Labor senators support the seven recommendations made by the committee. These
additional comments elaborate further on Labor senators' views.
Labor government investment in skills and education
Policies to support jobs and job
Since 2007 the Labor government reformed job support services to ensure
that job seekers receive adequate support and participate in activities and
develop skills that will assist them to find work and sustainable employment.
Job Services Australia (JSA) is the employment services system
administered by the Department of Education, Employment and Workplace Relations
(DEEWR). Over the past three years the Labor government has invested $4.5
million in assisting job seekers find work. During this period more than 1.2
million job placements have been made (39 per cent of which have been for
disadvantaged job seekers in streams 3 and 4).
Over March 2011–March 2012 nearly 50 per cent of all job seekers who
received assistance from JSA were employed within three months of obtaining
assistance – 41 per cent in full time employment.
The table below illustrates this success rate:
Disability Employment Services (DES) is the primary employment program
to assist people with a disability. As the support provided by DES is uncapped,
every eligible job seeker may have immediate and ongoing access to job support
The DES program has also experienced success. Since DES was implemented
in March 2010, more than 102,000 job seekers have obtained employment. More
than a third of participants assisted by DES over March 2011–March 2012 were
employed within 12 months, of which 26 per cent obtained full time employment,
as the table below illustrates.
The successful job placement outcomes obtained by JSA and DES are more
cost effective than the previous services established by the Howard government.
The Joint Agency submission explained that:
For 2010–11, each employment outcome in Streams 1-3 was
achieved at an average cost of $2,332 (this equates to approximately 9.5 weeks
of Newstart Allowance) and $8,524 for Stream 4 (17.5 weeks of Newstart
Allowance). For Job Network, which assisted a similar cohort of job seekers to
those assisted in Streams 1-3 under JSA it reported a higher cost per
employment outcome of $3,933 for 2008–09. Similarly, the former Personal
Support Programme (PSP) assisted the most disadvantaged job seekers, a
comparable cohort of job seekers those now serviced in Stream 4. The estimated
average cost per employment outcomes under PSP was $11,503.
In addition to the support provided by DES and JSA, the Labor government
has also developed a number of initiatives to support jobseekers as they look
for work. For example:
- Through the Harvest Labour Services program job service providers
collect vacancies in harvest labour and provide workers to the employer.
- The New Enterprise Incentive Scheme program provides assistance
to up to 6300 eligible job seekers who want to start up and run a small
business. Support includes accredited small business training, business advice
and mentoring, as well as income support for up to a year.
- The Wage Connect program is designed to find sustainable and
ongoing employment for jobseekers who have been unemployed for more than 2
years. Employers who employ a job seeker through this scheme may offset some of
the costs associated with wages and training in the first six months that the
person is employed. This subsidy is around $5900 for each job placement.
- Connecting People with Jobs is a government initiative to promote
labour mobility across Australia. The $29.2 million program provides up to
$9000 to 4000 unemployed jobseekers who move for work. 
