Government changes to Newstart
The committee is concerned that certain measures in the 2014-15 Budget (the
budget) will affect young Australian jobseekers. These measures include changes
to the Newstart Allowance, which supports jobseekers while they are looking for
from 1 January 2015, increasing the age of eligibility for
claiming the Newstart Allowance
from 22 to 24 years of age; and
introducing a six-month waiting period before payment commences
for new claimants of Newstart and the Youth Allowance,
unless exemption criteria are met.
The committee received evidence suggesting these measures will seriously
affect young jobseekers by increasing disadvantage, particularly among already
marginalised groups, which will put many at risk of poverty and homelessness.
Changes to Newstart in the budget
According to the government, the rationale for lifting the Newstart eligibility
age is to 'strengthen the incentive for young unemployed people to participate
in education, training and employment',
as jobseekers between the ages of 22 and 24 will be placed on Youth Allowance,
which has a much lower payment rate than Newstart.
The budget also contains provisions to introduce a six-month waiting
period for Newstart payments for all new claimants under 30 years of age:
From 1 January 2015, all new claimants of Newstart Allowance
and Youth Allowance (Other) who are under 30 years of age must demonstrate
appropriate job search and participation in employment services support for six
months before receiving payments. Prior workforce participation may reduce the
waiting period. After six months, claimants will be required to participate in
25 hours per week Work for the Dole to receive income support, and following
this may continue to access employment services for a further six month period,
including access to a wage subsidy in lieu of income support.
Some exemptions will apply. New claimants will have one month discounted
for every year of full time work, or pro-rata for part-time work, up to a maximum
of five months.
There are also exemptions for individuals who only have a partial capacity for
work, those who are the principal carer of a child or part-time apprentices.
Exemptions will also apply to job seekers assessed as having relatively significant
or severe barriers to employment by Disability Employment Services (DES) or Job
Services Australia (JSA).
The government claims lifting the eligibility age for Newstart will
achieve savings of $508.1 million over five years and that the six-month waiting
period for Newstart will save a further $1.2 billion over the forward
Criticisms of the government's changes to Newstart
Grave concerns about these measures were raised by a number of
organisations, who told the committee these changes would increase unemployment
and poverty among young people, that the policies are based on false
assumptions about the job market and jobseekers, and that changes to Newstart
would lead to increased costs for the Commonwealth over the long term.
Inadequacy of Newstart
The Grattan Institute pointed out that there was already a consensus
among welfare groups, economists and the business sector that Newstart payments
are too low to provide an adequate minimum standard of living.
This was supported by Dr John Falzon, Chief Executive Officer, St
Vincent de Paul, who told the committee that current rates of Newstart are
already 'unconscionably low'.
The Grattan Institute explained that the low Newstart rate is a
potential barrier to employment as 'low payments erode the capacity of
individuals to present themselves well or to maintain their readiness for
Youth Connections also emphasised that young people deprived of income support will
find it difficult to cover the basic costs of applying for jobs.
Young people with no family support
have not been adequately considered
In addition to the low payment of Newstart acting as a barrier to young
people finding employment, the Grattan Institute also noted the deleterious
effects of young people being left without a source of income for long periods,
especially those who have no support or family network to draw on:
Budget measures that in effect cut Newstart payments by up to
50 per cent over the course of the year will increase youth poverty and
barriers to workforce entry. Young jobseekers are likely to find it very
difficult to maintain a minimum standard of living without family support.
However, young people from families that are less well-off are less likely to
be supported by their parents with housing and finance. Further, the mechanism
for reducing Newstart payments – cycling between periods of payment and
non-payment – will reduce the likelihood of young people being able to secure
permanent housing, compounding barriers to job search.
Youth Connections indicated it did not believe the Federal Government
had given consideration to how a young person without family assistance would
support themselves during non-payment periods:
The assumption that young people will be supported by family
until they transition into employment is a fallacy...For many young people,
living in the family unit is not safe or possible. Issues such as family
violence, systemic family dysfunction, re-partnering of parent or relocation of
parent often leaves young people instable and negotiating the housing market
Mr Kunal Luthra, Vice President External, Australian Medical Students
Association, cautioned the committee that changes to Newstart could leave many
new graduates without any support whatsoever:
Throughout the year we have spoken to many, many students on
the ground and consistently what they have said is that they are really quite
horrified at the prospect of graduating university and not being able to find
work despite their best efforts and being left with no support. Often these
students cannot rely on their families either because those families choose not
to or do not have the capacity to support them. These students are very
concerned that if the changes to Newstart manage to go through that will leave
them in a really dire state.
There are not enough jobs for young jobseekers
Witnesses told the committee that the government's adjustments to
Newstart were founded on false assumptions. For example, Mr Dave Oliver,
Secretary, Australian Council of Trade Unions, suggested the six-month waiting
period for Newstart payments was based on a false understanding there are plenty
of jobs for young Australians:
The budget included a so-called earn-or-learn policy which
means job seekers aged 29 or younger will be denied income support for up to
six months at a time. The assumption behind this seems to be that there are
plenty of jobs for younger workers and all they need to do is be forced to take
them. We know that is not true. There are currently almost 800,000 unemployed
Australians. Youth unemployment is 13.2 per cent yet there are only 150,000
jobs vacancies—800,000 does not go into 150,000. The vast majority of
unemployed people are out of work because employment is not available. The
government's response will only force these people further into poverty.
