermine Australia’s entire wage system with interns earning only $4 an hour—potentially dragging down pay and conditions for all workers. 24

Among other things, ACTU President, Ged Kearney has stated:

It is particularly concerning that the Employment Minister is saying business must demonstrate a ‘real vacancy’ exists before putting on a PaTH intern. This lays bare their intention to undermine the foundations of our wage and employment systems by allowing employers to access a pool of free labour rather than offering proper wages and

16. The Fair Work Act 2009 does not define ‘intern’ and is not clear on what constitutes a ‘vocational placement’. 17. Australian Labor Party (ALP), Protecting rights at work [and] Protecting rights at work fact sheet, ALP policy document, Election 2016, p. 3. 18. ALP, Youth jobs connect fact sheet, ALP policy document, Election 2016. 19. J Kelly, ‘Cash hits Labor’s interns as hypocrisy’, The Australian, 22 August 2016, p. 6. 20. A Workman, ‘Unpaid intern wrote key Labor policy while working in Bill Shorten's office’, Buzzfeednews, 2 November 2016. 21. A Bandt (Greens Employment spokesperson), Liberals’ youth unemployment plan: lure them into work for below minimum wage, media

release, [5 May 2016]. 22. R Siewert (Australian Greens Senator), Greens commit to dropping PaTH jobs program, media release, 25 June 2016. 23. See Australian Council of Trade Unions (ACTU), Young people deserve real Working Futures not a PaTH to nowhere, media release,

20 June 2016; ACTU, Government must address serious concerns with unravelling PaTH scheme, media release, 5 May 2016; ACTU, PATH scheme should be abandoned after public support evaporates, media release, 15 June 2016; ACTU, Australians dangerously uninformed on reality of PaTH scheme, media release, 16 May 2016; ACTU, Still no answers on youth unemployment, media release, 25 August 2016; ACTU, A PaTH to nowhere: Liberal Government’s jobs ‘plan’ in tatters, media release, 12 May 2016. 24. ACTU, Australians dangerously uninformed on reality of PaTH scheme, op. cit.

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conditions. Youth unemployment is an issue that must be addressed, but we need real investment in training, apprenticeships and education—not a hastily cobbled together free labour supply scheme for big business. 25

Australian Council of Social Service (ACOSS) ACOSS has been cautiously supportive of the program. Following the announcement of the Budget measure, ACOSS expressed the view:

The shift away from the ineffective Work for the Dole program towards a new approach is welcome. However, the Government must ensure that the PaTH program is well targeted, prevents young people from being exploited and leads to real employment outcomes. This applies especially to the internship component. 26

To this end, ACOSS has prepared a policy briefing in which it outlines a number of policy settings that it believes should be implemented in order to ensure that the potential benefits of the program are maximised and the risks kept to a minimum.

As ACOSS sees it, compulsory training under the program should be linked to work experience; payment during internships should be the equivalent of the national minimum wage or the National Training Wage; internships should be genuinely voluntary; the risk of exploitation or harm should be minimised; and, adverse impacts of the program on the labour market should be minimised.27

Issues raised by stakeholders in relation to the Bill are discussed in further detail in the ‘Key issues and provisions’ section, below.

Financial implications The Explanatory Memorandum estimates that the changes to the Youth Bonus wage subsidy arrangements enabled by Schedule 2 of the Bill will cost $5.7 million over the forward estimates period (2015-16 to 2019- 20).28

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.29

Parliamentary Joint Committee on Human Rights At the time of writing this Bills Digest the Parliamentary Joint Committee had not published any comments in relation to the Bill.

Key issues and provisions The income test is used to determine a person’s rate of income support. Subsection 8(8) of the Social Security Act 1991 lists those amounts that are not treated as income for the purposes of the income test, and the Act in general. Similarly, subsection 5H(8) of the Veterans’ Entitlements Act 1986 lists amounts not treated as income for the purposes of that Act.

