From social security to work
In chapter 3, the committee concluded that there were two options:
either increase Newstart Allowance or focus efforts to ensure that jobseekers
are able to quickly transition back to the workforce. In keeping with the
widely held view that the best form of welfare is a job, the committee
commences this chapter with the observation that it is of critical importance for
job seekers to be equipped with the skills and confidence to obtain secure
employment for themselves.
Job Services Australia and other employment support programs have a central
role to play in assisting people to move from welfare to work. It is for this
reason that the committee has given particular attention in this chapter to the
ability of such programs to support job seekers as they move to full
In the second part of this chapter the committee examines how casual and
part time work can be an important first step for long term unemployed job
seekers as they begin to transition to full time work. Unfortunately some
current policies discourage job seekers to take up casual and part time work.
Quality of employment services for job seekers
Job Services Australia (JSA) provides employment assistance to
unemployed people and those who are transitioning to work for the first time. Payments
to JSA under its contract with the Commonwealth from 1 July 2009 to 30 June
2012 ran to $4.362 billion. This comprised service fees, job placement and
outcome fees and expenditure through the Employment Pathway Fund.
On 30 June 2012, 509,000 Newstart Allowance recipients were receiving support
More than half of people who began to receive Newstart Allowance last
financial year, had moved off the payment in less than 12 months. This is a
good outcome, and demonstrates that Newstart Allowance is working well as a
short term payment as people transition back to paid employment. However, a
growing number of recipients have remained on the payment for more than 12
months. The table below reveals that some Newstart Allowance recipients have
been on the payment for many years.
It is clear from this table and from the committee's discussion in
chapter 3 that the longer a person is unemployed the more likely they are to
continue to remain on income support for some time. It is crucial that
appropriately targeted services are provided to job seekers to give each person
the best chance of finding sustainable employment.
The committee received evidence from witnesses and submitters about the
effectiveness of JSA programs. In the following pages the committee outlines
key issues raised in relation to classification of job seekers into streams,
provision of work experience, measures to address intergenerational, youth and
mature unemployment and the inadequacy of job support services for carers.
As discussed in chapter 2, following an assessment by the Department of
Human Services or JSA each job seeker is placed in a stream, based on need. All
job seekers have access to the Employment Pathway Fund, although the amount
available does vary according to stream. The committee heard concerns that job
seekers are not always accurately classified and placed in the most effective
stream, and that not enough support is provided in the first few months of
Jesuit Social Services believes that more time and care needs to be
devoted to setting up participation plans with jobseekers, to ensure that
jobseekers are placed in appropriate streams. The questions asked in the first
interview are very personal and it may take some time and sensitivity for a job
seeker to feel comfortable disclosing all their circumstances. Mr Michael
Livingstone explained to the committee:
One of the things we know is that, if the JSA providers and
Centrelink are putting together the participation plans, they are short on
time. It can often be one or two meetings where this is worked out. When you
are talking about people who have complex histories with multiple and complex
needs, we know from our work that it takes time to build that relationship and
work out what the fundamental issues are.
Mission Australia noted that while in theory a person can be quickly
reclassified, it had found in the past year that 'despite presentation of
significant evidence that the person has more barriers than originally
disclosed, they are simply not able to gain restreaming'.
In response to questions from the committee, the Department of Human
Services advised that if an error is identified a re-assessment can be done
Additionally, a service review is conducted every 12 months to ensure that job
seekers are appropriately streamed.
Some witnesses also expressed concern that the level of support to job
seekers placed in Stream 1 is inadequate, and in particular that job service
providers receive only $60 to support these job seekers for the first 13 weeks.
Dr Prins Ralston, Acting Chief Executive Officer, Mission Australia, told the
committee that this means the job seeker receives very limited assistance and
risks sliding 'into the long-term unemployed'.
At the other end of the spectrum, the Benevolent Society called for more
targeted and flexible assistance for job seekers in Stream 4 (those job seekers
have multiple and complex barriers to work participation). The Benevolent
Society argued that the service provided should recognise that these
individuals may not be immediately ready to commence vocational education and
training. Ms Annette Michaux told the committee:
We have 30 per cent dropout rates in TAFE courses when people
are being referred through JSA when they are in stream 4, I think. For us, that
is such a waste of resources. Let us first do something around coaching or
building parental confidence to make sure people are more likely to succeed
when they are ready to go to that next step. So it is looking at the individual
in front of you and working out how you are going to build that confidence and
self-esteem so that people can endure a TAFE course and not feel completely
embarrassed about their literacy or whatever it is. It is building something so
people can experience the system as positive, and sometimes we are finding that
needs some work first. We were working with a lot of people with mental health
issues, and we are finding we need to build quite a bit around them first, or
it might be low literacy.
The committee considers that more support should be provided up front to
jobseekers when they first become unemployed.
Employment service providers are also funded to work with employers,
particularly with a view to finding work experience opportunities for the long
term unemployed and young people. On 31 August 2012, 180 513 job seekers were
undertaking work experience.
