Why it pays to make our welfare system fair
Why it pays to make our welfare system fair
Australia is a rich nation – the richest in the world, if we assess it on median income (50th percentile). Yet we have one of the meanest sets of welfare payments of the OECD countries, ranking 22nd out of 29 countries. In this, means testing has become the core model for almost all payments, justified by reducing eligibility to only the truly needy, and thereby reducing costs.
Atax review document described the welfare system thus: 'Means testing is a key characteristic of Australia's unique transfer system, which is more highly targeted than other OECD countries... Within the current two-part means test — the income test and the assets test — some assets are assessed under both tests, while other assets are assessed only under the assets test'. 2
These data and descriptions sit oddly, given the egalitarian ‘fair go' we have traditionally promoted as part of our national image. While means testing reduces the overall costs of payments, it imposes a wide range of financial criteria on which eligibility and amounts are assessed. These reduce the net benefits of extra income, the Effective Marginal Tax rate.
Even more problematic are the strictly enforced rules named (but are not actually) ' Mutual Obligations'. These are hardly mutual and contribute to shaming the recipients, often leading to wider stigmatisation of those on working-age welfare. The publicity given to the sins of non-compliance are framed as ripping off taxpayers. Therefore, the general public is distracted from structural barriers to employment by the assumption of individual sins.
The expansion of the welfare state by most Western countries in the wake of World War Two, was to counter the damage to social cohesion that was witnessed after the First World War. The Treaty of Versailles effectively punished the losers, yet even the victors weren't
spared the 1929 collapse of Wall Street and subsequent Great Depression.
Mass unemployment and economic dispossession lead to the rise of dictators like Hitler, Mussolini and Franco, and then directly into the Second World War. The rise of communism in Russia offered another existential threat to the ideal of democracy.
In part, payments designed to prevent poverty were seen as a core element in creating adequate levels of trust in democracy. The model of the USA New Deal and the acceptance of the Keynes formula of extending government spending when markets malfunctioned, saw spending increase to fund forms of social democracy. This new spending was to give stability by reassuring voters of the nation states' democratic trustworthiness.
Welfare payments could therefore be deemed part of the government's compact with citizens, and justifies Australia's claims to a ‘fair go' ethos. We were one of the nations that followed these recipes for sustainable order, with our post-war reconstruction program led by Nugget Coombs.
The shift of most taxation from the states to Canberra – introduced to cover war expenses – was made permanent so that these payments could become national programs. In 1945, there were, for the first time, unemployment benefits and Invalid Pension policies for working age people.
Additional post-war changes were made over the next two decades, with more serious changes introduced after 1972, mainly by the incoming ALP government. These included a Double Orphans Pension, sole parent benefits, starting with mothers, and other nonpunitive options, including the Age Pension as a universal payment!
However, this was soon revoked by the Coalition, as there was little support for universal payments. Fraser added to this by replacing the universal Child Endowment, which had offered horizontal equity between those with and without children, with a range of income-tested family payments.
The Hawke government improved some areas but also made cuts, such as tightening the eligibility for the sole parent pension by imposing stricter limits on possible couplings. New means tests were introduced for the age pension and family payments, and the increasing effects of the neoliberal shift were becoming evident. Howard regained power for the Coalition in 1996.
The serious arrival of neoliberal values
A decade after Howard took power, he decided to make major changes. After tightening the eligibility criteria for various payments, his Government established the Welfare to Work program in 2006. This involved more changes to eligibility that increased the range and number of people expected to take on full or part-time work, and added more conditionalities that clearly blamed working age recipients for their lack of employment.
One of the target groups were sole parents, who were now expected to start looking for paid work once their youngest child turned six. Moreover, new claimants now lost their eligibility for the sole parent payment when the child turned eight, whereas they had previously been eligible until their child turned 16. They were then moved to the lower level Newstart payment. However, the 400,000 plus existing
Payments designed to prevent poverty were seen as a core element in creating adequate levels of trust in democracy
recipients were left on the payment (known as grandfathering) and many then transferred to disability and carer payments. 3
This grandfathering right was withdrawn in 2008 by the ALP government, along with abolishing Partner Allowance and Widows Pensions. The justification given by then Minister Macklin was that too few parents were actively looking for, or participating in, paid work.