Schedule 1 inserts proposed paragraph 8(8)(tc) to the Social Security Act list of amounts that are not treated as income and proposed paragraph 5H(8)(xad) to the Veterans’ Entitlements Act list, ensuring that internship payments made to participants in the Youth Jobs PaTH program are not treated as income under either of those Acts. This ensures that the extra payments will not affect the participants’ continuing eligibility for assistance under these Acts.

When a job seeker gains full time employment they typically no longer qualify for income support because of their employment earnings. As such, under sections 93 and 94 of the Social Security (Administration) Act 1999, their income support payment is automatically cancelled when they inform the Department of their change of

25. ACTU, Government must address serious concerns with unravelling PaTH scheme, op. cit. 26. Australian Council of Social Service (ACOSS), The Youth Jobs PaTH program, Policy briefing, ACOSS, [Sydney], May 2016, p. 3. 27. Ibid.

28. Explanatory Memorandum, Social Security Legislation Amendment (Youth Jobs Path: Prepare, Trial, Hire) Bill 2016, p. 2. 29. The Statement of Compatibility with Human Rights can be found at page nine of the Explanatory Memorandum to the Bill.

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circumstances. Section 85 of the Act allows for the resumption of a person’s income support payment after the payment’s cancellation or suspension.

Schedule 2, item 3 inserts proposed section 95C into the Social Security (Administration) Act. The effect of proposed subsection 95C(1) is to allow for a person who is employed by a business that is eligible to receive a Youth Bonus wage subsidy in relation to them to have their payment suspended for a 26-week period, rather than cancelled.

Under proposed subsection 95C(2), the person’s income support payment will be automatically cancelled at the end of the 26 week period if they do not qualify for the payment as a result of still being employed.

However, if the person loses their employment and the Secretary determines that this is as a result of their own voluntary act or misconduct, their income support will be cancelled from the day that they lost their employment, under proposed section 95C(3).

Youth unemployment The labour market for youth aged 15 to 24 years deteriorated substantially after the onset of the Global Financial Crisis (GFC) in 2008 and has only recently shown signs of recovery. Australian Bureau of Statistics (ABS) data show that the youth unemployment rate rose sharply from its most recent low of 7.6 per cent in August 2008 (in seasonally adjusted terms) to 12.2 per cent in May 2009.30 The youth unemployment rate then rose to 14.5 per cent in November 2014 but has since fallen to 12.6 per cent in September 2016 (in some parts of Australia the rate is significantly higher). This compares with an overall unemployment rate of 5.6 per cent.

In developed countries such as Australia young people tend to bear the brunt of economic downturn, suffering greater job losses and higher unemployment rates than adults. This is because ‘they are far more vulnerable than adults in a tight labour market: a lack of relevant skills and experience mean a greater risk of unemployment for recent entrants to the labour market’.31

Because young people typically have little or no labour market experience, businesses face higher costs of investment and lower costs of termination when employing young workers.32

This situation is exacerbated by the fact that young people who are making the transition from school to work tend to learn about their abilities and preferences by ‘job shopping’.33 This results in higher rates of turn-over and more frequent periods of unemployment for young people.

It is also the case that emerging technologies and structural changes in the labour market mean that many of the full-time manufacturing and industrial jobs that young people with limited skills and experience would have held in the past no longer exist.34 At the same time there has been a corresponding growth in service and technology industries and part-time and casual employment.35 This has resulted in an increased demand for what are termed ‘soft skills’—interpersonal people skills, social and communication skills—as well as self-management skills and problem solving abilities, and literacy and numeracy skills.

A recently released Anglicare jobs availability snapshot illustrates the nature of the problem.36 Based on an analysis of job advertisement numbers in May 2016, Anglicare found that only 13 per cent of jobs available were suitable for disadvantaged job seekers—that is, job seekers with lower skill levels, education and experience. This equates to more than six disadvantaged job seekers for every vacancy at the entry skill level across Australia

30. Australian Bureau of Statistics (ABS), Labour force, Australia, cat. no. 6202.0, ABS, Canberra, September 2016; ABS, Labour force, Australia, detailed—electronic delivery, cat. no. 6291.0.55.001, ABS, Canberra, September 2016. 31. Foundation for Young Australians (FYA), How young people are faring 2011, FYA, Melbourne, 2011, p. 14. 32. M Caliendo and R Schmidl, ‘Youth unemployment and active labour market policies in Europe’, IZA Journal of Labor Policy, 5(1), January 2016,

pp. 1-30.