The Labor government has invested heavily in additional support to
jobseekers – on top of allowance payments and JSA. For example, in the 2012–13
budget the government announced new measures such as:
- $225 million to improve child care assistance so that unemployed
parents can obtain training and skills to enter or return to work
- A new supplementary annual allowance, to assist recipients meet
unexpected cost of living expenses ($210 for singles and $175 for members of
Other Labor government policy initiatives that support jobs and grow the
productive capacity of the economy include:
- tripling the tax-free threshold, increasing the returns from work
for low and middle income earners;
- significant new investment to lift the overall educational
achievement and skill level of the community to meet the labour market needs of
the future, including a new national entitlement which will ensure that
everyone who wants training can get it, with expanded access to HECS-style
income contingent loans;
- support to help job seekers adapt to an economy in transition
through reforms to the national training system and delivering the most
effective employment services possible;
- intensive support for mature aged job seekers through a new
Mature Age Participation Job Seeker Assistance Package, announced in Budget
2012–13 and funded to commence from 1 January 2013, to provide job seekers aged
over 55 with more intensive job seeker assistance including refresher training
in information technology, skills reviews and peer support;
- targeted labour market programs in areas of high unemployment
including the Priority Employment Area program, introduced as a response to the
GFC and continuing to June 2013, which identifies and implements locally
relevant employment development initiatives in 20 areas experiencing the most
acute rates of unemployment or vulnerable to unemployment due to their
location, demographics or industry structure and economic circumstances;
- additional services for jobless families through a trial of new
approaches to tackling entrenched disadvantage and roadblocks to work in 10
locations (Kwinana (WA); Playford (SA); Hume and Greater Shepparton (Vic);
Burnie (Tas); Bankstown, Shellharbour and Wyong (NSW) and Logan and Rockhampton
- investing around $3.4 billion over ten years to work in
partnership with Aboriginal people and the Northern Territory Government to
continue efforts to close the gap in Indigenous disadvantage through the Remote
Jobs and Communities Program, announced in Budget 2012–13 and commencing from
July 2013, which will deliver important reforms including integration of
community development, economic development and employment initiatives and
stronger job seeker support.
Labor government reforms to the aged pension
Following the findings of the Harmer Pension Review of 2009, the Labor
government implemented the $14.2 billion Secure and Sustainable Pensions
package in the 2009–2010 budget.
A significant measure was the increase of the single rate pension rate to
approximately two thirds of the partnered pension rate. This ensures that that
single pensioners can maintain a comparative standard of living as partnered
Other measures included new indexing arrangements and cost of living benchmarks
(which are used to determine future increases to the pension).
However, no such reforms have been set for Newstart recipients who did
not enjoy the same indexing or bench marking arrangements, and in the case of
single recipients of Newstart Allowance, only receive 55 per cent of the
As well as helping people in immediate need, designing an adequate
allowance payment system is also about recognising that in spite of the best
intentions and efforts, policies and services, unemployment will always exist.
People will always lose their jobs. Some will find new jobs quickly, others
will take longer and need assistance. No Australian government has achieved or
even promised zero unemployment—no government could. Social security is a
safety net for all Australians, not only the ones currently reliant on
Labor senators took note of and were impressed with the quality of
evidence presented on the inadequacy of Newstart Allowance throughout this
inquiry. Multiple respected welfare groups and professionals with extensive
experience in the social security field presented the committee with a clear,
well-argued message which could not be ignored: the real value of Newstart
Allowance has receded so significantly that it is exacerbating poverty and
becoming an impediment to employment for many.
The Benevolent Society, as one example, provided a succinct explanation
of how unemployment can be difficult to overcome, pointing out that while the
majority of people who lose their jobs remain unemployed for under one year,
approximately 19 per cent are classified as long-term unemployed, and half of
them remain unemployed for two years or more.
There are many and multifaceted reasons for long-term unemployment:
Those who are unemployed for more than a year find it
increasingly difficult to find work and are 50% more likely to remain
unemployed for a further year. Low education levels are a contributory factor,
as almost half of those who are long-term unemployed did not complete secondary
school. Other barriers faced by this group, as reported by the Australian Bureau
of Statistics (ABS), include ill health and disability; lack of skills and
education; not enough or not recent enough work experience; age discrimination
against older workers; and, simply, too many applicants for each available job.
Older people, people with disabilities and Aboriginal and Torres Strait
Islander peoples are overrepresented amongst the long-term unemployed.
It is also not helpful to start with the assumption that people who are
long-term unemployed do not want to work, and can somehow be 'encouraged' to
work by being driven into poverty. This, the Benevolent Society said, is not
the case for the vast majority of people in this difficult and complex
There is no reliable evidence that people who are in receipt
of allowances do not want to work, as appears to be implied by the term
‘incentive into work’. On the contrary, the low level of payment, combined with
the extremely low income test free area and stringent participation
requirements, are frequently a hindrance to an individual’s attempts to find
While Labor senators maintain that keeping social security payments
below minimum wage is an important lever to incentivise people to work, there
must be limits to how low payments are allowed to fall. If payments are so low
that welfare agencies and social security experts tell us that being reliant on
Newstart Allowance actually impedes people's ability to gain employment, then
this is counterproductive to the very objective of the allowance payment, which
is to support people temporarily as they transition into paid employment. Labor
senators support the policy objective of Newstart Allowance as a transitional
payment, but draw attention to the fact that, for a proportion of recipients,
Newstart Allowance has become a long-term support payment.
