Passive Welfare - Killing Them Softly?

Presented by:

Senator the Hon. Amanda Vanstone
Minister for Family and Community Services and Minister Assisting the Prime Minister for the Status of Women

Introduction

Noel Pearson and John F Kennedy have a lot in common. They both, at one point, expressed the need for individuals to have a sense of empowerment and belonging. This comes from the idea of reciprocity - that society helps people and in return they give something tangible back.

Reciprocity must be a key feature of our society and welfare system. It is for this reason that we believe that our welfare system should increasingly incorporate mutual obligation. We ask people who receive certain benefits, to give something back by participating to the level that they can.

Frankly, we do not ask enough of some people in return for the taxpayers dollars we give them. Even more alarming perhaps we have created an environment that has encouraged people to slip into a state of dependence, "I want it. I am entitled to it even though I perhaps do not need it."

The purpose of my speech tonight is to talk about the importance of the contribution each person can make and asking for that contribution. When you ask for nothing of someone, you are effectively saying "you have got nothing of value to give".

Mutual obligation is not a negative, it is a positive. It allows people to contribute, to feel good about what they are doing and to be recognised for that contribution.

Noel Pearson talks about the damage "sit-down" money has caused in indigenous communities - or to put a modern spin on it "passive welfare". He argues that the welfare state has eroded the traditional indigenous economy which had at its core the need for "able bodied" people to work.

Pearson has made some telling points that I believe apply just as well to mainstream Australia.

He said, traditionally, Aboriginal communities were based on "economic and social reciprocity which is expressed through work, initiative, struggle, enterprise, contribution and effort." However, the key problem is that with "welfare it inherently does not demand reciprocity. In the absence of reciprocity, welfare support for able-bodied people is counter-productive for individuals and it is corrosive to society."

It's corrosive because people are simply robbed of the need to work together. Passive welfare, has removed reciprocity. The effect in indigenous communities has been devastating. Their need to work, their initiative to find work, and their will to work has been sapped away.

Pearson refers to this as "negative welfare." He rightly asserts that is "poisonous and socially corruptive".

In a very similar vein, in his inaugural address of President John F Kennedy coined a saying that struck a chord then and still rings true today. You remember it well: "Ask not what your country can do for you, ask what you can do for your country".

It was and remains an ennobling thought. It says to each and every citizen: you have something to contribute, we need you, you are a valuable part of this nation. That's what mutual obligation does.

The recognition that we all have something to give is important. It's inclusive. When we realise that we have something to contribute that we are valued, we feel enriched.

Noel Pearson wants to again empower Aboriginal communities and John F Kennedy wanted people to do what they can. Yet, many in the welfare lobby and Parliament do not see this. They do not appreciate that by not asking for something in return from welfare recipients devalues them. It harshly says "you are useless."

However, before you start to say to yourself - "ah here it comes she is about to advocate the reasons for pulling back on the welfare dollar". Let me assure you that is not the case.

In fact, this Government has increased assistance spending to unprecedented levels.

Over the last 7 years Government expenditure on income support has grown from $33.9billion in 1995-96 to a staggering $53.7billion in 2002-03. Support for sole parents has also grown significantly over the last 10 years.

In 1983 a sole parent family with 2 kids on an average weekly earnings received $17.38 in government assistance. Now in 2003 that same family receives government assistance of $114.35 per week. That increase is in real 2003 dollars. That family now gets six times as much assistance as it did 20 years ago.

I am not arguing that this increase in assistance is a bad thing. It is a good thing so long as we can afford to provide additional assistance and more importantly that it goes to those who need it and not just those who want it.

The key issue here is seeking reciprocity for individuals in return for the welfare payments they receive. When we don't seek anything in return, when we can see no value in somebody's contribution, we dis-empower them. Passive welfare is killing them softly.

Take sole parents for example. Why does the welfare lobby and some Members and Senators think that it is fair thing to leave a sole mother at home, once her youngest child has started to go to school, with no obligations for the $440 per fortnight they get from the Parenting Payment?

The bottom line is when the youngest child turns 16, the single mum will have to look for work. They think it is fair to say "look don't worry about trying to get some part time work, doing some extra study, or undertaking some volunteer work - you do not need to bother, because the Government will support you until your kid turns 16."

Leaving her unprepared for that jump is just cruel and indifferent.

This mum has had no work experience, no ongoing training or no support to prepare her for work. She is suddenly told to re-enter the workforce she may have left over a decade and a half ago. She knows she is up against it - as we all do, but we have done nothing to help her. She is up against it because in the past we have not sought any type of reciprocity from her. She hasn't learnt what she has to give and understandably lacks confidence. The welfare system has successfully killed her with kindness.

This is not fair and it's certainly not kind. Under the Howard Government's welfare reform package this cruelty is being addressed. Parents on Parenting Payments are being given extra support and help to re-enter the workforce.