33. Ibid.

34. A Esposto, ‘Upskilling and polarisation in the Australian labour market: a simple analysis’, Australian Bulletin of Labour, 37(2), 2011, pp. 191- 216; Australian Bureau of Statistics (ABS), Australian social trends, cat. no. 4102.0, ABS, Canberra, December 2011. 35. Ibid.

36. Anglicare Australia, Evidence base for state of the family 2016: the lived experience of jobseekers: jobs availability snapshot, Anglicare Australia, Canberra, October 2016.

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as a whole, with the situation in South Australia (more than nine) and in Tasmania (ten and a half) even more difficult.37

The combined effect of the abovementioned structural changes is that many young people experience complex and difficult transitions to their first full-time job. They are likely to switch between states of joblessness and training and working, and are more likely to enter temporary or precarious types of employment.38

The overall age at which young people are transitioning into full-time work has been getting higher. At the time of the Global Financial Crisis (GFC) in 2008 the average age at which young Australians transitioned into full-time work was 21.8 years; in 2013, it was 23.4 years.39

Where young people are not fully engaged in education or work (or a combination of the two) for extended periods, they are at greater long-term risk of unemployment, cycles of low pay and employment insecurity.40

The OECD has identified two groups of young people that face persistent difficulties in gaining stable employment after leaving school.41

The first is those young people who are left behind—they simply do not make it in the labour market because they lack qualifications and come from disadvantaged backgrounds. The research suggests that possible risk factors for poor labour force attachment among young people include early school leaving, young motherhood, disability and non-English speaking and Indigenous background.42

The second group is young people who may have received training and hold qualifications but nevertheless struggle to find stable employment. Instead they cycle between temporary work, unemployment, and periods out of the labour market. The OECD and other researchers refer to this group as ‘poorly integrated new entrants’.43

Displacement effects and exploitation of young workers A number of commentators have expressed concerns that without appropriate safeguards the program could be used by businesses to replace existing workers or as an alternative to recruiting young workers at the appropriate wage.44

In response to these concerns, the Department has indicated that it has in place a number of safeguards. In the Senate Estimates hearings of 6 May 2016, a Department representative stated:

As part of the process, as we have with the current work experience programs that we run, we will monitor placements. Our system is able to record ABNs and will be able to monitor how many job seekers undertake internships with particular businesses. We will be able to monitor how many of those job seekers end up in employment and we will be able to identify if businesses are utilising a large number of job seekers as interns and not ending up employing them. So we will have our standard monitoring processes in place where we see reports. We will not permit job seekers to be placed into internships if there is evidence that an employer is misusing the process and that interns are not ending up with employment on a regular basis.

45

The Department has also stated that jobactive providers will be expected to attempt to ensure that there is a real prospect of employment for participants. Employment service providers will also be required to make sure that businesses are not using interns as a substitute for other employees.

Host organisations will be required to sign an agreement with the Department under which they commit to not displacing existing workers in order to create a Youth Jobs PaTH program position. The Department will also rely

37. Ibid., p. 17. 38. Caliendo and Schmidl, ‘Youth unemployment and active labour market policies in Europe’, op. cit. 39. FYA, How young people are faring in the transition from school to work, FYA, Melbourne, 25 September 2014, p. 5. 40. Organisation for Economic Cooperation and Development (OECD), Off to a good start? Jobs for youth, OECD Publishing, [Paris], 2010. 41. Ibid.

42. J Pech, A McNevin and L Nelms, Young people with poor labour force attachment: a survey of concepts, data and previous research, Australian Fair Pay Commission, Canberra, 2009. 43. D Bell and K Benes, Transitioning graduates to work: improving the labour market success of poorly integrated new entrants (PINES) in Canada, Canadian Career Development Foundation, Ottawa, May 2012. 44. See A Patty, ‘Budget 2016: intern program risks being a “jobs destruction scheme”’, Sydney Morning Herald, 5 May 2016, p. 6. 45. Senate Education and Employment Legislation Committee, Official committee Hansard, 6 May 2016, op. cit., p. 20.