Dr Richard Denniss, Executive Director, Australia Institute observed
that work experience for jobseekers can be just as useful for the employer as
As a rule I think work experience is very useful, in part
because it helps to overcome the barriers in the employers' minds. A lot of
employers are quite concerned about employing someone who has been unemployed
for 12 months. If someone comes to a job interview and is competing against
three other people, one of whom has just moved into town, one of whom has just
finished school and one of whom has been unemployed for 12 months, a rational
employer would think, 'In every other interview you have sat in for the last 12
months, someone sitting in my seat has seen something that I haven't seen. So,
all other things being equal, I'm not going to bet on you.'
Work experience is very useful for confidence and experience
for employees; it is also a low-cost way to say to employers: 'You can get a
good look at this person. Even though on paper or in a job interview perhaps
you would not have put them at the top of the list, they are pretty good. They
fit in.' We have to understand there are structural impediments for employers
who literally see long-term unemployment as an adverse signal.
Mr David Thompson, from Jobs Australia, noted that in his experience
employers are very willing to give young unemployed people the opportunity to
participate in work experience, however better support should be provided to
employers who do this:
[T]he great majority of employers who take on people who are
long-term unemployed are small and small-medium businesses and they do not have
HR departments and they are very busy. One of the things that we are looking at
for the next iteration of Australia's public employment service is how to get
the system to provide better assistance to employers in addition to job
seekers. That would be so that there is provision of more support to them as
employers to be able to take some of these people on and, importantly, to
support them as well as the employees so that they stay in the job.
The committee heard that work experience has become a more important
feature in the Job Services system recently. However, it is too early to tell
whether this renewed focus will result in improved employment outcomes for job
seekers in the long term.
The labour market in Australia increasingly requires workers to be
mobile, however the committee heard that many job seekers are still reluctant
to move or travel for work.
Job seekers can access funds to assist with the travel costs associated
with looking for work through the Employment Pathway Fund (EPF), as discussed
in Chapter 2. From 1 July 2009 to 19 August 2012, more than $37 million
has been released from the EPF to assist with transport costs and to provide
licencing assistance and nearly $1.5 million has been released to provide
To promote mobility the government established the Connecting People
with Jobs program. The $29.2 million program, administered by Job Services
Australia, is targeted at jobseekers living in areas with high unemployment
rates. Eligible applicants may receive relocation assistance of up to $9,000.
While there are 4,000 places available on the program, the committee
understands that as at September 2012 only 369 people had taken part.
The committee did not receive sufficient evidence to assess this program, but
senses that either the attitude of job seekers needs to change or the program
is poorly targeted and needs to be reformed.
Mission Australia reported that long commute or travel times can present
barriers for job seekers based in regional or remote areas. For example, even
in Wollongong where there are solid public transport links to Sydney, the
organisation struggles to motivate jobseekers to travel to work 90 minutes
Nevertheless, there are some success stories. For example:
[Mission Australia] have just been engaged with a large
mining [project] that have given us 2,500 jobs to fill. The plan to fill that
number will see us identify the right people, train them, get them work
experience and so forth. It will take something like seven or eight months
according to our plan to actually get them on site. We will engage them through
that period of time in order to prep them up and get them the basic skills to
get them on site. That is a significant investment. That is an investment by
Mission Australia and the mining company.
The committee considered that many young people in receipt of Newstart
Allowance would be particularly well placed to move for work. The Australian
Youth Affairs Coalition advised that while it supported incentives to encourage
young people to move for work, it did not believe that this should ever be a
condition of payment.
During the hearing in Canberra, Mr Thompson explained to the committee
that for some jobseekers the incentives just need to be calibrated effectively:
There is no doubting the fact that the nature of the
contemporary labour market in Australia creates the need for some people to be
more mobile, and it is also clear that the current incentives that are provided
for people to relocate are not sufficient to motivate people to do things like
move from a place where there are limited job prospects but where housing
rentals and so on are very low, and they might have the support of family and
so on, to relocate to somewhere where housing costs are extremely high, where
family supports and other things are not there and where, if they lose a job,
they could find themselves in quite significant hardship and trouble. We are
currently working with our member organisations to see if we can find some
examples of ways in which people can be supported and helped, but it is not a
simple story by any means. For people that have significant barriers, I suspect
the answer is that we may be doing them more damage and harm by putting them at
risk in some of those situations. For people that do not have barriers, we just
have to find some ways of constructing the incentives.
The committee was alarmed to learn that approximately one in ten
families with children do not have at least one parent working full time.
It is far more important that job seekers are equipped with the skills and
confidence to find and secure employment for themselves than that they are
simply given handout. Since the 2006 Welfare to Work changes, government
policy has gradually increased the participation requirements of parents who
receive Newstart Allowance. These changes have resulted in an increase of
Further, DEEWR has a number of pilot projects targeted at addressing the
needs of people who are experiencing generational unemployment.
For example, the Family Centred Employment Project sites in Goodna and
Broadmeadows. Ms Sally Sinclair, National Employment Services Association,
explained that anecdotal evidence suggests that this project is 'producing good
A number of charitable organisations who submitted to this inquiry are
working to address intergenerational unemployment.
