Outcome-based Welfare Reform
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INTRODUCTION
There are around 2.2 million Australians with capacity to work who are receiving one of six types of working age payments.
For these Australians who have real capacity to contribute to their communities and provide for their families through paid work, how well government policy works to get them into work really, really matters.
And it matters to their kids in ways that are not always immediately apparent.
Our Government’s detailed data is revealing just how deep the transmission of intergenerational welfare dependence is.
Our priority investment approach data has revealed that since 2002, around 80 per cent of young mothers new to parenting payment had a parent or guardian who was on an income support payment at some stage during their upbringing.
Ensuring better futures for Australians who might otherwise need the assistance of working age welfare payments should be the core work of Government.
DEFINING SUCCESS
A central purpose in speaking before you today is to share with you data collated over the last year that we consider demonstrates enormous success in ensuring fewer Australians move onto welfare and more move from welfare to work.
The Coalition has very significantly reduced overall expenditure growth across the whole of Government. Real growth in all payments in the 2017/18 Budget was restricted to 1.9% (down from around 3.5% under Labor).
This could not have been achieved if the welfare bill had continued to grow at the same rates as it did under Labor.
Welfare spending is such a huge part of the Commonwealth Budget that restraining welfare expenditure growth has been critical to the fact that we now join the Howard Government as the second of only two modern governments to have managed to have expenditure growth lower than revenue growth.
Under Labor social security and welfare spending was growing at almost double the rate of revenue.
Under Labor, the yearly welfare bill climbed to be more than 100 per cent of the personal income tax take; that figure is now a more reasonable 80%.
It is this reasonable restraint of welfare expenditure growth that will ultimately allow our Nation to return to surplus and budget orthodoxy.
In 2018-19, the Government will no longer be borrowing to fund recurrent expenditure in the welfare system or elsewhere.
That is the most undervalued piece of good news for every young Australian in this country.
If welfare systems are meant to achieve fairness – the gross unfairness of the welfare system that we inherited in 2013 – was that it was being paid for in large part by borrowings.
Borrowing to fund recurrent welfare expenditure meant that – a young child in 2013 – would find that in 15 years’ time; they would be stuck with no choice but to pay taxes to fund spending on the welfare system of their own time and pay higher taxes to back pay the spending on welfare that happened in 2013.
For all the talk of fairness, what we inherited in 2013 was a morally unacceptable form of taxation without representation.
The idea that a mum and dad would spend big on themselves today using a credit card and bind their children to pay for that credit card bill in 15 years’ time – is an idea that we would all find outrageously unfair on an individual level.
When the entire welfare system was growing well beyond the capacity to pay for it – we were engaging in precisely the same form of intergenerational cost shifting but on a massive scale.
The human face of controlling welfare expenditure growth is not just that we end the shameful unfairness of pushing today’s welfare bill down onto the next generation of Australians.
Success in moving more people than ever before away from welfare and into work improves individual lives.
Under Labor the growth rate of job seeker income support was 13.5% a year (four times the growth rate of revenue over the period).
I have described 13.5% growth as unsustainable and the 3.5% achieved by the Coalition as representing a massive policy success.
Recently some commentary agreeing with these facts, said that it was a “stretch” to characterise this as a policy success.
The argument was that in 2008 the previous Labor government experienced the GFC and in 2013 Julia Gillard had a policy to move a significant number of people immediately from the single parent payment into Newstart; thus increasing expenditure growth on Newstart.
Obviously, job growth is a big part of the success in decreasing welfare expenditure growth.
But reading some commentary it seems the distinction between those outcomes our government is responsible for through policy and those that are just luck is identified this way.
We are completely responsible for any and all negative outcomes and just lucky when good outcomes occur.
Last year we created over 300% more job growth than the last year of the former Labor government (which was 5 years after the GFC) – this is good policy not good luck.
Trying to explain away the huge decrease in expenditure growth on Newstart by noting Labor policy that moved people between different categories of working age payments, suffers the weakness that our success has not just been with one category of working age welfare.
The decrease has been across all six major categories of working age welfare.
For example, under Labor the growth rate for Disability Support Pension was 9.5% per year. The Coalition has now reduced this to 0.3%.
Under Labor, the welfare expenditure growth for Carer Payment was 16.3%. The Coalition has reduced this to 6.5%.
Overall, across all six key working age payments, the cumulative growth rate of payments under Labor was 9.1 per cent per year.
Under this Government, the rate has been 2.1 per cent.
