Opinion & Commentary
Working for welfare
Mutual obligation requires people receiving welfare benefits to undertake a prescribed activity or forfeit some or all of their payment. This requirement has gradually been extended to cover most of those claiming unemployment allowances as well as single parents with school-age children and new disability support pensioners whose impairment is relatively mild.
Mutual obligation has had a positive impact in moving people from welfare to work. Program effects are as strong as any recorded overseas, but the main impact has been through compliance effects (ie imposition of activity requirements strengthens people's commitment to finding and accepting work).
Mutual obligation is popular with the public, but many welfare advocates regret the move away from the principle of unconditional welfare rights.
These critics have concentrated their opposition on the financial penalties which are imposed on welfare claimants who fail to carry out the activities required of them. They oppose suspension of benefits and say nobody should be penalised if it causes hardship.
If their demands were met, the mutual obligation system would effectively be undermined.
Over the years, government has modified penalties in an attempt to appease the critics, but opposition remains strong, and is often emotive.
The Federal Government has announced changes which meet many of the critics's demands and which threaten to undermine mutual obligation.
These include:
• Greater discretion for Job Network agencies in reporting 'participation failures';
• An end to automatic 8 week suspensions for claimants who record three 'participation failures' within 12 months (they will now be 'reviewed' instead);
• Financial penalties will not be imposed in cases where this might cause hardship;
• Part-time work requirements for single parents will be eased.
In addition, the Government wants to reduce the pressure on welfare claimants to accept jobs (the 'Work First' principle) and to emphasise training instead.
• Work for the Dole, which currently begins after six months of unemployment, will not now begin until 12 or 18 months (and in some cases even longer than that).
• Claimants who are not considered 'job ready' will receive training and/or special assistance for at least 12 months.
A program (Work for the Dole) which is proven to move people from welfare to work is therefore being rolled back, while training (which is known to be ineffective in most cases) is being substantially increased. This makes no sense.
The result of all these proposed changes will be higher government spending yet worse outcomes in moving people from welfare into jobs. The government should think again.
The best way to move people off welfare and into jobs is to require them to work.
Not everybody can or should be expected to work, but many of the 1.7 million working-age adults claiming income support could in principle be working full or part-time.
Over the last 10 years or so, the number of claimants required to look for work has been increasing, although the majority are still exempt.
When welfare claimants are told to look for work, policies need to be in place for those who for one reason or another fail to find it. This is the core reason why we need mutual obligation. Mutual obligation activities hopefully contribute to the common good, and should if possible enhance the skills and self-esteem of those who undertake them, but their key function is to ensure that welfare claimants who fail to find work nevertheless do something in return for the income they receive.
The previous federal government compromised with critics of mutual obligation without ever giving in to them. With the election of the Rudd Labor Government, however, the Government appears willing to cede most of what the critics want. The result will almost certainly be that welfare dependency will continue rising, for breaches of activity conditions will go unsanctioned, and the incentive to get off welfare and find work will be weakened.
The Government should distance itself from those who seek to undermine conditional welfare, and should rethink its current suite of proposals designed to weaken breaching penalties, roll back Work for the Dole and increase provision of training courses.
Keeping people on welfare for long periods while they go through pointless courses will do nothing to reduce welfare dependency levels and will certainly not solve the nation's skills shortage. It is not even 'compassionate'.
If we really want to improve the job prospects for hundreds of thousands of people now on welfare who could and should be working, the answer lies not in training, but in lowering the price employers have to pay to hire low-skilled workers.
Professor Peter Saunders is Social Research Director at The Centre for Independent Studies (CIS). His report, A Whiff of Compassion: The Attack on Mutual Obligation was released today. This is an edited extract.
