Opinion & Commentary
Lessons to learn from welfare reform in US
THE proportion of the working-age population reliant on welfare payments has ballooned from 3 per cent in 1965 to more than 16 per cent.
This is bad for taxpayers, who have to meet the escalating cost of income support; bad for those who become habituated to a life on benefits; and bad for children who grow up never seeing an adult work.
But suppose we could reverse this 40-year trend. What if the number of people living on welfare could be halved without increasing hardship?
Suppose that most former claimants got jobs, improved their incomes and reported feeling happier and more satisfied with their lives.
Imagine further that child poverty rates then dropped to their lowest level for more than 30 years, and that huge savings on welfare payments got diverted into improved child care funding and intensive help for people who were not ready for employment. And that crime rates plummeted and taxes were cut into the bargain!
A fairy story for adults? But all of this has happened since 1996 in the United States.
If you haven't heard much about this American welfare revolution, blame our social policy activists and intellectuals. Most of them insist there is nothing to be learned from what the Americans have done. They would rather follow the Europeans, with their high unemployment rates, high taxes and high rates of welfare dependency.
The US reversed the spiral of welfare dependency using a combination of sticks and carrots.
The sticks pushed people off welfare and into jobs. Receipt of welfare was made conditional on undertaking full-time work-related activities, time limits were introduced on receipt of benefits, and welfare agencies were given targets for reducing the rolls.
Carrots then encouraged people into work. Money that had been spent on welfare was used to fund child care so parents could work, and incomes of low-paid workers were boosted by tax changes. A low minimum wage and flexible labour laws ensured there was no shortage of jobs for people to fill.
Most Australian social policy commentators oppose nearly all of this. They want welfare payments made more generous, and they would like to see even our existing mutual obligation policies watered down or abolished. They believe in unconditional welfare so nobody need work if they choose not to, and are critical of the US reform.
Interestingly, when the reforms were first introduced in the US, activists and intellectuals expressed the same warnings we hear today from our experts.
They said there were not enough jobs for people on welfare to do, and that women and children would starve as they reached their time limit and were thrown off welfare.
One group forecast child poverty would go up by 12 per cent. An academic research institute predicted that 2.6 million more people would end up in poverty. One expert foresaw more malnutrition, crime, infant mortality and drug and alcohol abuse, and another attacked the reform as a "brutal act of social policy".
But the critics were wrong. Not only did the welfare rolls fall dramatically, but most former claimants found jobs, the poverty statistics improved and there was no evidence of increased individual or social pathology.
The 1996 reform is now recognised by former critics as well as supporters as a remarkably successful initiative, and nobody in the US today is talking seriously about going back.
Surveys undertaken by ACNielsen on behalf of the Centre for Independent Studies suggest that policies designed to get people off welfare and into work would be as popular here as they have been in America.
Seventy per cent of Australians agree with limiting unemployment benefits to a period of six months, after which claimants could participate full time in a Work for the Dole scheme until they found a job.
Eighty-four per cent think single parents should accept part-time work once their youngest child starts primary school, and 71 per cent think there should be a full-time work requirement once the youngest child starts high school.
Nearly two-thirds want a tightening of the eligibility rules for claiming Disability Support Pension to exclude people who could work, and there is widespread support for withdrawing benefits from people who refuse to participate in a mutual obligation activity.
There is also strong support for reducing taxes so that when people do go to work they can keep more of what they earn.
In the US, it was the combined effect of welfare reform and tax reform that was so effective in reducing the welfare rolls and getting many former claimants into the labour force.
We could achieve the same here, if only we would take our heads out of the sand and start acknowledging the success of these policies.
Professor Peter Saunders is the author of Australia's Welfare Habit: and how to kick it, published yesterday by Duffy & Snellgrove.
