Budget Review 2014–15 Index

Dr Luke Buckmaster

The Budget announced changes to the Disability Support Pension (DSP) intended to ‘help young people with disability enter the workforce if they are able to do so’.[1]

The DSP provides income support for people who have a disability and are unable to work for 15 hours or more per week.[2] Recipients must be permanently blind or have been assessed as having a physical, intellectual, or psychiatric impairment of at least 20 points under a classification system known as the impairment tables.

From 1 July 2014, DSP recipients under 35 years of age with an assessed work capacity of eight hours or more per week will be required to participate in ‘compulsory activities’ aimed at assisting them to find employment.[3] Participants will be required to develop a participation plan which will include activities such as Work for the Dole, job search, work experience, education and training, and connection with Disability Employment Services.[4] This will be the first time that participation requirements have been attached to the DSP. The measure is expected to cost $29.3 million over five years from 2013–14.

The Budget also includes a measure to review the eligibility of DSP recipients aged under 35 years who were granted DSP between 1 January 2008 and 31 December 2011. Eligibility will be reviewed against the revised impairment tables introduced on 1 January 2012. Under the new impairment tables, eligibility for support is focused more on the extent to which a person is impaired from working and less on whether a person has been diagnosed with a disabling condition. Those found eligible would continue to receive DSP and be subject to the new participation requirements outlined above. Those found ineligible would need to find employment and/or apply for income support through an Australian Government payment such as Newstart Allowance (NSA). Currently, the maximum payment rate of DSP for a person aged over 21 is $766.00 per fortnight, while the maximum payment for a single person on NSA is $510.50. The Government will provide $46.4 million over five years for this measure, which will terminate on 30 June 2019.

At June 2013, only around 17 per cent of DSP recipients were aged under 35 years, while over half (56.2 per cent) were over 50 years old.[5]

The Budget also announced changes to portability arrangements for DSP. From 1 January 2015, DSP recipients will be able to travel overseas for no more than four weeks in a 12 month period and still receive the payment. Currently, DSP recipients may be paid for temporary absences from Australia for up to six weeks, on multiple occasions in a given year. This measure is expected to result in savings of $12.3 million over five years.

Growth in DSP receipt

Receipt of DSP has grown substantially over the last three decades, despite various attempts to tighten criteria for eligibility. The numbers of people on DSP grew from 216,600 in June 1982 to 821,700 in June 2013.[6] This has led the Government to question the sustainability of the DSP in the absence of further reform.[7]

However, as the Parliamentary Library has previously noted, there is evidence that previous attempts at reform of DSP have been confounded by factors external to the payment itself.[8] A recent paper by economists, Duncan McVicar and Roger Wilkins, found that around 117,000 of the 600,000 additional DSP recipients since 1982 was driven by population growth in the working age population (those aged 16‑64 years). [9] They suggested a further 17 per cent of the increase in the working age population receiving DSP was attributable to population ageing.[10]

The main driver of growth in DSP receipt, they argue, has been changes to other payments, such as the increase in the age at which women can receive the Age Pension; the closure of other income support payments such as Mature Age Allowance and Partner Allowance; and tightening of eligibility for Parenting Payment.[11] The increasing disparity in payment rates between NSA and DSP in recent years has also probably made it much more likely that people with some capacity to work who may previously have registered for the former, are more likely to apply for the latter so as to receive higher rates of payment and be subject to a more liberal means test.

Indeed, the authors show that the percentage of the working age population with a disability receiving welfare has declined since 1993, leading them to wonder ‘whether there would be quite so much concern about the rise in DSP receipt were this simple fact widely appreciated’.[12]

Improving workforce participation by people with disabilities

As the Government notes, workforce participation by people with disabilities is low in Australia compared with other Organisation for Economic Cooperation and Development (OECD) countries.[13] A 2010 OECD report found that Australia ranks 21st out of 29 OECD countries in employment rates for people with a disability.[14] Further, in Australia, a person with a disability has a poverty risk around 2.7 times higher than a person without a disability, which puts Australia 27th out of 27 OECD countries on this measure.[15]

While the measures outlined above may result in some slowing in the growth of DSP receipt, they are unlikely to lead to a general improvement in the workforce participation and self-support of people with disabilities. The Government says that it ‘will continue to provide employment support to people with disability through Disability Employment Services, which offer a range of services including helping people with disability to prepare for work, providing job search support and providing support once placed into a job’.[16] However, the Budget does not include any additional funding for Disability Employment Services.

It is likely that improving employment rates for people with a disability will require more than changes to the DSP and the continued provision of employment services. This is particularly so, given that unemployment is forecast to increase over the next few years. [17] In a recent Parliamentary Library Lecture, Craig Wallace, president of People with a Disability Australia, argued that for genuine improvements to take place Australia would need to commit to a national challenge to create jobs for people with disabilities over the next decade.[18] This would involve more innovative approaches and setting targets for numbers of jobs to be created. He argued that 200,000 additional jobs (20,000 per year for 10 years) is ‘reasonable’ but requires ‘policy ambition’.

There is likely to be a range of views on the extent of this ambition and the manner in which it might be achieved. Further, the measures introduced by this Budget indicate that greater emphasis will be placed on improving the capacities of some people with disabilities on DSP to find employment. Nevertheless, there is little doubt that more substantial and sustained policy effort aimed at overcoming structural and institutional barriers to employment will be required to achieve the Government’s objective of helping people with disabilities into work.

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