|
|
[Home] [Help] [Databases] [WorldLII] [Feedback] |
|
Human Rights Defender |
George Argyrous
George Argyrous is a senior lecturer in the School of Social Science and Policy, UNSW
Social security reform since the early 1970s has been driven by a particular structural change in the labour market: the decline in full-time employment rates. This paper will focus specifically on policies and programs aimed at older males, who have been particularly affected by the loss of full-time jobs. Despite the government’s stated objective to reduce welfare dependency and encourage people back into work, social security programs have actually operated to accommodate the growing number of people for whom paid work is no longer available.
A significant shift has been the decline in full-time employment. In 1970 the full-time employment rate of the working age population was 53.9%, but by 2002 this had fallen to 42.8% (ABS 6204.0, 6203.0). To give this percentage change some practical meaning, we can say that had the full-time employment rate in June 2002 remained at its 1970 peak, there would be over 1.8 million more full-time jobs in the economy at present. This decline has impacted specifically upon male workers. The male full-time employment rate declined from 79% in 1971 to 57% in 2001; however, the female rate has remained stable at 29% (ABS 6204.0, 6203.0).
Another dramatic change has been the decline in the male participation rate in the labour force, from 83% in 1970 to 72% in 2001. For older males (those over 50) the shift has been more dramatic; nearly 1-in-3 males aged between 50 and 64 years are either employed or officially classified as unemployed.
The welfare system has had to absorb the bulk of this population of mostly older males who have ‘fallen out’ of the labour market. In 1989 for example, 14.1% of Australia’s working age population were on some form of income support, whereas by 1999 21.3% of the same group were in receipt of some form of income support.
The increase in income support payments has put pressure on the Federal Budget. Government outlays on income support have steadily increased from 25.7% of the Commonwealth Budget in 1989 to 30.3% of outlays in 1999. Similarly, as a percentage of GDP, Income Support Outlays have risen during this period from 6.28% to 7.53% (FaCS, 2000: 4). The Government has therefore repeatedly tried to contain this major cost item through its strategy of fiscal consolidation, which refers to government attempts to achieve budget surpluses through cost-cutting measures and asset sales. Ironically, there is evidence to suggest that it is precisely this strategy of fiscal consolidation that is feeding the problem of swelling welfare rolls (Argyrous, 2000).
Despite the government’s efforts, the problem of a shrinking jobs base has only become worse. The government has tended to focus on individual programs that at different points in time have absorbed the people falling out of the labour market, so as to be seen to be doing something about its Budget balance. But because the underlying problem of joblessness remains, the government has had to simultaneously absorb these numbers elsewhere in the complex of welfare programs. In other words, the effect of welfare reforms have been to shift people from one program to another, rather than actually reducing the total number of people on some form of welfare.
This shifting of the unemployment problem is like the con-artist’s ‘shell game’. People are drawn into the game and asked to pick the which shell a pea is hidden under, only to see the selected shell raised and find no pea beneath it. The pea hasn’t disappeared; rather a sleight of hand has shifted the pea beneath another shell. Similarly, the government has attacked the growing number of people under individual welfare programs, but in the context of a shrinking pool of full-time jobs, these people have been merely shifted on to other programs. The fundamental problem of joblessness has not been addressed; any welfare-to-work program that only addresses the ‘welfare’ component without adequately dealing with the ‘to-work’ component must ultimately fail. Interestingly, an ABS survey of job search activity of welfare recipients found that 97.1% of those sampled in 1995 who were on Disability or Sickness Benefits and who actively sought a job were still on such benefits a year later.
The welfare program that has been most closely tied to the state of the male labour market has been that aimed ostensibly at supporting people with disabilities. The Invalid Pension (renamed the Disability Support Pension in 1991) was the first program to act as a ‘shock-absorber’ when the economy began to shed jobs in the early 1970s and has remained a major form of income support for older males. This derives from the very meaning of ‘disability’, which is determined in each individual case by a combination of medical/psychological factors and socio-economic factors. The determination as to whether someone is ‘disabled’ requires a judgment about a complex set of factors consisting of medical, social, and economic conditions.
