Australia’s Welfare Habit

Australia’s Welfare Habit (2004) by Peter Saunders is a fascinating book by one of the rarest of things, a sociologist who is not left wing. It’s a fascinating book that is well worth reading. I’d also link to personally thank Wayne Swan for putting me onto to Saunder’s book in his decidedly average book Postcode: The Splintering of a Nation.

Saunders looks at what has happened to Australian welfare, how it compares to welfare in other countries and goes on to make recommendations as to what he thinks should be done. The first two things are done better than the last. Welfare is a really hard issue to discuss. Saunders points out that the welfare lobby, comprised of academics who study the issue and lobby groups are effective at blocking much change that they do not agree with. He also makes the point that welfare lobby is also fairly candid about wanting higher taxes.

In the book Saunders makes the huge point that Australia’s welfare spending and the proportion of people who are dependent has exploded. In 1969 just 2% of the working age population received unemployment, disability and the single parent allowance while in 2002 around 14% do. It’s a serious problem. The growth in unemployment is part of the issue as is the increase in single parents, but to see that disability pensions have more than doubled as a percentage of the workforce is really surprising. People do less physical work and are generally healthier than in 1969. Fewer smoke and we live longer.The increases have also occurred while society has gotten considerably richer, with the economy doubling in the period. Welfare continues to solidly rise. Under the Howard government, which many of the Left attempt to present as a hard right ‘neo-liberal’ regime social spending increasing from 40% to 44% of government spending.

Saunders provides a good overview of relative versus absolute poverty measures that range from under 5% of the population to over 40% . Saunders points out that no objective measure exists. The relative measures favoured by the lobby have the remarkable and curious effect of causing poverty to rise if only some parts of society get richer while no one gets any poorer at all. Saunders also points out that the welfare lobby itself claims that poverty keeps growing and that poverty spending is ineffective, and thus it demands still more money be spent. He also points out that being on welfare is demeaning and removes people’s self-respect and their ability to be independent.

Saunders look at Australian social spending and does point out that it is amongst the most efficient in the OECD with payments being directed towards those with the least money. This in turn has the effect of creating enormously high Effective Marginal Tax Rates ( EMTR s ) that provide a dis-incentive for people on welfare to find work. He also points out that Australian social security spending is different from most countries social spending because the money comes out of general revenue and that our benefits are paid without end. Saunders looks at how the US 1996 welfare reforms had a considerable effect. The participation rate grew and people were able to find jobs.

The section where Saunders looks disability payments is fascinating. In Australia over 50% of recipients of the Disability Support Pension (DSP) fall into two categories, Psychological/psychiatric and Musculo-skeletal/connective tissue, typically bad backs. Saunders points out that a huge proportion of these people are older men who are essentially taken off the unemployment list by shuffling onto DSP. Saunders also uses the figures to put the Dutch and Swedish unemployment figures into perspective. Using 2003 figures Dutch unemployment was only 4%, but a staggering 9% were on DSP type benefits. In Sweden the figures were 5% and 8% respectively. In Australia the figures are 6% and 5%. The Anglosphere countries average 11% combined unemployed and DSP while the main European economies average 13%. Saunders suggests that the current criterion of being unable to work for 30 hours is too strong. If it were reduced to being unable to work for 15 hours considerably more people would be able to work. He also suggests that activity requirements should also be used for people on DSP benefits.

Saunders discussion of single parent payments is also very good. He talks about how Australia does not require parents to fulfill any activities until the youngest child reaches 16 years of age. This is more generous than Sweden where at 3 years old parents are required to look for work. Saunders suggests that requiring single parents to undertake activities and look for work from the time their children reach school would be wise. He also points to substantial polling on the issues that state that 84% of Australians also believe this is the way things should be.

Saunders also looks at how many middle income people in Australia are part of a substantial tax churn, where they pay tax and then receive benefits which he sees to be crazy. He certainly has a point.

In the sections on what to do Saunders has solid suggestions for activity requirements and punitive measures for those who fail to fulfill them for the unemployed, changes to single parent benefits and to DSP benefits. He also goes further to suggest that lowering the minimum wage would be a good idea and removing government from many areas would improve things. This he provides far less support for. In the book he also makes the point that Australia social spending is, compared to many countries, quite low and very efficient.

The book is really, really interesting. I’d recommend it to anyone who is interested in social policy at all. Saunders solid presentation of clear data is excellent. Even if you disagree with Saunders his views are well worth reading. It’s also hard to imagine that people looking at balancing the Australian budget have not read his book. With much public support for some of the changes shown in polls, a centre left Australian government could easily implement some of his suggestions.

4/5

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3 responses to “Australia’s Welfare Habit

  1. How old is the book? Since 2006 Australia parents have had to look for work once the youngest child turns 6.

    I have also heard that the numbers on the disability pension are largely a blip rather than a trend, because many of them were made unemployed by a large structural change in the economy from tariff reform.

    You might also be interested in his book on Aboriginal issues

  2. Interesting, the book was released in 2004, the year of release is on all my reviews. Perhaps one of his suggestions has been taken already.

    The number of people on DSP is huge though. Also why is it also fairly similar to the other countries? Have they all seen tariff reductions? It would be interesting to see if it has reduced.

  3. Sorry, my bad, didn’t see the release date.

    All other OECD countries would have seen the same decline in manufacturing, over the same time period, due to mechanisation, China/India etc. So that might explain why there are the same numbers on disability support

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