Does income management work?

Dr Luke Buckmaster, Social Policy

Key issue
Evidence for the success of income management of welfare payments is mixed; while some people report that it has improved their lives, there is little evidence that it is leading to widespread changes in behaviour.

What is income management?

Income management (also known as ‘welfare quarantining’) refers to a policy under which a percentage of the welfare payments of certain people is set aside to be spent only on ‘priority items’ such as food, housing, clothing, education and health care. There is an explicit ban on the purchase of certain goods and services including alcohol, tobacco, pornography and gambling.

Income management was introduced by the Howard Government in 2007 as part of the legislation for the Northern Territory Emergency Response. It was later expanded by the Rudd and Gillard Governments.

Income management has been a controversial welfare reform. While conditions have always been applied to eligibility for welfare payments, restrictions on how payments may be spent are a new development, criticised by some as paternalist and stigmatising. Income management is also relatively expensive to administer, with an estimated cost up to 2014–15 in the range of $1 billion.

Who can be income managed?

Welfare recipients who can be subject to compulsory income management include those in:

  • the Northern Territory (NT) who are deemed by the government to be ‘Disengaged Youth’, ‘Long-term Welfare Recipients’ or ‘Vulnerable Welfare Payment Recipients’
  • the NT and parts of Western Australia (WA) who have been referred to Centrelink by a child protection officer to have their income managed (‘Child Protection Income Management’)
  • Cape York who have been ordered by a Queensland Government statutory body, the Family Responsibilities Commission (FRC), to be income managed for engaging in dysfunctional behaviour
  • one of five targeted communities (Bankstown, Greater Shepparton, Playford, Logan and Rockhampton) who have been referred for Child Protection Income Management or the Vulnerable Welfare Payment Recipients measure (known as ‘Place Based Income Management’) and
  • the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) South Australia (SA) or Ngaanyatjarra Lands (NG Lands) and Laverton Shire (WA) who have been referred for Child Protection Income Management or the Vulnerable Welfare Payment Recipients measure.

People in the above locations may also participate in income management voluntarily.

Currently, there are 21,261 people subject to income management across Australia, including 18,632 in the NT.

Objectives of income management

Evaluating the success of income management requires an understanding of what it is trying to achieve. The stated objectives of income management are to:

  • reduce immediate hardship and deprivation by directing welfare payments to priority needs
  • help affected welfare payment recipients to budget
  • reduce the amount of discretionary income available for alcohol, gambling, tobacco and pornography
  • reduce the likelihood that welfare payment recipients will be subject to harassment and abuse in relation to their welfare payments and
  • encourage socially responsible behaviour, particularly in the care and education of children.

In addition to these specific objectives, both the previous Coalition and Labor Governments have spoken of the role of income management in terms of broader welfare reform objectives, such as fostering individual responsibility and moving people away from welfare dependence.

Is it working?

A June 2012 Parliamentary Library paper summarised the (limited) available evidence in relation to the operation of income management in the NT, Queensland and WA. The paper found that positive changes had been uneven and fragile. On the other hand, there was little evidence that income management was worsening the situation in areas where it operates.

A March 2013 Australian Government evaluation of the Cape York Welfare Reform Trial found mixed results associated with income management. There was some evidence that income management assists in reducing behaviours that lead to people being reported to the FRC. Further, 78% of income managed people surveyed reported that the scheme had made their lives better. The evaluation found some dissent about income management, ‘with common complaints being the inability to use it in some stores and the paternalistic nature of the intervention’. It should be noted that income management in Cape York is part of a broader system involving case conferencing and referral to community support services, meaning that changes in behaviour may not be a result of income management alone.

A July 2013 evaluation of income management in the NT commissioned by the Australian Government also reported mixed findings. This evaluation found:

  • some evidence that income management may, to a limited degree, in the short-term, assist some people experiencing adverse outcomes from financial harassment and/or having problems managing their finances
  • it is applied in blanket fashion to a large number of people who are able to manage their money and who report that they do not have problems related to alcohol, drugs or gambling and
  • considerable feelings of disempowerment and unfairness among those who are compulsorily subject to the scheme.

In relation to longer-term objectives, the evaluation found:

… little evidence to date that income management is resulting in widespread behaviour change, either with respect to building an ability to effectively manage money or in building ‘socially responsible behaviour’ beyond the direct impact of limiting the amount that can be spent on some items.

Rather, the evaluation suggested that, ‘the early indications are that income management operates more as a control or protective mechanism than as an intervention which increases capabilities’.

As the evaluation notes, this raises two important questions for the future of income management in the NT. First, do the gains outweigh the costs? Second, would the situation be improved by a more targeted approach that includes better access to quality services (such as the Cape York approach)?

Further reading

L Buckmaster and C Ey, Is income management working?, Background note, Parliamentary Library, Canberra, 5 June 2012.

Australian Government, ‘Income Management Evaluations’, Department of Families, Housing, Community Services and Indigenous Affairs website, 18 July 2013.

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