That incredible turnaround cannot be explained away as movement between welfare categories or mere good luck.
Had Labor yearly spending growth of 9.1% on all six welfare payments been maintained that would have required an extra $83 billion in welfare payments being made over the years 2014-15 to 2020-21.
But ultimately, the greatest feature of this success is not financial it is human – by diverting people away from welfare and into work we are improving individual lives in profound ways.
There is a persistent idea in social services that because work necessarily involves costs associated with travel and preparation – that someone may be worse off working for an amount similar to what they might achieve through a combination of welfare payments in a generous safety net system.
The most extreme ideological extension of this idea is the concept that everyone should be paid a universal basic income (irrespective of their circumstances): as a means of liberating people from a need to work.
While persistent – these ideas miss the most fundamental point; that the most important benefits of work are not economic.
Humans have always worked and did so well before there was even such a thing as market economies.
The reason we worked was to apply our individual capabilities to improve the circumstances of our families and our wider communities.
Before it was ever an economic exchange – work was (and still remains) THE most fundamental form of giving – the giving by the direct application of individual capabilities to community needs.
This is why work provides depth and meaning to our lives. It is self-worth from self-reliance. Its friendships, its purpose and meaning in life.
And when our capacity to work is applied in our own communities the fundamental reward is that we are linked into those communities and isolation gives way to connectedness and belonging.
The human face of our government’s welfare to work success is that the actual number of Australians on Newstart is shrinking. There is no more important measure of improved lives than 29,000 less people dependent on Newstart.
In the first six months of this year, we have seen the number of Australians on Newstart and Youth Allowance (Other) drop from 863,000 to 834,000.
If maintained this represents up to $3.5 billion in savings to the Australian taxpayer in the welfare system’s future lifetime welfare costs.
Over all payments the results have been even more remarkable.
Over 6 years Labor increased the number of people aged 16 – 64 who were on some form of income support by 250,000 people (up from 2.3 to 2.54 million Australians) that was 16.6% of the working age population on income support.
Since our first budget our government has decreased the number of people on income support by 140,000 (down from 2.54 to 2.4 million Australians) taking it to 15% of the working age population the lowest proportion it’s been at in at least 25 years.
Increasing welfare dependency by a city the size of Geelong is a terrible failure decreasing welfare dependency by a city the size of Darwin is I think an incredible success.
THE BASIS FOR SUCCESS
This welfare to work policy success is not accidental.
Simply described it has only been achieved by doing and trying many new things AND never losing sight of the single most important thing.
In a famous essay, the philosopher Isaiah Berlin described politicians as being of two types; hedgehogs and foxes.
I’m sure some journalists might add a few more animals to the list.
But this particular distinction came from an observation of an ancient Greek: “[That] The fox knows many things, but the hedgehog knows one big thing.”
Hedgehogs have a single big idea, which is the start and finish of their response to everything. Foxes come up with new ideas for every situation.
Producing really substantial results in welfare policy requires you to be part hedgehog and part fox.
As a government, there can be no doubt about our willingness to try new, often controversial things in the welfare space.
- The first ever actuarial valuation of the welfare system;
- Linking welfare to vaccination rates;
- Automatically deducting rent from welfare;
- Cashless welfare card trials;
- Data matching to enforce compliance with welfare rules and recover overpayments;
- Linking childcare payments to workforce participation.
But the many policies start from a single central motivating idea.
The central idea – is simple.
The primary goal of government in administering the working age welfare system must be to help as many people as possible avoid the welfare system and move away from welfare and into work.
If your answer is, alternatively, that the primary goal is to continually redistribute income to produce ever more even levels of income co-efficient measured equality; you would have a completely different approach and get very different results.
And there should be little doubt about how different the central approaches of the two major parties have become on this issue.
The Opposition Leader used to believe, as we do, that business tax cuts are essential to produce the economic growth that moves people away from welfare and into work and so produce more fairness by cutting welfare dependency.
In 2011 Bill Shorten gave this description of a country with great opportunities and a great way to create more opportunities for all Australians:
“reducing the corporate tax rate…is an investment in the Australian people…including people who might be on welfare…we need to create employment…not greater welfare dependency.”
In 2017 he painted a very different (very bleak picture) of “economic gaps” and “social fractures” becoming “permanent fault lines in our country” where an absence of opportunity has created a sense (that in his words).
