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Welfare reform: One size doesn't fit all

By Peter Saunders - posted Tuesday, 18 January 2005

Welfare reform is back on the Howard Government's agenda. Responsibility for income support payments has shifted to the Department of Employment and Workplace Relations, signalling that every working-age adult who is capable of doing a job will be regarded as part of the workforce.

And now Workplace Relations Minister Kevin Andrews wants to merge the various pensions and allowances for working-age adults into a single Participation Payment to make it easier to move people from welfare to work.

The idea for a single payment was originally proposed in the 2000 McClure Report. It found that people in similar circumstances get treated very differently according to which category of payment they receive. Unemployed people who get on to the Disability Support Pension, for example, receive higher payments and exemption from mutual obligation activity, but those on Newstart get lower payments and are required to look for work.


McLure proposed a single basic payment and some form of social or economic participation for all recipients according to their individual capacities and circumstances. Everyone entering the welfare system would be assessed and those with special needs would receive extra cash.

McLure was right to emphasise the need to increase participation. Of the three main income-support payments for people below retirement age, only unemployment benefits entail mutual obligation. The DSP is obligation-free, and although at least half of those claiming it are capable of working, 90 per cent never re-enter the workforce. Parenting Payment, too, requires little of claimants. Even though single parents could work part-time once their children start school, those on welfare spend an average of 12 years reliant on income support.

Years of inactivity on welfare undermine self-esteem, corrode skills and render many people effectively unemployable. McClure was right to want to reduce long-term dependency rates. But is a single Participation Payment the best solution?

One problem is cost. Unemployment allowances are less generous than DSP and Parenting Payment. McClure said there should be no reductions in existing rates, and the Government agrees, so any single payment will have to be rounded up. The report admitted this would be "very costly".

A second problem concerns bureaucratic discretion. There is discretion in the present system (that's why some unemployed people get on to DSP while others receive Newstart), but the rules governing different types of claimants are clear. With a single payment, however, Centrelink will have to work out payments and participation requirements on a case-by-case basis, which will make it difficult to ensure that similar cases are treated in similar ways.

The main problem with abolishing different categories of payments, however, is that it will blur the traditional distinction between jobless people who are expected to find work (who at present get temporary unemployment allowances) and those who are not expected to work (who are given longer-term pensions). Moving to a single Participation Payment puts everybody in the same boat.


A single mum with an infant will be on the same benefit as a paraplegic requiring round-the-clock care and an unemployed youth who has just lost his job. But community expectations in these three cases are totally different, and this must be clear in the rules governing their access to support. The new mum needs to know that she will be expected to return to work when the child is older; the disabled person needs assurance that support is open-ended and unconditional; and the unemployed youth needs to understand the urgency of finding another job.

Abolishing the distinction between allowances and pensions will make it much more difficult to impose clear conditions and time limits. The result will be a further escalation in welfare dependency.

McClure and the Government see the existence of different categories of income support as the source of our difficulties, but the real problem lies in our failure to come up with adequate eligibility rules governing access to each of these payments.

The slippage of long-term unemployed people into DSP is a serious concern, but the solution is not to abolish the distinction between those who can work and those who cannot. Rather, we need tighter eligibility rules to ensure that only the genuinely disabled get on to DSP.

Similarly with Parenting Payment - it is appropriate that single parents should be supported to look after infants and toddlers full-time, but once children start school, we need to ensure that parents return to the workforce (as in almost every other OECD country) rather than lingering on welfare.

Andrews says the existing system is "confusing". However, what's needed to overcome the confusion is not abolition of the different categories of payment, but better criteria for applying them. Abolishing the distinctions is like passing all the candidates in an examination because it is difficult separating those clustering around the pass-fail margin. Classifying people into categories is difficult, but giving up on the categories altogether is not the answer.

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First published in The Australian  December 27, 2004. This article is also avaialble on the Centre for Independent Studies web site.

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About the Author

Peter Saunders is a distinguished fellow of the Centre for Independent Studies, now living in England. After nine years living and working in Australia, Peter Saunders returned to the UK in June 2008 to work as a freelance researcher and independent writer of fiction and non-fiction.He is author of Poverty in Australia: Beyond the Rhetoric and Australia's Welfare Habit, and how to kick it. Peter Saunder's website is here.

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