3. Possible causes and solutions

3.1
There is statistical evidence that children who grow up in families that are heavily reliant on welfare support are more likely to become welfare recipients. However there are a number of different causes put forward to explain this correlation.
3.2
This chapter broadly discusses some of the current approaches to addressing welfare dependence. It also discusses possible causes and potential solutions—ranging from broadly conceptual to specific programs—that have been identified or trialled in the past. There is also a brief overview of relevant international practice.

Two main approaches

3.3
Academics and policymakers believe there are two broad approaches to work towards solving welfare dependency:
Resources and opportunity approach—also named the structural approach. This approach is based on the assumption that disadvantaged families lack opportunities to develop human capital, earn income, and maintain wellbeing, and that poor outcomes for parents lead to poor outcomes for children. The approach focuses on policies that provide families with additional resources as well as policies that seek to remove structural barriers to opportunity (for example, by dealing with discrimination).
Behavioural approach—also named the individual approach. This approach is based on the assumption that disadvantaged parents need to change their behaviour in order to achieve better outcomes for themselves and their children. According to this approach, the major problem is not a lack of resources and opportunity but a failure to take advantage of opportunities that are already available.
3.4
In practice these approaches overlap, and supporters of one will often see value in adopting solutions from the other. For example, supporters of the behavioural approach may acknowledge a need for extra resources such as greater investment in early childhood education and care. Similarly, supporters of the resources and opportunity approach may acknowledge the need for greater conditionality in the income support system to ensure that disadvantaged parents take advantage of programs and services that will benefit their children.
3.5
The Committee would like to move beyond this dichotomy and hear from stakeholders about how to develop welfare policy and programs with outcomes that reduce the dependency of families and children on welfare support.

Causes and potential solutions

3.6
The following causes and potential solutions for intergenerational welfare dependence have been gathered from a range of government policies and academic literature. They do not reflect the Committee’s views or conclusions.

Parental capacity to work

3.7
The recent Department of Social Security (DSS) Valuation Report, which assessed the likely future welfare cost of classes of individuals, showed that individuals who are currently in the welfare system and not able to work (as shown by an exemption from mutual obligation requirements, reported psychological/psychiatric condition, or assessed work capacity) are more likely to have a greater future dependence on welfare.1
3.8
While this is not surprising, research shows that children of parents in this group are more likely to receive social assistance in the future than children of parents who are in receipt of unemployment payments:
The extent to which social assistance is linked across generations depends on the nature of those benefits, however. The relationship is particularly strong in the case of single-parent payments (PPS), disability support payments (DSP), and carer payments (CP): The likelihood of youths receiving social assistance is 1.6 times larger if their parents received any of these three payments than if they did not. In contrast, partnered-parent payments and unemployment payments are associated with rates of social assistance receipt among young people that are only 1.3 – 1.4 times higher.2
3.9
There has been an increase in the number of reported psychological or psychiatric conditions for people in the Working Age class over the last five years. This has occurred over the same period as the tightening of DSP eligibility and introduction of DSP medical reviews.
3.10
The Committee is interested in views on what interventions are necessary for the children of payment recipients who have an identified lack of capacity to work to reduce the likelihood of their children being recipients of social assistance.

Changing frameworks and institutions

3.11
If poor outcomes for families are the result of a lack of opportunity, then one response would be to change mainstream social institutions to ensure all members of society have access to the resources and opportunities they need for development and to maintain wellbeing.
3.12
This may include changing access to health and education, remodelling worker protections, or improving anti-discrimination legislation. It could also assist by actively redistributing power by, for example, greater inclusion of disadvantaged groups in policy-making.
3.13
The Committee in interested in views on combatting structural disadvantages that promote intergenerational welfare dependence.

Family composition

3.14
Data shows that single person family units with children have the highest level of welfare dependency, with the majority of adults in these family units receiving income support. Partnered adults tend to have similar levels of income support dependence regardless of whether or not they have children. However, those people with children tend to have a much higher utilisation of non-income support payments compared to those without children.3
3.15
The Committee is interested in views on family composition and its potential effect on intergenerational disadvantage.

Sustainable self-reliance

3.16
Many welfare assistance programs aim to build an individual’s capacity for self-reliance. However each individual or family has differing potential for long-term self-reliance. A recent review identified three separate skill sets needed for long-term employability:
technical or discipline specific skills
language, literacy and numeracy skills
employability skills.4
3.17
The Committee is interested in ways to target assistance to improve these skill sets where it will cause the most sustainable improvements.

Better support for employers

3.18
In order to employ people who are currently disadvantaged in the labour market, employers need support to provide real and meaningful jobs. This also includes support to employers to engage or retain disabled workers, who may otherwise be reliant on the welfare system.
3.19
Possible solutions include incentives such as wage subsidies, support for additional job creation, employment covenants, reducing administrative burdens on employers and increasing the links between jobseeker supply and employer demand. The Committee is interested in innovative ways of supporting employers to offer opportunities to job seekers. For example, there may also be scope for creating new businesses or microenterprises based on community needs; particularly in rural and regional areas.

