The Impacts of the Newstart Program and Its Effectiveness in Resolving Unemployment in Australia - Term Paper Example

Introduction The Newstart Australia Program is an unemployment benefit program which came into effect in February 1989 conducted by the Department of Social Security in collaboration with the Department of Employment, Education and Training. The program was designed to provide financial help for unemployed Australians originally between the ages of 21 (subsequently modified to 22 in 2012) and 64 who had been on unemployment benefits for more than 12 months (DHS 2012). The Newstart Program aims to provide financial help for its recipients while they search for employment or provide financial support as they undertake activities which would increase their employment prospects such as training and studying (DHS 2012). However, the program was deliberately designed to provide incentives for people eligible for the Newstart allowances (commonly referred to as the dole) to find employment by making payments contingent on doing activities under an employment pathway plan which would increase employment prospects such as applying for jobs, skills training or volunteering or by participating in a labour market program (Work for the Dole) (Kinnear et al 2003). The program also has a policy of maintaining a substantial gap between the income available to the employed and the income of the unemployed to act as a disincentive for overreliance on the allowance and to motivate recipients to seek employment (Sloan 2011). The Newstart program is a critical labour and welfare issue in Australia. This is principally due to the fact that a constant feature of any labour market is volatility characterized by a certain level of unemployment- estimated at 5.2 percent in Australia in 2012 by the Australia Bureau of Statistics (Bita 2012; Irvine 2012). Employment is never spontaneous and as people enter the labour market or change jobs, there is a time lapse before they actually find employment and in certain cases, a longer lapse is correlated with more sustainable employment as it increases the chances of a good match between employer and worker (Kinnear et al 2003, Sloan 2011). Thousands of jobs are created and lost on a daily basis in Australia plunging workers into joblessness. Therefore, the Newstart allowance is important in shielding a significant part of the Australian prospective labour force from poverty as they search for suitable employment. The allowances enable them to confidently apply for jobs or acquire new skills without the threat of facing poverty. The program is also a key issue due to its role in reducing the level of long-term unemployment in Australia (Davidson 2011). This literature review will focus on the impacts of the Newstart program and evaluate its effectiveness in resolving long term unemployment in Australia. The literature review will first provide a brief background of the Newstart Program by examining how it works, who is eligible for the allowance and what other kinds of employment support are offered by the program. The paper will then examine the impact of the Newstart on different groups of recipients such as mature age versus the youth, male versus female and people living in different housing conditions, different family sizes, with different number of children and dependants. The review will then examine the impacts of living under the Newstart allowance such as social exclusion or marginalisation, stigmatization, health and poverty. In conclusion, the review will evaluate the effectiveness of the Newstart program by examining some of its successes and failures, public perception of the program, advocacy issues around Newstart and suggesting areas of reform which would improve on the effectiveness of the program. How Newstart Operates Eligibility There are several eligibility criteria that recipients of Newstart allowance must meet for unemployment support. Principally, the recipient must be an unemployed Australian citizen (this includes applicants who are in casual, temporary or part time work) aged more than 22 years as of 2012 but under pensionable age. The recipient must also demonstrate that they are searching for paid employment and be prepared to enter into an Employment Plan and meet the activity-test requirements for the program which entail undertaking or completing several activities to enhance employment prospects such as applying for jobs, taking part in volunteer and labour programs and enrolling for training or studying. The recipient must also not be unemployed due to their involvement in any form of industrial action (DHS 2012). Benefits Under the Newstart Program, recipients are given fortnightly unemployment allowances through Centrelink based on their fulfilment of mutual agreements negotiated between them (as job seekers), Centrelink and Job Services Australia. The amount of the Newstart allowance depends on several factors such as the person’s marital status and whether they have children (or dependants) or not (DHS 2012). For example, as of October 2011, the Newstart allowance for an unemployed single person was $245 per week excluding other payments such as rent assistance, pharmaceutical allowance, training supplement and the Work for Dole supplement which are all paid fortnightly depending on the recipient’s personal circumstances and activities. Generally, the allowances paid to married