However, the ALP failed to note that of the 100,000 remaining grandfathered payment recipients, the statistics showed 60 percent were employed, albeit part time. The shift meant they lost income when they were moved to Newstart, as the effective marginal tax rates saw various payments cut and a loss of other entitlements.
Some gave up jobs that offered too little extra income after the shift. This move provided a job disincentive as net extra income was often quite savagely reduced. Checking income was accompanied by the need to report on set conditions, particularly for those required to seek paid work, meaning interactions with the departmental officers were often frequent and difficult. 4
Later data failed to show any serious increases in recipients finding more jobs, neither in 2006 nor in this later debacle. These changes, plus the tightening of eligibility for the Disability Support Pension from 2016, are all signs that both major parties were determined to cut the costs of payments and emphasise the need for recipients to find jobs – all under the slogan of mutual obligations, which seemed very much restricted to compelling behaviour change in recipients.
These attempts to constrain the activities of recipients and to increase their focus on getting paid jobs, failed to show real benefits. There are many articles that suggest there is little evidence for the effectiveness of these tactics, and some evidence of harm.
This odd mix of neoliberalism and punitive conservatism in long-term policy setting all promoted the implication that the problem lay with flawed individual welfare recipients. This poisonous political narrative piled ever-increasing stigma on those receiving payments. Likewise, it tilled the soil of public opinion to more easily accept additional controls over existing payments and the trialling of new forms of conditional models.
By entrenching the narrative of undeserving welfare recipients, it has made fair changes all the more difficult to achieve.
These attempts to constrain the activities of recipients and to increase their focus on getting paid jobs, failed to show real benefits.
This misuse of The Children Are Sacred Report was seen as a vote getter. Nonetheless, the Howard Government lost. Even so, the NTER remained legislated.
The arrival of 'trials' of income management
The concept of 'trialling' new forms of conditional payments started in 2007, as part of the Howard election campaign. Mal Brough, then Minister for Indigenous Affairs, was looking for something spectacular to promote as an election issue, so initiated the Northern Territory Emergency Response (NTER) to a Report by Pat Anderson and Rex Wild, suggesting the need to address Aboriginal child sexual abuse and disorder in the Northern Territory.
Part of what was recommended was a program of Income Management for some 20-plus Aboriginal communities, seen as having problems. This would control 50 percent of welfare payments to reduce access to cash for grog, gambling and drugs etc.
This misuse of The Children Are Sacred Report was seen as a vote getter. Nonetheless, the Howard Government lost. Even so, the NTER remained legislated by the incoming ALP, who were interested in maintaining and upgrading it. This occurred in 2010 to meet the views of Jenny Macklin, the then-alp Minister for Indigenous Affairs.
The new program was no longer targeted just at remote Indigenous recipients, but widely extended to other NT recipients of payments, seen as needing encouragement to find paid work. So the legislation was no longer exempt from the Racial Discrimination Act (RDA) as it was to apply widely to a range of recipients in the NT and elsewhere. The extended model, now including the Basicscard (BC), would extend the scope of restrictions on the 50 percent of non-accessible cash used to control bad behaviour.
The ALP introduced their Stronger Futures Act in 2012, as a ten-year plan focusing on their Closing the Gap commitments. This continued to include control over spending on sinful items such as grog, and better food access, once again individualising blame and centralising control.
This Basicscard was the first example of a system of delivering welfare payments, that was built on the assumed spending and consumption sins of a presumed substantial proportion of recipients, an unproven assumption.
At about the same time there was a small trial set up by Noel Pearson in Cape York on a location model, with more local controls. In the following years, various other small trials were set up in many other sites, seen as having possible welfare problems, such as WA communities, Bankstown, Logan, and Shepparton. The administration was done by the federal government.
