Contents

Background Note Index

Background Note

Trends in the receipt of income support by workforce age people 1978 to 2007

Online only 22 April 2008

Introduction

Over the last 30 years there have been major economic, demographic and social changes in Australia (see Box 1). These changes, together with associated government income support policy responses, have been important factors driving trends in the proportion of workforce age people receiving income support. This Background Note outlines these income support policy developments. It also provides data on changes over the same period in the proportion of the workforce age population who receive income support, including the proportion receiving the different types of income support payments. This data is provided in Table 1 and Chart 1 below.

The influence of government income support policy

Over time, governments have introduced new payments, abolished old payments and changed the eligibility or means testing requirements for most payments. Each of these changes has influenced the numbers receiving income support. The main changes over the period are set out below.

The phasing out of payments for those with little attachment to the workforce

Income support is presently structured to encourage workforce participation by able-bodied people of workforce age. This has not always been the case. In the past, certain groups of able bodied workforce age people were given access to income support without any work test, even though they had no caring responsibilities. Payments for widows, older unemployed people, wives of pensioners and dependant spouses were in this category. This reflected the social norms of the time with regard to expectations of labour force participation. Most of these payments are now being phased out. This is gradually altering the balance between unemployment payments and other payments.

The payments being phased out are:

• Mature Age Allowance for people aged 60 to 65 years with no recent workforce experience. No new claims have been allowed since 20 September 2003. In J anuary 2008, there were 2518 recipients down from about 60 000 in June 1997.
• Widow Allowance for women who are widowed, divorced or separated and who are over 50 years old with no recent work force experience. From July 2005, the eligibility age was limited to women aged 50 years at that time. In January 2008, there were 41 297 recipients. The payment will be phased out by 2020 because it is only available to women born before July 1955.
• Partner Allowance for partners of income support payment recipients who have no recent workforce experience. No new claims have been allowed since 20 September 2003. In January 2008, there were 43 434 recipients down from 102 811 in June 2003.
• Wife Pension for partners of pensioners (mostly age and disability support pensioners). No new grants have been made since 1 July 1995. In June 2007, there were 35 273 recipients down from 161 450 in June 1995.
• Widow B Pension for older widows. No new grants have been made since 20 March 1997. In June 2007, there were 732 recipients down from a peak of 86 692 in June 1988.
• Age pension for women aged less than 65 years. From July 1995, the eligibility age for women began to increase gradually. By July 2013, the eligibility age will be 65 years, the same as that for men. In June 1995, recipient numbers reached a peak of 211 685. By June 2007 this had fallen to less than half of that number.

The increased provision of income support for carers

Increased recognition of caring work has resulted in the provision of income support for low income carers. In June 2007, there were 116 614 recipients of Carer Payment compared to only 20 098 in June 1995. Eligibility for the payment has slowly been broadened so that more carers can receive it.

Means test changes

Changes to means tests to encourage part-time work have enabled more people to receive payments. This is because these changes to means tests allow people to remain on income support until their private incomes reach a higher cut-off threshold. However, as a consequence, a much higher proportion of income support recipients now receive part-rate payments.

The most significant changes were:

• The income test for unemployment payments was modified in 1995 and again in 2006 to increase the financial benefit to those moving from unemployment into part-time work.
• In 2000, the taper rate under the pension income test was eased as part of the package of measures to compensate for the impact of the introduction of the GST on the cost of living.
• In September 2007, the pension assets test taper rate was reduced as part of the superannuation reform package.

Reform of income support for parents and people with disabilities

The Welfare to Work reforms of July 2006 introduced job search obligations for many people receiving income support because of their parenting role or their disability. In recognition of their reduced ability to take up employment because of their disability or their parenting role, they are only required to look for part-time work. Over time, these changes are expected to increase the proportion of people receiving unemployment payments and to reduce the proportion receiving parenting and disability payments.

Increased access to higher education and student income support

Since the introduction of Austudy in 1985-86 and other government polices to encourage participation in higher education, there has been considerable growth in the numbers of students receiving income support. Student income support recipients of workforce age have increased from about 120 000 in 1986 to about 310 000 in 2007.

The data

In Table 1 and Chart 1, payments have been grouped into categories corresponding to current payments as set out in Box 2. This means that superseded payments have been placed in the category where they logically fall.

For the purposes of this paper the workforce age population has been defined as those aged 16 to 64 years. This matches the age cut-offs used in current income support policy settings. Children who turn 16 years of age become eligible for student, disability or unemployment assistance. People up to the age of 64 years will by 2014 be unable to access age pensions. The phasing out of age pensions for women aged 60 to 64 years is at present well underway.

Commentary

Table 1 and Chart 1 show marked changes in the composition of the income support population over time. They also indicate the great variation in the total proportion of the workforce aged population receiving income support over time. In 1996, that proportion reached its highest point of around 25 per cent, up from under 14 percent in 1978. By 2007, that proportion had shrunk back to about 17.5 per cent.

The composition of the income support population has also changed over the period. A steady growth in the representation of people with disability, carer and parenting payments has been offset by reductions in the representation of people with veteran and low workforce attachment payments. Payments for the unemployed have varied with changes in the unemployment rate that reflect the economic cycle. The influence of the recessions of the early 1980s and the early 1990s are evident in the data.

Further related reading

The following chronologies on the Parliamentary Library website give more detail about the history of income support in Australia.

Social Security Payments for the Unemployed, the Sick and those in Special Circumstances, 1942 to 2006

Social Security Payments for the Aged, People with Disabilities and Carers 1909 to 2006

Social Security Payments for People Caring for Children, 1912 to 2006

Table 1. Recipients of income support as a proportion of the workforce age population, 1978 to 2007

Notes: Point in time data is used for June of each year. ABS (2006), Australian Historical Population Statistics (cat. no. 3105.0.65.001), Table 19 was used for workforce statistics.

Data on income support recipients has been sourced from the annual reports and statistical publications of the Department of Family, Housing, Community Services and Indigenous Affairs, the Department of Veterans Affairs, the Department of Education, Employment and Workplace Relations and their predecessors.

For copyright reasons some linked items are only available to members of Parliament.

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