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Newstart and unfair dismissal laws pour salt on wounds of jobless

The best of intentions ... Julia Gillard.

The best of intentions ... Julia Gillard. Photo: Reuters

There is a sound economic argument for the Prime Minister, Julia Gillard, and the Treasurer, Wayne Swan, to bring in a surplus in next week's budget. However, there is also a good reason for Gillard and Swan to increase expenditure on the unemployed who genuinely cannot obtain work. The current Newstart Allowance, at about $245 per week, may be sufficient for those who are temporarily out of work. But it is certainly not adequate for the long-term unemployed.

In view of the state of the world economy, unemployment in Australia remains relatively low - especially when compared with the situation in Western Europe and the United States. Yet Labor has presided over a substantial increase in the long-term unemployment rate.

The Australian Bureau of Statistics' paper titled ''Long-term unemployment'', dated September 2011, tells the story. In February 2009, 13 per cent of unemployed men and women had been out of work for 52 weeks or more. By June 2011, this figure had increased to 20 per cent. The long-term unemployment rate is highest for young people aged between 15 and 24 years followed by men aged 55 to 64 years.

According to the ABS, ''long-term unemployed people were more likely than the short-term unemployed to have lost their last job (mostly through being laid-off, retrenched or because the job was temporary or seasonal) rather than having left it (either for unsatisfactory work arrangements or for other reasons such as returning to studies)''.

It follows that an employer, particularly a small business, takes a risk in hiring a long-term unemployed person. Successful business is about risk management and private sector employers are used to taking chances. However, there is little risk-taking in this instance if a small business can get rid of new employees who perform poorly - either immediately or after some time in the job.

The problem is that Labor's reintroduction of the unfair dismissal laws - which had been junked by the Howard government with respect to employers employing 100 or fewer staff - has made risk-taking less attractive. This is a contributing factor to the disturbing increase in long-term unemployment since the introduction of Labor's Fair Work Act.

There is no doubt that the Rudd and Gillard governments - with the support of the trade union movement - have acted with the best of intentions. It's just that some well-motivated acts have unintended consequences. Last month, the Employment and Workplace Relations Minister, Bill Shorten, announced the introduction of a jobs bonus scheme under which some 10,000 employers who recruit and retain a worker aged 50-plus for more than three months will receive a $1000 payment.

Well, it might work. But this is doubtful. Mature-age workers tend to be stable employees and do not readily abandon their jobs. This makes them attractive, since employers will not waste money on training if they engage them. So there are already financial incentives in taking on older workers, irrespective of whether the government provides a $1000 taxpayer-funded handout.

The current disincentive to employing older workers is the cost - in money, legal expenses and time - of dismissing poor performers. There has been a significant increase in unfair dismissal claims since the introduction of Labor's Fair Work Act. The risk to business in employing older workers is similar to employing younger workers.

On April 18 Brian Howe, the deputy prime minister during the Labor government in the early 1990s, addressed the National Press Club. He has been engaged by the ACTU to inquire into insecure work in Australia. Howe, an academic of long standing, spoke about ''holistic'' approaches, expressed ''societal concern'' and condemned the ''right-wing media''. Nothing new there.

Howe's concern is that many employers are taking workers in casual capacities. Yet he appears to have no conception of why this might be so - despite commenting that industries which have ''low levels of unemployment have little casualisation''. In other words, the more successful businesses are prepared to engage full-time workers, while the less prosperous businesses are less inclined to take the risk.

Howe is clearly well-meaning. Yet he is one of the many concerned Labor, trade union and public service types who have never had the responsibility of raising money in a competitive business environment and having to make up a payroll each month. Howe's background is university and Parliament. He doesn't understand why small businesses think deeply before employing permanent staff.

It may be unfashionable to say so, but unemployment was never so low in the modern era as during John Howard's prime ministership. Moreover, in Howard's day, the young, women and older employers found permanent employment easier to obtain. Sure, this partly reflected the good economic times. But it also resulted from greater labour market flexibility, which reached its height under the Howard government.

Last October, The Sunday Age headed an article by Misha Schubert ''Even conservatives say the dole is too low''. The journalist was reporting comments by Ian Harper and Judith Sloan to this effect. The businessman Hugh Morgan has made similar comments recently. All three are correct.

The fact is that political conservatives seem to know more about unemployment and its consequences than those who depict themselves as progressives. It makes sense to increase the Newstart Allowance. But it makes much more sense to deregulate the labour market and encourage employers to take on staff.

Gerard Henderson is executive director of The Sydney Institute.

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57 comments

  • "The current disincentive to employing older workers is the cost - in money, legal expenses and time - of dismissing poor performers".