This position was supported by the Grattan Institute, which highlighted
the difficult employment market for young people:
...incentive measures can only improve youth employment
outcomes where there are jobs available. Youth unemployment rates are more
sensitive to business cycle conditions than the adult unemployment rate. The
principle cause of the decline in youth employment rates since 2008 has been
the slowdown in hiring because of the economic downturn – a factor clearly
outside of the control of young job seekers.
The government should be supporting
Ms Jenny Lambert, Director, Employment, Education and Training,
Australian Chamber of Commerce and Industry (ACCI), told the committee the
government was concentrating too heavily on punitive measures rather than assisting
young people to find employment:
We say the focus should not be
on the six months; the focus should be on the job. The focus of the whole
system has to be on what employment strategy is in place and what is going to
lead to a job, because it will only be a six months wait if there is no job.
The assumption that the wait is going to be six months long is an assumption
that we have not got the settings right to get that person into work.
The ACTU agreed with this perspective. Mr Dave Oliver, ACTU, told the
committee that, alongside cuts, the budget has:
...at a time when unemployment is at its highest levels in a
decade, it has done nothing to promote jobs and training opportunities.
Newstart adjustments will be counterproductive over the long term
The goal of the government's changes to the Newstart Allowance is saving
money in the short term. However, the committee heard these changes will cost
the government more over the longer term, as they will result in greater
unemployment, disadvantage and disengagement among young people.
Dr Falzon, St Vincent de Paul, told the committee the budget measures
relating to Newstart would increase levels of unemployment and disengagement:
...the reality is that, if we
acquiesce to an Australia that is quite comfortable with lowering the level of
social expenditure and increasing the burden on the poor, we will see greater
social unrest and even higher levels of unemployment. This absurd notion that,
by reducing the level of income support, you increase the incentive for people
to get job flies in the face of all evidence....we will actually see increased
levels of unemployment, of disengagement, of exclusion, of alienation and of
The Grattan Institute supported the view the Newstart adjustments
outlined in the budget would entrench youth unemployment, which 'would result
in negative consequences for the budget over the long term – reducing the tax
base and increasing the costs of welfare and support payments'.
Newstart changes may increase
Representatives of Youth Connections Anglicare told the committee that
tighter conditions for Newstart eligibility may mean young people will look for
ways to make ends meet that are dangerous or illegal. Ms Shyanne Watson,
Coordinator, Youth Connections Anglicare explained:
If [young people without an income] cannot fund themselves to
eat, have clothing or engage with the JSA or an employment provider and fit
into employment, they are going to look for a different avenue. That different
avenue will be crime....
Ms Jennifer Kitchin, Director, Community Services ACT, Youth Connections
Anglicare, highlighted a further risk for young people left without an income:
....The other thing, unpleasant as it is, is prostitution. We
are really concerned about some of our young women, in particular. Some of
those young women have been involved in that activity before, and we have
worked with them to come out of that. It would be very easy for them to slip
back into that.
Dr Falzon, St Vincent de Paul, also expressed concern that young people
denied Newstart payments may turn to already overburdened charities or risky
behaviours so they could make ends meet:
You do not help young people into jobs by making them live on
fresh air and sunshine for six months of every year, forcing them to rely on
charity or to survive through crime. It is not charity that they should have to
depend on; it is justice they should be able to count on.
The committee considers the proposed changes to Newstart in the budget
take a very short term approach aimed solely at saving money. In a rush for
savings the government has not considered how these changes would affect the
most vulnerable in the community.
The committee recognises that many young jobseekers who are made to wait
six months to access Newstart will have very limited options or support available
to them. Some will be able to rely on financial support or accommodation from
their families. However, many will not be so fortunate. With no source of
income for extended periods, those already disadvantaged will be at increased
risk of poverty or homelessness.
Some will be able to access support from the charities and welfare
sector. However, it is clear that this sector is already overstretched, and so
many deserving people may be turned away. In a worst case scenario, the
committee is concerned that, to make ends meet, some may turn to dangerous
and/or illegal activities.
In addition, the committee believes these policy changes are based on
false assumptions about young jobseekers, employment and the current health of
the jobs market. The government seems to believe that young Australians do not
wish to work - that all they need to gain employment is the threat of having a
safety net denied to them. These measures show the government would prefer to
punish young job seekers for not being in work rather than put in place
policies to help them to find employment.
The committee understands that the labour market is not strong,
particularly for the young, so it is unrealistic to expect jobseekers to be
able to find employment easily. Even the government's own analysis suggests the
labour market is currently subject to 'weak employment growth, a falling
participation rate and a rising unemployment rate'.
Given the sole aim of the government appears to be finding savings, it
is incongruous that the government fails to recognise that these changes will
actually increase levels of disengagement and unemployment which will increase
government expenditure on welfare, healthcare and social services over the long
It is profoundly disappointing the budget lacks sufficient provisions designed
to genuinely support jobseekers to access training or find employment. The
committee is dismayed by cuts to programs that successfully engage young
Australians in educational and employment opportunities, notably the Youth Connections
and RecLink Australia programs, and this will be discussed in the following
The committee recommends that the government maintains the age of
eligibility for Newstart at 22 years of age.
The committee recommends that the government abandons the
2014-15 Budget measure providing for a six-month waiting period for
Newstart payments for new claimants.
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