2.1
This chapter discusses the views raised in submissions to the Senate Community Affairs Legislation Committee’s (committee’s) inquiry into the Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 (bill) and concludes with the committee’s view and recommendation.
2.2
In discussion of the bill, the following matters were raised:
workforce and skills shortages;
benefits of the instant top-up of the Work Bonus income bank and suspending, rather than cancelling, pensioner and veterans’ access to benefits and entitlements;
other benefits of increasing pensioner and veteran workforce participation;
increasing the Work Bonus amount;
extending the timeframe of the measure, as well as conducting a review; and
effective communication of the bill’s benefits to promote engagement with the scheme.
Addressing workforce shortages
2.3
The committee received evidence from a broad range of industry bodies describing their industries as experiencing acute skills and labour shortages, which are driving up costs and reducing production. Many identified that securing a reliable, committed and capable workforce was a top priority for their respective industry. For example, submitters reported:
the need for an additional 40 000 skilled workers within the Western Australian resources sector over the next four years, noting a potential shortfall of 33 000 workers as soon as 2023;
skilled trade shortages within the residential building industry are at one of their highest levels on record, with demand expected to remain exceptionally high throughout 2022 and 2023;
a 252.4 per cent increase in job vacancies within the hospitality industry compared to the demand for workers prior the pandemic;
a decrease of approximately 36 000 workers in agriculture, forestry and fishing between February 2020 and February 2022, and around 11 000 fewer people working in horticulture; and
labour shortages in the health care and social assistance sectors, which have been rising rapidly with 19 700 vacancies recorded in May 2020, growing to
74 300 vacancies in August 2022.
2.4
Most submissions viewed the bill’s amendments as a useful way to start to address the skills and labour shortages being experienced in Australia.
2.5
The Victorian Chamber of Commerce and Industry (VCCI), a non-government body representing the Victorian business community and industry, submitted that removing disincentives for experienced workers of pension age is a positive step towards increasing workforce participation and alleviating skills shortages. It recognised that ‘pensioners and veterans can help provide business[es] with the workers they need to keep operating’ and argued that:
We should not be encouraging them to exit or disincentivising them [to]
re-enter the workforce, particularly in times of skills and labour shortages and the rising cost of living. Increased workforce participation in this cohort benefits businesses who need experienced staff.
2.6
Similarly, the Australian Chamber of Commerce and Industry (ACCI), a body representing businesses and industry Australia-wide, agreed that the bill would ‘provide greater benefits for businesses by removing the previous restrictions on experienced and qualified pensioners participating in the labour market’.
2.7
The Minerals Council of Australia (MCA), the peak mining industry association, acknowledged that:
Incentivising mature Australians, veterans and disability pensioners to
re-enter the workforce is a proactive measure that can help alleviate the severity of the current labour market conditions within a relatively short timeframe.
2.8
In relation to the farming sector, National Farmers Federation (NFF), the national peak body representing farmers, also saw the benefits of the bill’s amendments, stating that ‘relaxing the restrictions placed on Australian pensioners working’ would be one way to ‘encourage and enable Australians and permanent residents to take up farm jobs’.
Instant top-up of the Work Bonus income bank
2.9
In general, submitters were supportive of the bill, with some noting the particular benefits of the instant top-up to the Work Bonus income bank rather than pensioners needing to accrue that amount over time.
2.10
For example, NFF stated that the bill’s proposal to provide an instant one-off income bank increase would:
… provide greater flexibility to workers and immediate relief for pensioners and is more conducive to participation in seasonal work compared to an accrual model delivered by an increase in the fortnightly work bonus.
2.11
Similarly, National Seniors Australia (NSA), an advocacy body for older Australians, submitted that the proposed change to the Work Bonus scheme was positive because it not only increases the amount a pensioner can earn before their pension is reduced, but also because:
… it is provided up front, enabling pensioners to earn intensively over a short period. This will be beneficial for businesses requiring surge workforces, such as those needed in the busy pre and post-Christmas period and to supply harvesting jobs in rural areas.
