Australia — LAST
month, a leaked document suggested the Federal Cabinet is
considering a major overhaul of income support payments.
The distinction between unemployment allowances,
parenting payments and disability support pension would
be abolished in favour of a single payment for all
working-age claimants.
This idea was first floated in the
McLure Report in 2000. McLure noted how our existing
system can treat people in similar circumstances very
differently. In particular, some jobless claimants get
classified as "unemployed" while others get classified as
"disabled", even though there is little difference
between them.
If you get registered as
unemployed, you receive a lower payment than if you are
on the DSP. You also have to look for work and undertake
a mutual obligation activity, which does not apply to
those on the disability pension. Clearly it is unfair if
people in similar circumstances are ending up on these
two different payments, yet there is plentiful evidence
that this is happening.
Over the last 25 years, there has
been a trend for unemployed people to gravitate to
disability payments. In 1980, just 2.3 per cent of
working-age adults (229,000 people) drew the Invalid
Pension. Today, 5 per cent of working-age adults -
673,000 people - are on DSP. While health and fitness
levels have been rising, the proportion of people
claiming to be disabled has more than doubled. One in
nine 50 to 64-year-olds is on the pension.
There has been a massive leakage
from unemployment into disability. Half of those going
onto DSPs have been unemployed for the previous 12
months. They manage to get themselves reclassified. The
most common ailments are those which are most difficult
to diagnose - "musculo-skeletal" problems (which often
means bad backs) and "psychological/psychiatric" problems
like depression.
For around a third-of-a-million
Australians, the DSP now functions like an early
retirement scheme. This suits politicians, for it
significantly reduces the official unemployment figures.
Nor are the job network agencies complaining, for they no
longer have to find work for these hard-to-place clients.
And it suits the claimants themselves, for they get a
higher payment and no hassle from mutual
obligation.
The only people it doesn't suit are
taxpayers. If the "hidden unemployed" on the DSP were
transferred to the unemployment rolls, we would
immediately save $500 million every year in the cost of
benefits. If just one-third of them subsequently found
jobs, at least another $1 billion could be
saved.
Some of this money could help
improve support for those who really are
disabled.
So why don't we tighten up the
rules to ensure that only genuinely disabled people
receive the DSP? To be fair to the Howard Government,
this is precisely what it tried to do last year when
ministers proposed to redefine "incapacity". But the
Senate blocked the move.
So now the Government is taking a
different tack. Rather than clarifying the distinction
between unemployment and disability, it wants to take
McLure's advice and scrap it altogether.
But as McLure admitted, this is a
"very costly" thing to do. Mr Howard has promised that no
payments will be reduced as a result of reform, and Kay
Patterson, the Family and Community Services Minister,
repeated that pledge. This means the new single payment
will have to match the value of pensions Raising
unemployment allowances to pension level would cost $1.5
billion per annum.
A single payment would also blur
the crucial distinction between those who are expected to
work and those who are not. People with severe
disabilities (and those with full-time caring
responsibilities) should not be expected to earn an
income, and it is important that our welfare system
should make clear the distinction between them and
claimants who are capable of supporting themselves and
are looking for work.
Of course there will always be
cases where it is difficult to determine whether or not
somebody is so incapacitated as to be incapable of
working.
But this is not a good reason for
scrapping the distinction between unemployment and
disability. It would be like scrapping grades in an
examination because of the difficulty of distinguishing
candidates at the pass/fail margin. The solution is to
improve the criteria for classification, not to abolish
the categories.
An ACNielsen survey conducted for
the Centre for Independent Studies suggests the public is
happy to support those who genuinely cannot work, but is
unhappy about supporting able-bodied claimants on DSP.
Nearly two-thirds thought the DSP eligibility rules
should be tightened. The Federal Government should not
give up so easily. There is a problem, but the solution
lies in developing clearer criteria of eligibility for
entry to DSP, not in giving up and merging all payments
into one.
Peter Saunders is author of Why We
Must Reform the Disability Support Pension, published on
April 6 by The Centre for Independent Studies
Background paper - PDF
document here
