The Rudd Government says it supports the principle of mutual obligation in welfare, yet its new policy proposals threaten to pull the rug out from under the entire system.
Mutual obligation requires certain categories of people receiving welfare benefits to find a job, or undertake training, part-time study, remedial literacy classes or Work for the Dole while they are looking for work. Those who do not find a job and who fail to participate in an activity may forfeit some or all of their welfare payment.
Mutual obligation was gradually extended in the Howard years to cover most people on unemployment allowances. Single parents with school-age children and new Disability Support Pensioners with mild impairments are also now required to find part-time work or perform a mutual obligation task. Nevertheless, only a minority of the 1.7 million working-age adults claiming welfare benefits is covered by the scheme.
The policy has four positive outcomes. It stops people become habituated to idleness. It equips them with new skills or work experiences which enhance their chances of finding employment. It makes a positive contribution to the life of the community (Work for the Dole projects, for example, provide facilities which would not otherwise receive funding). And it helps ensure that living on welfare does not become a more attractive option than accepting a low-paid, full-time job.
All four are important, but the last one - the so-called “compliance effect” - is key. While training and work experience can help some people get off benefits and into jobs, it is the fact of having to undertake an activity that shakes many more out of the welfare system. Mutual obligation succeeds as much by “hassling” people as by “helping” them.
This element of “hassle” is intensely disliked by many in the welfare industry who think people in need should qualify for benefits with no strings attached. They say welfare recipients want to work and do not need to be hassled, but that there are “barriers” to their “participation” which prevent them from working - things like drug and alcohol addiction, problems of finding child care, or lack of skills or confidence. They need help overcoming these “barriers” and should not be pushed into the first available job by a “Work First” policy.
But hassling people who have become withdrawn and fatalistic is often the best way of helping them. For many people, the best preparation for work is not training, or intensive assistance, or self-esteem workshops. It is a job.
Few welfare groups accept this, however, and for years they have campaigned against the use of financial sanctions to enforce activity requirements. They say no one should ever lose more than 25 per cent of their payments if they refuse to undertake mutual obligation activities, and that nobody should be penalised if it causes hardship.
These demands would spell the end for mutual obligation, for if nothing much happens when you refuse to comply with an activity rule, people will simply ignore the rule. It is therefore a matter of concern that many of these demands have now been endorsed by the Rudd Government.
In a new Discussion Paper, the government says it wants to give more discretion to Job Network agencies in reporting welfare recipients who fail to undertake a mutual obligation activity. And even when people are reported, it wants to end the current automatic eight week suspension of benefits for claimants who record three “participation failures” within 12 months. It will “review” them instead.
Echoing the welfare groups’ demands, there will also be an end to financial penalties in cases where this might cause hardship. This probably means financial penalties on single parents who refuse to comply with activity requirements will be scrapped. There will also be an easing of part-time work requirements for single parents who may be allowed to study or do voluntary work instead of getting a job.
The government also wants to scrap the “Work First” principle. Instead of insisting that claimants take a job when one is available, they will be offered training. Work for the Dole, which currently begins after six months of unemployment, will not now begin until 12 or 18 months (and in some cases even longer than that).
None of this makes sense. Mutual obligation has been relatively effective in getting people off welfare and into work (it compares favourably with most programs around the world), but enforcement of activity requirements is to be watered down. A program (Work for the Dole) which is proven to move people from welfare to work is being rolled back, while training (which is known to be ineffective in most cases) is being substantially increased.
The predictable result will be higher government spending yet worse outcomes in moving people from welfare into jobs. The government should think again.
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