couples with children are higher than those for single persons. Newstart allowances are also higher for people who are single principal caregivers of a dependent child (DHS 2012). Conditions The basic condition that qualifies a recipient for the fortnightly Newstart allowances is that they must enter into an employment pathway program and meet the activity test conditions stipulated. This plan, negotiated with Centrelink, outlines the activities that the recipient must agree to do while looking for employment as a basic condition to keep receiving the allowance. The recipient must agree to apply for a specific minimum number of jobs, usually ten per fortnight, undertake a training course or other types of study that would improve their employment prospects, undertake part-time work or participate in various voluntary of labour market programs such as Work for the Dole (Kinnear et al 2003, DHS 2011). Impact of Living on Newstart Despite the policy design of the Newstart Program to provide support for the unemployment as they search for paid work, the Newstart Program has had several unintended and counterproductive effects on people living under the allowance. Several advocacy groups have criticised the Newstart Program for marginalizing Australia’s unemployed citing the inadequacy of the Newstart allowance to support a decent standard of living (AAP). The Business Council of Australia has recently criticised the program of marginalization by treating Australia’s unemployed as pariahs and severely limiting their chances of presenting themselves decently for job interviews and applications due to the inadequacy of the allowances which drives some of them to homelessness or even maintaining their readiness for work (AAP 2012, Karvelas 2012). The BCA claims that the dole payments have fallen unacceptably behind the levels of other income support offered to working age Australians such as disability pension. Recipients of the Newstart Program themselves have lamented that the Newstart allowance has only forced them to seek cheap, substandard housing, exacerbating their marginalisation and social exclusion as they cannot afford to meet most of their basic needs (Saunders 2011). This situation has only been exacerbated by the rapidly increasing cost of living in Australia which has risen by over 40 percent in the last decade while the allowances have only been increased slightly (Bita 2012). Therefore, while the Newstart Program and its employment support initiatives have been beneficial to many working age Australians, especially those transitioning from studying or training to employment, advocacy groups have claimed that the low levels of the Newstart allowance have actually acted as a disincentive for seeking long-term employment by resulting in marginalisation and stigmatisation of the unemployed and that they continue to increase the risk of entrenching poverty among the unemployed in Australia. Impact of Newstart on different groups of recipients Newstart significantly benefits the youth in the sense that it helps them to have an easy transition from school to employment. Transitioning from school to employment may be difficult and demanding since it demands that one should have a certain level of financial leverage in order to effectively seize employment opportunities. Therefore the Newstart allowance provides young recipients with the means through which they can either undergo further job training or effectively seek for job opportunities through job agencies or other channels that may require the use of money. For some, especially those who have failed to finish their school for one reason or the other, Newstart provides a new leash of hope by helping these individuals to either undergo training in their area of work or find financial assistance while they work towards securing employment (ONV 2009). Over the years, Newstart has helped to boost the morale and self-esteem of both its young and elderly recipients. For recipients who are gifted however due to different circumstances have been unable to demonstrate their abilities in the formal school setting, the program provides a platform where individuals can better their situation by finding channels where they can creatively use their abilities and grow as individuals. Basically, one of the key goals of this program is to help individuals unlock themselves from their current situation and move to a better phase. Newstart is based on the notion of giving people a second chance and finding innovative ways of enabling people to help themselves. Over the years, this program has provided creatively engaged and helped young people to make positive choices especially in relation to their vocation. Through the use of multi-layered intervention of activities, young people have been able to build their self-esteem, confidence and develop a wide range of skills. For instance, since 1997 over 1,000 students have significantly gained from the program. The program has helped these young to transition from unemployment to employment by providing them with training opportunities that have nurtured them to become competitive in their area of work (ONV 2009). Moreover, the Newstart program has helped to minimise the levels of victimization and offending. It has also helped to promote better outcomes for the young, the elderly, their families and the society in general. According to a Social Return on Investment (SROI) analysis conducted on the Shepparton Newstart program, it was established that the program realised a social return of at least $3.68 for every dollar that was put into the program. This can be largely attributed to improvements in vocational training outcomes for recipients thus resulting to high lifetime earning which have in turn contributed to improvements in family income and housing conditions (ONV 2009). Evaluation of the Newstart program Newstart programs have proved to be successful in helping individuals transition from unemployment to employment. The programs provide both financial and moral support to unemployed individuals thus motivating and empowering them to effectively seek for job opportunities available in the market. Social Return on Investment (SROI) analysis conducted on this program shows that, this program has brought about positive outcomes by reducing the rates of unemployment amongst the youth, increasing the lifetime earnings of individuals thus improving family income and living conditions of people (ONV 2009). However, in as much as there are numerous benefits associated with these programs, Newstart programs have been accused for being counterproductive and unfair. Some critics argue that this program creates disincentives for people to work by treating unemployed people like “pariahs.” As a result the program may not necessarily be the best approach of dealing with unemployment (Ninemsn 2012). Furthermore, based on statistical studies on unemployment, it is worth questioning whether this program has made any significant impact in minimising the rates of unemployment and helping people access employment opportunities. For instance, some studies show that, as a result of government’s economic policies and other unavoidable phenomenon in the market, the total number of new employment opportunities has virtually remained the same whereas the rates of unemployment have gradually increased with time. Consequently, it is worth questioning whether the Newstart program has been effective in reducing the rates of unemployment (Gittins 2012). Due to the rising costs of living, the allowances provided by the Newstart program have proved to be inadequate in providing unemployed people with a means to survive on. As a result, a considerable number of unemployed people have succumbed to poor living conditions. This has in turn affected their ability to effectively look for employment opportunities and present themselves accordingly when seeking for employment opportunities (Davidson 2011). Suggestion for Reform In order to enhance the effectiveness of the program, it is important for the government to make this program holistic in nature such that it not only incorporates the provision of financial support but also involves other programs that equip recipients with adequate skills and knowledge that will help them become competitive in the job market. Moreover, New start allowances should be raised to close the gap between Newstart and other forms of income support offered to working age Australians such as the disability support pension. The allowances should also be pegged based on the inflation rates so as to cushion the recipients from the increasing costs of living. Conclusion The Newstart program is a critical labour and welfare issue in Australia. Newstart programs have proved to be successful in helping individuals transition from unemployment to employment. The programs provide both financial and moral support to unemployed individuals thus motivating and empowering them to effectively seek for job opportunities available in the market (ONV 2009). However, in as much as there are numerous benefits associated with these programs, Newstart programs have been accused for being counterproductive and unfair (Ninemsn 2012). References AAP General News Wire 2012, ‘NSW: Newstart programs slammed by Howe’, 9News, 16 May. Retrieved on 15 August, 2012 from Bita, N 2012, ‘Inflation rate not a patch on cost of living’, The Australian, 2 August, Retrieved on 16 August, 2012 from Davidson, P 2011, ‘Did 'Work First' Work? The Role of Employment Assistance Programs in Reducing Long-term Unemployment in Australia (1990-2008)’, Australian Bulletin of Labour, Vol. 37, No. 1, pp 51-96. Department of Human Services (DHS) 2012, Newstart Allowance, Retrieved on 16 August, 2012 from Gittins, R. 2012, How to demystify the jobless rates thrills and spills, Retrieved on 15 August 2012 < http://www.smh.com.au/business/how-to-demystify-the-jobless-rates-thrills-and-spills-20120810-23zin.html> Irvine, J 2012, ‘Change is the only constant in jobs market’, Sydney Morning Herald, 11 August. Retrieved on 16 August, 2012 from Karvelas, P 2012, ‘Business backs higher Newstart to stop entrenched joblessness’, The Australian, 14 August. Retrieved on 15 August, 2012 from Kinnear, P., Grant, D. and Oliver, K. 2003, ‘Welfare Reform in Australia, an evidence-based approach’, Paper for Australian Social Policy Conference July 9-11, University of New South Wales, Sydney. Ninemsn, 2012, Newstart programs slammed by Howe, Retrieved 14 August 12 Operation Newstart Victoria (ONV), 2009, Operation Newstart Victoria, viewed on 14 August 2012< http://onv.org.au> Saunders, P 2011, Down and Out: Poverty and Exclusion in Australia, The Policy Press: Sydney. Sloan, J 2011, ‘Newstart needs a boost’, The Drum Opinion, 31 October Retrieved on 15 August, 2012 from Read More