Finance Work We’re two-faced about ‘wasting’ money on welfare

We’re two-faced about ‘wasting’ money on welfare

negative gearing reform
Distorting tax refunds to the employed cost a lot more than payments to long-term unemployed. Photo: Getty
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Whether he meant to or not, Social Services Minister Christian Porter opened up a new ‘them and us’ debate last week when he released the most comprehensive data yet compiled on Australia’s ‘welfare dependent’.

It did not take long for One Nation leader Pauline Hanson to latch onto the issue, announcing she would support a four-week waiting period for under-25 job seekers wishing to receive benefits.

She told ABC radio: “Kids who leave school, or young adults, they can leave school at 15 years of age and I think if they see this golden egg there and [think] we can receive this money, I don’t think it’s an incentive for kids to get out and go to work.”

Pauline Hanson welfare reform
One Nation leader Pauline Hanson: worried about the ‘golden egg’ of welfare.

It’s a popular idea on the right of politics – that indolent youth choose the ‘golden egg’ of welfare over paid work.

The bludger myth

There are quite a few problems with that kind of reasoning, and quite a lot of social harm that can be done by creating a ‘taxpayers vs bludgers’ debate.

The first is the current labour market. As Anglicare Australia executive director Kasy Chambers recently noted there’s a problem with the “simple maths … there’s something like one job vacancy for every seven unemployed people, and that’s not talking about underemployment”.

The second is that the problem ‘welfare dependents’ identified by the government are a tiny fraction of the total number of Australians who dip in and out of the welfare system.

Professor Peter Whiteford, a professor at the ANU’s Crawford School of Public Policy, points out that over the 15 years covered by Mr Porter’s study, around 50 per cent of individuals and 70 per cent of households would enter and leave the welfare system due to “adverse life events”.

Those events include losing your job, an illness or injury or suffering financial hardship due to a relationship breakdown.

People forget, Professor Whiteford says, that paying tax to fund welfare is a kind of insurance, and one that only governments can provide.

Unemployment insurance, often known as ‘national insurance’, doesn’t only help cover private costs such as rent and food bills – it also produces a ‘social good’ by keeping a lid on crime, preventing social unrest and helping maintain a pool of labour.

The ‘welfare dependents’ the government has identified are real, but they are a tiny, tiny fraction of the Australians who use the welfare system through the course of their lives.

Professor Whiteford says this can be clearly seen in Melbourne University’s ongoing Household, Income and Labour Dynamics in Australia (HILDA) Survey data, which was used along with Department of Social Security records to compiled Mr Porter’s report.

It shows, he says, that individuals who derived 90 per cent of their income from welfare for over a decade, represented just 0.3 of one per cent of Australians using the welfare system.

Show me the money

And that is at the heart of the third big problem with the ‘taxpayers vs bludgers’ way of thinking about welfare – most welfare is like a legitimate ‘insurance’ pay-out, with only a small amount paying for the ‘dependents’.

Mr Porter’s report identified 11,000 young carers, 4370 young parents and 6600 young students who, according to actuarial probabilities, would go on to access income support for an average of 43, 45 and 37 years of their future lives respectively.

Christian Porter investment welfare
Social services minister Christian Porter: focused on long-term welfare recipients.

If they were all on the equivalent of the full rate of Newstart – $529 per fortnight – they’d be a burden on the budget of around $300 million a year in today’s dollars.

Compare that with the $3 billion or so we refund to property investors each year because of the market-distorting negative gearing laws.

So we praise people who sign-up for large tax refunds, but demonise people who sign on while looking for their next job.

What’s missing in the welfare debate is an acknowledgment that most people who move in and out of the welfare system really are using it as a bridge through a tough time, with the long-term goal of ‘getting ahead’.

To undermine that because of ‘them and us’ arguments over a tiny minority would be a big mistake.

To read more columns by Rob Burgess click here.

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