Issue Analysis
The Tender Trap: Reducing Long-Term Welfare Dependency by Reforming the Parenting Payment System
The single biggest cause of poverty in Australia is joblessness. The single most important solution to poverty is therefore to move as many people as possible from welfare into work.
The huge increase in welfare dependency in recent decades has come about as a result of increases in unemployment, disability and sole parent claimants. Reform is needed in all three areas, but this paper focuses on the third of these groups.
One-third of sole parents rely on Parenting Payment as their only source of income and another 20% rely on it as their main source of income. Recent research estimates that sole parents claiming Parenting Payment end up spending an average of 12 years on welfare.
This high level of long-term welfare dependency is expensive for taxpayers, unfair to working parents, and counter-productive for claimants and their children. There is a strong case for supporting parents so that they can stay at home with children under the age of five, but there is no good rationale for a system that pays parents to remain at home until their children turn 16.
It is proposed that parents with children under five should continue to be eligible for Parenting Payment; that those with children of primary school age should receive a half payment (and should be expected to find part-time work), and that those whose children are of high school age would no longer receive Parenting Payment.
This would bring Australia into line with current practice in many other western countries.
This reform will need to go hand-in-hand with tax reform (aimed at taking low-paid workers out of the income tax system) and further labour market reform (designed to stimulate more job creation, particularly at lower skill levels).
It is estimated that this proposal could save at least $1 billion per annum. This money could be spent improving support services aimed at moving people from welfare into work and/or on reducing the tax burden on low-paid workers.A new Centre for Independent Studies survey reveals strong public support for this proposal: 84% of those polled think single parents should work part-time when their youngest child starts school, and 71% think they should work full-time when their youngest child starts high school. These results, which are consistent with earlier surveys, indicate that the proposed reform is not only fair and efficient but also politically feasible.
Professor Peter Saunders is Director of Social Policy Research at The Centre for Independent Studies. Dr Kayoko Tsumori is a CIS Policy Analyst.
