Intergenerational disadvantage is a broad topic that touches on many aspects of public policy. This inquiry focusses on welfare dependence of families and the outcomes for children. The Committee intends to progress this inquiry on the basis of agreed definitions of key terms, and with an agreed understanding of the scale and scope of the issue.
The Committee is therefore interested in views on the following definitional matters.
A fundamental question for the inquiry is the definition of ‘welfare’. At its broadest, welfare can be defined as all social assistance payments. The administrative category of ‘social security and welfare’ is used for budget papers. The total estimated cost of this is shown in the graph below, sourced from the 2016–17 Budget papers.
Figure 2.1: Estimated Australian Government expenses on social security and welfare
[Source: Parliamentary Library]
As Figure 2.1 shows, a substantial proportion of social assistance payments are on age pension, aged care, child care and NDIS. These categories—particularly aged care—are expected to increase over time due to changing demographics in the Australian population. Most of the estimated increase in Australia’s welfare spending is driven by these categories.
This inquiry is about the effect of welfare payments over generations, which necessarily focusses on people who are raising children. It may be therefore useful for this inquiry to focus on payments to working age people. This would exclude age pension and aged care but would include childcare assistance and study assistance.
The Committee is conscious of the complexity of the payment system, and the many differences of design and delivery between all the payment types. It may be that each payment type has differing impacts on children, and cannot be usefully discussed as a broad ‘welfare’ group, or even a ‘working age’ group.
An important part of limiting the definition of welfare for the purposes of this inquiry is to ensure the accuracy of data. In particular, the Committee wishes to ensure that data about one category is not inaccurately extrapolated to more categories; and that data about the overall social assistance spend is not inaccurately used to draw conclusions about a particular category.
Capacity to work
The Committee seeks views on whether this inquiry should be limited to recipients of working-age payments who have a capacity to work. This would include Newstart Allowance and activity tested Parenting Payment. The Committee also seeks views on what, if any, barriers to employment exist for children of Disability Support Payment recipients.
On the one hand, becoming ‘trapped’ in the system is only relevant where the option of working is available, but is not taken up or is difficult to access. On the other hand, there is a strong correlation between parental disability and a young person’s likelihood of requiring welfare support. Some research suggests that poor parental labour market outcomes are easier for young people to overcome than parental disability.
More broadly, the Committee is interested in the differing influence of intergenerational outcomes between parental welfare payments that do, or do not, indicate a capacity to work.
Receipt of welfare payments does not in itself constitute welfare dependence. However at some point the amount of welfare received, the proportion of family income derived from welfare and the duration of time spent become sufficient to be classified as dependence.
According to a report from the US Department of Health and Human Services:
Welfare dependence, like poverty, is a continuum, with variations in degree and in duration. Families may be more or less dependent if larger or smaller shares of their total resources are derived from welfare programs. The amount of time over which a family depends on welfare might also be considered in assessing its degree of dependence.
Different commentators and studies have defined dependence in differing ways. For example, the New Zealand Welfare Working Group focussed on long-term benefit recipients, defining this group as those who had received a benefit for five years or more.
The proportion of income derived from welfare may also be relevant. In the US Department of Health and Human Services report quoted above, the report adopted a definition of welfare dependence among individuals in families as ‘the proportion of all individuals in families that receive more than half of their total family income in one year’ from welfare payments.
It may be more helpful to introduce degrees of welfare dependency to target interventions where necessary, or to predict future welfare expenditure. For example, the recent Valuation Report by the Department of Social Services grouped the level of parental welfare dependence into four bands:
1 – 35
36 – 80
81 – 100
[Source: Department of Social Services]
The Committee is interested in how to accurately identify groups that are—or that could become—long term welfare recipients, as this will lead to better targeted programs for addressing entrenched disadvantage.
Accurate data is essential to determining the scale and scope of intergenerational welfare dependence. The following data sources have been identified as useful in this area. Links to the sources are provided in the footnotes where available.
The National Centre for Longitudinal Data (NCLD) was established to advance a longitudinal evidence base able to inform policies to improve the wellbeing of Australians throughout their lives. The NCLD currently manages four surveys:
The Household, Income and Labour Dynamics in Australia (HILDA) Survey
Growing Up in Australia: The Longitudinal Study of Australian Children (LSAC)
Building a New Life in Australia (BNLA): The Longitudinal Study of Humanitarian Migrants
Footprints in Time: The Longitudinal Study of Indigenous Children (LSIC).
The Youth in Focus project published a number of papers between 2007 and 2011, combining administrative data with a longitudinal survey.
As discussed elsewhere in this report, an actuarial valuation of the Australian income support and social security system has been prepared by PricewaterhouseCoopers (PwC) for DSS. The model attempts to project individuals’ trajectories through life and their interactions with the welfare system. DSS use the model to make decisions about the Australian Priority Investment Approach to Welfare.
The Synthetic Priority Investment Approach Data, 2001–2015 was created to help identify groups at risk of long-term welfare dependence.
Other data sources
Data.gov.au provides information on the numbers of people receiving income support payments:
DSS Payment Trends and Profile Reports
DSS Payment Demographic Data
DSS Payments by 2016 Commonwealth Electoral Division.
Labour Market and Related Payments Monthly Profile publications present statistical information for the various types of labour market payments delivered by Centrelink on behalf of the Department of Social Services.
Budget Strategy and Outlook Budget Paper No. 1 2018–19 provides information on spending in the ‘social security and welfare category’ (this includes spending on services as well as on income support payments).
There is also information on spending by the Department of Social Services and Department of Human Services in the relevant portfolio budget papers.
The Department of Social Services’ annual reports include data on income support recipients including the percentage of Newstart recipients who exit income support before 3, 6 and 12 months.
The Committee is interested in any other datasets or data sources that are used in determining disadvantage, particularly across generations.
Although there is a lack of long-term data, current evidence suggests people with higher parental welfare dependence tend to enter into the welfare system earlier, utilise more income support, and have a higher average lifetime cost. The Committee recognises that accessing welfare payments by the children of parent/s who also rely on welfare payments may be an indication of these means-tested payments working as intended. However the issue of these same children being ’trapped’ into long term reliance on welfare dependence requires further review.
There are generally large differences in outcomes between those with the highest parental welfare dependence and those with none. Two examples of these differences are:
Around 26% of 16 to 20 year olds with a very high level of parental welfare dependency are currently receiving Working Age payments, compared to just 2% for those individuals with no parental welfare dependency.
By the age of 25, around 90% of children with very high parental welfare dependence will have interacted with the welfare system, compared to around 45% for those with no such dependence.
Data collection in Australia for long term welfare recipients is limited. Data that shows a snapshot in time is not always useful in predicting the scale of future welfare, and the lines of causation (as opposed to correlation) between parental and child welfare receipt. Potential causes are discussed more in Chapter 3 of this paper; however the Committee is interested in exploring ways to measure intergenerational welfare that moves beyond anecdotal evidence.
Recent media reports have talked of the ‘welfare time bomb’—a potential for rapidly increasing welfare expenditure over the future years and decades. The increase is mostly driven by increases in age pension, with total payments to working-age people falling.
The Committee is seeking detailed information on the scale and potential of Australia’s welfare expenditure.
This inquiry focusses on families and improving outcomes for children. As part of the inquiry, the Committee is interested in evidence on what are the primary influences on children that may affect their later labour force engagement.
Without necessarily making a hard and fast definition of what is a ‘family’, it is important for this inquiry to explore the potential influence of all social networks, including extended families, paid and unpaid carers, professional educators and any other adults who may play the important role of ‘first teachers’.