Ms Annette Michaux, from the Benevolent Society, explained to the committee
that education and encouraging helpful home learning environments will also
assist in breaking these cycles.
The committee is considering the impact of the home environment on student outcomes
in a separate references inquiry, which will report on this issue in more
detail during the course of 2013.
Job Services Australia also has recently commenced a number of projects
to target 'entrenched disadvantage amongst jobseekers'. These projects are
still in their infancy so data does not exist yet to explain their efficacy.
The committee is pleased to hear that there have been some improvements
in the participation rates of parents in jobless families. However there
clearly need to be more improvements in this area.
Support for youth
The committee was pleased to hear of some case studies illustrating job
services providers developing creative solutions to assist unemployed young
people engage with work.
For example, during the Melbourne hearing the committee heard about an
innovative program developed by the Salvation Army to support unemployed young
people to find work on Hamilton Island. Major Moulds told the committee:
[We] have a relationship at the moment with Hamilton Island.
We have 16 young people, all of whom were formerly homeless, employed or
working on traineeships on that island. We have a worker who visits there
monthly, does a debrief with every one of those young people and is on the
phone constantly...And it is working brilliantly. Hamilton Island are so thrilled
with the results of that, they are talking to Uluru resort at the moment and to
all the big resort owners, because they have an unemployment problem when it
comes to getting young people to come and work for them, and we have in some
way helped them solve that.
However, the committee heard that the Salvation Army struggled to
receive support from JSA to implement these programs:
The Salvation Army struggles, can I say, to convince the Job
Services Australia providers to actually pay for an airfare to get them there,
with the guarantee of a job. They say, 'It's too risky. We might lose that
amount of money.' We have some runs on the board now, so it is not as hard, but
can you get support out of them? These guys are going to need a bit of support,
but Job Services will not provide it, so we pay for that. There is a flaw in
the system around the way that this group of people is supported and the money
is made available to provide that support. 
Jesuit Social Services has run social enterprise schemes to provide
training to young jobseekers. This can be challenging at times but the scheme
has produced reasonable results. Particular success has been experienced with
skilled members of the African community who face language barriers to
employment. Jesuit Social Services believes that after several years of hard
work it has developed 'a very solid model that we can replicate in other
The committee recognises the need for employment services programs to
cater to the needs of different cohorts and in turn deliver innovative
Support for mature aged recipients
Mature aged Newstart Allowance recipients are defined by the government
as between 55 and 64 years of age.
This group represents 18 per cent of the Newstart population. Additional
supplements and concessions are available to this cohort, including a higher
rate of payment to recipients who have relied on income support for 9 months or
longer and reduced activity requirements.
Employment outcomes for mature age recipients are not as strong as for
other cohorts, and a considerable proportion remain on Newstart Allowance until
transferring to either the Disability Support Pension or the Aged Pension.
The consequences of this trend are significant. A study undertaken by Deloitte
Access Economics, funded by the Age Discrimination Commissioner, reported that
if the workforce participation of people over 60 was increase by 3 per cent the
benefit to the Australian economy would be $48 billion a year.
Mr Thompson, Chief Executive Officer, Jobs Australia, advised that older
jobseekers face particular discrimination – and many people mistakenly assume
they only want part time work:
There is no getting away from the fact that there is very
significant discrimination against older workers more generally. I think there
is also a common misconception that many of them just need some part-time work.
Many of them need full-time work and probably need full-time work for longer
than they first thought because of the state of their super and for all sorts
of other reasons. I think the biggest problem in that space is being able to
recognise the contribution they can make rather than imagining they cannot.
The government has developed some specific programs to assist mature aged
jobseekers re-enter the workforce, for example wage subsidy schemes.
The Council of the Aging explained that while well-intentioned, these schemes
could be improved. During the Sydney hearing Ms Josephine Root, National Policy
Manager, provided a frank assessment to the committee:
We think that probably the wage subsidy level is not high
enough, and the period of time for which people have to be employed is not long
enough, to significantly make a difference to an employer's decision to take on
a longer-term older employee. If they have a built-in view that an older person
is not good enough, then $1,000 is probably not going to be enough. Three
months is a very short period of time for a person to gain the skills to do the
job competently and be seen as a valuable employee.
The other thing about wage subsidies, particularly targeted
at older people, is that it is almost reinforcing this view of the employers
that these employees are somehow second-rate and so they almost have to be
bribed to take them.
Ms Root argued that rather than reinforcing the mistaken belief of some employers
that mature workers are 'second-rate', employers and the government need to
recognise that 'there are a lot of older people out there who have all the
skills' and who have 'done the work to make their skills current'.
The committee is also aware of anecdotal evidence that some individual
JSA officers also have similar views.
The Age Discrimination Commissioner advised that no formal complaint had been
received about such discrimination by JSAs, although she too had spoken with
people who had raised similar concerns.
The Council of the Aging called for mature age job seekers to be 'given
heavier weighting in assessing which stream people go into', noting that some
older workers will not require this additional assistance and will transition
to work very quickly.
