Issue Analysis
A Whiff of Compassion? The Attack on Mutual Obligation
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 (for example, 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 that fall 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.
Meeting their demands would effectively undermine the mutual obligation system. Over the years, government has modified penalties in an attempt to appease the critics, but opposition remains strong, and is often emotive.
The new Rudd government has announced changes that meet many of the critics’ demands and threaten to undermine mutual obligation. These include:
- Greater discretion for Job Network agencies in reporting ‘participation failures.’
- An end to automatic eight-week suspensions for claimants who record three ‘participation failures’ within twelve 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 twelve or eighteen months (and in some cases even longer than that).
- Claimants who are not considered ‘job-ready’ will receive training, special assistance, or both, for at least twelve months.
This rolls back a program—Work for the Dole—that is a proven way to move people from welfare to work, in favour of substantially increased training, which is known to be ineffective in most cases.
The result of all these proposed changes will be that government spending on moving people from welfare into jobs will increase but outcomes will worsen. The government should think again.
Professor Peter Saunders was the Social Research Director of the Centre for Independent Studies until June 2008. He remains a Distinguished Fellow of the Centre, and is the author of Australia’s Welfare Habit, and How to Kick It.
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