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on its national tip-off line to identify instances where the program is being exploited. Any employer found to be misusing the program is to be banned from using it in the future.46

Brotherhood of St Laurence Executive Director, Tony Nicholson is reported to have been highly critical of claims that the program is inherently exploitative.47 The Brotherhood of St Laurence has an ongoing campaign on the issue of youth unemployment. For some time, it has championed the need for programs that support young people to become competitive in the labour market, and especially those young people at risk of long-term unemployment. The Brotherhood has consistently advocated for governments to stimulate the availability of entry-level opportunities for young people in need of work experience and work. In response to criticisms of the Youth Jobs PaTH program, Nicholson has said:

The debate has been hijacked by those who are concerned only with the interests of the privileged and tertiary-educated people, but they are not the target of this program or the people we are concerned about … when I have read the criticism, it comes from academics who spend their time salivating over spreadsheets and scatter graphs or from lobbyists who spend their time policing their ideological rhetoric, but they don’t talk to long-term unemployed people, their parents or employers—we do … I’ve heard some of the criticism, that this will displace workers. But that displays a fundamental misunderstanding of who we are working with here. These are young people who are not employed by employers because they don’t have the skills in the initial period. The majority are early school leavers, some only scraped through Year 12, they are relatively poorly educated and they are not equipped for the jobs that are available in areas of the economy that are growing.

48

Internship payments A number of commentators have criticised the program on the grounds that participants will only be paid $200 a fortnight in addition to their existing income support payment. Given that participants are to work between 15 and 25 hours per week, the payment thus effectively amounts to a minimum of four dollars per hour and a maximum of $6.67 per hour.

Even when paid at the maximum rate, the payment is substantially less than the national minimum adult wage of $17.29, as well as being less than junior minimum wages for a 17 year old.49

The Australian Council of Social Service (ACOSS) has argued that ‘participants should be paid the hourly equivalent of the minimum wage, or where appropriate training is provided, the National Training Wage’.50 ACOSS suggests this could be achieved ‘either by capping the weekly hours of the internship or by increasing the proposed $100 per week payment for participants’.51

CEO of Jobs Australia, David Thompson has similarly argued that all participants in the program should be provided with formal training, and that their hours should be capped so that they receive at least the trainee wage.52 As Thompson sees it ‘if people are doing real work in real jobs, then it’s only fair that they receive a payment that is equivalent to a real wage, regardless of whether that payment comes from the employer or comes from Centrelink’.53

Such proposals appear to be premised on the notion that participation in the Youth Jobs PaTH program is or should be treated as employment. Based on this reading, the Australian Council of Trade Unions (ACTU) has obtained legal advice from the law firm, Maurice Blackburn which reportedly indicates that the program is ‘illegal’ and in violation of the Fair Work Act 2009.54

46. Ibid., pp. 13-53. These safeguards are broadly consistent with those recommended by Jobs Australia. 47. R Morton, ‘Welfare blasts unions, academics on youth jobs’, Weekend Australian, 7 May 2015, p. 1. 48. Ibid.

49. Junior minimum wages are paid at a percentage of the relevant adult minimum wage. At 17 years of age this is 57.8 per cent; at 18, 68.3 per cent; at 19, 82.5 per cent and at 20 years, 97.7 per cent. Fair Work Commission, Miscellaneous Award 2010. 50. ACOSS, The Youth Jobs PaTH program, op. cit., p. 3. National Training Wage amounts are specified in the National Training Wage Schedule of the Miscellaneous Award 2010. 51. Ibid.

52. Jobs Australia, ‘Youth jobs path to give young people real work opportunities’, Jobs Australia website. 53. Ibid.

54. W Williams, ‘Youth Jobs PaTH program needs new legislation, ACTU claims’, ProBono Australia, 16 May 2016. See also G Sivaraman, ‘PM's plan risks creating an underclass of workers’, Sydney Morning Herald, 13 May 2016, p. 18.