The Council of the Aging stated that the Employment Pathway Fund and JSA were
failing older people and identified a range of possible reasons for this:
It could be that older people are reluctant to undertake the
training, undertake skills. We know that a lot of training at the moment, in
the way it is being delivered, is not geared towards older people. We often
hear people saying that the training needs to be paced at a different level or
it needs to be delivered in a different way. For example, delivery of training
online for people who are perhaps in their late 50s or 60s and have not done
any learning online is not actually very constructive. It is what is offered
and how it is offered. We would probably say that the funding is not sufficient
to help move people from unemployment to employment.
Dr Susan Ryan, Age Discrimination Commissioner, told the committee that
many mature age workers become unemployed because of discrimination and
struggle to obtain employment also because of discrimination. Dr Ryan called
for targeted support to be provided by JSA immediately, not months after a
person has lost their job:
If I could get a message through to you today it would be
that it is imperative that, as soon as an older worker loses his or her job,
assistance to get them back into the workforce is immediately available. If
they have to spend a year or two without much support, constantly putting in
CVs, constantly being knocked back, not being told why they are being knocked
back, they do deteriorate understandably and they can develop mental health
problems which in some cases lead them eventually to go onto the disability
benefit. That is a very negative result all round.
In response to the suggestion that an alternative JSA stream could be
developed for older workers, the Department of Education, Employment and
Workplace Relations (DEEWR) responded that JSA was based on individual needs
regardless of age:
JSA operates on the basis of the individual, not the fact
that they are 50, 60 or 20. It is assessing the barriers that the individual
has, which is why the streams are set up so that the most disadvantaged get
into the higher streams and get access to the most intensive support. The
system as it currently operates would take into account the barriers to
workforce participation that the individual has, rather than setting up
specific streams. Our experience is that within cohorts people can do very
well; they can get back into the workforce quite easily. Other people, because
of their individual circumstances, take a bit longer or need more help.
DEEWR also advised that older job seekers tend to be in the higher
streams, and therefore are receiving a higher level of support.
The committee considered whether support could be provided to employers,
so that older workers do not become unemployed in the first place. The Council
of the Aging agreed with this approach, arguing that employers should be
encouraged to develop transitional arrangements with older workers who would
like part time or more flexible hours, or who need to change the nature of
their work duties.
Dr Ryan told the committee that she was conducting a study into ageism
and negative stereotypes of older workers. During the Sydney hearing the
committee heard that many employers hold negative views of older workers that
are not supported by the evidence. For example, studies indicate that older
workers have lower rates of absenteeism and sick days than other workers.
The Age Discrimination Commissioner advised that she has focused her efforts on
employers because 'they are the ones who are laying these people off too soon
and who are very reluctant to rehire or hire older people'.
Support for carers transitioning to
Carers perform an important
function in Australian society and provide an essential support and service to
those for whom they care. In some cases, the caring relationship can last for
years or decades. When this relationship ends, the change for the carer can be
quite abrupt. The carer's payment ceases, and in many cases the carer will move
to the lower rate of Newstart Allowance and have activity requirements.
The committee heard during the
Canberra hearing that neither the Department of Human Services or DEEWR have
specific programs in place to support people who are transitioning from a
carers role to employment.
In its submission to this
inquiry Carers Australia made a wide range of recommendations. Of particular
interest to the committee were recommendations directed at supporting carers who
seek to transition to paid employment. In this respect Carers Australia called
- Transitional arrangements to be put in place over a 12 month
period for carers who move from the higher carer payment (at the pension rate)
to a allowance payment (such as Newstart Allowance);
- Participation requirements to be graduated over time to 'allow
for readjustment' and 'take into account any ongoing caring needs' (such as
where the person cared for has moved to residential care); and
- Specific access to appropriate education and training, and other
measures, to support carers capable of re-entering the workforce to develop
appropriate skills and experience.
During the Canberra hearing the committee was privileged to receive
evidence from Mr Terry Stroud, who was a fitter and turner in the power
industry for more than a decade before becoming a carer. Mr Stroud told the
I was a carer for 17½ years. That began in 1991. My mother
suffered a stroke and was in a wheelchair, paralysed on the right side, and
could not speak. I worked full time in the power industry as a tradesman in the
Latrobe Valley in Victoria for five years after my mum had a stroke. My father
was very ill with a heart condition and he passed away in 1995. I worked for
another year, with some assistance to look after my mum in our family home. She
was rated as a full nursing care person. My sister suffered a stroke so I left
work in 1996 and went on the carer payment full time. I cared for mum until she
passed away in January 2009. On average I got up about 1½ times a night over
the 17½ years to care for my mother.
Mr Stroud's role as a carer ended when his mother passed away, and this
is when he visited Centrelink:
When mum passed away I had the three months bereavement time
and went to Centrelink. In my first contact with them after that I had to tell
I was a carer; they just thought I was a Newstart person. They said they had no
record that I was even a carer. My mum and I ran the house between us—my mum
was mentally fine and she liked to run the house side of things—and we shared
everything. I transported Mum everywhere.