Labor senators lend their in-principle support to an increase in
Newstart Allowance, and note that many in the welfare sector advocate an
increase of $50 per week, as explained in the committee report.
Such an increase would ensure that the same ratio is applied between
single and partnered payment rates for Newstart Allowance as for pensions, as
advocated by the authors of the Australia's Future Tax System report (the Henry
It would also restore the allowance to the same proportion of the minimum wage
as in 1996, and the same proportion of average wages as in 2002.
The Henry Report [Australia's Future Tax System Final Report]
therefore recommended that the formula applied by the Harmer Report to pensions
– a single rate equal to 66.3% of the combined partnered rate – should apply to
Allowance payments. Currently, that would require an increase of approximately
$50 per week in the single rate of the relevant Allowance payments. It also
recommended that allowance payments be indexed in similar fashion to pensions
to prevent the payment gap from growing further. That implies indexation of
allowances to a measure of wages as well as the CPI [Consumer Price Index],
though the Report did not specify exactly how this should be done.
Labor senators agree that a more consistent approach to payment
relativities within allowance and pension payment categories is desirable. The
committee did not conduct an in-depth analysis of methods of achieving this
consistency and Labor senators agree that it is difficult to assess what the
quantum of an increase should be given the different supplementary payments
that individuals and couples may receive depending on their particular
circumstances. Nevertheless, Labor senators believe that Newstart Allowance
Single should be promptly increased, while more detailed assessments are
Labor senators agree with the premise that Newstart Allowance should be
set below the minimum wage to ensure that adequate incentives to work are built
into the payment system. However, as pointed out in the committee report,
evidence suggests that each year Newstart Allowance decreases in real terms due
to inflation and cost of living pressures.
The committee report outlined the key differences in how allowances and
pensions are adjusted to ensure that they buying power is not lost over the
years. Whereas Newstart Allowance is indexed to the Consumer Price Index (CPI)
and therefore does not rise automatically in real terms, the Disability Support
Pension is maintained at a fixed proportion of, and therefore moves with, male
total average weekly earnings (MTAWE). Clearly, many submitters and witnesses
before the committee were of the view that reforms were needed to indexing
arrangements for Newstart Allowance. As put by the Australian Council of Trade
The adequacy of an income support payment should be defined
with reference to the standard of living generally prevailing in the community,
and thus the payment rate should rise in line with community standards. The
current indexation arrangements for Newstart Allowance do not satisfy this
test. Because real wages are growing over time, Newstart Allowance will fall
further behind community standards and behind the DSP unless the indexation
arrangements are changed.
The Australian Council of Social Service (ACOSS) explained the impact of
the different indexing arrangements for allowances such as Newstart:
Due to the different indexation arrangements for pensions and
allowances, the gap between the single pension and Newstart Allowance payments
rose from $55 per week in September 2008 to $133 per week today. On current
trends, by 2040 the single Newstart rate will be just half that of the pension.
Labor senators believe that the question of indexing is a serious matter
worthy of further exploration and analysis. It is highly likely that, without
changes to the indexing arrangements for Newstart Allowance, the real value of
the payment will again fall over time despite any increase applied today,
necessitating further increases down the track.
Changing nature of the labour
The committee report provides an overview of the changing nature of the
labour market, with a particular focus on the increase in part time, casual and
The proportion of workers who are employed part-time (rather than full
time) has increased since 1982. For example, in 1982 only 16.3 per cent of
employment was part-time, thirty years later this has increased to 29.7 per
cent in 2012.
Some workers are also returning to Newstart Allowance after finding employment
and others are remaining on Newstart Allowance for years. For example, since
2007 around 15 per cent of recipients at that time have remained on, or
returned to, Newstart Allowance.
