Incentives and capabilities in Australian welfare to work policy
Peter Davidson
Australian Council of Social Services
Contact Email:   peteracoss.org.au

Successful ‘welfare to work’ policies improve people’s incentives and capabilities. In Australia and most Anglophone countries, incentive-boosting policies take precedence. Activity requirements have been progressively tightened and extended to more income support recipients including people with disabilities and parents. Income tests have been eased to encourage workforce participation and proposals to introduce working tax credits have been debated.

For Australia to make further inroads into unemployment, policy must change focus in response to the social and economic disadvantage faced by those who remain jobless. Over 60 per cent of jobless single parents and long term unemployed people have Year 10 qualifications or less. Around half of all Newstart Allowance recipients received this payment for over two years. A minority of income support recipients live in families and communities that have little or no experience of stable employment. To simply intensify job search requirements is to set these job seekers up to fail and expose them to harsh financial penalties.

Two directions for reform are canvassed. First, activation should not be an end in itself. It should be a gateway to training, work experience, mentoring and intermediation with employers. In theory the Job Network model rewards providers for these interventions if they improve employment outcomes. In practice, it deprives them of the resources and incentives to do so. The funding structure should be overhauled to give employment consultants the tools to overcome barriers to work and fulfil the Network’s original promise of consumer-responsive service.

Second, the income support system needs major reform. The main problem is not income tests. It is the complex web of payment categories based on people’s ‘distance from employment’, that creates unfairness and perverse incentives (for people with disabilities, for example) to avoid participation in the labour market. The structure belongs to another era when people were either jobseekers or students or parents or people with disabilities. The system does not facilitate the combinations of these roles that are essential to navigate a changing labour market.

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