My income dropped about 60 per cent in that grieving period.
It was very difficult and I did not know what to do. I had to be assessed and I
had to really stand up for myself and say I had been a carer for 17½ years and
that mentally I felt I was not ready to concentrate or focus on work or what to
do. I had not even thought about what I would do next—my mum had got ill
Mr Stroud advised the committee that Centrelink were generally
understanding of his circumstances, however as a former long term carer he
simply did not fit easily into any particular job seeker profile. Following 'a
couple of assessments' he received a six month exemption from work, and was
then transferred to Newstart Allowance. However, Centrelink did not have any
employment support services which were appropriate and Mr Stroud was sent to
the Commonwealth Rehabilitation Service (CRS). Mr Stroud explained that
Centrelink 'do not know how to approach it' and this was frustrating:
It is like you fall through the cracks and you do fit any
existing category after being a carer and on the carer payment so you are not
recognised as being a carer and you are just a Newstart person that was a
Mr Stroud continues to look for work and has had some short contracts
recently. However, it is challenging because he has been out of the workforce
for so long and needs to update and refresh his skills.
The committee asked Mr Stroud to identify particular measures that he
believe should be taken by the government to ensure that carers are treated
fairly and sensitively by the allowance payment system. In a two page response
Mr Stroud echoed the recommendations made by Carers Australia in its
submission. He also detailed some other suggested changes, calling for:
- Centrelink to flag former carers when they first make contact
after the caring relationship has ended;
- The first appointment with Centrelink to be in a private space
with appropriately trained staff who can respond sensitively to the carer;
- A separate stream or pathway through the JSA system (including
appropriate support for study and retraining); and
- Appropriate counselling to assist the carer to re-enter the
Mr Stroud emphasised that the needs of individual carers will vary, and
that the allowance payment system needs to sensitively accommodate these needs
as carers transition to paid employment.
In responses to questions during the Canberra hearing, DEEWR advised
In circumstances where a Carer Payment recipient ceases to
qualify for Carer Payment because the care receiver dies, the recipient may
qualify for bereavement assistance in the form of a 14 week extension of Carer
Payment. Similarly, if a care receiver is admitted permanently into an
institution that provides care, the carer may remain qualified for Carer Payment
for 14 weeks after the care receiver is admitted to that institution, to allow
the carer to adjust to their changed circumstances.
Carer Payment recipients who cease to qualify for Carer
Payment may then be eligible to receive another income support payment, such as
Newstart Allowance, depending on their circumstances.
DEEWR's response to further questions during the Sydney hearing
confirmed for the committee that the process that Mr Stroud went through from
Carer's Payment to Newstart was typical, and there are no targeted job services
for former carers.
Overall, Job Services Australia and other employment support programs
are effectively assisting people to move from welfare to work. There are some
areas where these services can be improved and better targeted, particularly
for carers and people who have only recently become unemployed. For other job
seekers – such as parents in jobless families – it is too early to tell how
effective government pilot programs will be.
Stream 1 jobseekers tend to move relatively quickly into employment
within a few months. However, too many do not, and for those the support
provided by JSA in stream 1 is extremely limited. The committee believes that
Stream 1 jobseekers should receive more intensive support up front, at a time
when they are most employable.
On balance the committee accepts DEEWR's evidence that people are placed
on streams based on their personal circumstances, including their age, and that
this is the best way to account for any discrimination they face.
Nevertheless, training and support opportunities provided by Job
Services Australia could be better tailored to the needs of older job seekers
In relation to older workers, the committee has heard that some training
within these streams is ineffective and anecdotal evidence suggests that some
JSA providers themselves are not aware of the benefits that older workers can
The committee also is cognisant of the need to educate employers about
the particular skills and experience that older workers can offer, and notes
with approval the study currently undertaken by the Age Discrimination
Commissioner. The government should continue to work with employers and older
workers to ensure that these workers have appropriate transition arrangements
where this is appropriate.
While existing programs provide discretion, and the committee was
assured that DHS and DEEWR are accommodating of the particular vulnerabilities
of former carers, the committee was disappointed to hear that there are no
specifically targeted programs to assist former carers transition from caring
The committee has considered the experiences of long term carers, and
believes that DHS and DEEWR should carefully consider these valuable insights
and suggestions and develop a targeted program of support for former carers who
are transitioning from a caring role to work or study.
The committee recommends that the government consider increasing the
resources available to Stream 1 jobseekers, to ensure that prompt and effective
support is provided in the first weeks and months of unemployment.
The committee recommends that the Department of Education, Employment
and Workplace Relations work with Job Services Australia to ensure that
training and support programs for workers aged 45–64 are appropriately
The committee recommends that the government develop targeted and
tailored programs for former carers as they move to Newstart Allowance or
another payment once their caring responsibilities end.
The actual experience of working is the best way for people to move from
unemployment to sustainable work. In the remainder of this chapter the
committee examines how Newstart Allowance can be better structured to ensure
that the appropriate incentives are in place to encourage jobseekers to find employment.
