Waiting period for young people to access income support

Budget Review 2015–16 Index

Dr Matthew Thomas

As a part of last year’s Budget, the Government introduced a measure that would have imposed a six-month waiting period on a majority of new claimants of Newstart Allowance (NSA), Youth Allowance (Other)(YA(o)) and Special Benefit for those aged under 30 years.[1] After six months in receipt of payment, these young people would have been excluded from income support for a further six months, with this cycle continuing until they gained employment, undertook full-time study or turned 30 years of age. Following strong community resistance to the proposed measure and its failure to pass the Senate, the Government has made some changes in this Budget.

Under the revised measure, a waiting period of four weeks would be applied to new claimants of NSA, YA(o) and Special Benefit for those aged under 25 years.[2] As was the case under the previous measure, there would be some exemptions. The waiting period would be applied only to those new claimants judged to be the most work ready—that is, those job seekers who are classified as Stream A under the new jobactive employment services arrangements.[3] Young people with dependent children and those assessed as requiring greater assistance to obtain employment or as having vocational issues and/or other forms of disadvantage would be exempt. It appears that the ongoing exclusion period component of the previous measure has been dropped.

From 1 July 2016, young people subject to the waiting period would be obliged to participate in a new RapidConnect Plus rapid activation strategy.[4] This strategy would require participants to undertake a number of additional job search activities in the four weeks before they received income support.[5]

The Government expects that the changes will result in costs in excess of $1.8 billion over five years. While the previous measure was not legislated, it was nevertheless budgeted.[6] Hence, the costs are a result of the Government’s not proceeding with the previous measure and having to pay out an increased amount in income support under the new measure.

Rationale for the measure

According to the Government, the new waiting period measure ‘will set the clear expectation that young people must make every effort to maximise their chances of successfully obtaining work’.[7] As such, the waiting period measure appears to be premised on the notion that many young people are either choosing, or likely to choose, to rely on government-provided income support, rather than attempting to find work. According to this argument, it is necessary to provide a disincentive to stop young people from becoming disengaged and reliant on government-provided support. The Government has chosen to create such a disincentive by withholding unemployment benefits and thereby forcing young people to increase their efforts to find work.

There are three main issues associated with this rationale.

First, there is no substantive evidence to suggest that young Australians lack the will to work. A number of surveys of young people show that a majority want to work or to work more hours, but face a number of barriers to their doing so.[8] These include a lack of available jobs, particularly entry-level positions and full-time work opportunities; not having the relevant experience, skills or qualifications required or the opportunity to acquire experience or training; and, employers who are unwilling to hire younger people.[9]

Second, where young people are in receipt of income support, they must comply with the general requirements under the activity test, as well as other participation requirements, if they are to remain eligible for their payment.[10] In terms of job search requirements and monitoring, Australia’s eligibility criteria for unemployment benefits are some of the strictest in the OECD.[11]

Third, the low rate at which NSA and YA(o) are paid is likely to prove sufficient incentive for many young people to find and accept work. This is the intention of these payments, whose low rates and strict eligibility criteria are calculated to provide a clear financial incentive for people to work or engage in training to boost their employability.

Risks and unintended consequences

While the waiting period measure is not nearly as severe as the previous budget’s measure, it nevertheless does not appear to have the support of Labor, the Greens, or a majority of the Senate crossbenchers.[12] Judging by recent media reports, much of the community services sector is opposed to the measure.[13]

The main argument that has been raised against the proposed waiting period is that, although it has been significantly reduced, four weeks without access to income support would still place many young people in severe financial hardship. National Welfare Rights Network Policy Officer, Gerard Thomas, has insisted that the measure would ‘lead to greater levels of welfare dependency, not less’.[14]

As has been noted in relation to the previous iteration of the waiting period proposal, withdrawing access to income support could have the unintended consequence of detracting from some young people’s ability to find and gain paid employment.[15] Some have argued that the low level at which NSA is paid (a base rate of $519.20 per fortnight for a single person with no children) already restricts recipients’ capacity to find paid work.[16] If young people subject to the proposed new waiting period are unable or unwilling to call upon family support or the assistance of charities, then they could lack sufficient means to find a job. Further, if they have no savings or other means of support, these young people would be more likely to be preoccupied with the immediate needs of paying for food and rent than with finding paid employment.

