Opinion & Commentary
Antidote to welfare dependency
The federal government’s extension of income management across the country, announced late last year, reflects a new consensus in Australia and internationally about the pernicious effects on individuals and families of long-term welfare dependence.
From July, long-term welfare-dependent people will have half their payment quarantined to be spent on food and household essentials. Income management will also be extended to welfare dependent parents who are the subject of child protection concerns, and people assessed as vulnerable because of domestic violence or financial crisis.
The government’s announcement was undoubtedly designed to ward off criticism that the Northern Territory intervention is racially discriminatory. Yet despite this practical (and even cynical) motivation, this bold policy shift is the biggest reform to welfare policy since the Howard government’s ‘mutual obligation’ package in the late 1990s.
The Rudd government should be congratulated for taking such a tough stance.
We now know that many of the welfare policies designed to help people instead trap them in a cycle of dependency. In Australia, the evidence of this is most apparent in remote indigenous communities. But experience shows that the damaging effects of welfare are not confined to any race, gender or geographical location.
Almost one in six Australians of working age is reliant on income support. Long-term welfare dependence, which is often coupled with drug and alcohol addiction, child abuse and domestic
violence, is overwhelmingly concentrated in disadvantaged communities. Children of jobless parents are more likely to end up on welfare. If these problems are to be overcome, the cycle of dependence must be broken.
Governments should not only help people to move off welfare but also hassle those who have lost their confidence, motivation and capacity for independent action to find work.
The new income management policy will try to achieve this with a mix of carrots and sticks. Individuals who show they can manage their money responsibly can opt out, and incentives will be offered to those who demonstrate that they can save.
While the usual critics of welfare reform claim that this policy unfairly targets the most vulnerable people, it appears that there have been some important converts. Appearing on ABC radio in November, Mission Australia chief Toby Hall endorsed the policy. He said that for the group of people who had ‘taken welfare for granted for too long’, income management would increase the pressure to move into work.
The opposition should support the move as well. Expanding income management is the next logical step in the successful program of welfare reform implemented by the Coalition. John Howard’s reforms, along with prosperous economic times, saw the number of prime-age households (in their mid-30s to mid-50s) reliant on welfare drop from about one in six in the mid-1990s to one in 10 in the late 2000s.
But while the Labor reforms are a move in the right direction, the road ahead may still be rocky. Income management on a large scale is untested. The potential for unforseen and unintended consequences is high. The government must be careful to define exactly what its objectives are, and be willing to change tack if they are not being met.
One danger is that income management could potentially exacerbate the dependency it is trying to overcome.
Income management should be the means to an end, not the end itself. The reforms will fail if people simply become more reliant on government to manage their budget, instead of taking up the responsibility themselves.
To guard against this, local communities should be given some autonomy to decide how income management is administered. This flexibility could be more effective in tackling problems such as poor school attendance, domestic violence or drug abuse, which vary between communities.
A good example of this approach is Noel Pearson’s Family Responsibilities Commission in Cape York, which empowers local leaders to make decisions about individuals’ income management based on their adherence to basic standards of behaviour.
There is also a danger that, in exempting Disability Support Pension from income management, the government will inadvertently increase the incentive for people who may be marginally disabled but still able to work to apply for this payment. Once they are on DSP, there is little chance they will ever leave welfare.
It is politically difficult for the government to extend income quarantining to DSP recipients, many of whom have severe physical and mental disabilities and would see income management as an unfairly punitive measure. But this difficulty simply highlights the need for reform of this payment. Perhaps it is time for a two-track system where severely disabled people are exempt from measures such as income management but those with a greater capacity to work are not.
In an open, liberal society, we celebrate our capacity to live our lives free from a high level of government interference. But growing levels of long-term welfare dependency present us with a real dilemma.
Should we strive to protect the independence of those who are so clearly dependent on the state in so many ways?
Paradoxically, paternalistic interventions may now be essential to rebuild people’s capacity to take responsibility for themselves.
Jessica Brown is a policy analyst at the Centre for Independent Studies. Her report What’s Next for Welfare to Work was published by the CIS in 2009.
