The myths and facts of welfare in Australia

The Interim Report of the federal government’s long-awaited and much-feared welfare review, A New System For Better Employment And Social Outcomes, was released on June 29.

Former Mission Australia CEO Patrick McLure, who also chaired the 2000 welfare review for the John Howard government, is chair of the review.

The report calls for income support to be made “simpler and sustainable”, with “a stronger employment focus [and] adequate support while encouraging more people to work to their capacity”.

Like its predecessor, the current review advocates dramatic reductions to the number of payments and supplements, and increased activity and participation requirements for job-seekers.

No specific recommendations are made but there are some prominent suggestions, most notably that the Disability Support Pension be restricted to those with permanent disabilities and no capacity to work — meaning those with episodic or temporary disabilities, such as mental health conditions, would be shifted to a lower “working-age payment”.

Also, it suggests “Mutual Obligation” requirements be broadened to include more carers and parents with young children, who should have more obligations in return for receiving Centrelink benefits. It calls for income management to be expanded to young people not working or studying, as is already the case in the Northern Territory.

The review briefly recognises the inadequacy of Newstart and student allowances, the need to raise Rent Assistance — which has not risen at the same rate as rents — and the case for reforming income-free areas and taper rates for different payments to ensure people keep more of their benefits when they work. But most of the review is an evidence-free zone.

Like most of the welfare proposals of the Tony Abbott government, ideological commitments — the drive to focus on the deficiencies of Centrelink clients rather than structural factors — reign supreme. The review relies on some very stubborn myths.

MYTH 1
People who want to work can find work. Barriers to employment are mainly the poor attitudes and efforts of people receiving Centrelink benefits.

The facts: There are not enough jobs to go around. In December last year, there were 716,000 job-seekers. This figure would be higher if you included people who became discouraged and stopped searching for work. Job vacancies were 140,000. Eva Cox suggests the ratio could be twice as high — about one job for every 10 job-seekers.

Available jobs generally favour the well-educated, whereas half of the long-term unemployed have lower than Year 12 qualifications.

People with major caring responsibilities, such as single parents, often find it difficult to find work that fits around their commitments.

A 2008 federal government survey documented how employers discriminate against people such as single mothers, those with disabilities, older unemployed, and long-term unemployed (even when they have recently had training).

The shortage of jobs is the elephant in the room: it hardly rates a mention in the report. Blaming job-seekers distracts us from the real causes of unemployment and helps to justify successive crackdowns on welfare recipients.

Do governments and businesses even want full employment?

The conventional economic wisdom is that there is a conflict between employment and inflation, that too much employment leads to prices rising too quickly, "overheating" the economy. In short, there is supposedly a goldilocks zone for unemployment — not too much, not too little — that governments try to maintain, but there is no interest in getting rid of unemployment completely.

In fact, there is another reason why unemployment exists and it has nothing to do with unemployed people being lazy. There has never been full employment under capitalism, even during the so-called golden age of capitalism, the period of sustained economic growth between the late 1940s and early 1970s.

The reason is important: it is desirable for capitalists, because sizeable pools of desperately poor unemployed workers give employers more power by increasing competition for jobs, pushing down wages and keeping workers disciplined and easily replaceable.

MYTH 2

Australia spends too much on Centrelink payments and too many people rely on it. This is unsustainable and we cannot afford it.

The facts: Australia spends only 6.9% of its gross domestic product (GDP) on payments and it is expected that spending levels will be more or less the same in 2050. Australia spends 3.5% of GDP on age pensions, 2.5% on family payments, and 0.5% on unemployment benefits.

While spending on age pensions will grow to 3.9% by 2050, this will still be very low compared to other developed nations. Spending on the age Pension is 6% in Britain, 8% in Sweden, 10% in Belgium and 14% in France.

Australia has a strict system that provides income support to only those who need it. In 2011, 18.5% of people received Centrelink payments, down from 23% in 2001. Only 4.8% of working-age households derive 90% or more of their income from Centrelink, down from 7.1% in 2001. In fact, levels of reliance on welfare payments are at their lowest since the 1980s.

An OECD report into welfare spending showed that among developed nations, only in Mexico and Korea are those on average incomes less dependent on welfare than their Australian counterparts. More of our welfare spending targets those at the very bottom than in most wealthy countries.

MYTH 3
It is too easy to receive the Disability Support Pension (DSP). The number of people on the payment is dramatically rising.

The facts: As of December last year, there were 830,000 people on the DSP, or 5.4% of people aged 18-64, down from 5.5% two years earlier. This is roughly average for OECD nations.

Over the past decade, the proportion of people on the DSP has risen slightly but that is because Australia has an ageing population — 57% of all DSP recipients are over the age of 50.

Most of the rise in DSP numbers came from those aged over 60 (mainly women) being placed on the DSP, as several payment categories that covered older women, like the Mature Age Allowance, were scrapped, and the age pension age for women was raised.

To be eligible for the DSP a person must have a serious medical condition that would prevent them within the next two years from working 15 hours or more a week in any job in Australia (even with retraining or rehabilitation). Eligibility will be further tightened for recipients under 35, who will have increased activity and participation requirements.

The process involves a detailed questionnaire, written reports from doctors and specialists, and assessment by government-chosen experts.

In 2012-2013, 212 DSP recipients were found to be no longer eligible for the payment, roughly 0.25% of all payment recipients. Recipients are reviewed if they advise that their condition has improved or suspicion is raised that they are no longer medically eligible.