Coalition 'tough love' welfare reform proposals

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Coalition 'tough love' welfare reform proposals

Posted 7/04/2011 by Matthew Thomas



The Federal Opposition has proposed a number of substantial changes to the welfare system, which it says are designed to encourage more people into work. Opposition Leader, Tony Abbott, announced the proposed changes in a speech to the Queensland Chamber of Commerce and Industry on 31 March. Mr Abbott's proposals have been subject to criticism from some commentators primarily on the grounds that they will do little to get people into work. On the other hand, some of Mr Abbott's proposed measures have gained support on the grounds that tougher measures might be required to increase workforce participation.

The proposals are:

  • Work for the Dole should be made mandatory for people under 50 years of age and receiving unemployment benefits (Newstart Allowance and Youth Allowance) for more than six months
  • income management should be extended to all long-term unemployed people (those unemployed for more than one year)
  • a new benefit, in addition to the Disability Support Pension (DSP), should be introduced for 'people whose disabilities can be readily treated' and
  • unemployment benefits for people aged under 30 years should be suspended in areas 'where there are unfilled, unskilled jobs'.

Mr Abbott argued that the Work for the Dole change was necessary because 'reasonably fit working age people should be working, preferably for a wage but if not for the dole'. He suggested that the expansion of income management was necessary because 'taxpayers have a right to insist that their money is not wasted' and appropriate because the Government had already expanded income management to all long-term unemployed in the Northern Territory.

In arguing for a new disability benefit for people whose disabilities can be readily treated, Mr Abbott highlighted the large and expanding numbers of people in receipt of DSP (around 800 000). He also noted that the majority of people in receipt of DSP have mental health or musculo-skeletal conditions and suggested that these are 'potentially treatable'. Under the new disability benefit envisaged by Mr Abbott, people with potentially treatable conditions would have different support arrangements and face different expectations in relation to workforce participation than people on DSP.

Finally, Mr Abbott argued that the proposal for suspension of unemployment benefits for young people in areas where there are shortages of unskilled labour, would send a strong signal that 'people must take opportunities to work seriously'.

Several commentators have criticised—either directly or indirectly—the welfare reforms proposed in Mr Abbott’s speech. The Australian Council of Social Service (ACOSS) has argued that the proposed measures are not only punitive, but also inconsistent with what they believe is actually required to assist long-term unemployed people and people with disabilities into paid work. ACOSS insists that it makes little sense to use a ‘bigger stick’, when stricter approaches have been proven to be both costly and unsuccessful in terms of employment outcomes. As ACOSS sees it, the Activity Test requirements that are placed on unemployed people are already tough enough. In their view, most unemployed people want to work. And, they argue, from the experience of employment service providers who work with long-term unemployed people and people who have a disability, what is required to help them into work is measures like the provision of incentives to employers and paid work experience in a regular job rather than Work for the Dole.

Chief executive of Mission Australia, Toby Hall has criticised both Mr Abbott’s proposed reforms and the Government’s planned imposition of tougher compliance requirements on job seekers. On his account, these reforms will neither reduce the number of people on DSP nor help long-term unemployed people into work. If these goals are to be achieved, he argues, what is required is genuine ‘root and branch’ welfare reform. In the case of DSP recipients, this would include ensuring that they receive the training they need to gain employment in areas of skills shortage as well as support in dealing with non-employment-related life issues. Further, Mr Hall suggests that the tax and welfare systems would need to be changed to fix effective marginal tax rates under which unemployed people and people on DSP face higher tax rates than do wealthier individuals as they move into the workforce. He acknowledges that welfare reform such as he describes is expensive. However he goes on to argue that ‘even more financially debilitating is letting the current situation continue’.

Recently, economics reporter, Peter Martin questioned the possibility of getting people off DSP and into full-time work. So long as DSP is paid at a higher rate, he argues, unemployed people will strive to qualify for this form of payment and remain ‘disabled’. He suggests that increasing the requirements placed on NSA recipients is likely to exacerbate this problem, rather than force people to leave this form of payment for a job. The answer, as he sees it, is to increase NSA and to have it indexed on the same basis as DSP. This, he suggests, would stem the flow of people into DSP and increase the pool of potential workers, as most people on DSP tend to remain on it for life (or else move onto the Age Pension).

Other commentators have expressed support for some of the proposed measures, but not others. For example, Aboriginal leader and former ALP President, Warren Mundine is reported to have backed the idea that income support benefits should be suspended for people under the age of 30 in areas where there are unfilled, unskilled jobs. Professor Mark Wooden of the Melbourne Institute is less enamoured of this idea, seeing it as ‘problematic’, along with the proposal to quarantine half of long-term unemployed people’s income support payments. Nevertheless, Professor Wooden is said to be supportive of mandatory Work for the Dole for long term unemployed people and the creation of a new benefit for people whose disability may be readily treated.

In response to Mr Abbott's proposals, Professor Roger Wilkins of the Melbourne Institute has reportedly argued that increasing activity tests can improve people's employment prospects by making it 'a lot less effort for the money to get a job than to satisfy the activity tests to get the benefit'.

Recent welfare reform proposals from both the Government and the opposition have placed great emphasis on the virtues of work and the corrosive effects of welfare dependency. Both sides of politics are agreed on the need for welfare reform as a means to increase workforce participation. And, while the specifics of their proposals may differ, both the Government and the opposition have stressed in their reform proposals the principle of mutual obligation; they have focused on tough proposals to activate the unemployed. While a rigorous active welfare approach may help contribute to increased employment participation, the OECD has stressed, especially in relation to people with disability, that enhanced support services and making work pay are equally important. Crudely put, if welfare reforms are to prove successful, then the 'carrots' may need to be meted out in equal proportion to the 'sticks'.

Compiled by Matthew Thomas and Luke Buckmaster.

(Image sourced from: National Employment Services Association, at http://www.nesa.com.au/)


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