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If the program’s arrangements are to be treated as an employment arrangement, then the provisions of the Fair Work Act would apply to it and workers engaging in the program would be entitled to earn the minimum rates and conditions spelled out in the Fair Work Act. However, Minister for Employment, Senator Michaelia Cash and Department representatives have made it clear that the program’s arrangements are for work experience and not employment.55

Job seekers are currently able to participate in work experience activities similar to those proposed under the Youth Jobs PaTH program without being paid any more than an allowance on top of their regular income support payment.

Under existing arrangements, a young job seeker may participate in Voluntary Work56 or the National Work Experience Programme57 (NWEP) as a means to satisfy their mutual obligation requirements, enhance their vocational skills and gain experience in a work-like environment. As is the case for the Youth Jobs PaTH program, Unpaid Work Experience, Volunteer Work and the NWEP are not classified as employment or training, an apprenticeship or other similar scheme.

In the case of the NWEP, placements can be for a maximum 25 hours per week and may last for a maximum of four weeks. Participants in the program are paid an approved program of work supplement (APWS) of $20.80 per fortnight to assist with any additional costs associated with NWEP participation.58 The supplement is taxable, but exempt from the income test, which is used to determine an income support recipient’s payment rate. Hence, payments under the Youth Jobs PaTH program represent an improvement on the current situation for NWEP participants.

As suggested above, one of the main barriers to the employment of young people is the fact that they have little or no skills or work experience, especially if they are disadvantaged. This results in employers being unwilling to take them on, based on the assumption that they are likely to be unprofitable—initially, at least. Emeritus Professor Phil Lewis has described his reading of the situation as follows:

Young people are unemployed because, given their lack of skills and/or training, firms can’t find anything profitable for them to do at the institutionally set wage firms must legally pay. It may also be the case that the wage that firms would be willing to pay (in the absence of minimum wages) in order to profitably employ them would not be attractive enough for the unemployed given the level of unemployment benefit they would get if they didn’t work.

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As Lewis sees it, then, ‘the beauty of Youth Jobs PaTH is that it addresses both the demand side by reducing labour costs significantly and the supply side by providing an incentive for young people to work’.60

It might be argued that for some of the workplaces in which program participants may end up relatively few skills or work experience may be required and that, as a result, employers will effectively be gaining cheap labour. However, the counter to this argument might be that, as Tony Nicholson has observed, many participants are likely to have limited or no skills and experience, and to be disadvantaged.

If Lewis is right and young people in the target group are not productive enough to employ at the legal minimum wage, then to achieve an impact that extends beyond the placement, participants will need to develop their skills and experience enough to make hiring them at minimum wage profitable for employers.

55. Department of Employment Secretary, Renée Leon has stated ‘these people are not being employed. They are on income support. They are not employed by the host organisation. They are still on income support. They are job seekers in the jobactive caseload. They will be given an additional amount of money as an incentive to participate in the program, but they are not employed, so the question of minimum wage is not relevant to their circumstances. They are unemployed, they are on the unemployment benefit and they are on the jobactive caseload’. Senate Education and Employment Legislation Committee, Official committee Hansard, 6 May 2016, op. cit., p. 15.

56. Department of Social Services (DSS), ‘Guide to Social Security Law: 3.2.9.130 suitable activity—voluntary work’, DSS website, last modified 1 July 2015. 57. Department of Employment, ‘National Work Experience programme’, Department of Employment website, last modified 4 December 2015. 58. Department of Social Services (DSS), ‘1.2.7.180 Approved Program of Work Supplement (APWS) - description’, Guide to social security law,

DSS website, last reviewed 7 November 2016. The National Work Experience Programme was introduced on 1 October 2015. See M Cash (Minister for Employment), Work experience to help job seekers into work, media release, 5 October 2015. The Department of Employment is currently undertaking an evaluation of the programme. 59. P Lewis, ‘Budget 2016: Youth Jobs PaTH—paving the way for employment growth’, Committee for Economic Development of Australia (CEDA), blog, 11 May 2016. 60. Ibid.

