07 May 2016
by Ben Eltham

Forced Internships Don’t Create Jobs

The government has run into trouble with its plan to create internships for young unemployed people. Should they really be surprised?

As the dust settles on Budget 2016, it’s clear that one of the most controversial aspects of Scott Morrison’s “ten year plan for the economy” is the budget’s plan for youth employment.

The blowback has certainly surprised the government. On budget day, Morrison was enthusiastic about the youth employment measures, mentioning the work he had done on the subject as Social Services Minister, and the feedback he’d gathered from welfare groups and experts like Patrick McClure.

The government announcement details a $752 million policy that aims to get younger jobseekers into work experience and then an ongoing job. There are subsidies for businesses that take on interns, and also for those that then offer those interns a job.

There’s little doubt a high-quality internship can enhance the job prospects of a younger job seeker. Employers consistently tell researchers that recent and relevant experience in the workplace is at the top of the list of attributes they look for when hiring.

“Work experience is the crucial attribute that employers want even for students who have yet to work full-time,” US economist Peter Cappelli told The Atlantic in 2014. Cappelli’s paper on job skills in America showed that employers are more interested experience than qualifications like university degrees. None of this is news to younger Australians, who often pursue internships in the final years of their university study, and find voluntary placements after graduation in an attempt to burnish their CVs.

So there is certainly a case for finding appropriate work placements for young jobseekers. But if it is to be done at all, it must plainly be done very carefully, with appropriate safeguards in place.

It’s not clear that the government appreciates this. For instance, when explaining the internships, the government’s own glossy brochure listed examples like waiting tables and working in a supermarket.

“Miles”, the fictional job seeker used by the government as an example, is described as “a nineteen-year old job seeker who has been struggling with depression.” The linking of mental health to the internship scheme is concerning: surely Miles’ depressive illness needs to be considered separately from his employment status.

If jobseekers are “struggling with depression”, as we know many are, then they need adequate treatment from Australia’s increasingly rickety health system (which the government cut funding to again on Tuesday night). An eight-week internship at the local café should have no bearing on this. There’s a taint of paternalism here that shows again that the government is out of touch.

Internships have become such an accepted part of a young person’s jobseeking experience that there is increasing concern about the abuse of the practice by employers. The media is far from innocent in this regard.

Fairfax recently advertised for interns on its Facebook page. The company claimed to offer “a supported learning environment focused on developing world-class journalists.” Successful applicants will work full-time for seven weeks with no pay.

Media and entertainment union the MEAA has become so worried about the spread of internships that it has recently released guidelines for internships to try and improve the experience for young unpaid workers. According to the MEAA’s Katelin McInerney, “far too often, unpaid work is used by media companies to take advantage of young graduates desperate for a foothold in the sector.”

“Internships should provide practical hands-on industry experience in a closely supervised environment for a finite period of time,” she continued, “not an opportunity for an employer to replace paid workers with unpaid ones.”

Across the economy, industry is increasingly abandoning its former commitment to on-the-job training. It wasn’t that long ago that companies like Fairfax offered extensive training opportunities to young journalists – paid for by the company. They were called “cadetships” and they were paid with a full-time wage.

But as formerly wealthy companies like Fairfax have fallen on hard times, commitments to training in the form of cadetships have gone out the window. It’s far easier to vacuum up a cohort of young hopefuls, who will helpfully provide the company with free labour, while Fairfax lays off experienced staff in newsrooms across the country.

Media attention – especially from youth-focused outlets like BuzzFeed – has concentrated on the low pay that the internships represent. At $100 a week for an internship that could be as onerous as 25 hours a week, interns will be paid at $4 an hour.

The government counters that this figure doesn’t take the dole itself into account. But the dole is not a wage: it is an unemployment benefit, paid to jobseekers in return for looking for work. Interns working for a business are, by definition, not looking for work, even if they are gaining job skills. But Employment Minister Michaelia Cash says they will still be compelled to take internships on offer, under pain of having their benefits cut-off.

If interns are indeed working for a business waiting tables or stacking supermarket shelves, then it seems clear they should be getting paid fairly for that work.

We have had a minimum wage in this country since 1907, and we’ve had it for a reason. In the immortal words of High Court Justice Henry Higgins in the original Sunshine Harvester case, the basic wage should be enough to maintain a worker in “frugal comfort.” At $100 a week on top of the already penurious rate of Newstart ($527.60 a fortnight), jobseekers on these internships will be working up to 25 hours a week while earning just $363.80. The poverty line in Australia for a single person is $422.06 a week.

The government can rightly claim that there will be jobseekers who will welcome an extra $100 a week. Who can blame them? The desperately low amount paid to jobseekers by the federal government is an ongoing national scandal. But this can hardly excuse an internship program that forces jobseekers to work three days a week for an income well below the poverty line.

It’s true, of course, that Work for the Dole is a failed policy that should be abolished in favour of a genuine policy to address youth unemployment. Perhaps this explains the puzzling support for the program by welfare groups like ACOSS. But this new “PaTH” to work through poorly paid internships is not a genuine policy. At 30,000 places a year, it can only address a minority of those seeking work. This is an issue that can’t be wished away by a government or welfare sector arguing that the new policy is better than the current system of Work for the Dole.

Not surprisingly, unions are less than impressed with the government’s policy. After all, interns will directly compete with low-skilled workers already in the workforce, with subsidies from the taxpayer to boot. If companies were able to abuse the scheme, the result could even be job destruction, as businesses replace full-time workers with an army of government-subsidised interns.

And there is a bigger problem here, which is that ultimately the reasons for unemployment are structural and macro-economic. Unemployment is driven essentially by the level of demand in the economy. In states like Tasmania and South Australia, there simply aren’t the jobs that could soak up the pool of jobseekers looking for work. Low-paid internships won’t solve this problem.

The other aspect of public policy that the internship announcement highlights is the ongoing destruction of Australia’s vocational education and training sector, which used to deliver the sort of job-ready skills that internships are said to provide. Two decades ago, Australia boasted a respected sector of largely public vocational education, led by TAFEs and public sector training institutes. That sector has been decimated by huge cuts to the TAFE sector and the disastrous policy of deregulation.

On-the-job training has always been a key aspect of well-designed vocational education. But Australia’s VET sector has been hollowed out by the deregulation fiasco. Instead of first-rate apprenticeships and diplomas, our VET system is now churning out dubious qualifications in fitness instruction.

The truth is that employment and training programs are expensive. There is no easy fix for the problem of youth unemployment. Even if there was, this program isn’t it.