This flexibility in the operational definition of disability has meant that it is the welfare program most closely tied to the state of the labour market[1]
In particular, corresponding to the weakening of the labour market since 1970 described above, there has been a dramatic increase in the rate at which the working age population has accessed the Invalid/Disability Support Pension. In 1970 this rate was 1% (representing 134,000 people), but had tripled to over 3% (representing over 600,000 people) by June 2000 (Department of Social Security various years; Department of Family and Community Services (various years).
As a result of this increase, the Disability Support Pension has attracted the attention of the government. In the 2002-2003 Budget the Treasurer announced the government’s plan to reduce the number of people accessing this pension.
This will not be the first time the government has tried to restrict access to the Invalid/Disability Pension in order to reduce a Budget deficit. In the 1980s the federal government attempted to restrict eligibility for the Invalid Pension on two occasions. Each time the restrictions simply pushed people who would otherwise have received the Invalid Pension onto other welfare programs, especially unemployment benefits and Sickness Benefits. The latter program had acted as a ‘half-way’ house between long-term unemployment and eventually receipt of the Invalid Pension, or during periods in which eligibility for the Invalid Pension was being tightened, as a ‘holding tank’ until eligibility for the Invalid Pension was subsequently relaxed (Cass et al. 1988).
In the early 1990s the government made a major change to the underlying definition of disability. Unable to reduce recipient numbers by tightening eligibility criteria, policy-makers changed the actual criteria. In 1991 the Invalid Pension was replaced by the Disability Support Pension, under which the concept of disability was no longer determined by ‘85 per cent permanent incapacity to work’ but rather by ‘an inability to work at least 30 hours a week at full award wages for at least the next two years’. The new eligibility criterion acknowledged the new part-time/casualised labour market and heralded a new ‘workfare’ goal for welfare policy whereby recipients could more easily move in and out of the labour market.
A number of other measures were introduced under the new scheme to encourage existing pensioners back into the workforce. Recipients were offered a ‘workforce transition package’ that sought to make it easier for people to move back into employment after spending time on disability support. It included education and employment ‘entry payments’, increases in allowable weekly income before a medical review for eligibility was required, retention of the Pensioner Health card for up to 12 months, and the provision to allow recipients to return to the Disability Support Pension within two years of leaving it for full-time work without having to again be medically examined to re-confirm eligibility (Department of Social Security, 1990-91, 1991-92).
These reforms were aimed at making the relationship between the disability pension and the labour market more open so that people could more easily flow from the welfare system into periodic employment. For example, the provision that recipients could return to the Disability Support Pension within 2 years of leaving it for employment without again proving incapacity was introduced because it was felt that under the old rules many recipients were not prepared to accept employment, since they would find it harder to again prove incapacity to work in order to reclaim disability during subsequent periods of unemployment. It was expected therefore that the total stock of people on income support would decline. However, the underlying weakness of the labour market, even during a period of economic growth, meant that traffic flowed more heavily from the labour market to the welfare system, rather than the reverse. Disability pension recipient numbers continued to grow. And unlike previous decades, even the rate at which females accessed disability support began to rise (largely due to the tightening of eligibility or removal of other female specific welfare programs).
The failure of this redefined concept of ‘disability’ to reduce recipient rates led to a new ‘shell’ being created to absorb the long-term unemployed. The Mature Age Allowance (MAA) was introduced in 1994, and is available to males aged 61-64 years who have been in receipt of an income support payment for the preceding nine months and who have had no recent workforce experience during the previous 12 months. The MAA does not require the medical assessment required for the Disability Support Pension, and as a result the number of males on MAA practically exploded – at its peak in 1997, 52,798 people were in receipt of the MAA – while the number of males in the 61-64 years age group in receipt of the Disability Support Pension levelled off (this age group of males had experienced the fastest growing rate of the Disability Support Pension receipt prior to 1994).