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Participation—voluntary or not? As noted above, participation in the work experience part of the Youth Jobs PaTH program is to be voluntary. Job seekers will be free to choose whether or not they wish to take part. However, Australian Greens Senator Rachel Siewert has argued that while participation in the program has been presented as being voluntary, it has the potential to become compulsory, in effect:

… people shouldn’t be fooled by the rhetoric that this is voluntary because if a job service provider puts it into a person’s job plan it essentially becomes compulsory as penalties apply if someone doesn’t support their plan. 61

In working with job seekers, jobactive service providers begin by negotiating a Job Plan. The Job Plan is the document that sets out the actions job seekers are required to undertake in order to satisfy the requirements for receipt of income support, and, ideally, gain employment as soon as possible. Once a Job Plan has been agreed, the job seeker is required to meet the requirements set out in the Plan, or risk being penalised for non-compliance.62

Senator Siewert’s concern is that employment service providers might pressure vulnerable young job seekers into including participation in Youth Jobs PaTH work experience in their Plans in order to secure an outcome fee.63 The job seekers would then be obliged to participate in the program or risk a penalty for non-compliance.

When Senator Siewert raised this possibility in Senate Estimates hearings, Secretary of the Department of Employment, Ms Renée Leon responded:

But the provider cannot insist on something being in a plan that the guidelines require them to comply with our program requirements that say the program is voluntary. The providers would be in breach of their deed with us if they sought to force someone into an internship when we have instructed them that internships are voluntary … the program is voluntary for the job seeker. If any job seeker were to say they were being forced to put that in their job plan we would invite them to immediately call our tip-off line, because the provider will be subject to guidelines from the department that internships are voluntary.

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ACOSS is of the view that the Youth Jobs PaTH internships:

… should be genuinely voluntary so that if a young person decides that an internship is not useful for them, they can discontinue without additional financial penalties (beyond the cessation of the additional $100 a week payment for participation), even if the activity is agreed in their Employment Pathway Plan. 65

Work cover Concerns were initially raised regarding the arrangements under which participants will be covered for workers’ compensation. It is to be assumed that these will be the same as for participants in the NWEP.

61. K Silva, P McDonald and T Taylor, ‘Budget 2016: jobseekers weigh up internship program but experts fear workers could be exploited’, ABC News, first published 4 May 2016, updated 12 August 2016. 62. Under section 42E of the Social Security (Administration) Act 1999 if a job seeker refuses to enter into a Job Plan without good reason this may result in their income support payment not being paid until they do enter into a Job Plan, and penalties being applied.

Currently, failing to enter into a Job Plan results in a connection failure. There is no immediate penalty for a connection failure, but the job seeker may be required to comply with a reconnection requirement. In this instance, this would entail the job seeker entering into a Job Plan. If the job seeker fails to meet their reconnection requirement (enter into a Job Plan) without a valid excuse then this amounts to a reconnection failure and sanctions apply. For every day that a job seeker fails to meet their reconnection requirement, they incur a penalty equivalent to their daily rate of income support payment. In the course of the 44th Parliament, the Government introduced to the Parliament a Bill—the Social Security Legislation Amendment (Further Strengthening Job Seeker Compliance) Bill 2015—that would have allowed for the immediate non-payment of income support to job seekers who fail to meet their requirements under the Social Security (Administration) Act 1999, including entering into a Job Plan, and for penalties to be applied for the period in which they fail to comply, without having a reasonable excuse. The Bill was before the Senate when Parliament was dissolved and lapsed on prorogation of Parliament. 63. Under jobactive system arrangements, employment services providers are paid outcome fees where a job seeker gains employment. Full

outcome payments are paid where a job seeker gains employment and moves fully off income support for four, twelve and 26 weeks. Partial outcome fees are paid where a job seeker has a job which reduces their income support payment on average by 60 per cent and may be paid at four and 12 weeks only. Department of Employment, Request for tender for employment services 2015-2020, Department of Employment, Canberra, November 2014, p. 61. 64. Senate Education and Employment Legislation Committee, Official committee Hansard, 6 May 2016, op. cit., pp. 24-25. 65. ACOSS, The Youth Jobs PaTH program, op. cit., p. 4.

