Dr Matthew Thomas
As a part of last year’s Budget, the Government introduced a
measure that would have imposed a six-month waiting period on a majority of new
claimants of Newstart Allowance (NSA), Youth Allowance (Other)(YA(o)) and
Special Benefit for those aged under 30 years.[1] After six months in
receipt of payment, these young people would have been excluded from income
support for a further six months, with this cycle continuing until they gained
employment, undertook full-time study or turned 30 years of age. Following
strong community resistance to the proposed measure and its failure to pass the
Senate, the Government has made some changes in this Budget.
Under the revised measure, a waiting period of four weeks
would be applied to new claimants of NSA, YA(o) and Special Benefit for those
aged under 25 years.[2] As was the case under the
previous measure, there would be some exemptions. The waiting period would be
applied only to those new claimants judged to be the most work ready—that is,
those job seekers who are classified as Stream A under the new jobactive employment
services arrangements.[3] Young people with dependent
children and those assessed as requiring greater assistance to obtain
employment or as having vocational issues and/or other forms of disadvantage would
be exempt. It appears that the ongoing exclusion period component of the previous
measure has been dropped.
From 1 July 2016, young people subject to the waiting period
would be obliged to participate in a new RapidConnect Plus rapid activation
strategy.[4] This strategy would
require participants to undertake a number of additional job search activities
in the four weeks before they received income support.[5]
The Government expects that the changes will result in costs
in excess of $1.8 billion over five years. While the previous measure was not
legislated, it was nevertheless budgeted.[6] Hence, the costs are a
result of the Government’s not proceeding with the previous measure and having
to pay out an increased amount in income support under the new measure.
Rationale for the measure
According to the Government, the new waiting period measure
‘will set the clear expectation that young people must make every effort to
maximise their chances of successfully obtaining work’.[7]
As such, the waiting period measure appears to be
premised on the notion that many young people are either choosing, or likely to
choose, to rely on government-provided income support, rather than attempting
to find work. According to this argument, it is necessary to provide a
disincentive to stop young people from becoming disengaged and reliant on
government-provided support. The Government has chosen to create such a
disincentive by withholding unemployment benefits and thereby forcing young
people to increase their efforts to find work.
There are three main issues
associated with this rationale.
First, there is no substantive evidence
to suggest that young Australians lack the will to work. A number of surveys of
young people show that a majority want to work or to work more hours, but face
a number of barriers to their doing so.[8] These include
a lack of available jobs, particularly entry-level positions and full-time work
opportunities; not having the relevant experience, skills or qualifications
required or the opportunity to acquire experience or training; and, employers
who are unwilling to hire younger people.[9]
Second, where young people are in
receipt of income support, they must comply with the general requirements under
the activity test, as well as other participation requirements, if they are to
remain eligible for their payment.[10] In terms
of job search requirements and monitoring, Australia’s eligibility criteria for
unemployment benefits are some of the strictest in the OECD.[11]
Third, the low rate at which NSA and YA(o) are paid is
likely to prove sufficient incentive for many young people to find and accept
work. This is the intention of these payments, whose low rates and strict
eligibility criteria are calculated to provide a clear financial incentive for
people to work or engage in training to boost their employability.
Risks and unintended consequences
While the waiting period measure is not nearly as severe as
the previous budget’s measure, it nevertheless does not appear to have the
support of Labor, the Greens, or a majority of the Senate crossbenchers.[12]
Judging by recent media reports, much of the community services sector is
opposed to the measure.[13]
The main argument that has been raised against the proposed
waiting period is that, although it has been significantly reduced, four weeks
without access to income support would still place many young people in severe
financial hardship. National Welfare Rights Network Policy Officer, Gerard
Thomas, has insisted that the measure would ‘lead to greater levels of welfare
dependency, not less’.[14]
As has been noted in relation to the previous iteration of
the waiting period proposal, withdrawing access to income support could have
the unintended consequence of detracting from some young people’s ability to
find and gain paid employment.[15] Some have argued that
the low level at which NSA is paid (a base rate of $519.20 per fortnight for a
single person with no children) already restricts recipients’ capacity to find
paid work.[16] If young people subject
to the proposed new waiting period are unable or unwilling to call upon family
support or the assistance of charities, then they could lack sufficient means
to find a job. Further, if they have no savings or other means of support, these
young people would be more likely to be preoccupied with the immediate needs of
paying for food and rent than with finding paid employment.