Those with a youngest child aged 6-11 will need to have an annual interview with a Personal Adviser at Centrelink to help them plan a return to work. Then when their youngest is 13-15 years, obligations kick in and they have to do a part-time activity of up to 150 hours in each six-month period. Roughly 6 hours a week.

Just as we need to understand the value of asking people to do things, so too do we need to remember that when we expect something tangible from government we are expecting other Australians to pay for it.

Let's be honest here, when the Government hands out welfare payments it is not dipping into its own pockets - it is dipping into the pockets of everyone on the street who pays taxes.

And interestingly, it is the average person on the street earning up to $40,000 a year who pays 32% of tax in Australia.

It is not just the rich businessmen with a cigar hanging out of his mouth, cruising the streets of Double Bay in his Rolls or Jag.

It is also the neighbour over the back fence with the hills-hoist loaded with overalls, nappies and undies who contributes the taxes that funds our $62 billion welfare bill.

Australia's welfare system is now intrinsically fair. It is not based on want. It is based solely on need.

What this means is that people in the same circumstances are entitled to the same assistance.

Each of the benefits has a maximum rate, which tapers off as your income increases. As you start to earn more, the support from the Government is reduced.

It's this aspect of our system that makes it so fair. It's also this aspect of the system that makes it distinctively Australian. And yet it's this aspect that causes so much consternation.

If you earn more, you get less. You are becoming independent. You are supporting yourself and relying less on support from others.

As your income moves into the taxable area, in addition to paying tax you continue to substitute dollars you have earned for dollars of support the community provided you with as welfare.

The amount of tax you pay in the dollar, plus the withdrawal rate in the dollar from any benefit you lose, is sometimes called your EMTR.

Let's be clear about this, however. There are two elements to this equation. Like everyone else, people moving from the dole to work, pay tax. At the same time, they are replacing welfare dollars with dollars they earn themselves. They are building independence. These are two different things.

For example, in the Newstart payment once you start earning over $62 per fortnight we take 50 cents of welfare away for every extra dollar you earn. You keep 50 cents of the welfare even though you've earned an extra dollar. Then when you're earning $142 a fortnight, we withdraw 70 cents for every extra dollar you earn. At $230 per fortnight, you will start to pay 17 cents in the dollar tax.

Note, you are better off working.

In my view, taper rates ensure that individuals maintain a safety net as they make the transition to work - while still getting the benefits of working.

The term EMTR implies that you keep fewer cents in the dollar than someone who isn't getting welfare. However, it is seriously misleading to suggest that you are giving more of your hard earned money to the tax man than anyone else is required to do.

You are giving exactly the same amount of your hard earned money to the taxman as anyone else.

You're not returning your hard earned money, you're taking less of the hard earned taxpayer dollars and you are doing it because you have some hard earned dollars of your own.

This is a vital distinction.

Economic behaviour gurus will tell you that if people don't feel there is sufficient reward for effort, the effort will not be expended. The argument is that people will be more likely to stay on welfare.

The EMTR view of things assumes zero exertion for the dole dollar. This is no longer true for people on Newstart who can work. For these people we ask them to complete a job diary, attend interviews with the Job Network and Work for the Dole. In short, they are fulfilling their mutual obligation.

Mutual obligation recognises that need should not be looked at only in terms of dollars and cents. It also recognises that it is wrong of Government to satisfy need only with welfare payments. Our needs are greater than just money. They run to needing a sense of being part of the community, being praised for your efforts, and being satisfied for your contributions. But this does not come from simply sitting on your hands doing nothing.

We need to look past the days of dependence, to a future where individuals can be independent through work and giving back to the community that has previously supported them.

This independence results in increased social contact that delivers: job satisfaction; self-esteem; the chance of advancement; of knowing you're setting a good example to your kids: and, of course, there's the longer term tangible of having some superannuation.

The Howard Government is not sitting on its hands. We are trying to re-design and simplify the welfare system. To make it work, to help people, to deliver long term benefits for everyone.

Our consultation paper on Building a Simpler Working Age Payment System raises the issue of work incentives and, in particular, the multiple withdrawals.

As we work towards redesigning the working age payments structure, we are aware that it is like playing 3D chess - every piece you move can have unseen and unexpected consequences.

We have to decide if we want the dole to be short-term assistance while someone looks for work, or a long-term subsidy to part-time workers.

Personally, I do not believe we can afford economically, or even less so socially, to build a society that encourages a bit of work and a bit of welfare.

We need to strive for a welfare system that supports people when they genuinely need it and helps them re-enter the workforce when they are able to. It needs to continue to build on the idea of reciprocity and a sense of personal achievement.

Asking people to reciprocate in return for a welfare dollar should not be seen as a negative but a very real positive. It recognises what they can do. By asking for nothing, by recognising no value in welfare reciprocity we are killing them softly.

Left to Right: CofFEE Director Bill Mitchell, The Minister
and CofFEE Deputy Director Martin Watts.

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