It is important to first consider employment trends for Newstart recipients,
before turning to focus on the amount of employment income that recipients can
earn before the payment rate reduces, and whether or not recipients are able to
easily determine the financial benefit of work.
Employment trends for Newstart recipients
The majority of Newstart recipients who transition to work initially do
so through casual and part time work. This trend is consistent with broader
changes to the Australian labour market. As discussed in Chapter 2, the
proportion of workers who are employed part-time (rather than full time) has
increased considerably since 1982. For example, in 1982 only 16.3 per cent of
employment was part-time, thirty years later this has increased to 29.7 per
cent in 2012.
Casual and part time work is also consistent with the changing
demographic of Newstart Allowance recipients. Since the 2006 Welfare to Work
reforms, Newstart has shifted from a payment designed only for people who have
the capacity to work full time to also support people who have less capacity to
work due to caring responsibilities or a disability.
Almost a fifth of Newstart Allowance recipients are combining the
allowance payment with employment income, and this proportion has nearly
doubled in the past decade.
Some recipients are also cycling on and off Newstart. Nineteen per cent of
Allowance recipients who find work with the help of JSA, lose that employment
within 26 weeks.
DEEWR does not monitor or collect data after 26 weeks.
However, the DEEWR has tracked the current status of people who were receiving Newstart
Allowance recipients on 1 July 2007, as the table below illustrates.
As illustrated above, a fair proportion of Newstart Allowance recipients
in 2007 have remained on, or returned to, that payment (around 15 per cent).
The Newstart allowance payment should be structured to recognise these
practical realities and ensure that appropriate incentives to work remain –
even as job seekers commence casual or part time work.
Newstart Allowance is designed to facilitate transition to full time
work, and for this reason recipients can combine employment income and
allowance income up to a point. The government advises that recipients 'are
generally required to accept any suitable work, including casual or part time
work, which is offered to them'.
As discussed in Chapter 2, Newstart Allowance recipients may earn $62 a
fortnight before income support is impacted. If a person earns more than this
amount per fortnight their payment gradually decreases.
For income earned above $62 and below $250, each dollar earned reduces
Newstart Allowance by 50 cents in the dollar. Income above $250 reduces payment
by 60 cents in the dollar. Partner income which exceeds the partner income free
area of $830.00 reduces fortnightly allowance by 60 cents in the dollar (this
is benchmarked to the cut-off point for a partnered Newstart Allowance
recipient’s personal earnings).
From 1 January 2013, a new income test will apply for single principal
carer parents on Newstart Allowance. From this date, a 40 cent in the dollar
taper rate will apply for all income earned above $62 per fortnight. 
Recipients can build up a 'working credit' if their total income is less
than $48 a fortnight (this figure has not been indexed since the scheme
commenced in 2003). When that recipient gets work in the future, then they can
use this working credit to reduce the effect which income has on their payment,
until the credits are exhausted. However, a Newstart Allowance recipient can
only build up a $1000 worth of credit.
As a consequence, this credit cannot effectively be used for seasonal
employment where an employee may work intensively for weeks or months, but not
for the rest of the year.
If over a 13 week period a recipient's employment income is too high to
receive an allowance payment, the Newstart Allowance eligibility is terminated.
If that individual subsequently became unemployed, they would need to meet the
Newstart Allowance income and asset tests in order receive the allowance.
The committee received evidence from a range of witnesses and submitters
which questioned whether the income free area and taper rates provide
sufficient incentive for recipients to work.
Building incentives to take up casual, part time or seasonal work
The committee heard that the taper rate was too high and the income free
area was too low, and also that waiting periods associated with signing back
onto Newstart acted as disincentives for Newstart recipients to take up
employment in casual, insecure or seasonal roles.
This is problematic because part time and casual work is the starting point for
many jobseekers as they transition to sustainable full time work.
During the Melbourne hearing, Major Paul Moulds from the Salvation Army,
explained to the committee that incentives and support need to be in place to
ensure that this first step is successful and the economic benefits are clear:
Some of them—and I speak from experience here—really struggle
to make that first step into full-time employment simply because of the fear
and the newness of it all, and I think that even that needs to be a well
supported step. The more we can make that a positive and enriching experience
which makes them say, 'I've got more disposable income—this is good for me,'
the better things will be. It is that sort of mind shift. In many of the people
we work with who come from a generation of not working, it is really changing
that mindset so that they get that moment of saying, 'This is great,' and then
the doors open. So we would certainly be supportive of—and maybe it is for that
group, though I am not trying to differentiate here—a change to that provision
which allows people to benefit more from that experience of work, even if it is
casual or part-time.
Major Moulds advised the committee that once a person has success in
part time work 'their capacity to go on into further and full-time work is
Mr Michael Livingstone, Jesuit Social Services, also emphasised to the
committee the importance of casual and part time work, arguing that 'any type
of engagement and involvement in the labour market is a positive step and
something that we welcome'.