Comment
The imposition of an extended up-front waiting period for
income support is a novel measure in international terms. The New Zealand
requirement for some claimants of working age payments to undertake pre-benefit
activities within a 28-day period has been compared to a one-month waiting
period.[17] However, claimants who
successfully complete the requisite activities within 28 days can receive their
payments earlier and all eligible recipients will receive back pay to the
relevant commencement date.[18]
If there could be said to be a
‘usual practice’ where it comes to withholding access to income support, it is
to place time limits on receiving income support benefit.[19]
As such, in the absence of overseas precedents, it is unclear what the outcomes
of the measure will be. While the waiting period has been significantly reduced
from that of the previous measure, this has not allayed the concerns of many in
the community services sector that the measure would result in a substantial
number of young people experiencing financial hardship.
[1].
Australian Government, Budget
measures: budget paper no. 2: 2014–15, p. 195.
[2].
Australian Government, Budget
measures: budget paper no. 2: 2015–16, 2015, pp. 159–60.
[3].
See Department of Employment (DoE), jobactive, DoE
website.
[4].
Budget
measures: budget paper no. 2: 2015–16, op. cit., p. 159.
[5].
RapidConnect Plus operates on a similar principle to the existing
Rapid Connect process, which seeks to connect job seekers with employment
service providers as quickly as possible by obliging them to meet with their
provider before they are able to receive their first income support payment.
The Rapid Connect measure was introduced by the Howard Government as a part of
the 2005–06 Budget’s Welfare to Work package. Australian Government, Budget measures:
budget paper no. 2: 2005–06, 2005, p. 146. The idea behind this general
approach is that connecting a job seeker with their employment services
provider and making them actively seek work as quickly as possible both
improves their prospects of finding a job quickly and does not give them a
chance to become dependent on welfare.
[6].
Budget measures: budget paper no. 2: 2014–15, op. cit.
[7].
Australian Government, Budget
2015: growing jobs and small business, p. 27.
[8].
P Cameron and R Denniss, Hard to get a break?
Hours, leave and barriers to re-entering the Australian workforce,
Institute paper, 13, The Australia Institute, 2013; Mission Australia, Youth
survey 2014, Mission Australia, Sydney, 2013; N Herault, W Kostenko, G
Marks and R Zakirova, ‘The
effects of macroeconomic conditions on the education and employment outcomes of
youth’, Australian Journal of Labour
Economics, 15(1), 2012, pp. 17–36; S Burrows, ‘Youth
unemployment in the Illawarra region’, Journal
of Australian Political Economy, 65, 2010, pp. 89–106
[9].
Ibid.
[10].
Under the Social
Security Act 1991, all recipients of Newstart Allowance or Youth
Allowance (other) must comply with the activity test and other participation
requirements. This means that a person must be actively seeking and willing to
undertake paid work that is suitable for that person.
[11].
D Venn, Eligibility
criteria for unemployment benefits: quantitative indicators for OECD and EU
countries, OECD social, employment and migration working papers, 131,
OECD Publishing, Paris, 2012.
[12].
On 14 May 2015, Senator Rachel Siewert moved ‘that the Senate calls on
the Government to drop its ideological attack on young job seekers by
withdrawing the budget measure that forces young people under 25 to wait one
month before being able to access income support’. The motion was supported by
a majority of the Senate. See: Australia, Senate, Journals,
94, 2015, pp. 2604–05. See also: J Macklin (Shadow Minister for Families and
Payments), Abbott’s
cut to young job seekers still unfair, media release, 13 May 2015. J
Ireland, ‘Federal
budget 2015: young unemployed will still go hungry, say agencies’, The Sydney Morning Herald, (online
edition), 15 May 2015.
[13].
For example: J Ireland, op. cit.
[14].
Ibid.
[15].
C Ey, M Klapdor, M Thomas and P Yeend, Social
Services and Other Legislation Amendment (2014 Budget Measures no. 2) Bill 2014,
Bills digest, 16, 2014–15, Parliamentary Library, Canberra, 2014, p. 43.
[16].
See J Sloan, ‘Newstart
needs a boost’, The Drum, 31 October 2011 and J Westacott (Chief
Executive, Business Council of Australia), Sharing
prosperity: Brotherhood of St Laurence Sambell Oration, speech, 23
November 2011. For current Newstart rates, see: Department of Human Services, A
guide to Australian Government payments 20 March–30 June 2015, p. 26.
[17].
See K Andrews (Minister for Social Services), New
Zealand waiting period for benefits, media release, 23 September 2014.
[18].
New Zealand, Work and Income (WINZ), ‘Pre
benefit activities’, WINZ website.
[19].
In the US, for example, time limits have been in place at the state level
since the 1990s and, in 1996, a 60-month time limit was imposed on federally
funded assistance for most families under the Personal Responsibility and Work
Opportunity Reconciliation Act. See M Farrell, S Rich, L Turner, D Seith and D
Bloom, Welfare
time limits: an update on state policies, implementation and effects on
families, The Lewin Group and MDRC, 2008.
All online articles accessed May 2015.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.