Toward the end of the previous Labor Government and especially since the election of the Coalition the Federal Government has pursued a welfare-to-work reform strategy (similar to that of the Blair government in the U.K. and the Clinton Administration in the U.S.A.). Under the notion of a citizen’s ‘mutual obligation’ to the state, welfare recipients are facing increased pressure to engage in more vigorous job search activity and/or training or relocation. There is an underlying economic rationalist presumption to this strategy that the reason for the growth in welfare numbers relates to the personal deficiencies of the individuals on welfare, such as a lack of training or education, a disposition to choose leisure over labour (‘malingering’), individual health problems, or a reluctance to relocate to regions and industries where jobs are expanding. This supply-side perspective has led to a new wave of reforms to the welfare system that may be signalling a fundamentally different approach to providing income support for those out of work. This seems to be a move to a universal single payment system for all people of working age in need of income support.
The first ‘wave’ of these reforms in the mid-1990s involved closing entry to a number of allowances predominantly accessed by women, such as the Wife Pension and the Mature Age Partner Allowance. This began the process of consolidating income support ‘customers’ (as they are now known) into other larger programs such as Newstart and the Disability Support Pension. The clearest example of this was the changes to the Sickness Benefit scheme. Under the redefined concept of ‘disability’ after 1991, unemployed people who were suffering more substantial ‘incapacity’ moved directly onto the Disability Support Pension without going through the Sickness Allowance ‘half-way’ house (which had been the case in the 1970s and 1980s). And with the introduction of the Job Search/Newstart Allowance program in 1992, unemployed people who became sick and unable to work for more than 4 weeks remained on Newstart rather than transferring onto Sickness Allowance (as was the case prior to the changes). Sickness Allowance became payable only to persons who were unfit for work and had a job to return to. To cater for people on Newstart who were unfit for work, a category of ‘Activity Type’ called ‘Newstart: Incapacitated’ was created. The outcome was that the number of people on Sickness Allowance fell dramatically, while those in the ‘Newstart: Incapacitated’ group increased by a corresponding amount (Department of Family and Community Services, various years).
Recent reforms by the Federal Government suggest more dramatic movement down this path of program consolidation. These reforms focus almost solely on the need to ‘stimulate’ those currently on welfare to seek jobs, with the aid of programs that make job seekers more employable. The ultimate end of these changes seems to be the universalisation of income support programs, such that all people of working age who are unemployed or underemployed and in need of income support will all receive a single benefit. This is likely to be an expanded Newstart Allowance program – a ‘one shell for all’ approach. The move in this direction is suggested by:
| • | The gradual increase between July 1995 and 2013 in the female retirement age from 60 to the male equivalent of 65 years. |
| • | No new grants under the Mature Age Allowance, the Partner Allowance, and the Widows Allowance after 1 July 2003. |
| • | A tightening of eligibility for the Disability Support Pension announced by the Federal Treasurer in the 2002-2003 Budget. |
The government seems to believe that specially defined welfare programs create an incentive for people to ‘acquire’ the characteristics that make them eligible for such programs. Moving all working age income support recipients onto the Newstart program, on the other hand, increases the pressure on recipients to move back into employment. It also allows a closer integration of the welfare system and the labour market, in which employment growth has almost totally been in terms of part-time and casual employment. People supposedly will be able to move between the labour market and the welfare system, or more easily combine income from these two sources, under a regime where specialized welfare programs are eliminated and everyone falls under the Newstart umbrella.
There are two views one can take on this move toward a universal income payment scheme. One can accept the government’s rhetoric that it is treating welfare recipients, such as those on the Disability Support Pension, not as dependent citizens, but as people capable of leading productive and rewarding working lives. Bringing these people closer to the labour market under an expanded Newstart scheme removes the attractiveness of testing for specialized payment schemes such as the Disability Support Pension and prevents certain groups being locked into a lifetime of welfare dependence by defining particular characteristics as rendering them unemployable.