However, other issues can arise as a result of returning to casual and insecure
work, such as subsequent unemployment and re-engagement with the income support
Jesuit Social Services observed that for some the difficulties associated with
going back onto Newstart Allowance following retrenchment can act as a
disincentive to pursue casual and insecure work in the first place. To protect
against this, Ms Parnell reported to the committee that the system needs to
have more flexibility so that:
[there] is no disincentive for people to be getting off
benefits. Many of the people we see may have opportunities to be involved in
the casual labour market and that may be the first part of that intermediary
step. We would like to see is more flexibility around people getting on and off
their benefits without disincentives.
The Australian Council of Trade Unions submitted that the income free
threshold is too low, particularly given the minimum wage and minimum number of
hours work. During the hearing in Melbourne Mr Matt Cowgill, Economic Policy
Officer, Australian Council of Trade Unions, explained to the committee:
We noted in our submission that the current level of $31 per
week is less than two hours of work at the national minimum wage. Most modern
awards—they are minimum industrial instruments—have a minimum engagement period
of three hours of work per week, so, if you were employed under an award, say,
in the retail sector or the hospitality sector, you would need to be put on for
a shift of at least three hours. Thereby, by working at all, you are automatically
going over that free area and you are seeing your income support payment
reduced. So we say that as a minimum it should be increased such that it is
equal to at least three hours work at the national minimum wage, so that people
can do some work before their payment rate starts to be reduced.
The National Employment Services Association advised the committee that
any changes to taper rates will have flow on effects for payments to employment
services providers. For example, if due to a change in taper rates a recipient
who is working receives even $1 in thirteen weeks from Newstart Allowance, this
significantly reduces the income that the Job Services Provider receives. Ms
Sally Sinclair, Chief Executive Officer, explained:
In Job Services Australia effectively you are paid primarily
on outcomes and your outcomes are determined by the levels of withdrawal from
income support. The more generous the taper rate is generally the harder it is
to achieve the outcome and therefore to have the requisite investment in
services. That is why we are saying that we believe the inquiry needs to look
at those two systems in an integrated way to make sure that there are not
unintended consequences of addressing some of the deficiencies in the payment
system when it comes to the impact on employment services.
The ACTU observed that to increase the income free area and raise
Newstart by $50 a week would result in an unintended consequence of some full
time workers being eligible for Newstart Allowance.
The process of returning to Newstart Allowance after a short term
contract finishes may also provide a disincentive for applicants to work. This
is because once they lose that job, they have to go through the process of
signing back onto Newstart Allowance and often serve a waiting period (while
they receive neither employment income or support income).
Ms Amelia Christie, Combined Pensioners and Superannuants Association
Victoria agreed that the current taper rates did not 'create much of an
incentive to take up short-term, insecure work'.
Dr Prins Ralston, Mission Australia, submitted that the current taper rates
'can create a barrier to employment', particularly in relation to 'short-term
or insecure work' because of the 'waiting periods associated with going back to
To avoid this, some job seekers will deliberately earn just under the
full cut off point to ensure that if they lose their current employment they
are still engaged with the system and can revert immediately to the full rate
of Newstart Allowance. The National Employment Services Association told the
We have heard people saying that sometimes there is a risk
seen in going out and testing yourself in the labour market. When people
actually get into work sometimes they will want to hang on, even by getting
that dollar, because they are scared of the process of getting back in, which
means that they are actually holding themselves back to avoid the potential
risk of not qualifying to get back on again.
Dr Susan Ryan called for the government to consider the return on
investment that may accrue from raising the amount recipients can earn in paid
At the moment we understand that the limit on what you can
earn and maintain Newstart is too low. Although we understand that there are
cost implications for the federal budget, this is really a case where we would
hope the longer term outcome would prevail. If that person can get some
part-time work while they are looking for work, they are much more likely to
find a job. We all know that. If you are in work it is easy to find another
job. If you are completely out of work and cut off from everything, then your
chances get worse and worse. So even though there would be a cost in lifting
the amount that the part-time Newstart person is allowed to work, I am sure
that the many economists you had coming before the committee would agree that
the savings you had on getting that person back to full-time work possibly for
another 20 years and therefore saving their superannuation, delaying the time
they go onto age pension and all of would mean those budget benefits would be
In response to questioning by the committee, DEEWR has estimated that to
increase the income free threshold to $96 a fortnight for all Allowance
recipients would cost $220 million over four years.
The current income free threshold for Newstart Allowance recipients is
too low, at less than three hours work a week at the minimum wage. Given that
each casual or part time shift must be at least three hours, this means that
jobseekers cannot work a shift a week and still receive the full rate of
Newstart Allowance. For this to occur, the income free area would need to be
increased by a modest $34 to approximately $96 per fortnight. The committee
believes that by increasing the income free threshold for long term job seekers
– those who face the most barriers to participation – this group will be better
able to transition to full time work.
DEEWR has advised that to increase the income free threshold to $96 a
fortnight for all Allowance recipients would cost $220 million over four years.
This estimate is significantly less than the $8 billion estimated cost of
increasing the single rate of Allowances, outlined in Chapter 3.