Suspension of benefits rather than cancellation
2.12
Whilst most submissions focused on the increase to the Work Bonus income bank, support was also expressed for the other amendments contained in the bill. These amendments pertain to the suspension, rather than cancellation, of Age Pension, Disability Support Pension and certain veterans’ entitlement recipient’s benefits and entitlements for up to two years if their income precludes payment, including retaining access to concession cards for the same period.
2.13
ACCI, for example, submitted that it supported these amendments as they would remove disincentives for pensioners to work, including by removing the administrative burden of lodging new pension claims. Additionally, it noted that extending the concession card qualification would also act as an incentive for pensioners to work.
2.14
Similarly, Chamber of Minerals and Energy of Western Australia (CME), the peak representative body for the resources sector in Western Australia, was supportive of these amendments, stating they would provide an incentive for ‘workers to access additional income in an economic environment of inflationary pressures and rising cost of living’.
Pensioners want to work
2.15
A number of submissions referenced a survey conducted by NSA which found that 20 per cent of pensioners would re-enter the workforce if perceived disincentives were removed from the pension system.
2.16
The Institute of Public Affairs (IPA), a public policy think tank, submitted in reference to the survey:
… that 20 per cent of age pensioners would enter the workforce if work barriers were reduced, which equates to approximately 510,000 age pensioners. This is compared to the current rate of just three per cent of age pensioners in the workforce.
2.17
VCCI summarised the rationale pensioners provided for wanting to re-join the workforce, stating:
Seniors want to work … The primary motivation for this is the desire for increased income, due to a lack of superannuation, struggling to make ends meet on a sole pension income, and increases to the costs of living. Income is not the only reason however, with public spirit and a desire to serve and help fill skills shortages also found as motivators.
Other benefits of pensioners re-joining the workforce
2.18
Some submitters discussed the benefits of the bill’s amendments beyond addressing workforce shortages. In particular, cost of living pressures were raised as an issue facing many pensioners that could be addressed by removing barriers for pensioners to work, as well as the added benefit of providing a means to establish valuable social and community connections. For businesses, the opportunity to capitalise on the wealth of knowledge and experience of pensioners and veterans was also raised as a potential positive outcome of the bill’s amendments.
2.19
NSA, VCCI, IPA and Hancock Prospecting all agreed that encouraging pensioners and veterans to remain in employment, work more hours, or
re-enter the workforce is a public policy that would not only benefit the economy, but also improve lives by allowing these groups to address the rising costs of living.
2.20
IPA acknowledged that work was also ‘a source of dignity, esteem, and social connection’ for pensioners and veterans.
2.21
Similarly, VCCI agreed that working provided pensioners with an ‘increased opportunity for social connection and engagement in their community’ and added:
With loneliness among older Australians strongly identified as a problem, the social connection available from employment is important and should not be disincentivised by impacts on pension payments.
2.22
Some industry bodies outlined a number of benefits of employing pensioners and veterans in their respective industries. CME, for example, described its focus on supporting the safety and productivity of its workforce, submitting:
The opportunity for [veterans and pensioners] to act as mentors and informal trainers for the newly recruited talent is vast and would deliver dividends in the form of further protecting health and safety outcomes for the workforce, enhancing opportunities to transfer relevant productive knowledge, and providing additional financial benefits to workers who may be nearing retirement age.
2.23
MCA described the value that mature workers could provide the mining industry, stating they ‘bring a lifetime of knowledge, deep experience and long-term perspectives’ and that ‘[e]mploying mature workers can shore up institutional memory within businesses and deliver dividends for the mining industry as a whole’. MCA were also particularly enthusiastic about the opportunities presented by employing veterans and highlighted that:
Australian veterans possess experience, skills, character and extensive training complementary to most employment sectors, including and especially mining. As a demographic, veterans are highly versatile and can play a significant role in addressing mining industry skills shortages.
Both the defence and mining industries are users of heavy machinery and complex systems, which means these industries share demand for occupations such as engineers, electricians and heavy vehicle drivers – many of which are currently in short supply.
2.24
VCCI also recognised pensioners and veterans as ‘important members of [its] community and workforce’, stating that:
Experienced, pension age workers have much needed knowledge and skills. The broader workforce benefits from their increased participation; not only from the work that they do, but the benefits from knowledge sharing, mentoring, and increased productivity and skills development.
