Dr Matthew Thomas and Dale Daniels, Social Policy Section
Australia’s population is ageing. At the same time,
spending on income support payments as a whole (and not just age
pensions) is anticipated to increase. Without on-going high rates
of economic growth, the nation will struggle to support its ageing
population and those who rely on government income support.
Australian governments have long recognised the need to increase
workforce participation—to support economic growth, increase
social participation and reduce welfare expenditure. Since the mid
1980s Australia has, along with most other OECD countries, been
progressively introducing active labour market policies. These
policies seek to closely integrate labour market programs and
income support policies. In doing so, they aim to increase the
employment participation and self-reliance of people otherwise
dependent on government income support.
Recent reforms
Arguably, the most significant move in this direction has been
the Welfare to Work reforms introduced by the Howard Government in
2006. These reforms increased the range and number of people
required to look for and accept work and expanded the support and
assistance provided to these typically disadvantaged jobseekers. In
particular, the reforms targeted principal carer parents, people
with disabilities, mature age job seekers and the very long-term
unemployed.
The results of the Welfare to Work reforms have been mixed.
While there is evidence that the changes resulted in people from
some of the above groups leaving income support for employment
(mostly parents), for members of the other groups the results were
minimal. Indeed, in some instances, the reforms may have merely
encouraged a shift into Disability Support Pension (DSP), the only
remaining non-activity tested payment.
In a bid to address these problems, and to increase workforce
participation more generally, the Labor Government introduced
further changes. These included, among other things: reconfiguring
employment services to better cater to the needs of disadvantaged
job seekers; increasing the Child Care Rebate; introducing paid
parental leave; increasing from 2017 the age at which people can
access the Age Pension; and, tightening access to the DSP. Many of
these measures have only recently been implemented and their
success or otherwise has yet to be determined.
An unfinished agenda
Generally speaking, Australia is doing relatively well in terms
of working age employment participation. As at 2008
Australia’s participation rate of 76.5 per cent for people
aged 15 to 64 years was the tenth highest in the OECD. That said,
there is room for further reform to improve the participation of
sole parents and those with more moderate levels of disability.
Incremental reform of income support over the last 30 years has
been aimed at creating a more active system that supports self
provision. The chart below points to the successes and failures of
those efforts: the phasing out of a plethora of payments for groups
with limited workforce attachment to restrict income support to
those who study, care for others, have disabilities or are
searching for work; the shifting of groups no longer catered for to
the remaining passive disability payments; and, the limited impact
to date of repeated efforts to move people with disability and sole
parents to independence through employment. This mixed picture
points to the failure of some reforms, the incremental nature of
others and the need for further reform to complete the transition
towards a fully active income support system.
While the working age participation rate is expected to rise
from 76.2 per cent in 2009–10 to 79.7 per cent by
2049–50, this is insufficient to cancel out the impact of
ageing on workforce participation. Age-related pension expenditures
are expected to increase as a share of GDP in the years to
2049–50. The only other payments for which expenditure is
expected to increase are DSP and Carer Payments. Hence, if overall
working age participation is to be increased, reforms in areas that
would help to increase the participation of people with
disabilities and carers may be required.
Doing away with any design features that create incentives for
disadvantaged people to seek to qualify for DSP on account of its
non-activity tested status is one such reform. Another is the
provision of sufficient support and services to ensure that people
with disabilities and carers are able to function in the workplace.
What is required in the disability services area generally is
continued and consistent investment and better planned and
integrated service delivery. The introduction of a National
Disability Insurance Scheme, as is currently being considered, may
be a means to address this problem, as well as meeting the broader
needs of people with disabilities and carers.
Chart 1. Main categories of
workforce age income support recipients as a proportion of the
workforce age population, 1978 to 2009 - Text version
Sources: ABS (2006), Australian
Historical Population Statistics (cat. no. 3105.0.65.001), Table
19. Annual reports and statistical publications of the Department
of Family, Housing, Community Services and Indigenous Affairs, the
Department of Veterans Affairs, the Department of Education,
Employment and Workplace Relations and their predecessors.
Library publications and key documents
Treasury, Australia to 2050: future
challenges, Treasury, Canberra, 2010, http://www.treasury.gov.au/igr/igr2010/
Department of Employment and Workplace
Relations (DEWR), Welfare to Work Evaluation Report, DEWR,
Canberra, 2008,
http://www.workplace.gov.au/workplace/Publications/ProgrammeEvaluation/WelfaretoWorkEvaluationReport.htm