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Economy

Jan 24, 2014

Kevin Andrews, don't pick on the disabled and those on the dole

Hands off people on the dole and disability payments, but wind back the age pension. That's what experts told Crikey about welfare reform as the government prepares to slice and dice.

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The Abbott government plans to crack down on disability payments and the dole, but is it targeting the wrong welfare recipients? Experts have called for the age pension — which costs almost five times as much as the dole — to be wound back first.

Social Services Minister Kevin Andrews recently flagged big changes to the welfare system via his regular bulletins in The Australian. He described the system as “unsustainable … the two big areas are Newstart and the DSP [Disability Support Pension] in terms of ensuring the viability and sustainability of welfare in the future”.

Crikey asked four experts about this plan and found none thought it was a good idea. So we crowned them minister for the day and asked how they’d reform welfare (and perhaps save some cash). The most popular response was to wind back the age pension or target superannuation concessions. Some suggested making the disability support program and dole work better, rather than cutting them back.

By way of background, Andrews has hinted the May budget would tighten eligibility for new recipients for the DSP and the dole, with more changes later. The government has a couple of reviews reporting back soon. While Prime Minister Tony Abbott has talked about banning the dole for people under 30, and a Nationals MP recently said people on the dole were out to “screw the system”, the only concrete proposal is to stop allowing people on the dole to refuse a job if it’s more than 90 minutes away.

Andrews has ruled out changes to the age pension — and why not, given that older people tend to vote for the Coalition? At the September federal election the Coalition nabbed 51.8% of the primary vote from the over-50s (Labor got 31.1%). Among the 18-34 age group, the major parties polled about the same (36.6% Coalition, 36.1% Labor).

The dole (aka Newstart) is $501 per fortnight (plus up to $124 rent assistance if eligible, and other top-ups). The DSP is $751.70 per fortnight (plus a supplement of $61.70 if eligible), the same as the full rate for the aged pension.

Here’s what our experts would do about welfare …

“If government wants to slow the growth in welfare expenditure, the age pension is the main game.”

Cassie McGannon, fellow at the Grattan Institute: wind back the age pension

“If government wants to slow the growth in welfare expenditure, the age pension is the main game,” McGannon told Crikey. It costs $36.4 billion a year, 10% of the federal budget. The dole costs $7.6 billion. McGannon’s issue with the age pension is generous indexation and changes to rates and eligibility, making it “relatively untargeted”. Older households with million-dollar assets may still get part of the pension. “These people are relatively wealthy, they’re doing a lot better than a lot of the people on DSP and Newstart,” she said.

Grattan wants the government to include owner-occupied dwellings in the pension assets test, and the institute calculates this would save $7 billion a year. Households in this situation but with low cash incomes could get the pension but would accumulate a debt to the government against their property (like a reverse mortgage). Grattan has also suggested lifting the age pension and super age to 70.

McGannon says it “seems shortsighted” for Andrews to rule out changes to the age pension; “you’re really limiting your options”.

Chris Richardson, economist and partner at Deloitte Access Economics: cut middle-class welfare

Richardson says the welfare system needs reform, but “I’d focus more on middle-class welfare”. Industry welfare and top-end tax breaks should be reined in, too.

He says the DSP could be looked at, particularly eligibility requirements, and says it is concerning that people who stay on the dole for a few years often end up on the DSP. But the dole should not be restricted. “The unemployment benefit is too low,” Richardson said. He’d increase it, and would not make it a pressing task to reconsider eligibility for the dole.

Rather, Richardson thinks Andrews should look at the way people on higher incomes access the age pension. Older Australians who have travelled well financially in the last decade and self-funded retires — many of whom are comfortably off — are getting good help from the government. The system should be more targeted towards people in need, Richardson told Crikey: “You do want to look at assistance to older Australians.”

Nicholas Gruen, economist and CEO at Lateral Economics: rein in super

Gruen says the government should be vigilant about welfare payments, but the expansion of disability payments is a global trend “and has proven very intractable”. He suggests expanding work-for-the-dole but notes that would cost the budget money, in the short term at least.

The best way to reform the DSP and the dole is to engage much better with individuals and communities — a question of capability, not cutting back budgets. “Actually responding to people and communities on their merits is something that not just governments but large organisations everywhere find immensely difficult,” he said (he’s written on the subject here and here).

In terms of cutbacks, “we could save a vast amount of money by tightening up superannuation concessions and taxing them more progressively”, Gruen reckons.

