Opinion & Commentary
Motivate those on hand-outs
If form is anything to go by, welfare advocates who this week called for an increase in the sole-parent pension are not likely to get much joy. The Rudd government this year granted a pay rise for aged, disabled and carers pensioners, but conspicuously left out sole parents.
The Rudd government’s approach to sole-parent families, as with that of its predecessor, is that the best form of welfare is a job.
This tactic is paying dividends. The number of people on the parenting payment (mostly single mums, or women whose partner is not working or only marginally employed) has dropped by more than 100,000 since mid-2006. This was when the Howard government introduced tough rules that compelled parenting payment recipients to work part time when their kids reached school age.
These reforms were controversial – there were some suggestions they contributed to the Howard government’s 2007 election defeat – but the new figures suggest they were effective.
However, welfare reforms were not the sole reason for the drop.
Part of the impressive fall in parents claiming welfare is undoubtedly due to a simultaneous shift in the jobs market. Most parenting payment recipients are relatively younger women looking for part-time work, the type of work more readily available.
While unemployment has been rising generally, more than 100,000 jobs were created in the female-dominated healthcare and social assistance sectors in the year to August.
Historically, sole parents also have had much higher rates of work than other groups of welfare recipients, and many were working before John Howard’s reforms compelled them to.
The story for disability support pensioners, the other target of the 2006 reforms, could not be more different.
There are nearly 750,000 DSP recipients. That’s almost 10 times the number of people who packed into Sydney’s Olympic Stadium for this month’s NRL grand final. Rather than the changes slashing their numbers, we have seen an increase of 35,000 disability support pensioners in the three years since tougher eligibility criteria were introduced.
We don’t know what the number would have been had the reforms not been introduced; perhaps it would have been even higher.
But it’s clear more needs to be done if the number is to be reduced.
There will always be people who cannot work because of disability and maintaining a safety net for them is vital. But there is a growing acceptance that for people with a mild disability, some work will always be better than a life of long-term welfare dependency.
A few lessons can be learned from the parenting payment reforms. A work test can be applied to existing, not just new, DSP recipients. This will help to reduce the flow of new claimants and trim the existing cohort.
If work tests are applied to new applicants, it is fair and equitable that existing recipients face the same test.
Criteria for determining which DSP recipients are able to work could also be made more objective.
All parenting payment recipients face a part-time work test when their youngest child reaches school. This measure is easy for administrators to determine and recipients know what to expect.
In contrast, determining which DSP recipients face work requirements is much more subjective.
Individuals vary in their capacity to work and doctors vary in their assessments of their patients’ capacity to work.
Adopting a more objective and better defined benchmark of which DSP recipients are required to look for work and which are exempt should lead to improved outcomes.
However, the type of jobs being lost and created during this downturn also gives us a clue about why it is so difficult to reduce DSP numbers.
Many DSP recipients are low-skilled people, mostly men, many of whom have experience in industries such as manufacturing, where jobs are being lost. Pushing them off welfare will be meaningless if there are no suitable jobs available.
DSP claims traditionally rise as unemployment goes up. As it becomes harder to find a job, fewer people continue looking for one. Discouraged jobseekers often end up on payments such as DSP that don’t have the strict job search requirements of unemployment benefits.
There is a danger that higher unemployment, along with a long-term decline in low-skilled employment, will lead to a jump in long-term welfare dependence.
For the government to make a serious dent in DSP numbers, it will need to look beyond simply tightening eligibility to broader strategic changes in welfare and employment policy.
Allowing the minimum wage to fall will remove structural impediments to low-skilled jobs growth. At the same time the tax-transfer system can be used to protect the living standards of low-paid workers and their families.
This will pave the way for job creation and increase the incentive to move from welfare to work. Because the best form of welfare really is a job.
Jessica Brown is a Policy Analyst at The Centre for Independent Studies, which published her report What’s Next for Welfare-to-Work in November 2009.