A Quick Guide in 2015 by the Parliamentary Library stated the following:
"The objectives of income management are to:
· reduce immediate hardship and deprivation by directing welfare payments to the priority needs of recipients, their partners, children and any other dependents
· help affected welfare payment recipients to budget so that they can meet their priority needs
· reduce the amount of discretionary income available for alcohol, gambling, tobacco and pornography
· reduce the likelihood that welfare payment recipients will be subject to harassment and abuse in relation to their welfare payments and
· encourage socially responsible behaviour, particularly in the care and education of children.” 5
These targets were rarely met in any of the trial evaluations, yet past and current governments' enthusiasm for income management continues unabated.
The Cashless Debit Card (CDC)
The Cashless Debit Card was born out of proposals in the Twiggy Forrest Report on Indigenous needs. For three years the CDC has been in development, with the model controlling 80 percent of a person's cash. Worryingly, it is not administered by the Department of Social Services (DSS), like the Basics Card, but is separately contracted to a private firm, Indue Pty Ltd, to administer it.
It was originally trialed in Ceduna, South Australia, and has since been extended to Western Australian sites and, more recently, to Bundaberg in Queensland. The last site is the first to have a minority Indigenous population area, which suggests that the Government may be contemplating its much wider extension to other communities with few Indigenous people, or rolling it out universally.
There are suggestions that the people now on the Basicscard, mostly in the Northern Territory and Cape York, will be transferred to the CDC model in the near future. This option and the extension of current sites is opposed by many, including the Australian Council of Social Services (ACOSS) who stated they “oppose the expansion of the cashless debit card trials under the Social Services Legislation Amendment (Cashless Debit Card Trial Expansion) Bill 2018. The cashless debit policy is paternalistic, intrusive and punitive; and without a reliable evidence base that proves it benefits communities.”
The Cashless Debit Card was born out of proposals in the Twiggy Forrest Report on Indigenous needs… with the model controlling 80 percent of a person's cash.
Rather than promoting independence and the building of skills and capabilities, New Income Management in the NT appears to have encouraged increasing dependence upon the welfare system.
Evaluations of Income Management and CDC programs
There have been a range of formal and community evaluations of the effects of both cards but most have failed to provide valid data that they have been effective in meeting any of the objectives offered above.
There were a range of evaluations by consultants and the Government to various programs. However, the main report, issued in 2014, was a major comprehensive document prepared by a consortium of experienced academics. It concluded in its summary the following:
‘ The evaluation data does not provide evidence of income management having improved the outcomes that it was intending to have an impact upon. Indeed, rather than promoting independence and the building of skills and capabilities, New Income Management in the Northern Territory appears to have encouraged increasing dependence upon the welfare system, and the tools which were envisaged as providing them with the skills to manage have rather become instruments which relieve them of the burden of management. While at one level, and for some groups, this may still be seen as a positive outcome and one which they report as having improved their quality of life – and it is possible that some may be able to lift themselves out of their situation – more broadly it also comes at a cost of greater dependence.' (p xxii) 6
While it reported that some recipients felt they had benefited and wanted to retain the program, there was no data then, or more recently, that safety, access to food, school attendance or wellbeing had improved over the decade it had been operating. There has been no other recent data that suggests these earlier findings are not still applicable.
Similarly, the evaluations of the more recent trials of the Cashless Debit Card in Ceduna and the Western Australian sites have not offered valid data on its merits. The report prepared by Orima, a consultancy often used by the Commonwealth in this area, was seriously criticised for poor design and methodology by the Australian National Audit Office with the following conclusion:
The Department of Social Services largely established appropriate arrangements to implement the Cashless Debit Card Trial, however, its approach to monitoring and evaluation was inadequate. As a consequence, it is difficult to conclude whether there had been a reduction in social harm and whether the card was a lower cost welfare quarantining approach. 7
The above criticisms were further expanded by myself and Janet Hunt from the Australian National University, and written up in The Guardian under the heading Cashless welfare card report does not support the Ministers claims.
My concerns were methodological as the Orima data collection was seriously flawed. The data, quoted frequently by Ministers as proof of good results, was seriously unreliable. It was collected in street interviews with people, who had been asked for their proof of identity, then promised a cash voucher. They were then asked to tick (yes/no) questions on whether participants had reduced their alcohol intake and gambling and if they spent more time with their children. These unethical processes created invalid, 8 unreliable responses!
