NEETs and welfare dependency—what the OECD says

According to a recent report from the Organisation for Economic Co-operation and Development (OECD), there are 580,000 15 to 29 year old Australians not in employment, education or training. In the jargon of the policy community, these young people are known as NEETs.

Most NEETs receive some form of income support, with many on unemployment payments like Youth Allowance (other) and Newstart Allowance. A common concern is that unemployment payments may do more harm than good for young people—particularly those who have never held a steady job. The fear is that young people who have yet to develop strong work habits will become habituated to life on income support.

However, the OECD does not seem especially worried about young people receiving payments like Newstart. The report says that it is ‘not at all obvious’ that dependence on unemployment payments among young people ‘should really be a prime concern for the Australian Government’ (p. 232).

According to the OECD, relatively few young people receive unemployment payments—only 6.3% of 15 to 29 year olds reported receiving unemployment payments in 2013. Young recipients are actually slightly less likely to spend long periods on payment than prime age adults. For 16 to 29 year olds 25.3% of unemployment payment spells last longer than 12 months. For 30 to 49 year olds it is 27.4% (p. 120).

Instead of worrying that it is too easy to get unemployment payments, the OECD worries that—for the most disadvantaged young people—the government is trying to make it too hard. According to the report:

The recent tightening of the eligibility criteria for unemployment benefits may create additional incentives to actively look for work, but it also bears the risk of pushing the most disadvantaged youth into inactivity and possibly poverty (p. 21).

For vulnerable young people who are unlikely to move into steady work without help, the OECD’s preferred approach is to keep them connected to the income support system as a way of engaging them in some form of education, training or other assistance. If young people are not receiving income support, they have less incentive to engage with other forms of assistance.

While the OECD rejects concerns that healthy young people are being lured away from work by an overly generous and undemanding system of unemployment payments, it is concerned about other aspects of the Australia’s income support system.

The OECD is particularly concerned about two payments: the Disability Support Pension and the Carer Payment. According to the report, Australia experienced:

… a 14% increase in the receipt rate of disability-related payments (mainly Disability Support Pension and Carers Payment) from 2.4% to 2.8% of youth between 2008 and 2013. Australia was among the OECD countries with the highest rate of disability benefit receipt among youth in 2013. The gatekeeping of these benefits should be monitored (p. 25).

According to the OECD, a person’s chances of returning to employment are very low once they receive a disability benefit. While Australia has tightened the eligibility criteria for Disability Support Pension in recent years, the OECD says that significant numbers of people with mental health disorders continue to get a pension (p. 111). Young people with poor mental health are more likely to drop out of school early and go on to become NEET. The OECD argues that this group should receive support to help them complete their education.

Carer Payment goes to people who care for someone with a severe disability, medical condition, or who is frail aged. The majority of recipients (69%) are women. Young carers are at risk of dropping out of education and may become disengaged from the labour force. While the OECD report identifies this group as a problem, it does not make concrete recommendations on how government should respond.

For the OECD, young people on unemployment payments are less of a concern than those receiving disability, carer and single parent payments. This is consistent with a recent shift in focus in New Zealand.

When the New Zealand Government commissioned an analysis of the costs associated with people receiving income support they found that those single parent and disability payments accounted for far more of the lifetime costs than those on unemployment payments. Welfare to work policy shifted as a result. Australia’s new Priority Investment Approach to Welfare is modelled on New Zealand’s experience.

While much of the media debate focuses on tightening access to unemployment payments, the OECD is more concerned with young people on other payments.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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