Today's Age:
By ROSS GITTINS
Wednesday 23 August 2000
Isn't it terrific? We have bipartisan support for the caring-but-sensible
McClure report on welfare reform, which, provided its not-inexpensive
recommendations are implemented faithfully, will eventually turn around the
problem of growing welfare dependency.
You know about welfare dependency, of course. Since 1965 the proportion of
working-age people receiving government income support has more than
quadrupled, from 5 per cent to 22 per cent. The Federal Government's
welfare bill now exceeds $50 billion a year.
The woman leading the Howard Government's drive to reform welfare, Senator
Jocelyn Newman, says we now have "an entrenched culture of welfare
dependency" involving "certain members of our community who are not only
prepared, but feel entitled, to exploit the social safety net".
But before we hard-pressed taxpayers get too high on our high horse - or
too optimistic about the difference the McClure reforms could make - we
need to take a cooler and harder look at the size and causes of "welfare
dependency".
The trouble with the government's push to reform welfare - as Dr Paul
Henman, a Macquarie University sociologist, argued in his submission to the
inquiry - is that it rushed off in search of solutions without pausing to
properly identify the problem.
The first point to understand is that the statistics that have been tossed
around so freely to demonstrate a rise in welfare dependency are
misleading. For a start, a fair proportion of the apparent increase in
dependency is artificial.
Between 1988 and 1998 the number of welfare recipients of workforce age
rose from 1.3million to 2.3million. But one of the changes made during this
period was to take the dole paid to the married unemployed and divide it in
two, with half to the husband and half to the wife. The other spouse's half
was called the "partner allowance".
The idea was to encourage that other spouse to find at least some form of
paid employment - that is, to reduce the couple's dependence on welfare.
But if you just look at the figures, the number of welfare "recipients"
doubles from one couple to two individuals.
Henman estimates that just this and another change would have increased the
number of welfare recipients by about 320,000. If so, this would account
for almost a third of the seeming increase in welfare "dependency" over the
10 years to 1998.
Yet another change - made several times - was to ease the means test
applying to social security payments. The aim was to increase the incentive
for people on benefits to at least take whatever part-time or casual work
they could find.
But every time you ease the means test on a benefit you increase the number
of people who are eligible for it - even if only a small part of it.
So here we have a sensible measure to reduce dependency on welfare that, if
you just look at the figures, makes it seem as though dependency has increased.
Moving on from statistical illusions, the next thing we need to think about
is the reasons for the increase in the number of working-age people
dependent on government benefits. Is it because we're rapidly becoming a
nation of bludgers and layabouts?
Obviously not. The fundamental causes of the rise in welfare dependency are
marital, demographic and, above all, macro-economic.
It's no accident that the marked rise in the number of people on welfare
since the mid-1970s coincides perfectly with the period in which our
economy has been put through the wringer. The past 25 years have brought
dramatic changes in technology and in the rest of the world - factors
beyond our governments' control - but also sweeping changes in government
policy in the name of micro-economic reform and, until about 1993,
persistently bad management of the macro-economy.
Would it surprise you to be told that, as a result of all these things, the
average level of unemployment was a lot higher in the 1990s than it was in
the '80s, a lot higher in the '80s than it was in the '70s, and a lot
higher in the '70s than the '60s?
No? Then why all the shock and horror to be told there are a lot more
people on welfare today than there were in the '60s? Higher unemployment
accounts for the lion's share of the rise in welfare dependency.
And disguised unemployment accounts for much of the marked increase in the
number of people on the disability pension (along with the demographic fact
that the baby boomer bulge is now of an age when it's more likely to be
disabled) and even for some of the rise in the number of sole parents
(along with increasing marriage breakdown).
The point is, first, that it's illogical and unfair to hold individuals
responsible for their failure to be in the workforce like the rest of us
and, second, that no amount of encouragement or compulsion will get them to
take jobs that aren't there.
Now, I happen to believe that, thanks to the belated payoff from
micro-economic reform and greatly improved macro-economic management, we're
at last seeing a genuine improvement in unemployment. If so - and if it
continues - it is this that will reduce the number of people dependent on
welfare.
The sort of reforms proposed by the McClure report will help at the margin,
but they're very much a secondary issue.
Ross Gittins is a staff writer.
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