Investment approach to welfare

3.20
The development of an investment approach was one of the recommendations of the review of Australia’s welfare system, A New System for Better Employment and Social Outcomes, the McClure Review, in 2015. An investment approach reduces the future liability associated with long-term income support dependence by targeting investment to build self-reliance.
3.21
The first step in the approach is an actuarial valuation that estimates the ‘future liability’ associated with current income support claims. Policy makers then identify interventions to reduce the liability and prioritise these interventions by their expected return on investment (the amount they save relative to their cost). The Department of Social Services has recently completed a valuation.5
3.22
This approach has been implemented in New Zealand since 2011.6
3.23
The Committee is interested in views on how the investment approach and the valuation information can be best used to govern welfare policy in the future.

Increasing conditionality

3.24
If income support fosters dependency because it places too few conditions on recipient behaviour, then increasing conditions should reduce reliance on welfare.
3.25
For example, conditionality may be increased in areas such as participation in job search, training, work experience, drug treatment programs, and school attendance by children.
3.26
Welfare conditionality has been a policy position in the United Kingdom (UK) for many years and the UK has trialled various programs under this policy position.
3.27
The Committee is interested in views on the use and effectiveness of welfare conditionality at reducing intergenerational welfare dependence.

Removing access to cash

3.28
Some argue that welfare payments to working age people result in a combination of cash and free time that enables dysfunctional behaviours such as drug abuse.
3.29
Access to cash can be removed by measures such as income management and the cashless debit card. The cashless debit card is currently operating in the Goldfields region, Western Australia, and the Bundaberg and Hervey Bay region in Queensland, and the Committee would be interested in views on its effectiveness.

Culture of dependency

3.30
Some commentators claim that one of the causes of intergenerational disadvantage is that parents pass on a ‘culture of dependency’ to their children. This approach considers that the welfare system itself reduces self-responsibility and a sense of initiative, which is then passed down to children.
3.31
Linked to this is the idea that intergenerational disadvantage exists because children lack role models who can model successful behaviour. It is much harder for children to believe that they can gain higher education and secure work if adults around them do not have those advantages.
3.32
One of the most controversial theories about intergenerational welfare dependence is British researcher Adam Perkins’ ‘employment resistant personality’ thesis. Perkins claims that individuals ‘with aggressive, rule-breaking and antisocial personality characteristics are over-represented among welfare claimants’ and that the availability of income support payments mean that more of these individuals are having children.7 Some opposing academics state that Perkins’ argument fails to show causal links to welfare dependency and is instead simply assertion. The Committee notes that this theory is not generally supported.

International approaches

3.33
Globally, the delivery of social welfare is based on disparate policy imperatives. As noted above, New Zealand has followed the investment model since 2011, although it is now reconsidering this approach. The United Kingdom has implemented welfare conditionality for some years. Both models are now able to be assessed with longitudinal data.
3.34
Canada delivers welfare at a provincial level to meet the needs of a diverse population that is not dissimilar to Australia’s and this may offer some lessons for program delivery.
3.35
The United States also has a local and state-based approach to delivery of social welfare initiatives. While it is difficult to make a wholesale comparison of services in the United States and Australia, some of the questions being asked in both countries about work and income security are the same.8
3.36
The Nordic Model9—the balance of a social welfare state with the market economy—may also offer key lessons for Australia about balancing social support with high engagement with the labour force.
3.37
A common feature of these disparate policies, however, is to improve intergenerational outcomes and reduce dependence on welfare support.
3.38
The Committee is interested in any international examples of policy positions or program delivery that have proven to be effective and should be considered in the Australian context.
Mr Russell Broadbent MP
Chair
15 August 2018

  • 1
    Department of Social Services, Final Report 2018, ‘Valuation Report’, p. 31-33.
  • 2
    D Cobb-Clark, S Dahmann, N Salamanca, A Zhu, ‘Intergenerational Disadvantage: Learning About Equal Opportunity From Social Assistance Receipt’, Life Course Centre, October 2017, p. 17.
  • 3
    Department of Social Services, Final Report 2018, ‘Valuation Report’, pp. 13-14.
  • 4
    Reference Group on Welfare Reform, ‘A New System for Better Employment and Social Outcomes’, February 2015, Canberra, p. 110.
  • 5
    Department of Social Services, Final Report 2018, ‘Valuation Report’, July 2018.
  • 6
    Noting that the New Zealand Government is currently undertaking a review of this approach.
  • 7
    A Perkins, ‘State Benefits Negatively Affect Personality – Here’s How’, The Conversation, 9 November 2015.
  • 8
    MDRC, https://www.mdrc.org/questions, accessed 24 July 2018.
  • 9
    The Nordic Model, associated with Sweden, Norway, Finland, Denmark and Iceland combines features of a market economy with social benefits and income distribution.

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