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Under this program, the Department of Employment purchases personal accident insurance and public and/or product liability insurance to cover job seekers while they undertake their placements, including travelling to and from the placement.66

Will the Youth Jobs PaTH program work?

Australian work experience programs The main source of ongoing data on labour market program effectiveness in Australia is Labour Market Assistance Outcomes reports which are generally released on a quarterly basis by the Department of Employment.67 Among other things, these reports provide details of the employment outcomes of job seekers who participate in the individual programs that make up Australia’s employment services system.

Based on the latest available data, 34.8 per cent of job seekers who exited unpaid work experience in the 12 months to June 2015 were in paid employment around three months after their participation. This figure is higher than that for vocational training (28.5 per cent), Work for the Dole (23.1 per cent) and voluntary work (24.4 per cent).68

While on the face of it work experience appears to be reasonably effective in comparison to other forms of labour market assistance program, it is not possible to read too much into these outcomes data. The outcomes could be largely a result of selection biases and the differing characteristics of program participants.69

Ireland’s JobBridge internship scheme In recent Senate Estimates hearings, Departmental representatives indicated that they had drawn on the experience of the Irish internship scheme, JobBridge in developing the Youth Jobs PaTH program.70

The JobBridge National Internship Scheme was introduced in 2011 in response to rising youth unemployment following the GFC. Under the scheme, unemployed people in receipt of qualifying payments or signing on for credits for a total of three months in the previous six months are able to participate in work experience for between 30 and 40 hours per week for six or nine months.71 Participants continue to receive their income support payments and are paid an additional €52.50 per week.72

Where host organisations choose to employ participants they may receive a JobsPlus employer incentive—or wage subsidy—of €7,500 for a person who has been unemployed for more than 12 months but less than 24 months or €10,000 for a person who has been unemployed for longer than 24 months.73

Various requirements are made of host organisations, including the demand that interns must not displace existing employees and that the host organisation must have no vacancies in the area of activity where the internship is offered.

The Irish Government also introduced a First Steps—Youth Development Internship, which is ‘aimed at unemployed young people aged from 18-24 who may have lower levels of education, be long-term unemployed or face other barriers to entering employment’.74 The scheme is similar to JobBridge with the main differences

66. Department of Employment, ‘National Work Experience programme’, Department of Employment website, last modified 4 December 2015. 67. Department of Employment, ‘Labour market assistance outcomes reports’, Department of Employment website, last updated 13 October 2016. 68. Job Services Australia, Labour Market Assistance Outcomes, Department of Employment, Canberra, September 2015, p. 12. 69. A net impact study would provide a more accurate picture of the program’s effectiveness. The net impact methodology compares the

employment outcomes of a group of program participants with those of a control group of similar job seekers who did not participate in the program. 70. Senate Education and Employment Legislation Committee, Official committee Hansard, 6 May 2016, op. cit., pp. 43-44. 71. Most European countries’ main form of income support is social insurance. Under a social insurance scheme, workers, employers, or government make contributions to a fund. Workers who become unemployed, sick, disabled or reach retirement age are able to claim benefits. In Ireland, while a person is unemployed or ill and not contributing to an insurance fund, they may be awarded credits. These credits are similar to the contributions people make while they are working. Credits enable people to qualify for income support while at the same time allowing their social insurance record to remain unbroken. See Department of Social Protection, ‘Credit contributions’, Department of Social Protection website, last modified 17 February 2015. 72. Citizens Information, ‘JobBridge’, Citizens Information website, page edited 25 October 2016. 73. Ibid.

74. Ibid.

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being that the internships: are not publicly advertised; may be for a shorter duration (three months); are for four rather than five days a week; and, are accompanied by extensive support including a work preparation course.

