Should we treat all unemployed people equally?

On Thursday September 15, 2005, Minister for Employment and Workplace Relations Kevin Andrews addressed over 60 delegates of advocacy organisations and concerned citizens. He expressed his confidence in the fairness of the proposed Welfare to Work arrangements, despite there being no legislative substance behind his assertions at the time. Central to his argument was a telling question, which advocates have not adequately addressed: “Why should disabled people and single parents be treated differently to the unemployed?”

The delegation argued (correctly in this author’s opinion) that Newstart Allowance (NSA) at 18 per cent below the Henderson Poverty Line is inadequate for anyone. However an alternative answer is also possible, that certain groups should be treated differently.

This article will outline three key areas of disadvantage that need to addressed by extra supportive effort, both financial and in enabling participation in work and society. These are the capacity of each group, the extra costs incurred by each group and the relative reward for effort experienced by each group. Each disadvantage has severe economic consequences. Failure to counter this disadvantage results in an intergenerational poverty trap that the government assures us is the problem they are trying to tackle.

Capacity

An unemployed person has capacity to work full-time. Most are able to participate in the work, study or aggressive job seeking that will enable them to escape the poverty trap. Once they have a job, if they wish to improve their circumstances, they can work a second job, or study outside work hours to improve their position. This is not to minimise the difficulty faced by long-term unemployed, but they are at least ten times more successful at entering the workforce than the disabled.

If their prospects are poor in their current location, they have the capacity to relocate to a place with better prospects. Single mothers and the disabled require support from family, medical and other services that may be lost or significantly disrupted by relocation.

Commuting time and effort, while frustrating is not a barrier for most. However for those with parenting responsibilities seeking to be available to their children outside school hours, long commutes significantly erode hours available for work away from the local area. For the disabled, the demands of travel also significantly reduce their “functional time”, whether it is for work, or non-work activities.

Clearly the two groups targeted by the Government have reduced capacity. For many, even 110 per cent investment of their capacity in suitable work will not allow them to escape poverty. For an able bodied unemployed person, even a 50 per cent investment of their total capacity is sufficient to provide a way out.

Living costs

Parenting and disability add additional living costs. People with limited earning capacity face tough choices. If their income does not meet the costs of living, they must reduce their costs. They must decide who will suffer. This financial barrier prevents many disabled people from pursuing treatment, which if they could afford it, would increase their capacity. Dietary change, supplements, physiotherapy, counselling and other professional services that could make a difference are beyond their reach. Public services have long waiting lists and limited numbers of treatment sessions if they are available at all. Non-PBS medications and supplements are unaffordable.

Those with children are forced to deprive them of many positive social experiences such as sporting, cultural and religious activities that are increasingly adopting the “user pays” approach. This also impacts on nutrition which is fundamental to children’s brain development and forms another link in the chain that locks the poverty trap.

Transport is another cost impacting on the disadvantaged. For many, a car is unaffordable, public transport is inadequate, and local opportunities are non-existent. Disability transport services are unreliable and expensive, even with subsidies and mobility allowance. The cost of transport places a further burden on people whose disposable income is about to be slashed.

There is also a personal cost. For the disabled, work and travel frequently cause a worsening of symptoms that significantly affect their ability to enjoy and participate in non-work time. For sole parents, the cost is in time and energy unavailable for the role the government assures us is essential to Australian society - parenting.

The able-bodied, unemployed person without sole parent responsibilities can readily address these barriers in ways that are beyond the reach of sole parents and the disabled. Again the groups are fundamentally different.

Reward

Conservative governments are strong believers in reward for effort. People, regardless of their circumstances and backgrounds should be rewarded for their effort. So how do the groups compare when they invest equal amounts of time and effort?

Escaping poverty by finding a job is difficult for the long-term unemployed. However the relative success rates of programs such as PSP (Personal Skills Program) and Intensive Assistance, and DEWR’s (Department of Employment and Workplace Relations) recent DSP (Disability Support Pension) trial show the success rates for people with a disability are much lower than the general population. This author’s personal experience and the personal accounts I hear from DSP applicants confirm this.

When an unemployed person able to work full-time applies for a job, they are more likely than a sole parent to be successful. They are much more likely that a person with a disability to succeed, regardless of how skilled and experienced the disabled person is.

If they find work, they will face marginal tax rates up to 75 per cent. People living in public housing may face effective marginal tax rates over 100 per cent. Yet the Treasurer assures us that tax rates of 49 per cent are far too high for the wealthy. If 49 per cent is a disincentive for the rich, how can the Government argue that 65 per cent or more is NOT a disincentive for the poor?

Clearly reward for effort is not equal. Sole parents and the disabled do not experience a level playing field.

So what’s the difference?

The difference between unemployed people, eligible for NSA and the group including sole parents and the disabled is immense. Their capacity is less, their return on investment of this capacity is less, and the personal and financial costs of their disadvantages are higher. They are far less able to escape the poverty trap.

No one denies the abilities of this disadvantaged group, or their genuine capacity to participate. That is why ACOSS and others criticise the paltry level of investment in the positive aspects of the Welfare to Work package. That is why this author believes the problem to be addressed is employer attitudes and incentive. Only when employers are demonstrating their willingness to employ the disabled and offer family friendly part-time work can obligation begin to be considered “mutual”, or fair.

However, in spite of the best efforts of sole parents and the disabled, and in spite of the limited extra investment offered in the reforms, they will continue to experience prejudice, barriers and bias that a simply “unemployed” person will not.

If they are not guaranteed adequate income support, which sufficiently allows for the costs of living, housing, transport, parenting and disability, the inevitable result will be long-term, sometimes lifelong poverty and penury. Unless the government invests significantly in improving access to local, flexible, accessible and financially rewarding work, their best efforts will be unrewarded, or the small gains will barely offset the high costs.

This is the very result the government assures us they want to eliminate. So why not leave pension conditions as they are and invest in positive change? If the government’s proposed programs are so effective, then surely all these disadvantaged people will successfully get jobs and be paying taxes, rather than receiving welfare. Insistence that people be transferred from pensions onto the lower Newstart is a tacit admission that the Government doesn’t really believe its plans will work.

The result will be that the sins of wealthy, out of touch leaders, will be visited on the children of the disadvantaged, and intergenerational poverty will remain entrenched in Australian society. For the disabled and single parents, Australia will be neither lucky, nor clever.