Natasha Cortis, research fellow at the UNSW’s Social Policy Research Centre: make the dole work better

Cortis does not support restricting eligibility for the dole. “It’s already been tightened in recent years, and affords only very low payments for those who can access them,” she told Crikey.

But the system does need reform. The real problem is that many job seekers are transitioning to casual, temporary or seasonal work, or jobs without enough hours. “We should be looking at the poor quality of work at the lower end of the labour market,” Cortis said. The government should work up programs to improve the quality of these jobs, particularly for people in disadvantaged areas. Perhaps the government could help employment services to work with employers on this.

Cortis says employment services should be overhauled to provide better support to people once they do find work, to help them keep it. “Employment services tend to work to strict KPIs and caseworkers are often underqualified, which doesn’t help,” she said.

Cathy Alexander —

Cathy Alexander

Freelance journalist and PhD candidate in politics at the University of Melbourne

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54 thoughts on “Kevin Andrews, don’t pick on the disabled and those on the dole

  1. Zeke

    Chris Richardson mentions that people who have spent a few years on the dole end up on a DSP. Having spent some time on the dole about a decade ago, I’m lucky I finally got a job or I’d be either dead or incapable of looking after myself. The way that Centrelink treat you is like you’re not worth anything and that it is all your fault for not finding a job. They put you on all these senseless programs that do nothing to improve your job eligibility. My problem was simply that I wasn’t a 20 year old. There’s a lot of discrimination out there against older workers.

    I got a job by my own efforts (and with support from my partner), absolutely no help from Centrelink or their stupid and senseless programs. I went to TAFE (My wife supported me) and got some qualifications and worked like a trojan at volunteer work until I was deemed suitable enough for a trial at real work. If I didn’t have a wonderful partner who supported me financially after I stopped my dole payments I would now be toast. A decade later I’m still working and putting away super at a crazy rate, hoping to avoid having to go on the age pension (If it still exists when I’m deemed old enough to retire…70? 80? 90? 100?). I don’t want to have anything to do with any more of their “caring” or “welfare”. I couldn’t take any more of their “support”.

    If ever I were unemployed again (god forbid!) I’ll steal or sell drugs or anything rather than go on the dole. I couldn’t take any more of their “encouragement back into the workforce” as Julia Gillard called it. I hate to think of the suffering that we, through our government, put asylum seekers through, merely as a “deterrent to other illegals”. Actually we could save billions by allowing asylum seekers to live and work in our community while processing their asylum claim. Imagine how much we’d save on counseling and lawsuits alone! It’s also more humane than threatening some poor doley with starvation.

    These people are evil. No they’re not. Actually it is the system which is evil and allows people without a conscience to do well in the political system and in the upper levels of our government bureaucracy.

    I’d suggest cutting the diesel subsidy, cutting any spending to private schools (including all religious schools) and dumping the ridiculous childcare welfare to middle class well-off women. I’d also call for a review of the corporate tax system to make those b@stards pay at least the same rate as PAYE taxpayers. I’d also use a rotating committee of unemployed people to oversee remuneration of our parliamentarians and their pig trough, sorry, expenses.

    Sh#tting on the unemployed always is a vote winner for Labor and liberal governments. The rich think they’re lazy scum and the ordinary workers think the unemployed are bludging off their hard work. Unemployed people don’t have a voice and can’t defend themselves. If they even try to do so they’ll be starved into submission. You don’t get time to organize when all your time is micro-managed by Centrelink. Fail to jump through a hoop and you’ll be cut off, you’ll starve.

    Social security actually means a secure society. Society stays secure when you pay an adequate allowance to those unfortunate enough to be unemployed. Otherwise society will be destabilized by a mob of hungry people and hungry people are desperate and angry.

  2. Roy Inglis

    @ David Hand,

    It’s not so much people hiding assets to get the age pension, it’s more the high levels of wealth people can have and get a part pension and the health care card coupled with the generous superannuation tax concessions given to people to amass much wealth well beyond that needed to avoid the age pension.

    These policy settings are driving the structural deficit much more than Newstart & the DSP yet so far, appear out of bounds for reform by the current Federal government.

    Taxpayers should help people acquire enough super to generate enough retirement income so they don’t qualify for the pension & health care card, albeit with the aforementioned high levels of wealth related cut offs being questionable.

    That taxpayers have to assist people to amass high levels of investments beyond the pension and health care card replacement levels is more an institutional rort come electoral bribe than anything to do with equitable and sustainable social and economic policies.

