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The trouble with welfare reform miracles

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Frank Quinlan |  16 December 2007

Babies and BossesThe Organisation for Economic Cooperation and Development has some stern words for Australian policy makers. In its latest Babies and Bosses report on work and family life they argue that too many Australian children are growing up in jobless, welfare reliant households with the biggest problem among single parent families.

The OECD’s experts say that Australia needs to do more to move single parents off welfare and into work. According to their figures, in Sweden and Denmark around 80 per cent of sole parents are in paid work. But in Australia, the figure is only 50 per cent. This is a problem, they argue, because long-term welfare reliance is associated with child poverty, and poverty damages childhood development.

Moving single parents from welfare into work seems like a win, win, win proposition. Employers fill vacancies faster, families lift themselves out of poverty, and the government makes savings on income support. What could be wrong with encouraging people to do something that's good for the community and good for their families?

But as with everything else, there’s a catch — it’s a public policy version of the 'pick two rule'. Engineers and software designers are fond of telling clients that they can have a product fast, cheap or good … but not all three at once. There are trade-offs and clients need to decide which goals are most important.

It’s the same with welfare to work policy. It’s possible to create programs that move single parents from welfare to work, lift families out of poverty, and save the taxpayer money. But it’s not possible to create programs that do all three at once.

In the early 1990s, Wisconsin Republican Governor Tommy Thompson pushed through a series of aggressive reforms which slashed the state's welfare rolls. In 1997 the conservative Heritage Foundation dubbed it a miracle. Thompson has 'routinely accomplished what the welfare industry declared impossible', crowed the Foundation's Robert Rector. But in 2005 the state's Legislative Audit Bureau reported that only 20 per cent the program's participants were earning more than the poverty level in the year after they left. Hardly a miracle for children in the other 80 per cent of families.

Wisconsin's policy makers made moving recipients into work their top priority. Supporters like the Wisconsin Policy Research Institute have urged them to stick to that goal. Earlier this year the WPRI's David Dodenhoff wrote that poverty reduction was 'an unrealistic, unreachable goal'. This doesn’t worry Robert Rector. He simply refuses to accept that poverty is bad for children.

Policy makers in countries like Denmark, Sweden and Norway take poverty more seriously. According to the OECD's poverty definition, around 22 per cent of US children were in poverty in 2000. But all three of these Nordic countries had child poverty rates below four per cent. According to the OECD, the explanation for this isn't just low rates of joblessness for parents — it’s the combination of high rates of employment with policies that redistribute income through the tax and welfare system.

Nordic policy makers are both tougher and more generous than those in Australia. Single parents are expected to return to work much earlier in Australia and can face sanctions if they fail to participate in assistance. But they also receive more assistance and a better quality of assistance.

The Nordic countries keep poverty low and employment high by investing heavily in employment assistance, support for working parents, and early education programs for children. The OECD experts are blunt about the trade-off. The policies are 'very expensive' and not every nation is prepared to raise the taxes needed to pay for them.

The OECD's preferred approach involves mutual obligation. To many Australian commentators mutual obligation means policies like Work for the Dole which emphasise hassle over help. This isn't the OECD view. They argue that mutual obligation involves a greater commitment from government, not just greater conditionality for welfare recipients. And they argue that income support sanctions should be 'moderate'.

In a 2002 Babies and Bosses study of Australian, Danish and Dutch policies, the OECD warned that policy makers needed to 'ensure that the activity to be carried out is appropriate to the objective of encouraging participation, rather than coming to be seen merely as a further compliance requirement'. The OECD has made it clear that many disadvantaged single parents will need more than a push to get them into paid work. Assistance needs to be of high quality.

There are no miracles in welfare to work policy. If Australians want their government to move single parents off welfare and reduce child poverty at the same time then it's going to cost money. The trade-off we choose will tell us more about our priorities than any speech or press conference.


Frank QuinlanFrank Quinlan is executive director of Catholic Social Services Australia.




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Submitted comments

I am a member of a SVDP welfare conference and a home visitor and i support any initiative to help single mothers return to the work force, but i feel we should do a little extra like paying total child care costs while the person is at work and retaining their pension for a month after starting work and a guarantee of no breaching for three months after that until she settles into the job. If she then loses the job or the employer doesn't want her services her pension should be immediately reinstated with no penalty so that she can continue to look for work.

andy thomson 17 December 2007

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