” … The deck is stacked against ordinary people… the fix is in and the deal is done … it’s not what you know it’s who you know”
Every politician has to make a fundamental decision whether to engage in the politics of opportunity through economic growth or embrace of the politics of envy.
Opposition rhetoric increasingly reveals a tactical conclusion that there is political advantage in tapping into a variety of general frustrations and trying to specifically convince people that they live in a country devoid of substantial opportunity.
Tactically the politics of envy might have short-term attraction.
But the long term problem in devoting energy to telling people they should be angry as victims of an absence of opportunity; is that you fail to devote your energies to the core work of GOVERNMENT – to grow opportunities for Australians and help and encourage people to make everything they can of those enhanced opportunities.
A central criticism of constant redistribution to achieve some ideally conceived even level of income is that just redistributing the slices of the economic pie has never made societies more prosperous EVER.
The best way to produce a fairer Australia is to produce a more prosperous Australia with more opportunity through more employment.
If you believe that the Australian economy is a place of scarce opportunity, that it’s a fix — a done deal — then you devote your time to re-dealing income not to the real work of growing everyone’s income through generating more employment opportunities.
The redistribution focus does not lead to innovative welfare to work policy – because the redistribution becomes the end in itself.
The problem though is that, properly conceived, the government’s job in welfare policy is not to just spend more money – the job is to get more people into jobs.
CASCADING SUCCESS
The worst welfare policy is policy that does not confront the fact that passive receipt of welfare by people capable of more community contribution; creates a tyranny of low expectations.
Academic and Indigenous leader Marcia Langton recently described how passive welfare can become what she describes as:
“a systemic enabler of illicit drug use, alcohol abuse and free-range gambling. [She further described that]
If welfare exists as a safety net, it should not be an enabler of harmful alcohol and drug use that contributes to high rates of violence and abuse, and traps people in poverty.”
The start of this speech outlined the remarkable turnaround in the expenditure levels for the major payments in working age welfare. And the remarkable decrease in the number of people under 65 reliant on welfare in Australia.
Central to this success was a vision of Australia as a fundamentally fair place with more opportunity than most places on earth but also a place that can be made even fairer with a clear commitment to increasing opportunity to move people away from welfare into work.
While having the hedgehog’s commitment to this central idea; the Ministers for Employment, Human Services, Education and the Treasurer have all been foxes – willing to be flexible and develop new ideas and new approaches for different situations.
A remarkably wide range of policies across portfolios have been deployed and directed at the one commitment.
To move people away from welfare and into work.
And although very broad, these many policies can be grouped into three general types – Pull policies, Preparation policies and Push polices.
Pull policies recognise the need for job creation to pull people away from welfare and into work.
The number of jobs in Australia has increased for the 13th straight month – the longest consecutive run of jobs growth since 1994.
Since the Coalition was elected to office in September 2013, 831,100 jobs have been created – an average of over 200,000 new jobs each year.
There are now 355,700 more Australians in work than a year ago – more than 80% of these new jobs are full time jobs.
This astonishing turnaround in job growth is not an accident. Successive budgets have had tax policy designed to stimulate small business and we have been willing to run the risk of the ruthless politics of envy that Labor levies at wholesale business tax cuts.
Preparation policies recognise that in order for people to make the most of new employment opportunities, they often need to improve their skills and training.
So we have invested in a number of programs which do not spend more money on welfare payments but rather spend money to help prepare groups of people for work based on their individual circumstances.
ParentsNext is a prime example.
We are funding the ParentsNext program nationally at a cost of $263 million.
ParentsNext assists parents with a youngest child aged under six years to prepare for work. It provides one on one support finding a TAFE course to refresh skills, helping to make the most of childcare to facilitate training and work; and provides preparation for job interviews.
We are also spending:
- $98 million on mature age reskilling programs to help job seekers over the age of 50 to re-skill and change careers
- $9.6 million to increase the number of National Work Experience Program places from 6,000 to 10,000
- $30 million to develop the social impact investment market to harness private capital to support innovative approaches to solve complex social problems affecting the most vulnerable.
- $212 million for Transition to Work, to support young people aged 15-21 to improve their work readiness and help them get into work (including apprenticeship and traineeships) or education through intensive, pre-employment support.
- $50 million over four years to establish the Empowering YOUth Initiatives to assist young people 15-24 years of age and at risk of long-term welfare dependency, onto the pathway to sustainable employment.
This is all on top of the Youth Employment “Path” Package which we delivered in the 2016-17 Budget and which will give vulnerable young people the skills they need and that employers want by investing $840.3 million in preparation, incentives and bonuses for taking on a young Australian into a job.