Suggestions for expanding the bill’s incentives
2.25
All submissions welcomed the bill’s proposed amendments; however, many also proposed that there would be benefits in expanding the incentives further. The following section discusses the suggestions proposed by submitters for expanding the amendments in the bill.
Increasing the Work Bonus income credit bank
2.26
The committee received a range of proposals regarding the amount of the Work Bonus income credit bank increase.
2.27
ACCI explained that by increasing the Work Bonus income credit bank by $4000, pensioners would be able to earn approximately $150 extra per fortnight, equating to an additional ‘seven hours of work per fortnight (at minimum wage) on top of the currently allowed two days until a person's age pension payments are reduced’.
2.28
IPA argued that the bill was not ambitious enough to address workforce shortages as providing pensioners with the ability to only work an additional half a day per week was unsuitable for many businesses who need staff
full-time.
2.29
ACCI proposed that doubling the Work Bonus to a maximum of
$15 600 per annum would offer a greater incentive by providing an additional 14 hours per fortnight for an approximate four days of work a fortnight. It stated that whilst the bill was an improvement, it:
… still imposes restrictions on pensioners' participation and consequently limits the benefits to business due to the fixed costs of engaging an employee and the limited ability for mentorship of more junior employees if only working one and a half days per week.
2.30
VCCI, on the other hand, proposed that the Work Bonus income bank be increased by $10 000 rather than $4000 to allow a pensioner to work up to three days a week. It stated that the bill’s proposal is ‘conservative, significantly restricting pension recipients who want to work more and businesses who really need staff’.
2.31
NSA submitted that whilst the $4000 increase could be attractive to pensioners in short periods of intensive work (such as work over the Christmas period or harvesting jobs), it suggested ‘it may be less effective in mobilising pensioners to work more because the additional amount offered is relatively small when averaged out over the timeframe of the policy’. Instead, NSA argued for an increase in the Work Bonus limit to $6000 bi-annually rather than the one off $4000 as proposed by the bill.
Extending the incentive timeframe
2.32
Some submitters suggested extending the timeframe of the increase to the Work Bonus income credit bank would better support the bill’s purpose to address workforce shortages by encouraging pensioners to work. Others also proposed that a review of the program would be useful to determine whether the scheme was working well and to assess whether it could be extended.
2.33
NSA stated that the timeframe for the increase to the Work Bonus income bank is too short to effectively mobilise pensioners into the workforce. It noted that there was insufficient time to promote the scheme which may lead to limited uptake and undermine the scheme.
2.34
Furthermore, NSA also raised the concern that the short timeframe of the incentive would be an issue for business surety, whereby:
Businesses facing critical labour shortages will be unable to ramp up services because the timeframe, starting in December 2022 and finishing in June 2023 is extremely limited.
2.35
As such, NSA proposed that the incentive should operate for at least two years as a trial to provide enough time to mobilise the workforce and assess the impact the incentive has had.
2.36
Similarly, VCCI also proposed that the Work Bonus increase should be extended for an additional two years to 30 June 2025, and subsequently reviewed. VCCI explained:
Considering the ongoing high cost of living and deep-rooted skills shortages, the 2023 end date is much too early. At the very least, the Work Bonus should be extended to 2025, giving pension recipients and businesses more certainty, and then reviewed on a two-yearly basis to assess cost of living and skill shortage pressures, if the option for a permanent measure is unviable.
2.37
HIA reasoned that because skills shortages within the residential building industry were expected to persist into 2023, it argued that it would be beneficial to extend the measure at least until 2024. It noted that this would also further incentivise the industry to engage with the pensioner cohort.
2.38
Similarly, ACCI expected labour market conditions to continue beyond the proposed timeframe of the bill’s incentive. ACCI explained:
Considering the deeply rooted labour market conditions, faltering productivity rates, and downgrades to domestic and international economic growth forecasts, these amendments will end long before the challenges facing businesses and the economy are solved. ACCI proposes a review to be conducted before the bonus expires, with the aim of extending the temporary Bill by a minimum of a further one year.
2.39
Whilst MCA did not propose an extension to the timeframe of the bill’s incentive, its submission did support a post-implementation evaluation to assess ‘the uptake and impact of the measures on addressing skills shortages for particular industries, examine whether suspension timeframes are
well-calibrated, and address any other issues’. MCA added that industry should be provided the opportunity to engage in the evaluation process as well.
