Opinion & Commentary
A fair way to reduce dependence on welfare
Welfare reform is back on the rails. Budget reforms affecting Parenting Payment, Newstart and the Disability Support Pension promise to reduce dependency rates in a way that most Australians will regard as fair and reasonable.
Despite 15 years of sustained economic growth, one in six Australians of working age relies on welfare as their sole or principal source of income, and dependency rates are still growing. These proposals should help stem the tide.
Australia is almost alone among western countries in offering parents welfare so they can stay home until their youngest child reaches school-leaving age. This is a legacy of the 1950s, when women were not expected to work and single mothers were supported as "housewives" until their children grew up.
Today, when it is normal for mothers to return to work after their children start school, it is difficult to justify taxing them to pay welfare to women in similar circumstances who choose to stay home.
The new policy requires welfare parents to seek part-time work once their youngest child turns six.
Single-parent lobby groups have predictably attacked the changes, but requiring parents of school-age children to look for part-time work is asking no more than is expected of anyone else, and it promises to improve the quality of their lives as well as benefiting their children.
The changes to DSP are also positive. Reform in this area is always difficult because lobbyists portray any change as an attack on the weak and the frail. But the proportion of the working-age population on DSP has grown from 2 to 5 per cent since 1980, and many of those on the pension today are capable of working. New rehabilitation and training programs will help them find jobs.
There are also important changes to Newstart aimed at reducing long-term unemployment. Those genuinely seeking work will be helped by subsidies to prospective employers; those who have given up will go on full-time Work for the Dole, which will help prevent entrenchment of dependency.
Opinion polls show reforms like those proposed will be seen as fair by the majority of Australians, and once implemented, no future government will reverse them. There are, however, three concerns.
First, the measures do not apply to existing claimants, so we shall not get the dramatic fall in welfare rolls the Americans got with their big-bang reforms.
Second, we are putting a lot of money into helping claimants move from welfare into work before anyone has actually shifted. Supports like child care and retraining are important, but the US paid for these out of welfare savings rather than paying upfront. We have to trust that the pay-off will come later.
Third, welfare reform alone is not enough. If this budget is to be the turning point in welfare dependency, we still need to sort out our convoluted tax and award wages systems to improve work incentives and generate more jobs for those with fewer skills to do.
Professor Peter Saunders is social research director at The Centre for Independent Studies.