It is important that Newstart Allowance is structured to recognise these
practical realities and that appropriate work incentives and support are
present as job seekers commence casual and part time work.
The recommendations contained in the committee report go some way to addressing
these concerns. However Labor senators believe that more needs to be done to
support people as they return to work. In particular, recommendation 4 in the
committee report should be expanded to include all Newstart Allowance
recipients (including principal carer parents) and the income free threshold
should be increased to the equivalent of 8 hours work per a fortnight at the
Time for review
The McClure Review on welfare in Australia was provided to the government
in August 2000, and substantial reforms were initiated.
Throughout this inquiry the committee has heard that it is timely to revisit
the fundamentals of the allowance payment system and conduct a fresh review.
For example, the Australian Council of Social Services submitted that
'the system of social security payments and employment supports for people of
working age be independently reviewed'.
ACOSS advised that the terms of reference of the review should include:
-recent labour market trends and future employment prospects for people
on working-age income support payments
-trends in reliance on income support including the current and likely
future profiles of people on social security
-the adequacy, targeting and employment effects of income support payments
for people of working age, and options for reform to facilitate transitions to
employment, improve fairness and simplify the system
-the effectiveness of employment services for disadvantaged jobseekers
(Job Services Australia and disability employment services), including how
these might be better integrated with vocational training, work experience, and
social support services.
Support for a review also came from the Australian Council of Trade
Unions, who called for the review to focus on:
-Current trends in the labour market, including insecure employment, and
the implications of these trends for the income support system.
-The movement towards a common base payment for people of working age,
with supplements for people who face additional costs or barriers, such as
those associated with disability or caring responsibilities.
-The appropriate level of income for allowances to be withdrawn
completely, as well as the taper rates and thresholds that apply as the
allowance is withdrawn.
-The operation of a range of technical and administrative aspects of the
allowance system, outlined in detail in this submission.
-The operation of the Job Services Australia system, including the
efficacy of the structure of payments to providers and the interactions between
JSA agencies and other aspects of the income support system.
General support for a review was offered by a number of other
While the recommendations in the committee's report go some way to
address the immediate concerns of Labor Senators, it is plain that Newstart
Allowance is too low, particularly for single recipients. For this reason
Newstart Allowance Single should be increased, taking into account other
potential increases consequential to recommendations made in the committee's
report. Labor Senators believe that indexing arrangements for Newstart
Allowance need to be reviewed, with consideration given to whether, like
pensions, the payment should not decrease in real terms each year.
Labor senators note that recommendations 4, 5 and 6 in the committee
report are targeted at increasing incentives for Newstart recipients to engage
with the workforce as they transition away from the payment. These
recommendations are a good beginning. However Labor senators believe that it is
more appropriate that the income free threshold for all Newstart Allowance
recipients should be increased to the equivalent of 8 hours per fortnight at
the minimum wage.
Twelve years on from the McClure Review, it is timely to conduct another
comprehensive review, with a particular focus on Allowance payments. Such a
review should consider indexing arrangements, adequate payment rates, participation
requirements, incentives and support to work, supplements such as rent
assistance, job support services (including the Job Services Australia
incentives framework for providers) and the changing nature of the labour
market. The review should also consider how tailored assistance can be better
provided to people who face particular barriers to employment. For example:
young people, sole parents, people with a partial capacity to work and people
who have been unemployed for more than a year.
Labor senators recommend that the government increase Newstart Allowance
Single, taking into account the relationship to the base rate and other payment
design changes recommended by the committee.
Labor senators recommend that the government review the indexing
arrangements for Newstart Allowance and other Allowance payments.
Labor senators recommend that the government increases the income
free threshold for Newstart Allowance recipients to the equivalent of 8 hours work
per fortnight at the minimum wage.
Labor senators recommend that the government commission a comprehensive
review of Newstart Allowance and other allowance payments.
|Senator Gavin Marshall
|Senator Alex Gallacher
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