    What simplistic claptrap. There are many disincentives to employing older workers; lack of contemporary skills, perception of limited longevity, higher salaries, reduced long-term return on training. The list goes on.

    Why not talk to some real employers and find out for yourself? I have, I'm still out of work but at least I have a realistic notion of why.

    Commenter
    Mikey
    Location
    Sydney
    Date and time
    May 01, 2012, 7:55AM
    • I have been an employer and I am mature aged.
      As I cannot get a job in my industry owing to be over qualified, I am stuck running my own business.

      As another commenter states, running a small business results in lower than usual income with increased stress and pressures. People with my qualifications in employed positions would be earning more than double what I earn and I have more skill and experience than many of them.

      Commenter
      ccb
      Date and time
      May 01, 2012, 9:27AM
    • ccb, you did not start a business, you bought yourself a job just like the 1000's of people in small business.

      Commenter
      Diego Garcia
      Location
      Not here.
      Date and time
      May 01, 2012, 9:41AM
    • ccb:

      If you can't get a job because you are 'over-qualified', why don't you just pretend to be less qualified? It's bad form to make up good things on a CV, but I don't know that it's a sin to leave them out.

      Commenter
      Redsaunas
      Date and time
      May 01, 2012, 9:42AM
    • I agree. More junk from the Sydney Institute of right wing dogma.

      Employers can sack workers summarily within 180 days, which should be pleanty to know how well they work. After that they need a reason, how hard is that.

      There is absolutely no evidence that unfair dismissal laws have any effect on the economy. If Employers have the work, they will employ someone to do it. Very simple.

      Commenter
      T
      Date and time
      May 01, 2012, 10:21AM
    • Redsaunas How can anyone pretend to be less qualified when one must give a work history in a resume? Or are you suggesting that I make something up, that once it is checked I get a rejection letter because I lied about work history?

      Commenter
      ccb
      Date and time
      May 01, 2012, 10:31AM
    • ccb: Someone posting a comment below played it like I suggest and says he has loads of work. Maybe not in his previous field, but work nonetheless.

      Employers are wise to embellishers, maybe not to those who hide their lights under bushels.

      Commenter
      Redsaunas
      Date and time
      May 01, 2012, 11:23AM
    • T - Please explain why there has been a spike in unfair dismissal claims since the introduction of FWA. Why does FWA place the burden of proof on the employer and the employer has to proof his or her innocence?
      You claim "there is absolutely no evidence that unfair dismissal laws have any effect on the economy" - have you asked any business that is contemplating taking on an additional employee but decided against it due to the FWA's unfair dismissal claim provisions?

      Commenter
      hbloz
      Date and time
      May 01, 2012, 1:30PM
    • No Micky i am affraid the auther is correct. As an employer i have not employed another person since the unfair dismissal laws changed, young or old, and i prefer older workers. And especially since Gillard brought in the worlds most anti business laws ever created called General Protections laws. These new laws state that the employer is wrong at all times, no matter what they have or have not done. The employer can be sued by a disgruntled employee for anything under the sun and there is no limit to the amounts. It is then that the employer must prove their innocence as there is a draconian revesal of proof enforced onto the employer. I know i have been done, i had to prove i was innocent, which i was, but then had to pay Go Away money!! And there is a whole industry now built around it of ambulance chasing lawyers who are Gillards old mates. Seriously, its a very scary place for employers out there right now, any new work i get goes to China, its just not safe to employ in Australia any more.

      Commenter
      Al
      Location
      Sydney
      Date and time
      May 01, 2012, 3:09PM
    • @ Al:

      I however, was an employee of a small business in mid 2007 (pre-Rudd government) and I was brought on specifically to assist in growing the business in the niche industry in which it operated. I was given basically zero support and had to make my own leads and do everything from cold calling from the local phone book to leverage existing clients. I was paid a modest but liveable wage and I kept records of the new business income I generated - which was on average 5x my salary cost.

      After about 3 months (and just before the election), my boss (who spent the best part of some days at "gentleman's spas" rather than working) called me in to his office and said "I've been chatting with the accountant and decided that I want to trade the BMW for the new S-Class, and he said that with the additional salary to pay I won't be able to afford it this financial year, plus if the Labor party gets in, I'll be forced to pay severance pay, so I'm going to have to let you go now" and fired me for no reason, a month before Christmas with no pay in lieu or notice.

      So you're a bit worried that your new staff won't work out for you...?

      Cry me a river.

      Commenter
      Screwed
      Location
      Sydney
      Date and time
      May 01, 2012, 4:48PM

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