Comment

The imposition of an extended up-front waiting period for income support is a novel measure in international terms. The New Zealand requirement for some claimants of working age payments to undertake pre-benefit activities within a 28-day period has been compared to a one-month waiting period.[17] However, claimants who successfully complete the requisite activities within 28 days can receive their payments earlier and all eligible recipients will receive back pay to the relevant commencement date.[18]

If there could be said to be a ‘usual practice’ where it comes to withholding access to income support, it is to place time limits on receiving income support benefit.[19] As such, in the absence of overseas precedents, it is unclear what the outcomes of the measure will be. While the waiting period has been significantly reduced from that of the previous measure, this has not allayed the concerns of many in the community services sector that the measure would result in a substantial number of young people experiencing financial hardship.



[1].          Australian Government, Budget measures: budget paper no. 2: 2014–15,  p. 195.

[2].          Australian Government, Budget measures: budget paper no. 2: 2015–16, 2015, pp. 159–60.

[3].          See Department of Employment  (DoE), jobactive, DoE website.

[4].          Budget measures: budget paper no. 2: 2015–16, op. cit., p. 159.

[5].          RapidConnect Plus operates on a similar principle to the existing Rapid Connect process, which seeks to connect job seekers with employment service providers as quickly as possible by obliging them to meet with their provider before they are able to receive their first income support payment. The Rapid Connect measure was introduced by the Howard Government as a part of the 2005–06 Budget’s Welfare to Work package. Australian Government, Budget measures: budget paper no. 2: 2005–06, 2005, p. 146. The idea behind this general approach is that connecting a job seeker with their employment services provider and making them actively seek work as quickly as possible both improves their prospects of finding a job quickly and does not give them a chance to become dependent on welfare.

[6].          Budget measures: budget paper no. 2: 2014–15,  op. cit.

[7].          Australian Government, Budget 2015: growing jobs and small business, p. 27.

[8].          P Cameron and R Denniss, Hard to get a break? Hours, leave and barriers to re-entering the Australian workforce, Institute paper, 13, The Australia Institute, 2013; Mission Australia, Youth survey 2014, Mission Australia, Sydney, 2013; N Herault, W Kostenko, G Marks and R Zakirova, ‘The effects of macroeconomic conditions on the education and employment outcomes of youth’, Australian Journal of Labour Economics, 15(1), 2012, pp. 17–36; S Burrows, ‘Youth unemployment in the Illawarra region’, Journal of Australian Political Economy, 65, 2010, pp. 89–106

[9].          Ibid.

[10].       Under the Social Security Act 1991, all recipients of Newstart Allowance or Youth Allowance (other) must comply with the activity test and other participation requirements. This means that a person must be actively seeking and willing to undertake paid work that is suitable for that person.

[11].       D Venn, Eligibility criteria for unemployment benefits: quantitative indicators for OECD and EU countries, OECD social, employment and migration working papers, 131, OECD Publishing, Paris, 2012.

[12].       On 14 May 2015, Senator Rachel Siewert moved ‘that the Senate calls on the Government to drop its ideological attack on young job seekers by withdrawing the budget measure that forces young people under 25 to wait one month before being able to access income support’. The motion was supported by a majority of the Senate. See: Australia, Senate, Journals, 94, 2015, pp. 2604–05. See also: J Macklin (Shadow Minister for Families and Payments), Abbott’s cut to young job seekers still unfair, media release, 13 May 2015. J Ireland, ‘Federal budget 2015: young unemployed will still go hungry, say agencies’, The Sydney Morning Herald, (online edition), 15 May 2015.

[13].       For example: J Ireland, op. cit.

[14].       Ibid.

[15].       C Ey, M Klapdor, M Thomas and P Yeend, Social Services and Other Legislation Amendment (2014 Budget Measures no. 2) Bill 2014, Bills digest, 16, 2014–15, Parliamentary Library, Canberra, 2014, p. 43.

[16].       See J Sloan, ‘Newstart needs a boost’, The Drum, 31 October 2011 and J Westacott (Chief Executive, Business Council of Australia), Sharing prosperity: Brotherhood of St Laurence Sambell Oration, speech, 23 November 2011. For current Newstart rates, see: Department of Human Services, A guide to Australian Government payments 20 March–30 June 2015, p. 26.

[17].       See K Andrews (Minister for Social Services), New Zealand waiting period for benefits, media release, 23 September 2014.

[18].       New Zealand, Work and Income (WINZ), ‘Pre benefit activities’, WINZ website.

[19].       In the US, for example, time limits have been in place at the state level since the 1990s and, in 1996, a 60-month time limit was imposed on federally funded assistance for most families under the Personal Responsibility and Work Opportunity Reconciliation Act. See M Farrell, S Rich, L Turner, D Seith and D Bloom, Welfare time limits: an update on state policies, implementation and effects on families, The Lewin Group and MDRC, 2008.

 

All online articles accessed May 2015. 

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