Communication of the scheme
2.40
A number of submitters suggested that effective communication was essential to ensuring the success of the bill’s amendments.
2.41
MCA, for example, submitted that in order to ensure the successful implementation of the bill and to ‘promote positive outcomes for mature Australians, veterans and people with disability’, the bill ‘must be supported by efforts to improve awareness of the measures among employment providers and employers, potential workers and the community’.
2.42
Similarly, NSA agreed that mobilising pensioners to re-join the workforce would not occur unless the bill and its benefits are effectively communicated. It suggested communication on the bill should occur:
directly to pensioners via Centrelink
to pensioners via social media and mainstream channels
to pensioners via stakeholder organisations.
2.43
In its submission, HIA stated that communicating the effect of the changes set out in the bill, such as how many additional hours can be worked before a recipient’s pension is affected and the timeframe that the measure is available for, was key to providing those wishing to take up employment opportunities with the confidence to do so.
2.44
ACCI agreed that pensioners may be reluctant to participate if there is miscommunication or confusion about how the Work Bonus operates, so clear communication was essential if the bill is to be effective in achieving its aims.
Committee view
2.45
The committee acknowledges the pressing challenges of acute workforce and skills shortages across the country and across industry sectors. The committee agrees that expanding employment opportunities amongst pension and veteran cohorts will contribute to increasing workforce participation and alleviating skills shortages, whilst also lifting incomes and living standards. The committee thanks the many industry bodies that took the time to engage with the inquiry and outline the issues facing their respective sectors.
2.46
The committee notes data from the Department of Social Services (DSS) that indicates approximately 3 per cent of pensioners currently engage in paid employment activity. Evidence provided by NSA indicated that 20 per cent of pensioners would re-enter the workforce if perceived disincentives were removed from the pension system and that pensioners primarily were motivated by the desire to increase their income. The committee recognises that engaging in work can also provide other benefits for pensioners and veterans, such as providing a source of dignity and esteem as well as the opportunity to build social and community connections.
2.47
The committee was encouraged to receive unanimous broad support across submissions for the bill’s intention to support pensioners and veterans to
re-enter the workforce or increase their hours of work as a way to address skills and workforce shortages. Submitters noted the benefits of the instant top-up to the Work Bonus income bank and supported the suspension, rather than cancellation, of pensioner’s and certain veterans’ benefits and entitlements. Many industry bodies also outlined numerous benefits to employing veterans and pensioners, including the opportunity for highly skilled and experienced workers to act as mentors, transferring a lifetime of knowledge, and filling skills gaps.
2.48
The committee notes the range of proposals by submitters regarding preferences for increased Work Bonus increases. However, the committee is of the view that the bill reflects a measured approach which incentivises pensioners and veterans to work as a means of addressing workforce and skills shortages and cost of living pressures, whilst being mindful of budgetary constraints. The committee recognises the immediate need to address workforce pressures, particularly over the holiday and seasonal period, and believes the instant top-up of the Work Bonus income bank will help alleviate some of this pressure.
2.49
The committee acknowledges the suggestions for an evaluation to be conducted to assess the uptake of the incentive by pensioners and veterans, and the impact of the measures on addressing skills and workforce shortages across industries. The committee sees merit in DSS and the Department of Veterans’ Affairs monitoring participation in the scheme across pension and veteran cohorts.
2.50
Further, submitters raised the importance of effective communication of the scheme to ensure the successful up-take of the Work Bonus incentive. The committee notes that Services Australia promotes the Work Bonus across multiple communication channels, including its website, social media, printed brochures, video content, and media engagements. The committee encourages relevant departments and agencies to continue their engagement with pension and veteran cohorts, as well as with industry bodies and businesses, to communicate the benefits and incentives available through the Work Bonus scheme.
2.51
The committee considers that the measures contained in the bill are positive incentives aimed at addressing workforce and skills shortages and alleviating cost of living pressures, and should be implemented without delay. The committee, therefore, recommends that the bill be passed.
2.52
The committee recommends that the bill be passed.
Senator Marielle Smith
Chair