Despite the GFC, income support reliance remains low

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Despite the GFC, income support reliance remains low

Posted 15/08/2012 by Carol Ey

The Senate Education, Employment and Workplace Relations Committee is currently holding two separate but related enquiries, one into the adequacy of the allowance payment system for jobseekers and others, and the other into legislation to remove the ‘grandfathering’ transitional arrangements for parenting payment recipients (among other changes).

In this context, it is timely to look at the impact of previous changes to the welfare system and consider what proportion of the working age population is affected by issues being considered by the Committee.

Despite the impact of the Global Financial Crisis (GFC), which led to a slight increase over the period to 2010, the level of income support reliance among the working age population is now at historically low levels, with the only other years at comparable levels since 1982 being 1989 and 1990.

The chart below shows the proportion of the population aged between 16 and 64 who were in receipt of an income support payment as at 30 June of the each year from 1978 to 2011.

Main categories of workforce age income support recipients as a proportion of the workforce age population, 1978 to 2011

As at June 2011, some 17.7 per cent of the working age population received some form of income support. The largest category are those on disability and sickness payments (mainly Disability Support Pension) at 5.6 per cent of the working age population, followed by unemployment benefits (4.2 per cent), students (2.6 per cent) and single parents (2.2 per cent). While some of these people also had income from other sources, for example part-time or casual work, their income support and other social security payments (such as Family Tax Benefit for those with children) are the major source of income for most.

Not surprisingly, the trends over time for both the total proportion and particularly the proportion on unemployment benefits reflect the economic environment, with peaks during the early 1980s, the early to mid 1990s and an upturn following the GFC in 2007.

However the impact of changes to the welfare system is also apparent, particularly in the decline of those on payments with low workforce attachment (for example, payments to widows, mature age allowance and payments to the partners of welfare recipients without dependent children). People receiving these payments do not have an obligation to look for work or engage in other activities such as education or caring. Changes introduced in the mid 1990s and the Welfare to Work initiatives in 2006 have meant that many of these payments are no longer open to new entrants, resulting in a reduction from 4.9 per cent of the working age population in 1995 to less than 1 per cent in 2011.

The Welfare to Work changes also had an impact on the proportion receiving parenting payments, declining from a peak of nearly 5 per cent during the late 1990s and early 2000s to 3 per cent in 2011. The changes being proposed by the Government, and which are the subject of the Senate Committee inquiry, to apply the new criteria to those who were on payment before 1 July 2006 are estimated to shift some 72 900 people currently receiving parenting payments on to unemployment benefits from 1 January 2013, which will mean a reduction of a further 0.5 per cent of the workforce age population on parenting payments and a corresponding increase in those on unemployment payments.

Interestingly the proportion of the population receiving disability payments has continued to rise steadily despite repeated attempts by governments to reduce access to these payments. While in earlier years this increase was largely offset by a decline in those receiving veterans’ payments, more recently disability and carer payments were the only areas that did not decline during the periods of very low unemployment in the early to mid 2000s.

Since the introduction of a carer’s pension in December 1983, payments to carers has been the fastest growing area of working age income support, with the proportion of the population receiving payment for caring doubling from 2004 to 2011.

The payment rates vary across each of these categories, with those receiving disability, veteran or carer payments being paid at the pension rate of payment, which is $695.30 per fortnight (pf) for singles and $524.10 for a member of a couple. The main unemployment payment, Newstart Allowance, is $489.70 pf for single people without dependents, $529.80 pf for single people with dependent children, and $442.00 for members of a couple, and student payments are also around this level. Parenting Payment Single is at a rate between these two categories, at $648.50 pf.

In total, over 42 per cent of income support recipients of working age are receiving payments at the pension rate, some 27 per cent at the Newstart Allowance rate, 18 per cent at the student rate and over 12 per cent at the rate for single parents. Hence an increase in the rate for Newstart Allowance would benefit some 5 per cent of the working age population, with this rising to nearly 8 per cent if this increase also flowed through to student payments.

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