Earlier this year, with Queensland devastated by natural disasters, I was asked about a possible alternative to the mooted flood levy. "We spend $13 billion each year on the Disability Support Pension," came the question, "and everyone knows that lots of the people on the DSP could probably work. So why don't we just get them off welfare and into jobs, and use the savings for the reconstruction effort?" My answer was, unfortunately, if it were that easy we would have done it already.
I was reminded of this question on Tuesday night when watching Treasurer Wayne Swan deliver his budget to parliament. With a mining boom, an ageing population, and a nasty hangover from the overzealous GFC-induced spending spree, Swan's theme was productivity and participation. We all need to be working to make the most of the good times (and pay off that pesky deficit too).
A big part of this narrative is welfare reform. There are currently 2 million working age Australians on welfare, a number that has barely shifted for a decade despite a fall in unemployment. Getting people off welfare will save some of the $120 billion we currently spend on social security; getting them into work will boost the $240 billion we pay in income tax.
But the truth is in fact a bit murkier than this. Welfare reform will undoubtedly save money in the long-term, for exactly the reasons mentioned above. But in this year's budget it will actually cost money to get tough on the indolent and inactive. And if we don't get the settings right, we run the risk of these expensive programs having no impact at all.
Yet despite these difficulties, there is a growing consensus- across the political spectrum- that welfare reform is worth doing. What's more, we have been at it for long enough to know what works, and what does not.
Previous reforms targeting sole parents have been remarkably successful. Since 2006, single mums (and a few dads) have been required to look for part-time work when their kids reach school age. Previously, they were allowed to remain out of the workforce until their children turned 16.
After the change was enacted the number of people claiming Parenting Payment fell 20%, and continued to slide. With unemployment low and female workforce participation on the rise, the vast majority moved into jobs rather than the unemployment queue.
The changes were so successful that there are now increasing calls for single mums to be required to look for work, or at least begin to prepare for work, when their children are of pre-school age. This week's budget sensibly gives sole parents a greater incentive to work, by increasing the amount they are allowed to earn before their benefit is cut. But the government could have reasonably applied a bit more stick to go with this carrot by increasing activity requirements for mums of four and five year olds too.
The budget targets teenage mothers, but they represent only a small fraction of single parents without a job. More could be done to ensure that all sole parents retain a connection with the workforce while their children are young.
Another important target in the budget is Disability Support Pension. With more than 800,000 people on DSP – around 5% of the working age population- the government is rightly worried that the payment is ballooning out of control.
Now DSP recipients under the age of 35, excluding those with very serious disabilities, will have to attend Centrelink interviews to help them prepare for work. New applicants will need to prove they have tested their ability to get a job before they are accepted onto the payment.
Given the big changes in the demographic characteristics of disability pensioners, these are potentially important reforms. While DSP was previously the domain of older men who had once worked in manual jobs, new recipients are increasingly in their 20s and 30s and many suffer from intellectual disabilities and mental illness.
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