These unproven income management models are not the only examples that show the current full extent of conditions put on welfare payments continuing to blame recipients for their problems. Parents Next is targeted at primary sole carers (generally mothers) of children under six, which sign them up for compulsory 'worthy' activities or they lose their payments. If they miss sessions they are obviously not getting ‘job-ready'.
These punitive measures are examples
of a developed new insurance model that estimates the risk of individuals becoming dependent on welfare long term. Obviously, there is yet no data supporting this assumption, only algorithms. Other welfare-to-work programs have similar conditional structures.
Another example of excessive use of risky data is the crude model of retrieving unproven debts, Robo-debt, which has caused death and distress. It is yet another example of blaming the victim, with mistakes and deliberately negative assumptions built into the system.
There are clear plans to extend the more conditional CDC, which will soon replace the Income Management (IM) model in the Northern Territory and Cape York. There are also hints it will soon be expanded further to cover most other welfare recipients.
Yet, there is little evidence that the community at large will notice the changes, and object to the broadening of the unproven model, despite its high costs and possible harm. The racial origins of the program seem to protect it from public and media scrutiny.
There were 25,270 people on IM in March 2018, 78 percent were Indigenous and 22,069 in the Northern Territory, including those on the Cashless Debit Card. There are objectors
Parents Next is targeted at primary sole carers (generally mothers) of children under six, which sign them up for compulsory 'worthy' activities or they lose their payments.
but they are seen as the usual suspects and largely ignored. The public's lack of interest in these major changes could be a mix of anti-welfare views and racism, as the majority of recipients are Indigenous. 9
To understand how we reached this point it is important to understand the ideological beliefs that have underpinned our welfare system throughout the previous century. In its early development, welfare was an over-bureaucratised, relatively mean set of payments that created both bureaucratic barriers and serious stigma to discourage recipients. More problematic were the actual means tests, which resulted in recipients receiving little extra net income, even if they did earn or received additional money.
The support for the permanent and wide rollout of the more conditional CDC model indicates that neither major party has been deterred by the fact that extra pressure on recipients has not improved their workforce participation. Both the ALP and the Coalition have introduced and maintained ever more controlling programs, despite the latest
Coalition version being labelled as ‘trials'. Both parties have caused and contributed to this problematic shift of policies.
Much of the Australian public, if they are even aware of these types of changes, clearly do not understand that it may affect them or those they know. For far too many of us, welfare is still defined as essentially targeting other groups' 'wicked' problems, ones they don't face.
An option to consider
We need to address the underlying prejudiced, somewhat one-sided debates about welfare reform, by challenging the relatively recent valorisation of paid work as the core contribution people make to national wellbeing.
This is deeply gendered as it fails to see the value of the many unpaid social contributions made mostly by women, but also by men. It is the residue of the public/private splits in the Industrial Revolution, plus the Northern European Reformation's Protestant work ethic that characterised the avoidance of paid work as sinful.
The current welfare debates still reflect these divides.
If you add in the recent neoliberal biases against social equity policies, and a strong commitment by labour groups to constant economic growth, the emphasis on paid work remains. Yet we need policies to cope with lower demands for paid workers, as technology and the need to reduce environmental damage take over priorities.
We are moving to a Post-industrial era, so we need to look at other forms of ensuring adequate equitable access to income. There are hopeful signs that welfare reform is gaining ground as many debates and trials explore other possible payments such as Universal Basic Income (UBI) and variations such as a Universal Social Dividend (USD) that recognises the value of unpaid communal contributions and are not means tested.
Australia's centrist parties have not yet discussing this issue, but local interest and support are rising. We need to push for trials to occur here as we design fairer options. For example, what if we could replace the Basic/cashless Debit cards with an equivalent USD/ UBI for all recipients, or at least a valid sample. It would cost little and save lots of administration costs and it would pay to see if it restores dignity and agency to Australia's most in need!
Universal Basic Income and variations such as a Universal Social Dividend recognises the value of unpaid communal contributions and are not means tested.
JAN– MAR 2020