The committee also believes that job seekers are more likely to take up
short term contract and casual employment if they know that once the contract
ends or they again become unemployed through no fault of their own, they are
able to quickly sign back onto Newstart Allowance. The committee heard that
some recipients will refuse work short term full time work opportunities
because of the mandatory waiting periods before they can sign back onto
Newstart Allowance. Efforts should be made to remove this disincentive. This
initiative would also enable the government to track how regularly people are
coming back onto Newstart in a 12 month time period.
The committee accepts that any decision to increase taper rates must
also take into account the impact this will have on JSA funding and eligibility
for Newstart Allowance. The committee acknowledges the concerns expressed by
Employment Services providers that contractual earnings will decrease if the
income free threshold is raised. However, the committee is also mindful that if
the income free threshold is increased then JSA contractors may in fact earn
more as recipients are more likely to go off Newstart altogether if they have
the security of knowing they can sign back on within 12 months. These interests
would need to be carefully balanced by the government.
The committee recommends that the government identify savings in
the existing social security expenditure to increase the income free threshold
for long term Newstart Allowance recipients to 6 hours work per fortnight at
the minimum wage.
The committee recommends that the working credit for Newstart recipients
be increased from $1000 to the equivalent of three months' work at the minimum
The committee recommends that the government reform its processes
to enable departing Newstart recipients to remain active on departmental
systems for one year after they cease receiving payment.
Simplification of the allowance payment system
The committee heard that the current system is very complex and many job
seekers struggle to understand what is required of them and what support is
available. For this reason it is not always clear to jobseekers what the
incentives are to work. Ms Annette Gill, National Employment Services
Association, described the type of information that jobseekers need:
You need to be able to work out the benefit of work—being
able to work out how you will be better off in work by being able to put
together everything you have and how it would be different if you were in a
job, and being able to calculate a taper rate. Our providers are used to the
system, but even for them to try to work through where a person would be in
terms of income reduction with partial employment is highly challenging.
Consumers cannot do that on their own.
Unfortunately this information is not easily available to jobseekers,
particularly for those who are engaged in part time work and in receipt of
Newstart Allowance. As a consequence, the economic benefit of work is not
always clear to people.
Ms Annette Gill, Policy Manager, National Employment Services
Association, referred the committee to a facility in the United Kingdom that
provides clear and accurate information to applicants about the impact of work
on their payments:
[The] UK in particular used to have a very good ability for
the employment service providers to say, 'If you take this job which is
offering 20 hours a week, this is where you will be in terms of your income
support. You can see where you are better off in work.' Now with partial
employment—and given its prevalence in Australia—we cannot do that clearly to
people. We know that they can work two hours and that they start to reduce the
money. That is a disincentive for those transitional pathways.
The allowance payment system is too complex. The committee has received
evidence of the difficulties that recipients and their advocates have
encountered as they attempt to navigate the web of entitlements, exclusions and
supplements. Indeed the committee itself has struggled at time to comprehend
the material presented to it by the government.
The committee believes that the allowance payment system can, and
should, be simplified and streamlined. This reform would benefit both
applicants and their service providers, and be a much need efficiency and cost
saving measure. In the meantime, the government needs to better communicate the
financial benefits of working to recipients.
The committee recommends that the government assess the viability of
creating an online calculator for Newstart and other recipients to enable
jobseekers to easily calculate the costs and benefits of work, and the impact
of work on allowances and other payments.
Throughout this inquiry the committee has heard from witnesses how
important work is to an individual and to families. In addition to the obvious
financial and economic benefits, work also builds up confidence and skills, and
entrenches dignity and a sense of wellbeing. Parents who work are more likely
to have children who will successfully participate in the labour market as
adults, and in so doing break the cycle of intergenerational unemployment.
Higher workplace participation also benefits Australian society. Work
contributes to tax revenues, and with an aging workforce, ensures that spending
on health and education, and the aged pension, remain adequate. 
When individuals remain unemployed for long periods of time the
consequences for that person are dire. The individual will lose skills and
capabilities, will become detached from the workforce, whittle away savings and
fail to contribute to superannuation. Widespread unemployment brings about significantly
reduced taxation revenue and greatly increased expenditure on income support
payments such as Newstart Allowance. The children of long term unemployed
people are more likely themselves to become dependent on income support
The committee agrees that 'the best way that a person can keep their
attachment to the workforce while they look for a full-time job is doing
To this end the committee has made a number of recommendations to create further
incentives for Newstart Allowance recipients to undertake part time and casual
work. The committee has also considered the particular needs of carers who are
re-entering the workforce after a period of caring, and the particular
challenges faced by mature age workers.
Witnesses and submitters to this inquiry have identified a number of
other areas where reforms could be made, and new policies initiated,
particularly in relation to adequacy. However for the committee to make such
recommendations would be fiscally irresponsible in the current economic
Throughout this inquiry the committee has been reminded of the singular
importance of employment. It is the view of the committee that the attention
and effort of policy makers should be focused on equipping and assisting job seekers
to find jobs, rather than increasing financial incentives that will result in
jobseekers languishing on income support payments for generations to come.
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