    The Fraser – Howard government of the late 70s and early 80s raged against the profligacy of the Labor Whitlam government yet, the Fraser deficit was about the same percent of GDP as it was under Whitlam. The only change was its spending and taxing priorities, Also the Fraser – Howard government for all their spin about fairness failed to address tax rorting and indeed oversaw an unprecedented outbreak of it.

    It will be the May Federal budget that defines the current government. Will be like the Fraser – Howard government or will it live up to it’s rhetoric and put the Federal budget, the Australian economy and our society onto a sustainable path? A path that also builds an Australia fit for the the future.

  3. David Hand

    You see drsmithy, it all went pear-shaped for the big government interventionist tax and spend economies between about 1975 and 1982. That was when the Australian and New Zealand economies finally could no longer sustain a centrally planned, government owned, regulated and protected socialist economy.

    The Europeans have staved it off for a few decades with their increasingly ridiculous customs wall but they’ve finally come to the end as well.

    The problem was and is that for large numbers of people to be supported by taxpayers, the proportion of wealth-creating tax payers to beneficiaries has to be sustainable and industry must be efficient and profitable. You guys call it neo-liberalism. The rest of us call it a market economy.

    I agree that older affluent people shouldn’t get the pension and I believe many of them arrange their financial situation in cohorts with their children to get it. But generally, they are not likely to become taxpayers again, unlike many of the 1,500,000 people on the unemployment benefit and the disability support pension. Most of them are of working age.

    Measures that encourage them to enter the workforce a positive.

    You guys should lay off the self-righteousness. It’s a lefty disease where you see those who have a different view as morally flawed and/or evil. you know, the sort of views that make you ashamed to be Australian.

    When you come from that judgemental world view, the contest of ideas becomes impossible.

  4. drsmithy

    The problem was and is that for large numbers of people to be supported by taxpayers, the proportion of wealth-creating tax payers to beneficiaries has to be sustainable and industry must be efficient and profitable. You guys call it neo-liberalism. The rest of us call it a market economy.

    No, what we call neoliberalism is the absurd belief in the infallibility of “the market”.

    But generally, they are not likely to become taxpayers again, unlike many of the 1,500,000 people on the unemployment benefit and the disability support pension. Most of them are of working age.

    Measures that encourage them to enter the workforce a positive.

    No matter how miserable you desire to make like for people on the dole, they can’t work if there aren’t any jobs.

    You guys should lay off the self-righteousness. It’s a lefty disease where you see those who have a different view as morally flawed and/or evil.

    I don’t see those who have a different view as morally flawed and/or evil.

    I see people who promote morally flawed and/or evil philosophies as morally flawed and/or evil.

    When you come from that judgemental world view, the contest of ideas becomes impossible.

    The most prosperous period in human history was the quarter-century after WW2. Innovation abounded, wealth and quality of life increased across the board in leaps and bounds, income inequality dropped, anyone who wanted to work had a job, public services were extensive and high-quality, global poverty nosedived.

    Then the neoliberals took over in the late ’70s, and we got massive private debt levels, structural public debt (from lowering taxes), ongoing sales of public assets, declining quality of public services, increasing wealth gaps, stagnant wages for all but the top few percent and entrenched high unemployment.

    We’ve _had_ the “contest of ideas”. Yours have been an utter disaster.

  5. That Hyena Bloke

    One of the things that really bothered me when I was on the dole, was just how much Centrelink targets people who are genuinely looking for work while giving the rorters a free pass. When I was on the dole I always had my forms filled out with genuine job searching and had about half my payments cut because of the income I was reporting from the casual jobs I could find. But whenever it came to their pointless activities and WFD scheme I was basically a worthless bludger in their eyes, and I was required to do the maximum amount of “job seeker activities” whenever I happened to be between bouts of work. Compare that to the people I knew who openly admitted to making living on Newstart their “lifestyle”, sitting on lower streams and almost never having to even report their job searching. How about we work on targeting these punitive measures towards the right people before making up more of them?

    I understand the urge to try and tighten the system on the shifty people, I really do. But it shouldn’t be at the expense of those who can prove they’re doing what they can to find work. If you do even a tiny amount of casual work it should exempt you automatically from activities, since not only are you showing yourself to be a genuine and capable job seeker doing much more for your career than those activities ever will, but you’re actively saving the government money in reduced payments. They shouldn’t flush those savings down the toilet paying “job placement agencies” that do nothing but suck up the cash and run honest people through their bureaucratic meat grinder.

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