There is, however, a more cynical view one can take on these reforms. Unless the government actively pursues some job-creation or job-sharing programs that will take care of the ‘to-work’ component of welfare-to-work, the fundamental problem of joblessness will not be alleviated. Without job creation programs to accompany them, the strategy of universalisation can be seen as a cost containment exercise, given the problem of long-term unemployment. That is, the government has accepted that the unemployment problem is intractable and is now looking for ‘second-best’ solution; a way to minimise the cost implications that the lack of paid employment has for the Budget. To borrow a metaphor from another area of government policy, the government may be gathering the ‘internal economic refugees’ from globalisation into one welfare ‘boat’ with a view to casting them adrift of the rest of the society and thereby mitigate the impact on the Budget bottom-line. The extreme end of this process may be to eventually set a time limit to the duration that any individual can be in receipt of Newstart.
There is evidence to support the view that the government’s proposed reforms are a capricious cost-containment exercise. The Newstart payment is lower than that for the programs it replaces. The Disability Support Pension payment, for example, is tied to the level of the Age Pension and includes receipt of the concessions associated with the Age Pension such as the Pensioner Concession Card. For a single person on the maximum rate, for example, the Disability Support Pension is $53 more per fortnight than the maximum rate of Newstart Allowance. The job search obligations under Newstart are also more costly to the individual and more onerous, making recipients susceptible to the punitive breaching penalties imposed by Centrelink. The Disability Support Pension is also not subject to tax and payment tapers off at a slower rate when income is earned from other sources such as part-time or casual employment (Abello and Chalmers 2002). Indeed, the much higher marginal tax rates faced by Newstart recipients as compared to Disability Support Pension recipients means that the former produces a stronger disincentive to finding employment. If the government were serious about reducing welfare dependency and integrating the income support system more closely with changes in the labour market where employment is increasingly part-time or casual, it would reduce these marginal tax rates rather than increase them.
Ultimately, which of these views proves to be correct will be determined by the flow of income support recipients into either employment or into long periods of Newstart payment receipt. Given the government’s (and Centrelink’s) track record for (not) dealing with the problem of long-term unemployment, our suspicion is that the latter will result. We suspect that the ‘Newstart: Incapacitated’ category, after initially absorbing people who previously would have been on Sickness Allowance, will now become the new shell for hiding the long-term unemployed who will no longer be able to access the Disability Support Pension.
Abello, D. and Chalmers, J. 2002. Disabling Employment Policy. Drawingboard, www.econ.usyd.edu.au/drawingboard/digest/0206/
Australian Bureau of Statistics, 1986. The Labour Force Australia Historical Summary 1966 to 1984. Cat. 6204.0
Australian Bureau of Statistics, 1998. Disability, Ageing and Carers: Summary of Findings. Cat. 4430.0.
Australian Bureau of Statistics, 2001. Labour Force Australia. Cat.6203.0
Autor, D.H. and Duggan, M.G. 2001. The Rise in Disability Recipiency and the Decline in Unemployment, mimeo National Bureau of Economic Research.
Beatty, C., Fother Gill, S. and MacMillan R. 2000. A theory of employment, unemployment and sickness. Regional Studies, vol. 34, no. 7, pp. 617-630.
Cass, B. Gibson, F. And Tito, F. 1988. Towards Enabling Policies: Income Support for People with Disabilities, Social Security Review, Australian Government Publishing Service, Canberra.
Commonwealth of Australia, various years. Budget Papers, no.1 Australian Government Publishing Service, Canberra.
Department of Family and Community Services (various years) Income Support Customers: A Statistical Overview, Australian Government Publishing Service, Canberra.
Department of Family and Community Services. 2000. Income Support and Related Statistics: A 10-year Compendium, Australian Government Publishing Service, Canberra.
Department of Social Security, various years. Annual Report, AGPS, Canberra.
[1] While applied to Australia, the results are consistent with studies of both the
USA (Autor and Duggan, 2001) and the UK (Beatty, Fother Gill, and MacMillan, 2000) that have shown that the growth in the number of people on disability support programs has been driven primarily by demand conditions in the labour market.