Add to this reform of VET to ensure courses pursued are actually helpful in finding employment and these are core examples of a wide variety of preparation policies.
Push policies recognise that a failure to have sufficient or to sufficiently enforce mutual obligations leads to too much passive receipt of welfare.
We have been willing to drive stringency into the welfare system, by increasing audits and checks and investigations to ensure greater compliance greater recovery of overpayments and greater scrutiny in the assessment of people before they enter into passive welfare categories.
THE Welfare Reform Bill now before the Senate is the next critical step in strengthening mutual obligations to search for work and making sure that dysfunctional compliance systems do not allow passive welfare receipt and the avoidance of mutual obligations to search for and attend the job interviews for jobs that are being created faster than before.
In the welfare reform space we are also willing to use detailed data to focus tailored approaches to small at risk groups.
Roughly, a year ago I outlined here that as part of our commitment to new approaches in welfare we would be using new data systems to identify key groups with the poorest lifetime outcomes of welfare dependency and intergenerational welfare dependence.
And we would specifically design policies to assist these groups into employment and better lives.
The early signs of this focused approach are incredibly encouraging.
One of the groups our data identified as having very high risks of welfare dependency were students who move from study to unemployment benefits.
The data showed that the risk soared when students moved onto welfare for a year or more and that of the 7,160 young Australians in this group 39% would still be on welfare in 10 years and 30% in 20 years.
In one year to June 2016 the number of students moving from student payments to welfare decreased by 4,860 people.
That’s 4,860 fewer students moving into the welfare system – more students moving into work and building careers and independence and better lives.
That one-year improvement will also save the taxpayer up to $410m over the life of those young Australians.
The data has also shown that young parents are particularly vulnerable to welfare dependency and that of the 27,940 young Australians in this group their expected average duration on income support in some or all of 45 years over their future lifetime.
Since the Coalition came to government, the number of young parents on welfare decreased by 4,031 people.
That’s 4,031 fewer young parents in the welfare system, more young parents moving into work or further education and building careers, independence and better lives.
That 4,000 person improvement will also save the taxpayer up to $2 billion over the life of those young Australians.
Try, Test and Learn
Last year I also announced $96 million for a Try, Test and Learn fund.
Over the past two months, I have announced $23 million for 14 successful projects from nearly 400 proposals put forward by individuals, stakeholders and the community.
Initiatives range from leading edge brain mapping techniques to address cognitive barriers to getting young people into work; to smartphone-based apps coupled with personalised help to get young people job-ready. These new and innovative partnerships between government and the private sector are exactly the sort of ideas we need and apply great Australian ingenuity to longstanding social problems.
Today I am very pleased to announce the next round of Try, Test and Learn.
We will be inviting ideas to support our next four priority groups that we are seeking to benefit from focused intervention of innovative new ideas.
As with the previous priority groups, these have been identified through analysis of data from the Priority Investment Approach.
The groups are:
- Newstart recipients aged 50 years and over (251,400)
- Migrants and refugees on a working age income support payment (299,416)
- Working age carers on Carer Payment (221,716)
- At risk young people on income support (109,028)
So far the approach has focused on younger people at risk of long-term welfare dependency. But also many older Newstart recipients find their skills and experience are not properly valued and much more can be done to improve outcomes for these Australians; many suffer age discrimination.
CONCLUSION
There is nothing compassionate about a more of the same welfare approach that does not address welfare dependency. More money in more welfare payments as a lazy means of demonstrating more compassion is not actually an outcome.
In fact it is often counterproductive because it leaves many politicians contented with the easy display of empathy that accompanies spending and happy to hang out the mission-accomplished banner simply on the basis that more money has been taken from one group in tax and reallocated to another in welfare.
Labor levels of welfare expenditure growth increasing at 9.1% per year did not represent more compassion through better outcomes. They represented increasing inequities and more unfairness for working age Australians – as more people became welfare dependent.
Under the Coalition Government, we have changed the focus to real outcomes for people grounded in testing new and innovative approaches; as a result, we are reforming the welfare system, ending unsustainable welfare growth to bring the Budget back to surplus; but most importantly, providing opportunity and jobs for people previously dependent on long-term welfare payments.
Commentators rightly want government to point to their achievements – well 140,000 less working age Australians on welfare is an achievement of the most substantial type and can produce an intergenerational improvement that any government or any Prime Minister would be proud of.