Ideas@TheCentre
DSP the wrong target for budget savings
The Business Council of Australia (BCA) caused a stir this week, calling for cuts to the Disability Support Pension (DSP) to help fund the flood reconstruction effort.
There are now almost 800,000 people on a disability pension – about one in 20 working age Australians. Despite efforts by successive governments to reduce this number, it has continued to climb. DSP is projected to cost taxpayers about $13 billion this year.
The BCA is right to argue that in the search for budget savings to meet the clean-up bill, there should be no sacred cows – and that more should be done to get people with disabilities off benefits and into work.
But it is unrealistic to think that reform of the DSP will deliver a quick budget fix.
Governments all around the developed world have spent the last few decades grappling with an explosion in disability benefit rolls. So far, none have come up with a solution.
In 2006, the Howard government radically changed the entry requirements for new applicants for disability pensions. Yet DSP numbers kept going up.
In 2010, the Gillard government introduced tougher entry requirements for disability pensioners. From what we can tell, DSP numbers have continued to go up.
A brave government could apply the new rules retrospectively in an attempt to move some of the existing disability pensioners into the workforce. But they would find that many have lower than average education levels, limited work experience, and few of the skills needed in modern workplaces.
Some disability pensioners are bright, enthusiastic people, who just need an employer willing to give them a go.
But others have what Britain’s Economic Policy journal calls 'work disability.' It is not just their health problems but also their low level of attachment to the workforce that stands in the way of getting a job. Work would no doubt benefit them, but it may not be easy to find.
'Active labour market policies' have now replaced passive welfare both in Australia and around the world. Mutual obligation programs have been remarkably successful in getting unemployed people back into work. There should be no reason why, with a bit of tweaking and enough political will, they couldn't be successfully applied to disability pensioners too.
But getting welfare recipients ready for work is an expensive business. It takes job agencies, counsellors, and bureaucrats to chase up non-compliance and run 'work for the dole' programs. It might pay in the long run, but the upfront costs are high.
Welfare reform, especially of DSP, must continue to be a policy priority. But it is unlikely to help us find a spare billion dollars in this year’s budget. For that, the BCA will have to look elsewhere.
Jessica Brown is a Research Fellow at The Centre for Independent Studies. Her report Defeating Dependency: Moving Disability Support Pensioners into jobs was released by the CIS last year.