In October 2016 the results of an independent evaluation of the JobBridge National Internship Scheme were published.75 The evaluation used econometric techniques to estimate the employment impacts of the scheme for participants; survey response data from interns and host organisations; and, a cost-benefit analysis, adjusted for levels of deadweight, job displacement and the opportunity costs of work and public funding.76

The evaluation’s main finding was that program participants’ employment outcomes were improved by 32 per cent, compared to a matched group of non-participants:

Specifically, our estimation suggests that matched individuals on the Live Register had a 36.6% probability of securing employment within one year in the absence of JobBridge. With the JobBridge treatment, interns’ probability of securing employment within one year increased to 48.4% (i.e., an 11.8 percentage point difference). The implication of this finding is that the Scheme provides additionality, in terms of the probability of becoming employed as a result of participating in JobBridge, of 32%. The results suggest much more positive impacts for JobBridge than has been evident for many other labour market activation programmes. This evidence demonstrates that the Scheme has been effective in enhancing the probability of interns subsequently obtaining paid employment.

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The evaluation also found:

• 64 per cent of participants were currently employed either with their host organisation or with another employer and just under 10 per cent were pursuing further education or training

• 79 per cent of participants—around 38,000 people—had gained paid employment at some stage since completing the program and

• 70 per cent of respondents felt that the program gave them new skills and provided quality work experience.78

Not all respondents were satisfied with the program, with over 18 per cent feeling that the scheme had not provided them with new job skills. Many respondents were also disappointed with the value of the top-up payment—28 per cent were very dissatisfied and 23 per cent dissatisfied.

On the whole, a majority of interns (54 per cent) were either satisfied or very satisfied with JobBridge.79 However, nearly a third were dissatisfied or very dissatisfied. A majority of host organisations (52 per cent of respondents) were very satisfied with the work performance and engagement of interns, with a further 38 per cent stating that they were satisfied with interns’ performance and commitment.80

The scheme was determined to have had a positive economic benefit, and it was felt that there were likely to be wider additional social and health benefits as a result of the increased employment.

It should be noted that the scheme has attracted a great deal of negative publicity since its introduction. Critics have expressed concerns about the quality of jobs found by interns after their participation in the scheme, the fact that the scheme has been widely used by multinational companies and state agencies, and that the scheme may subsidise low-wage jobs and displace regular employment.81 In response to negative public perceptions and

75. Department of Social Protection (Ireland), Varadkar announces end to JobBridge, media release, 18 October 2016; Indecon, Indecon evaluation of JobBridge activation programme, Report to the Minister of Social Protection, JobBridge evaluation report, Indecon, Dublin, 14 October 2016.

76. Deadweight loss describes those employment outcomes that are likely to have happened without the provision of government incentives or assistance. The cost-benefit analysis assumed a level of deadweight of 75.6 per cent and a job displacement level of 29.1 per cent. 77. Indecon, Indecon evaluation of JobBridge activation programme, op. cit., p. iii. 78. Ibid., pp. iii-viii. 79. Ibid., p. ix. Just under 25 per cent of interns were under 25 years of age, around 42 per cent were between 25 and 34 and over 30 per cent

were 35 years of age and older. 80. Ibid., p. vi. 81. See for example F Gartland, ‘JobBridge internship scheme to be replaced, says Varadkar’, The Irish Times, 22 May 2016; and Labour Market

Council, Report of the Labour Market Council: proposal for a new work placement programme drawing on the lessons from JobBridge, Report to the Minister of Social Protection, JobBridge evaluation report, Labour Market Council, Dublin, 2016.

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improved labour market conditions, the Irish Government has closed the scheme to new applicants. JobBridge is to be replaced by a new, smaller and more targeted scheme that is ‘more suited to the current job market’.82

Concluding comments Many young people struggle to gain employment due to a lack of employment experience and general workplace skills. There is some evidence to suggest that the Youth Jobs PaTH program could help to provide young people with such skills and experience.

A number of critics have argued that the program is inherently exploitative. However, to the extent that it is closely regulated, participants are furnished with relevant training and labour market experience, and there is at least some prospect of employment as a result of program participation, then it might reasonably be argued that the program is less exploitative than existing work experience and Work for the Dole arrangements for young people on income support.

Ultimately, the success or otherwise of the program in terms of improving the employment prospects of young people will depend on the state of the overall economy, and whether or not sufficient entry level jobs are being created.

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82. Gartland, ‘JobBridge internship scheme to be replaced, says Varadkar’, op. cit.